-----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, ED3Fe4mhkRm4LAYNEYGzuxd0JT//r9NiIigBKePLibwTZLNNIuNVwgURHLNq+DUP AS6p0XHM8+TPWNh6+2tPsA== 0001036050-98-001664.txt : 19981002 0001036050-98-001664.hdr.sgml : 19981002 ACCESSION NUMBER: 0001036050-98-001664 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 19981001 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/A SEC ACT: SEC FILE NUMBER: 333-62019 FILM NUMBER: 98719338 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/A 1 FORM S-3/A As filed with the Securities and Exchange Commission on October 1, 1998 Registration No. 333-62019 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 --------------- AMENDMENT NO. 1 TO 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) 1 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 1 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: [_] - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- $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% 0.15%-0.75% 99.85%-99.25% - -------------------------------------------------------------------------------- Total................... $100,000,000 $150,000-$750,000 $99,850,000-$99,250,000 - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
(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 0.15% to 0.75% 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, estimated at $614,500 which are payable by the Company. ---------------- 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 October 5, 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, 1 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. 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." 2 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 1 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 preferred securities dividend requirements 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 issues (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 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. 3 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 Indentures, 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 notes may be issued thereunder 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 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, and except as described under the heading "Redemption," 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") 4 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 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 issue 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 issue 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, the Note Trustee will not be required to exchange or register a transfer of any Notes 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 $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. (Section 2.13). 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 or similar next day 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 5 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). 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 4.10). 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") of the Company or any other person (other than the Notes), 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) 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 acquisition of such property provide that such mortgage shall be secured by such extensions or additions); (b) any mortgage 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; (c) any mortgage existing as of the Substitution Date; (d) any Permitted Encumbrance (as defined below); and (e) 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 (d), 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). 6 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 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 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. (Section 6.8). 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 contested in good faith) or import duties incurred in the ordinary course of business, or 7 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." (Section 3.4) EVENTS OF DEFAULT The following constitute events of default under the Note Indenture (an "Event of Default"): (a) default in the payment of principal or premium, if any, on any note issued under the Note Indenture when due and payable and continuance of such default for five days; (b) default in the payment of interest on any note issued under the Note Indenture 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 issued under the Note Indenture 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 issued under the Note Indenture have given written notice to the Note Trustee; and (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 Company's first mortgage bonds issued under the Mortgage or the Substituted Mortgage in accordance with the Mortgage or the Substituted Mortgage, 8 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 issued under the Note Indenture 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 outstanding notes issued under the Note Indenture, 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). The Company is required to notify the Note Trustee within five days of becoming aware of an Event of Default. (Section 6.7). 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; (f) adversely affect the rights of a holder to institute suit for the enforcement of any payment on or with respect to any Note; (g) 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 series 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 (h) 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 of the holders (a) to add to the covenants of the Company for the benefit of 9 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 all notes then outstanding under the Note Indenture. (Section 4.3). 10 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 issued under the Note Indenture. 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 outstanding note issued under the Note Indenture 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. 11 Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. 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 Note 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 Note 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 the 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 the 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 the Notes. In that event, certificates for the 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. 12 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 Twentieth 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 of the Mortgage. First Mortgage Bonds issued or issuable under the Mortgage are hereinafter sometimes called "Bonds." A copy of the Mortgage including the 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. (Section 2.1). 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). 13 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 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 17th 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 14 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 Series 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; 15th Supp., Section 3.2; 16th Supp., Section 3.2; 18th Supp., Section 3.2.; 19th Supp., Section 3.2.; 20th Supp., Section 3.2; 21st Supp., Section 3.2; and 22nd Supp. Section 3.2). 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; 22nd Supp.). 15 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 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; 22nd 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, 22nd 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). 16 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). 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 the Company 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; (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., 21st Supp and 22nd 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 17 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; 21st Supp., Section 7.1 and 22nd Supp. Section 7.1). The 15th Supp., 16th Supp., 18th Supp., 19th Supp., 20th Supp. 21st Supp. and 22nd 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., 21st Supp. or 22nd 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, before proceeding to enforce the lien of the Mortgage, is entitled to be indemnified to its satisfaction against all its prospective costs, expenses, and liability in connection therewith. (Sections 11.01 and 11.02). 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 and 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. (Section 12.01). "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. (Article I). 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 18 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 0.15% to 0.75% 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 of Notes, 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................................................................ 3 Use of Proceeds............................................................ 3 Description of Securities.................................................. 3 Description of Notes....................................................... 4 Description of the Pledged Bond............................................ 13 Plan of Distribution....................................................... 18 Legal Matters.............................................................. 20 Experts.................................................................... 20
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- $100,000,000 LOGO [South Jersey Gas Company] SOUTH JERSEY GAS COMPANY SECURED MEDIUM TERM NOTES SERIES A --------------- PROSPECTUS --------------- PAINEWEBBER INCORPORATED PRUDENTIAL SECURITIES INCORPORATED FIRST UNION CAPITAL MARKETS --------------- OCTOBER 5, 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. 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. II-1 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). (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).
II-2
EXHIBIT NO. EXHIBIT DESCRIPTION ----------- ------------------- (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). (23)(a)* Consent of Deloitte & Touche LLP. (23)(b) Consent of Dechert Price & Rhoads (included in Exhibit 5). (24)* Power of Attorney. (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. (27)* Financial Data Schedule (submitted only in electronic format to the Securities and Exchange Commission).
- -------- * Previously filed. 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; II-3 (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 HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN FOLSOM, NEW JERSEY, ON THE 1ST DAY OF OCTOBER 1998. South Jersey Gas Company /s/ George L. Baulig By: ____________________________ GEORGE L. BAULIG, Senior Vice President and Corporate Secretary PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
NAME TITLE DATE SIGNATURE ---- ----- ---- --------- C. Biscieglia President (principal executive officer) and Director * D.A. Kindlick Senior Vice President (principal financial officer) * W.J. Smethurst, Jr. Vice President and Treasurer (principal accounting officer) * F.R. Raring Director * A.G. Dickson Director * R.L. Dunham Director October 1, 1998 /s/ R.L. Dunham C.D. McCormick Director * S.M. Vioni Director *
*By: /s/ George L. Baulig Date: October 1, 1998 ------------------------------------- George L. Baulig Attorney-in-Fact II-5 EX-1.(A) 2 DISTRIBUTION AGREEMENT Exhibit 1(a) SOUTH JERSEY GAS COMPANY Secured Medium Term Notes, Series A Due From One Year to Forty Years From Date of Issue Distribution Agreement October __, 1998 New York, New York PaineWebber Incorporated Prudential Securities Incorporated First Union Capital Markets, a division of Wheat First Securities, Inc. c/o PaineWebber Incorporated 1285 Avenue of the Americas New York, New York 10019 Dear Sirs: South Jersey Gas Company, a New Jersey corporation (the "Company"), confirms its agreement with each of you with respect to the issue and sale by the Company from time to time of up to $100,000,000 aggregate principal amount of its Secured Medium Term Notes, Series A, Due from One Year to Forty Years from Date of Issue (the "Notes"). The Notes will be issued under an indenture of trust (the "Indenture") dated as of October __, 1998 between the Company and The Bank of New York, as trustee (the "Trustee"). Prior to the Substitution Date (as defined in the Indenture), the Notes will be secured by the delivery to the Trustee of (1) one or more first mortgage bonds issued under the Company's mortgage indenture, as specified in the Prospectus referred to below (collectively, the "Pledged Bonds"). Unless otherwise set forth in a supplement to the Prospectus referred to below, the Notes will be issued in fully registered form in minimum denominations of $1,000 and in denominations exceeding such amount by integral multiples of $1,000 and will have the annual interest rates, maturities and, if appropriate, other terms set forth in such supplement to the Prospectus. The Notes will be issued, and the terms thereof established, in accordance with the Indenture and, in the case of Notes sold pursuant to Section 2(a), the Secured Medium Term Note Administrative Procedures attached hereto as Exhibit A (the "Procedures") (unless a Terms Agreement (as defined in Section 2(b)), modifies or supersedes such Procedures with respect to the Notes issued pursuant to such Terms Agreement). The Procedures may only be amended by written agreement of the Company and you after notice to, and with the approval of, the Trustee. For the purposes of this Agreement, the term "Agent" shall refer to any of you acting solely in the capacity as agent for the Company pursuant to Section 2(a) and not as principal (collectively, the "Agents"), the term the "Purchaser," shall refer to any one of you acting solely as principal pursuant to Section 2(b) and not as agent, and the term "you" shall refer to you collectively whether at any time any of you is acting in both such capacities or in either such capacity. 1. Representations and Warranties. The Company represents and warrants to, and agrees with, you as set forth below in this Section 1. Certain terms used in this Section 1 are defined in paragraph (y) hereof. (a) At the time of filing and the Effective Date, the Company meets the requirements for use of Form S-3 under the Securities Act of 1933, as amended (the "Act") for purposes of registering the Notes and has filed with the Securities and Exchange Commission (the "Commission") a registration statement on such Form (File Number: 333-62019), including a prospectus, which registration statement, as amended, has become effective, for the registration under the Act of the issuance of $100,000,000 aggregate principal amount of the Notes. Such registration statement, as amended at the date of this Agreement, meets the requirements set forth in Rule 415(a)(1)(ix) or (x) under the Act and complies in all other material respects with said Rule. In connection with the sale of Notes the Company proposes to file with the Commission pursuant to the applicable paragraph of Rule 424(b) under the Act supplements to the Prospectus (as defined by Section 1(y)) specifying the interest rates, maturity dates and, if appropriate, other terms of the Notes sold pursuant hereto or the offering thereof. (b) As of the Execution Time (as defined by Section 1(y)), on the Effective Date (as defined by Section 1(y)), when any supplement to the Prospectus is filed with the Commission, as of the date of any Terms Agreement (as defined by Section 2(b)) and at the date of delivery by the Company of any Notes sold hereunder (a "Closing Date"), (i) the Registration Statement (as defined by Section 1(v)), as amended as of any such time, and the Prospectus, as supplemented as of any such time, and the Indenture will comply in all material respects with the applicable requirements of the Act, the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act") and the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the respective rules thereunder; (ii) the Registration Statement, as amended as of any such time, did not or will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and (iii) the Prospectus, as supplemented as of any such time, will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to (i) the Statement of Eligibility on Form T-1 or (ii) the information contained in or omitted from the Registration Statement or the Prospectus (or any supplement thereto) in reliance upon and in conformity with information furnished in writing to the Company by any of you specifically for use in connection with the preparation of the Registration Statement or the Prospectus (or any supplement thereto). -2- (c) As of the time any Notes are issued and sold hereunder, each of the Indenture and the Indenture of First Mortgage, dated October 1, 1947, as supplemented and amended by twenty-two supplemental indentures, including the Twenty-Second Supplemental Indenture, dated as of October __, 1998, (the "New Supplement") between the Company and the Bank of New York, as trustee (as so supplemented and amended, the "Mortgage" and such trustee being the "Mortgage Trustee"), assuming the due execution and delivery thereof by the Trustee and the Mortgage Trustee, respectively, will constitute a legal, valid and binding instrument enforceable against the Company in accordance with its terms except, in each case, as enforceability may be limited by bankruptcy, reorganization, moratorium, insolvency or other laws now or hereafter in effect relating to or affecting mortgagees' or other creditors' rights or general principles of equity (whether asserted in a proceeding at law or in equity), and the Notes and the Pledged Bonds will have been duly authorized, executed, authenticated and, when the Notes have been paid for by the purchasers thereof, the Notes and the Pledged Bonds will constitute legal, valid and binding obligations of the Company entitled to the benefits of the Indenture or the Mortgage, respectively except, in each case, as enforceability may be limited by bankruptcy, reorganization, moratorium, insolvency or other laws now or hereafter in effect relating to or affecting mortgagees' or other creditors' rights or general principles of equity (whether asserted in a proceeding at law or in equity); the Notes, the Indenture, the Mortgage and the Pledged Bonds will conform in all material respects to all statements relating thereto contained in the Prospectus. (d)(i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is incorporated, with full corporate power and authority to own or lease its properties and conduct its business as described in the Prospectus. The properties now owned or leased and the business now transacted by the Company do not require it to be qualified as a foreign corporation in any jurisdiction. (d)(ii) SJG Capital Trust (the "Subsidiary") has been duly organized and is validly existing as a statutory trust in good standing under the laws of the jurisdiction in which it is organized, with full power and authority to own its properties and conduct its business as described in the Prospectus, and is duly qualified to do business as a foreign organization and is in good standing under the laws of each jurisdiction which requires such qualification wherein it owns or leases material properties or conducts material business, except where the failure to be so qualified would not materially adversely affect the Company and its Subsidiary taken as a whole. (e) All the outstanding shares of capital stock of the Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable, and, except as otherwise set forth in the Prospectus, all outstanding shares of capital stock of the Subsidiary are owned directly by the Company free and clear of any perfected security interest and, to the knowledge of the Company, any other security interests, claims, liens or encumbrances. -3- (f) The Company's authorized equity capitalization is as set forth in the Registration Statement; and the Notes and the Pledged Bonds conform to the descriptions thereof contained in the Prospectus (subject to the insertion in the Notes and the Pledged Bonds of the maturity dates, the interest rates and other similar terms thereof which will be described in supplements to the Prospectus as contemplated by the last sentence of Section 1(a) of this Agreement). (g) No consent, approval, authorization or order of any court or governmental agency or body (other than authorization from the New Jersey Board of Public Utilities, referred to below) is required for the consummation of the transactions contemplated herein except such as have been obtained under the Act, the Exchange Act and the Trust Indenture Act, and such as may be required under the blue sky laws of any jurisdiction in connection with the sale of the Notes as contemplated by this Agreement and such other approvals as have been obtained. The New Jersey Board of Public Utilities (the "BPU") has entered an order, dated August 20, 1998, authorizing the issuance and sale of the Notes and the issuance of the Pledged Bonds by the Company on terms and conditions not inconsistent with the terms and conditions set forth in or contemplated by this Agreement. The Notes, when issued and sold by the Company, and the Pledged Bonds, when issued by the Company, will comply in all material respects with the terms, conditions and limitations set forth in such order. Such order is in full force and effect and has not been amended, supplemented or otherwise modified without the consent of the Agents and the period has expired during which any proceeding to review, suspend, limit, modify, restrict or revoke such order may be instituted as of right by any Person other than the BPU. (h) Any accounting firm which audited the financial statements included or incorporated by reference in the Registration Statement and the Prospectus are independent accountants within the meaning of the Act and the Act Regulations. (i) The financial statements, selected financial information and any supporting schedules of the Company and its consolidated subsidiaries included or incorporated by reference in the Registration Statement and the Prospectus fairly present the consolidated financial position of the Company and its Subsidiary as of the dates indicated and the consolidated results of their operations for the periods specified; and, except as stated therein, said financial statements have been prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis; and the supporting schedules included or incorporated by reference in the Registration Statement present fairly the information required to be stated therein. No other financial statements or schedules of the Company are required by the Act or the rules and regulations thereunder, or Exchange Act or the rules and regulations thereunder, to be included in the Registration Statement or the Prospectus. (j) This Agreement has been duly and validly authorized, executed and delivered by the Company and, upon execution and delivery by the Agents, will be a -4- valid and binding agreement of the Company, enforceable in accordance with its terms except, as enforceability may be limited by bankruptcy, reorganization, moratorium, insolvency or other laws now or hereafter in effect relating to or affecting mortgagees' or other creditors' rights or general principles of equity (whether asserted in a proceeding at law or in equity). (k) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as may otherwise be stated therein or contemplated thereby, (a) there has been no material adverse change, or any development known to the Company involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings or business affairs of the Company and its Subsidiary taken as a whole, whether or not arising in the ordinary course of business and (b) there has not been any material transaction entered into by the Company or its Subsidiary, other than transactions in the ordinary course of business and transactions contemplated by the Registration Statement and the Prospectus. (l) Neither the Company nor its Subsidiary is in violation of its articles of incorporation, by-laws or other organizational documents. No default exists, and no event has occurred which, with notice or lapse of time or both, would constitute a default in the due performance and observance of any obligation, agreement or condition by the Company or its Subsidiary contained in any mortgage, indenture, deed of trust, note, loan agreement or other agreement or instrument to which the Company or its Subsidiary is a party or by which the Company or its Subsidiary is bound or to which any property or asset of the Company or its Subsidiary is subject, except for defaults the effect of which would not materially adversely affect the Company and its Subsidiary taken as a whole. The execution and delivery of this Agreement, the Indenture and the New Supplement and the consummation of the transactions contemplated herein, therein and pursuant to any applicable Terms Agreement have been or will be duly authorized by all necessary corporate action and will not conflict with, result in a breach of any of the terms or provisions of, or constitute a default under, or, except for the issuance of Notes and the Pledged Bonds, secured by the lien of the Mortgage, result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or its Subsidiary pursuant to the terms or provisions of, or give any party a right to terminate any of its obligations under, or result in the acceleration of any obligation under: (i) the articles of incorporation or bylaws (or equivalent documents) of the Company or its Subsidiary, or (ii) any indenture, mortgage, deed of trust, loan agreement, bond, debenture, note or other evidence of indebtedness, lease, contract or other material agreement or instrument to which the Company or its Subsidiary is a party or by which it or any of them may be bound or to which any of the property or assets of the Company or any such Subsidiary is subject, except, in the case of clause (ii) only, where the effect of which would not materially adversely affect the Company and its Subsidiary taken as a whole, nor will such action violate or conflict with any judgment, ruling, decree, order, statute, rule or regulation of any court or other -5- governmental agency or body applicable to the business or properties of the Company or its Subsidiary. (m) The Company has good and marketable title to all the real properties described in the granting clauses of the Mortgage, subject (other than properties released from the lien of the Mortgage pursuant to the terms thereof) to the lien of the Mortgage and no other liens or encumbrances except liens permitted under the Mortgage. No further deeds, conveyances, transfers or instruments, other than the New Supplement and related documents, are necessary for the purpose of effectually subjecting such properties to the direct lien and operation of the Mortgage. (n) The Mortgage constitutes a valid first mortgage lien of record upon all real and personal property of the Company (including easements, rights-of-way, and other rights relating to real estate and franchises) specifically or generally described or referred to in the Mortgage as subject to the lien thereof and owned by the Company at the time of the actual issue of the Pledged Bonds, subject to no liens or encumbrances other than "excepted encumbrances" (as defined in Subdivision A of Section 3.04 of the Mortgage). (o) The Mortgage has been duly filed for recording in such manner and in such places as are required by law in order to establish, preserve, and protect the first lien of the Mortgage on all real and personal property of the Company specifically or generally described or referred to in the Mortgage as subject to the lien of the Mortgage (except that (a) additional filings and recordings of the Mortgage will be required if property is acquired by the Company subsequent to the date hereof which is located in a county where the Mortgage has not previously been filed for recording and (b) the Mortgage will not be a first lien on property hereafter acquired by the Company which at the time of acquisition is subject to prior liens or other encumbrances), and all taxes, fees and other charges payable in connection therewith have been paid in full. (p) Except as may be set forth in the Registration Statement and Prospectus, there is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened against or affecting, the Company or its Subsidiary, wherein an unfavorable ruling, decision or finding might materially and adversely affect the Company and its Subsidiary taken as a whole or the business, properties, condition (financial or otherwise) or results of operations of the Company and its Subsidiary as a whole or which in the aggregate might affect the ability of the Company to enter into this Agreement, the Indenture or the New Supplement or issue and sell the Notes or issue the Pledged Bonds; and there are no contracts or documents of the Company or its Subsidiary which are required to be described in or filed as exhibits to the Registration Statement by the Act or the rules and regulations thereunder, or the Exchange Act or the rules and regulations thereunder, which have not been so described or filed as required. -6- (q) Each of the Company and its Subsidiary has valid and sufficient grants, franchises, licenses and permits, adequate for the conduct of its business in the territories in which it is now conducting such business and the ownership of the properties now owned by it and, except as otherwise set forth in the Registration Statement and the Prospectus, there are no legal or governmental proceedings pending or threatened which might result in a material modification, suspension or revocation thereof. Each of the Company and its Subsidiary has, and is operating in compliance with, in all material respects, all material and necessary authorizations, approvals, orders, licenses, certificates and permits of and from all governmental regulatory officials and bodies, to own, lease, license and operate its properties and conduct its business as presently conducted and as contemplated by the Registration Statement and the Prospectus, and the Company and its Subsidiary have filed all material reports and taken all other action required by the authority issuing the same where the failure to file or take other action might reasonably be expected to give rise to a right in such authority to seek to revoke, suspend or materially limit any such material license, certificate or permit. The Company has all requisite power, authority, authorizations, approvals, orders, licenses, certificates and permits to enter into this Agreement and to carry out the provisions and conditions hereof. Neither the Company nor its Subsidiary has received any notice of conflict with asserted rights of others in any respect (nor is the Company aware of any existing violation or breach of any authorizations, approvals, orders, licenses, certificates or permits by the Company or its Subsidiary providing a basis therefor) which could materially adversely affect its business, except as described in the Registration Statement and Prospectus. (r) Except as set forth in the Registration Statement and the Prospectus, no labor disturbance by the employees of the Company or its Subsidiary exists or is imminent which might be expected to materially adversely affect the conduct of the business, operations, financial condition or income of the Company and its Subsidiary, taken as a whole. (s) South Jersey Industries, Inc., a New Jersey corporation (the "Parent Company") owns all of the common stock of the Company. The Parent Company is a "holding company" and the Company is a "subsidiary" of a "holding company" as such terms are defined under the Public Utility Holding Company Act of 1935, as amended. The Company and the Parent Company are exempt from all provisions of the Public Utility Holding Company Act of 1935 (except Section 9(a)(2) thereof) pursuant to Section 3(a)(1) and Rule 2 of such Act and the Parent Company has duly filed all exemption statements required by Rule 2 of such Act. There are no actions, proceedings or investigations pending or (to the knowledge of the Company) threatened to terminate such exemptions. (t) Except as set forth in the Registration Statement and the Prospectus, neither the Company nor its Subsidiary (in the case of matters relating to environmental protection, occupational safety and health and equal employment opportunity, to the best of its knowledge) is in violation of any laws, ordinances, governmental rules and regulations to which it is subject, which violation is likely to -7- materially adversely affect the financial condition, business or operations of the Company and the Subsidiary taken as a whole. (u) The Company is not an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. (v) No stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending or, to the best knowledge of the Company, threatened by the SEC. (w) Immediately after any sale of Notes by the Company hereunder or under any Terms Agreement, the aggregate amount of debt securities which shall have been issued and sold by the Company hereunder will not exceed the aggregate amount of debt securities registered under the Registration Statement. (x) Except as set forth in the Registration Statement, to the best of the knowledge and belief of the Company, the Company is not in violation of any applicable Federal, state, or local laws, statutes, rules, regulations or ordinances relating to public health, safety or the environment, including, without limitation, relating to releases, discharges, emissions or disposals to air, water, land or ground water, to the withdrawal or use of ground water, to the use, handling or disposal of polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde, to the treatment, storage, disposal or management of hazardous substances (including, without limitation, petroleum, crude oil or any fraction thereof, or other hydrocarbons), pollutants or contaminants, to exposure to toxic, hazardous or other controlled, prohibited or regulated substances or to the use and restoration of land, which violation is likely to have a material adverse effect on the business, financial condition or results of operations of the Company. Except as set forth in the Registration Statement and the Prospectus, the Company does not know of any liability or class of liability of the Company under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.), the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section 6901 et seq.), the New Jersey Spill Compensation and Control Act, as amended (N.J.S.A. 58:10-23.11 et seq.) or the Environmental Cleanup Responsibility Act, as amended (N.J.S.A. 13:1 K-6 et seq.) for the release of a non-deminimus quantity of hazardous or toxic substances or wastes. (y) The terms which follow, when used in this Agreement, shall have the meanings indicated. The term "the Effective Date" shall mean each date that the Registration Statement and any subsequent post effective amendment or amendments thereto became or become effective. "Execution Time" shall mean the date and time that this Agreement is executed and delivered by the parties hereto. "Prospectus" shall mean the form of prospectus relating to the Notes contained in the Registration Statement at the Effective Date. "Registration Statement" shall mean the registration statement referred to in paragraph (a) above, including incorporated documents, -8- exhibits and financial statements, as amended at the Execution Time. "Rule 415" and "Rule 424" refer to such rules under the Act. Any reference herein to the Registration Statement, or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 which were filed under the Exchange Act on or before the Effective Date of the Registration Statement or the issue date of the Prospectus, as the case may be; and any reference herein to the terms "amend," "amendment" or "supplement" with respect to the Registration Statement or the Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the Effective Date of the Registration Statement or the issue date of the Prospectus, as the case may be, deemed to be incorporated therein by reference. 2. Appointment of Agents; Solicitation by the Agents of Offers to Purchase; Sales of Notes to a Purchaser. (a) Subject to the terms and conditions set forth herein, the Company hereby authorizes each of the Agents to act as its agent to solicit offers for the purchase of all or part of the Notes from the Company. On the basis of the representations and warranties, and subject to the terms and conditions set forth herein, each of the Agents agrees, as agent of the Company, to use its reasonable best efforts to solicit offers to purchase the Notes from the Company upon the terms and conditions set forth in the Prospectus (and any supplement thereto) and in the Procedures. Each Agent shall make reasonable efforts to assist the Company in obtaining performance by each purchaser whose offer to purchase Notes has been solicited by such Agent and accepted by the Company, but such Agent shall not, except as otherwise provided in this Agreement, have any liability to the Company in the event any such purchase is not consummated for any reason. Except as provided in Section 2(b), under no circumstances will any Agent be obligated to purchase any Notes for its own account. It is understood and agreed, however, that any Agent may purchase Notes as principal pursuant to Section 2(b). The Company reserves the right, in its sole discretion, to instruct the Agents to suspend at any time, for any period of time or permanently, the solicitation of offers to purchase the Notes. Upon receipt of instructions from the Company, the Agents will forthwith suspend solicitation of offers to purchase Notes from the Company until such time as the Company has advised them that such solicitation may be resumed. The Company agrees to pay each Agent a commission, on the Closing Date with respect to each sale of Notes by the Company as a result of a solicitation made by such Agent, in an amount equal to that percentage specified in Schedule I hereto of the aggregate principal amount of the Notes so sold by the Company. Such commission shall be payable as specified in the Procedures. Subject to the provisions of this Section and to the Procedures, offers for the purchase of Notes may be solicited by an Agent as agent for the Company at such time and in such amounts as such Agent deems advisable. The Company may from time to time offer Notes -9- for sale otherwise than through an Agent; provided, however, that so long as this Agreement shall be in effect the Company shall not solicit or accept offers to purchase Notes in this registered offering through any agent other than an Agent. If the Company shall default in its obligations to deliver Notes to a purchaser whose offer it has accepted, the Company shall indemnify and hold each Agent harmless against any loss, claim or damage arising from or as a result to such default by the Company. (b) Subject to the terms and conditions stated herein, whenever the Company and any Agent determine that the Company shall sell Notes directly to such Agent as Purchaser, each such sale of Notes shall be made in accordance with the terms of this Agreement, unless otherwise agreed by the Company and such Agent, and any supplemental agreement relating thereto (which may be an oral or written agreement) between the Company and the Purchaser. Each such supplemental agreement (which shall be substantially in the form of Exhibit B) is herein referred to as a "Terms Agreement." Each Terms Agreement shall describe (whether orally or in writing) the Notes to be purchased by the Purchaser pursuant thereto, and shall specify the principal amount of such Notes, the maturity date of such Notes, the rate at which interest will be paid on the Notes and the record dates for each payment of interest, the Closing Date for the purchase of such Notes, the place of delivery of the Notes and payment therefor, the method of payment and any requirements for the delivery of opinions of counsel, certificates from the Company or its officers, or letter from the Company's independent public accountants as described in Section 6(b). Such Terms Agreement shall also specify the period of time referred to in Section 4(m). The Purchaser's commitment to purchase Notes pursuant to any Terms Agreement shall be deemed to have been made on the basis of the representations and warranties of the Company herein contained and shall be subject to the terms and conditions herein set forth. Delivery of the certificates for Notes sold to the Purchaser pursuant to any Terms Agreement shall be made as agreed to between the Company and the Purchaser as set forth in the respective Terms Agreement, not later than the Closing Date set forth in such Terms Agreement, against payment of funds to the Company in the net amount due to the Company for such Notes by the method and in the form set forth in the Procedures unless otherwise agreed to between the Company and the Purchaser in such Terms Agreement. Unless otherwise agreed to between the Company and the Purchaser in a Terms Agreement, any Note sold to a Purchaser (i) shall be purchased by such Purchaser at a price equal to 100% of the principal amount thereof less a percentage equal to the commission applicable to an agency sale of a Note of identical maturity and (ii) may be resold by such Purchaser at varying prices related to prevailing market prices at the time of resale or, if so agreed, at a fixed public offering price, as determined by such Purchaser. In connection with any resale of Notes purchased, a Purchaser may use a selling or dealer group and may reallow any portion of the discount or commission payable pursuant hereto to dealers or purchasers. -10- 3. Offering and Sale of Notes. Each Agent and the Company agree to perform the respective duties and obligations specifically provided to be performed by them in the Procedures. 4. Agreements. The Company agrees with you that: (a) Prior to the termination of the offering of the Notes, the Company will not file any amendment to the Registration Statement or supplement to the Prospectus except (i) periodic or current reports filed under the Exchange Act (including, without limitation, pursuant to Sections 13 and 15 of the Exchange Act) or (ii) a supplement relating to any offering of Notes providing solely for the specification of or a change in the maturity dates, interest rates, issuance prices or other similar terms of any Notes, unless the Company shall have furnished to each of you a copy for your review prior to filing and given each of you a reasonable opportunity to comment on such proposed amendment or supplement. Subject to the foregoing sentence, the Company will cause each supplement to the Prospectus to be filed with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to you of such filing. The Company will promptly advise each of you (i) when the Prospectus, and any supplement thereto, shall have been filed with the Commission pursuant to Rule 424(b), (ii) when, prior to the termination of the offering of the Notes, any amendment of the Registration Statement shall have been filed or become effective, (iii) of any request by the Commission for any amendment of the Registration Statement or supplement to the Prospectus or for any additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement, or any part thereof, or the institution of any proceeding for that purpose, or if the Company has knowledge that any such action is contemplated by the Commission, and (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. The Company will use its reasonable best efforts to prevent the issuance of any such stop order and, if issued, to obtain as soon as reasonably possible the withdrawal thereof. (b) If, at any time when a prospectus relating to the Notes is required to be delivered under the Act, any event occurs as a result of which the Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it shall be necessary to amend the Registration Statement or to supplement the Prospectus to comply with the Act or the Exchange Act or the respective rules thereunder, the Company promptly will (i) notify each of you to suspend solicitation of offers to purchase Notes (and, if so notified by the Company, each of you shall forthwith suspend such solicitation and cease using the Prospectus as then supplemented), (ii) prepare and file with the Commission, subject to the first sentence of paragraph (a) of this Section 4, an amendment or supplement which will correct such statement or omission or effect such compliance and (iii) supply any -11- supplemented Prospectus to each of you in such quantities as you may reasonably request. If such amendment or supplement, and any documents, certificates and opinions furnished to each of you pursuant to paragraph (g) of this Section 4 in connection with the preparation or filing of such amendment or supplement are satisfactory in all respects to you, you will, upon the filing of such amendment or supplement with the Commission and upon the effectiveness of an amendment to the Registration Statement, if such an amendment is required, resume your obligation to solicit offers to purchase Notes hereunder. Notwithstanding the foregoing, if, at the time of any notification to suspend solicitations, any Agent shall own any of the Notes with the intention of reselling them, or the Company has accepted an offer to purchase Notes but the related settlement has not occurred, the Company, subject to the provisions of subsection (a) of this Section, will promptly prepare and file with the Commission an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance. (c) The Company, during the period when a prospectus relating to the Notes is required to be delivered under the Act, will file promptly all documents required to be filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and will furnish to each of you copies of such documents. In addition, except as otherwise provided in Section 4(n) hereof, on or prior to the date on which the Company makes any announcement to the general public concerning earnings or concerning any other event which is required to be described, or which the Company proposes to describe, in a document filed pursuant to the Exchange Act, the Company will furnish to each of you the information contained or to be contained in such announcement and will also furnish to each of you copies of all other press releases or announcements to the general public. The Company will immediately notify each of you of any downgrading in the rating of the Notes or any other debt securities or preferred stock of the Company, or any proposal to downgrade the rating of the Notes or any other debt securities or preferred stock of the Company, by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act), as soon as the Company learns of any such downgrading or proposal to downgrade. (d) As soon as practicable, the Company will make generally available to its security holders and to each of you an earnings statement or statements of the Company and its Subsidiary which will satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act. (e) The Company will furnish to each of you and your counsel, without charge, copies of the Registration Statement (including all amendments and exhibits thereto) and, so long as delivery of a prospectus may be required by the Act, as many copies of the Prospectus and any supplement thereto as you may reasonably request. (f) The Company will arrange for the qualification of the Notes for sale under the laws of such jurisdictions as any of you may designate, will maintain such qualifications in effect so long as required for the distribution of the Notes, and will provide access to information to assist in the determination of the legality of the Notes for purchase by institutional investors. -12- (g) The Company shall furnish to each of you such information, documents, certificates of officers of the Company and opinions of counsel for the Company relating to the business, operations and affairs of the Company, the Registration Statement, the Prospectus, and any amendments thereof or supplements thereto, the Indenture, the Notes, this Agreement, the Procedures and the performance by the Company and you of its and your respective obligations hereunder and thereunder as any of you may from time to time and at any time prior to the termination of this Agreement reasonably request. (h) The Company shall, whether or not any sale of the Notes is consummated, (i) pay all expenses incident to the performance of its obligations under this Agreement, including the fees and disbursements of its accountants and counsel, the cost of printing or other production and delivery of the Registration Statement, the Prospectus, all amendments thereof and supplements thereto, the Indenture, the New Supplement, this Agreement and all other documents relating to the offering, the cost of preparing, printing, packaging and delivering the Notes, the fees and disbursements, including fees of counsel, incurred in compliance with Section 4(f), the fees and disbursements of the Trustee and the fees of any agency that rates the Notes, (ii) reimburse each of you on a monthly basis for all reasonable out-of-pocket expenses (including without limitation advertising expenses), if any, incurred by you in connection with this Agreement, but not during a period when the Company has instructed the Agents not to solicit purchasers for the Notes and (iii) pay the reasonable fees and expenses of your counsel incurred in connection with this Agreement. (i) Each acceptance by the Company of an offer to purchase Notes will be deemed to be an affirmation that its representations and warranties contained in this Agreement are true and correct at the time of such acceptance, as though made at and as of such time, and a covenant that such representations and warranties will be true and correct at the time of delivery to the purchaser of the Notes relating to such acceptance, as though made at and as of such time (it being understood that for purposes of the foregoing affirmation and covenant such representations and warranties shall relate to the Registration Statement and Prospectus as amended or supplemented at each such time). Each such acceptance by the Company of an offer for the purchase of Notes shall be deemed to constitute an additional representation, warranty and agreement by the Company that, as of the settlement date for the sale of such Notes, after giving effect to the issuance of such Notes and of any other Notes to be issued on or prior to such settlement date, the aggregate amount of Notes which have been issued and sold by the Company will not exceed the amount of Notes registered pursuant to the Registration Statement. (j) Each time that the Registration Statement or the Prospectus is amended or supplemented (other than by an amendment or supplement providing solely for the specification of or a change in the maturity dates, the interest rates, the issuance prices or other similar terms of any Notes sold pursuant hereto), the Company will deliver or cause to be delivered promptly to each of you a certificate of the Company, signed by the Chairman of the Board or the President and the principal financial or accounting officer of the Company, dated the date of the effectiveness of such amendment or the date of the filing of such supplement, in form reasonably satisfactory to you, of the same tenor as the certificate referred to in Section 5(d) but modified to relate to the last day of the fiscal quarter for -13- which financial statements of the Company were last filed with the Commission and to the Registration Statement and the Prospectus as amended and supplemented to the time of the effectiveness of such amendment or the filing of such supplement. (k) Each time that the Registration Statement or the Prospectus is amended or supplemented (other than by an amendment or supplement (i) providing solely for the specification of or a change in the maturity dates, the interest rates, the issuance prices or other similar terms of any Notes sold pursuant hereto or (ii) consisting of a current or periodic report under the Exchange Act unless, in the case of clause (ii) above, in the reasonable judgment of any of you, such financial statements or other information are of such a nature that an opinion of counsel should be furnished), the Company shall furnish or cause to be furnished promptly to each of you written opinions of counsel to the Company satisfactory to each of you, dated the date of the effectiveness of such amendment or the date of the filing of such supplement, in form satisfactory to each of you, of the same tenor as the opinions referred to in Sections 5(b) and 5(c) but modified to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of the effectiveness of such amendment or the filing of such supplement or, in lieu of such opinion, counsel last furnishing such an opinion to you may furnish each of you with a letter to the effect that you may rely on such last opinion to the same extent as though it were dated the date of such letter authorizing reliance (except that statements in such last opinion will be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of the effectiveness of such amendment or the filing of such supplement). (l) Each time that the Registration Statement or the Prospectus is amended or supplemented to set forth amended or supplemental financial information (except for current reports on Form 8-K which only announce quarterly earnings), the Company shall cause its independent public accountants promptly to furnish to each of you a letter, dated the date of the effectiveness of such amendment or the date of the filing of such supplement, in form satisfactory to each of you, of the same tenor as the letter referred to in Section 5(e) with such changes as may be necessary to reflect the amended and supplemental financial information included or incorporated by reference in the Registration Statement and the Prospectus, as amended or supplemented to the date of such letter; provided, however, that, if the Registration Statement or the Prospectus is amended or supplemented solely to include or incorporate by reference financial information as of and for a fiscal quarter, the Company's independent public accountants may limit the scope of such letter, which shall be satisfactory in form to each of you, to the unaudited financial statements, the related "Management's Discussion and Analysis of Financial Condition and Results of Operations" and any other information of an accounting, financial or statistical nature included in such amendment or supplement, unless, in the reasonable judgment of any of you, such letter should cover other information or changes in specified financial statement line items. (m) If required pursuant to any Terms Agreement, during the period, if any, specified (whether orally or in writing) in such Terms Agreement, the Company shall not, without the prior consent of the Purchaser thereunder, offer, sell, contract to sell or announce the proposed issuance of any debt securities, including Notes (other than the Notes being sold under such Terms Agreement), with terms substantially similar to the Notes being -14- purchased pursuant to such Terms Agreement, other than borrowings under its revolving credit agreement and lines of credit and issuances of its commercial paper. (n) The Company shall not be required to comply with the second sentence of Section 4(c) and the provisions of Sections 4(g), 4(j), 4(k) and 4(l) hereof during any period (x) from any time when (i) the Agents shall have suspended solicitation of purchasers of the Notes, in their capacity as agents pursuant to Section 2(a) hereof and (ii) the Agents shall not then hold any Notes as principal purchased pursuant to a Terms Agreement, (y) to the time the Company shall determine that solicitation of purchasers of the Notes should be resumed or shall subsequently enter into a new Terms Agreement with any or all of the Agents, at which time all such action specified in the aforementioned provisions will be taken, as applicable. 5. Conditions to the Obligations of the Agents. The obligation of each Agent to solicit offers to purchase the Notes shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein as of the Execution Time, on the Effective Date, when any supplement to the Prospectus is filed with the Commission, as of each Closing Date and on the date of each solicitation, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions: (a) If filing of the Prospectus, or any supplement thereto, is required pursuant to Rule 424(b), the Prospectus, and any such supplement, shall have been filed in the manner and within the time period required by Rule 424(b); and no stop order suspending the effectiveness of the Registration Statement, or any part thereof, shall have been issued and no proceedings for that purpose shall have been instituted or threatened, or, to the knowledge of the Company or any Agent, be contemplated by the Commission. (b) The Company shall have furnished to each Agent the opinion of Dechert Price & Rhoads, counsel for the Company, dated the Execution Time, substantially to the effect, as appropriate, that (except that, after the Substitution Date, such opinion need not be given with respect to the New Supplement, the Mortgage, the Mortgage Trustee or the Pledged Bond): (i)(a) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is chartered, with full corporate power and authority to own its properties and conduct its business as described in the Prospectus. The nature of the business conducted by the Company and the location and character of the property owned or leased by it do not require its qualification as a foreign corporation in any jurisdiction. The Company holds all franchises, certificates of public convenience, licenses and permits necessary to carry on the utility business in which it is engaged; -15- (i)(b) The Subsidiary has been duly organized and is validly existing as a statutory trust in good standing under the laws of the jurisdiction in which it is organized, with full power and authority to own its properties and conduct its business as described in the Prospectus; (ii) All the outstanding shares of capital stock of the Subsidiary have been duly and validly authorized and issued and are fully paid and nonassessable, and, except as otherwise set forth in the Prospectus, all outstanding shares of capital stock of the Subsidiary are owned directly by the Company free and clear of any perfected security interest and, to the knowledge of such counsel, after due inquiry, any other security interests, claims, liens or encumbrances; (iii) The Company's authorized equity capitalization is as set forth in the Registration Statement; and the Notes and the Pledged Bond conform to the descriptions thereof contained in the Prospectus (subject to the insertion in the Notes of the maturity dates, the interest rates and other similar terms thereof which will be described in supplements to the Prospectus as contemplated by the last sentence of Section l(a) of this Agreement); (iv) Each of the Indenture, the New Supplement, the Notes and the Pledged Bond has been duly authorized by all necessary corporate action on the part of the Company (no shareholder approval being required with respect to such authorization) and has been duly executed and delivered by authorized officers of the Company and, in the case of the Notes, duly authenticated by the Trustee, and in the case of the Pledged Bond, duly authenticated by the Mortgage Trustee, and the Indenture, the Mortgage (including the New Supplement), the Notes and the Pledged Bond are each valid and binding instruments enforceable in accordance with their respective terms except (A) that the enforceability thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or other similar laws relating to or affecting the enforcement of creditors' or mortgagees' rights generally, (B) to the extent that the availability of the remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding therefor may be brought, (C) that rights of acceleration arising from defaults other than payment defaults and the availability of equitable remedies may be limited by equitable principles of general applicability, (D) general principles of equity (whether asserted at a proceeding at law or in equity) and (E) that the laws of the State of New Jersey may limit certain remedies provided therein, but none of such principles or limitations will, in the opinion of such counsel, materially interfere with the practical realization of the benefits of the security intended to be provided by the Mortgage, and, in the opinion of such counsel, the Mortgage contains adequate provisions for enforcing payment of the Pledged Bond and realizing upon such security; and the Notes when executed and authenticated in accordance with the provisions of the Indenture and the Procedures and delivered by the Trustee and paid for by the purchasers thereof, will constitute legal, valid and binding obligations of the Company entitled to the benefits of the Indenture except, in each case, as enforceability may be limited by bankruptcy, reorganization, moratorium, insolvency or other laws now or hereafter in effect -16- relating to or affecting mortgagees' or other creditors' rights or general principles of equity (whether asserted in a proceeding at law or in equity); (v) The Pledged Bond is entitled to the benefits and security intended to be granted and afforded by the Mortgage, and is so secured equally and ratably with all other bonds outstanding under the Mortgage (except as to any sinking or other fund established for the bonds of any particular series). (vi) South Jersey Industries, Inc. ("SJI"), which owns all of the common stock of the Company, is a "holding company" and the Company is a "subsidiary" of a "holding company" as such terms are defined under the Public Utility Holding Company Act of 1935, as amended (the "1935 Act"), but SJI, having filed with the Securities and Exchange Commission an annual exemption statement for the current year pursuant to Rule 2 promulgated under the 1935 Act, and the Company are exempt from all provisions of the 1935 Act except Section 9(a)(2) thereof, relating to the acquisition of securities of a "public utility company." (vii) To the best knowledge of such counsel, there is no pending or threatened action, suit or proceeding before any court or governmental agency, authority or body involving the Company or its Subsidiary, of a character required to be disclosed in the Registration Statement which is not adequately disclosed in the Prospectus, and there is no franchise, contract or other document of a character required to be described in the Registration Statement or Prospectus, or to be filed as an exhibit, which is not described or filed as required; and the statements included or incorporated in the Prospectus describing any legal proceedings or material contracts or agreements relating to the Company fairly summarize such matters; (viii) The Registration Statement and the Prospectus comply, and any document incorporated by reference into the Prospectus at the time it was filed complied, in all material respects as to form with the requirements of the Act, the Exchange Act, the rules and regulations under the Exchange Act and the rules and regulations under the Act (except that no opinion need be expressed as to financial statements, schedules and other financial and statistical data contained in the Registration Statement or the Prospectus or incorporated by reference therein or in the Trustee's Statement of Eligibility on Form T-1). All descriptions in the Prospectus of statutes, regulations or legal or governmental proceedings are accurate and fairly present the information required to be shown; (ix) The Registration Statement has become effective under the Act; any required filing of the Prospectus, and any supplements thereto, pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); to the best knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued, no proceedings for that purpose have been instituted or threatened; -17- (x) This Agreement has been duly authorized, executed and delivered by the Company, and the Company has full corporate power and authority to enter into the Agreement; (xi) No consent, approval, authorization or order of any court or governmental agency or body (other than authorization from the New Jersey Board of Public Utilities, referred to below) is required for the consummation of the transactions contemplated herein except such as have been obtained under the Act and such as may be required under the blue sky laws of any jurisdiction in connection with the sale of the Notes as contemplated by this Agreement and such other approvals (specified in such opinion) as have been obtained. The BPU has entered an order, dated August 20, 1998, authorizing the issuance and sale of the Notes and the issuance of the Pledged Bond by the Company on terms and conditions not inconsistent with the terms and conditions set forth in or contemplated by this Agreement. The Notes, when issued and sold by the Company, and the Pledged Bond, when issued by the Company, will comply in all material respects with the terms, conditions and limitations set forth in such order. Such order is in full force and effect and has not been amended, supplemented or otherwise modified without the consent of the Agents and the period has expired during which any proceeding to review, suspend, limit, modify, restrict or revoke such order may be instituted as of right by any Person other than the BPU. (xii) Neither the execution and delivery of the Indenture or the New Supplement, the issue and sale of the Notes or the issuance of the Pledged Bond, nor the consummation of any other of the transactions herein contemplated nor the fulfillment of the terms hereof will conflict with, result in a breach or violation of, or constitute a default under, any law or the charter or bylaws of the Company or the terms of any indenture or other agreement or instrument known to such counsel and to which the Company or its Subsidiary is a party or bound, or any judgment, order, decree or regulation known to such counsel to be applicable to the Company or its Subsidiary of any court, regulatory body, administrative agency, or governmental body having jurisdiction over the Company or its Subsidiary; and except for the issuance of the Notes and the Pledged Bonds which are secured by the lien of the Mortgage, the execution and delivery of this Agreement by the Company, the consummation by the Company of the transactions therein contemplated and the compliance by the Company with the terms of this Agreement do not and will not result in the creation or imposition of any other lien, charge or encumbrance upon any of the assets of the Company or its Subsidiary pursuant to the terms or provisions of any of the aforesaid documents, instruments or matters; (xiii) To the best knowledge of such counsel, neither the Company nor its Subsidiary is in violation of its articles of incorporation, bylaws or other charter documents or in default (nor has an event occurred which with notice or lapse of time or both would constitute a default or acceleration) in the performance of any obligation, agreement or condition contained in any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement or -18- other evidence of indebtedness, lease, contract or other agreement or instrument known to such counsel to which the Company or its Subsidiary is a party or by which it or its properties is bound or affected, except for defaults which are not reasonably expected to have a materially adverse effect on the business, properties, condition (financial or otherwise) or results of operations of the Company and its Subsidiary considered as one enterprise, and neither the Company nor its Subsidiary is in violation of any judgment, ruling, decree, order, franchise, license or permit known to such counsel or any statute, rule or regulation of any court or other governmental agency or body applicable to the business or properties of the Company or its Subsidiary, which violation or default would be reasonably expected to have a materially adverse effect on the business, properties, condition (financial or otherwise) or results of operations of the Company or its Subsidiary considered as one enterprise; (xiv) To the best of such counsel's knowledge, no holders of securities of the Company have the right to require registration of any of the Company's securities in connection with the filing of the Registration Statement; (xv) All descriptions in the Prospectus of statutes, regulations or legal or governmental proceedings are accurate and fairly present the information required to be shown; (xvi) The Company has good and marketable title in fee simple to all the real property and good and merchantable title to all the personal property specifically or generally described or referred to in the Mortgage as subject to the lien thereof, except properties expressly excepted therefrom and properties properly released from the lien thereof pursuant to the terms thereof; the description in the Mortgage of such properties is legally sufficient to constitute a lien thereon; and such properties constitute substantially all the permanent physical properties of the Company and are held by the Company free and clear of all liens and encumbrances except the lien of the Mortgage and "excepted encumbrances" (as defined in Subdivision A of Section 3.04 of the Mortgage). (xvii) The Mortgage constitutes a valid first mortgage lien of record upon all real and personal property of the Company (including easements, rights-of-way, and other rights relating to real estate and franchises) specifically or generally described or referred to in the Mortgage as subject to the lien thereof and owned by the Company at the time of the actual issue of the Pledged Bond, subject to no liens or encumbrances other than "excepted encumbrances" (as defined in Subdivision A of Section 3.04 of the Mortgage). (xviii) The Mortgage has been duly filed for recording in such manner and in such places as are required by law in order to establish, preserve, and protect the first lien of the Mortgage on all real and personal property of the Company specifically or generally described or referred to in such instruments as subject to the lien of the Mortgage (except that (a) additional filings and recordings of the Mortgage will be required if property is acquired by the Company subsequent to the date hereof which -19- is located in a county where the Mortgage has not previously been filed for recording and (b) the Mortgage will not be a first lien on property hereafter acquired by the Company which at the time of acquisition is subject to prior liens or other encumbrances), and all taxes, fees and other charges payable in connection therewith have been paid in full. (ix) In addition, such counsel shall state that it has participated in conferences with officers and other representatives of the Company, representatives of the independent accountants of the Company and Agents and counsel for the Agents at which the contents of the Registration Statement and the Prospectus were reviewed and discussed and, although such counsel is not passing upon, and does not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus or any documents incorporated, or deemed to be incorporated, by reference therein and has made no independent check or verification thereof, on the basis of the foregoing, no facts have come to such counsel's attention that have led such counsel to believe that the Registration Statement or the Prospectus at the Execution Time contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, except that such counsel need express no opinion or belief with respect to (x) the financial statements, schedules and other financial information included therein or incorporated, or deemed to be incorporated, by reference in the Registration Statement or the Prospectus or excluded therefrom or (y) exhibits to the Registration Statement, including the Form T-1. In rendering such opinion, such counsel may rely (i) as to matters of New Jersey law, upon local New Jersey counsel and (ii) as to matters of fact, to the extent deemed proper, on certificates of responsible officers of the Company and public officials. References to the Prospectus in this paragraph (b) include any supplements thereto at the date such opinion is rendered. (c) Each Agent shall have received from Chapman and Cutler, Chicago, Illinois, counsel for the Agents, such opinion or opinions, dated the Execution Time, with respect to the issuance and sale of the Notes, the Indenture, the Registration Statement, the Prospectus (together with any supplement thereto) and other related matters as the Agents may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters. (d) The Company shall have furnished to each Agent a certificate of the Company, signed by the Chairman of the Board or the President and the principal financial or accounting officer of the Company, dated the Execution Time, to the effect that the signers of such certificate have carefully examined the Registration Statement, the Prospectus, any supplement to the Prospectus and this Agreement and that: (i) the representations and warranties of the Company in this Agreement are true and correct in all material respects upon and as of such date the same effect as if made on such date and the Company has complied with all the agreements and satisfied -20- all the conditions on its part to be performed or satisfied as a condition to the obligation of the Agents to solicit offers to purchase the Notes (except that, after the Substitution Date, such certificate need not confirm any representation and warranties with respect to the New Supplement, the Mortgage or the Pledged Bonds); (ii) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or, to the Company's knowledge, threatened; and (iii) since the date of the most recent financial statements included in the Prospectus (exclusive of any supplement thereto dated after the Execution Time), there has been no material adverse change in the condition (financial or other), earnings, business or properties of the Company and its Subsidiary, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Prospectus (exclusive of any supplement thereto dated after the Execution Time). (e) At the Execution Time, Deloitte & Touche LLP shall have furnished to each Agent a letter or letters (which may refer to letters previously delivered to the Agents), dated as of the Execution Time, in form and substance satisfactory to the Agents, confirming that they are independent accountants within the meaning of the Act and the Exchange Act and the respective applicable published rules and regulations thereunder and stating in effect that: (i) in their opinion the audited financial statements and financial statement schedules, if any, included or incorporated in the Registration Statement and the Prospectus and reported on by them comply in form in all material respects with the applicable accounting requirements of the Act and the Exchange Act and the related published rules and regulations; (ii) on the basis of specified procedures (but not an examination in accordance with generally accepted auditing standards) which would not necessarily reveal matters of significance with respect to the comments set forth in such letter, a reading of the minutes of the meetings of the stockholders, directors and executive committee of the Company and the Subsidiary; a reading of the latest available interim unaudited consolidated financial statements of the Company and its Subsidiary; and inquiries of certain officials of the Company who have responsibility for financial and accounting matters of the Company and its Subsidiary as to transactions and events subsequent to the date of the most recent audited financial statements included or incorporated in the Prospectus, nothing came to their attention which caused them to believe that: (1) any unaudited consolidated financial statements and pro forma financial statements, if any, included or incorporated in the Registration Statement and the Prospectus do not comply in form in all material respects with applicable accounting requirements and with the published rules and regulations of the Commission with respect to financial statements included or -21- incorporated in quarterly reports on Form 10-Q under the Exchange Act; and said unaudited financial statements are not in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included or incorporated in the Registration Statement and the Prospectus; (2) with respect to the period subsequent to the date of the most recent consolidated financial statements (other than any capsule information), audited or unaudited, included or incorporated in the Registration Statement and the Prospectus, there were any changes, at a specified date not more than five business days prior to the date of the letter, in the long-term or short-term debt, common equity or preferred stock (not subject to purchase or sinking funds) of the Company and its Subsidiary, or decreases in the consolidated net current assets or common equity of the Company and its Subsidiary, as compared with the amounts shown on the most recent consolidated balance sheet included or incorporated in the Registration Statement and the Prospectus, or for the period from the date of the most recent financial statements included or incorporated in the Registration Statement and the Prospectus to such specified date there were any decreases, as compared with the corresponding period in the preceding year in operating revenues or operating income or net income applicable to common stock of the Company and its Subsidiary, except in all instances for (i) changes resulting from the issuance of the Notes and (ii) changes or decreases set forth in such letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof unless said explanation is not deemed necessary by the Agents; or (3) the amounts included under the caption "Selected Financial Data" of the Company's Annual Report on Form 10-K, incorporated in the Registration Statement and the Prospectus, were not determined on a basis substantially consistent with that of the corresponding amounts in the audited financial statements included or incorporated in the Registration Statement and the Prospectus; (iii) they have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is limited to accounting, financial or statistical information derived from the general accounting records of the Company and its Subsidiary) set forth in the Registration Statement and the Prospectus, including certain of the information included or incorporated under the caption "Selected Financial Data" and in Items 1, 6, 7, 10 and 11 of the Company's Annual Report on Form 10-K, incorporated in the Registration Statement and the Prospectus, certain of the information included in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" included or incorporated in the Company's Quarterly Reports on Form 10-Q, incorporated in the Registration Statement and the Prospectus, and the information included in the Prospectus under the captions "Ratio -22- of Earnings to Fixed Charges" agrees with the accounting records of the Company and its Subsidiary, excluding any questions of legal interpretation; and (iv) if unaudited pro forma financial statements are included or incorporated in the Registration Statement and the Prospectus, on the basis of a reading of the unaudited pro forma financial statements, carrying out certain specified procedures, inquiries of certain officials of the Company and its Subsidiary (including any entity which is acquired, by merger or otherwise, after the Execution Time, and including any entity which is the subject of any contract to acquire, by merger or otherwise, on the date of such financial statements) who have responsibility for financial and accounting matters, and proving the arithmetic accuracy of the application of the pro forma adjustments to the historical amounts in the pro forma financial statements, nothing came to their attention which caused them to believe that the pro forma financial statements do not comply in form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X or that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of such statements. References to the Prospectus in this paragraph (e) include any supplement thereto at the date of the letter. (f) Prior to the Execution Time, the Company shall have furnished to each Agent such further information, documents, certificates, letters from accountants and opinions of counsel as the Agents may reasonably request. If any of the conditions specified in this Section 5 shall not have been fulfilled in all material respects when and as provided in this Agreement, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be in all material respects reasonably satisfactory in form and substance to such Agents and its counsel, this Agreement and all obligations of any Agent hereunder may be canceled at any time by the Agents. Notice of such cancellation shall be given to the Company in writing or by telephone or telegraph confirmed in writing. The documents required to be delivered by this Section 5 shall be delivered at the office of Chapman and Cutler, counsel for the Agents, at 111 West Monroe Street, Chicago, Illinois, at the Execution Time. 6. Conditions to the Obligations of the Purchaser. The obligations of the Purchaser to purchase any Notes will be subject to the accuracy of the representations and warranties on the part of the Company herein as of the date of any related Terms Agreement and as of the Closing Date for such Notes, to the performance and observance by the Company of all covenants and agreements herein contained on its part to be performed and observed and to the following additional conditions precedent: -23- (a) No stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Company, threatened by the Commission. (b) If specified by any related Terms Agreement and except to the extent modified by such Terms Agreement, the Purchaser shall have received, appropriately updated, (i) a certificate of the Company, dated as of the Closing Date, to the effect set forth in Section 5(d) (except that references to the Prospectus shall be to the Prospectus as supplemented at the time of execution of the Terms Agreement), (ii) the opinion of Dechert Price & Rhoads, counsel for the Company, dated as of the Closing Date, to the effect set forth in Section 5(b), (iii) the opinion of Chapman and Cutler, counsel for the Purchaser, dated as of the Closing Date, to the effect set forth in Section 5(c), and (iv) a letter of Deloitte & Touche LLP, independent accountants for the Company, dated as of the Closing Date, to the effect set forth in Section 5(e). (c) Prior to the Closing Date, the Company shall have furnished to the Purchaser such further information, certificates and documents as the Purchaser may reasonably request. If any of the conditions specified in this Section 6 shall not have been fulfilled in all material respects when and as provided in this Agreement and any Terms Agreement, or if any of the opinions and certificates mentioned above or such Terms Agreement shall not be in all material respects reasonably satisfactory in form and substance to the Purchaser and its counsel, such Term Agreement and all obligations of the Purchaser thereunder and with respect to the Notes subject thereto may be canceled at, or at any time prior to, the respective Closing Date by the Purchaser. Notice of such cancellation shall be given to the Company in writing or by telephone or telegraph confirmed in writing. 7. Right of Person Who Agreed to Purchase to Refuse to Purchase. (a) The Company agrees that any person who has agreed to purchase and pay for any Note, including a Purchaser and any person who purchases pursuant to a solicitation by any of the Agents, shall have the right to refuse to purchase such Note if, at the Closing Date therefor, any condition set forth in Section 5 or 6, as applicable, shall not be satisfied. (b) The Company agrees that any person who has agreed to purchase and pay for any Note pursuant to a solicitation by any of the Agents shall have the right to refuse to purchase such Note if, subsequent to the agreement to purchase such Note, any change, condition or development specified in any of the Sections 9(b)(i) through (v) shall have occurred (without regard to any judgment of a Purchaser required therein) the effect of which is, in the judgment of the Agent which presented the offer to purchase such Note, so material and adverse as to make it impractical or inadvisable to proceed with the delivery of such Note (it being understood that under no circumstance shall any such Agent have any duty or obligation to exercise the judgment permitted to be exercised under this Section 7(b) and Section 9(b)). -24- 8. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless each of you, the directors, officers, employees and agents of each of you and each person who controls each of you within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which you, they or any of you or them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement for the registration of the Notes as originally filed or in any amendment thereof, or in the Prospectus or any preliminary Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that (i) the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by any of you specifically for use in connection with the preparation thereof, and (ii) such indemnity with respect to the Prospectus or any preliminary Prospectus shall not inure to the benefit of any of you (or any person controlling any of you) from whom the person asserting any such loss, claim, damage or liability purchased the Notes which are the subject thereof if such person did not receive a copy of the Prospectus (or the Prospectus as amended or supplemented) excluding documents incorporated therein by reference at or prior to the confirmation of the sale of such Notes to such person in any case where such delivery is required by the Act and the untrue statement or omission of a material fact contained in the Prospectus or any preliminary Prospectus was corrected in the Prospectus (or the Prospectus as amended or supplemented). This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) Each of you, severally and not jointly, agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Registration Statement and each person who controls the Company within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, to the same extent as the foregoing indemnity from the Company to you, but only with reference to written information relating to such of you furnished to the Company by such of you specifically for use in the preparation of the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability which you may otherwise have. The Company acknowledges that the statements concerning the Agents set forth in the last paragraph of the cover page of the Prospectus and under the heading "Plan of Distribution" in the Prospectus, constitute the only information furnished in writing by any of you for inclusion in the documents referred to in the foregoing indemnity, and you confirm that such statements are correct. -25- (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under this Section 8. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent that it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof, with counsel satisfactory to such indemnified party; provided, however, that if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel (in addition to local counsel) to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed separate counsel in connection with the assertion of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, approved by you in the case of paragraph (a) of this Section 8, representing the indemnified parties under such paragraph (a) who are parties to such action), (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. (d) In order to provide for just and equitable contribution in circumstances in which the indemnification provided for in paragraph (a) of this Section 8 is due in accordance with its terms but is for any reason held by a court to be unavailable from the Company on grounds of public policy or otherwise, the Company and each of you shall contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) to which the Company and any of you may be subject in such proportion so that each of you is responsible for that portion represented by the percentage that the aggregate commissions received by such of you pursuant to Section 2 in connection with the Notes from which such losses, claims, damages and liabilities arise (or, in the case of Notes sold pursuant to a Terms Agreement, the aggregate commissions that would have been received by such of you if such commissions had been payable), bears to the aggregate principal amount of such Notes sold and the Company is responsible for the balance; provided, however, that (y) in no case shall any of you be responsible for any amount in excess of the commissions received by such of -26- you in connection with the Notes from which such losses, claims, damages and liabilities arise (or, in the case of Notes sold pursuant to a Terms Agreement, the aggregate commissions that would have been received by such of you if such commissions had been payable) and (z) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls any of you within the meaning of Section 15 of the Act shall have the same rights to contribution as you and each person who controls the Company within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to clause (z) of this paragraph (d). Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this paragraph (d), notify such party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any other obligation it or they may have hereunder or otherwise than under this paragraph (d). 9. Termination. This Agreement will continue in effect until terminated as provided in this Section 9. In the event of such termination, no party shall have any liability to the other party hereto, except as provided in the fourth paragraph of Section 2(a), Section 4(h), Section 8 and Section 10. (a) This Agreement may be terminated by either the Company as to any of you or by any of you insofar as this Agreement relates to such of you, by giving written notice of such termination to such of you or the Company, as the case may be. This Agreement shall so terminate at the close of business on the first business day following the receipt of such notice by the party to whom such notice is given. (b) Each Terms Agreement (whether oral or written) shall be subject to termination in the absolute discretion of the Purchaser, by notice given to the Company prior to delivery of any payment for any Note to be purchased thereunder, if prior to such time (i) there shall have occurred, subsequent to the agreement to purchase such Note, any change, in or affecting the business or properties of the Company and its Subsidiary the effect of which is, in the judgment of the Purchaser, so material and adverse to the Company and the Subsidiary taken as a whole as to make it impractical or inadvisable to proceed with the delivery of such Note, (ii) there shall have been, subsequent to the agreement to purchase such Note, any decrease in the rating of any of the Company's debt securities or preferred securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Act) or any notice given of any intended or potential decrease in any such rating or of a possible change in any such rating that does not indicate the direction of the possible change, (iii) trading in any of the Company's securities shall have been suspended by the Commission or, The New York Stock Exchange or trading in -27- securities generally on The New York Stock Exchange shall have been suspended or limited or minimum prices shall have been established on such Exchange, (iv) a banking moratorium shall have been declared either by Federal or New York State authorities, or (v) there shall have occurred any outbreak or escalation or hostilities, declaration by the United States of a national emergency or war or other calamity or crisis the effect of which on financial markets is such as to make it, in the judgment of the Purchaser, impracticable or inadvisable to proceed with the offering or delivery of such Notes as contemplated by the Prospectus. 10. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and of you set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of you or the Company or any of the officers, directors or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Notes. The provisions of Sections 4(h) and 8 hereof shall survive the termination or cancellation of this Agreement. The provisions of this Agreement (including without limitation Section 7 hereof) applicable to any purchase of a Note for which an agreement to purchase exists prior to the termination hereof shall survive any termination of this Agreement. 11. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to any of you, will be mailed, delivered or telegraphed and confirmed to such of you, at the address specified in Schedule I hereto, with a copy to Chapman and Cutler, 111 W. Monroe Street, Chicago, Illinois 60603, Attention: Jonathan Koff; or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at Number One South Jersey Plaza, Route 54, Folsom, NJ 08037, attention of the President, with a copy to Dechert Price & Rhoads, 4000 Bell Atlantic Tower, 1717 Arch Street, Philadelphia, PA 19103-2793, Attention: George W. Patrick. 12. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors, directors, officers, employees, agents and controlling persons referred to in Section 8 hereof, and, to the extent provided in Section 7, any person who has agreed to purchase Notes, and no other person will have any right or obligation hereunder. 13. Applicable Law. This Agreement will be governed by and construed in accordance with the internal laws of the State of New York without giving effect to conflict of laws rules thereof. -28- If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement among the Company and you. Very truly yours, South Jersey Gas Company By:__________________________________ Its:_________________________________ -29- The foregoing Agreement is hereby confirmed and accepted as of the date hereof. PaineWebber Incorporated By:_____________________________ Its:___________________________ Prudential Securities Incorporated By:_____________________________ Its:___________________________ First Union Capital Markets, a division of Wheat First Securities, Inc. By:_____________________________ Its:___________________________ -30- SCHEDULE I The Company agrees to pay each Agent a commission equal to the following percentage of the principal amount of each Note sold by such Agent, and to pay the Purchasers a commission in the form of a discount to the purchase price equal to the following percentage of the principal amount of each Note purchased by the Agent under Section 2(b): Maturity Range of Notes amount Percentage of Principal From 1 year to less than 18 months .150% From 18 months to less than 2 years .200% From 2 years to less than 3 years .250% From 3 years to less than 4 years .350% From 4 years to less than 5 years .450% From 5 years to less than 6 years .500% From 6 years to less than 7 years .550% From 7 years to less than 10 years .600% From 10 years to less than 15 years .625% From 15 years to less than 20 years .700% From 20 years or longer .750% The commission rate payable to any Agent with respect to any Notes, and the discount with respect to any Notes sold to a Purchaser, may be increased by agreement between the Company and such Agent or Purchaser, with no requirement that the other Agents or Purchasers receive notice of, or consent to, such higher commission rate or discount. Address for Notice to you: Notices to PaineWebber Incorporated shall be directed to it at 1285 Avenue of the Americas, New York, New York 10019, Attention: Corporate Finance Department. Notices to Prudential Securities Incorporated shall be directed to it at One New York Plaza, 15th floor, New York, New York 10292, Attention: Debt Origination Group. Notices to First Union Capital Markets shall be directed to it at One First Union Center, TW-10, 301 South College Street, Charlotte, NC 28288-0604, Attention: Utilities and Strategic Finance. -31- Exhibit A MEDIUM-TERM NOTE ADMINISTRATIVE PROCEDURES OCTOBER ___, 1998 The Secured Medium-Term Notes, Series A (the "Notes") are to be offered on a continuing basis, unless suspended pursuant to Section 2(a). PaineWebber Incorporated, Prudential Securities Incorporated and First Union Capital Markets, as agents (the "Agents"), have agreed to use reasonable efforts to solicit offers to purchase Notes. No Agent will be obligated to purchase Notes for its own account. The Notes are being sold pursuant to a Distribution Agreement between South Jersey Gas Company (the "Issuer" or the "Company") and the Agents dated as of the date hereof (the "Agreement"). The Notes will be issued under an indenture (the "Indenture") dated as of October 1, 1998, between the Issuer and The Bank of New York, as trustee (the "Trustee"). The procedures to be followed during, and the specific terms of, the solicitation of offers by each Agent and the sale as a result thereof by the Issuer are explained below. Administrative and record-keeping responsibilities will be handled for the Issuer by its Treasurer. The Issuer will advise each Agent and the Trustee in writing of those persons handling administrative responsibilities with whom the Agents and the Trustee are to communicate regarding offers to purchase Notes and the details of their delivery and will promptly advise each Agent and the Trustee in writing if any such person shall cease to handle such responsibilities or of the authorization of any additional person to handle such responsibilities. The Notes will either be issued (a) in book-entry form and represented by one or more fully registered Notes (each, a "Book-Entry Note") delivered to the Trustee, as agent for The Depository Trust Company ("DTC"), and recorded in the book-entry system maintained by DTC, or (b) in certificated form delivered to the purchaser thereof or a person designated by such purchaser. Except in the limited circumstances described in the Prospectus, owners of beneficial interests in Book-Entry Notes will not be entitled to physical delivery of Notes in certificated form. General procedures relating to the issuance of all Notes are set forth in Part I hereof. Book-Entry Notes will be issued in accordance with the procedures set forth in Part II, as adjusted in accordance with changes in DTC's operating requirements. Notes issued in certificated form will be issued in accordance with the procedures set forth in Part III hereof. Capitalized terms used herein that are not otherwise defined shall have the meanings ascribed thereto in the Indenture or the Notes, as the case may be. To the extent the procedures set forth below conflict with the provisions of the Notes, the Indenture, DTC's operating requirements or the Agreement, the relevant provisions of the Notes, the Indenture, DTC's operating requirements or the Agreement shall control. A-1 PART I: PROCEDURES OF GENERAL APPLICABILITY Maturities: Each Note will mature on a Business Day not less than one year nor more than 40 years after the Original Issue Date (as defined below) for such Note. Denominations: The denomination of any Note will be in U.S. dollars and a minimum of $1,000 or any larger amount that is an integral multiple of $1,000. Form: Notes will be issued only in fully registered form in accordance with the Indenture. Date of Issuance: Each Note will be dated the date of its authentication by the Trustee. Each Note will also bear an "Original Issue Date," which will be the date of its original issue, or in the case of any Note (or portion thereof) issued subsequently upon transfer or exchange of a Note or in lieu of a destroyed, mutilated, defaced, lost or stolen Note, the Original Issue Date of the predecessor Note, regardless of the date of authentication of such subsequently issued Note. Preparation of Pricing Supplement: If any offer to purchase a Note is accepted by the Company, the Company, with the approval of the Agent presenting the offer (the "Presenting Agent"), will prepare a Pricing Supplement reflecting the terms of such Note and file the Pricing Supplement relating to the Notes and the plan of distribution thereof with the Commission in accordance with Rule 424 under the Act and the provisions of Regulation S-T under the Act. The Presenting Agent will cause a Pricing Supplement and a Prospectus to be delivered to the purchaser of such Notes. The Company shall have delivered a completed Pricing Supplement, via next day mail or telecopy to arrive no later than 11 a.m. on the Business Day following the trade date, to the Presenting Agent at the following address: If PaineWebber Incorporated is the Presenting Agent, to it at 1285 Avenue of the Americas, New York, New York 10019, Attention: Corporate Finance Department. Facsimile number (212) 969-7602. A-2 If Prudential Securities Incorporated is the Presenting Agent, to it at One New York Plaza, 15th floor, New York, New York 10292, Attention: Debt Origination Group. Facsimile number (212) 778-1279. If First Union Capital Markets is the Presenting Agent, to it at One First Union Center, TW-10, 301 South College Street, Charlotte, NC 28288-0604, Attention: Utilities and Strategic Finance. Facsimile number (704) 383-6670. In each instance that a Pricing Supplement is prepared, the Presenting Agent will affix the Pricing Supplement to Prospectuses prior to their use. Outdated Pricing Supplements, and the Prospectuses to which they are attached (other than those retained for files) will be destroyed. Acceptance of Offers: Any Agent may, in its reasonable discretion, reject any offer to purchase Notes received by it, in whole or, if permitted by the terms thereof, in part. Each Agent will promptly advise the Issuer of any offers to purchase Notes received by such Agent, other than offers rejected by such Agent and, if such Agent or any of its affiliates shall be the offeror, shall advise the Issuer of that fact. The Issuer will have the sole right to accept offers to purchase Notes in whole or, if permitted by the terms thereof, in part. The Issuer may reject any such offer in whole or, if permitted by the terms thereof, in part. The Issuer will forthwith advise an Agent of the acceptance or rejection of any offer received through such Agent (the "Presenting Agent"), and such Agent will so advise the offeror. Suspension of Solicitation; Amendment or Supplement: The Company may instruct the Agents to suspend solicitation of purchases at any time. Upon receipt of such instructions the Agents will promptly suspend solicitation of offers to purchase Notes, which, in any event, shall not be later than the close of business on the day such instructions are received, from the Company until such time as the Company has advised it that solicitation of offers to purchase may be resumed. If the Company decides to amend the Registration Statement (including incorporating any documents by reference therein) or supplement any of A-3 such documents (other than to change rates or other variable terms), it will promptly furnish the Agents and their counsel with copies of the amendment (including any document proposed to be incorporated by reference therein) or supplement. One copy of such filed document, along with a copy of the cover letter sent to the Commission, will be delivered or mailed to the Agents at the following addresses: If PaineWebber Incorporated is the Presenting Agent, to it at 1285 Avenue of the Americas, New York, New York 10019, Attention: Corporate Finance Department. If Prudential Securities Incorporated is the Presenting Agent, to it at One New York Plaza, 15th floor, New York, New York 10292, Attention: Debt Origination Group. If First Union Capital Markets is the Presenting Agent, to it at One First Union Center, TW-10, 301 South College Street, Charlotte, NC 28288-0604, Attention: Utilities and Strategic Finance. In the event that at the time the solicitation of offers to purchase from the Company is suspended there shall be any orders outstanding which have not been settled, the Company will promptly advise the Agents and the Trustee whether such orders may be settled and whether copies of the Prospectus as in effect at the time of the suspension may be delivered in connection with the settlement of such orders. The Company will have the sole responsibility for such decision and for any arrangements which may be made in the event that the Company determines that such orders may not be settled or that copies of such Prospectus may not be so delivered. Delivery of Prospectus: The Agents will cause a copy of the most recent Prospectus and Pricing Supplement to accompany or precede the earlier of (a) the written confirmation of a sale sent to a customer or the agent of such customer, and (b) the delivery of Notes to a customer or the agent of such customer. A-4 Documents incorporated by reference: The Company shall supply each Agent with an adequate supply of all documents incorporated by reference in the Registration Statement that are reasonably requested by such Agent. Confirmation: For each offer to purchase a Note solicited by an Agent and accepted by the Issuer, such Agent will issue a confirmation to the purchaser, with a copy to the Issuer. Settlement Date: Subject to Section 6 of the Agreement, the Settlement Date with respect to any offer to purchase Notes accepted by the Issuer will be the third Business Day next succeeding the date of acceptance unless otherwise agreed by the purchaser and the Issuer and shall be specified upon acceptance of such offer. Trustee Not to Risk Funds: Nothing herein shall be deemed to require the Trustee to risk or expend its own funds in connection with any payment to the Issuer or the Agents or any purchaser, it being understood by all parties that payments made by the Trustee to the Issuer or the Agents or a purchaser shall be made only to the extent that immediately available funds are provided to the Trustee for such purpose. Authenticity of Signatures: The Issuer will cause the Trustee to furnish the Agents from time to time with the specimen signatures of each of the Trustee's officers, employees or agents who have been authorized by the Trustee to authenticate Notes, but the Agents will have no obligation or liability to the Issuer or to the Trustee in respect of the authenticity of the signature of any officer, employee or agent of the Issuer or the Trustee on any Note. Payment of Expenses: Each Agent shall forward to the Issuer, on a quarterly basis, a statement of the out-of-pocket expenses incurred by such Agent during that quarter that are reimbursable to it pursuant to the terms of the Agreement. The Issuer will remit payment to each Agent currently on a quarterly basis. A-5 PART II: PROCEDURES FOR NOTES ISSUED IN BOOK-ENTRY FORM In connection with the qualification of the Book-Entry Notes for eligibility in the book-entry system maintained by DTC, the Trustee will perform the custodial, document control and administrative functions described below, in accordance with its respective obligations under a Letter of Representations from the Company and the Trustee to DTC, dated ________, ___, 1998, and a Medium-Term Note Certificate Agreement, dated August 17, 1989, between the Trustee and DTC (the "Certificate Agreement"), and its obligations as a participant in DTC, including DTC's Same-Day Funds Settlement System ("SDFS"). Issuance: All Book-Entry Notes having the same Original Issue Date, redemption provisions, interest payment dates, interest rate, and stated Maturity (collectively, the "Terms") will be represented initially by a single Global Note in fully registered form without coupons. Each Book-Entry Note will be dated and issued as of the date of its authentication by the Trustee. Each Book-Entry Note will bear an original issue date, which will be (i) with respect to an original Book-Entry Note (or any portion thereof), the original issue date specified in such Book- Entry Note and (ii) following a consolidation of Global Notes, with respect to the Book-Entry Note resulting from such consolidation, the most recent Interest Payment Date to which interest has been paid or duly provided for on the predecessor Global Notes, regardless of the date of authentication of such resulting Book-Entry Note. No Book-Entry Note will represent any securities in certificated form. Identification: The Issuer has arranged with the CUSIP Service Bureau of Standard & Poor's Ratings Group, a division of McGraw-Hill (the "CUSIP Service Bureau"), for the reservation of approximately 900 CUSIP numbers which have been reserved for and relating to Book-Entry Notes and the Company has delivered to the Trustee and DTC a written list of such CUSIP numbers. The Trustee will assign CUSIP numbers to Book-Entry Notes as described below under Settlement Procedure B. DTC will notify the CUSIP Service Bureau periodically of the CUSIP numbers that the Company has assigned to Book- Entry Notes. The Trustee will notify the Company at any A-6 time when fewer than 50 of the reserved CUSIP numbers remain unassigned to Book-Entry Notes, and, if it deems necessary, the Company will reserve additional CUSIP numbers for assignment to Book-Entry Notes. Upon obtaining such additional CUSIP numbers, the Company will deliver a list of such additional numbers to the Trustee and DTC. Registration: Each Book-Entry Note will be registered in the name of Cede & Co., as nominee for DTC, on the register maintained by the Trustee under the Indenture. The beneficial owner of a Note issued in book-entry form i.e., an owner of a beneficial interest in a Book-Entry Note) (or one or more indirect participants in DTC designated by such owner) will designate one or more participants in DTC (with respect to such Note issued in book- entry form, the "Participants") to act as agent or agents for such beneficial owner in connection with the book-entry system maintained by DTC, and DTC will record in book-entry form, in accordance with instructions provided by such Participants, a credit balance with respect to such Note issued in book-entry form in the account of such Participants. The ownership interest of such beneficial owner in such Note issued in book-entry form will be recorded through the records of such Participants or through the separate records of such Participants and one or more indirect participants in DTC. Transfers: Transfers of a Book-Entry Note will be accomplished by book entries made by DTC and, in turn, by Participants (and in certain cases, one or more indirect participants in DTC) acting on behalf of beneficial transferors and transferees of such Book-Entry Note. Exchanges: The Trustee may deliver to DTC and the CUSIP Service Bureau at any time a written notice specifying (a) the CUSIP numbers of two or more Book-Entry Notes outstanding on such date that represent Book-Entry Notes having the same terms (other than Original Issue Dates) and for which interest has been paid to the same date; (b) a date, occurring at least 30 days after such written notice is delivered and at least 30 days before the next Interest Payment Date for the related Notes issued in book-entry form, on which such Book-Entry Notes shall be exchanged for a single A-7 replacement Book-Entry Note; and (c) a new CUSIP number, obtained from the Company, to be assigned to such replacement Book-Entry Note. Upon receipt of such a notice, DTC will send to its participants (including the Trustee) a written reorganization notice to the effect that such exchange will occur on such date. Prior to the specified exchange date, the Trustee will deliver to the CUSIP Service Bureau written notice setting forth such exchange date and the new CUSIP number and stating that, as of such exchange date, the CUSIP numbers of the Book-Entry Notes to be exchanged will no longer be valid. On the specified exchange date, the Trustee will exchange such Book-Entry Notes for a single Book-Entry Note bearing the new CUSIP number and the CUSIP numbers of the exchanged Book-Entry Notes will, in accord with CUSIP Service Bureau procedures, be canceled and not reassigned. Interest Payments: General. Interest (if any) on each Note will accrue from the original Issue Date of such Note, and will be calculated and paid in the manner described in such Note. Unless otherwise provided in the Indenture or the Notes, the first payment of interest on any Note originally issued after a Record Date and on or before the next succeeding Interest Payment Date will be made no earlier than the Interest Payment Date following the next succeeding Record Date. Interest payable at maturity of a Note, or upon earlier redemption or repayment, will be payable to the person to whom the principal of such Note is payable. DTC will arrange for each pending deposit message described under Settlement Procedure C below to be transmitted to Standard & Poor's Ratings Group, which will use the information in the message to include certain terms of the related Book-Entry Note in the appropriate daily bond report published by Standard & Poor's Ratings Group. Record Dates. The Record Dates with respect to the Interest Payment Dates shall be the April 15 or October 15 (whether or not a business day) next preceding such Interest Payment Date. A-8 Interest Payment Dates. Unless otherwise specified pursuant to Settlement Procedure "A" below, interest payments on Book-Entry Notes will be made semiannually on May 1 and November 1 of each year and at Maturity; provided, however, that if an Interest Payment Date for a Book-Entry Note is not a Business Day, the payment due on such day shall be made on the next succeeding Business Day and no interest shall accrue on such payment for the period from and after such Interest Payment Date; provided, further, that in the case of a Book-Entry Note issued between a Regular Record Date and an Interest Payment Date, the first interest payment will be made on the Interest Payment Date following the next succeeding Regular Record Date. Payments of Principal and Interest: Payments of Interest Only. Not later than five Business Days following each Record Date, the Trustee will deliver to the Issuer and DTC a written notice specifying by CUSIP number the amount of interest to be paid on each Book-Entry Note on the following Interest Payment Date (other than an Interest Payment Date coinciding with a Maturity Date) and the total of such amounts. DTC will confirm the amount payable on each Book-Entry Note on such Interest Payment Date by reference to the daily bond reports published by Standard & Poor's. On such Interest Payment Date, the Issuer will pay to the Trustee, and the Trustee in turn will pay to DTC, such total amount of interest due (other than at Maturity Date), at the times and in the manner set forth below under "Manner of Payment." Payments at Maturity Date. Prior to the first Business Day of each month in which principal and/or interest is to be paid, the Trustee will deliver to the Issuer and DTC a written list of principal, interest and premium, if any, to be paid on each Book-Entry Note maturing either at Stated Maturity or on a Redemption Date in the following month. The Trustee, the Issuer and DTC will confirm the amounts of such principal and interest payments with respect to a Book-Entry Note on or about the fifth Business Day preceding the Maturity of such Book-Entry Note. On or before Maturity Date, the Issuer will pay to the Trustee, and A-9 the Trustee in turn will pay to DTC, the principal amount of such Note, together with interest and premium, if any, due at such Maturity Date, at the times and in the manner set forth below under "Manner of Payment." Promptly after payment to DTC of the principal and interest due at Maturity of such Book-Entry Note, the Trustee will cancel such Book-Entry Note in accordance with the Indenture and so advise the Issuer. If any Maturity Date of a Book-Entry Note is not a Business Day, the payment due on such day shall be made on the next succeeding Business Day and no interest shall accrue on such payment for the period from and after such Maturity. Manner of Payment. The total amount of any principal, premium, if any, and interest due on Book-Entry Notes on any Interest Payment Date or at Maturity shall be transferred by the Issuer to the Trustee to an account designated by the Trustee in funds available for use by the Trustee as of 12:00 noon, New York City time, on such date. The Issuer will confirm such instructions in writing to the Trustee. Prior to 2:00 p.m., New York City time, on such date or as soon as possible thereafter, the Trustee will pay (but only from funds withdrawn from such account) by separate wire transfer (using Fedwire message entry instructions in a form previously specified by DTC) to an account at the Federal Reserve Bank of New York previously specified by DTC, in funds available for immediate use by DTC, each payment of interest, principal and premium, if any, due on a Book-Entry Note on such date. Thereafter on such date, DTC will pay, in accordance with its SDFS operating procedures then in effect, such amounts in funds available for immediate use to the respective Participants in whose names such Notes are recorded in the book-entry system maintained by DTC. Neither the Issuer nor the Trustee shall have any responsibility or liability for the payment by DTC of the principal of, or premium, if any, or interest on, the Book-Entry Notes to such Participants. Withholding Taxes. The amount of any taxes required under applicable law to be withheld from any interest payment on a Note will be determined and withheld by the Participant, indirect participant in DTC or other A-10 Person responsible for forwarding payments and materials directly to the beneficial owner of such Note. Settlement Procedures: Settlement Procedures with regard to each Book- Entry Note sold by the Presenting Agent, as agent of the Company, will be as follows: A. The Presenting Agent will advise the Issuer by telephone (confirmed in writing) or telecopy of the following Settlement information: 1. Taxpayer identification number of the purchaser. 2. Principal amount of the Note. 3. Interest rate, and interest payment dates. 4. Price to public of the Note. 5. Trade date. 6. Settlement Date (Original Issue Date). 7. Maturity. 8. Net proceeds to the Company. 9. Agent's commission. 10. Redemption provisions, if any. B. The Issuer will advise the Trustee by telephone (confirmed in writing) or telecopy by 10:00 a.m. on the second Business Day preceding the Settlement Date of the above settlement information received from the Presenting Agent with respect to the Book- Entry Note representing such Note. C. The Issuer will assign a CUSIP number to such Note and the Trustee will communicate to DTC through DTC's Participant Terminal System, a pending deposit message specifying the following settlement information, which will route such relevant information to the A-11 Presenting Agent, Standard & Poor's Ratings Group and Interactive Data Corporation: 1. The information set forth in Settlement Procedure A. 2. Identification numbers of the participant accounts maintained by DTC on behalf of the Trustee and the Agent. 3. Initial Interest Payment Date for such Note, number of days by which such date succeeds the related Record Date for DTC purposes and, if then calculable, the amount of interest payable on such Interest Payment Date (which amount shall have been confirmed by the Trustee). 4. CUSIP number of the Book-Entry Note representing such Note. D. The Trustee will complete a Book-Entry Note representing such Note in a form that has been approved by the Company, the Agents and the Trustee. E. The Trustee will authenticate the Book-Entry Note representing such Note. F. DTC will credit such Note to the participant account of the Trustee maintained by DTC. G. The Trustee will enter an SDFS deliver order through DTC's Participant Terminal System instructing DTC (i) to debit such Note to the Trustee's participant account and credit such Note to the participant account of the Presenting Agent maintained by DTC and (ii) to debit the settlement account of the Presenting Agent and credit the settlement account of the Trustee maintained by DTC, in an amount equal to the price of such Note less such Agent's commission. Any entry of such a deliver order shall be deemed to constitute a representation and warranty by the Trustee to DTC that (i) the A-12 Book-Entry Note representing such Note has been issued and authenticated and (ii) the Trustee is holding such Book-Entry Note pursuant to the Note Certificate Agreement between the Trustee and DTC. H. The Presenting Agent will enter an SDFS deliver order through DTC's Participant Terminal System instructing DTC (i) to debit such Note to the Presenting Agent's participant account and credit such Note to the participant account of the Participants maintained by DTC and (ii) to debit the settlement accounts of such Participants and credit the settlement account of the Presenting Agent maintained by DTC, in an amount equal to the public offering price of such Note. I. Transfers of funds in accordance with SDFS deliver orders described in Settlement Procedures G and H will be settled in accordance with SDFS operating procedures in effect on the Settlement Date. J. Upon receipt of such funds, the Trustee will credit to an account of the Company identified to the Trustee funds available for immediate use in the amount transferred to the Trustee in accordance with Settlement Procedure G. K. The Presenting Agent will confirm the purchase of such Note to the purchaser either by transmitting to the Participant with respect to such Note a confirmation order through DTC's Participant Terminal System or by mailing a written confirmation to such purchaser. Settlement Procedures Timetable: For orders of Notes accepted by the Company, Settlement Procedures "A" through "K" set forth above shall be completed as soon as possible but not later than the respective times (New York City time) set forth below: A-13 Settlement Procedure Time A 11:00 a.m. on the trade date B 10:00 a.m. on the second Business Day preceding Settlement Date C 2:00 p.m. on the trade date D 3:00 p.m. on the Business Day before Settlement Date E 9:00 a.m. on Settlement Date F 10:00 a.m. on Settlement Date G-H 2:00 p.m. on the Settlement Date I 4:45 p.m. on Settlement Date J-K 5:00 p.m. on Settlement Date If a sale is to be settled more than one Business Day after the trade date, Settlement Procedures A, B, and C shall be completed as soon as practicable but in no event later than 11:00 a.m. and 12:00 noon on the first Business Day after such sale date but no later than 2:00 p.m. on the Business Day before the Settlement Date, respectively. Settlement Procedure I is subject to extension in accordance with any extension of Fedwire closing deadlines and in the other events specified in the SDFS operating procedures in effect on the Settlement Date. If settlement of a Book-Entry Note is rescheduled or canceled, the Trustee, if notified in time, will deliver to DTC, through DTC's Participant Terminal System, a cancellation message to such effect by no later than 2:00 p.m., New York City time, on the Business Day immediately preceding the scheduled Settlement Date. Failure to Settle: If the Trustee fails to enter an SDFS deliver order with respect to a Book-Entry Note pursuant to Settlement Procedure G, the Trustee may deliver to DTC, through DTC's Participant Terminal System, as A-14 soon as practicable a withdrawal message instructing DTC to debit such Note to the participant account of the Trustee maintained at DTC. DTC will process the withdrawal message, provided that such participant account contains a principal amount of the Book-Entry Note representing such Note that is at least equal to the principal amount to be debited. If withdrawal messages are processed with respect to all the Notes represented by a Book-Entry Note, the Trustee will mark such Book-Entry Note "canceled," make appropriate entries in its records and send such canceled Book-Entry Note to the Company. The CUSIP number assigned to such Book-Entry Note shall, in accordance with CUSIP Service Bureau procedures, be canceled and not immediately reassigned. If withdrawal messages are processed with respect to a portion of the Notes represented by a Book-Entry Note, the Trustee will exchange such Book-Entry Note for two Book-Entry Notes, one of which shall represent the Book-Entry Notes for which withdrawal messages are processed and shall be canceled immediately after issuance, and the other of which shall represent the other Notes previously represented by the surrendered Book- Entry Note and shall bear the CUSIP number of the surrendered Book-Entry Note. If the purchase price for any Book-Entry Note is not timely paid to the Participants with respect to such Note by the beneficial purchaser thereof (or a person, including an indirect participant in DTC, acting on behalf of such purchaser), such Participants and, in turn, the related Agent may enter SDFS deliver orders through DTC's Participant Terminal System reversing the orders entered pursuant to Settlement Procedures G and H, respectively. Thereafter, the Trustee will deliver the withdrawal message and take the related actions described in the preceding paragraph. If such failure shall have occurred for any reason other than default by the applicable Agent to perform its obligations hereunder or under the Agreement, the company will reimburse such Agent on an equitable basis for its loss of the use of funds during the period when the funds were credited to the account of the Company. A-15 Notwithstanding the foregoing, upon any failure to settle with respect to a Book-Entry Note, DTC may take any actions in accordance with its SDFS operating procedures then in effect. In the event of a failure to settle with respect to a Note that was to have been represented by a Book-Entry Note also representing other Notes, the Trustee will provide, in accordance with Settlement Procedures D and E, for the authentication and issuance of a Book-Entry Note representing such remaining Notes and will make appropriate entries in its records. PART III: PROCEDURES FOR NOTES ISSUED IN CERTIFICATED FORM Interest Payments: Interest (if any) on each Note will accrue from the Original Issue Date of such Note, and will be calculated and paid in the manner described in such Note. Unless otherwise provided in the Indenture or the Notes, the first payment of interest on any Note originally issued after a Record Date and on or before the next succeeding Interest Payment Date will be made no earlier than the Interest Payment Date following the next succeeding Record Date. Interest payable at maturity of a Note, or upon earlier redemption or repayment, will be payable to the person to whom the principal of such Note is payable. All interest payments for each Interest Payment Date (excluding interest payments made on the Maturity Date or upon the acceleration thereof or on earlier redemption) will be made by check mailed to the person entitled thereto as provided above, or at the option of the registered holder, at such other place in the United States as the registered holder shall designate to the Trustee in writing, except that a holder of the equivalent of $10,000,000 or more in aggregate principal amount of Notes with the same Interest Payment Date shall be entitled to receive such payments in immediately available funds paid to an account at a bank in New York, New York (or other bank consented to by the Issuer and the Trustee), but only if appropriate payment instructions have been received in writing by the Trustee on or prior to the applicable Record Date (provided that such bank A-16 designated by the registered holder has appropriate facilities therefor). Within five Business Days following each Record Date, the Trustee will provide to the Issuer a list of interest payments to be made for each Note on the next succeeding Interest Payment Date and the total amount of the interest payments. The Trustee will provide monthly to the Issuer a list of the principal, premium, if any, and interest to be paid on Notes maturing or being redeemed in the next succeeding month. Settlement: The Issuer will instruct the Trustee to effect delivery of each Note no later than 1:00 p.m., New York City time, on the Settlement Date to the Presenting Agent for delivery to the purchaser. Details for Settlement: For each offer to purchase a Note that is accepted by the Issuer, the Presenting Agent will provide (unless provided by the purchaser directly to the Issuer) by telephone the following information to the Issuer: 1. The exact name of the Registered Owner. 2. The exact address of the Registered Owner and the address for delivery, notices and payments of principal and interest. 3. The taxpayer identification number of the Registered Owner. 4. A description of the terms and provisions of the Notes that includes the information identified in Exhibit A to the Agreement and any other information required to describe such Notes properly. 5. The Issue Price. 6. The Trade Date. 7. The Settlement Date. 8. The Presenting Agent's commission, determined as provided in Section 2(a) of the Agreement. A-17 The Issuer will advise the Trustee of the foregoing information for each offer to purchase a Note solicited by the Presenting Agent and accepted by the Issuer in time for the Trustee to prepare and authenticate the required Note, but not later than 10:00 a.m. New York City time on the second Business Day preceding the Settlement Date. Before accepting any offer to purchase a Note to be settled in less than three Business Days, the Issuer shall verify that the Trustee will have adequate time to prepare and authenticate such Note. After receiving from the Presenting Agent the details for each offer to purchase a Note, the Issuer will, after recording the details and any necessary calculations, provide appropriate documentation to the Trustee, including the information provided by the Presenting Agent necessary for the preparation and authentication of such Note. Prior to preparing the Note for delivery (but in any case no later than 10:00 a.m. on the Business Day next preceding the Settlement Date therefor), the Trustee will confirm the details of such issue with the Issuer, and the Issuer will confirm such instruction to the Presenting Agent, in each case by telephone, telecopy or telex. Deliveries and Cash Payment: Upon receipt of appropriate documentation and instructions with respect to the Notes, the Issuer will cause the Trustee to prepare and authenticate the form of Note previously approved by the Issuer, the Presenting Agent and the Trustee and deliver such Note and a customer receipt to the purchaser. If the form of Note is not pre-printed and four- ply, the Trustee shall deliver a photocopy of such authenticated Note to the Presenting Agent and the Issuer and shall retain one copy. Otherwise, it shall deliver the copies in the four-ply Note as follows: Stub 1--For the Presenting Agent. Stub 2--For the Issuer. Stub 3--For the Trustee. Each Note shall be authenticated on the Settlement Date therefor. The Trustee will authenticate each Note and deliver it to the Presenting Agent (and deliver the stubs as indicated above), all in accordance with A-18 written instructions (or oral instructions confirmed in writing, which may be given by telex or telecopy, on the next Business Day) from the Issuer. Upon verification by the Presenting Agent that a Note has been prepared and properly authenticated by the Trustee and registered in the name of the purchaser in the proper principal amount, payment will be made to the Issuer by the Presenting Agent the same day in immediately available funds. Such payment shall be made only upon prior receipt by the Presenting Agent of immediately available funds from or on behalf of the purchaser unless the Presenting Agent decides, at its option, exercised in the sole discretion of such Presenting Agent, to advance its own funds for such payment against subsequent receipt of funds from the purchaser. The Presenting Agent shall immediately notify the Issuer of its decision to advance its own funds for payment against subsequent receipt of funds from a purchaser. Upon delivery of a Note to the Presenting Agent, the Presenting Agent shall promptly deliver such Note to the purchaser. In the event any Note is incorrectly prepared, the Trustee shall promptly issue a replacement Note in exchange for the incorrectly prepared Note. Failure to Settle: If the Presenting Agent, at its own option, has advanced its own funds for payment against subsequent receipt of funds from a purchaser, and if such purchaser shall fail to make payment for the Note on the Settlement Date therefor, the Presenting Agent will promptly notify the Trustee and the Issuer by telephone, promptly confirmed in writing, which may be given by telex or telecopy (but no later than the next Business Day). In such event, the Issuer shall promptly provide the Trustee with appropriate documentation and instructions consistent with these procedures for the return of the Note to the Trustee, and the Presenting Agent will promptly return the Note to the Trustee. Upon (i) confirmation from the Trustee in writing which may be given by telex or telecopy) that the Trustee has received the Note and upon (ii) confirmation from the Presenting Agent in A-19 writing (which may be given by telex or telecopy) that the Presenting Agent has not received payment from such purchaser (the matters referred to in clauses (i) and (ii) are referred to hereinafter as the ("confirmations")), the Issuer will promptly pay to the Presenting Agent an amount in immediately available funds equal to the amount previously paid by the Presenting Agent in respect of such Note. Assuming receipt of such Note by the Trustee and of the confirmations by the Issuer, such payment will be made on the Settlement Date if reasonably practical, and in any event not later than the Business Day following the date of receipt of the Note and the confirmations. If a purchaser shall fail to make payment for such Note for any reason other than the failure of the Presenting Agent to provide the necessary information to the Issuer as described above for settlement or to provide a confirmation to the purchaser within a reasonable period of time as described above or otherwise to satisfy its obligations hereunder or in the Agreement, and if the Presenting Agent shall have otherwise complied with its obligations hereunder and in the Agreement, the Issuer will reimburse the Presenting Agent for its loss of the use of funds during the period when they were credited to the account of the Issuer. Immediately upon receipt of the Note in respect of which the failure occurred, the Trustee will void said Note, make appropriate entries in its records and destroy such Note; and upon such action, such Note will be deemed not to have been issued, authenticated or delivered. A-20 Exhibit B SOUTH JERSEY GAS COMPANY Secured Medium Term Notes, Series A Due from One Year to Forty Years from Date of Issue TERMS AGREEMENT South Jersey Gas Company Number One South Jersey Plaza Route 54 Folsum, NJ 08037 ____________, 19__ Attention: Subject in all respects to the terms and conditions of the Distribution Agreement (the "Agreement") dated October __, 1998, among PaineWebber Incorporated, Prudential Securities Incorporated and First Union Capital Markets and you, the undersigned agrees to purchase the following Notes of: Aggregate Principal Amount: Interest Rate: Date of Maturity: Interest Payment Dates: Regular Record Dates: [Redemption Dates and Prices:] [Repayment Dates and Prices:] Purchase Price: % of Principal Amount [Plus accrued interest from ____________, 199_] Purchase Date and Time: Place for Delivery of Notes and Payment Therefor: Method of Payment: Modification, if any, in the requirements to deliver the documents specified in Section 6(b) of the Agreement: Period during which additional Notes may not be sold pursuant to Section 4(m) of the Agreement: [Purchaser] By:_____________________________ Accepted: By:_____________________________ Title:________________________ EX-5 3 OPINION OF DECHERT PRICE & RHOADS Exhibit 5 [Letterhead of Dechert Price & Rhoads] October 1, 1998 South Jersey Gas Company Number One South Jersey Plaza Route 54 Folsom, NJ 08037 Re: Form S-3 Registration Statement (File No. 333-62019) -------------------------------- Gentlemen and Ladies: We have acted as counsel to South Jersey Gas Company, a New Jersey corporation (the "Company"), in connection with the preparation and filing of a Registration Statement (the "Registration Statement") on Form S-3 (File No. 333- 62019) under the Securities Act of 1933, as amended, and the Trust Indenture Act of 1939, as amended, in connection with the proposed issuance of an aggregate of up to $100,000,000 principal amount of Medium Term Notes (the "Notes") of the Company. The Notes are to be issued pursuant to the terms of an Indenture substantially in the form filed as Exhibit 4(e) to the Registration Statement (the "Indenture"), between the Company and The Bank of New York, as Trustee. We have participated in the preparation of the Registration Statement and have made such legal and factual examination and inquiry which we have deemed advisable for the rendering of this opinion. In making our examination we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to all South Jersey Gas Company October 1, 1998 Page 2 authentic original documents of all documents submitted to us as copies. Based on the foregoing it is our opinion that: The Notes, when duly executed, authenticated and delivered in accordance with the terms of the Indenture and paid for in the manner and at the prices set forth in the Registration Statement and the applicable pricing supplement thereto, will constitute legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, moratorium, reorganization or other similar laws affecting creditors' rights, creditors' remedies or debtors' obligations and to general principles of equity (whether asserted in a proceeding at law or in equity). The opinion expressed herein is rendered for your benefit in connection with the transaction contemplated herein. The opinion expressed herein may not be used or relied on by any other person, nor may this letter or any copies thereof be furnished to a third party, filed with a government agency, quoted, cited or otherwise referred to without our prior written consent, except as noted below. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the use of our name in the Prospectus contained therein, under the caption "Legal Matters." In giving such consent we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act. Very truly yours, /s/ Dechert Price & Rhoads -----END PRIVACY-ENHANCED MESSAGE-----