As filed with the Securities and Exchange Commission on August 21, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________
SOUTH JERSEY GAS COMPANY
(Exact name of Registrant as specified in its Charter)
NEW JERSEY 21-0398330
(State of Incorporation) (I.R.S. Employer Identification Number)
NUMBER ONE SOUTH JERSEY PLAZA, ROUTE 54
FOLSOM, NEW JERSEY 08037
(609-561-9000)
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
______________
GEORGE L. BAULIG, SECRETARY
SOUTH JERSEY GAS COMPANY
NUMBER ONE SOUTH JERSEY PLAZA, ROUTE 54
FOLSOM, NEW JERSEY 08037
(609) 561-9000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
______________
Copies to:
GEORGE W. PATRICK, ESQUIRE JONATHAN A. KOFF, ESQUIRE
DECHERT PRICE & RHOADS CHAPMAN AND CUTLER
4000 BELL ATLANTIC TOWER 111 WEST MONROE
1717 ARCH STREET CHICAGO, ILLINOIS 60603
PHILADELPHIA, PENNSYLVANIA 19103-2793 (312) 845-2978
(215) 994-2631
______________
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC:
After this Registration Statement becomes effective, as determined by market
conditions and other factors.
______________
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.[_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box:[X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act of 1933 registration statement number of the earlier
effective registration statement for the same offering:[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering:[_]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box:[X]
______________
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM
SECURITIES TO BE REGISTERED AGGREGATE AMOUNT OF
OFFERING PRICE (1) REGISTRATION FEE
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Debt Securities.................... $100,000,000 $29,500
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(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(o).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST , 1998
$100,000,000
SOUTH JERSEY GAS COMPANY
SECURED MEDIUM TERM NOTES, SERIES A
______________________
South Jersey Gas Company (the "Company") intends to offer and sell from
time to time its Secured Medium Term Notes, Series A (the "Notes"), in an
aggregate principal amount up to $100,000,000 and having maturities ranging from
1 year to 40 years from date of issue. The Notes will be issued only in fully-
registered form, in minimum denominations of $1,000 and integral multiples of
$1,000 in excess thereof. Unless otherwise indicated in the applicable Pricing
Supplement (as defined below), interest on each Note will be payable
semiannually in arrears on May 1 and November 1 at a fixed rate determined by
the Company and agreed upon by the purchaser thereof at or prior to the time of
sale. The purchase price, aggregate principal amount, interest rate, stated
maturity date, optional redemption provisions and any other material terms not
described herein of each issue of Notes will be set forth in an accompanying
supplement to this Prospectus (each, a "Pricing Supplement"). See "Description
of Notes."
Prior to the Substitution Date (as defined herein), the Notes will be
serviced and secured as to the payment of the principal thereof and interest
thereon by the Company's First Mortgage Bonds, 10% Medium Term Notes Series A
(the "Pledged Bond") in an aggregate principal amount equal to $100,000,000
issued and pledged by the Company and delivered to the Note Trustee (as defined
herein) in accordance with the provisions of the Note Indenture (as defined
herein). The principal amount of the Pledged Bond deemed outstanding will at all
times be equal to the outstanding principal amount of the Notes. The Pledged
Bond will be deemed to bear interest corresponding to the required payments of
interest in respect of the Notes. Payments of principal and interest in respect
of the Notes will constitute payments on the Pledged Bond. The Pledged Bond
constitutes a separate series of the Company's First Mortgage Bonds, all of
which are secured by a lien on substantially all of the property owned by the
Company. See "Description of the Pledged Bond." On the Substitution Date, the
Pledged Bond will cease to secure the Notes, and, at the option of the Company,
the Notes either will become unsecured general obligations of the Company or
will be secured by first mortgage bonds issued under a mortgage other than the
Company's current mortgage indenture. See "Description of Notes -- Security;
Substitution Date."
Each Note will be represented by a Global Note (each, a "Global Note")
registered in the name of The Depository Trust Company, as depository ("DTC" or
the "Depository"), or its nominee, unless otherwise specified in the applicable
Pricing Supplement. Beneficial interests in Global Notes will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depository and its participants. Global Notes will not be issuable in
certificate form except under the limited circumstances described herein. See
"Description of Notes -- Certificated Notes."
______________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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Price to Agents' Proceeds to
Public (1) Commissions(2) Company(1)(3)
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Per Note............... 100.00%
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Total.................. $100,000,000
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(1) Unless otherwise specified in the applicable Pricing Supplement, Notes will
be sold at 100% of the principal amount thereof.
(2) The Company will pay to PaineWebber Incorporated, Prudential Securities
Incorporated and First Union Capital Markets, as agents (each an "Agent"
and collectively, the "Agents"), a commission ranging from ___% to ____% of
the principal amount of any Note, depending on its stated maturity, sold
through such Agent. The Company may also sell Notes to an Agent, as
principal, for resale to one or more investors or other purchasers at a
fixed public offering price or at varying prices related to prevailing
market prices at the time of resale, as determined by such Agent. Unless
otherwise specified in the applicable Pricing Supplement, any Notes sold to
an Agent as principal shall be purchased by such Agent at a price equal to
100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a Note of
identical maturity. See "Plan of Distribution."
(3) Before deduction of expenses payable by the Company, estimated at $614,500.
The Company has agreed to indemnify the Agents against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Plan of Distribution."
_____________
The Notes will be offered on a continuing basis by the Company through the
Agents, who have agreed to use their reasonable best efforts to solicit offers
to purchase the Notes. The Company also may sell Notes to an Agent, as
principal, for resale to one or more investors or other purchasers. The Notes
will not be listed on any securities exchange, and there can be no assurance
that the Notes will be sold or that there will be a secondary market for the
Notes. The Company reserves the right to withdraw, cancel or modify the offer
made hereby without notice. The Company or an Agent, if it solicits such offer,
may reject any offer to purchase Notes, in whole or in part. See "Plan of
Distribution."
_____________
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
FIRST UNION CAPITAL MARKETS
_____________
The date of this Prospectus is August , 1998.
AVAILABLE INFORMATION
South Jersey Gas Company (the "Company") is a wholly-owned subsidiary of
South Jersey Industries, Inc. ("SJI"). Each of the Company and SJI is subject to
the informational reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and in accordance therewith files reports and
other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information can be inspected and copied at
the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. and at its regional offices at 500 West Madison
Street, Chicago, Illinois and 7 World Trade Center, New York, New York. Copies
of such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549-1004 at prescribed
rates. Information regarding the operation of the public reference facilities
may be obtained by calling the Commission at (800) SEC-0330. The Commission also
maintains an Internet site that contains reports, proxy statements and other
information regarding issuers that file electronically with the Commission. The
address of the Commission's Internet site is http://www.sec.gov. Such material
can also be inspected at the New York Stock Exchange, Inc. where certain of the
Company's and SJI's securities are listed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1997, filed pursuant to the Exchange Act.
2. The Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1998 and June 30, 1998, filed pursuant to the Exchange Act.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering of the Notes shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be modified or superseded for the
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is delivered,
upon written or oral request of such person, a copy of any or all of the
documents referred to above which have been or may be incorporated by reference
in this Prospectus, other than exhibits to such documents not specifically
incorporated by reference herein. Requests for such copies should be directed to
George L. Baulig, Secretary, South Jersey Gas Company, Number One South Jersey
Plaza, Route 54, Folsom, New Jersey 08037, (609) 561-9000.
CERTAIN STATEMENTS CONTAINED IN THIS REGISTRATION STATEMENT, INCLUDING THOSE
STATEMENTS CONTAINED IN DOCUMENTS INCORPORATED HEREIN BY REFERENCE, THAT ARE NOT
RELATED TO HISTORICAL RESULTS ARE FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE PROJECTED OR IMPLIED IN THE FORWARD-LOOKING
STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE,
BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS."
FURTHER, CERTAIN FORWARD-LOOKING STATEMENTS ARE BASED UPON ASSUMPTIONS AS TO
FUTURE EVENTS THAT MAY NOT PROVE TO BE ACCURATE.
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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."
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THE COMPANY
GENERAL
The Company is a regulated New Jersey public utility and is the principal
subsidiary of SJI. The Company is a gas distribution utility that supplies
natural gas to residential, commercial and industrial customers in the southern
part of New Jersey. The Company also makes off-system sales of natural gas on a
wholesale basis to various customers on the interstate pipeline system and
transports natural gas purchased directly from producers or suppliers by some of
its customers.
At December 31, 1997, the Company served approximately 261,000 residential,
commercial and industrial customers throughout 112 municipalities in Atlantic,
Cape May, Cumberland, and Salem counties and portions of Burlington, Camden and
Gloucester Counties. The Company's service territory covers approximately 2,500
square miles and has an estimated permanent population of 1.1 million. Gas sales
and transportation for 1997 amounted to 73,574,000 Mcf (thousand cubic feet), of
which approximately 50,181,000 Mcf was firm sales and transportation, 8,931,000
Mcf was interruptible sales and transportation and 14,462,000 Mcf was off system
sales. At December 31, 1997 the breakdown of firm sales includes 39.8%
residential, 16.1% commercial, 2.5% cogeneration and electric generation, 1.4%
industrial and other and 40.2% transportation. The Company is regulated as to
rates and other matters by the New Jersey Board of Public Utilities.
The Company's executive offices are located at Number One South Jersey
Plaza, Route 54, Folsom, New Jersey 08037 and its telephone number is (609) 561-
9000.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for each of the periods
indicated is as follows:
TWELVE
MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
- ---------------------------------------------------- -----------------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
2.6 2.1 2.3 2.5 2.6 2.4
The ratio of earnings to fixed charges represents, on a pre-tax basis, the
number of times earnings cover fixed charges. Earnings consist of net income, to
which has been added fixed charges and taxes based on income of the Company,
excluding the cumulative effect of an accounting change. Fixed charges consist
of interest charges and an interest factor in rentals.
USE OF PROCEEDS
Unless otherwise specified in the applicable Pricing Supplement, the net
proceeds from the sale of the Notes will be used by the Company to retire short-
term debt and to fund capital expenditure requirements. At June 30, 1998, the
Company had $72.3 million of short-term debt outstanding with a weighted-average
interest cost of 5.8%, with maturities not exceeding one month.
DESCRIPTION OF SECURITIES
The Notes may be issued in one or more series (i) secured by the Company's
first mortgage bonds issued under the Company's current mortgage indenture or
(ii) following the Substitution Date (as defined below), as either unsecured
notes or as notes secured by the Company's first mortgage bonds issued under a
mortgage indenture other than the Company's current mortgage indenture. On the
Substitution Date, any outstanding Notes secured by the Company's first mortgage
bonds when issued will cease to be secured by first mortgage bonds issued under
the Company's current mortgage indenture and, at the Company's option, either
(a) will become unsecured general
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obligations of the Company or (b) will be secured by the Company's first
mortgage bonds issued under a mortgage indenture other than the Company's
current mortgage indenture.
The Notes will be issued under an indenture (the "Note Indenture"), the
form of which is an exhibit to the Registration Statement of which this
Prospectus is a part, between the Company and The Bank of New York, as trustee
(the "Note Trustee"), and are described below under the caption "Description of
Notes." Prior to the Substitution Date, a Series of first mortgage bonds
designated as "South Jersey Gas Company First Mortgage Bonds, 10% Medium Term
Notes Series A" (the "Pledged Bond") will be issued under the Indenture of First
Mortgage, dated October 1, 1947, as heretofore supplemented and amended by
supplemental indentures and a new Twenty-Second Supplemental Indenture (the "New
Supplement") (such Indenture of First Mortgage, as supplemented, is herein
referred to as the "Mortgage"), all from the Company to The Bank of New York, as
successor trustee to Guaranty Bank (the "Mortgage Trustee") and pledged to the
Note Trustee under the Note Indenture to secure the Notes. The Pledged Bond to
be issued under the Mortgage is described below under the caption "Description
of the Pledged Bond."
There is no requirement, under either the Note Indenture, or the Mortgage
(collectively, the "Indentures"), that future issues of debt securities of the
Company be issued under the Indenture, and, subject to certain restrictions
following the Substitution Date which are described in "Description of Notes-
Limitations on Liens" the Company will be free to employ other indentures or
documentation, containing provisions different from those included in the
Indenture or applicable to one or more issues of Notes, in connection with
future issues of such other debt securities.
DESCRIPTION OF NOTES
GENERAL
The following summaries of certain provisions of the Note Indenture do not
purport to be complete and are subject to, and qualified in their entirety by,
all of the provisions of the Note Indenture which is incorporated herein by
reference and the form of which is an exhibit to the Registration Statement of
which this Prospectus is a part. References to Section numbers under this
caption are references to the Section numbers of the Note Indenture.
Until the Substitution Date (as defined below), the Notes will be secured
by the Pledged Bond issued under the Mortgage and delivered by the Company to
the Note Trustee. See "Security; Substitution Date." ON THE SUBSTITUTION DATE
(AS DEFINED BELOW), THE NOTES WILL CEASE TO BE SECURED BY THE PLEDGED BOND AND,
AT THE COMPANY'S OPTION, EITHER (I) WILL BECOME UNSECURED GENERAL OBLIGATIONS OF
THE COMPANY OR (II) WILL BE SECURED BY THE COMPANY'S FIRST MORTGAGE BONDS (THE
"SUBSTITUTED PLEDGED BONDS") ISSUED UNDER A MORTGAGE INDENTURE OTHER THAN THE
MORTGAGE (A "SUBSTITUTED MORTGAGE"). The Note Indenture provides that, in
addition to the Notes offered hereby, additional notes may be issued thereunder,
without limitation as to aggregate principal amount, provided that, prior to the
Substitution Date, the amount of Notes that may be issued cannot exceed the
aggregate principal amount of first mortgage bonds that the Company is able to
issue under the Mortgage. See "Description of the Pledged Bond--Issuance of
Additional Bonds."
The Note Indenture provides that the Notes will be issued in one or more
series, may be issued at various times, may have differing maturity dates and
may bear interest at differing rates; provided that Notes which are secured by
the Pledged Bond will bear interest at a rate not to exceed 10%, the stated
interest rate of the Pledged Bond. The Pricing Supplement applicable to each
series and issue of Notes will set forth any variation in the terms and
provisions of such Notes from those described in this Prospectus. Unless
otherwise indicated in the applicable Pricing Supplement, the Notes will be
denominated in United States currency in minimum denominations of $1,000 and
integral multiples thereof.
Unless otherwise indicated in the applicable Pricing Supplement, there are
no provisions in the Note Indenture or the Notes that require the Company to
redeem, or permit the holders to cause a redemption of, the Notes or that
otherwise protect the holders in the event that the Company incurs substantial
additional indebtedness (except for certain restrictions on the Company's
ability to create, assume or incur certain liens after the Substitution Date, as
described in "Limitations on Liens") whether or not in connection with a change
in control of the Company. However, under current law, any change in control
transaction that involves the incurrence of additional long-term
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indebtedness (as notes, first mortgage bonds or otherwise) by the Company would
require approval of state utility regulatory authorities and, possibly, of
federal utility regulatory authorities.
REGISTRATION, TRANSFER AND EXCHANGE
Notes of any series will be exchangeable for one or more Notes of the same
series and issue of any authorized denominations and of a like aggregate
principal amount and tenor. (Section 2.6).
Unless otherwise indicated in the applicable Pricing Supplement, Notes may
be presented for registration of transfer (duly endorsed or accompanied by a
duly executed written instrument of transfer), at the office of the Note Trustee
maintained for such purpose with respect to any series of Notes and referred to
in the applicable Pricing Supplement, without service charge but upon the
payment of any taxes and other governmental charges as described in the Note
Indenture. Such transfer or exchange will be effected upon being satisfied with
the documents of title and indemnity of the person making the request. (Sections
2.6 and 2.7).
In the event of any redemption of Notes of any series, the Note Trustee
will not be required to exchange or register a transfer of any Notes of such
series selected, called or being called for redemption except, in the case of
any Note to be redeemed in part, the portion thereof not to be so redeemed.
(Section 2.6). See "Book-Entry System."
CERTIFICATED NOTES
Each Note will be represented by a Global Note registered in the name of
the Depository, or its nominee, unless otherwise specified in the applicable
Pricing Supplement. The Notes represented by the Global Note are exchangeable
for certificated Notes in definitive form of like tenor as such Notes in
denominations of U.S.$1,000 and integral multiples thereof if (i) the Depository
notifies the Company that it is unwilling or unable to continue as Depository
for the Global Note or if at any time the Depository ceases to be a clearing
agency registered under the Exchange Act or (ii) the Company in its discretion,
at any time, determines not to have all of the Notes represented by the Global
Note. Any Note that is exchangeable pursuant to the preceding sentence is
exchangeable for certificated Notes issuable in authorized denominations and
registered in such names as the Depository shall direct. Subject to the
foregoing, the Global Note is not exchangeable, except for a Global Note of the
same aggregate denomination to be registered in the name of the Depository or
its nominee.
PAYMENT AND PAYING AGENTS
Principal of and interest on Notes issued in the form of Global Notes will
be paid in the manner described below under the caption "Book-Entry System."
Unless otherwise indicated in the applicable Pricing Supplement, interest on
Notes that are in the form of certificated securities will be paid by wire
transfer of clearinghouse funds or by check mailed to the person entitled
thereto at such person's address as it appears in the register for the Notes
maintained by the Note Trustee; however, a holder of Notes of one or more series
under the Note Indenture in the aggregate principal amount of $10,000,000 or
more having the same interest payment dates will be entitled to request to
receive payments of interest on such series by wire transfer of immediately
available funds to a bank located within the continental United States if an
appropriate request including wire transfer instructions has been received by
the Note Trustee on or prior to the applicable regular record date in accordance
with the Note Indenture. Unless otherwise indicated in the applicable Pricing
Supplement, the principal of, and interest at maturity on Notes in the form of
certificated Notes will be payable in immediately available funds at the office
of the Note Trustee upon proper presentment and surrender thereof. (Section
2.12).
All moneys paid by the Company to a paying agent for the payment of
principal of, or interest, on any Note which remain unclaimed at the end of one
year after such principal or interest shall have become due and payable will be
repaid to the Company and the holder of such Note will thereafter look only to
the Company for payment thereof (Section 5.4).
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SECURITY; SUBSTITUTION DATE
Until the Substitution Date (as defined below), the Notes will be secured
by the Pledged Bond issued and delivered by the Company to the Note Trustee. See
"Description of the Pledged Bond."
THE "SUBSTITUTION DATE" WILL BE THE DATE THAT ALL FIRST MORTGAGE BONDS OF
THE COMPANY ISSUED AND OUTSTANDING UNDER THE MORTGAGE OTHER THAN THE PLEDGED
BOND (THE "FIRST MORTGAGE BONDS") HAVE BEEN RETIRED (AT, BEFORE OR AFTER THE
MATURITY THEREOF) THROUGH PAYMENT, REDEMPTION OR OTHERWISE (INCLUDING THOSE
FIRST MORTGAGE BONDS DEEMED TO BE PAID WITHIN THE MEANING OF THE MORTGAGE). ON
THE SUBSTITUTION DATE, THE NOTE TRUSTEE WILL DELIVER TO THE COMPANY FOR
CANCELLATION THE PLEDGED BOND, AND THE COMPANY WILL CAUSE THE NOTE TRUSTEE TO
PROVIDE NOTICE TO ALL HOLDERS OF NOTES OF THE OCCURRENCE OF THE SUBSTITUTION
DATE. AS A RESULT, ON THE SUBSTITUTION DATE, THE PLEDGED BOND WILL CEASE TO
SECURE THE NOTES, AND, AT THE OPTION OF THE COMPANY, THE NOTES EITHER (I) WILL
BECOME UNSECURED GENERAL OBLIGATIONS OF THE COMPANY OR (II) WILL BE SECURED BY
SUBSTITUTED PLEDGED BONDS (Section 4.11).
LIMITATIONS ON LIENS
Following the Substitution Date, the Company shall cause the Mortgage to be
closed and the Company shall not issue any additional Bonds under the Mortgage.
In addition, following the Substitution Date, except as described below and
unless Substituted Pledged Bonds are issued to secure the Notes, the Company may
not create, assume or incur any mortgage, pledge, lien or security interest
(collectively referred to in this context as "mortgages") upon any real property
interest or other depreciable asset which is used in the Company's gas utility
business, whether owned at the Substitution Date or thereafter acquired, to
secure any indebtedness for money borrowed other than indebtedness with
maturities of twelve months or less ("Debt"), without effectively securing all
Notes (other than such Notes, if any, which shall by their terms be expressly
excluded from such provision) equally and ratably with such Debt; provided,
however, that this restriction will not apply to:
(a) mortgages on any property existing at the time of the
property's acquisition, including acquisition by means of merger or
consolidation (but excluding any extension of or addition to such
property unless the terms of the mortgage as of the date of
acquisition of such property provide that such mortgage shall be
secured by such extensions or additions);
(b) mortgages to secure the payment of all or part of the
purchase price of property or to secure any Debt incurred prior to, at
the time of or within 180 days after the acquisition of such property
for the purpose of financing all or part of the purchase price of such
property;
(d) mortgages existing as of the Substitution Date;
(e) Permitted Encumbrances (as defined below);
(f) any extension, refinancing, renewal or replacement (or
successive extensions, refinancings, renewals or replacements), in
whole or in part, of any mortgage referred to in clauses (a) through
(e); provided, however, that the principal amount of Debt secured
thereby may not exceed the principal amount of Debt (plus any premium
or fee payable in connection with such extension, renewal or
replacement) so secured at the time of such extension, refinancing,
renewal or replacement; and provided, further, that such mortgage must
be limited to all or such part of the property which was subject to
the mortgage so extended, refinanced, renewed or replaced (plus
improvements on such property);
(g) mortgages in favor of the United States, any State thereof,
any other country or any political subdivision of any of the
foregoing, to secure partial, progress, advance or other payments
under any contract or statute; or
(h) mortgages securing industrial development, pollution control
or similar revenue bonds.
Notwithstanding the foregoing restriction, the Company may create, assume
or incur any mortgage not excepted above without equally and ratably securing
the Notes if the aggregate amount of all Debt then outstanding and secured by
such mortgage or any other mortgage not excepted above does not exceed 10% of
the total
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consolidated capitalization of the Company as shown on the audited consolidated
balance sheet contained in the latest annual report of the Company as filed with
the Commission. For the purposes of this provision, any mortgage in favor of the
United States of America or any States thereof, or any other country, or any
political subdivision of any of the foregoing, to secure partial, progress,
advance or other payments pursuant to the provisions of any contract or statute,
or any mortgage securing industrial development, pollution control or similar
revenue bonds shall not be deemed to create a mortgage to secure any Debt.
For the purposes of this provision, the term "Permitted Encumbrance" means
(a) Liens for taxes, assessments or governmental charges or levies
for the then current year and taxes, assessments or governmental charges or
levies not then delinquent or which thereafter can be paid without penalty or
are being contested in good faith; liens for worker's compensation awards and
similar obligations not then delinquent or which thereafter can be paid without
penalty or are being contested in good faith; liens imposed by law, such as
carriers', warehousemen's, landlords', suppliers', mechanics', laborers',
materialmen's and other similar liens not then delinquent or which are being
contested in good faith;
(b) Liens and charges incidental to construction or current operation
which have not at such time been filed or asserted or the payment of which has
been adequately secured or which are insignificant in amount;
(c) Liens securing obligations not assumed by the Company and on
account of which it has not customarily paid and does not expect to pay interest
and existing upon real estate over or in respect of which the Company has a
right of way or other easement or right for pipelines, rights of way,
transmission, distribution or similar purposes; provided that the loss of all
such easements would not materially adversely affect the operations of the
Company;
(d) Any right which the United States of America or any municipal or
governmental body or agency may have by virtue of any franchise, license,
contract or statute to recapture or to purchase, or designate a purchaser of or
order the sale of, any property of the Company upon payment of reasonable
compensation therefor, or upon reasonable compensation or conditions to
terminate any franchise, license or other rights before the expiration date
thereof or to regulate the property and business of the Company;
(e) Liens of judgments covered by insurance, or upon appeal or other
proceeding for review, or not exceeding at any one time $10 million in aggregate
amount;
(f) Easements or reservations in respect of any property of the
Company for the purpose of transmission or distribution lines or other rights-
of-way, including overhead and underground transmission and distribution lines
and pipelines, or similar purposes, zoning ordinances, regulations,
reservations, survey exceptions, building restrictions, covenants, party wall
agreements, conditions of records and such other encumbrances or charges against
real property as are of a nature generally existing with respect to properties
of a similar character;
(g) Liens on the property of the Company incurred in the ordinary
course of business to secure performance of obligations with respect to
statutory or regulatory requirements, performance or return-of-money bonds,
surety bonds or other obligations of a like nature, in each case which are not
incurred in connection with the borrowing of money, the obtaining of advances or
credit or the payment of the deferred purchase price of property;
(h) Pledges or deposits by the Company under workmen's compensation
laws, unemployment insurance laws or similar legislation, or good faith deposits
in connection with bids, tenders, contracts (other than for the payment of Debt)
or leases to which the Company is a party, or deposits to secure public or
statutory obligations of the Company, or deposits of cash or United States
government bonds to secure surety or appeals bonds obtained in the ordinary
course of business to which the Company is a party, or deposits as security for
taxes (that shall not at the time be delinquent or thereafter can be paid
without penalty or are being
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contested in good faith) or import duties incurred in the ordinary course of
business, or deposits for the payment of rent or performance of other
obligations under a lease, in each case incurred in the ordinary course of
business;
(i) Rights reserved to or vested in any municipality or public
authority by the terms of any franchise, grant, license, or governmental consent
or permit, or by any provision of law, to acquire, purchase, or recapture at
fair value, or to designate a purchaser of such property;
(j) Rights reserved to or vested in any municipality or public
authority to use or control or regulate such property;
(k) Any obligations or duties, affecting such property, to any
municipality or public authority with respect to any franchise, grant, license
or permit;
(l) Exceptions or reservations therefrom of minerals, precious
metals, gas, oil, petroleum, hydrocarbons, or any other substances, which
exceptions or reservations exist at the time of acquisition by the Company of
the property and which do not materially and adversely affect the use made or
proposed to be made by it of such property; or
(m) Liens existing on the Substitution Date not otherwise described
in clauses (a) through (l) above.
REDEMPTION
The Pricing Supplement relating to each Note will indicate that such Note
cannot be redeemed prior to its stated maturity or that such Note will be
redeemable at the option of the Company in whole or in part, on any date on or
after the date specified in such Pricing Supplement, at prices declining from a
specified premium, if any, to par, together with accrued interest to the date of
redemption. In addition, the Notes shall be subject to redemption upon payment
of the principal amount thereof, either as a whole or in part, from time to
time, through the application of proceeds available under the Mortgage upon
redemption of the Pledged Bond from the condemnation of property subject to the
lien of the Mortgage, or proceeds of sale of such property to a governmental
body or agency having the power of eminent domain made as a result of the threat
(evidenced in writing by such body or agency) of condemnation of such property
together with accrued interest to the date fixed for redemption in accordance
with the terms of the Mortgage. See "Description of the Pledged Bond--
Redemption"
EVENTS OF DEFAULT
The following constitute events of default under the Note Indenture:
(a) default in the payment of principal or premium, if any, on any
Note when due and payable and continuance of such default for five days;
(b) default in the payment of interest on any Note when due which
continues for 30 days;
(c) default in the performance or breach of any other covenant or
warranty of the Company in the Note Indenture and the continuation thereof
for 90 days after written notice to the Company as provided in the Note
Indenture;
(d) prior to the Substitution Date, the occurrence of a default under
the Mortgage, of which default the Mortgage Trustee or the holders of a
majority in aggregate principal amount of the outstanding Notes have given
written notice to the Note Trustee;
(e) if any Substituted Pledged Bonds are outstanding, the occurrence
of a default under the Substituted Mortgage, of which default the trustee
under such Substituted Mortgage or the holders of a majority in aggregate
principal amount of the outstanding Notes have given written notice to the
Note Trustee; and
-9-
(f) certain events of bankruptcy, insolvency or reorganization
of the Company. (Section 8.1).
If an Event of Default, other than one relating to an event of default
under the Mortgage or the Substituted Mortgage, as applicable, and the
acceleration of the principal of the First Mortgage Bonds or any Substituted
Pledged Bonds in accordance with the Mortgage or the Substituted Mortgage, as
applicable, occurs and is continuing, either the Note Trustee or the registered
holders of a majority in aggregate principal amount of the outstanding Notes of
such series may declare the principal amount of all Notes of such series to be
due and payable immediately. At any time after an acceleration of the Notes of
such series has been declared, but before a judgment or decree for the immediate
payment of the principal amount of such Notes has been obtained and so long as
all of the Company's first mortgage bonds have not been accelerated, the
registered holders of a majority in aggregate principal amount of the
outstanding Notes of such series may, under certain circumstances, rescind and
annul such acceleration and its consequences. If an Event of Default relating to
an event of default under the Mortgage or the Substituted Mortgage, as
applicable, and the acceleration of the principal of the first mortgage bonds
issued under either the Mortgage or the Substituted Mortgage, as the case may
be, in accordance with the Mortgage or the Substituted Mortgage, as applicable,
occurs (see "Description of the Pledged Bond--Defaults and Notice Thereof"), the
principal of all of the Notes, together with interest accrued thereon, shall
become due and payable immediately without the necessity of any action by the
Note Trustee or the registered holders of any Notes; provided, however, that a
rescission and annulment of the declaration that the Company's first mortgage
bonds outstanding under the Mortgage or the Substituted Mortgage, as applicable,
be due and payable prior to their stated maturities shall constitute a waiver of
such Event of Default under the Note Indenture and of its consequences (Section
8.1).
The Note Indenture provides that the Note Trustee generally will be under
no obligation to exercise any of its rights or powers under the Note Indenture
at the request or direction of any of the holders unless such holders have
offered to the Note Trustee reasonable security or indemnity against the
liabilities and costs which may be incurred by such exercise. (Section 9.2). The
holders of a majority in principal amount of the outstanding Notes generally
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Note Trustee, or of exercising any
trust or power conferred on the Note Trustee, with respect to the Notes.
(Section 8.7). Each holder of any Note has the right to institute a proceeding
with respect to the Note Indenture, but such right is subject to certain
conditions precedent specified in the Note Indenture. (Section 8.4). The Note
Indenture provides that the Note Trustee, within 90 days after the occurrence of
a default with respect to the Notes, is required to give the holders of the
Notes notice of such default, unless cured or waived, but, except in the case of
default in the payment of principal of, or premium, if any, or interest on any
Notes, the Note Trustee may withhold such notice if it determines in good faith
that it is in the interest of such holders to do so. (Section 8.8). The Company
is required to deliver to the Note Trustee each year a certificate as to whether
or not, to the knowledge of the officers signing such certificate, the Company
is in compliance with the conditions and covenants under the Note Indenture
(Section 6.6).
MODIFICATION
Modification and amendment of the Note Indenture may be effected by the
Company and the Note Trustee with the consent of the holders of a majority in
principal amount of the outstanding Notes affected thereby, provided that no
such modification or amendment may, without the consent of the holder of each
outstanding Note affected thereby, (a) change the maturity date of any Note; (b)
reduce the rate or extend the time of payment of interest on any Note; (c)
reduce the principal amount of, or premium payable on, any Note; (d) change the
coin or currency of any payment of principal of, or any premium or interest on,
any Note; (e) change the date on which any Note may be redeemed or adversely
affect the rights of a holder to institute suit for the enforcement of any
payment on or with respect to any Note; (f) impair the interest of the Note
Trustee in the Pledged Bond or Substituted Pledged Bonds held by it or, prior to
the Substitution Date, reduce the principal amount of the Pledged Bond or
Substituted Pledged Bonds securing the Notes to an amount less than the
principal amount of the related issue of Notes or alter the payment provisions
of such Pledged Bond or Substituted Pledged Bonds in a manner adverse to the
holders of the Notes; or (g) modify the foregoing requirements or reduce the
percentage of outstanding Notes necessary to modify or amend the Note Indenture
or to waive any past default to less than a majority. Modification and amendment
of the Note Indenture may be effected by the Company and the Note Trustee
without the consent
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of the holders (a) to add to the covenants of the Company for the benefit of the
holders or to surrender a right conferred on the Company in the Note Indenture;
(b) to add further security for the Notes; (c) to make certain other
modifications, generally of a ministerial or immaterial nature; or (d) to make
certain other modifications which are not prejudicial to the interests of the
holders of the Notes (Sections 13.1 and 13.2).
DEFEASANCE AND DISCHARGE
The Note Indenture provides that the Company will be discharged from any
and all obligations in respect to the Notes and the Note Indenture (except for
certain obligations such as obligations to register the transfer or exchange of
Notes, replace stolen, lost or mutilated Notes and maintain paying agencies) if,
among other things, the Company irrevocably deposits with the Note Trustee, in
trust for the benefit of holders of Notes, money or certain United States
government obligations, or any combination thereof, which through the payment of
interest thereon and principal thereof in accordance with their terms will
provide money in an amount sufficient, without reinvestment, to make all
payments of principal of, and any premium and interest on, the Notes on the
dates such payments are due in accordance with the terms of the Note Indenture
and the Notes. Thereafter, the holders of Notes must look only to such deposit
for payment of the principal of, and interest and any premium on, the Notes
(Section 5.1).
CONSOLIDATION, MERGER AND SALE OR DISPOSITION OF ASSETS
The Company will not consolidate with or merge into any other corporation
or sell, transfer or otherwise dispose of all or substantially all its assets
unless the successor or transferee corporation assumes by supplemental indenture
the due and punctual payment of the principal of and premium and interest on all
the Notes and the performance of every covenant of the Note Indenture to be
performed or observed by the Company and (i) if such transaction occurs prior to
the Substitution Date, unless the successor or transferee corporation assumes
the Company's obligations under the Mortgage with respect to the Pledged Bond,
or (ii) if such transaction occurs on or after the Substitution Date and
Substituted Pledged Bonds are outstanding, unless the successor or transferee
corporation assumes the Company's obligations under the Substituted Mortgage
with respect to the Substituted Pledged Bonds. Upon any such consolidation,
merger, sale, transfer or other disposition of all or substantially all of the
assets of the Company, the successor corporation formed by such consolidation or
into which the Company is merged or to which such transfer is made shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under the Note Indenture with the same effect as if such successor
corporation had been named as the Company therein and the Company will be
released from all obligations under the Note Indenture. The Note Indenture
defines "all or substantially all" of the assets of the Company as being 50% or
more of the total assets of the Company as shown on the balance sheet of the
Company as of the end of the prior year and specifically permits any such sale,
transfer or other disposition during a calendar year of less than 50% of total
assets without the consent of the holders of the Notes and without the
assumption by the transferee of the Company's obligations on the Notes and
covenants contained in the Note Indenture. (Sections 12.1 and 12.2).
VOTING OF THE PLEDGED BOND HELD BY NOTE TRUSTEE
The Note Trustee, as a holder of the Pledged Bond, may attend any meeting
of bondholders under the Mortgage to which it receives due notice, or, at its
option, may deliver its proxy in connection therewith. Either at such meeting,
or where any action, amendment, modification, waiver or consent to or in respect
of the Mortgage or Bonds issued under the Mortgage is sought without a meeting
(a "proposed action"), the Note Trustee will vote the Pledged Bond held by it,
or will consent with respect thereto, as described below. The Note Trustee may
agree to any proposed action without the consent of or notice to holders of the
Notes where such proposed action would not adversely affect the holders of the
Notes. In the event that the proposed action would adversely affect the holders
of the Notes, the Note Trustee shall not vote the Pledged Bond without notice to
and the approval of holders of at least a majority in aggregate principal amount
of Notes then outstanding. (Section 4.3).
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RESIGNATION OR REMOVAL OF NOTE TRUSTEE
The Note Trustee may resign at any time upon written notice to the Company
specifying the day upon which the resignation is to take effect and such
resignation will take effect immediately upon the later of the appointment of a
successor Note Trustee and such specified day. (Section 9.10).
The Note Trustee may be removed at any time by an instrument or concurrent
instruments in writing filed with the Note Trustee and signed by the holders, or
their attorneys-in-fact, of at least a majority in principal amount of the then
outstanding Notes. In addition, so long as no event of default or event which,
with the giving of notice or lapse of time or both, would become an event of
default has occurred and is continuing, the Company may remove the Note Trustee
upon notice to the holder of each Note outstanding and the Note Trustee, and
appointment of a successor Note Trustee (Section 9.10).
BOOK-ENTRY SYSTEM
Each issue of Notes may be issued in the form of one or more Global Notes
representing all or part of such issue of Notes and which will be deposited with
or on behalf of the Depository and registered in the name of the Depository or a
nominee of the Depository.
The following is based solely on information furnished by the Depository:
Unless otherwise specified in the Pricing Supplement, DTC will act as
Depository for those Notes issued as Global Notes. The Global Notes will be
issued as fully-registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). DTC is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants" include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants"). The
rules applicable to DTC and its Participants are on file with the Commission.
Purchases of the Notes under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Notes on DTC's records.
The ownership interest of each actual purchaser of each Note ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect Participants'
records. Beneficial Owners will not receive written confirmation from DTC of
their purchase, but Beneficial Owners are expected to receive written
confirmation providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Notes are to be accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in the Notes, except
in the event that use of the book-entry system for the Notes is discontinued.
To facilitate subsequent transfers, all securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of the Notes with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Notes; DTC's records reflect only the
identity of the Direct Participants to whose accounts such Notes are credited,
which may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of the holdings on behalf of their customers.
-12-
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
If the Global Notes are redeemable, redemption notices shall be sent to
Cede & Co. If less than all of the Global Notes are being redeemed, DTC's
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the Notes.
Under its usual procedures, DTC mails an Omnibus Proxy to the Company as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Notes are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Principal, interest and any premium payments on the Notes will be made to
DTC. DTC's practice is to credit Direct Participant's accounts on payable date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on payable date. Payments
by Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as in the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such Participant and not of DTC, the applicable Trustee or the
Company, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal, interest and any premium to DTC is the
responsibility of the Company or the applicable Trustee, disbursement of such
payments to Direct Participants shall be the responsibility of DTC, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to a series of Notes at any time by giving reasonable notice to the
Company or the Note Trustee. Under such circumstances, if a successor securities
depository is not obtained, certificates for such series of Notes are required
to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository) for any series of
Notes. In that event, certificates for such series of Notes will be printed and
delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from DTC, and the Company and any underwriters, dealers or
agents take no responsibility for the accuracy thereof.
The underwriters, dealers or agents of any Notes may be Direct Participants
of DTC.
NONE OF THE COMPANY, THE NOTE TRUSTEE, THE MORTGAGE TRUSTEE, OR ANY AGENT
FOR PAYMENT ON OR REGISTRATION OF TRANSFER OR EXCHANGE OF THE GLOBAL NOTE WILL
HAVE ANY RESPONSIBILITY OR LIABILITY FOR ANY ASPECT OF THE RECORDS RELATING TO
OR PAYMENTS MADE ON ACCOUNT OF BENEFICIAL INTERESTS IN SUCH GLOBAL NOTE OR FOR
MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO SUCH BENEFICIAL
INTERESTS.
CONCERNING THE NOTE TRUSTEE
The Bank of New York is the Note Trustee under the Note Indenture. The Note
Trustee also acts as trustee for the Company's first mortgage bonds. The Company
also currently maintains other banking relationships with the Note Trustee in
the ordinary course of business.
DESCRIPTION OF THE PLEDGED BOND
GENERAL
The Pledged Bond is to be issued under and secured by the Mortgage and the
New Supplement providing for the Pledged Bond. The Pledged Bond constitutes the
series of the Company's First Mortgage Bonds designated as South Jersey Gas
Company First Mortgage Bonds, 10% Medium Term Notes Series A, which is limited
to the aggregate principal amount of $100,000,000. The following statement
includes brief summaries of certain provisions of the Mortgage. For a complete
statement of such provisions, reference is made to the actual provisions
-13-
of the Mortgage. First Mortgage Bonds issued or issuable under the Mortgage are
hereinafter sometimes called "Bonds." A copy of the Mortgage including a
proposed New Supplement may be inspected at the office of the Mortgage Trustee
at 101 Barclay Street, Floor 21 West, New York, New York 10286 or at the office
of the Commission, 450 Fifth Street, N.W., Washington, D.C. References to
articles and sections under this caption are reference to articles and sections
of the Mortgage.
The Pledged Bond will be issued initially to the Note Trustee and will be
issuable only in fully registered form in any denomination authorized by the
Company. The Pledged Bond will be transferable and the several denominations
thereof will be exchangeable for Bonds of other authorized denominations but of
the same series and aggregate principal amount, upon compliance with the
applicable provisions of the Mortgage and the Note Indenture. No service charge
will be made for any such transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto.
The Pledged Bond has not been registered under the Securities Act of 1933,
as amended.
INTEREST, MATURITY AND PAYMENT
Interest on the Pledged Bond shall accrue at the rate of 10% per annum
computed on the basis of a 360-day year of twelve 30-day months and shall be
payable semi-annually in arrears on May 1 and November 1 of each year, payable
initially on May 1, 1999, subject to receipt of certain credits against
principal and interest and such obligations as set forth below.
In addition to any other credit, payment or satisfaction to which the
Company is entitled with respect to the Pledged Bond, the Company shall be
entitled to credits against amounts otherwise payable in respect of the Pledged
Bond in an amount corresponding to (i) the principal amount of any of the Notes
issued under the Note Indenture secured thereby surrendered to the Note Trustee
by the Company, or purchased by the Note Trustee, for cancellation, (ii) the
amount of money held by the Note Trustee and available and designated for the
payment of principal of, and/or interest on, the Notes secured thereby,
regardless of the source of payment to the Note Trustee of such moneys and (iii)
the amount by which principal of and interest due on the Pledged Bond exceeds
principal of and interest due on the Notes secured thereby. The Note Trustee
shall make notation on the Pledged Bond of any such credit.
LIEN AND SECURITY
The Pledged Bond is secured by the lien of the Mortgage equally and
proportionately with all other Bonds. The Mortgage constitutes a first lien
(subject to "excepted encumbrances" as defined in the Mortgage) on substantially
all the property and franchises of the Company now owned or hereafter acquired,
for the equal and ratable benefit of all Bonds now or hereafter outstanding
under the Mortgage. The Mortgage excepts from its lien materials and supplies
consumable in the operation of the Company, merchandise and products acquired,
manufactured, produced or held for sale in the usual course of business, motor
vehicles, and cash, accounts receivable, stocks, bonds, notes, and securities
which are neither specifically pledged with the Mortgage Trustee nor required by
the Mortgage to be so pledged (Granting Clause). There are certain conditions
which must be complied with relating to the lien of the Mortgage in case of a
merger, consolidation or sale of all the assets of the Company. (Article VII)
ISSUANCE OF ADDITIONAL BONDS
Additional Bonds, ranking equally with all outstanding Bonds, may be issued
under the Mortgage, without limit as to aggregate principal amount, upon
compliance with Article III of the Mortgage and after obtaining the approval of
the New Jersey Board of Public Utilities ("BPU"). The principal provisions for
the issuance of additional Bonds are summarized below.
Additional Bonds may be issued in principal amount not exceeding: (i) 60%
of the cost or fair value (whichever is less) of property additions which
consist of real and personal property constructed or acquired by the Company
subject to the lien of the Mortgage and not previously utilized under the
Mortgage as the basis for additional bonds or certain other purposes, located in
the State of New Jersey, and used or useful by the Company in connection with
its business, after deducting from such cost or fair value the excess, if any,
of the cost of
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mortgaged property retired (as defined in the Mortgage) and certain amounts
relating to depreciation of the mortgaged property which are calculated in the
annual certificate for the replacement fund hereafter referred to; provided
that: (a) the net earnings of the Company (as defined in the Mortgage) for 12
consecutive months within the preceding 15 months shall have been at least 2
times the annual interest charges on all prior lien obligations and all Bonds to
be outstanding after the authentication of those about to be authenticated; and
(b) if such property additions are subject to a prior lien: (x) 166-2/3% of the
principal amount of the outstanding obligations secured by such prior lien shall
be deducted from the cost or fair value of such property additions (unless such
deduction has been made previously); and (y) if the deduction referred to in
clause (x) has not previously been made, then the aggregate principal amount of
all outstanding prior lien obligations upon all property additions used as the
basis for authentication of Bonds, withdrawal of money, or release of property
under the Mortgage or as a credit against a payment to any improvement or
sinking fund for Bonds of a particular series, or the replacement fund
hereinafter referred to, shall not exceed 10% of the principal amount of all
Bonds to be outstanding after authentication of those about to be authenticated
(Section 3.04); (ii) the principal amount of other Bonds acquired, paid,
retired, or with respect to which payment has been provided for excluding,
however, any such Bonds paid or retired by the operation of any sinking,
replacement, purchase or other analogous fund or otherwise used as a credit
against the obligations of the Company, with certain specified exceptions;
provided that if such Bonds were not theretofore bona-fide issued and bear
interest at a lower rate than the Bonds to be authenticated, the net earnings
condition specified above in paragraph (i) must be complied with (Sections 3.04
and 3.06); and (iii) the amount of money deposited with the Mortgage Trustee for
that purpose (Sections 3.03 and 3.07). Money so deposited may be withdrawn by
the Company upon the same conditions as would entitle it to obtain the
authentication of Bonds of an equal principal amount under the above clauses (i)
or (ii), except that if the net earnings condition specified in clause (i) was
complied with at the time of the deposit of such money and included all interest
charges on prior lien obligations existing at the time of the requested
withdrawal, it need not be again complied with upon the withdrawal thereof.
Pending such withdrawal, such money may be invested by the Mortgage Trustee in
obligations of the United States and the net proceeds of any sale thereof
withdrawn as aforesaid (Section 3.08 and 3.09).
If the additional Bonds are to be issued on the basis of property
additions, the Mortgage requires the delivery to the Mortgage Trustee of a
certificate of an engineer, appraiser, or other expert as to the fair value of
such additions to the Company as of a specified date not more than three months
before the application for the additional Bonds is filed with the Mortgage
Trustee. If any of such additions were acquired from another gas utility, the
Mortgage requires that the initial appraisal be performed by an engineer,
appraiser or other expert who is independent of the Company (Section 3.04, as
amended by 17/th/ Supp.).
REPLACEMENT FUND
The Mortgage requires that the Company on or before April 1 of each year,
deliver a replacement fund certificate and pay to the Mortgage Trustee for a
replacement fund an amount equal to $198,000 plus 2% of the cost of all
additions made to its depreciable public utility property during the period from
0ctober 1, 1947, to the end of the preceding calendar year, less 2% of the cost
of all depreciable public utility property retired by it during such period. The
Company may take as a credit against such payment (a) 166-2/3% times the
principal amount of bonds which could then be issued on the basis of property
additions, and (b) the principal amount of Bonds paid, acquired, or retired by
it, to the extent that the same have not been otherwise included in a prior
Replacement Fund Certificate filed with the Mortgage Trustee. So long as any
Bonds of the Fourteenth Series, Fifteenth Series, Sixteenth Series, Seventeenth
Series, Eighteenth Series, Nineteenth or Twentieth Series remain outstanding,
the Company will satisfy its obligations under the replacement fund through the
use of cash only if it has first used all available property additions and
retired bonds, and then only to the extent such amounts are not sufficient to
satisfy such obligations. All money in the replacement fund shall, upon request
by the Company, be applied as described below under "Release and Substitution of
Property" in the case of proceeds from the sale of released property (Sections
5.19 and 6.07; 15/th/ Supp., Section 3.2; 16th Supp., Section 3.2; 18th Supp.,
Section 3.2.; 19th Supp., Section 3.2.; 20th Supp., Section 3.2; 21/st/
Supp., Section 3.2; and 22/nd/ Supp. Section 3.2).
-15-
RELEASE AND SUBSTITUTION OF PROPERTY
Upon substitution of other property of equal value, the Company may dispose
of, free from the lien of the Mortgage and without procuring a release
therefrom, any machinery, tools, implements, fixtures, or equipment unsuitable
or not required for the conduct of its business (Section 6.03). Any property no
longer necessary for the proper conduct of its business may be sold, exchanged
or disposed of by the Company, and released from the lien of the Mortgage, upon
receipt by the Company of a consideration, which shall be paid or delivered to
the Mortgage Trustee (unless required to be paid or delivered to the trustee of
a prior lien), equal to at least the fair value thereof and which shall consist
of (i) money, (ii) obligations of any federal, state, municipal, or other
governmental body or agency purchasing such property, (iii) obligations maturing
within 15 years, secured by a purchase money mortgage on such property, and
constituting not more than 60% of such consideration, and/or (iv) property
additions (not otherwise utilized under the Mortgage) which might have formed
the basis for the authentication of additional Bonds (Sections 6.04 and 6.05).
Property taken by eminent domain proceedings or under governmental power of
purchase shall be released from the Mortgage and the proceeds of such taking or
purchase shall be paid to the Trustee (Section 6.08). Proceeds received by the
condemnation or from the sale of property released from the Mortgage (i) may be
withdrawn by the Company upon compliance with the same conditions that would
authorize the authentication of Bonds of an equal principal amount, except that
no earnings condition shall be applicable, and except that money may be
withdrawn on the basis of property additions up to 100% of the cost or fair
value (whichever is less) thereof after deducting the required amount on account
of any prior lien obligations and without any deduction for the cost of property
retired; (ii) may be temporarily invested by the Mortgage Trustee in obligations
of the United States; or (iii) may be applied to the purchase or redemption of
Bonds; provided that all such proceeds (including proceeds temporarily invested
as aforesaid) not withdrawn or applied for 5 years after receipt by the Mortgage
Trustee shall be applied to the purchase or redemption of Bonds (Section 6.07).
Proceeds of insurance on mortgaged property, except on losses of less than
$10,000, are payable to the Mortgage Trustee and may be applied by it (i) to
reimburse the Company for the cost of repairing, renewing, or replacing property
damaged or destroyed or (ii) as above provided in the case of proceeds of the
sale of property released from the Mortgage (Section 5.12). No prior notice is
required in connection with any releases or substitutions of property, but
Section 8.03 contains provisions relating to the transmission by the Mortgage
Trustee to Bondholders, from time to time, of reports of such releases or
substitutions, and the consideration received therefor.
RESTRICTIONS ON DIVIDENDS
So long as any Bonds of the Twentieth Series shall remain outstanding, the
Company will not declare or pay any dividend on any shares of its Common Stock
(other than dividends payable in shares of its Common Stock) or make any
distribution on such shares, or purchase or otherwise acquire any such shares
(except shares acquired without cost to the Company), or advance any amount to
or invest any amount in the property, securities or indebtedness of, or
guarantee any indebtedness of, any subsidiary if, after giving effect to such
action, the sum of the aggregate amounts so declared, paid, distributed,
purchased, acquired, advanced, invested or guaranteed after December 31, 1997
would exceed the aggregate net income of the Company available for dividends on
its Common Stock earned after such date plus the sum of $56,000,000. (Section
3.1; 22/nd/ Supp.) For the purposes of this restriction, "subsidiary" shall
mean any corporation directly or indirectly controlled by or under common
control with the Company. For the purpose of calculating the requirements of
this restriction, the net income of the Company available for dividends on its
Common Stock shall be determined in accordance with such system of accounts as
may be prescribed by any governmental authority having jurisdiction in the
premises or in the absence thereof in accordance with generally accepted
accounting principles as in effect at such time; provided, however, that (a) the
deductions for depreciation or renewal or replacement reserves in respect of
each year shall be the amount taken therefor on the accounts of the Company or
the amount required to be stated in item (1) of the Replacement Fund Certificate
to be filed under the Mortgage with respect to the period ending at the close of
such year, whichever be greater, and (b) no deduction or adjustment shall be
made from gross income for or in respect of (i) expenses in connection with the
redemption or retirement of any securities issued by the Company, including any
amount paid in excess of the principal or par or stated value of securities
redeemed or retired, and, if such redemption or retirement is effected with the
proceeds of sale of other securities of the Company, interest on the securities
redeemed or retired from the date on which the funds required for such
redemption or retirement shall be deposited in trust for such purpose to the
date of such redemption or retirement, (ii) profits or losses from sales of
-16-
capital assets or taxes in respect of such profits, (iii) any adjustments to
retained earnings (including tax adjustments) applicable to any period prior to
January 1, 1998, (iv) charges for the write-off of unamortized debt discount and
expense carried on the books of the Company at December 31, 1997, or (v) charges
for the write-off or write-down of the amount at which any property of the
Company was carried on its books at December 31, 1997, to the extent that the
same shall be approved by, or be made pursuant to any rule, regulation, or order
of, any governmental authority having jurisdiction in the premises and shall not
be required by such authority to be charged against earning accumulated after
December 31, 1997. (Section 3.1; 22/nd/ Supp.)
REDEMPTION
Bonds of the Twentieth Series, including the Pledged Bond, shall be subject
to redemption, either as a whole or in part, from time to time upon payment of
the principal amount thereof through the application of proceeds available under
the Mortgage from the condemnation of property subject to the lien of the
Mortgage, or proceeds of sale of such property to a governmental body or agency
having the power of eminent domain made as a result of the threat (evidenced in
writing by such body or agency) of condemnation of such property together with
accrued interest to the date fixed for redemption in accordance with the terms
of the Mortgage, which provides that if less than all Bonds of all Series are
redeemed then proceeds from the sale of such property will be applied to the
redemption of all Bonds, including the Pledged Bond, on a pro rata basis, based
on the amount of the Bonds then outstanding. (Section 1.7, 22/nd/ Supp.)
CONSOLIDATION, MERGER, OR SALE
Subject to the approval of the BPU, the Mortgage does not prevent a
consolidation or merger of the Company with or into any other corporation or a
conveyance and transfer of all of the property and franchises of the Company to
any other corporation, if (i) the consolidation, merger, or conveyance and
transfer is subject to the continuing lien of the Mortgage on the mortgaged
property and will not impair the lien or any of the rights or powers of the
Trustee or Bondholders; (ii) the corporation formed by the consolidation or into
which the Company is merged or which acquires the mortgaged property assumes and
agrees in writing to pay the Bondholders the principal of and interest on all
the Bonds, as and when due; (iii) any such successor corporation executes and
delivers a supplemental indenture which contains, among other things: (w) an
agreement to perform all obligations of the Company under the Mortgage, (x) a
stipulation that such consolidation, merger, or conveyance and transfer is not a
waiver or release of any rights or powers of the Mortgage Trustee or the
Bondholders, (y) a grant confirming the lien of the Mortgage Trustee upon the
mortgaged property and (z) a grant to the Mortgage Trustee subjecting to the
lien of the Mortgage property additions to be used in the future and certain
after-acquired property; and (iv) the Mortgage Trustee shall have consented to
the consolidation, merger, or conveyance and transfer, which consent the
Mortgage Trustee is required to give upon receiving an opinion of counsel that
the foregoing conditions in the Mortgage have been satisfied unless in the
Mortgage Trustee's opinion the transaction would be prejudicial to the interests
of the bondholders. (Section 7.01)
MODIFICATIONS OF MORTGAGE
With the written consent of the holders of 66-2/3% in principal amount of
the Bonds outstanding, any of the provisions of the Mortgage or of the Bonds may
be altered, amended or eliminated, or additional provisions added. If such
change pertains only to the Bonds of one or more Series, but less than all
Series, only the written consent of the holders of 66-2/3% in principal amount
of the then outstanding Bonds of each Series to which such change pertains is
needed. However, no such change may (i) alter or modify the right (expressed in
Section 9.16) of any Bondholder to receive payment of the principal of and
interest on his Bonds on or after the respective due dates thereof; (ii) change
any of the provisions of any Bond with respect to the time, terms, manner, or
amount of any payment of the principal thereof or interest thereon without the
consent of the holder of such Bonds; or (iii) reduce the percentage of
Bondholders whose consent shall be required for the execution of any subsequent
supplemental indenture. The consent of the BPU may be required before certain of
the above actions may be taken (Section 10.02). Certain other modifications and
amendments described in the Mortgage may be made without the consent of the
Bondholders (Section 10.01).
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PERCENTAGE OF BONDHOLDERS REQUIRED TO TAKE CERTAIN ACTION
Upon the occurrence of a Mortgage Event of Default (as defined below), the
Mortgage Trustee or the holders of 25% in principal amount of the Bonds then
outstanding may by written declaration accelerate the maturity of the principal
of all the Bonds (Section 9.03); but if the Company shall cure all Mortgage
Events of Default, the holders of a majority in principal amount of the Bonds
then outstanding may rescind, or require the Mortgage Trustee to rescind, such
acceleration (Section 9.13). The holders of 66-2/3% in principal amount of the
Bonds then outstanding may waive any past default under the Mortgage and its
consequences except a default in the payment of principal of or interest on any
of the Bonds (Section 9.13). No bondholder may enforce the lien of the Mortgage
unless the holders of 25% in principal amount of the Bonds then outstanding have
requested the Mortgage Trustee to do so and offered to indemnify it against
expenses and liabilities in connection therewith, and unless the Mortgage
Trustee has failed to take such action within 60 days (Section 9.15). The
holders of a majority in principal amount of the Bonds then outstanding may
direct the time, method and place of conducting any proceeding for any remedy
available to the Mortgage Trustee or exercising any trust or power conferred on
it, unless such action would be contrary to law or the provisions of the
Mortgage or would, in the opinion of the Mortgage Trustee, be unjustly
prejudicial to the other Bondholders (Section 9.18).
For the purpose of computing the percentage of holders of Bonds requisite
for the taking of any action permitted under the Mortgage (including the
modification of the Mortgage) the calculation will be on the basis of the
principal amount of all Bonds outstanding exclusive of Bonds held by the Company
and all Bonds known to the Mortgage Trustee to be held by or any person
controlling or controlled by or under common control with the Company shall be
disregarded (Article I).
DEFAULTS AND NOTICE THEREOF
The following constitute events of default under the Mortgage (a "Mortgage
Event of Default"): (i) defaults in the payment of principal of any Bond or
prior lien obligation; (ii) default for 60 days in the payment of interest on
any Bond or any prior lien obligations, or in the payment of any sinking,
replacement, purchase or analogous fund; (iii) default for 60 days after notice
in the performance of any other covenant in the Mortgage or in any prior lien
mortgage in certain cases; (iv) default occurs in observing or performing any
covenant or condition in any mortgage constituting a prior lien on mortgaged
property and the mortgagee or trustee thereunder institutes proceedings to
invoke rights or remedies available by reason of such default, and (v) certain
events of bankruptcy, insolvency or reorganization (Section 9.02). The 15th
Supp., 16th Supp., 18th Supp., 19th Supp., 20th Supp., 21/st/ Supp and 22/nd/
Supp. provide that the following also constitute events of default under the
Mortgage: (i) default in the payment of principal of any Bond of the Fourteenth
Series, Fifteenth Series, Sixteenth Series, Seventeenth Series, Eighteenth
Series, Nineteenth Series or Twentieth Series, respectively, at maturity or upon
redemption pursuant to the provisions of any sinking, replacement, purchase or
analogous fund or pursuant to any optional or other redemption or otherwise
provided if payment is made by wire transfer reasonably expected to be effective
on such due date, which transfer is not credited to the Bondholder's account on
such date, default shall not occur until after five days following the due date;
(ii) and default for ten days in the payment of interest on any Bond of the
Fourteenth Series, Fifteenth Series, Sixteenth Series, Seventeenth Series,
Eighteenth Series, Nineteenth Series or Twentieth Series respectively (15th
Supp., Section 6.1; 16th Supp., Section 6.1; 18th Supp., Section 6.1; 19th
Supp., Section 6.1; 20th Supp., Section 7.1; 21/st/ Supp. Section 7.1 and
22/nd/ Supp. Section 7.1). The 15th Supp., 16th Supp., 18th Supp., 19th Supp.,
20th Supp. 21/st/ Supp. and 22/nd/ Supp. also provide that it shall be an event
of default under the Mortgage if the Company shall default in the performance of
or compliance with any covenant, condition or term in the Mortgage or the 15th
Supp., 16th Supp., 18th Supp., 19th Supp., 20th Supp., 21/st/ Supp. or 22/nd/
Supp., respectively, and such default shall continue for 30 days after the
Company shall have knowledge thereof. Within 90 days after the occurrence
thereof, the Mortgage Trustee shall give notice of any defaults to the
Bondholders, provided that in the case of default in the payment of principal of
or interest on any Bond or of any sinking fund or purchase fund installment, the
Mortgage Trustee is not required to give notice to the Bondholders of any
default under the Mortgage if the Mortgage Trustee in good faith determines that
the withholding of such notice is in the interest of the Bondholders (Section
11.05). Periodic evidence of compliance with certain provisions of the Mortgage
is required to be submitted to the Mortgage Trustee (Sections 5.09, 5.12, 5.18
and 5.19). The Mortgage Trustee, subject to its duty to use the same degree of
care and skill as a prudent man would use in the conduct of his own affairs
(Section 11.02), before proceeding to enforce the lien of the Mortgage, is
-18-
entitled to be indemnified to its satisfaction against all its prospective
costs, expenses, and liability in connection therewith. (Section 11.01)
DISCHARGE AND SATISFACTION
Whenever all amounts due or to become due on all outstanding Bonds
issued under the Mortgage shall have been paid or provision for the payment
thereof shall have been made (as such provision for payment is defined below),
and all amounts payable by the Company to the Mortgage Trustee under the
Mortgage shall have been paid, the Mortgage Trustee shall, upon the request and
at the expense of the Company, satisfy or discharge the Mortgage of record
wherever recorded, and convey, transfer, assign, and deliver the mortgaged
property to or upon the order of the Company, and all the title, estate, rights,
and powers of the Mortgage Trustee shall forthwith cease, the mortgaged property
shall revert to the Company, and all responsibility of the Mortgage Trustee and
all obligations of the Company under the Mortgage (except as expressly provided
therein) shall then cease.
"Provision for payment of a Bond" shall be deemed to have been made if
(a) when the principal of such Bond shall have become due and payable, whether
by maturity, call for redemption, declaration, or otherwise, all amounts due
thereon shall have been paid or shall have been deposited in trust with and
shall be held by the Mortgage Trustee for the account of the holder thereof, or
(b) at any time in advance of the maturity thereof, the Company (1) shall have
either (i) deposited with the Mortgage Trustee in trust all amounts to become
due thereon up to and upon the maturity date thereof or (ii) duly called such
Bond for redemption on a date specified, in accordance with the provisions of
the Mortgage, given all notices required to make such call effective or made
provision satisfactory to the Mortgage Trustee for giving all such notices, and
deposited with the Mortgage Trustee in trust all amounts to become due upon such
Bond up to and upon such redemption date, and (2) shall have irrevocably
authorized the Mortgage Trustee forthwith to pay to the holder thereof, out of
the funds so deposited with it, all amounts so to become due on such Bond up to
and upon the maturity date or the redemption date, as the case may be, such
payment to be made upon such Bond whenever the same shall be presented for that
purpose without awaiting the maturity date or the redemption date, and shall
have given at least one notice by publication of such deposit and authorization
or shall have made provision satisfactory to the Mortgage Trustee for giving
such notice.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through
the Agents, each of which has agreed to use reasonable best efforts to solicit
purchases of the Notes. The Notes may also be sold to an Agent as principal for
reoffering as described below. The Company will have the sole right to accept
offers to purchase Notes and may reject any proposed purchase of Notes in whole
or in part. Each Agent will have the right, in its discretion reasonably
exercised, to reject any proposed purchase of Notes through it in whole or in
part. The Company will pay a commission to an Agent, depending upon maturity,
ranging from ____% to ____% of the principal amount of any Notes sold through
such Agent.
Unless otherwise specified in the applicable Pricing Supplement, any Notes
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage equal to the
commission applicable to any agency sale of a Note of identical maturity. Such
Note may be resold by an Agent to investors and other purchasers from time to
time in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale or may
be resold to certain dealers. Resales of notes by an Agent to a dealer may be
made at a discount, which will not be in excess of the discount to be received
by such Agent from the Company. After the initial public offering of Notes, the
public offering price (in the case of Notes to be resold on a fixed public
offering price basis), the commission and the discount may be changed.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject orders in whole or in part placed through
an Agent.
Unless otherwise specified in an applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in New York City on the date of settlement.
No Note will have an established trading market when issued. The Notes will
not be listed on any securities exchange. Each Agent may from time to time
purchase and sell Notes in the secondary market, but no Agent is obligated to do
so, and there can be no assurance that there will be a secondary market for the
Notes or liquidity in the secondary market if one develops. From time to time,
the Agents may make a market in the Notes but are not obligated to do so and may
discontinue such market-making activity at any time.
In connection with the offering, the rules of the Commission permit the
Agents to engage in certain transactions that stabilize the price of the Notes.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the price of the Notes.
If the Agents create a short position in the Notes in connection with an
offering of Notes (i.e., if they sell more Notes than are set forth on the cover
page of the Pricing Supplement), the Agents may reduce that short position by
purchasing Notes in the open market.
PaineWebber Incorporated, on behalf of the Agents, may also impose a
penalty bid on certain of the Agents. This means that if PaineWebber
Incorporated, on behalf of the Agents, purchases Notes in the open market to
reduce the Agents' short position or to stabilize the price of the Notes, it may
reclaim the amount of the selling concession from the Agents who sold the Notes
as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.
Neither the Company nor any of the Agents makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above might have on the price of the Notes. In addition, neither the
Company nor any of the Agents make any representation that they will engage in
such transactions or that such transactions, once commenced, will not be
discontinued without notice.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended. The Company has agreed to indemnify the
Agents against certain liabilities, including liabilities under
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such Act, and to contribute to payments the Agents may be required to make in
respect thereof. In addition, the Company has agreed to reimburse the Agents for
certain expenses related to the offering made hereby.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Dechert Price
& Rhoads, Philadelphia, Pennsylvania, counsel to the Company, and for the Agents
by Chapman and Cutler, Chicago, Illinois.
EXPERTS
The financial statements and the related financial statement schedules
included in the Company's Annual Report on Form 10-K incorporated in this
prospectus by reference have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
-20-
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND ANY PRICING
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY AGENT. THIS
PROSPECTUS AND ANY PRICING SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS AND ANY PRICING SUPPLEMENT OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS AND ANY PRICING SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR THEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT
THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE OF SUCH INFORMATION.
________
TABLE OF CONTENTS
PROSPECTUS
PAGE
----
Available Information..................................................... 2
Incorporation of Certain Documents by Reference........................... 2
The Company............................................................... 4
Use of Proceeds........................................................... 4
Description of Securities................................................. 4
Description of Notes...................................................... 5
Description of the Pledged Bond........................................... 13
Plan of Distribution...................................................... 19
Legal Matters............................................................. 20
Experts................................................................... 20
_________
$100,000,000
SOUTH JERSEY GAS COMPANY
[LOGO]
SECURED MEDIUM TERM
NOTES
SERIES A
----------
PROSPECTUS
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PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES
INCORPORATED
FIRST UNION CAPITAL
MARKETS
__________
AUGUST , 1998
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC Registration Fee................................................. $ 29,500
Legal Fees and Expenses.............................................. 200,000
Accounting Fees and Expenses......................................... 110,000
Rating Agency Fees................................................... 105,000
Printing and Certificate Engraving................................... 150,000
Miscellaneous (including Blue Sky Fees and Expenses)................. 20,000
-------
Total................................................................ $ 614,500
=======
Each amount set forth above, except for the SEC registration fee, is estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 14A:3-5 of the New Jersey Business Corporation Act, the Company:
(1) has power to indemnify each director and officer of the Company (as
well as its employees and agents) against expenses and liabilities in connection
with any proceeding involving him by reason of his being or having been such
director or officer, other than a proceeding by or in the right of the Company,
if (a) such director or officer acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, and (b) with respect to any criminal proceeding, such director or
officer had no reasonable cause to believe his conduct was unlawful;
(2) has power to indemnify each director and officer of the Company
against expenses in connection with any proceeding by or in the right of the
Company to procure a judgment in its favor which involves such director or
officer by reason of his being or having been such director or officer, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the Company; however, in such proceeding no
indemnification may be provided in respect to any claim, issue or matter as to
which such director or officer shall have been adjudged to be liable to the
Company, unless and only to the extent that the court determines that the
director or officer is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper;
(3) must indemnify each director and officer against expenses to the
extent that he has been successful on the merits or otherwise in any proceeding
referred to in (1) and (2) above or in defense of any claim, issue or matter
therein; and
(4) has power to purchase and maintain insurance on behalf of a director
or officer against any expenses incurred in any proceeding and any liabilities
asserted against him by reason of his being or having been a director or
officer, whether or not the Company would have the power to indemnify him
against such expenses and liabilities under the statute.
As used in the statute, "expenses" means reasonable costs, disbursements
and counsel fees, "liabilities" means amounts paid or incurred in satisfaction
of settlements, judgments, fines and penalties, and "proceedings" means any
pending, threatened or completed civil, criminal, administrative or arbitrative
action, suit or proceeding, and any appeal therein and any inquiry or
investigation which could lead to such action, suit or proceeding.
II-1
Indemnification may be awarded by a court under (1) or (2) as well as under
(3) above, notwithstanding a prior determination by the Company that the
director or officer has not met the applicable standard of conduct.
Indemnification under the statute does not exclude any other rights to
which a director or officer may be entitled under a certificate of
incorporation, by-law, or otherwise.
Article VII of the Company's Bylaws provides, in pertinent part, as
follows:
(1) the Company shall indemnify any corporate agent against his expenses
and liabilities in connection with any proceedings involving the corporate agent
by reason of his being or having been such a corporate agent to the extent that
(a) such corporate agent is not otherwise indemnified; and (b) the power to do
so has been or may be granted by statute; and for this purpose the Board of
Directors of the Company may, and on request of any such corporate agent shall
be required to, determine in each case whether or not the applicable standards
in any such statute have been met, or such determination shall be made by
independent legal counsel if the Board so directs or if the Board is not
empowered by statute to make such determination;
(2) to the extent that the power to do so has been or may be granted by
statute, the Company shall pay expenses incurred by a corporate agent in
connection with a proceeding in advance of the final disposition of the
proceeding upon receipt of an undertaking by or on behalf of such corporate
agent to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified as provided by statute;
(3) the indemnification provided in the Company's Bylaws shall not be
exclusive of any other rights to which a corporate agent may be entitled, both
as to any action in his official capacity or as to any action in another
capacity while holding such office, and shall inure to the benefits of the
heirs, executors, or administrators of any such corporate agent; and
(4) the Board of Directors of the Company shall have the power to (a)
purchase and maintain, at the Company's expense, insurance on behalf of the
Company and on behalf of others to the extent that power to do so has been or
may be granted by statute and (b) give other indemnification to the extent
permitted by law.
The Company maintains and pays all premiums on directors and officers
liability insurance policies with a primary liability limit of $35,000,000.
ITEM 16. EXHIBITS.
EXHIBIT NO. EXHIBIT DESCRIPTION
1(a)* Form of Distribution Agreement.
(4)(a) Form of Stock Certificate for Common Stock. Incorporated by
reference from Exhibit (4)(a) of Form 10 filed March 1997
(4)(b)(i) First Mortgage Indenture dated October 1, 1947. Incorporated by
reference from Exhibit (4)(b)(i) of Form 10-K of SJI for 1987
(1-6364)
(4)(b)(ii) Twelfth Supplemental Indenture dated as of June 1, 1980.
Incorporated by reference from Exhibit 5(b) of Form S-7 of SJI
(2-68038).
(4)(b)(iii) Sixteenth Supplemental Indenture dated as of April 1, 1989, 10
1/4% Series due 2008. Incorporated by reference from Exhibit
(4)(b)(xv) of Form 10-Q of SJI for the quarter ended March 31,
1988 (1-6364).
(4)(b)(iv) Seventeenth Supplemental Indenture dated as of May 1, 1989.
Incorporated by reference from Exhibit (4)(b)(xv) of Form 10-K
of SJI for 1989 (1-6364).
(4)(b)(v) Eighteenth Supplemental Indenture dated as of March 1, 1990.
Incorporated by reference from Exhibit (4)(e) of Form S-3 of
SJI (33-36581).
II-2
EXHIBIT NO. EXHIBIT DESCRIPTION
(4)(b)(vi) Nineteenth Supplemental Indenture dated as of April 1, 1992.
Incorporated by reference from Exhibit (4)(b)(xvii) of Form 10-
K of SJI for 1992 (1-6364).
(4)(b)(vii) Twentieth Supplemental Indenture dated as of June 1, 1993.
Incorporated by reference from Exhibit (4)(b)(xviii) of Form
10-K of SJI for 1993 (1-6364).
(4)(b)(viii) Twenty-First Supplemental Indenture dated as of March 1, 1997.
Incorporated by reference from Exhibit (4)(b)(xviv) of Form 10-
K of SJI for 1997 (1-6364).
(4)(b)(ix) Form of Twenty-Second Supplemental Indenture.
(4)(c) Indenture dated as of January 31, 1995; 8.60% Debenture Notes
due February 1, 2010. Incorporated by reference from Exhibit
(4)(c) of Form 10-K of SJI for 1994 (1-6364).
(4)(d) Certificate of Trust for SJG Capital Trust. Incorporated by
reference from Exhibit 3(a) of Form S-3 of SJG Capital Trust
and South Jersey Gas Company as filed March 27, 1997, as
amended April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(i) Trust Agreement of SJG Capital Trust. Incorporated by reference
from Exhibit 3(b) of Form S-3 of SJG Capital Trust and South
Jersey Gas Company as filed March 27, 1997, as amended April
18, 1997 and April 23, 1997 (333-24065).
(4)(d)(ii) Form of Amended and Restated Trust Agreement for SJG Capital
Trust. Incorporated by reference from Exhibit 3(c) of Form S-3
of SJG Capital Trust and South Jersey Gas Company as filed
March 27, 1997, as amended April 18, 1997 and April 23, 1997
(333-24065).
(4)(d)(iii) Form of Preferred Security for SJG Capital Trust. Incorporated
by reference from Exhibit 4(a) of Form S-3 of SJG Capital Trust
and South Jersey Gas Company as filed March 27, 1997, as
amended April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(iv) Form of Deferrable Interest Subordinated Debenture.
Incorporated by reference from Exhibit 4(b) of Form S-3 of SJG
Capital Trust and South Jersey Gas Company as filed March 27,
1997, as amended April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(v) Form of Deferrable Interest Subordinated Debenture.
Incorporated by reference from Exhibit 4(c) of Form S-3 of SJG
Capital Trust and South Jersey Gas Company as filed March 27,
1997, as amended April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(vi) Form of Guaranty Agreement between South Jersey Gas Company and
SJG Capital Trust. Incorporated by reference from Exhibit 4(d)
of Form S-3 of SJG Capital Trust and South Jersey Gas Company
as filed March 27, 1997, as amended April 18, 1997 and April
23, 1997 (333-24065).
(4)(e) Form of Medium Term Note Indenture
5* Opinion of Dechert Price & Rhoads
(12) Calculation of Ratio of Earnings to Fixed Charges (Before
Federal Income Taxes) (filed herewith).
(23)(a) Consent of Deloitte & Touche LLP (see page II-6 hereof).
(23)(b) Consent of Dechert Price & Rhoads (included in Exhibit 5).
(24) Power of Attorney (See page II-5 hereof).
II-3
EXHIBIT NO. EXHIBIT DESCRIPTION
(25)(a) Statement of Eligibility under the Trust Indenture Act of 1939
of The Bank of New York as Indenture Trustee under the Medium
Term Note Indenture (filed herewith).
(27) Financial Data Schedule (submitted only in electronic format to
the Securities and Exchange Commission).
* To be filed by amendment.
ITEM 17. UNDERTAKINGS.
A. Undertaking required by Item 512(a) of Regulation S-K.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed in
this Registration Statement or any material change to such information in this
Registration Statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
B. Undertaking required by Item 512(b) of Regulation S-K.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
undersigned Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Undertaking required by Item 512(h) of Regulation S-K.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the undersigned Registrant pursuant to the foregoing provisions, or
otherwise, the undersigned Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the undersigned Registrant of expenses incurred or paid by a
director, officer or controlling person of the undersigned Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the undersigned Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, South Jersey
Gas Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Folsom, New Jersey, on the 21 day of August 1998.
SOUTH JERSEY GAS COMPANY
By: /s George L. Baulig
-------------------
George L. Baulig,
Senior Vice President and
Corporate Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below
constitutes and appoints George L. Baulig such person's true and lawful
attorney-in-fact and agent, with full power of substitution and revocation, for
such person and in such person's name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement and any registration statements filed pursuant to
Rule 462 promulgated under the Securities Act of 1933 and to file the same with
all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as such
person might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent or his substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
NAME TITLE DATE SIGNATURE
C. Biscieglia President (principal August 21, 1998 s/ C. Biscieglia
executive officer)
and Director
D.A. Kindlick Senior Vice President August 21, 1998 s/ D.A. Kindlick
principal financial
officer)
W.J. Smethurst, Vice President and August 21, 1998 s/ W.J. Smethurst, Jr.
Jr. Treasurer (principal
accounting officer)
F.R. Raring Director August 21, 1998 /s F.R. Raring
A.G. Dickson Director August 21, 1998 /s A.G. Dickson
R.L. Dunham Director
C.D. McCormick Director August 21, 1998 /s C.D. McCormick
S.M. Vioni Director August 21, 1998 /s S.M. Vioni
II-5
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
South Jersey Gas Company on Form S-3 of our report dated February 18, 1998
appearing in the Annual Report on Form 10-K of South Jersey Gas Company for the
year ended December 31, 1997, and to the reference to us under the heading
"Experts" in the Prospectus which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
August 21, 1998
II-6