As filed with the Securities and Exchange Commission on October 1, 1998
Registration No. 333-62019
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SOUTH JERSEY GAS COMPANY
(Exact name of Registrant as specified in its Charter)
---------------
New Jersey 21-0398330
(State of Incorporation) (I.R.S. Employer
Identification Number)
1 SOUTH JERSEY PLAZA, ROUTE 54
FOLSOM, NEW JERSEY 08037
(609) 561-9000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
GEORGE L. BAULIG, SECRETARY
SOUTH JERSEY GAS COMPANY
1 South Jersey Plaza, Route 54
Folsom, New Jersey 08037
(609) 561-9000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
GEORGE W. PATRICK, ESQUIRE JONATHAN A. KOFF, ESQUIRE
Dechert Price & Rhoads Chapman and Cutler
4000 Bell Atlantic Tower 111 West Monroe
1717 Arch Street Chicago, Illinois 60603
Philadelphia, Pennsylvania 19103-2793 (312) 845-2978
(215) 994-2631
---------------
Approximate Date of Commencement of the Proposed Sale to the Public: After
this Registration Statement becomes effective, as determined by market
conditions and other factors.
---------------
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act of 1933 registration statement number of the
earlier effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box: [_]
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The Registrant hereby amends this Registration Statement on such date as may
be necessary to delay its effective date until the Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the commission, acting pursuant to said Section
8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$100,000,000
South Jersey Gas Company
Secured Medium Term Notes, Series A
----------------
South Jersey Gas Company (the "Company") intends to offer and sell from time
to time its Secured Medium Term Notes, Series A (the "Notes"), in an aggregate
principal amount up to $100,000,000 and having maturities ranging from 1 year
to 40 years from date of issue. The Notes will be issued only in fully-
registered form, in minimum denominations of $1,000 and integral multiples of
$1,000 in excess thereof. Unless otherwise indicated in the applicable Pricing
Supplement (as defined below), interest on each Note will be payable
semiannually in arrears on May 1 and November 1 at a fixed rate determined by
the Company and agreed upon by the purchaser thereof at or prior to the time
of sale. The purchase price, aggregate principal amount, interest rate, stated
maturity date, optional redemption provisions and any other material terms not
described herein of each issue of Notes will be set forth in an accompanying
supplement to this Prospectus (each, a "Pricing Supplement"). See "Description
of Notes."
Prior to the Substitution Date (as defined herein), the Notes will be
serviced and secured as to the payment of the principal thereof and interest
thereon by the Company's First Mortgage Bonds, 10% Medium Term Notes Series A
(the "Pledged Bond") in an aggregate principal amount equal to $100,000,000
issued and pledged by the Company and delivered to the Note Trustee (as
defined herein) in accordance with the provisions of the Note Indenture (as
defined herein). The principal amount of the Pledged Bond deemed outstanding
will at all times be equal to the outstanding principal amount of the Notes.
The Pledged Bond will be deemed to bear interest corresponding to the required
payments of interest in respect of the Notes. Payments of principal and
interest in respect of the Notes will constitute payments on the Pledged Bond.
The Pledged Bond constitutes a separate series of the Company's First Mortgage
Bonds, all of which are secured by a lien on substantially all of the property
owned by the Company. See "Description of the Pledged Bond." On the
Substitution Date, the Pledged Bond will cease to secure the Notes, and, at
the option of the Company, the Notes either will become unsecured general
obligations of the Company or will be secured by first mortgage bonds issued
under a mortgage other than the Company's current mortgage indenture. See
"Description of Notes--Security; Substitution Date."
Each Note will be represented by a Global Note (each, a "Global Note")
registered in the name of The Depository Trust Company, as depository ("DTC"
or the "Depository"), or its nominee, unless otherwise specified in the
applicable Pricing Supplement. Beneficial interests in Global Notes will be
shown on, and transfers thereof will be effected only through, records
maintained by the Depository and its participants. Global Notes will not be
issuable in certificate form except under the limited circumstances described
herein. See "Description of Notes--Certificated Notes."
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Price to Agents' Proceeds to
Public(1) Commissions(2) Company(1)(3)
- --------------------------------------------------------------------------------
Per Note................ 100% 0.15%-0.75% 99.85%-99.25%
- --------------------------------------------------------------------------------
Total................... $100,000,000 $150,000-$750,000 $99,850,000-$99,250,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1)Unless otherwise specified in the applicable Pricing Supplement, Notes will
be sold at 100% of the principal amount thereof.
(2) The Company will pay to PaineWebber Incorporated, Prudential Securities
Incorporated and First Union Capital Markets, as agents (each an "Agent"
and collectively, the "Agents"), a commission ranging from 0.15% to 0.75%
of the principal amount of any Note, depending on its stated maturity,
sold through such Agent. The Company may also sell Notes to an Agent, as
principal, for resale to one or more investors or other purchasers at a
fixed public offering price or at varying prices related to prevailing
market prices at the time of resale, as determined by such Agent. Unless
otherwise specified in the applicable Pricing Supplement, any Notes sold
to an Agent as principal shall be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a Note of
identical maturity. See "Plan of Distribution."
(3) Before deduction of expenses, estimated at $614,500 which are payable by
the Company.
----------------
The Notes will be offered on a continuing basis by the Company through the
Agents, who have agreed to use their reasonable best efforts to solicit offers
to purchase the Notes. The Company also may sell Notes to an Agent, as
principal, for resale to one or more investors or other purchasers. The Notes
will not be listed on any securities exchange, and there can be no assurance
that the Notes will be sold or that there will be a secondary market for the
Notes. The Company reserves the right to withdraw, cancel or modify the offer
made hereby without notice. The Company or an Agent, if it solicits such
offer, may reject any offer to purchase Notes, in whole or in part. See "Plan
of Distribution."
----------------
PaineWebber Incorporated
Prudential Securities Incorporated
First Union Capital Markets
----------------
The date of this Prospectus is October 5, 1998.
AVAILABLE INFORMATION
South Jersey Gas Company (the "Company") is a wholly-owned subsidiary of
South Jersey Industries, Inc. ("SJI"). Each of the Company and SJI is subject
to the informational reporting requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information can be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. and at its regional offices at 500 West Madison
Street, Chicago, Illinois and 7 World Trade Center, New York, New York. Copies
of such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549-1004 at
prescribed rates. Information regarding the operation of the public reference
facilities may be obtained by calling the Commission at (800) SEC-0330. The
Commission also maintains an Internet site that contains reports, proxy
statements and other information regarding issuers that file electronically
with the Commission. The address of the Commission's Internet site is
http://www.sec.gov. Such material can also be inspected at the New York Stock
Exchange, Inc. where certain of the Company's and SJI's securities are listed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the year ended December 31,
1997, filed pursuant to the Exchange Act.
2. The Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1998 and June 30, 1998, filed pursuant to the Exchange Act.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering of the Notes shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be modified or superseded for the
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus is
delivered, upon written or oral request of such person, a copy of any or all
of the documents referred to above which have been or may be incorporated by
reference in this Prospectus, other than exhibits to such documents not
specifically incorporated by reference herein. Requests for such copies should
be directed to George L. Baulig, Secretary, South Jersey Gas Company, 1 South
Jersey Plaza, Route 54, Folsom, New Jersey 08037, (609) 561-9000.
CERTAIN STATEMENTS CONTAINED IN THIS REGISTRATION STATEMENT, INCLUDING THOSE
STATEMENTS CONTAINED IN DOCUMENTS INCORPORATED HEREIN BY REFERENCE, THAT ARE
NOT RELATED TO HISTORICAL RESULTS ARE FORWARD-LOOKING STATEMENTS. ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE PROJECTED OR IMPLIED IN THE FORWARD-
LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES
INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND
"BUSINESS." FURTHER, CERTAIN FORWARD-LOOKING STATEMENTS ARE BASED UPON
ASSUMPTIONS AS TO FUTURE EVENTS THAT MAY NOT PROVE TO BE ACCURATE.
CERTAIN PERSONS PARTICIPATING IN A PARTICULAR OFFERING OF NOTES HEREUNDER
MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE
PRICE OF THE NOTES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN THE NOTES, AND THE IMPOSITION OF A PENALTY BID. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
2
THE COMPANY
GENERAL
The Company is a regulated New Jersey public utility and is the principal
subsidiary of SJI. The Company is a gas distribution utility that supplies
natural gas to residential, commercial and industrial customers in the
southern part of New Jersey. The Company also makes off-system sales of
natural gas on a wholesale basis to various customers on the interstate
pipeline system and transports natural gas purchased directly from producers
or suppliers by some of its customers.
At December 31, 1997, the Company served approximately 261,000 residential,
commercial and industrial customers throughout 112 municipalities in Atlantic,
Cape May, Cumberland, and Salem counties and portions of Burlington, Camden
and Gloucester Counties. The Company's service territory covers approximately
2,500 square miles and has an estimated permanent population of 1.1 million.
Gas sales and transportation for 1997 amounted to 73,574,000 Mcf (thousand
cubic feet), of which approximately 50,181,000 Mcf was firm sales and
transportation, 8,931,000 Mcf was interruptible sales and transportation and
14,462,000 Mcf was off system sales. At December 31, 1997, the breakdown of
firm sales includes 39.8% residential, 16.1% commercial, 2.5% cogeneration and
electric generation, 1.4% industrial and other and 40.2% transportation. The
Company is regulated as to rates and other matters by the New Jersey Board of
Public Utilities.
The Company's executive offices are located at 1 South Jersey Plaza, Route
54, Folsom, New Jersey 08037 and its telephone number is (609) 561-9000.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for each of the periods
indicated is as follows:
TWELVE
MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------------------------------------- ------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
2.6 2.1 2.3 2.5 2.6 2.4
The ratio of earnings to fixed charges represents, on a pre-tax basis, the
number of times earnings cover fixed charges. Earnings consist of net income,
to which has been added fixed charges and taxes based on income of the
Company, excluding the cumulative effect of an accounting change. Fixed
charges consist of interest charges and preferred securities dividend
requirements and an interest factor in rentals.
USE OF PROCEEDS
Unless otherwise specified in the applicable Pricing Supplement, the net
proceeds from the sale of the Notes will be used by the Company to retire
short-term debt and to fund capital expenditure requirements. At June 30,
1998, the Company had $72.3 million of short-term debt outstanding with a
weighted-average interest cost of 5.8%, with maturities not exceeding one
month.
DESCRIPTION OF SECURITIES
The Notes may be issued in one or more issues (i) secured by the Company's
first mortgage bonds issued under the Company's current mortgage indenture or
(ii) following the Substitution Date (as defined below), as either unsecured
notes or as notes secured by the Company's first mortgage bonds issued under a
mortgage indenture other than the Company's current mortgage indenture. On the
Substitution Date, any outstanding Notes secured by the Company's first
mortgage bonds when issued will cease to be secured by first mortgage bonds
issued under the Company's current mortgage indenture and, at the Company's
option, either (a) will become unsecured general obligations of the Company or
(b) will be secured by the Company's first mortgage bonds issued under a
mortgage indenture other than the Company's current mortgage indenture.
3
The Notes will be issued under an indenture (the "Note Indenture"), the form
of which is an exhibit to the Registration Statement of which this Prospectus
is a part, between the Company and The Bank of New York, as trustee (the "Note
Trustee"), and are described below under the caption "Description of Notes."
Prior to the Substitution Date, a series of first mortgage bonds designated as
"South Jersey Gas Company First Mortgage Bonds, 10% Medium Term Notes Series
A" (the "Pledged Bond") will be issued under the Indenture of First Mortgage,
dated October 1, 1947, as heretofore supplemented and amended by supplemental
indentures and a new Twenty-Second Supplemental Indenture (the "New
Supplement") (such Indenture of First Mortgage, as supplemented, is herein
referred to as the "Mortgage"), all from the Company to The Bank of New York,
as successor trustee to Guaranty Bank (the "Mortgage Trustee") and pledged to
the Note Trustee under the Note Indenture to secure the Notes. The Pledged
Bond to be issued under the Mortgage is described below under the caption
"Description of the Pledged Bond."
There is no requirement, under either the Note Indenture or the Mortgage
(collectively, the "Indentures"), that future issues of debt securities of the
Company be issued under the Indentures, and, subject to certain restrictions
following the Substitution Date which are described in "Description of Notes--
Limitations on Liens," the Company will be free to employ other indentures or
documentation, containing provisions different from those included in the
Indenture or applicable to one or more issues of Notes, in connection with
future issues of such other debt securities.
DESCRIPTION OF NOTES
GENERAL
The following summaries of certain provisions of the Note Indenture do not
purport to be complete and are subject to, and qualified in their entirety by,
all of the provisions of the Note Indenture which is incorporated herein by
reference and the form of which is an exhibit to the Registration Statement of
which this Prospectus is a part. References to Section numbers under this
caption are references to the Section numbers of the Note Indenture.
Until the Substitution Date (as defined below), the Notes will be secured by
the Pledged Bond issued under the Mortgage and delivered by the Company to the
Note Trustee. See "Security; Substitution Date." ON THE SUBSTITUTION DATE (AS
DEFINED BELOW), THE NOTES WILL CEASE TO BE SECURED BY THE PLEDGED BOND AND, AT
THE COMPANY'S OPTION, EITHER (I) WILL BECOME UNSECURED GENERAL OBLIGATIONS OF
THE COMPANY OR (II) WILL BE SECURED BY THE COMPANY'S FIRST MORTGAGE BONDS (THE
"SUBSTITUTED PLEDGED BONDS") ISSUED UNDER A MORTGAGE INDENTURE OTHER THAN THE
MORTGAGE (A "SUBSTITUTED MORTGAGE"). The Note Indenture provides that, in
addition to the Notes offered hereby, additional notes may be issued
thereunder, without limitation as to aggregate principal amount, provided
that, prior to the Substitution Date, the amount of Notes that may be issued
cannot exceed the aggregate principal amount of first mortgage bonds that the
Company is able to issue under the Mortgage. See "Description of the Pledged
Bond--Issuance of Additional Bonds."
The Note Indenture provides that notes may be issued thereunder in one or
more series, may be issued at various times, may have differing maturity dates
and may bear interest at differing rates; provided that Notes which are
secured by the Pledged Bond will bear interest at a rate not to exceed 10%,
the stated interest rate of the Pledged Bond. The Pricing Supplement
applicable to each issue of Notes will set forth any variation in the terms
and provisions of such Notes from those described in this Prospectus. Unless
otherwise indicated in the applicable Pricing Supplement, the Notes will be
denominated in United States currency in minimum denominations of $1,000 and
integral multiples thereof.
Unless otherwise indicated in the applicable Pricing Supplement, and except
as described under the heading "Redemption," there are no provisions in the
Note Indenture or the Notes that require the Company to redeem, or permit the
holders to cause a redemption of, the Notes or that otherwise protect the
holders in the event that the Company incurs substantial additional
indebtedness (except for certain restrictions on the Company's ability to
create, assume or incur certain liens after the Substitution Date, as
described in "Limitations on Liens")
4
whether or not in connection with a change in control of the Company. However,
under current law, any change in control transaction that involves the
incurrence of additional long-term indebtedness (as notes, first mortgage
bonds or otherwise) by the Company would require approval of state utility
regulatory authorities and, possibly, of federal utility regulatory
authorities.
REGISTRATION, TRANSFER AND EXCHANGE
Notes of any issue will be exchangeable for one or more Notes of the same
series and issue of any authorized denominations and of a like aggregate
principal amount and tenor. (Section 2.6).
Unless otherwise indicated in the applicable Pricing Supplement, Notes may
be presented for registration of transfer (duly endorsed or accompanied by a
duly executed written instrument of transfer), at the office of the Note
Trustee maintained for such purpose with respect to any issue of Notes and
referred to in the applicable Pricing Supplement, without service charge but
upon the payment of any taxes and other governmental charges as described in
the Note Indenture. Such transfer or exchange will be effected upon being
satisfied with the documents of title and indemnity of the person making the
request. (Sections 2.6 and 2.7).
In the event of any redemption of Notes, the Note Trustee will not be
required to exchange or register a transfer of any Notes selected, called or
being called for redemption except, in the case of any Note to be redeemed in
part, the portion thereof not to be so redeemed. (Section 2.6). See "Book-
Entry System."
CERTIFICATED NOTES
Each Note will be represented by a Global Note registered in the name of the
Depository, or its nominee, unless otherwise specified in the applicable
Pricing Supplement. The Notes represented by the Global Note are exchangeable
for certificated Notes in definitive form of like tenor as such Notes in
denominations of $1,000 and integral multiples thereof if (i) the Depository
notifies the Company that it is unwilling or unable to continue as Depository
for the Global Note or if at any time the Depository ceases to be a clearing
agency registered under the Exchange Act or (ii) the Company in its
discretion, at any time, determines not to have all of the Notes represented
by the Global Note. Any Note that is exchangeable pursuant to the preceding
sentence is exchangeable for certificated Notes issuable in authorized
denominations and registered in such names as the Depository shall direct.
Subject to the foregoing, the Global Note is not exchangeable, except for a
Global Note of the same aggregate denomination to be registered in the name of
the Depository or its nominee. (Section 2.13).
PAYMENT AND PAYING AGENTS
Principal of and interest on Notes issued in the form of Global Notes will
be paid in the manner described below under the caption "Book-Entry System."
Unless otherwise indicated in the applicable Pricing Supplement, interest on
Notes that are in the form of certificated securities will be paid by wire
transfer of clearinghouse or similar next day funds or by check mailed to the
person entitled thereto at such person's address as it appears in the register
for the Notes maintained by the Note Trustee; however, a holder of Notes of
one or more series under the Note Indenture in the aggregate principal amount
of $10,000,000 or more having the same interest payment dates will be entitled
to request to receive payments of interest on such series by wire transfer of
immediately available funds to a bank located within the continental United
States if an appropriate request including wire transfer instructions has been
received by the Note Trustee on or prior to the applicable regular record date
in accordance with the Note Indenture. Unless otherwise indicated in the
applicable Pricing Supplement, the principal of, and interest at maturity on
Notes in the form of certificated Notes will be payable in immediately
available funds at the office of the Note Trustee upon proper presentment and
surrender thereof. (Section 2.12).
All moneys paid by the Company to a paying agent for the payment of
principal of, or interest on, any Note which remain unclaimed at the end of
one year after such principal or interest shall have become due and payable
5
will be repaid to the Company and the holder of such Note will thereafter look
only to the Company for payment thereof. (Section 5.4).
SECURITY; SUBSTITUTION DATE
Until the Substitution Date (as defined below), the Notes will be secured by
the Pledged Bond issued and delivered by the Company to the Note Trustee. See
"Description of the Pledged Bond."
THE "SUBSTITUTION DATE" WILL BE THE DATE THAT ALL FIRST MORTGAGE BONDS OF
THE COMPANY ISSUED AND OUTSTANDING UNDER THE MORTGAGE OTHER THAN THE PLEDGED
BOND (THE "FIRST MORTGAGE BONDS") HAVE BEEN RETIRED (AT, BEFORE OR AFTER THE
MATURITY THEREOF) THROUGH PAYMENT, REDEMPTION OR OTHERWISE (INCLUDING THOSE
FIRST MORTGAGE BONDS DEEMED TO BE PAID WITHIN THE MEANING OF THE MORTGAGE). ON
THE SUBSTITUTION DATE, THE NOTE TRUSTEE WILL DELIVER TO THE COMPANY FOR
CANCELLATION THE PLEDGED BOND, AND THE COMPANY WILL CAUSE THE NOTE TRUSTEE TO
PROVIDE NOTICE TO ALL HOLDERS OF NOTES OF THE OCCURRENCE OF THE SUBSTITUTION
DATE. AS A RESULT, ON THE SUBSTITUTION DATE, THE PLEDGED BOND WILL CEASE TO
SECURE THE NOTES, AND, AT THE OPTION OF THE COMPANY, THE NOTES EITHER (I) WILL
BECOME UNSECURED GENERAL OBLIGATIONS OF THE COMPANY OR (II) WILL BE SECURED BY
SUBSTITUTED PLEDGED BONDS. (Section 4.10).
LIMITATIONS ON LIENS
Following the Substitution Date, the Company shall cause the Mortgage to be
closed and the Company shall not issue any additional bonds under the
Mortgage. In addition, following the Substitution Date, except as described
below and unless Substituted Pledged Bonds are issued to secure the Notes, the
Company may not create, assume or incur any mortgage, pledge, lien or security
interest (collectively referred to in this context as "mortgages") upon any
real property interest or other depreciable asset which is used in the
Company's gas utility business, whether owned at the Substitution Date or
thereafter acquired, to secure any indebtedness for money borrowed other than
indebtedness with maturities of twelve months or less ("Debt") of the Company
or any other person (other than the Notes), without effectively securing all
Notes (other than such Notes, if any, which shall by their terms be expressly
excluded from such provision) equally and ratably with such Debt; provided,
however, that this restriction will not apply to:
(a) any mortgage upon property existing at the time of acquisition
thereof, including acquisition by means of merger or consolidation (but
excluding any extension thereof or addition thereto unless the terms of the
mortgage as of the date of acquisition of such property provide that such
mortgage shall be secured by such extensions or additions);
(b) any mortgage to secure the payment of all or part of the purchase
price of property or to secure any Debt incurred prior to, at the time of
or within 180 days after the acquisition of such property for the purpose
of financing all or part of the purchase price of such property;
(c) any mortgage existing as of the Substitution Date;
(d) any Permitted Encumbrance (as defined below); and
(e) any extension, refinancing, renewal or replacement (or successive
extensions, refinancings, renewals or replacements), in whole or in part,
of any mortgage referred to in clauses (a) through (d), inclusive;
provided, however, that the principal amount of Debt secured thereby shall
not exceed the principal amount of Debt (plus any premium or fee payable in
connection with such extension, refinancing, renewal or replacement) so
secured at the time of such extension, refinancing, renewal or replacement;
and provided, further, that such mortgage shall be limited to all or such
part of the property which was subject to the mortgage so extended,
refinanced, renewed or replaced (plus improvements on such property).
6
Notwithstanding the foregoing restriction, the Company may create, assume or
incur any mortgage not excepted above without equally and ratably securing the
Notes if the aggregate amount of all Debt then outstanding and secured by such
mortgage or any other mortgage not excepted above does not exceed 15% of the
total consolidated capitalization of the Company as shown on the audited
consolidated balance sheet contained in the latest annual report of the
Company as filed with the Commission. For the purposes of this provision, any
mortgage in favor of the United States of America or any States thereof, or
any other country, or any political subdivision of any of the foregoing, to
secure partial, progress, advance or other payments pursuant to the provisions
of any contract or statute, or any mortgage securing industrial development,
pollution control or similar revenue bonds shall not be deemed to create a
mortgage to secure any Debt. (Section 6.8).
For the purposes of this provision, the term "Permitted Encumbrance" means
(a) Liens for taxes, assessments or governmental charges or levies for
the then current year and taxes, assessments or governmental charges or
levies not then delinquent or which thereafter can be paid without penalty
or are being contested in good faith; liens for worker's compensation
awards and similar obligations not then delinquent or which thereafter can
be paid without penalty or are being contested in good faith; liens imposed
by law, such as carriers', warehousemen's, landlords', suppliers',
mechanics', laborers', materialmen's and other similar liens not then
delinquent or which are being contested in good faith;
(b) Liens and charges incidental to construction or current operation
which have not at such time been filed or asserted or the payment of which
has been adequately secured or which are insignificant in amount;
(c) Liens securing obligations not assumed by the Company and on account
of which it has not customarily paid and does not expect to pay interest
and existing upon real estate over or in respect of which the Company has a
right of way or other easement or right for pipelines, rights of way,
transmission, distribution or similar purposes; provided that the loss of
all such easements would not materially adversely affect the operations of
the Company;
(d) Any right which the United States of America or any municipal or
governmental body or agency may have by virtue of any franchise, license,
contract or statute to recapture or to purchase, or designate a purchaser
of or order the sale of, any property of the Company upon payment of
reasonable compensation therefor, or upon reasonable compensation or
conditions to terminate any franchise, license or other rights before the
expiration date thereof or to regulate the property and business of the
Company;
(e) Liens of judgments covered by insurance, or upon appeal or other
proceeding for review, or not exceeding at any one time $10 million in
aggregate amount;
(f) Easements or reservations in respect of any property of the Company
for the purpose of transmission or distribution lines or other rights-of-
way, including overhead and underground transmission and distribution lines
and pipelines, or similar purposes, zoning ordinances, regulations,
reservations, survey exceptions, building restrictions, covenants, party
wall agreements, conditions of records and such other encumbrances or
charges against real property as are of a nature generally existing with
respect to properties of a similar character;
(g) Liens on the property of the Company incurred in the ordinary course
of business to secure performance of obligations with respect to statutory
or regulatory requirements, performance or return-of-money bonds, surety
bonds or other obligations of a like nature, in each case which are not
incurred in connection with the borrowing of money, the obtaining of
advances or credit or the payment of the deferred purchase price of
property;
(h) Pledges or deposits by the Company under workmen's compensation laws,
unemployment insurance laws or similar legislation, or good faith deposits
in connection with bids, tenders, contracts (other than for the payment of
Debt) or leases to which the Company is a party, or deposits to secure
public or statutory obligations of the Company, or deposits of cash or
United States government bonds to secure surety or appeals bonds obtained
in the ordinary course of business to which the Company is a party, or
deposits as security for taxes (that shall not at the time be delinquent or
thereafter can be paid without penalty or are being contested in good
faith) or import duties incurred in the ordinary course of business, or
7
deposits for the payment of rent or performance of other obligations under
a lease, in each case incurred in the ordinary course of business;
(i) Rights reserved to or vested in any municipality or public authority
by the terms of any franchise, grant, license, or governmental consent or
permit, or by any provision of law, to acquire, purchase, or recapture at
fair value, or to designate a purchaser of such property;
(j) Rights reserved to or vested in any municipality or public authority
to use or control or regulate such property;
(k) Any obligations or duties, affecting such property, to any
municipality or public authority with respect to any franchise, grant,
license or permit;
(l) Exceptions or reservations therefrom of minerals, precious metals,
gas, oil, petroleum, hydrocarbons, or any other substances, which
exceptions or reservations exist at the time of acquisition by the Company
of the property and which do not materially and adversely affect the use
made or proposed to be made by it of such property; or
(m) Liens existing on the Substitution Date not otherwise described in
clauses (a) through (l) above.
REDEMPTION
The Pricing Supplement relating to each Note will indicate that such Note
cannot be redeemed prior to its stated maturity or that such Note will be
redeemable at the option of the Company in whole or in part, on any date on or
after the date specified in such Pricing Supplement, at prices declining from
a specified premium, if any, to par, together with accrued interest to the
date of redemption. In addition, the Notes shall be subject to redemption upon
payment of the principal amount thereof, either as a whole or in part, from
time to time, through the application of proceeds available under the Mortgage
upon redemption of the Pledged Bond from the condemnation of property subject
to the lien of the Mortgage, or proceeds of sale of such property to a
governmental body or agency having the power of eminent domain made as a
result of the threat (evidenced in writing by such body or agency) of
condemnation of such property together with accrued interest to the date fixed
for redemption in accordance with the terms of the Mortgage. See "Description
of the Pledged Bond--Redemption." (Section 3.4)
EVENTS OF DEFAULT
The following constitute events of default under the Note Indenture (an
"Event of Default"):
(a) default in the payment of principal or premium, if any, on any note
issued under the Note Indenture when due and payable and continuance of
such default for five days;
(b) default in the payment of interest on any note issued under the Note
Indenture when due which continues for 30 days;
(c) default in the performance or breach of any other covenant or
warranty of the Company in the Note Indenture and the continuation thereof
for 90 days after written notice to the Company as provided in the Note
Indenture;
(d) prior to the Substitution Date, the occurrence of a default under the
Mortgage, of which default the Mortgage Trustee or the holders of a
majority in aggregate principal amount of the outstanding notes issued
under the Note Indenture have given written notice to the Note Trustee;
(e) if any Substituted Pledged Bonds are outstanding, the occurrence of a
default under the Substituted Mortgage, of which default the trustee under
such Substituted Mortgage or the holders of a majority in aggregate
principal amount of the outstanding notes issued under the Note Indenture
have given written notice to the Note Trustee; and
(f) certain events of bankruptcy, insolvency or reorganization of the
Company. (Section 8.1).
If an Event of Default, other than one relating to an event of default under
the Mortgage or the Substituted Mortgage, as applicable, and the acceleration
of the principal of the Company's first mortgage bonds issued under the
Mortgage or the Substituted Mortgage in accordance with the Mortgage or the
Substituted Mortgage,
8
as applicable, occurs and is continuing, either the Note Trustee or the
registered holders of a majority in aggregate principal amount of the
outstanding notes issued under the Note Indenture of such series may declare
the principal amount of all notes of such series to be due and payable
immediately. At any time after an acceleration of the notes of such series has
been declared, but before a judgment or decree for the immediate payment of
the principal amount of such notes has been obtained and so long as all of the
Company's first mortgage bonds have not been accelerated, the registered
holders of a majority in aggregate principal amount of the outstanding notes
of such series may, under certain circumstances, rescind and annul such
acceleration and its consequences. If an Event of Default relating to an event
of default under the Mortgage or the Substituted Mortgage, as applicable, and
the acceleration of the principal of the first mortgage bonds issued under
either the Mortgage or the Substituted Mortgage, as the case may be, in
accordance with the Mortgage or the Substituted Mortgage, as applicable,
occurs (see "Description of the Pledged Bond--Defaults and Notice Thereof"),
the principal of all of the outstanding notes issued under the Note Indenture,
together with interest accrued thereon, shall become due and payable
immediately without the necessity of any action by the Note Trustee or the
registered holders of any notes; provided, however, that a rescission and
annulment of the declaration that the Company's first mortgage bonds
outstanding under the Mortgage or the Substituted Mortgage, as applicable, be
due and payable prior to their stated maturities shall constitute a waiver of
such Event of Default under the Note Indenture and of its consequences.
(Section 8.1).
The Note Indenture provides that the Note Trustee generally will be under no
obligation to exercise any of its rights or powers under the Note Indenture at
the request or direction of any of the holders unless such holders have
offered to the Note Trustee reasonable security or indemnity against the
liabilities and costs which may be incurred by such exercise. (Section 9.2).
The holders of a majority in principal amount of the outstanding Notes
generally will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Note Trustee, or of
exercising any trust or power conferred on the Note Trustee, with respect to
the Notes. (Section 8.7). Each holder of any Note has the right to institute a
proceeding with respect to the Note Indenture, but such right is subject to
certain conditions precedent specified in the Note Indenture. (Section 8.4).
The Note Indenture provides that the Note Trustee, within 90 days after the
occurrence of a default with respect to the Notes, is required to give the
holders of the Notes notice of such default, unless cured or waived, but,
except in the case of default in the payment of principal of, or premium, if
any, or interest on any Notes, the Note Trustee may withhold such notice if it
determines in good faith that it is in the interest of such holders to do so.
(Section 8.8). The Company is required to deliver to the Note Trustee each
year a certificate as to whether or not, to the knowledge of the officers
signing such certificate, the Company is in compliance with the conditions and
covenants under the Note Indenture. (Section 6.6). The Company is required to
notify the Note Trustee within five days of becoming aware of an Event of
Default. (Section 6.7).
MODIFICATION
Modification and amendment of the Note Indenture may be effected by the
Company and the Note Trustee with the consent of the holders of a majority in
principal amount of the outstanding notes affected thereby, provided that no
such modification or amendment may, without the consent of the holder of each
outstanding note affected thereby, (a) change the maturity date of any Note;
(b) reduce the rate or extend the time of payment of interest on any Note; (c)
reduce the principal amount of, or premium payable on, any Note; (d) change
the coin or currency of any payment of principal of, or any premium or
interest on, any Note; (e) change the date on which any Note may be redeemed;
(f) adversely affect the rights of a holder to institute suit for the
enforcement of any payment on or with respect to any Note; (g) impair the
interest of the Note Trustee in the Pledged Bond or Substituted Pledged Bonds
held by it or, prior to the Substitution Date, reduce the principal amount of
the Pledged Bond or Substituted Pledged Bonds securing the Notes to an amount
less than the principal amount of the related series of Notes or alter the
payment provisions of such Pledged Bond or Substituted Pledged Bonds in a
manner adverse to the holders of the Notes; or (h) modify the foregoing
requirements or reduce the percentage of outstanding notes necessary to modify
or amend the Note Indenture or to waive any past default to less than a
majority. Modification and amendment of the Note Indenture may be effected by
the Company and the Note Trustee without the consent of the holders (a) to add
to the covenants of the Company for the benefit of
9
the holders or to surrender a right conferred on the Company in the Note
Indenture; (b) to add further security for the Notes; (c) to make certain
other modifications, generally of a ministerial or immaterial nature; or (d)
to make certain other modifications which are not prejudicial to the interests
of the holders of the Notes. (Sections 13.1 and 13.2).
DEFEASANCE AND DISCHARGE
The Note Indenture provides that the Company will be discharged from any and
all obligations in respect to the Notes and the Note Indenture (except for
certain obligations such as obligations to register the transfer or exchange
of Notes, replace stolen, lost or mutilated Notes and maintain paying
agencies) if, among other things, the Company irrevocably deposits with the
Note Trustee, in trust for the benefit of holders of Notes, money or certain
United States government obligations, or any combination thereof, which
through the payment of interest thereon and principal thereof in accordance
with their terms will provide money in an amount sufficient, without
reinvestment, to make all payments of principal of, and any premium and
interest on, the Notes on the dates such payments are due in accordance with
the terms of the Note Indenture and the Notes. Thereafter, the holders of
Notes must look only to such deposit for payment of the principal of, and
interest and any premium on, the Notes. (Section 5.1).
CONSOLIDATION, MERGER AND SALE OR DISPOSITION OF ASSETS
The Company will not consolidate with or merge into any other corporation or
sell, transfer or otherwise dispose of all or substantially all its assets
unless the successor or transferee corporation assumes by supplemental
indenture the due and punctual payment of the principal of and premium and
interest on all the Notes and the performance of every covenant of the Note
Indenture to be performed or observed by the Company and (i) if such
transaction occurs prior to the Substitution Date, unless the successor or
transferee corporation assumes the Company's obligations under the Mortgage
with respect to the Pledged Bond, or (ii) if such transaction occurs on or
after the Substitution Date and Substituted Pledged Bonds are outstanding,
unless the successor or transferee corporation assumes the Company's
obligations under the Substituted Mortgage with respect to the Substituted
Pledged Bonds. Upon any such consolidation, merger, sale, transfer or other
disposition of all or substantially all of the assets of the Company, the
successor corporation formed by such consolidation or into which the Company
is merged or to which such transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Note Indenture with the same effect as if such successor corporation had
been named as the Company therein and the Company will be released from all
obligations under the Note Indenture. The Note Indenture defines "all or
substantially all" of the assets of the Company as being 50% or more of the
total assets of the Company as shown on the balance sheet of the Company as of
the end of the prior year and specifically permits any such sale, transfer or
other disposition during a calendar year of less than 50% of total assets
without the consent of the holders of the Notes and without the assumption by
the transferee of the Company's obligations on the Notes and covenants
contained in the Note Indenture. (Sections 12.1 and 12.2).
VOTING OF THE PLEDGED BOND HELD BY NOTE TRUSTEE
The Note Trustee, as a holder of the Pledged Bond, may attend any meeting of
bondholders under the Mortgage to which it receives due notice, or, at its
option, may deliver its proxy in connection therewith. Either at such meeting,
or where any action, amendment, modification, waiver or consent to or in
respect of the Mortgage or Bonds issued under the Mortgage is sought without a
meeting (a "proposed action"), the Note Trustee will vote the Pledged Bond
held by it, or will consent with respect thereto, as described below. The Note
Trustee may agree to any proposed action without the consent of or notice to
holders of the Notes where such proposed action would not adversely affect the
holders of the Notes. In the event that the proposed action would adversely
affect the holders of the Notes, the Note Trustee shall not vote the Pledged
Bond without notice to and the approval of holders of at least a majority in
aggregate principal amount of all notes then outstanding under the Note
Indenture. (Section 4.3).
10
RESIGNATION OR REMOVAL OF NOTE TRUSTEE
The Note Trustee may resign at any time upon written notice to the Company
specifying the day upon which the resignation is to take effect and such
resignation will take effect immediately upon the later of the appointment of
a successor Note Trustee and such specified day. (Section 9.10).
The Note Trustee may be removed at any time by an instrument or concurrent
instruments in writing filed with the Note Trustee and signed by the holders,
or their attorneys-in-fact, of at least a majority in principal amount of the
then outstanding notes issued under the Note Indenture. In addition, so long
as no event of default or event which, with the giving of notice or lapse of
time or both, would become an event of default has occurred and is continuing,
the Company may remove the Note Trustee upon notice to the holder of each
outstanding note issued under the Note Indenture and the Note Trustee, and
appointment of a successor Note Trustee. (Section 9.10).
BOOK-ENTRY SYSTEM
Each issue of Notes may be issued in the form of one or more Global Notes
representing all or part of such issue of Notes and which will be deposited
with or on behalf of the Depository and registered in the name of the
Depository or a nominee of the Depository.
The following is based solely on information furnished by the Depository:
Unless otherwise specified in the Pricing Supplement, DTC will act as
Depository for those Notes issued as Global Notes. The Global Notes will be
issued as fully-registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). DTC is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization" within the meaning of
the New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of Section 17A of the
Securities Exchange Act of 1934. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. "Direct Participants" include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks, and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to DTC and its Participants are on file with the
Commission.
Purchases of the Notes under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Notes on DTC's
records. The ownership interest of each actual purchaser of each Note
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmation providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Notes are to be accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
will not receive certificates representing their ownership interests in the
Notes, except in the event that use of the book-entry system for the Notes is
discontinued.
To facilitate subsequent transfers, all securities deposited by Participants
with DTC are registered in the name of DTC's partnership nominee, Cede & Co.
The deposit of the Notes with DTC and their registration in the name of Cede &
Co. effect no change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the Notes; DTC's records reflect only the identity
of the Direct Participants to whose accounts such Notes are credited, which
may or may not be the Beneficial Owners. The Participants will remain
responsible for keeping account of the holdings on behalf of their customers.
11
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
If the Global Notes are redeemable, redemption notices shall be sent to Cede
& Co. If less than all of the Global Notes are being redeemed, DTC's practice
is to determine by lot the amount of the interest of each Direct Participant
in such issue to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the Notes.
Under its usual procedures, DTC mails an Omnibus Proxy to the Company as soon
as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts the
Notes are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Principal, interest and any premium payments on the Notes will be made to
DTC. DTC's practice is to credit Direct Participant's accounts on payable date
in accordance with their respective holdings shown on DTC's records unless DTC
has reason to believe that it will not receive payment on payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as in the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of DTC, the Note
Trustee or the Company, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment of principal, interest and any
premium to DTC is the responsibility of the Company or the Note Trustee,
disbursement of such payments to Direct Participants shall be the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners shall be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Notes at any time by giving reasonable notice to the Company or
the Note Trustee. Under such circumstances, if a successor securities
depository is not obtained, certificates for the Notes are required to be
printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository) for the Notes. In
that event, certificates for the Notes will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from DTC, and the Company and any underwriters, dealers or
agents take no responsibility for the accuracy thereof.
The underwriters, dealers or agents of any Notes may be Direct Participants
of DTC.
NONE OF THE COMPANY, THE NOTE TRUSTEE, THE MORTGAGE TRUSTEE, OR ANY AGENT
FOR PAYMENT ON OR REGISTRATION OF TRANSFER OR EXCHANGE OF THE GLOBAL NOTE WILL
HAVE ANY RESPONSIBILITY OR LIABILITY FOR ANY ASPECT OF THE RECORDS RELATING TO
OR PAYMENTS MADE ON ACCOUNT OF BENEFICIAL INTERESTS IN SUCH GLOBAL NOTE OR FOR
MAINTAINING, SUPERVISING OR REVIEWING ANY RECORDS RELATING TO SUCH BENEFICIAL
INTERESTS.
CONCERNING THE NOTE TRUSTEE
The Bank of New York is the Note Trustee under the Note Indenture. The Note
Trustee also acts as trustee for the Company's first mortgage bonds. The
Company also currently maintains other banking relationships with the Note
Trustee in the ordinary course of business.
12
DESCRIPTION OF THE PLEDGED BOND
GENERAL
The Pledged Bond is to be issued under and secured by the Mortgage and the
New Supplement providing for the Pledged Bond. The Pledged Bond constitutes
the Twentieth Series of the Company's First Mortgage Bonds designated as
"South Jersey Gas Company First Mortgage Bonds, 10% Medium Term Notes Series
A," which is limited to the aggregate principal amount of $100,000,000. The
following statement includes brief summaries of certain provisions of the
Mortgage. For a complete statement of such provisions, reference is made to
the actual provisions of the Mortgage. First Mortgage Bonds issued or issuable
under the Mortgage are hereinafter sometimes called "Bonds." A copy of the
Mortgage including the New Supplement may be inspected at the office of the
Mortgage Trustee at 101 Barclay Street, Floor 21 West, New York, New York
10286 or at the office of the Commission, 450 Fifth Street, N.W., Washington,
D.C. References to articles and sections under this caption are reference to
articles and sections of the Mortgage.
The Pledged Bond will be issued initially to the Note Trustee and will be
issuable only in fully registered form in any denomination authorized by the
Company. The Pledged Bond will be transferable and the several denominations
thereof will be exchangeable for Bonds of other authorized denominations but
of the same series and aggregate principal amount, upon compliance with the
applicable provisions of the Mortgage and the Note Indenture. No service
charge will be made for any such transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto.
The Pledged Bond has not been registered under the Securities Act of 1933,
as amended.
INTEREST, MATURITY AND PAYMENT
Interest on the Pledged Bond shall accrue at the rate of 10% per annum
computed on the basis of a 360-day year of twelve 30-day months and shall be
payable semi-annually in arrears on May 1 and November 1 of each year, payable
initially on May 1, 1999, subject to receipt of certain credits against
principal and interest and such obligations as set forth below.
In addition to any other credit, payment or satisfaction to which the
Company is entitled with respect to the Pledged Bond, the Company shall be
entitled to credits against amounts otherwise payable in respect of the
Pledged Bond in an amount corresponding to (i) the principal amount of any of
the Notes issued under the Note Indenture secured thereby surrendered to the
Note Trustee by the Company, or purchased by the Note Trustee, for
cancellation, (ii) the amount of money held by the Note Trustee and available
and designated for the payment of principal of, and/or interest on, the Notes
secured thereby, regardless of the source of payment to the Note Trustee of
such moneys and (iii) the amount by which principal of and interest due on the
Pledged Bond exceeds principal of and interest due on the Notes secured
thereby. (Section 2.1).
LIEN AND SECURITY
The Pledged Bond is secured by the lien of the Mortgage equally and
proportionately with all other Bonds. The Mortgage constitutes a first lien
(subject to "excepted encumbrances" as defined in the Mortgage) on
substantially all the property and franchises of the Company now owned or
hereafter acquired, for the equal and ratable benefit of all Bonds now or
hereafter outstanding under the Mortgage. The Mortgage excepts from its lien
materials and supplies consumable in the operation of the Company, merchandise
and products acquired, manufactured, produced or held for sale in the usual
course of business, motor vehicles, and cash, accounts receivable, stocks,
bonds, notes, and securities which are neither specifically pledged with the
Mortgage Trustee nor required by the Mortgage to be so pledged. (Granting
Clause). There are certain conditions which must be complied with relating to
the lien of the Mortgage in case of a merger, consolidation or sale of all the
assets of the Company. (Article VII).
13
ISSUANCE OF ADDITIONAL BONDS
Additional Bonds, ranking equally with all outstanding Bonds, may be issued
under the Mortgage, without limit as to aggregate principal amount, upon
compliance with Article III of the Mortgage and after obtaining the approval
of the New Jersey Board of Public Utilities ("BPU"). The principal provisions
for the issuance of additional Bonds are summarized below.
Additional Bonds may be issued in principal amount not exceeding: (i) 60% of
the cost or fair value (whichever is less) of property additions which consist
of real and personal property constructed or acquired by the Company subject
to the lien of the Mortgage and not previously utilized under the Mortgage as
the basis for additional bonds or certain other purposes, located in the State
of New Jersey, and used or useful by the Company in connection with its
business, after deducting from such cost or fair value the excess, if any, of
the cost of mortgaged property retired (as defined in the Mortgage) and
certain amounts relating to depreciation of the mortgaged property which are
calculated in the annual certificate for the replacement fund hereafter
referred to; provided that: (a) the net earnings of the Company (as defined in
the Mortgage) for 12 consecutive months within the preceding 15 months shall
have been at least 2 times the annual interest charges on all prior lien
obligations and all Bonds to be outstanding after the authentication of those
about to be authenticated; and (b) if such property additions are subject to a
prior lien: (x) 166 2/3% of the principal amount of the outstanding
obligations secured by such prior lien shall be deducted from the cost or fair
value of such property additions (unless such deduction has been made
previously); and (y) if the deduction referred to in clause (x) has not
previously been made, then the aggregate principal amount of all outstanding
prior lien obligations upon all property additions used as the basis for
authentication of Bonds, withdrawal of money, or release of property under the
Mortgage or as a credit against a payment to any improvement or sinking fund
for Bonds of a particular series, or the replacement fund hereinafter referred
to, shall not exceed 10% of the principal amount of all Bonds to be
outstanding after authentication of those about to be authenticated (Section
3.04); (ii) the principal amount of other Bonds acquired, paid, retired, or
with respect to which payment has been provided for excluding, however, any
such Bonds paid or retired by the operation of any sinking, replacement,
purchase or other analogous fund or otherwise used as a credit against the
obligations of the Company, with certain specified exceptions; provided that
if such Bonds were not theretofore bona-fide issued and bear interest at a
lower rate than the Bonds to be authenticated, the net earnings condition
specified above in paragraph (i) must be complied with (Sections 3.04 and
3.06); and (iii) the amount of money deposited with the Mortgage Trustee for
that purpose. (Sections 3.03 and 3.07). Money so deposited may be withdrawn by
the Company upon the same conditions as would entitle it to obtain the
authentication of Bonds of an equal principal amount under the above clauses
(i) or (ii), except that if the net earnings condition specified in clause (i)
was complied with at the time of the deposit of such money and included all
interest charges on prior lien obligations existing at the time of the
requested withdrawal, it need not be again complied with upon the withdrawal
thereof. Pending such withdrawal, such money may be invested by the Mortgage
Trustee in obligations of the United States and the net proceeds of any sale
thereof withdrawn as aforesaid. (Section 3.08 and 3.09).
If the additional Bonds are to be issued on the basis of property additions,
the Mortgage requires the delivery to the Mortgage Trustee of a certificate of
an engineer, appraiser, or other expert as to the fair value of such additions
to the Company as of a specified date not more than three months before the
application for the additional Bonds is filed with the Mortgage Trustee. If
any of such additions were acquired from another gas utility, the Mortgage
requires that the initial appraisal be performed by an engineer, appraiser or
other expert who is independent of the Company. (Section 3.04, as amended by
17th Supp.).
REPLACEMENT FUND
The Mortgage requires that the Company on or before April 1 of each year,
deliver a replacement fund certificate and pay to the Mortgage Trustee for a
replacement fund an amount equal to $198,000 plus 2% of the cost of all
additions made to its depreciable public utility property during the period
from 0ctober 1, 1947, to the end of the preceding calendar year, less 2% of
the cost of all depreciable public utility property retired by it during such
period. The Company may take as a credit against such payment (a) 166 2/3%
times the principal
14
amount of bonds which could then be issued on the basis of property additions,
and (b) the principal amount of Bonds paid, acquired, or retired by it, to the
extent that the same have not been otherwise included in a prior Replacement
Fund Certificate filed with the Mortgage Trustee. So long as any Bonds of the
Fourteenth Series, Fifteenth Series, Sixteenth Series, Seventeenth Series,
Eighteenth Series, Nineteenth Series or Twentieth Series remain outstanding,
the Company will satisfy its obligations under the replacement fund through
the use of cash only if it has first used all available property additions and
retired Bonds, and then only to the extent such amounts are not sufficient to
satisfy such obligations. All money in the replacement fund shall, upon
request by the Company, be applied as described below under "Release and
Substitution of Property" in the case of proceeds from the sale of released
property. (Sections 5.19 and 6.07; 15th Supp., Section 3.2; 16th Supp.,
Section 3.2; 18th Supp., Section 3.2.; 19th Supp., Section 3.2.; 20th Supp.,
Section 3.2; 21st Supp., Section 3.2; and 22nd Supp. Section 3.2).
RELEASE AND SUBSTITUTION OF PROPERTY
Upon substitution of other property of equal value, the Company may dispose
of, free from the lien of the Mortgage and without procuring a release
therefrom, any machinery, tools, implements, fixtures, or equipment unsuitable
or not required for the conduct of its business. (Section 6.03). Any property
no longer necessary for the proper conduct of its business may be sold,
exchanged or disposed of by the Company, and released from the lien of the
Mortgage, upon receipt by the Company of a consideration, which shall be paid
or delivered to the Mortgage Trustee (unless required to be paid or delivered
to the trustee of a prior lien), equal to at least the fair value thereof and
which shall consist of (i) money, (ii) obligations of any federal, state,
municipal, or other governmental body or agency purchasing such property,
(iii) obligations maturing within 15 years, secured by a purchase money
mortgage on such property, and constituting not more than 60% of such
consideration, and/or (iv) property additions (not otherwise utilized under
the Mortgage) which might have formed the basis for the authentication of
additional Bonds. (Sections 6.04 and 6.05). Property taken by eminent domain
proceedings or under governmental power of purchase shall be released from the
Mortgage and the proceeds of such taking or purchase shall be paid to the
Trustee. (Section 6.08). Proceeds received by the condemnation or from the
sale of property released from the Mortgage (i) may be withdrawn by the
Company upon compliance with the same conditions that would authorize the
authentication of Bonds of an equal principal amount, except that no earnings
condition shall be applicable, and except that money may be withdrawn on the
basis of property additions up to 100% of the cost or fair value (whichever is
less) thereof after deducting the required amount on account of any prior lien
obligations and without any deduction for the cost of property retired; (ii)
may be temporarily invested by the Mortgage Trustee in obligations of the
United States; or (iii) may be applied to the purchase or redemption of Bonds;
provided that all such proceeds (including proceeds temporarily invested as
aforesaid) not withdrawn or applied for 5 years after receipt by the Mortgage
Trustee shall be applied to the purchase or redemption of Bonds. (Section
6.07). Proceeds of insurance on mortgaged property, except on losses of less
than $10,000, are payable to the Mortgage Trustee and may be applied by it (i)
to reimburse the Company for the cost of repairing, renewing, or replacing
property damaged or destroyed or (ii) as above provided in the case of
proceeds of the sale of property released from the Mortgage. (Section 5.12).
No prior notice is required in connection with any releases or substitutions
of property, but Section 8.03 contains provisions relating to the transmission
by the Mortgage Trustee to Bondholders, from time to time, of reports of such
releases or substitutions, and the consideration received therefor.
RESTRICTIONS ON DIVIDENDS
So long as any Bonds of the Twentieth Series shall remain outstanding, the
Company will not declare or pay any dividend on any shares of its Common Stock
(other than dividends payable in shares of its Common Stock) or make any
distribution on such shares, or purchase or otherwise acquire any such shares
(except shares acquired without cost to the Company), or advance any amount to
or invest any amount in the property, securities or indebtedness of, or
guarantee any indebtedness of, any subsidiary if, after giving effect to such
action, the sum of the aggregate amounts so declared, paid, distributed,
purchased, acquired, advanced, invested or guaranteed after December 31, 1997,
would exceed the aggregate net income of the Company available for dividends
on its Common Stock earned after such date plus the sum of $56,000,000.
(Section 3.1; 22nd Supp.).
15
For the purposes of this restriction, "subsidiary" shall mean any corporation
directly or indirectly controlled by or under common control with the Company.
For the purpose of calculating the requirements of this restriction, the net
income of the Company available for dividends on its Common Stock shall be
determined in accordance with such system of accounts as may be prescribed by
any governmental authority having jurisdiction in the premises or in the
absence thereof in accordance with generally accepted accounting principles as
in effect at such time; provided, however, that (a) the deductions for
depreciation or renewal or replacement reserves in respect of each year shall
be the amount taken therefor on the accounts of the Company or the amount
required to be stated in item (1) of the Replacement Fund Certificate to be
filed under the Mortgage with respect to the period ending at the close of
such year, whichever be greater, and (b) no deduction or adjustment shall be
made from gross income for or in respect of (i) expenses in connection with
the redemption or retirement of any securities issued by the Company,
including any amount paid in excess of the principal or par or stated value of
securities redeemed or retired, and, if such redemption or retirement is
effected with the proceeds of sale of other securities of the Company,
interest on the securities redeemed or retired from the date on which the
funds required for such redemption or retirement shall be deposited in trust
for such purpose to the date of such redemption or retirement, (ii) profits or
losses from sales of capital assets or taxes in respect of such profits, (iii)
any adjustments to retained earnings (including tax adjustments) applicable to
any period prior to January 1, 1998, (iv) charges for the write-off of
unamortized debt discount and expense carried on the books of the Company at
December 31, 1997, or (v) charges for the write-off or write-down of the
amount at which any property of the Company was carried on its books at
December 31, 1997, to the extent that the same shall be approved by, or be
made pursuant to any rule, regulation, or order of, any governmental authority
having jurisdiction in the premises and shall not be required by such
authority to be charged against earning accumulated after December 31, 1997.
(Section 3.1; 22nd Supp.).
REDEMPTION
Bonds of the Twentieth Series, including the Pledged Bond, shall be subject
to redemption, either as a whole or in part, from time to time upon payment of
the principal amount thereof through the application of proceeds available
under the Mortgage from the condemnation of property subject to the lien of
the Mortgage, or proceeds of sale of such property to a governmental body or
agency having the power of eminent domain made as a result of the threat
(evidenced in writing by such body or agency) of condemnation of such property
together with accrued interest to the date fixed for redemption in accordance
with the terms of the Mortgage, which provides that if less than all Bonds of
all Series are redeemed then proceeds from the sale of such property will be
applied to the redemption of all Bonds, including the Pledged Bond, on a pro
rata basis, based on the amount of the Bonds then outstanding. (Section 1.7,
22nd Supp.).
CONSOLIDATION, MERGER, OR SALE
Subject to the approval of the BPU, the Mortgage does not prevent a
consolidation or merger of the Company with or into any other corporation or a
conveyance and transfer of all of the property and franchises of the Company
to any other corporation, if (i) the consolidation, merger, or conveyance and
transfer is subject to the continuing lien of the Mortgage on the mortgaged
property and will not impair the lien or any of the rights or powers of the
Trustee or Bondholders; (ii) the corporation formed by the consolidation or
into which the Company is merged or which acquires the mortgaged property
assumes and agrees in writing to pay the Bondholders the principal of and
interest on all the Bonds, as and when due; (iii) any such successor
corporation executes and delivers a supplemental indenture which contains,
among other things: (w) an agreement to perform all obligations of the Company
under the Mortgage, (x) a stipulation that such consolidation, merger, or
conveyance and transfer is not a waiver or release of any rights or powers of
the Mortgage Trustee or the Bondholders, (y) a grant confirming the lien of
the Mortgage Trustee upon the mortgaged property and (z) a grant to the
Mortgage Trustee subjecting to the lien of the Mortgage property additions to
be used in the future and certain after-acquired property; and (iv) the
Mortgage Trustee shall have consented to the consolidation, merger, or
conveyance and transfer, which consent the Mortgage Trustee is required to
give upon receiving an opinion of counsel that the foregoing conditions in the
Mortgage have been satisfied unless in the Mortgage Trustee's opinion the
transaction would be prejudicial to the interests of the bondholders. (Section
7.01).
16
MODIFICATIONS OF MORTGAGE
With the written consent of the holders of 66 2/3% in principal amount of
the Bonds outstanding, any of the provisions of the Mortgage or of the Bonds
may be altered, amended or eliminated, or additional provisions added. If such
change pertains only to the Bonds of one or more Series, but less than all
Series, only the written consent of the holders of 66 2/3% in principal amount
of the then outstanding Bonds of each Series to which such change pertains is
needed. However, no such change may (i) alter or modify the right (expressed
in Section 9.16) of any Bondholder to receive payment of the principal of and
interest on his Bonds on or after the respective due dates thereof; (ii)
change any of the provisions of any Bond with respect to the time, terms,
manner, or amount of any payment of the principal thereof or interest thereon
without the consent of the holder of such Bonds; or (iii) reduce the
percentage of Bondholders whose consent shall be required for the execution of
any subsequent supplemental indenture. The consent of the BPU may be required
before certain of the above actions may be taken. (Section 10.02). Certain
other modifications and amendments described in the Mortgage may be made
without the consent of the Bondholders. (Section 10.01).
PERCENTAGE OF BONDHOLDERS REQUIRED TO TAKE CERTAIN ACTION
Upon the occurrence of a Mortgage Event of Default (as defined below), the
Mortgage Trustee or the holders of 25% in principal amount of the Bonds then
outstanding may by written declaration accelerate the maturity of the
principal of all the Bonds (Section 9.03); but if the Company shall cure all
Mortgage Events of Default, the holders of a majority in principal amount of
the Bonds then outstanding may rescind, or require the Mortgage Trustee to
rescind, such acceleration. (Section 9.13). The holders of 66 2/3% in
principal amount of the Bonds then outstanding may waive any past default
under the Mortgage and its consequences except a default in the payment of
principal of or interest on any of the Bonds. (Section 9.13). No Bondholder
may enforce the lien of the Mortgage unless the holders of 25% in principal
amount of the Bonds then outstanding have requested the Mortgage Trustee to do
so and offered to indemnify it against expenses and liabilities in connection
therewith, and unless the Mortgage Trustee has failed to take such action
within 60 days. (Section 9.15). The holders of a majority in principal amount
of the Bonds then outstanding may direct the time, method and place of
conducting any proceeding for any remedy available to the Mortgage Trustee or
exercising any trust or power conferred on it, unless such action would be
contrary to law or the provisions of the Mortgage or would, in the opinion of
the Mortgage Trustee, be unjustly prejudicial to the other Bondholders.
(Section 9.18).
For the purpose of computing the percentage of holders of Bonds requisite
for the taking of any action permitted under the Mortgage (including the
modification of the Mortgage) the calculation will be on the basis of the
principal amount of all Bonds outstanding exclusive of Bonds held by the
Company and all Bonds known to the Mortgage Trustee to be held by the Company
or any person controlling or controlled by or under common control with the
Company shall be disregarded. (Article I).
DEFAULTS AND NOTICE THEREOF
The following constitute events of default under the Mortgage (a "Mortgage
Event of Default"): (i) defaults in the payment of principal of any Bond or
prior lien obligation; (ii) default for 60 days in the payment of interest on
any Bond or any prior lien obligations, or in the payment of any sinking,
replacement, purchase or analogous fund; (iii) default for 60 days after
notice in the performance of any other covenant in the Mortgage; (iv) default
occurs in observing or performing any covenant or condition in any mortgage
constituting a prior lien on mortgaged property and the mortgagee or trustee
thereunder institutes proceedings to invoke rights or remedies available by
reason of such default, and (v) certain events of bankruptcy, insolvency or
reorganization. (Section 9.02). The 15th Supp., 16th Supp., 18th Supp., 19th
Supp., 20th Supp., 21st Supp and 22nd Supp. provide that the following also
constitute events of default under the Mortgage: (i) default in the payment of
principal of any Bond of the Fourteenth Series, Fifteenth Series, Sixteenth
Series, Seventeenth Series, Eighteenth Series, Nineteenth Series or Twentieth
Series, respectively, at maturity or upon redemption pursuant to the
provisions of any sinking, replacement, purchase or analogous fund or pursuant
to any optional or other redemption or otherwise; provided if payment is made
by wire transfer reasonably expected to be effective on such due date, which
transfer is not credited to the Bondholder's account on such date, default
shall not occur until after five
17
days following the due date; (ii) and default for ten days in the payment of
interest on any Bond of the Fourteenth Series, Fifteenth Series, Sixteenth
Series, Seventeenth Series, Eighteenth Series, Nineteenth Series or Twentieth
Series respectively (15th Supp., Section 6.1; 16th Supp., Section 6.1; 18th
Supp., Section 6.1; 19th Supp., Section 6.1; 20th Supp., Section 7.1; 21st
Supp., Section 7.1 and 22nd Supp. Section 7.1). The 15th Supp., 16th Supp.,
18th Supp., 19th Supp., 20th Supp. 21st Supp. and 22nd Supp. also provide that
it shall be an event of default under the Mortgage if the Company shall
default in the performance of or compliance with any covenant, condition or
term in the Mortgage or the 15th Supp., 16th Supp., 18th Supp., 19th Supp.,
20th Supp., 21st Supp. or 22nd Supp., respectively, and such default shall
continue for 30 days after the Company shall have knowledge thereof. Within 90
days after the occurrence thereof, the Mortgage Trustee shall give notice of
any defaults to the Bondholders, provided that in the case of default in the
payment of principal of or interest on any Bond or of any sinking fund or
purchase fund installment, the Mortgage Trustee is not required to give notice
to the Bondholders of any default under the Mortgage if the Mortgage Trustee
in good faith determines that the withholding of such notice is in the
interest of the Bondholders. (Section 11.05). Periodic evidence of compliance
with certain provisions of the Mortgage is required to be submitted to the
Mortgage Trustee (Sections 5.09, 5.12, 5.18 and 5.19). The Mortgage Trustee,
subject to its duty to use the same degree of care and skill as a prudent man
would use in the conduct of his own affairs, before proceeding to enforce the
lien of the Mortgage, is entitled to be indemnified to its satisfaction
against all its prospective costs, expenses, and liability in connection
therewith. (Sections 11.01 and 11.02).
DISCHARGE AND SATISFACTION
Whenever all amounts due or to become due on all outstanding Bonds issued
under the Mortgage shall have been paid or provision for the payment thereof
shall have been made (as such provision for payment is defined below) and all
amounts payable by the Company to the Mortgage Trustee under the Mortgage
shall have been paid, the Mortgage Trustee shall, upon the request and at the
expense of the Company, satisfy or discharge the Mortgage of record wherever
recorded, and convey, transfer, assign and deliver the mortgaged property to
or upon the order of the Company, and all the title, estate, rights and powers
of the Mortgage Trustee shall forthwith cease and the mortgaged property shall
revert to the Company, and all responsibility of the Mortgage Trustee and all
obligations of the Company under the Mortgage (except as expressly provided
therein) shall then cease. (Section 12.01).
"Provision for payment of a Bond" shall be deemed to have been made if (a)
when the principal of such Bond shall have become due and payable, whether by
maturity, call for redemption, declaration, or otherwise, all amounts due
thereon shall have been paid or shall have been deposited in trust with and
shall be held by the Mortgage Trustee for the account of the holder thereof,
or (b) at any time in advance of the maturity thereof, the Company (1) shall
have either (i) deposited with the Mortgage Trustee in trust all amounts to
become due thereon up to and upon the maturity date thereof or (ii) duly
called such Bond for redemption on a date specified, in accordance with the
provisions of the Mortgage, given all notices required to make such call
effective or made provision satisfactory to the Mortgage Trustee for giving
all such notices, and deposited with the Mortgage Trustee in trust all amounts
to become due upon such Bond up to and upon such redemption date, and (2)
shall have irrevocably authorized the Mortgage Trustee forthwith to pay to the
holder thereof, out of the funds so deposited with it, all amounts so to
become due on such Bond up to and upon the maturity date or the redemption
date, as the case may be, such payment to be made upon such Bond whenever the
same shall be presented for that purpose without awaiting the maturity date or
the redemption date, and shall have given at least one notice by publication
of such deposit and authorization or shall have made provision satisfactory to
the Mortgage Trustee for giving such notice. (Article I).
PLAN OF DISTRIBUTION
The Notes are being offered on a continuing basis by the Company through the
Agents, each of which has agreed to use reasonable best efforts to solicit
purchases of the Notes. The Notes may also be sold to an Agent
18
as principal for reoffering as described below. The Company will have the sole
right to accept offers to purchase Notes and may reject any proposed purchase
of Notes in whole or in part. Each Agent will have the right, in its
discretion reasonably exercised, to reject any proposed purchase of Notes
through it in whole or in part. The Company will pay a commission to an Agent,
depending upon maturity, ranging from 0.15% to 0.75% of the principal amount
of any Notes sold through such Agent.
Unless otherwise specified in the applicable Pricing Supplement, any Notes
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage equal to the
commission applicable to any agency sale of a Note of identical maturity. Such
Note may be resold by an Agent to investors and other purchasers from time to
time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of
sale or may be resold to certain dealers. Resales of notes by an Agent to a
dealer may be made at a discount, which will not be in excess of the discount
to be received by such Agent from the Company. After the initial public
offering of Notes, the public offering price (in the case of Notes to be
resold on a fixed public offering price basis), the commission and the
discount may be changed.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject orders in whole or in part placed through
an Agent.
Unless otherwise specified in an applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in New York City on the date of settlement.
No Note will have an established trading market when issued. The Notes will
not be listed on any securities exchange. Each Agent may from time to time
purchase and sell Notes in the secondary market, but no Agent is obligated to
do so, and there can be no assurance that there will be a secondary market for
the Notes or liquidity in the secondary market if one develops. From time to
time, the Agents may make a market in the Notes but are not obligated to do so
and may discontinue such market-making activity at any time.
In connection with the offering of Notes, the rules of the Commission permit
the Agents to engage in certain transactions that stabilize the price of the
Notes. Such transactions consist of bids or purchases for the purpose of
pegging, fixing or maintaining the price of the Notes.
If the Agents create a short position in the Notes in connection with an
offering of Notes (i.e., if they sell more Notes than are set forth on the
cover page of the Pricing Supplement), the Agents may reduce that short
position by purchasing Notes in the open market.
PaineWebber Incorporated, on behalf of the Agents, may also impose a penalty
bid on certain of the Agents. This means that if PaineWebber Incorporated, on
behalf of the Agents, purchases Notes in the open market to reduce the Agents'
short position or to stabilize the price of the Notes, it may reclaim the
amount of the selling concession from the Agents who sold the Notes as part of
the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases. The imposition of a penalty
bid might also have an effect on the price of a security to the extent that it
were to discourage resales of the security.
Neither the Company nor any of the Agents makes any representation or
prediction as to the direction or magnitude of any effect that the
transactions described above might have on the price of the Notes. In
addition, neither the Company nor any of the Agents make any representation
that they will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended. The Company has agreed to indemnify the
Agents against certain liabilities, including liabilities under
19
such Act, and to contribute to payments the Agents may be required to make in
respect thereof. In addition, the Company has agreed to reimburse the Agents
for certain expenses related to the offering made hereby.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Dechert Price &
Rhoads, Philadelphia, Pennsylvania, counsel to the Company, and for the Agents
by Chapman and Cutler, Chicago, Illinois.
EXPERTS
The financial statements and the related financial statement schedules
included in the Company's Annual Report on Form 10-K incorporated in this
Prospectus by reference have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein
by reference, and have been so incorporated in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
20
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND ANY PRICING
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY AGENT. THIS
PROSPECTUS AND ANY PRICING SUPPLEMENT DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS AND ANY PRICING SUPPLEMENT OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS AND ANY PRICING SUPPLEMENT NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
---------------
TABLE OF CONTENTS
PROSPECTUS
PAGE
----
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Use of Proceeds............................................................ 3
Description of Securities.................................................. 3
Description of Notes....................................................... 4
Description of the Pledged Bond............................................ 13
Plan of Distribution....................................................... 18
Legal Matters.............................................................. 20
Experts.................................................................... 20
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
$100,000,000
LOGO
[South Jersey Gas Company]
SOUTH JERSEY GAS COMPANY
SECURED MEDIUM TERM NOTES
SERIES A
---------------
PROSPECTUS
---------------
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES
INCORPORATED
FIRST UNION CAPITAL MARKETS
---------------
OCTOBER 5, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC Registration Fee............................................... $ 29,500
Legal Fees and Expenses............................................ 200,000
Accounting Fees and Expenses....................................... 110,000
Rating Agency Fees................................................. 105,000
Printing and Certificate Engraving................................. 150,000
Miscellaneous (including Blue Sky Fees and Expenses)............... 20,000
--------
Total............................................................ $614,500
========
Each amount set forth above, except for the SEC registration fee, is
estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 14A:3-5 of the New Jersey Business Corporation Act, the
Company:
(1) has power to indemnify each director and officer of the Company (as
well as its employees and agents) against expenses and liabilities in
connection with any proceeding involving him by reason of his being or
having been such director or officer, other than a proceeding by or in the
right of the Company, if (a) such director or officer acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company, and (b) with respect to any criminal proceeding,
such director or officer had no reasonable cause to believe his conduct was
unlawful;
(2) has power to indemnify each director and officer of the Company
against expenses in connection with any proceeding by or in the right of
the Company to procure a judgment in its favor which involves such director
or officer by reason of his being or having been such director or officer,
if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interest of the Company; however, in such
proceeding no indemnification may be provided in respect to any claim,
issue or matter as to which such director or officer shall have been
adjudged to be liable to the Company, unless and only to the extent that
the court determines that the director or officer is fairly and reasonably
entitled to indemnity for such expenses as the court shall deem proper;
(3) must indemnify each director and officer against expenses to the
extent that he has been successful on the merits or otherwise in any
proceeding referred to in (1) and (2) above or in defense of any claim,
issue or matter therein; and
(4) has power to purchase and maintain insurance on behalf of a director
or officer against any expenses incurred in any proceeding and any
liabilities asserted against him by reason of his being or having been a
director or officer, whether or not the Company would have the power to
indemnify him against such expenses and liabilities under the statute.
As used in the statute, "expenses" means reasonable costs, disbursements and
counsel fees, "liabilities" means amounts paid or incurred in satisfaction of
settlements, judgments, fines and penalties, and "proceedings" means any
pending, threatened or completed civil, criminal, administrative or
arbitrative action, suit or proceeding, and any appeal therein and any inquiry
or investigation which could lead to such action, suit or proceeding.
Indemnification may be awarded by a court under (1) or (2) as well as under
(3) above, notwithstanding a prior determination by the Company that the
director or officer has not met the applicable standard of conduct.
Indemnification under the statute does not exclude any other rights to which
a director or officer may be entitled under a certificate of incorporation,
by-law, or otherwise.
II-1
Article VII of the Company's Bylaws provides, in pertinent part, as follows:
(1) the Company shall indemnify any corporate agent against his expenses
and liabilities in connection with any proceedings involving the corporate
agent by reason of his being or having been such a corporate agent to the
extent that (a) such corporate agent is not otherwise indemnified; and (b)
the power to do so has been or may be granted by statute; and for this
purpose the Board of Directors of the Company may, and on request of any
such corporate agent shall be required to, determine in each case whether
or not the applicable standards in any such statute have been met, or such
determination shall be made by independent legal counsel if the Board so
directs or if the Board is not empowered by statute to make such
determination;
(2) to the extent that the power to do so has been or may be granted by
statute, the Company shall pay expenses incurred by a corporate agent in
connection with a proceeding in advance of the final disposition of the
proceeding upon receipt of an undertaking by or on behalf of such corporate
agent to repay such amount unless it shall ultimately be determined that he
is entitled to be indemnified as provided by statute;
(3) the indemnification provided in the Company's Bylaws shall not be
exclusive of any other rights to which a corporate agent may be entitled,
both as to any action in his official capacity or as to any action in
another capacity while holding such office, and shall inure to the benefits
of the heirs, executors, or administrators of any such corporate agent; and
(4) the Board of Directors of the Company shall have the power to (a)
purchase and maintain, at the Company's expense, insurance on behalf of the
Company and on behalf of others to the extent that power to do so has been
or may be granted by statute and (b) give other indemnification to the
extent permitted by law.
The Company maintains and pays all premiums on directors and officers
liability insurance policies with a primary liability limit of $35,000,000.
ITEM 16. EXHIBITS.
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
1(a) Form of Distribution Agreement.
(4)(a) Form of Stock Certificate for Common Stock. Incorporated by
reference from Exhibit (4)(a) of Form 10 filed March 1997
(4)(b)(i) First Mortgage Indenture dated October 1, 1947. Incorporated by
reference from Exhibit (4)(b)(i) of Form 10-K of SJI for 1987 (1-
6364)
(4)(b)(ii) Twelfth Supplemental Indenture dated as of June 1, 1980.
Incorporated by reference from Exhibit 5(b) of Form S-7 of SJI
(2-68038).
(4)(b)(iii) Sixteenth Supplemental Indenture dated as of April 1, 1989, 10
1/4% Series due 2008. Incorporated by reference from Exhibit
(4)(b)(xv) of Form 10-Q of SJI for the quarter ended March 31,
1988 (1-6364).
(4)(b)(iv) Seventeenth Supplemental Indenture dated as of May 1, 1989.
Incorporated by reference from Exhibit (4)(b)(xv) of Form 10-K of
SJI for 1989 (1-6364).
(4)(b)(v) Eighteenth Supplemental Indenture dated as of March 1, 1990.
Incorporated by reference from Exhibit (4)(e) of Form S-3 of SJI
(33-36581).
(4)(b)(vi) Nineteenth Supplemental Indenture dated as of April 1, 1992.
Incorporated by reference from Exhibit (4)(b)(xvii) of Form 10-K
of SJI for 1992 (1-6364).
(4)(b)(vii) Twentieth Supplemental Indenture dated as of June 1, 1993.
Incorporated by reference from Exhibit (4)(b)(xviii) of Form 10-K
of SJI for 1993 (1-6364).
(4)(b)(viii) Twenty-First Supplemental Indenture dated as of March 1, 1997.
Incorporated by reference from Exhibit (4)(b)(xviv) of Form 10-K
of SJI for 1997 (1-6364).
II-2
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
(4)(b)(ix)* Form of Twenty-Second Supplemental Indenture.
(4)(c) Indenture dated as of January 31, 1995; 8.60% Debenture Notes due
February 1, 2010. Incorporated by reference from Exhibit (4)(c) of
Form 10-K of SJI for 1994 (1-6364).
(4)(d) Certificate of Trust for SJG Capital Trust. Incorporated by
reference from Exhibit 3(a) of Form S-3 of SJG Capital Trust and
South Jersey Gas Company as filed March 27, 1997, as amended April
18, 1997 and April 23, 1997 (333-24065).
(4)(d)(i) Trust Agreement of SJG Capital Trust. Incorporated by reference
from Exhibit 3(b) of Form S-3 of SJG Capital Trust and South
Jersey Gas Company as filed March 27, 1997, as amended April 18,
1997 and April 23, 1997 (333-24065).
(4)(d)(ii) Form of Amended and Restated Trust Agreement for SJG Capital
Trust. Incorporated by reference from Exhibit 3(c) of Form S-3 of
SJG Capital Trust and South Jersey Gas Company as filed March 27,
1997, as amended April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(iii) Form of Preferred Security for SJG Capital Trust. Incorporated by
reference from Exhibit 4(a) of Form S-3 of SJG Capital Trust and
South Jersey Gas Company as filed March 27, 1997, as amended April
18, 1997 and April 23, 1997 (333-24065).
(4)(d)(iv) Form of Deferrable Interest Subordinated Debenture. Incorporated
by reference from Exhibit 4(b) of Form S-3 of SJG Capital Trust
and South Jersey Gas Company as filed March 27, 1997, as amended
April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(v) Form of Deferrable Interest Subordinated Debenture. Incorporated
by reference from Exhibit 4(c) of Form S-3 of SJG Capital Trust
and South Jersey Gas Company as filed March 27, 1997, as amended
April 18, 1997 and April 23, 1997 (333-24065).
(4)(d)(vi) Form of Guaranty Agreement between South Jersey Gas Company and
SJG Capital Trust. Incorporated by reference from Exhibit 4(d) of
Form S-3 of SJG Capital Trust and South Jersey Gas Company as
filed March 27, 1997, as amended April 18, 1997 and April 23, 1997
(333-24065).
(4)(e)* Form of Medium Term Note Indenture
5 Opinion of Dechert Price & Rhoads
(12)* Calculation of Ratio of Earnings to Fixed Charges (Before Federal
Income Taxes).
(23)(a)* Consent of Deloitte & Touche LLP.
(23)(b) Consent of Dechert Price & Rhoads (included in Exhibit 5).
(24)* Power of Attorney.
(25)(a)* Statement of Eligibility under the Trust Indenture Act of 1939 of
The Bank of New York as Indenture Trustee under the Medium Term
Note Indenture.
(27)* Financial Data Schedule (submitted only in electronic format to
the Securities and Exchange Commission).
- --------
* Previously filed.
ITEM 17. UNDERTAKINGS.
A. UNDERTAKING REQUIRED BY ITEM 512(A) OF REGULATION S-K.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change
to such information in this Registration Statement;
II-3
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
B. UNDERTAKING REQUIRED BY ITEM 512(B) OF REGULATION S-K.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
undersigned Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934, as amended that is incorporated
by reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
C. UNDERTAKING REQUIRED BY ITEM 512(H) OF REGULATION S-K.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and controlling
persons of the undersigned Registrant pursuant to the foregoing provisions, or
otherwise, the undersigned Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the undersigned Registrant of expenses incurred or paid by a
director, officer or controlling person of the undersigned Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the undersigned Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
II-4
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, SOUTH JERSEY GAS
COMPANY HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO
BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN
FOLSOM, NEW JERSEY, ON THE 1ST DAY OF OCTOBER 1998.
South Jersey Gas Company
/s/ George L. Baulig
By: ____________________________
GEORGE L. BAULIG,
Senior Vice President and
Corporate Secretary
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
NAME TITLE DATE SIGNATURE
---- ----- ---- ---------
C. Biscieglia President (principal
executive
officer) and Director *
D.A. Kindlick Senior Vice President
(principal
financial officer) *
W.J. Smethurst, Jr. Vice President and
Treasurer
(principal accounting
officer) *
F.R. Raring Director *
A.G. Dickson Director *
R.L. Dunham Director October 1, 1998 /s/ R.L. Dunham
C.D. McCormick Director *
S.M. Vioni Director *
*By: /s/ George L. Baulig Date: October 1, 1998
-------------------------------------
George L. Baulig
Attorney-in-Fact
II-5