Exhibit 1(a)

                            SOUTH JERSEY GAS COMPANY


                      Secured Medium Term Notes, Series A
                        Due From One Year to Forty Years
                               From Date of Issue

                             Distribution Agreement


                                                        October __, 1998
                                                        New York, New York
PaineWebber Incorporated
Prudential Securities Incorporated
First Union Capital Markets, a division
  of Wheat First Securities, Inc.
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019

Dear Sirs:

     South Jersey Gas Company, a New Jersey corporation (the "Company"),
confirms its agreement with each of you with respect to the issue and sale by
the Company from time to time of up to $100,000,000 aggregate principal amount
of its Secured Medium Term Notes, Series A, Due from One Year to Forty Years
from Date of Issue (the "Notes").  The Notes will be issued under an indenture
of trust (the "Indenture") dated as of October __, 1998 between the Company and
The Bank of New York, as trustee (the "Trustee").  Prior to the Substitution
Date (as defined in the Indenture), the Notes will be secured by the delivery to
the Trustee of (1) one or more first mortgage bonds issued under the Company's
mortgage indenture, as specified in the Prospectus referred to below
(collectively, the "Pledged Bonds").  Unless otherwise set forth in a supplement
to the Prospectus referred to below, the Notes will be issued in fully
registered form in minimum denominations of $1,000 and in denominations
exceeding such amount by integral multiples of $1,000 and will have the annual
interest rates, maturities and, if appropriate, other terms set forth in such
supplement to the Prospectus.  The Notes will be issued, and the terms thereof
established, in accordance with the Indenture and, in the case of Notes sold
pursuant to Section 2(a), the Secured Medium Term Note Administrative Procedures
attached hereto as Exhibit A (the "Procedures") (unless a Terms Agreement (as
defined in Section 2(b)), modifies or supersedes such Procedures with respect to
the Notes issued pursuant to such Terms Agreement).  The Procedures may only be
amended by written agreement of the Company and you after notice to, and with
the approval of, the Trustee.  For the purposes of this Agreement, the term
"Agent" shall refer to any of you acting solely in the capacity as agent for the
Company pursuant to Section 2(a) and not as principal (collectively, the
"Agents"), the term the "Purchaser," shall refer to any one of you acting solely
as principal pursuant to 

 
Section 2(b) and not as agent, and the term "you" shall refer to you
collectively whether at any time any of you is acting in both such capacities or
in either such capacity.

1.   Representations and Warranties.

     The Company represents and warrants to, and agrees with, you as set forth
below in this Section 1.  Certain terms used in this Section 1 are defined in
paragraph (y) hereof.

            (a) At the time of filing and the Effective Date, the Company meets
     the requirements for use of Form S-3 under the Securities Act of 1933, as
     amended (the "Act") for purposes of registering the Notes and has filed
     with the Securities and Exchange Commission (the "Commission") a
     registration statement on such Form (File Number:  333-62019), including a
     prospectus, which registration statement, as amended, has become effective,
     for the registration under the Act of the issuance of $100,000,000
     aggregate principal amount of the Notes.  Such registration statement, as
     amended at the date of this Agreement, meets the requirements set forth in
     Rule 415(a)(1)(ix) or (x) under the Act and complies in all other material
     respects with said Rule.  In connection with the sale of Notes the Company
     proposes to file with the Commission pursuant to the applicable paragraph
     of Rule 424(b) under the Act supplements to the Prospectus (as defined by
     Section 1(y)) specifying the interest rates, maturity dates and, if
     appropriate, other terms of the Notes sold pursuant hereto or the offering
     thereof.

            (b) As of the Execution Time (as defined by Section 1(y)), on the
     Effective Date (as defined by Section 1(y)), when any supplement to the
     Prospectus is filed with the Commission, as of the date of any Terms
     Agreement (as defined by Section 2(b)) and at the date of delivery by the
     Company of any Notes sold hereunder (a "Closing Date"), (i) the
     Registration Statement (as defined by Section 1(v)), as amended as of any
     such time, and the Prospectus, as supplemented as of any such time, and the
     Indenture will comply in all material respects with the applicable
     requirements of the Act, the Trust Indenture Act of 1939, as amended (the
     "Trust Indenture Act") and the Securities Exchange Act of 1934, as amended
     (the "Exchange Act") and the respective rules thereunder; (ii) the
     Registration Statement, as amended as of any such time, did not or will not
     contain any untrue statement of a material fact or omit to state any
     material fact required to be stated therein or necessary in order to make
     the statements therein not misleading; and (iii) the Prospectus, as
     supplemented as of any such time, will not contain any untrue statement of
     a material fact or omit to state a material fact necessary in order to make
     the statements therein, in the light of the circumstances under which they
     were made, not misleading; provided, however, that the Company makes no
     representations or warranties as to (i) the Statement of Eligibility on
     Form T-1 or (ii) the information contained in or omitted from the
     Registration Statement or the Prospectus (or any supplement thereto) in
     reliance upon and in conformity with information furnished in writing to
     the Company by any of you specifically for use in connection with the
     preparation of the Registration Statement or the Prospectus (or any
     supplement thereto).

                                      -2-

 
            (c) As of the time any Notes are issued and sold hereunder, each of
     the Indenture and the Indenture of First Mortgage, dated October 1, 1947,
     as supplemented and amended by twenty-two supplemental indentures,
     including the Twenty-Second Supplemental Indenture, dated as of October __,
     1998, (the "New Supplement") between the Company and the Bank of New York,
     as trustee (as so supplemented and amended, the "Mortgage" and such trustee
     being the "Mortgage Trustee"), assuming the due execution and delivery
     thereof by the Trustee and the Mortgage Trustee, respectively, will
     constitute a legal, valid and binding instrument enforceable against the
     Company in accordance with its terms except, in each case, as
     enforceability may be limited by bankruptcy, reorganization, moratorium,
     insolvency or other laws now or hereafter in effect relating to or
     affecting mortgagees' or other creditors' rights or general principles of
     equity (whether asserted in a proceeding at law or in equity), and the
     Notes and the Pledged Bonds will have been duly authorized, executed,
     authenticated and, when the Notes have been paid for by the purchasers
     thereof, the Notes and the Pledged Bonds will constitute legal, valid and
     binding obligations of the Company entitled to the benefits of the
     Indenture or the Mortgage, respectively except, in each case, as
     enforceability may be limited by bankruptcy, reorganization, moratorium,
     insolvency or other laws now or hereafter in effect relating to or
     affecting mortgagees' or other creditors' rights or general principles of
     equity (whether asserted in a proceeding at law or in equity); the Notes,
     the Indenture, the Mortgage and the Pledged Bonds will conform in all
     material respects to all statements relating thereto contained in the
     Prospectus.

            (d)(i) The Company has been duly incorporated and is validly
     existing as a corporation in good standing under the laws of the
     jurisdiction in which it is incorporated, with full corporate power and
     authority to own or lease its properties and conduct its business as
     described in the Prospectus.  The properties now owned or leased and the
     business now transacted by the Company do not require it to be qualified as
     a foreign corporation in any jurisdiction.

            (d)(ii) SJG Capital Trust (the "Subsidiary") has been duly organized
     and is validly existing as a statutory trust in good standing under the
     laws of the jurisdiction in which it is organized, with full power and
     authority to own its properties and conduct its business as described in
     the Prospectus, and is duly qualified to do business as a foreign
     organization and is in good standing under the laws of each jurisdiction
     which requires such qualification wherein it owns or leases material
     properties or conducts material business, except where the failure to be so
     qualified would not materially adversely affect the Company and its
     Subsidiary taken as a whole.

            (e) All the outstanding shares of capital stock of the Subsidiary
     have been duly authorized and validly issued and are fully paid and
     nonassessable, and, except as otherwise set forth in the Prospectus, all
     outstanding shares of capital stock of the Subsidiary are owned directly by
     the Company free and clear of any perfected security interest and, to the
     knowledge of the Company, any other security interests, claims, liens or
     encumbrances.

                                      -3-

 
            (f) The Company's authorized equity capitalization is as set forth
     in the Registration Statement; and the Notes and the Pledged Bonds conform
     to the descriptions thereof contained in the Prospectus (subject to the
     insertion in the Notes and the Pledged Bonds of the maturity dates, the
     interest rates and other similar terms thereof which will be described in
     supplements to the Prospectus as contemplated by the last sentence of
     Section 1(a) of this Agreement).

            (g) No consent, approval, authorization or order of any court or
     governmental agency or body (other than authorization from the New Jersey
     Board of Public Utilities, referred to below) is required for the
     consummation of the transactions contemplated herein except such as have
     been obtained under the Act, the Exchange Act and the Trust Indenture Act,
     and such as may be required under the blue sky laws of any jurisdiction in
     connection with the sale of the Notes as contemplated by this Agreement and
     such other approvals as have been obtained. The New Jersey Board of Public
     Utilities (the "BPU") has entered an order, dated August 20, 1998,
     authorizing the issuance and sale of the Notes and the issuance of the
     Pledged Bonds by the Company on terms and conditions not inconsistent with
     the terms and conditions set forth in or contemplated by this Agreement.
     The Notes, when issued and sold by the Company,  and the Pledged Bonds,
     when issued by the Company, will comply in all material respects with the
     terms, conditions and limitations set forth in such order.  Such order is
     in full force and effect and has not been amended, supplemented or
     otherwise modified without the consent of the Agents and the period has
     expired during which any proceeding to review, suspend, limit, modify,
     restrict or revoke such order may be instituted as of right by any Person
     other than the BPU.

            (h) Any accounting firm which audited the financial statements
     included or incorporated by reference in the Registration Statement and the
     Prospectus are independent accountants within the meaning of the Act and
     the Act Regulations.

            (i) The financial statements, selected financial information and any
     supporting schedules of the Company and its consolidated subsidiaries
     included or incorporated by reference in the Registration Statement and the
     Prospectus fairly present the consolidated financial position of the
     Company and its Subsidiary as of the dates indicated and the consolidated
     results of their operations for the periods specified; and, except as
     stated therein, said financial statements have been prepared in conformity
     with generally accepted accounting principles in the United States applied
     on a consistent basis; and the supporting schedules included or
     incorporated by reference in the Registration Statement present fairly the
     information required to be stated therein.  No other financial statements
     or schedules of the Company are required by the Act or the rules and
     regulations thereunder, or Exchange Act or  the rules and regulations
     thereunder, to be included in the Registration Statement or the Prospectus.

            (j) This Agreement has been duly and validly authorized, executed
     and delivered by the Company and, upon execution and delivery by the
     Agents, will be a 

                                      -4-

 
     valid and binding agreement of the Company, enforceable in accordance with
     its terms except, as enforceability may be limited by bankruptcy,
     reorganization, moratorium, insolvency or other laws now or hereafter in
     effect relating to or affecting mortgagees' or other creditors' rights or
     general principles of equity (whether asserted in a proceeding at law or in
     equity).

            (k) Since the respective dates as of which information is given in
     the Registration Statement and the Prospectus, except as may otherwise be
     stated therein or contemplated thereby, (a) there has been no material
     adverse change, or any development known to the Company involving a
     prospective material adverse change, in the condition, financial or
     otherwise, or in the earnings or business affairs of the Company and its
     Subsidiary taken as a whole, whether or not arising in the ordinary course
     of business and (b) there has not been any material transaction entered
     into by the Company or its Subsidiary, other than transactions in the
     ordinary course of business and transactions contemplated by the
     Registration Statement and the Prospectus.

            (l) Neither the Company nor its Subsidiary is in violation of its
     articles of incorporation, by-laws or other organizational documents.  No
     default exists, and no event has occurred which, with notice or lapse of
     time or both, would constitute a default in the due performance and
     observance of any obligation, agreement or condition by the Company or its
     Subsidiary contained in any mortgage, indenture, deed of trust, note, loan
     agreement or other agreement or instrument to which the Company or its
     Subsidiary is a party or by which the Company or its Subsidiary is bound or
     to which any property or asset of the Company or its Subsidiary is subject,
     except for defaults the effect of which would not materially adversely
     affect the Company and its Subsidiary taken as a whole.  The execution and
     delivery of this Agreement, the Indenture and the New Supplement and the
     consummation of the transactions contemplated herein, therein and pursuant
     to any applicable Terms Agreement have been or will be duly authorized by
     all necessary corporate action and will not conflict with, result in a
     breach of any of the terms or provisions of, or constitute a default under,
     or, except for the issuance of Notes and the Pledged Bonds, secured by the
     lien of the Mortgage, result in the creation or imposition of any lien,
     charge or encumbrance upon any property or assets of the Company or its
     Subsidiary pursuant to the terms or provisions of, or give any party a
     right to terminate any of its obligations under, or result in the
     acceleration of any obligation under:  (i) the articles of incorporation or
     bylaws (or equivalent documents) of the Company or its Subsidiary, or (ii)
     any indenture, mortgage, deed of trust, loan agreement, bond, debenture,
     note or other evidence of indebtedness, lease, contract or other material
     agreement or instrument to which the Company or its Subsidiary is a party
     or by which it or any of them may be bound or to which any of the property
     or assets of the Company or any such Subsidiary is subject, except, in the
     case of clause (ii) only, where the effect of which would not materially
     adversely affect the Company and its Subsidiary taken as a whole, nor will
     such action violate or conflict with any judgment, ruling, decree, order,
     statute, rule or regulation of any court or other 

                                      -5-

 
     governmental agency or body applicable to the business or properties of the
     Company or its Subsidiary.

            (m) The Company has good and marketable title to all the real
     properties described in the granting clauses of the Mortgage, subject
     (other than properties released from the lien of the Mortgage pursuant to
     the terms thereof) to the lien of the Mortgage and no other liens or
     encumbrances except liens permitted under the Mortgage.  No further deeds,
     conveyances, transfers or instruments, other than the New Supplement and
     related documents, are necessary for the purpose of effectually subjecting
     such properties to the direct lien and operation of the Mortgage.

            (n) The Mortgage constitutes a valid first mortgage lien of record
     upon all real and personal property of the Company (including easements,
     rights-of-way, and other rights relating to real estate and franchises)
     specifically or generally described or referred to in the Mortgage as
     subject to the lien thereof and owned by the Company at the time of the
     actual issue of the Pledged Bonds, subject to no liens or encumbrances
     other than "excepted encumbrances" (as defined in Subdivision A of Section
     3.04 of the Mortgage).

            (o) The Mortgage has been duly filed for recording in such manner
     and in such places as are required by law in order to establish, preserve,
     and protect the first lien of the Mortgage on all real and personal
     property of the Company specifically or generally described or referred to
     in the Mortgage as subject to the lien of the Mortgage (except that (a)
     additional filings and recordings of the Mortgage will be required if
     property is acquired by the Company subsequent to the date hereof which is
     located in a county where the Mortgage has not previously been filed for
     recording and (b) the Mortgage will not be a first lien on property
     hereafter acquired by the Company which at the time of acquisition is
     subject to prior liens or other encumbrances), and all taxes, fees and
     other charges payable in connection therewith have been paid in full.

            (p) Except as may be set forth in the Registration Statement and
     Prospectus, there is no action, suit or proceeding before or by any court
     or governmental agency or body, domestic or foreign, now pending, or, to
     the knowledge of the Company, threatened against or affecting, the Company
     or its Subsidiary, wherein an unfavorable ruling, decision or finding might
     materially and adversely affect the Company and its Subsidiary taken as a
     whole or the business, properties, condition (financial or otherwise) or
     results of operations of the Company and its Subsidiary as a whole or which
     in the aggregate might affect the ability of the Company to enter into this
     Agreement, the Indenture or the New Supplement or issue and sell the Notes
     or issue the Pledged Bonds; and there are no contracts or documents of the
     Company or its Subsidiary which are required to be described in or filed as
     exhibits to the Registration Statement by the Act or the rules and
     regulations thereunder, or the Exchange Act or the rules and regulations
     thereunder, which have not been so described or filed as required.

                                      -6-

 
            (q) Each of the Company and its Subsidiary has valid and sufficient
     grants, franchises, licenses and permits, adequate for the conduct of its
     business in the territories in which it is now conducting such business and
     the ownership of the properties now owned by it and, except as otherwise
     set forth in the Registration Statement and the Prospectus, there are no
     legal or governmental proceedings pending or threatened which might result
     in a material modification, suspension or revocation thereof.  Each of the
     Company and its Subsidiary has, and is operating in compliance with, in all
     material respects, all material and necessary authorizations, approvals,
     orders, licenses, certificates and permits of and from all governmental
     regulatory officials and bodies, to own, lease, license and operate its
     properties and conduct its business as presently conducted and as
     contemplated by the Registration Statement and the Prospectus, and the
     Company and its Subsidiary have filed all material reports and taken all
     other action required by the authority issuing the same where the failure
     to file or take other action might reasonably be expected to give rise to a
     right in such authority to seek to revoke, suspend or materially limit any
     such material license, certificate or permit.  The Company has all
     requisite power, authority, authorizations, approvals, orders, licenses,
     certificates and permits to enter into this Agreement and to carry out the
     provisions and conditions hereof.  Neither the Company nor its Subsidiary
     has received any notice of conflict with asserted rights of others in any
     respect (nor is the Company aware of any existing violation or breach of
     any authorizations, approvals, orders, licenses, certificates or permits by
     the Company or its Subsidiary providing a basis therefor) which could
     materially adversely affect its business, except as described in the
     Registration Statement and Prospectus.

            (r) Except as set forth in the Registration Statement and the
     Prospectus, no labor disturbance by the employees of the Company or its
     Subsidiary exists or is imminent which might be expected to materially
     adversely affect the conduct of the business, operations, financial
     condition or income of the Company and its Subsidiary, taken as a whole.

            (s) South Jersey Industries, Inc., a New Jersey corporation (the
     "Parent Company") owns all of the common stock of the Company.  The Parent
     Company is a "holding company" and the Company is a "subsidiary" of a
     "holding company" as such terms are defined under the Public Utility
     Holding Company Act of 1935, as amended.  The Company and the Parent
     Company are exempt from all provisions of the Public Utility Holding
     Company Act of 1935 (except Section 9(a)(2) thereof) pursuant to Section
     3(a)(1) and Rule 2 of such Act and the Parent Company has duly filed all
     exemption statements required by Rule 2 of such Act.  There are no actions,
     proceedings or investigations pending or (to the knowledge of the Company)
     threatened to terminate such exemptions.

            (t) Except as set forth in the Registration Statement and the
     Prospectus, neither the Company nor its Subsidiary (in the case of matters
     relating to environmental protection, occupational safety and health and
     equal employment opportunity, to the best of its knowledge) is in violation
     of any laws, ordinances, governmental rules and regulations to which it is
     subject, which violation is likely to

                                      -7-

 
     materially adversely affect the financial condition, business or operations
     of the Company and the Subsidiary taken as a whole.

            (u) The Company is not an "investment company" or an "affiliated
     person" of, or "promoter" or "principal underwriter" for, an "investment
     company," as such terms are defined in the Investment Company Act of 1940,
     as amended.

            (v) No stop order suspending the effectiveness of the Registration
     Statement has been issued and no proceedings for that purpose are pending
     or, to the best knowledge of the Company, threatened by the SEC.

            (w) Immediately after any sale of Notes by the Company hereunder or
     under any Terms Agreement, the aggregate amount of debt securities which
     shall have been issued and sold by the Company hereunder will not exceed
     the aggregate amount of debt securities registered under the Registration
     Statement.

            (x) Except as set forth in the Registration Statement, to the best
     of the knowledge and belief of the Company, the Company is not in violation
     of any applicable Federal, state, or local laws, statutes, rules,
     regulations or ordinances relating to public health, safety or the
     environment, including, without limitation, relating to releases,
     discharges, emissions or disposals to air, water, land or ground water, to
     the withdrawal or use of ground water, to the use, handling or disposal of
     polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde, to the
     treatment, storage, disposal or management of hazardous substances
     (including, without limitation, petroleum, crude oil or any fraction
     thereof, or other hydrocarbons), pollutants or contaminants, to exposure to
     toxic, hazardous or other controlled, prohibited or regulated substances or
     to the use and restoration of land, which violation is likely to have a
     material adverse effect on the business, financial condition or results of
     operations of the Company.  Except as set forth in the Registration
     Statement and the Prospectus, the Company does not know of any liability or
     class of liability of the Company under the Comprehensive Environmental
     Response, Compensation and Liability Act of 1980, as amended (42 U.S.C.
     Section 9601 et seq.), the Resource Conservation and Recovery Act of 1976,
     as amended (42 U.S.C. Section 6901 et seq.), the New Jersey Spill
     Compensation and Control Act, as amended (N.J.S.A. 58:10-23.11 et seq.) or
     the Environmental Cleanup Responsibility Act, as amended (N.J.S.A. 13:1 K-6
     et seq.) for the release of a non-deminimus quantity of hazardous or toxic
     substances or wastes.

            (y) The terms which follow, when used in this Agreement, shall have
     the meanings indicated.  The term "the Effective Date" shall mean each date
     that the Registration Statement and any subsequent post effective amendment
     or amendments thereto became or become effective.  "Execution Time" shall
     mean the date and time that this Agreement is executed and delivered by the
     parties hereto.  "Prospectus" shall mean the form of prospectus relating to
     the Notes contained in the Registration Statement at the Effective Date.
     "Registration Statement" shall mean the registration statement referred to
     in paragraph (a) above, including incorporated documents, 

                                      -8-

 
     exhibits and financial statements, as amended at the Execution Time. "Rule
     415" and "Rule 424" refer to such rules under the Act. Any reference herein
     to the Registration Statement, or the Prospectus shall be deemed to refer
     to and include the documents incorporated by reference therein pursuant to
     Item 12 of Form S-3 which were filed under the Exchange Act on or before
     the Effective Date of the Registration Statement or the issue date of the
     Prospectus, as the case may be; and any reference herein to the terms
     "amend," "amendment" or "supplement" with respect to the Registration
     Statement or the Prospectus shall be deemed to refer to and include the
     filing of any document under the Exchange Act after the Effective Date of
     the Registration Statement or the issue date of the Prospectus, as the case
     may be, deemed to be incorporated therein by reference.

2.   Appointment of Agents; Solicitation by the Agents of Offers to Purchase;
     Sales of Notes to a Purchaser.

     (a) Subject to the terms and conditions set forth herein, the Company
hereby authorizes each of the Agents to act as its agent to solicit offers for
the purchase of all or part of the Notes from the Company.

     On the basis of the representations and warranties, and subject to the
terms and conditions set forth herein, each of the Agents agrees, as agent of
the Company, to use its reasonable best efforts to solicit offers to purchase
the Notes from the Company upon the terms and conditions set forth in the
Prospectus (and any supplement thereto) and in the Procedures.  Each Agent shall
make reasonable efforts to assist the Company in obtaining performance by each
purchaser whose offer to purchase Notes has been solicited by such Agent and
accepted by the Company, but such Agent shall not, except as otherwise provided
in this Agreement, have any liability to the Company in the event any such
purchase is not consummated for any reason.  Except as provided in Section 2(b),
under no circumstances will any Agent be obligated to purchase any Notes for its
own account.  It is understood and agreed, however, that any Agent may purchase
Notes as principal pursuant to Section 2(b).

     The Company reserves the right, in its sole discretion, to instruct the
Agents to suspend at any time, for any period of time or permanently, the
solicitation of offers to purchase the Notes.  Upon receipt of instructions from
the Company, the Agents will forthwith suspend solicitation of offers to
purchase Notes from the Company until such time as the Company has advised them
that such solicitation may be resumed.

     The Company agrees to pay each Agent a commission, on the Closing Date with
respect to each sale of Notes by the Company as a result of a solicitation made
by such Agent, in an amount equal to that percentage specified in Schedule I
hereto of the aggregate principal amount of the Notes so sold by the Company.
Such commission shall be payable as specified in the Procedures.

     Subject to the provisions of this Section and to the Procedures, offers for
the purchase of Notes may be solicited by an Agent as agent for the Company at
such time and in such amounts as such Agent deems advisable.  The Company may
from time to time offer Notes 

                                      -9-

 
for sale otherwise than through an Agent; provided, however, that so long as
this Agreement shall be in effect the Company shall not solicit or accept offers
to purchase Notes in this registered offering through any agent other than an
Agent.

     If the Company shall default in its obligations to deliver Notes to a
purchaser whose offer it has accepted, the Company shall indemnify and hold each
Agent harmless against any loss, claim or damage arising from or as a result to
such default by the Company.

     (b) Subject to the terms and conditions stated herein, whenever the
Company and any Agent determine that the Company shall sell Notes directly to
such Agent as Purchaser, each such sale of Notes shall be made in accordance
with the terms of this Agreement, unless otherwise agreed by the Company and
such Agent, and any supplemental agreement relating thereto (which may be an
oral or written agreement) between the Company and the Purchaser.  Each such
supplemental agreement (which shall be substantially in the form of Exhibit B)
is herein referred to as a "Terms Agreement."  Each Terms Agreement shall
describe (whether orally or in writing) the Notes to be purchased by the
Purchaser pursuant thereto, and shall specify the principal amount of such
Notes, the maturity date of such Notes, the rate at which interest will be paid
on the Notes and the record dates for each payment of interest, the Closing Date
for the purchase of such Notes, the place of delivery of the Notes and payment
therefor, the method of payment and any requirements for the delivery of
opinions of counsel, certificates from the Company or its officers, or letter
from the Company's independent public accountants as described in Section 6(b).
Such Terms Agreement shall also specify the period of time referred to in
Section 4(m).  The Purchaser's commitment to purchase Notes pursuant to any
Terms Agreement shall be deemed to have been made on the basis of the
representations and warranties of the Company herein contained and shall be
subject to the terms and conditions herein set forth.

     Delivery of the certificates for Notes sold to the Purchaser pursuant to
any Terms Agreement shall be made as agreed to between the Company and the
Purchaser as set forth in the respective Terms Agreement, not later than the
Closing Date set forth in such Terms Agreement, against payment of funds to the
Company in the net amount due to the Company for such Notes by the method and in
the form set forth in the Procedures unless otherwise agreed to between the
Company and the Purchaser in such Terms Agreement.

     Unless otherwise agreed to between the Company and the Purchaser in a Terms
Agreement, any Note sold to a Purchaser (i) shall be purchased by such Purchaser
at a price equal to 100% of the principal amount thereof less a percentage equal
to the commission applicable to an agency sale of a Note of identical maturity
and (ii) may be resold by such Purchaser at varying prices related to prevailing
market prices at the time of resale or, if so agreed, at a fixed public offering
price, as determined by such Purchaser.  In connection with any resale of Notes
purchased, a Purchaser may use a selling or dealer group and may reallow any
portion of the discount or commission payable pursuant hereto to dealers or
purchasers.

                                      -10-

 
3.   Offering and Sale of Notes.

     Each Agent and the Company agree to perform the respective duties and
obligations specifically provided to be performed by them in  the  Procedures.

4.   Agreements.

     The Company agrees with you that:

     (a) Prior to the termination of the offering of the Notes, the Company
will not file any amendment to the Registration Statement or supplement to the
Prospectus except (i) periodic or current reports filed under the Exchange Act
(including, without limitation, pursuant to Sections 13 and 15 of the Exchange
Act) or (ii) a supplement relating to any offering of Notes providing solely for
the specification of or a change in the maturity dates, interest rates, issuance
prices or other similar terms of any Notes, unless the Company shall have
furnished to each of you a copy for your review prior to filing and given each
of you a reasonable opportunity to comment on such proposed amendment or
supplement.  Subject to the foregoing sentence, the Company will cause each
supplement to the Prospectus to be filed with the Commission pursuant to the
applicable paragraph of Rule 424(b) within the time period prescribed and will
provide evidence satisfactory to you of such filing.  The Company will promptly
advise each of you (i) when the Prospectus, and any supplement thereto, shall
have been filed with the Commission pursuant to Rule 424(b), (ii) when, prior to
the termination of the offering of the Notes, any amendment of the Registration
Statement shall have been filed or become effective, (iii) of any request by the
Commission for any amendment of the Registration Statement or supplement to the
Prospectus or for any additional information, (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement, or any part thereof, or the institution of any proceeding for that
purpose, or if the Company has knowledge that any such action is contemplated by
the Commission, and (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose.  The Company will use its reasonable best efforts to prevent the
issuance of any such stop order and, if issued, to obtain as soon as reasonably
possible the withdrawal thereof.

     (b) If, at any time when a prospectus relating to the Notes is required
to be delivered under the Act, any event occurs as a result of which the
Prospectus as then supplemented would include any untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, or if it shall be necessary to amend the Registration Statement or
to supplement the Prospectus to comply with the Act or the Exchange Act or the
respective rules thereunder, the Company promptly will (i) notify each of you to
suspend solicitation of offers to purchase Notes (and, if so notified by the
Company, each of you shall forthwith suspend such solicitation and cease using
the Prospectus as then supplemented), (ii) prepare and file with the Commission,
subject to the first sentence of paragraph (a) of this Section 4, an amendment
or supplement which will correct such statement or omission or effect such
compliance and (iii) supply any 

                                      -11-

 
supplemented Prospectus to each of you in such quantities as you may reasonably
request. If such amendment or supplement, and any documents, certificates and
opinions furnished to each of you pursuant to paragraph (g) of this Section 4 in
connection with the preparation or filing of such amendment or supplement are
satisfactory in all respects to you, you will, upon the filing of such amendment
or supplement with the Commission and upon the effectiveness of an amendment to
the Registration Statement, if such an amendment is required, resume your
obligation to solicit offers to purchase Notes hereunder. Notwithstanding the
foregoing, if, at the time of any notification to suspend solicitations, any
Agent shall own any of the Notes with the intention of reselling them, or the
Company has accepted an offer to purchase Notes but the related settlement has
not occurred, the Company, subject to the provisions of subsection (a) of this
Section, will promptly prepare and file with the Commission an amendment or
supplement which will correct such statement or omission or an amendment which
will effect such compliance.

     (c) The Company, during the period when a prospectus relating to the
Notes is required to be delivered under the Act, will file promptly all
documents required to be filed with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act and will furnish to each of you copies of
such documents.  In addition, except as otherwise provided in Section 4(n)
hereof, on or prior to the date on which the Company makes any announcement to
the general public concerning earnings or concerning any other event which is
required to be described, or which the Company proposes to describe, in a
document filed pursuant to the Exchange Act, the Company will furnish to each of
you the information contained or to be contained in such announcement and will
also furnish to each of you copies of all other press releases or announcements
to the general public.  The Company will immediately notify each of you of any
downgrading in the rating of the Notes or any other debt securities or preferred
stock of the Company, or any proposal to downgrade the rating of the Notes or
any other debt securities or preferred stock of the Company, by any "nationally
recognized statistical rating organization" (as defined for purposes of Rule
436(g) under the Act), as soon as the Company learns of any such downgrading or
proposal to downgrade.

     (d) As soon as practicable, the Company will make generally available to
its security holders and to each of you an earnings statement or statements of
the Company and its Subsidiary which will satisfy the provisions of Section
11(a) of the Act and Rule 158 under the Act.

     (e) The Company will furnish to each of you and your counsel, without
charge, copies of the Registration Statement (including all amendments and
exhibits thereto) and, so long as delivery of a prospectus may be required by
the Act, as many copies of the Prospectus and any supplement thereto as you may
reasonably request.

     (f) The Company will arrange for the qualification of the Notes for sale
under the laws of such jurisdictions as any of you may designate, will maintain
such qualifications in effect so long as required for the distribution of the
Notes, and will provide access to information to assist in the determination of
the legality of the Notes for purchase by institutional investors.

                                      -12-

 
     (g) The Company shall furnish to each of you such information, documents,
certificates of officers of the Company and opinions of counsel for the Company
relating to the business, operations and affairs of the Company, the
Registration Statement, the Prospectus, and any amendments thereof or
supplements thereto, the Indenture, the Notes, this Agreement, the Procedures
and the performance by the Company and you of its and your respective
obligations hereunder and thereunder as any of you may from time to time and at
any time prior to the termination of this Agreement reasonably request.

     (h) The Company shall, whether or not any sale of the Notes is
consummated, (i) pay all expenses incident to the performance of its obligations
under this Agreement, including the fees and disbursements of its accountants
and counsel, the cost of printing or other production and delivery of the
Registration Statement, the Prospectus, all amendments thereof and supplements
thereto, the Indenture, the New Supplement, this Agreement and all other
documents relating to the offering, the cost of preparing, printing, packaging
and delivering the Notes, the fees and disbursements, including fees of counsel,
incurred in compliance with Section 4(f), the fees and disbursements of the
Trustee and the fees of any agency that rates the Notes, (ii) reimburse each of
you on a monthly basis for all reasonable out-of-pocket expenses (including
without limitation advertising expenses), if any, incurred by you in connection
with this Agreement, but not during a period when the Company has instructed the
Agents not to solicit purchasers for the Notes and (iii) pay the reasonable fees
and expenses of your counsel incurred in connection with this Agreement.

     (i) Each acceptance by the Company of an offer to purchase Notes will be
deemed to be an affirmation that its representations and warranties contained in
this Agreement are true and correct at the time of such acceptance, as though
made at and as of such time, and a covenant that such representations and
warranties will be true and correct at the time of delivery to the purchaser of
the Notes relating to such acceptance, as though made at and as of such time (it
being understood that for purposes of the foregoing affirmation and covenant
such representations and warranties shall relate to the Registration Statement
and Prospectus as amended or supplemented at each such time).  Each such
acceptance by the Company of an offer for the purchase of Notes shall be deemed
to constitute an additional representation, warranty and agreement by the
Company that, as of the settlement date for the sale of such Notes, after giving
effect to the issuance of such Notes and of any other Notes to be issued on or
prior to such settlement date, the aggregate amount of Notes which have been
issued and sold by the Company will not exceed the amount of Notes registered
pursuant to the Registration Statement.

     (j) Each time that the Registration Statement or the Prospectus is
amended or supplemented (other than by an amendment or supplement providing
solely for the specification of or a change in the maturity dates, the interest
rates, the issuance prices or other similar terms of any Notes sold pursuant
hereto), the Company will deliver or cause to be delivered promptly to each of
you a certificate of the Company, signed by the Chairman of the Board or the
President and the principal financial or accounting officer of the Company,
dated the date of the effectiveness of such amendment or the date of the filing
of such supplement, in form reasonably satisfactory to you, of the same tenor as
the certificate referred to in Section 5(d) but modified to relate to the last
day of the fiscal quarter for 

                                      -13-

 
which financial statements of the Company were last filed with the Commission
and to the Registration Statement and the Prospectus as amended and supplemented
to the time of the effectiveness of such amendment or the filing of such
supplement.

     (k) Each time that the Registration Statement or the Prospectus is
amended or supplemented (other than by an amendment or supplement (i) providing
solely for the specification of or a change in the maturity dates, the interest
rates, the issuance prices or other similar terms of any Notes sold pursuant
hereto or (ii) consisting of a current or periodic report under the Exchange Act
unless, in the case of clause (ii) above, in the reasonable judgment of any of
you, such financial statements or other information are of such a nature that an
opinion of counsel should be furnished), the Company shall furnish or cause to
be furnished promptly to each of you written opinions of counsel to the Company
satisfactory to each of you, dated the date of the effectiveness of such
amendment or the date of the filing of such supplement, in form satisfactory to
each of you, of the same tenor as the opinions referred to in Sections 5(b) and
5(c) but modified to relate to the Registration Statement and the Prospectus as
amended and supplemented to the time of the effectiveness of such amendment or
the filing of such supplement or, in lieu of such opinion, counsel last
furnishing such an opinion to you may furnish each of you with a letter to the
effect that you may rely on such last opinion to the same extent as though it
were dated the date of such letter authorizing reliance (except that statements
in such last opinion will be deemed to relate to the Registration Statement and
the Prospectus as amended and supplemented to the time of the effectiveness of
such amendment or the filing of such supplement).

     (l) Each time that the Registration Statement or the Prospectus is
amended or supplemented to set forth amended or supplemental financial
information (except for current reports on Form 8-K which only announce
quarterly earnings), the Company shall cause its independent public accountants
promptly to furnish to each of you a letter, dated the date of the effectiveness
of such amendment or the date of the filing of such supplement, in form
satisfactory to each of you, of the same tenor as the letter referred to in
Section 5(e) with such changes as may be necessary to reflect the amended and
supplemental financial information included or incorporated by reference in the
Registration Statement and the Prospectus, as amended or supplemented to the
date of such letter; provided, however, that, if the Registration Statement or
the Prospectus is amended or supplemented solely to include or incorporate by
reference financial information as of and for a fiscal quarter, the Company's
independent public accountants may limit the scope of such letter, which shall
be satisfactory in form to each of you, to the unaudited financial statements,
the related "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and any other information of an accounting, financial or
statistical nature included in such amendment or supplement, unless, in the
reasonable judgment of any of you, such letter should cover other information or
changes in specified financial statement line items.

     (m) If required pursuant to any Terms Agreement, during the period, if
any, specified (whether orally or in writing) in such Terms Agreement, the
Company shall not, without the prior consent of the Purchaser thereunder, offer,
sell, contract to sell or announce the proposed issuance of any debt securities,
including Notes (other than the Notes being sold under such Terms Agreement),
with terms substantially similar to the Notes being

                                      -14-

 
purchased pursuant to such Terms Agreement, other than borrowings under its
revolving credit agreement and lines of credit and issuances of its commercial
paper.

     (n) The Company shall not be required to comply with the second sentence
of Section 4(c) and the provisions of Sections 4(g), 4(j), 4(k) and 4(l) hereof
during any period (x) from any time when (i) the Agents shall have suspended
solicitation of purchasers of the Notes, in their capacity as agents pursuant to
Section 2(a) hereof and (ii) the Agents shall not then hold any Notes as
principal purchased pursuant to a Terms Agreement, (y) to the time the Company
shall determine that solicitation of purchasers of the Notes should be resumed
or shall subsequently enter into a new Terms Agreement with any or all of the
Agents, at which time all such action specified in the aforementioned provisions
will be taken, as applicable.

5.   Conditions to the Obligations of the Agents.

     The obligation of each Agent to solicit offers to purchase the Notes shall
be subject to the accuracy of the representations and warranties on the part of
the Company contained herein as of the Execution Time, on the Effective Date,
when any supplement to the Prospectus is filed with the Commission, as of each
Closing Date and on the date of each solicitation, to the accuracy of the
statements of the Company made in any certificates pursuant to the provisions
hereof, to the performance by the Company of its obligations hereunder and to
the following additional conditions:

     (a) If filing of the Prospectus, or any supplement thereto, is required
pursuant to Rule 424(b), the Prospectus, and any such supplement, shall have
been filed in the manner and within the time period required by Rule 424(b); and
no stop order suspending the effectiveness of the Registration Statement, or any
part thereof, shall have been issued and no proceedings for that purpose shall
have been instituted or threatened, or, to the knowledge of the Company or any
Agent, be contemplated by the Commission.

     (b) The Company shall have furnished to each Agent the opinion of Dechert
Price & Rhoads, counsel for the Company, dated the Execution  Time,
substantially to the effect, as appropriate, that (except that, after the
Substitution Date, such opinion need not be given with respect to the New
Supplement, the Mortgage, the Mortgage Trustee or the Pledged Bond):

            (i)(a) The Company has been duly incorporated and is validly
     existing as a corporation in good standing under the laws of the
     jurisdiction in which it is chartered, with full corporate power and
     authority to own its properties and conduct its business as described in
     the Prospectus.  The nature of the business conducted by the Company and
     the location and character of the property owned or leased by it do not
     require its qualification as a foreign corporation in any jurisdiction.
     The Company holds all franchises, certificates of public convenience,
     licenses and permits necessary to carry on the utility business in which it
     is engaged;

                                      -15-

 
            (i)(b) The Subsidiary has been duly organized and is validly
     existing as a statutory trust in good standing under the laws of the
     jurisdiction in which it is organized, with full power and authority to own
     its properties and conduct its business as described in the Prospectus;

            (ii) All the outstanding shares of capital stock of the Subsidiary
     have been duly and validly authorized and issued and are fully paid and
     nonassessable, and, except as otherwise set forth in the Prospectus, all
     outstanding shares of capital stock of the Subsidiary are owned directly by
     the Company free and clear of any perfected security interest and, to the
     knowledge of such counsel, after due inquiry, any other security interests,
     claims, liens or encumbrances;

            (iii)  The Company's authorized equity capitalization is as set
     forth in the Registration Statement; and the Notes and the Pledged Bond
     conform to the descriptions thereof contained in the Prospectus (subject to
     the insertion in the Notes of the maturity dates, the interest rates and
     other similar terms thereof which will be described in supplements to the
     Prospectus as contemplated by the last sentence of Section l(a) of this
     Agreement);

            (iv) Each of the Indenture, the New Supplement, the Notes and the
     Pledged Bond has been duly authorized by all necessary corporate action on
     the part of the Company (no shareholder approval being required with
     respect to such authorization) and has been duly executed and delivered by
     authorized officers of the Company and, in the case of the Notes, duly
     authenticated by the Trustee, and in the case of the Pledged Bond, duly
     authenticated by the Mortgage Trustee, and the Indenture, the Mortgage
     (including the New Supplement), the Notes and the Pledged Bond are each
     valid and binding instruments enforceable in accordance with their
     respective terms except (A) that the enforceability thereof may be limited
     by bankruptcy, insolvency, moratorium, reorganization or other similar laws
     relating to or affecting the enforcement of creditors' or mortgagees'
     rights generally, (B) to the extent that the availability of the remedy of
     specific performance or injunctive relief is subject to the discretion of
     the court before which any proceeding therefor may be brought, (C) that
     rights of acceleration arising from defaults other than payment defaults
     and the availability of equitable remedies may be limited by equitable
     principles of general applicability, (D) general principles of equity
     (whether asserted at a proceeding at law or in equity) and (E) that the
     laws of the State of New Jersey may limit certain remedies provided
     therein, but none of such principles or limitations will, in the opinion of
     such counsel, materially interfere with the practical realization of the
     benefits of the security intended to be provided by the Mortgage, and, in
     the opinion of such counsel, the Mortgage contains adequate provisions for
     enforcing payment of the Pledged Bond and realizing upon such security; and
     the Notes when executed and authenticated in accordance with the provisions
     of the Indenture and the Procedures and delivered by the Trustee and paid
     for by the purchasers thereof, will constitute legal, valid and binding
     obligations of the Company entitled to the benefits of the Indenture
     except, in each case, as enforceability may be limited by bankruptcy,
     reorganization, moratorium, insolvency or other laws now or hereafter in
     effect

                                      -16-

 
     relating to or affecting mortgagees' or other creditors' rights or general
     principles of equity (whether asserted in a proceeding at law or in
     equity);

            (v) The Pledged Bond is entitled to the benefits and security
     intended to be granted and afforded by the Mortgage, and is so secured
     equally and ratably with all other bonds outstanding under the Mortgage
     (except as to any sinking or other fund established for the bonds of any
     particular series).

            (vi) South Jersey Industries, Inc. ("SJI"), which owns all of the
     common stock of the Company, is a "holding company" and the Company is a
     "subsidiary" of a "holding company" as such terms are defined under the
     Public Utility Holding Company Act of 1935, as amended (the "1935 Act"),
     but SJI, having filed with the Securities and Exchange Commission an annual
     exemption statement for the current year pursuant to Rule 2 promulgated
     under the 1935 Act, and the Company are exempt from all provisions of the
     1935 Act except Section 9(a)(2) thereof, relating to the acquisition of
     securities of a "public utility company."

            (vii)  To the best knowledge of such counsel, there is no pending or
     threatened action, suit or proceeding before any court or governmental
     agency, authority or body involving the Company or its Subsidiary, of a
     character required to be disclosed in the Registration Statement which is
     not adequately disclosed in the Prospectus, and there is no franchise,
     contract or other document of a character required to be described in the
     Registration Statement or Prospectus, or to be filed as an exhibit, which
     is not described or filed as required; and the statements included or
     incorporated in the Prospectus describing any legal proceedings or material
     contracts or agreements relating to the Company fairly summarize such
     matters;

            (viii)  The Registration Statement and the Prospectus comply, and
     any document incorporated by reference into the Prospectus at the time it
     was filed complied, in all material respects as to form with the
     requirements of the Act, the Exchange Act, the rules and regulations under
     the Exchange Act and the rules and regulations under the Act (except that
     no opinion need be expressed as to financial statements, schedules and
     other financial and statistical data contained in the Registration
     Statement or the Prospectus or incorporated by reference therein or in the
     Trustee's Statement of Eligibility on Form T-1).  All descriptions in the
     Prospectus of statutes, regulations or legal or governmental proceedings
     are accurate and fairly present the information required to be shown;

            (ix) The Registration Statement has become effective under the Act;
     any required filing of the Prospectus, and any supplements thereto,
     pursuant to Rule 424(b) has been made in the manner and within the time
     period required by Rule 424(b); to the best knowledge of such counsel, no
     stop order suspending the effectiveness of the Registration Statement has
     been issued, no proceedings for that purpose have been instituted or
     threatened;

                                      -17-

 
            (x) This Agreement has been duly authorized, executed and delivered
     by the Company, and the Company has full corporate power and authority to
     enter into the Agreement;

            (xi) No consent, approval, authorization or order of any court or
     governmental agency or body (other than authorization from the New Jersey
     Board of Public Utilities, referred to below) is required for the
     consummation of the transactions contemplated herein except such as have
     been obtained under the Act and such as may be required under the blue sky
     laws of any jurisdiction in connection with the sale of the Notes as
     contemplated by this Agreement and such other approvals (specified in such
     opinion) as have been obtained. The BPU has entered an order, dated August
     20, 1998, authorizing the issuance and sale of the Notes and the issuance
     of the Pledged Bond by the Company on terms and conditions not inconsistent
     with the terms and conditions set forth in or contemplated by this
     Agreement.  The Notes, when issued and sold by the Company,  and the
     Pledged Bond, when issued by the Company, will comply in all material
     respects with the terms, conditions and limitations set forth in such
     order.  Such order is in full force and effect and has not been amended,
     supplemented or otherwise modified without the consent of the Agents and
     the period has expired during which any proceeding to review, suspend,
     limit, modify, restrict or revoke such order may be instituted as of right
     by any Person other than the BPU.

            (xii)  Neither the execution and delivery of the Indenture or the
     New Supplement, the issue and sale of the Notes or the issuance of the
     Pledged Bond, nor the consummation of any other of the transactions herein
     contemplated nor the fulfillment of the terms hereof will conflict with,
     result in a breach or violation of, or constitute a default under, any law
     or the charter or bylaws of the Company or the terms of any indenture or
     other agreement or instrument known to such counsel and to which the
     Company or its Subsidiary is a party or bound, or any judgment, order,
     decree or regulation known to such counsel to be applicable to the Company
     or its Subsidiary of any court, regulatory body, administrative agency, or
     governmental body having jurisdiction over the Company or its Subsidiary;
     and except for the issuance of the Notes and the Pledged Bonds which are
     secured by the lien of the Mortgage, the execution and delivery of this
     Agreement by the Company, the consummation by the Company of the
     transactions therein contemplated and the compliance by the Company with
     the terms of this Agreement do not and will not result in the creation or
     imposition of any other lien, charge or encumbrance upon any of the assets
     of the Company or its Subsidiary pursuant to the terms or provisions of any
     of the aforesaid documents, instruments or matters;

            (xiii)  To the best knowledge of such counsel, neither the Company
     nor its Subsidiary is in violation of its articles of incorporation, bylaws
     or other charter documents or in default (nor has an event occurred which
     with notice or lapse of time or both would constitute a default or
     acceleration) in the performance of any obligation, agreement or condition
     contained in any indenture, mortgage, deed of trust, voting trust
     agreement, loan agreement, bond, debenture, note agreement or 

                                      -18-

 
     other evidence of indebtedness, lease, contract or other agreement or
     instrument known to such counsel to which the Company or its Subsidiary is
     a party or by which it or its properties is bound or affected, except for
     defaults which are not reasonably expected to have a materially adverse
     effect on the business, properties, condition (financial or otherwise) or
     results of operations of the Company and its Subsidiary considered as one
     enterprise, and neither the Company nor its Subsidiary is in violation of
     any judgment, ruling, decree, order, franchise, license or permit known to
     such counsel or any statute, rule or regulation of any court or other
     governmental agency or body applicable to the business or properties of the
     Company or its Subsidiary, which violation or default would be reasonably
     expected to have a materially adverse effect on the business, properties,
     condition (financial or otherwise) or results of operations of the Company
     or its Subsidiary considered as one enterprise;

            (xiv)  To the best of such counsel's knowledge, no holders of
     securities of the Company have the right to require registration of any of
     the Company's securities in connection with the filing of the Registration
     Statement;

            (xv) All descriptions in the Prospectus of statutes, regulations or
     legal or governmental proceedings are accurate and fairly present the
     information required to be shown;

            (xvi)  The Company has good and marketable title in fee simple to
     all the real property and good and merchantable title to all the personal
     property specifically or generally described or referred to in the Mortgage
     as subject to the lien thereof, except properties expressly excepted
     therefrom and properties properly released from the lien thereof pursuant
     to the terms thereof; the description in the Mortgage of such properties is
     legally sufficient to constitute a lien thereon; and such properties
     constitute substantially all the permanent physical properties of the
     Company and are held by the Company free and clear of all liens and
     encumbrances except the lien of the Mortgage and "excepted encumbrances"
     (as defined in Subdivision A of Section 3.04 of the Mortgage).

            (xvii)  The Mortgage constitutes a valid first mortgage lien of
     record upon all real and personal property of the Company (including
     easements, rights-of-way, and other rights relating to real estate and
     franchises) specifically or generally described or referred to in the
     Mortgage as subject to the lien thereof and owned by the Company at the
     time of the actual issue of the Pledged Bond, subject to no liens or
     encumbrances other than "excepted encumbrances" (as defined in Subdivision
     A of Section 3.04 of the Mortgage).

            (xviii)  The Mortgage has been duly filed for recording in such
     manner and in such places as are required by law in order to establish,
     preserve, and protect the first lien of the Mortgage on all real and
     personal property of the Company specifically or generally described or
     referred to in such instruments as subject to the lien of the Mortgage
     (except that (a) additional filings and recordings of the Mortgage will be
     required if property is acquired by the Company subsequent to the date
     hereof which 

                                      -19-

 
     is located in a county where the Mortgage has not previously been filed for
     recording and (b) the Mortgage will not be a first lien on property
     hereafter acquired by the Company which at the time of acquisition is
     subject to prior liens or other encumbrances), and all taxes, fees and
     other charges payable in connection therewith have been paid in full.

            (ix) In addition, such counsel shall state that it has participated
     in conferences with officers and other representatives of the Company,
     representatives of the independent accountants of the Company and Agents
     and counsel for the Agents at which the contents of the Registration
     Statement and the Prospectus were reviewed and discussed and, although such
     counsel is not passing upon, and does not assume any responsibility for,
     the accuracy, completeness or fairness of the statements contained in the
     Registration Statement or the Prospectus or any documents incorporated, or
     deemed to be incorporated, by reference therein and has made no independent
     check or verification thereof, on the basis of the foregoing, no facts have
     come to such counsel's attention that have led such counsel to believe that
     the Registration Statement or the Prospectus at the Execution Time
     contained an untrue statement of a material fact or omitted to state a
     material fact required to be stated therein or necessary to make the
     statements therein not misleading, except that such counsel need express no
     opinion or belief with respect to (x) the financial statements, schedules
     and other financial information included therein or incorporated, or deemed
     to be incorporated, by reference in the Registration Statement or the
     Prospectus or excluded therefrom or (y) exhibits to the Registration
     Statement, including the Form T-1.

     In rendering such opinion, such counsel may rely (i) as to matters of New
Jersey law, upon local New Jersey counsel and (ii) as to matters of fact, to the
extent deemed proper, on certificates of responsible officers of the Company and
public officials.  References to the Prospectus in this paragraph (b) include
any supplements thereto at the date such opinion is rendered.

     (c) Each Agent shall have received from Chapman and Cutler, Chicago,
Illinois, counsel for the Agents, such opinion or opinions, dated the Execution
Time, with respect to the issuance and sale of the Notes, the Indenture, the
Registration Statement, the Prospectus (together with any supplement thereto)
and other related matters as the Agents may reasonably require, and the Company
shall have furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.

     (d) The Company shall have furnished to each Agent a certificate of the
Company, signed by the Chairman of the Board or the President and the principal
financial or accounting officer of the Company, dated the Execution Time, to the
effect that the signers of such certificate have carefully examined the
Registration Statement, the Prospectus, any supplement to the Prospectus and
this Agreement and that:

            (i) the representations and warranties of the Company in this
     Agreement are true and correct in all material respects upon and as of such
     date the same effect as if made on such date and the Company has complied
     with all the agreements and satisfied 

                                      -20-

 
     all the conditions on its part to be performed or satisfied as a condition
     to the obligation of the Agents to solicit offers to purchase the Notes
     (except that, after the Substitution Date, such certificate need not
     confirm any representation and warranties with respect to the New
     Supplement, the Mortgage or the Pledged Bonds);

            (ii) no stop order suspending the effectiveness of the Registration
     Statement has been issued and no proceedings for that purpose have been
     instituted or, to the Company's knowledge, threatened; and

            (iii)  since the date of the most recent financial statements
     included in the Prospectus (exclusive of any supplement thereto dated after
     the Execution Time), there has been no material adverse change in the
     condition (financial or other), earnings, business or properties of the
     Company and its Subsidiary, whether or not arising from transactions in the
     ordinary course of business, except as set forth in or contemplated in the
     Prospectus (exclusive of any supplement thereto dated after the Execution
     Time).

     (e) At the Execution Time, Deloitte & Touche LLP shall have furnished to
each Agent a letter or letters (which may refer to letters previously delivered
to the Agents), dated as of the Execution Time, in form and substance
satisfactory to the Agents, confirming that they are independent accountants
within the meaning of the Act and the Exchange Act and the respective applicable
published rules and regulations thereunder and stating in effect that:

            (i) in their opinion the audited financial statements and financial
     statement schedules, if any, included or incorporated in the Registration
     Statement and the Prospectus and reported on by them comply in form in all
     material respects with the applicable accounting requirements of the Act
     and the Exchange Act and the related published rules and regulations;

            (ii) on the basis of specified procedures (but not an examination in
     accordance with generally accepted auditing standards) which would not
     necessarily reveal matters of significance with respect to the comments set
     forth in such letter, a reading of the minutes of the meetings of the
     stockholders, directors and executive committee of the Company and the
     Subsidiary; a reading of the latest available interim unaudited
     consolidated financial statements of the Company and its Subsidiary; and
     inquiries of certain officials of the Company who have responsibility for
     financial and accounting matters of the Company and its Subsidiary as to
     transactions and events subsequent to the date of the most recent audited
     financial statements included or incorporated in the Prospectus, nothing
     came to their attention which caused them to believe that:

                 (1) any unaudited consolidated financial statements and pro
          forma financial statements, if any, included or incorporated in the
          Registration Statement and the Prospectus do not comply in form in all
          material respects with applicable accounting requirements and with the
          published rules and regulations of the Commission with respect to
          financial statements included or 

                                      -21-

 
          incorporated in quarterly reports on Form 10-Q under the Exchange Act;
          and said unaudited financial statements are not in conformity with
          generally accepted accounting principles applied on a basis
          substantially consistent with that of the audited financial statements
          included or incorporated in the Registration Statement and the
          Prospectus;

                 (2) with respect to the period subsequent to the date of the
          most recent consolidated financial statements (other than any capsule
          information), audited or unaudited, included or incorporated in the
          Registration Statement and the Prospectus, there were any changes, at
          a specified date not more than five business days prior to the date of
          the letter, in the long-term or short-term debt, common equity or
          preferred stock (not subject to purchase or sinking funds) of the
          Company and its Subsidiary, or decreases in the consolidated net
          current assets or common equity of the Company and its Subsidiary, as
          compared with the amounts shown on the most recent consolidated
          balance sheet included or incorporated in the Registration Statement
          and the Prospectus, or for the period from the date of the most recent
          financial statements included or incorporated in the Registration
          Statement and the Prospectus to such specified date there were any
          decreases, as compared with the corresponding period in the preceding
          year in operating revenues or operating income or net income
          applicable to common stock of the Company and its Subsidiary, except
          in all instances for (i) changes resulting from the issuance of the
          Notes and (ii) changes or decreases set forth in such letter, in which
          case the letter shall be accompanied by an explanation by the Company
          as to the significance thereof unless said explanation is not deemed
          necessary by the Agents; or

                 (3) the amounts included under the caption "Selected Financial
          Data" of the Company's Annual Report on Form 10-K, incorporated in the
          Registration Statement and the Prospectus, were not determined on a
          basis substantially consistent with that of the corresponding amounts
          in the audited financial statements included or incorporated in the
          Registration Statement and the Prospectus;

          (iii)  they have performed certain other specified procedures as a
     result of which they determined that certain information of an accounting,
     financial or statistical nature (which is limited to accounting, financial
     or statistical information derived from the general accounting records of
     the Company and its Subsidiary) set forth in the Registration Statement and
     the Prospectus, including certain of the information included or
     incorporated under the caption "Selected Financial Data" and in Items 1, 6,
     7, 10 and 11 of the Company's Annual Report on Form 10-K, incorporated in
     the Registration Statement and the Prospectus, certain of the information
     included in the "Management's Discussion and Analysis of Financial
     Condition and Results of Operations" included or incorporated in the
     Company's Quarterly Reports on Form 10-Q, incorporated in the Registration
     Statement and the Prospectus, and the information included in the
     Prospectus under the captions "Ratio 

                                      -22-

 
     of Earnings to Fixed Charges" agrees with the accounting records of the
     Company and its Subsidiary, excluding any questions of legal
     interpretation; and

            (iv) if unaudited pro forma financial statements are included or
     incorporated in the Registration Statement and the Prospectus, on the basis
     of a reading of the unaudited pro forma financial statements, carrying out
     certain specified procedures, inquiries of certain officials of the Company
     and its Subsidiary (including any entity which is acquired, by merger or
     otherwise, after the Execution Time, and including any entity which is the
     subject of any contract to acquire, by merger or otherwise, on the date of
     such financial statements) who have responsibility for financial and
     accounting matters, and proving the arithmetic accuracy of the application
     of the pro forma adjustments to the historical amounts in the pro forma
     financial statements, nothing came to their attention which caused them to
     believe that the pro forma financial statements do not comply in form in
     all material respects with the applicable accounting requirements of Rule
     11-02 of Regulation S-X or that the pro forma adjustments have not been
     properly applied to the historical amounts in the compilation of such
     statements.

     References to the Prospectus in this paragraph (e) include any supplement
thereto at the date of the letter.

     (f) Prior to the Execution Time, the Company shall have furnished to each
Agent such further information, documents, certificates, letters from
accountants and opinions of counsel as the Agents may reasonably request.

     If any of the conditions specified in this Section 5 shall not have been
fulfilled in all material respects when and as provided in this Agreement, or if
any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to such Agents and its counsel, this Agreement and all obligations
of any Agent hereunder may be canceled at any time by the Agents.  Notice of
such cancellation shall be given to the Company in writing or by telephone or
telegraph confirmed in writing.

     The documents required to be delivered by this Section 5 shall be delivered
at the office of Chapman and Cutler, counsel for the Agents, at 111 West Monroe
Street, Chicago, Illinois, at the Execution Time.

6. Conditions to the Obligations of the Purchaser.

     The obligations of the Purchaser to purchase any Notes will be subject to
the accuracy of the representations and warranties on the part of the Company
herein as of the date of any related Terms Agreement and as of the Closing Date
for such Notes, to the performance and observance by the Company of all
covenants and agreements herein contained on its part to be performed and
observed and to the following additional conditions precedent:

                                      -23-

 
     (a) No stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceedings for that
purpose shall have been instituted or, to the knowledge of the Company,
threatened by the Commission.

     (b) If specified by any related Terms Agreement and except to the extent
modified by such Terms Agreement, the Purchaser shall have received,
appropriately updated, (i) a certificate of the Company, dated as of the Closing
Date, to the effect set forth in Section 5(d) (except that references to the
Prospectus shall be to the Prospectus as supplemented at the time of execution
of the Terms Agreement), (ii) the opinion of Dechert Price & Rhoads, counsel for
the Company, dated as of the Closing Date, to the effect set forth in Section
5(b), (iii) the opinion of Chapman and Cutler, counsel for the Purchaser, dated
as of the Closing Date, to the effect set forth in Section 5(c), and (iv) a
letter of Deloitte & Touche LLP, independent accountants for the Company, dated
as of the Closing Date, to the effect set forth in Section 5(e).

     (c) Prior to the Closing Date, the Company shall have furnished to the
Purchaser such further information, certificates and documents as the Purchaser
may reasonably request.

     If any of the conditions specified in this Section 6 shall not have been
fulfilled in all material respects when and as provided in this Agreement and
any Terms Agreement, or if any of the opinions and certificates mentioned above
or such Terms Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Purchaser and its counsel, such Term
Agreement and all obligations of the Purchaser thereunder and with respect to
the Notes subject thereto may be canceled at, or at any time prior to, the
respective Closing Date by the Purchaser.  Notice of such cancellation shall be
given to the Company in writing or by telephone or telegraph confirmed in
writing.

7. Right of Person Who Agreed to Purchase to Refuse to Purchase.

     (a) The Company agrees that any person who has agreed to purchase and pay
for any Note, including a Purchaser and any person who purchases pursuant to a
solicitation by any of the Agents, shall have the right to refuse to purchase
such Note if, at the Closing Date therefor, any condition set forth in Section 5
or 6, as applicable, shall not be satisfied.

     (b) The Company agrees that any person who has agreed to purchase and pay
for any Note pursuant to a solicitation by any of the Agents shall have the
right to refuse to purchase such Note if, subsequent to the agreement to
purchase such Note, any change, condition or development specified in any of the
Sections 9(b)(i) through (v) shall have occurred (without regard to any judgment
of a Purchaser required therein) the effect of which is, in the judgment of the
Agent which presented the offer to purchase such Note, so material and adverse
as to make it impractical or inadvisable to proceed with the delivery of such
Note (it being understood that under no circumstance shall any such Agent have
any duty or obligation to exercise the judgment permitted to be exercised under
this Section 7(b) and Section 9(b)).

                                      -24-

 
8. Indemnification and Contribution.

     (a) The Company agrees to indemnify and hold harmless each of you, the
directors, officers, employees and agents of each of you and each person who
controls each of you within the meaning of either Section 15 of the Act or
Section 20 of the Exchange Act against any and all losses, claims, damages or
liabilities, joint or several, to which you, they or any of you or them may
become subject under the Act, the Exchange Act or other Federal or state
statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement for the registration of the Notes
as originally filed or in any amendment thereof, or in the Prospectus or any
preliminary Prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and agrees to reimburse each such indemnified
party, as incurred, for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that (i) the Company will not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon any such untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with written information furnished to the Company by any of you
specifically for use in connection with the preparation thereof, and (ii) such
indemnity with respect to the Prospectus or any preliminary Prospectus shall not
inure to the benefit of any of you (or any person controlling any of you) from
whom the person asserting any such loss, claim, damage or liability purchased
the Notes which are the subject thereof if such person did not receive a copy of
the Prospectus (or the Prospectus as amended or supplemented) excluding
documents incorporated therein by reference at or prior to the confirmation of
the sale of such Notes to such person in any case where such delivery is
required by the Act and the untrue statement or omission of a material fact
contained in the Prospectus or any preliminary Prospectus was corrected in the
Prospectus (or the Prospectus as amended or supplemented).  This indemnity
agreement will be in addition to any liability which the Company may otherwise
have.

     (b) Each of you, severally and not jointly, agrees to indemnify and hold
harmless the Company, each of its directors, each of its officers who signs the
Registration Statement and each person who controls the Company within the
meaning of either Section 15 of the Act or Section 20 of the Exchange Act, to
the same extent as the foregoing indemnity from the Company to you, but only
with reference to written information relating to such of you furnished to the
Company by such of you specifically for use in the preparation of the documents
referred to in the foregoing indemnity.  This indemnity agreement will be in
addition to any liability which you may otherwise have.  The Company
acknowledges that the statements concerning the Agents set forth in the last
paragraph of the cover page of the Prospectus and under the heading "Plan of
Distribution" in the Prospectus, constitute the only information furnished in
writing by any of you for inclusion in the documents referred to in the
foregoing indemnity, and you confirm that such statements are correct.

                                      -25-

 
     (c) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 8.  In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein, and to the extent
that it may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to assume the
defense thereof, with counsel satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel (in addition to local counsel) to assert such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties.  Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in connection with the assertion of legal defenses in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel, approved by you in the case of paragraph (a) of
this Section 8, representing the indemnified parties under such paragraph (a)
who are parties to such action), (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party.

     (d) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in paragraph (a) of this
Section 8 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the Company on grounds of public policy or
otherwise, the Company and each of you shall contribute to the aggregate losses,
claims, damages and liabilities (including legal or other expenses reasonably
incurred in connection with investigating or defending same) to which the
Company and any of you may be subject in such proportion so that each of you is
responsible for that portion represented by the percentage that the aggregate
commissions received by such of you pursuant to Section 2 in connection with the
Notes from which such losses, claims, damages and liabilities arise (or, in the
case of Notes sold pursuant to a Terms Agreement, the aggregate commissions that
would have been received by such of you if such commissions had been payable),
bears to the aggregate principal amount of such Notes sold and the Company is
responsible for the balance; provided, however, that (y) in no case shall any of
you be responsible for any amount in excess of the commissions received by such
of 

                                      -26-

 
you in connection with the Notes from which such losses, claims, damages and
liabilities arise (or, in the case of Notes sold pursuant to a Terms Agreement,
the aggregate commissions that would have been received by such of you if such
commissions had been payable) and (z) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 8, each person who controls any
of you within the meaning of Section 15 of the Act shall have the same rights to
contribution as you and each person who controls the Company within the meaning
of either Section 15 of the Act or Section 20 of the Exchange Act, each officer
of the Company who shall have signed the Registration Statement and each
director of the Company shall have the same rights to contribution as the
Company, subject in each case to clause (z) of this paragraph (d). Any party
entitled to contribution will, promptly after receipt of notice of commencement
of any action, suit or proceeding against such party in respect of which a claim
for contribution may be made against another party or parties under this
paragraph (d), notify such party or parties from whom contribution may be
sought, but the omission to so notify such party or parties shall not relieve
the party or parties from whom contribution may be sought from any other
obligation it or they may have hereunder or otherwise than under this paragraph
(d).

9. Termination.

     This Agreement will continue in effect until terminated as provided in this
Section 9. In the event of such termination, no party shall have any liability
to the other party hereto, except as provided in the fourth paragraph of Section
2(a), Section 4(h), Section 8 and Section 10.

     (a) This Agreement may be terminated by either the Company as to any of
you or by any of you insofar as this Agreement relates to such of you, by giving
written notice of such termination to such of you or the Company, as the case
may be.  This Agreement shall so terminate at the close of business on the first
business day following the receipt of such notice by the party to whom such
notice is given.

     (b) Each Terms Agreement (whether oral or written) shall be subject to
termination in the absolute discretion of the Purchaser, by notice given to the
Company prior to delivery of any payment for any Note to be purchased
thereunder, if prior to such time (i) there shall have occurred, subsequent to
the agreement to purchase such Note, any change, in or affecting the business or
properties of the Company and its Subsidiary the effect of which is, in the
judgment of the Purchaser, so material and adverse to the Company and the
Subsidiary taken as a whole as to make it impractical or inadvisable to proceed
with the delivery of such Note, (ii) there shall have been, subsequent to the
agreement to purchase such Note, any decrease in the rating of any of the
Company's debt securities or preferred securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Act) or any notice given of any intended or potential decrease in any such
rating or of a possible change in any such rating that does not indicate the
direction of the possible change, (iii) trading in any of the Company's
securities shall have been suspended by the Commission or, The New York Stock
Exchange or trading in 

                                      -27-

 
securities generally on The New York Stock Exchange shall have been suspended or
limited or minimum prices shall have been established on such Exchange, (iv) a
banking moratorium shall have been declared either by Federal or New York State
authorities, or (v) there shall have occurred any outbreak or escalation or
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis the effect of which on financial markets is such as to
make it, in the judgment of the Purchaser, impracticable or inadvisable to
proceed with the offering or delivery of such Notes as contemplated by the
Prospectus.

10. Representations and Indemnities to Survive.

     The respective agreements, representations, warranties, indemnities and
other statements of the Company or its officers and of you set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of you or the Company or any of the
officers, directors or controlling persons referred to in Section 8 hereof, and
will survive delivery of and payment for the Notes.  The provisions of Sections
4(h) and 8 hereof shall survive the termination or cancellation of this
Agreement.  The provisions of this Agreement (including without limitation
Section 7 hereof) applicable to any purchase of a Note for which an agreement to
purchase exists prior to the termination hereof shall survive any termination of
this Agreement.

11. Notices.

     All communications hereunder will be in writing and effective only on
receipt, and, if sent to any of you, will be mailed, delivered or telegraphed
and confirmed to such of you, at the address specified in Schedule I hereto,
with a copy to Chapman and Cutler, 111 W. Monroe Street, Chicago, Illinois
60603, Attention: Jonathan Koff; or, if sent to the Company, will be mailed,
delivered or telegraphed and confirmed to it at Number One South Jersey Plaza,
Route 54, Folsom, NJ  08037, attention of the President, with a copy to Dechert
Price & Rhoads, 4000 Bell Atlantic Tower, 1717 Arch Street, Philadelphia, PA
19103-2793, Attention: George W. Patrick.

12. Successors.

     This Agreement will inure to the benefit of and be binding upon the parties
hereto and their respective successors, directors, officers, employees, agents
and controlling persons referred to in Section 8 hereof, and, to the extent
provided in Section 7, any person who has agreed to purchase Notes, and no other
person will have any right or obligation hereunder.

13. Applicable Law.

     This Agreement will be governed by and construed in accordance with the
internal laws of the State of New York without giving effect to conflict of laws
rules thereof.

                                      -28-

 
     If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement among the Company
and you.


                                     Very truly yours,

                                     South Jersey Gas Company


                                     By:__________________________________

                                     Its:_________________________________

                                      -29-

 
     The foregoing Agreement is hereby confirmed and accepted as of the date
hereof.



PaineWebber Incorporated

By:_____________________________
  Its:___________________________


Prudential Securities Incorporated

By:_____________________________
  Its:___________________________


First Union Capital Markets, a division
  of Wheat First Securities, Inc.

By:_____________________________
  Its:___________________________

                                      -30-

 
                                   SCHEDULE I

     The Company agrees to pay each Agent a commission equal to the following
percentage of the principal amount of each Note sold by such Agent, and to pay
the Purchasers a commission in the form of a discount to the purchase price
equal to the following percentage of the principal amount of each Note purchased
by the Agent under Section 2(b):


Maturity Range of Notes amount                 Percentage of Principal

From 1 year to less than 18 months                      .150%

From 18 months to less than 2 years                     .200%

From 2 years to less than 3 years                       .250%

From 3 years to less than 4 years                       .350%

From 4  years to less  than 5 years                     .450%

From 5  years to less  than 6 years                     .500%

From 6 years to less than 7 years                       .550%

From 7 years to less than 10 years                      .600%

From 10 years to less than 15 years                     .625%

From 15 years to less than 20 years                     .700%

From 20 years or longer                                 .750%

          The commission rate payable to any Agent with respect to any Notes,
and the discount with respect to any Notes sold to a Purchaser, may be increased
by agreement between the Company and such Agent or Purchaser, with no
requirement that the other Agents or Purchasers receive notice of, or consent
to, such higher commission rate or discount.

Address for Notice to you:

     Notices to PaineWebber Incorporated shall be directed to it at 1285 Avenue
of the Americas, New York, New York 10019, Attention:  Corporate Finance
Department.

     Notices to Prudential Securities Incorporated shall be directed to it at
One New York Plaza, 15th floor, New York, New York 10292, Attention: Debt
Origination Group.

     Notices to First Union Capital Markets shall be directed to it at One First
Union Center, TW-10, 301 South College Street, Charlotte, NC 28288-0604,
Attention: Utilities and Strategic Finance.

                                      -31-

 
                                                                       Exhibit A

                   MEDIUM-TERM NOTE ADMINISTRATIVE PROCEDURES

                               OCTOBER ___, 1998

     The Secured Medium-Term Notes, Series A (the "Notes") are to be offered on
a continuing basis, unless suspended pursuant to Section 2(a).  PaineWebber
Incorporated, Prudential Securities Incorporated and First Union Capital
Markets, as agents (the "Agents"), have agreed to use reasonable efforts to
solicit offers to purchase Notes.  No Agent will be obligated to purchase Notes
for its own account.  The Notes are being sold pursuant to a Distribution
Agreement between South Jersey Gas Company (the "Issuer" or the "Company") and
the Agents dated as of the date hereof (the "Agreement").  The Notes will be
issued under an indenture (the "Indenture") dated as of October 1, 1998, between
the Issuer and The Bank of New York, as trustee (the "Trustee").

     The procedures to be followed during, and the specific terms of, the
solicitation of offers by each Agent and the sale as a result thereof by the
Issuer are explained below.  Administrative and record-keeping responsibilities
will be handled for the Issuer by its Treasurer.  The Issuer will advise each
Agent and the Trustee in writing of those persons handling administrative
responsibilities with whom the Agents and the Trustee are to communicate
regarding offers to purchase Notes and the details of their delivery and will
promptly advise each Agent and the Trustee in writing if any such person shall
cease to handle such responsibilities or of the authorization of any additional
person to handle such responsibilities.

     The Notes will either be issued (a) in book-entry form and represented by
one or more fully registered Notes (each, a "Book-Entry Note") delivered to the
Trustee, as agent for The Depository Trust Company ("DTC"), and recorded in the
book-entry system maintained by DTC, or (b) in certificated form delivered to
the purchaser thereof or a person designated by such purchaser.  Except in the
limited circumstances described in the Prospectus, owners of beneficial
interests in Book-Entry Notes will not be entitled to physical delivery of Notes
in certificated form.

     General procedures relating to the issuance of all Notes are set forth in
Part I hereof.  Book-Entry Notes will be issued in accordance with the
procedures set forth in Part II, as adjusted in accordance with changes in DTC's
operating requirements.  Notes issued in certificated form will be issued in
accordance with the procedures set forth in Part III hereof.  Capitalized terms
used herein that are not otherwise defined shall have the meanings ascribed
thereto in the Indenture or the Notes, as the case may be.  To the extent the
procedures set forth below conflict with the provisions of the Notes, the
Indenture, DTC's operating requirements or the Agreement, the relevant
provisions of the Notes, the Indenture, DTC's operating requirements or the
Agreement shall control.

                                      A-1

 
                  PART I:  PROCEDURES OF GENERAL APPLICABILITY

Maturities:                   Each Note will mature on a Business Day not less
                              than one year nor more than 40 years after the
                              Original Issue Date (as defined below) for such
                              Note.

Denominations:                The denomination of any Note will be in U.S.
                              dollars and a minimum of $1,000 or any larger
                              amount that is an integral multiple of $1,000.

Form:                         Notes will be issued only in fully registered form
                              in accordance with the Indenture.

Date of Issuance:             Each Note will be dated the date of its
                              authentication by the Trustee. Each Note will also
                              bear an "Original Issue Date," which will be the
                              date of its original issue, or in the case of any
                              Note (or portion thereof) issued subsequently upon
                              transfer or exchange of a Note or in lieu of a
                              destroyed, mutilated, defaced, lost or stolen
                              Note, the Original Issue Date of the predecessor
                              Note, regardless of the date of authentication of
                              such subsequently issued Note.

Preparation of Pricing
Supplement:                   If any offer to purchase a Note is accepted by the
                              Company, the Company, with the approval of the
                              Agent presenting the offer (the "Presenting
                              Agent"), will prepare a Pricing Supplement
                              reflecting the terms of such Note and file the
                              Pricing Supplement relating to the Notes and the
                              plan of distribution thereof with the Commission
                              in accordance with Rule 424 under the Act and the
                              provisions of Regulation S-T under the Act. The
                              Presenting Agent will cause a Pricing Supplement
                              and a Prospectus to be delivered to the purchaser
                              of such Notes.

                              The Company shall have delivered a completed
                              Pricing Supplement, via next day mail or telecopy
                              to arrive no later than 11 a.m. on the Business
                              Day following the trade date, to the Presenting
                              Agent at the following address:

                              If PaineWebber Incorporated is the Presenting
                              Agent, to it at 1285 Avenue of the Americas, New
                              York, New York 10019, Attention:  Corporate
                              Finance Department.  Facsimile number 
                              (212) 969-7602.

                                      A-2

 
                              If Prudential Securities Incorporated is the
                              Presenting Agent, to it at One New York Plaza,
                              15th floor, New York, New York 10292, Attention:
                              Debt Origination Group.  Facsimile number (212)
                              778-1279.

                              If First Union Capital Markets is the Presenting
                              Agent, to it at One First Union Center, TW-10, 301
                              South College Street, Charlotte, NC 28288-0604,
                              Attention: Utilities and Strategic Finance.
                              Facsimile number (704) 383-6670.

                              In each instance that a Pricing Supplement is
                              prepared, the Presenting Agent will affix the
                              Pricing Supplement to Prospectuses prior to their
                              use.  Outdated Pricing Supplements, and the
                              Prospectuses to which they are attached (other
                              than those retained for files) will be destroyed.

Acceptance of Offers:         Any Agent may, in its reasonable discretion,
                              reject any offer to purchase Notes received by it,
                              in whole or, if permitted by the terms thereof, in
                              part. Each Agent will promptly advise the Issuer
                              of any offers to purchase Notes received by such
                              Agent, other than offers rejected by such Agent
                              and, if such Agent or any of its affiliates shall
                              be the offeror, shall advise the Issuer of that
                              fact. The Issuer will have the sole right to
                              accept offers to purchase Notes in whole or, if
                              permitted by the terms thereof, in part. The
                              Issuer may reject any such offer in whole or, if
                              permitted by the terms thereof, in part. The
                              Issuer will forthwith advise an Agent of the
                              acceptance or rejection of any offer received
                              through such Agent (the "Presenting Agent"), and
                              such Agent will so advise the offeror.

Suspension of Solicitation;
Amendment or Supplement:      The Company may instruct the Agents to suspend
                              solicitation of purchases at any time.  Upon
                              receipt of such instructions the Agents will
                              promptly suspend solicitation of offers to
                              purchase Notes, which, in any event, shall not be
                              later than the close of business on the day such
                              instructions are received, from the Company until
                              such time as the Company has advised it that
                              solicitation of offers to purchase may be resumed.
                              If the Company decides to amend the Registration
                              Statement (including incorporating any documents
                              by reference therein) or supplement any of 

                                      A-3

 
                              such documents (other than to change rates or
                              other variable terms), it will promptly furnish
                              the Agents and their counsel with copies of the
                              amendment (including any document proposed to be
                              incorporated by reference therein) or supplement.
                              One copy of such filed document, along with a copy
                              of the cover letter sent to the Commission, will
                              be delivered or mailed to the Agents at the
                              following addresses:

                              If PaineWebber Incorporated is the Presenting
                              Agent, to it at 1285 Avenue of the Americas, New
                              York, New York 10019, Attention:  Corporate
                              Finance Department.

                              If Prudential Securities Incorporated is the
                              Presenting Agent, to it at One New York Plaza,
                              15th floor, New York, New York 10292, Attention:
                              Debt Origination Group.

                              If First Union Capital Markets is the Presenting
                              Agent, to it at One First Union Center, TW-10, 301
                              South College Street, Charlotte, NC 28288-0604,
                              Attention: Utilities and Strategic Finance.

                              In the event that at the time the solicitation of
                              offers to purchase from the Company is suspended
                              there shall be any orders outstanding which have
                              not been settled, the Company will promptly advise
                              the Agents and the Trustee whether such orders may
                              be settled and whether copies of the Prospectus as
                              in effect at the time of the suspension may be
                              delivered in connection with the settlement of
                              such orders.  The Company will have the sole
                              responsibility for such decision and for any
                              arrangements which may be made in the event that
                              the Company determines that such orders may not be
                              settled or that copies of such Prospectus may not
                              be so delivered.


Delivery of Prospectus:       The Agents will cause a copy of the most recent
                              Prospectus and Pricing Supplement to accompany or
                              precede the earlier of (a) the written
                              confirmation of a sale sent to a customer or the
                              agent of such customer, and (b) the delivery of
                              Notes to a customer or the agent of such customer.

                                      A-4

 
Documents incorporated
by reference:                 The Company shall supply each Agent with an
                              adequate supply of all documents incorporated by
                              reference in the Registration Statement that are
                              reasonably requested by such Agent.

Confirmation:                 For each offer to purchase a Note solicited by an
                              Agent and accepted by the Issuer, such Agent will
                              issue a confirmation to the purchaser, with a copy
                              to the Issuer.

Settlement Date:              Subject to Section 6 of the Agreement, the
                              Settlement Date with respect to any offer to
                              purchase Notes accepted by the Issuer will be the
                              third Business Day next succeeding the date of
                              acceptance unless otherwise agreed by the
                              purchaser and the Issuer and shall be specified
                              upon acceptance of such offer.

Trustee
  Not to Risk Funds:          Nothing herein shall be deemed to require the
                              Trustee to risk or expend its own funds in
                              connection with any payment to the Issuer or the
                              Agents or any purchaser, it being understood by
                              all parties that payments made by the Trustee to
                              the Issuer or the Agents or a purchaser shall be
                              made only to the extent that immediately available
                              funds are provided to the Trustee for such
                              purpose.

Authenticity of Signatures:   The Issuer will cause the Trustee to furnish the
                              Agents from time to time with the specimen
                              signatures of each of the Trustee's officers,
                              employees or agents who have been authorized by
                              the Trustee to authenticate Notes, but the Agents
                              will have no obligation or liability to the Issuer
                              or to the Trustee in respect of the authenticity
                              of the signature of any officer, employee or agent
                              of the Issuer or the Trustee on any Note.

Payment of Expenses:          Each Agent shall forward to the Issuer, on a
                              quarterly basis, a statement of the out-of-pocket
                              expenses incurred by such Agent during that
                              quarter that are reimbursable to it pursuant to
                              the terms of the Agreement. The Issuer will remit
                              payment to each Agent currently on a quarterly
                              basis.

                                      A-5

 
                     PART II:  PROCEDURES FOR NOTES ISSUED
                               IN BOOK-ENTRY FORM

     In connection with the qualification of the Book-Entry Notes for
eligibility in the book-entry system maintained by DTC, the Trustee will perform
the custodial, document control and administrative functions described below, in
accordance with its respective obligations under a Letter of Representations
from the Company and the Trustee to DTC, dated ________, ___, 1998, and a
Medium-Term Note Certificate Agreement, dated August 17, 1989, between the
Trustee and DTC (the "Certificate Agreement"), and its obligations as a
participant in DTC, including DTC's Same-Day Funds Settlement System ("SDFS").

Issuance:                     All Book-Entry Notes having the same Original
                              Issue Date, redemption provisions, interest
                              payment dates, interest rate, and stated Maturity
                              (collectively, the "Terms") will be represented
                              initially by a single Global Note in fully
                              registered form without coupons.

                              Each Book-Entry Note will be dated and issued as
                              of the date of its authentication by the Trustee.
                              Each Book-Entry Note will bear an original issue
                              date, which will be (i) with respect to an
                              original Book-Entry Note (or any portion thereof),
                              the original issue date specified in such Book-
                              Entry Note and (ii) following a consolidation of
                              Global Notes, with respect to the Book-Entry Note
                              resulting from such consolidation, the most recent
                              Interest Payment Date to which interest has been
                              paid or duly provided for on the predecessor
                              Global Notes, regardless of the date of
                              authentication of such resulting Book-Entry Note.
                              No Book-Entry Note will represent any securities
                              in certificated form.

Identification:               The Issuer has arranged with the CUSIP Service
                              Bureau of Standard & Poor's Ratings Group, a
                              division of McGraw-Hill (the "CUSIP Service
                              Bureau"), for the reservation of approximately 900
                              CUSIP numbers which have been reserved for and
                              relating to Book-Entry Notes and the Company has
                              delivered to the Trustee and DTC a written list of
                              such CUSIP numbers. The Trustee will assign CUSIP
                              numbers to Book-Entry Notes as described below
                              under Settlement Procedure B. DTC will notify the
                              CUSIP Service Bureau periodically of the CUSIP
                              numbers that the Company has assigned to Book-
                              Entry Notes. The Trustee will notify the Company
                              at any 

                                      A-6

 
                              time when fewer than 50 of the reserved CUSIP
                              numbers remain unassigned to Book-Entry Notes,
                              and, if it deems necessary, the Company will
                              reserve additional CUSIP numbers for assignment to
                              Book-Entry Notes. Upon obtaining such additional
                              CUSIP numbers, the Company will deliver a list of
                              such additional numbers to the Trustee and DTC.

Registration:                 Each Book-Entry Note will be registered in the
                              name of Cede & Co., as nominee for DTC, on the
                              register maintained by the Trustee under the
                              Indenture. The beneficial owner of a Note issued
                              in book-entry form i.e., an owner of a beneficial
                              interest in a Book-Entry Note) (or one or more
                              indirect participants in DTC designated by such
                              owner) will designate one or more participants in
                              DTC (with respect to such Note issued in book-
                              entry form, the "Participants") to act as agent or
                              agents for such beneficial owner in connection
                              with the book-entry system maintained by DTC, and
                              DTC will record in book-entry form, in accordance
                              with instructions provided by such Participants, a
                              credit balance with respect to such Note issued in
                              book-entry form in the account of such
                              Participants. The ownership interest of such
                              beneficial owner in such Note issued in book-entry
                              form will be recorded through the records of such
                              Participants or through the separate records of
                              such Participants and one or more indirect
                              participants in DTC.

Transfers:                    Transfers of a Book-Entry Note will be
                              accomplished by book entries made by DTC and, in
                              turn, by Participants (and in certain cases, one
                              or more indirect participants in DTC) acting on
                              behalf of beneficial transferors and transferees
                              of such Book-Entry Note.

Exchanges:                    The Trustee may deliver to DTC and the CUSIP
                              Service Bureau at any time a written notice
                              specifying (a) the CUSIP numbers of two or more
                              Book-Entry Notes outstanding on such date that
                              represent Book-Entry Notes having the same terms
                              (other than Original Issue Dates) and for which
                              interest has been paid to the same date; (b) a
                              date, occurring at least 30 days after such
                              written notice is delivered and at least 30 days
                              before the next Interest Payment Date for the
                              related Notes issued in book-entry form, on which
                              such Book-Entry Notes shall be exchanged for a
                              single 

                                      A-7

 
                              replacement Book-Entry Note; and (c) a new CUSIP
                              number, obtained from the Company, to be assigned
                              to such replacement Book-Entry Note. Upon receipt
                              of such a notice, DTC will send to its
                              participants (including the Trustee) a written
                              reorganization notice to the effect that such
                              exchange will occur on such date. Prior to the
                              specified exchange date, the Trustee will deliver
                              to the CUSIP Service Bureau written notice setting
                              forth such exchange date and the new CUSIP number
                              and stating that, as of such exchange date, the
                              CUSIP numbers of the Book-Entry Notes to be
                              exchanged will no longer be valid. On the
                              specified exchange date, the Trustee will exchange
                              such Book-Entry Notes for a single Book-Entry Note
                              bearing the new CUSIP number and the CUSIP numbers
                              of the exchanged Book-Entry Notes will, in accord
                              with CUSIP Service Bureau procedures, be canceled
                              and not reassigned.

Interest Payments:            General. Interest (if any) on each Note will
                              accrue from the original Issue Date of such Note,
                              and will be calculated and paid in the manner
                              described in such Note.

                              Unless otherwise provided in the Indenture or the
                              Notes, the first payment of interest on any Note
                              originally issued after a Record Date and on or
                              before the next succeeding Interest Payment Date
                              will be made no earlier than the Interest Payment
                              Date following the next succeeding Record Date.
                              Interest payable at maturity of a Note, or upon
                              earlier redemption or repayment, will be payable
                              to the person to whom the principal of such Note
                              is payable.  DTC will arrange for each pending
                              deposit message described under Settlement
                              Procedure C below to be transmitted to Standard &
                              Poor's Ratings Group, which will use the
                              information in the message to include certain
                              terms of the related Book-Entry Note in the
                              appropriate daily bond report published by
                              Standard & Poor's Ratings Group.

                              Record Dates.  The Record Dates with respect to
                              the Interest Payment Dates shall be the April 15
                              or October 15 (whether or not a business day) next
                              preceding such Interest Payment Date.

                                      A-8

 
                              Interest Payment Dates.  Unless otherwise
                              specified pursuant to Settlement Procedure "A"
                              below, interest payments on Book-Entry Notes will
                              be made semiannually on May 1 and November 1 of
                              each year and at Maturity; provided, however, that
                              if an Interest Payment Date for a Book-Entry Note
                              is not a Business Day, the payment due on such day
                              shall be made on the next succeeding Business Day
                              and no interest shall accrue on such payment for
                              the period from and after such Interest Payment
                              Date; provided, further, that in the case of a
                              Book-Entry Note issued between a Regular Record
                              Date and an Interest Payment Date, the first
                              interest payment will be made on the Interest
                              Payment Date following the next succeeding Regular
                              Record Date.

Payments of Principal and
  Interest:                   Payments of Interest Only.  Not later than five
                              Business Days following each Record Date, the
                              Trustee will deliver to the Issuer and DTC a
                              written notice specifying by CUSIP number the
                              amount of interest to be paid on each Book-Entry
                              Note on the following Interest Payment Date (other
                              than an Interest Payment Date coinciding with a
                              Maturity Date) and the total of such amounts.  DTC
                              will confirm the amount payable on each Book-Entry
                              Note on such Interest Payment Date by reference to
                              the daily bond reports published by Standard &
                              Poor's.  On such Interest Payment Date, the Issuer
                              will pay to the Trustee, and the Trustee in turn
                              will pay to DTC, such total amount of interest due
                              (other than at Maturity Date), at the times and in
                              the manner set forth below under "Manner of
                              Payment."

                              Payments at Maturity Date.  Prior to the first
                              Business Day of each month in which principal
                              and/or interest is to be paid, the Trustee will
                              deliver to the Issuer and DTC a written list of
                              principal, interest and premium, if any, to be
                              paid on each Book-Entry Note maturing either at
                              Stated Maturity or on a Redemption Date in the
                              following month.  The Trustee, the Issuer and DTC
                              will confirm the amounts of such principal and
                              interest payments with respect to a Book-Entry
                              Note on or about the fifth Business Day preceding
                              the Maturity of such Book-Entry Note.  On or
                              before Maturity Date, the Issuer will pay to the
                              Trustee, and 

                                      A-9

 
                              the Trustee in turn will pay to DTC, the principal
                              amount of such Note, together with interest and
                              premium, if any, due at such Maturity Date, at the
                              times and in the manner set forth below under
                              "Manner of Payment." Promptly after payment to DTC
                              of the principal and interest due at Maturity of
                              such Book-Entry Note, the Trustee will cancel such
                              Book-Entry Note in accordance with the Indenture
                              and so advise the Issuer. If any Maturity Date of
                              a Book-Entry Note is not a Business Day, the
                              payment due on such day shall be made on the next
                              succeeding Business Day and no interest shall
                              accrue on such payment for the period from and
                              after such Maturity.

                              Manner of Payment.  The total amount of any
                              principal, premium, if any, and interest due on
                              Book-Entry Notes on any Interest Payment Date or
                              at Maturity shall be transferred by the Issuer to
                              the Trustee to an account designated by the
                              Trustee in funds available for use by the Trustee
                              as of 12:00 noon, New York City time, on such
                              date.  The Issuer will confirm such instructions
                              in writing to the Trustee.  Prior to 2:00 p.m.,
                              New York City time, on such date or as soon as
                              possible thereafter, the Trustee will pay (but
                              only from funds withdrawn from such account) by
                              separate wire transfer (using Fedwire message
                              entry instructions in a form previously specified
                              by DTC) to an account at the Federal Reserve Bank
                              of New York previously specified by DTC, in funds
                              available for immediate use by DTC, each payment
                              of interest, principal and premium, if any, due on
                              a Book-Entry Note on such date.  Thereafter on
                              such date, DTC will pay, in accordance with its
                              SDFS operating procedures then in effect, such
                              amounts in funds available for immediate use to
                              the respective Participants in whose names such
                              Notes are recorded in the book-entry system
                              maintained by DTC.  Neither the Issuer nor the
                              Trustee shall have any responsibility or liability
                              for the payment by DTC of the principal of, or
                              premium, if any, or interest on, the Book-Entry
                              Notes to such Participants.

                              Withholding Taxes.  The amount of any taxes
                              required under applicable law to be withheld from
                              any interest payment on a Note will be determined
                              and withheld by the Participant, indirect
                              participant in DTC or other 

                                     A-10

 
                              Person responsible for forwarding payments and
                              materials directly to the beneficial owner of such
                              Note.

Settlement Procedures:        Settlement Procedures with regard to each Book-
                              Entry Note sold by the Presenting Agent, as agent
                              of the Company, will be as follows:

                              A.    The Presenting Agent will advise the Issuer
                                    by telephone (confirmed in writing) or
                                    telecopy of the following Settlement
                                    information:

                                      1.  Taxpayer identification number of the
                                          purchaser.

                                      2.  Principal amount of the Note.

                                      3.  Interest rate, and interest payment
                                          dates.

                                      4.  Price to public of the Note.

                                      5.  Trade date.

                                      6.  Settlement Date (Original Issue Date).

                                      7.  Maturity.

                                      8.  Net proceeds to the Company.

                                      9.  Agent's commission.

                                      10. Redemption provisions, if any.

                              B.    The Issuer will advise the Trustee by
                                    telephone (confirmed in writing) or telecopy
                                    by 10:00 a.m. on the second Business Day
                                    preceding the Settlement Date of the above
                                    settlement information received from the
                                    Presenting Agent with respect to the Book-
                                    Entry Note representing such Note.

                              C.    The Issuer will assign a CUSIP number to
                                    such Note and the Trustee will communicate
                                    to DTC through DTC's Participant Terminal
                                    System, a pending deposit message specifying
                                    the following settlement information, which
                                    will route such relevant information to the

                                     A-11

 
                                    Presenting Agent, Standard & Poor's Ratings
                                    Group and Interactive Data Corporation:

                                    1. The information set forth in Settlement
                                       Procedure A.

                                    2. Identification numbers of the
                                       participant accounts maintained by DTC
                                       on behalf of the Trustee and the Agent.

                                    3. Initial Interest Payment Date for such
                                       Note, number of days by which such date
                                       succeeds the related Record Date for
                                       DTC purposes and, if then calculable,
                                       the amount of interest payable on such
                                       Interest Payment Date (which amount
                                       shall have been confirmed by the
                                       Trustee).

                                    4. CUSIP number of the Book-Entry Note
                                       representing such Note.

                              D.    The Trustee will complete a Book-Entry Note
                                    representing such Note in a form that has
                                    been approved by the Company, the Agents and
                                    the Trustee.

                              E.    The Trustee will authenticate the Book-Entry
                                    Note representing such Note.

                              F.    DTC will credit such Note to the participant
                                    account of the Trustee maintained by DTC.

                              G.    The Trustee will enter an SDFS deliver order
                                    through DTC's Participant Terminal System
                                    instructing DTC (i) to debit such Note to
                                    the Trustee's participant account and credit
                                    such Note to the participant account of the
                                    Presenting Agent maintained by DTC and (ii)
                                    to debit the settlement account of the
                                    Presenting Agent and credit the settlement
                                    account of the Trustee maintained by DTC, in
                                    an amount equal to the price of such Note
                                    less such Agent's commission.  Any entry of
                                    such a deliver order shall be deemed to
                                    constitute a representation and warranty by
                                    the Trustee to DTC that (i) the 

                                     A-12

 
                                    Book-Entry Note representing such Note has
                                    been issued and authenticated and (ii) the
                                    Trustee is holding such Book-Entry Note
                                    pursuant to the Note Certificate Agreement
                                    between the Trustee and DTC.

                              H.    The Presenting Agent will enter an SDFS
                                    deliver order through DTC's Participant
                                    Terminal System instructing DTC (i) to debit
                                    such Note to the Presenting Agent's
                                    participant account and credit such Note to
                                    the participant account of the Participants
                                    maintained by DTC and (ii) to debit the
                                    settlement accounts of such Participants and
                                    credit the settlement account of the
                                    Presenting Agent maintained by DTC, in an
                                    amount equal to the public offering price of
                                    such Note.

                              I.    Transfers of funds in accordance with SDFS
                                    deliver orders described in Settlement
                                    Procedures G and H will be settled in
                                    accordance with SDFS operating procedures in
                                    effect on the Settlement Date.

                              J.    Upon receipt of such funds, the Trustee will
                                    credit to an account of the Company
                                    identified to the Trustee funds available
                                    for immediate use in the amount transferred
                                    to the Trustee in accordance with Settlement
                                    Procedure G.

                              K.    The Presenting Agent will confirm the
                                    purchase of such Note to the purchaser
                                    either by transmitting to the Participant
                                    with respect to such Note a confirmation
                                    order through DTC's Participant Terminal
                                    System or by mailing a written confirmation
                                    to such purchaser.

Settlement Procedures 
Timetable:                    For orders of Notes accepted by the Company,
                              Settlement Procedures "A" through "K" set forth
                              above shall be completed as soon as possible but
                              not later than the respective times (New York City
                              time) set forth below:

                                     A-13

 
                              Settlement
                              Procedure               Time

                                  A     11:00 a.m. on the trade date

                                  B     10:00 a.m. on the second Business Day
                                        preceding Settlement Date

                                  C     2:00 p.m. on the trade date

                                  D     3:00 p.m. on the Business Day before
                                        Settlement Date

                                  E     9:00 a.m. on Settlement Date

                                  F     10:00 a.m. on Settlement Date

                                  G-H   2:00 p.m. on the Settlement Date

                                  I     4:45 p.m. on Settlement Date

                                  J-K   5:00 p.m. on Settlement Date

                              If a sale is to be settled more than one Business
                              Day after the trade date, Settlement Procedures A,
                              B, and C shall be completed as soon as practicable
                              but in no event later than 11:00 a.m. and 12:00
                              noon on the first Business Day after such sale
                              date but no later than 2:00 p.m. on the Business
                              Day before the Settlement Date, respectively.
                              Settlement Procedure I is subject to extension in
                              accordance with any extension of Fedwire closing
                              deadlines and in the other events specified in the
                              SDFS operating procedures in effect on the
                              Settlement Date.

                              If settlement of a Book-Entry Note is rescheduled
                              or canceled, the Trustee, if notified in time,
                              will deliver to DTC, through DTC's Participant
                              Terminal System, a cancellation message to such
                              effect by no later than 2:00 p.m., New York City
                              time, on the Business Day immediately preceding
                              the scheduled Settlement Date.

Failure to Settle:            If the Trustee fails to enter an SDFS deliver
                              order with respect to a Book-Entry Note pursuant
                              to Settlement Procedure G, the Trustee may deliver
                              to DTC, through DTC's Participant Terminal System,
                              as
                              
                                     A-14

 
                              soon as practicable a withdrawal message
                              instructing DTC to debit such Note to the
                              participant account of the Trustee maintained at
                              DTC.  DTC will process the withdrawal message,
                              provided that such participant account contains a
                              principal amount of the Book-Entry Note
                              representing such Note that is at least equal to
                              the principal amount to be debited.  If withdrawal
                              messages are processed with respect to all the
                              Notes represented by a Book-Entry Note, the
                              Trustee will mark such Book-Entry Note "canceled,"
                              make appropriate entries in its records and send
                              such canceled Book-Entry Note to the Company.  The
                              CUSIP number assigned to such Book-Entry Note
                              shall, in accordance with CUSIP Service Bureau
                              procedures, be canceled and not immediately
                              reassigned.  If withdrawal messages are processed
                              with respect to a portion of the Notes represented
                              by a Book-Entry Note, the Trustee will exchange
                              such Book-Entry Note for two Book-Entry Notes, one
                              of which shall represent the Book-Entry Notes for
                              which withdrawal messages are processed and shall
                              be canceled immediately after issuance, and the
                              other of which shall represent the other Notes
                              previously represented by the surrendered Book-
                              Entry Note and shall bear the CUSIP number of the
                              surrendered Book-Entry Note.

                              If the purchase price for any Book-Entry Note is
                              not timely paid to the Participants with respect
                              to such Note by the beneficial purchaser thereof
                              (or a person, including an indirect participant in
                              DTC, acting on behalf of such purchaser), such
                              Participants and, in turn, the related Agent may
                              enter SDFS deliver orders through DTC's
                              Participant Terminal System reversing the orders
                              entered pursuant to Settlement Procedures G and H,
                              respectively.  Thereafter, the Trustee will
                              deliver the withdrawal message and take the
                              related actions described in the preceding
                              paragraph.  If such failure shall have occurred
                              for any reason other than default by the
                              applicable Agent to perform its obligations
                              hereunder or under the Agreement, the company will
                              reimburse such Agent on an equitable basis for its
                              loss of the use of funds during the period when
                              the funds were credited to the account of the
                              Company.

                                     A-15

 
                              Notwithstanding the foregoing, upon any failure to
                              settle with respect to a Book-Entry Note, DTC may
                              take any actions in accordance with its SDFS
                              operating procedures then in effect.  In the event
                              of a failure to settle with respect to a Note that
                              was to have been represented by a Book-Entry Note
                              also representing other Notes, the Trustee will
                              provide, in accordance with Settlement Procedures
                              D and E, for the authentication and issuance of a
                              Book-Entry Note representing such remaining Notes
                              and will make appropriate entries in its records.

                     PART III:  PROCEDURES FOR NOTES ISSUED
                              IN CERTIFICATED FORM

Interest Payments:            Interest (if any) on each Note will accrue from
                              the Original Issue Date of such Note, and will be
                              calculated and paid in the manner described in
                              such Note.

                              Unless otherwise provided in the Indenture or the
                              Notes, the first payment of interest on any Note
                              originally issued after a Record Date and on or
                              before the next succeeding Interest Payment Date
                              will be made no earlier than the Interest Payment
                              Date following the next succeeding Record Date.
                              Interest payable at maturity of a Note, or upon
                              earlier redemption or repayment, will be payable
                              to the person to whom the principal of such Note
                              is payable.  All interest payments for each
                              Interest Payment Date (excluding interest payments
                              made on the Maturity Date or upon the acceleration
                              thereof or on earlier redemption) will be made by
                              check mailed to the person entitled thereto as
                              provided above, or at the option of the registered
                              holder, at such other place in the United States
                              as the registered holder shall designate to the
                              Trustee in writing, except that a holder of the
                              equivalent of $10,000,000 or more in aggregate
                              principal amount of Notes with the same Interest
                              Payment Date shall be entitled to receive such
                              payments in immediately available funds paid to an
                              account at a bank in New York, New York (or other
                              bank consented to by the Issuer and the Trustee),
                              but only if appropriate payment instructions have
                              been received in writing by the Trustee on or
                              prior to the applicable Record Date (provided that
                              such bank 

                                     A-16

 
                              designated by the registered holder has
                              appropriate facilities therefor).

                              Within five Business Days following each Record
                              Date, the Trustee will provide to the Issuer a
                              list of interest payments to be made for each Note
                              on the next succeeding Interest Payment Date and
                              the total amount of the interest payments.  The
                              Trustee will provide monthly to the Issuer a list
                              of the principal, premium, if any, and interest to
                              be paid on Notes maturing or being redeemed in the
                              next succeeding month.

Settlement:                   The Issuer will instruct the Trustee to effect
                              delivery of each Note no later than 1:00 p.m., New
                              York City time, on the Settlement Date to the
                              Presenting Agent for delivery to the purchaser.

Details for Settlement:       For each offer to purchase a Note that is accepted
                              by the Issuer, the Presenting Agent will provide
                              (unless provided by the purchaser directly to the
                              Issuer) by telephone the following information to
                              the Issuer:

                              1.    The exact name of the Registered Owner.

                              2.    The exact address of the Registered Owner
                                    and the address for delivery, notices and
                                    payments of principal and interest.

                              3.    The taxpayer identification number of the
                                    Registered Owner.

                              4.    A description of the terms and provisions of
                                    the Notes that includes the information
                                    identified in Exhibit A to the Agreement and
                                    any other information required to describe
                                    such Notes properly.

                              5.    The Issue Price.

                              6.    The Trade Date.

                              7.    The Settlement Date.

                              8.    The Presenting Agent's commission,
                                    determined as provided in Section 2(a) of
                                    the Agreement.

                                     A-17

 
                              The Issuer will advise the Trustee of the
                              foregoing information for each offer to purchase a
                              Note solicited by the Presenting Agent and
                              accepted by the Issuer in time for the Trustee to
                              prepare and authenticate the required Note, but
                              not later than 10:00 a.m. New York City time on
                              the second Business Day preceding the Settlement
                              Date.  Before accepting any offer to purchase a
                              Note to be settled in less than three Business
                              Days, the Issuer shall verify that the Trustee
                              will have adequate time to prepare and
                              authenticate such Note.

                              After receiving from the Presenting Agent the
                              details for each offer to purchase a Note, the
                              Issuer will, after recording the details and any
                              necessary calculations, provide appropriate
                              documentation to the Trustee, including the
                              information provided by the Presenting Agent
                              necessary for the preparation and authentication
                              of such Note.  Prior to preparing the Note for
                              delivery (but in any case no later than 10:00 a.m.
                              on the Business Day next preceding the Settlement
                              Date therefor), the Trustee will confirm the
                              details of such issue with the Issuer, and the
                              Issuer will confirm such instruction to the
                              Presenting Agent, in each case by telephone,
                              telecopy or telex.

Deliveries and Cash Payment:  Upon receipt of appropriate documentation and
                              instructions with respect to the Notes, the Issuer
                              will cause the Trustee to prepare and authenticate
                              the form of Note previously approved by the
                              Issuer, the Presenting Agent and the Trustee and
                              deliver such Note and a customer receipt to the
                              purchaser.

                              If the form of Note is not pre-printed and four-
                              ply, the Trustee shall deliver a photocopy of such
                              authenticated Note to the Presenting Agent and the
                              Issuer and shall retain one copy.  Otherwise, it
                              shall deliver the copies in the four-ply Note as
                              follows:

                                      Stub 1--For the Presenting Agent.
                                      Stub 2--For the Issuer.
                                      Stub 3--For the Trustee.

                              Each Note shall be authenticated on the Settlement
                              Date therefor.  The Trustee will authenticate each
                              Note and deliver it to the Presenting Agent (and
                              deliver the stubs as indicated above), all in
                              accordance with 

                                     A-18

 
                              written instructions (or oral instructions
                              confirmed in writing, which may be given by telex
                              or telecopy, on the next Business Day) from the
                              Issuer.

                              Upon verification by the Presenting Agent that a
                              Note has been prepared and properly authenticated
                              by the Trustee and registered in the name of the
                              purchaser in the proper principal amount, payment
                              will be made to the Issuer by the Presenting Agent
                              the same day in immediately available funds.  Such
                              payment shall be made only upon prior receipt by
                              the Presenting Agent of immediately available
                              funds from or on behalf of the purchaser unless
                              the Presenting Agent decides, at its option,
                              exercised in the sole discretion of such
                              Presenting Agent, to advance its own funds for
                              such payment against subsequent receipt of funds
                              from the purchaser.  The Presenting Agent shall
                              immediately notify the Issuer of its decision to
                              advance its own funds for payment against
                              subsequent receipt of funds from a purchaser.

                              Upon delivery of a Note to the Presenting Agent,
                              the Presenting Agent shall promptly deliver such
                              Note to the purchaser.

                              In the event any Note is incorrectly prepared, the
                              Trustee shall promptly issue a replacement Note in
                              exchange for the incorrectly prepared Note.

Failure to Settle:            If the Presenting Agent, at its own option, has
                              advanced its own funds for payment against
                              subsequent receipt of funds from a purchaser, and
                              if such purchaser shall fail to make payment for
                              the Note on the Settlement Date therefor, the
                              Presenting Agent will promptly notify the Trustee
                              and the Issuer by telephone, promptly confirmed in
                              writing, which may be given by telex or telecopy
                              (but no later than the next Business Day). In such
                              event, the Issuer shall promptly provide the
                              Trustee with appropriate documentation and
                              instructions consistent with these procedures for
                              the return of the Note to the Trustee, and the
                              Presenting Agent will promptly return the Note to
                              the Trustee. Upon (i) confirmation from the
                              Trustee in writing which may be given by telex or
                              telecopy) that the Trustee has received the Note
                              and upon (ii) confirmation from the Presenting
                              Agent in 

                                     A-19

 
                              writing (which may be given by telex or telecopy)
                              that the Presenting Agent has not received payment
                              from such purchaser (the matters referred to in
                              clauses (i) and (ii) are referred to hereinafter
                              as the ("confirmations")), the Issuer will
                              promptly pay to the Presenting Agent an amount in
                              immediately available funds equal to the amount
                              previously paid by the Presenting Agent in respect
                              of such Note. Assuming receipt of such Note by the
                              Trustee and of the confirmations by the Issuer,
                              such payment will be made on the Settlement Date
                              if reasonably practical, and in any event not
                              later than the Business Day following the date of
                              receipt of the Note and the confirmations. If a
                              purchaser shall fail to make payment for such Note
                              for any reason other than the failure of the
                              Presenting Agent to provide the necessary
                              information to the Issuer as described above for
                              settlement or to provide a confirmation to the
                              purchaser within a reasonable period of time as
                              described above or otherwise to satisfy its
                              obligations hereunder or in the Agreement, and if
                              the Presenting Agent shall have otherwise complied
                              with its obligations hereunder and in the
                              Agreement, the Issuer will reimburse the
                              Presenting Agent for its loss of the use of funds
                              during the period when they were credited to the
                              account of the Issuer.

                              Immediately upon receipt of the Note in respect of
                              which the failure occurred, the Trustee will void
                              said Note, make appropriate entries in its records
                              and destroy such Note; and upon such action, such
                              Note will be deemed not to have been issued,
                              authenticated or delivered.

                                     A-20

 
                                                                       Exhibit B

                            SOUTH JERSEY GAS COMPANY


                      Secured Medium Term Notes, Series A
                        Due from One Year to Forty Years
                               from Date of Issue

                                TERMS AGREEMENT


South Jersey Gas Company
Number One South Jersey Plaza
Route 54
Folsum, NJ 08037

                                                           ____________, 19__

Attention:

     Subject in all respects to the terms and conditions of the Distribution
Agreement (the "Agreement") dated October __, 1998, among PaineWebber
Incorporated, Prudential Securities Incorporated and First Union Capital Markets
and you, the undersigned agrees to purchase the following Notes of:

Aggregate Principal Amount:

Interest Rate:

Date of Maturity:

Interest Payment Dates:

Regular Record Dates:

[Redemption Dates and Prices:]

[Repayment Dates and Prices:]

Purchase Price:  % of Principal Amount [Plus accrued interest from 
                 ____________, 199_]


Purchase Date and Time:

 
Place for Delivery of Notes and 
Payment Therefor:

Method of Payment:

Modification, if any, in the 
requirements to deliver the 
documents specified in Section 6(b) 
of the Agreement:

Period during which additional 
Notes may not be sold pursuant to 
Section 4(m) of the Agreement:



                                     [Purchaser]


                                     By:_____________________________

Accepted:


By:_____________________________
  Title:________________________