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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
South Jersey Gas Company
----------------------------------------
Exact name of registrant as
specified in its
certificate of incorporation
New Jersey
----------------------------------------
State or Other Jurisdiction
of Incorporation or
Organization
21-0398330
----------------------------------------
(I.R.S. Employer
Identification No.)
Number One South Jersey Plaza, Route 54
Folsom, New Jersey 08037
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (609)561-9000
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
(Name of each exchange on
(Title of each class which each class is to be
to be so registered) registered)
- --------------------------------------- -------------------------------------
NONE
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
(Title of Class)
Common Stock, par value $2.50 per share
(voluntary filing)
<PAGE>
Item 1. Business.
South Jersey Gas Company, ("SJG"), a New Jersey corporation, is an
operating public utility company engaged in the purchase, transmission and sale
of natural gas for residential, commercial and industrial use in an area of
approximately 2,500 square miles in the southern part of New Jersey. SJG also
makes off-system sales of natural gas on a wholesale basis to various customers
on the interstate pipeline system and transports natural gas purchased directly
from producers or suppliers by some of its customers. SJG is the principal
subsidiary of South Jersey Industries, Inc. ("SJI"), a New Jersey corporation.
SJG's service territory includes 112 municipalities throughout Atlantic,
Cape May, Cumberland and Salem Counties and portions of Burlington, Camden and
Gloucester Counties, with an estimated permanent population of 1.1 million.
SJG serves 253,874 residential, commercial and industrial customers (at
December 31, 1996) in southern New Jersey. Gas sales and transportation for
1996 amounted to approximately 66,814,000 Mcf (thousand cubic feet), of which
approximately 51,203,000 Mcf was firm sales and transportation, 7,040,000 Mcf
was interruptible sales and transportation and 8,571,000 Mcf was off-system
sales. The breakdown of firm sales includes 42.4% residential, 19.8%
commercial, 10.1% cogeneration and electric generation, 2.4% industrial and
25.3% transportation. At year-end 1996, SJG served 236,008 residential
customers, 17,492 commercial customers and 374 industrial customers. This
includes 1996 net additions of 5,562 residential customers and 313 commercial
customers and a decrease of 23 industrial customers.
Under an agreement with Atlantic Electric, an electric utility serving
southern New Jersey, SJG supplies natural gas to several combustion turbine
facilities. This gas service is provided under the terms of a firm electric
service tariff approved by the New Jersey Board of Public Utilities (the "BPU")
on a demand/commodity basis. In 1996, 1.6 Bcf (billion cubic feet) was
delivered under this agreement.
SJG serviced eight cogeneration facilities in 1996. Combined sales and
transportation of natural gas to such customers amounted to approximately 9.2
Bcf in 1996.
SJG makes wholesale gas sales for resale to gas marketers for ultimate
delivery to end users. These "off-system" sales are made possible through the
issuance by the Federal Energy Regulatory Commission ("FERC") of Orders No. 547
and 636. Order No. 547 issued a blanket certificate of public convenience and
necessity authorizing all parties, which are not interstate pipelines, to make
FERC jurisdictional gas sales for resale at negotiated rates, while Order No.
636 allowed SJG to deliver gas
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at delivery points on the interstate pipeline system other than its own city
gate stations and release excess pipeline capacity to third parties. During
1996, off-system sales amounted to 8.6 Bcf. Also in 1996, SJG released 20.0 Bcf
of its firm interstate pipeline capacity to third parties.
Supplies of natural gas available to SJG that are in excess of the quantity
required by those customers who use gas as their sole source of fuel (firm
customers) make possible the sale of gas on an interruptible basis to commercial
and industrial customers whose equipment is capable of using natural gas or
other fuels, such as fuel oil and propane. The term "interruptible" is used in
the sense that deliveries of natural gas may be terminated by SJG at any time if
this action is necessary to meet the needs of higher priority customers as
described in SJG's tariffs. Usage by interruptible customers, including off-
system customers, in 1996 amounted to approximately 15.6 Bcf (approximately 23.4
percent of the total volume of gas delivered).
No material part of SJG business is dependent upon a single customer or a
few customers.
Service Territory
The majority of the SJG residential customers reside in the northern and
western portions of its service territory in Burlington, Camden, Salem and
Gloucester counties. A majority of new customers reside in this section of the
service territory, which includes the residential suburbs of Wilmington and
Philadelphia. The franchise area to the east is centered on Atlantic City and
the neighboring resort communities in Atlantic and Cape May counties, which
experience large population increases in the summer months. The impact of the
casino gaming industry on the Atlantic City area has resulted in the creation of
new jobs and the expansion of the residential and commercial infrastructure
necessary to support a developing year-round economy. Atlantic City is
experiencing a second wave of development as a result of casino gaming. The
centerpiece of this development is the new $254 million multi-purpose convention
center, accompanied with a planned billion dollar hotel and entertainment
complex. These facilities will be used to attract large conventions as well as
making Atlantic City into a family resort on a year-round basis. The convention
center is expected to be in operation in the spring of 1997.
Manufacturers or processors of sand, glass, farm products, paints,
chemicals and petroleum products are located in the western and southern sectors
of the service territory. New commercial establishments and high technology
industrial parks and complexes are part of the economic growth of this area.
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SJG's service area includes parts of the Pinelands region, a largely
undeveloped area in the heart of southern New Jersey. Future construction in
this area is expected to be limited by statute and by a master plan adopted by
the New Jersey Pinelands Commission; however, in terms of potential growth,
significant portions of SJG's service area are not affected by these
limitations.
Rates and Regulation
As a public utility, SJG is subject to regulation by the BPU. Additionally,
the Natural Gas Policy Act, which was enacted in November 1978, contains
provisions for Federal regulation of certain aspects of SJG's business. SJG is
affected by Federal regulation with respect to transportation and pricing
policies applicable to its pipeline capacity from Transcontinental Gas Pipeline
Corporation ("Transco"), SJG's major supplier, Columbia Gas Transmission
Corporation ("Columbia"), CNG Transmission Corporation ("CNG") and Equitrans,
Inc. ("Equitrans"), since such services are provided under rates and terms
established under the jurisdiction of the FERC.
Retail sales by SJG are made under rate schedules within a tariff filed
with and subject to the jurisdiction of the BPU. These rate schedules provide
primarily for either block rates or demand/commodity rate structures. The
tariff contains provisions permitting SJG to pass on to customers increases and
decreases in the cost of purchased gas supplies. The tariff also contains
provisions permitting the recovery of environmental remediation costs associated
with former manufactured gas plant sites and for the adjustment of revenues due
to the impact of temperature fluctuations as prescribed in SJG's tariff.
In April 1997, SJG will initiate its BPU approved pilot program to give
residential customers a choice of gas supplier. The program will be open to the
first 10,000 residential customers who apply for this service and is designed to
run until June 30, 1998, or later if approved by the BPU. SJG will continue to
deliver the natural gas through its distribution system with no loss of margins.
Revenue requirements for ratemaking purposes are established on the basis
of firm and interruptible sales projections. On January 27, 1997, the BPU
granted SJG a rate increase of $6.0 million based on an overall rate of return
of 9.62% including an 11.25% return on equity. The majority of this increase
will come from residential and small commercial customers. As part of this rate
increase, SJG is allowed to retain the first $5.0 million of pre-tax margins
generated by interruptible and off-system sales and transportation and 20% of
pre-tax margins generated by such sales above that level. In 1997 and 1998,
this $5.0 million threshold will be increased by the annual revenue requirement
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associated with specified major construction projects. These sharing formula
improvements are expected to result in additional rate relief of approximately
$1.4 million in 1997 and $1.8 million in 1998. In 1997, SJG will file to
recover additional post-retirement benefit costs of approximately $1.1 million
annually. This recovery is expected to begin in 1998. In addition, part of the
increase will be recovered from customers through new service fees which charge
specific customers for costs which they cause SJG to incur. In addition to the
rate increase, the BPU approved a revenue reduction in SJG's Temperature
Adjustment Clause, a mechanism designed to reduce the impact of extreme
fluctuations in temperature on SJG and its customers. For the period ended May
31, 1996, weather in SJG's service area was significantly colder than the 20-
year average, resulting in a $2.5 million credit due to customers' bills which
is reflected in the 1996 results of operations.
On December 14, 1994, the BPU granted SJG a rate increase of $12.1 million
based on a 9.51 percent return on rate base, which included an 11.5 percent
return on equity. Nearly the entire increase came from the residential,
commercial and small industrial customer classes. In addition, SJG was allowed
to retain the first $4.0 million of combined pre-tax interruptible and off-
system margins and 20 percent of margins above that level.
In 1996, SJG made no public announcement of, or otherwise made public
information about, a new product or industry segment that would require the
investment of a material amount of the assets of SJG or which otherwise was
material.
Raw Materials
Supply Contracts and Storage
- ----------------------------
SJG has direct connections to two interstate pipeline companies, Transco
and Columbia. It also secures firm transportation and other long term services
from four additional pipelines upstream of the Transco and Columbia systems.
They include: Columbia Gulf Transmission Company ("Columbia Gulf"), CNG, Texas
Gas Transmission Corporation ("Texas Gas") and Equitrans. Services provided by
these upstream pipelines are utilized to deliver gas into either the Transco or
Columbia systems for ultimate delivery to SJG. Services provided by all of the
above mentioned pipelines are subject to changes as directed by FERC Order No.
636.
Transco
- -------
Transco is SJG's largest supplier of long term gas transmission services.
These services include five (5) year-round and one (1) seasonal firm
transportation ("FT") service
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arrangement. When combined, these services enable SJG to purchase from third
parties and have delivered to its city gate stations by Transco, a total of
163,741 Thousand Cubic Feet of gas per day ("Mcf/d"). The terms of the year-
round agreements extend for various periods from 2002 to 2010 while the term of
the seasonal agreement extends to 2011.
SJG also has seven (7) long-term gas storage service agreements with
Transco that when combined are capable of storing approximately 10.1 Bcf.
Through these services, SJG can inject gas into storage during periods of low
demand and withdraw gas at a rate of up to 86,972 Mcf per day during periods of
high demand. The terms of the storage service agreements extend for various
periods from 1998 to 2008.
Transco renders a merchant service to SJG under its Rate Schedule FS
(defined below). Williams Energy Services Company ("WESCO"), an affiliate of
Transco, has assumed Transco's natural gas merchant function under which the
maximum purchase quantity amounts to 51,769 Mcf per day. FS is a no-notice
swing service which allows SJG to take between zero and its full contract
quantities (51,769 Mcf/d) on any day of the year. This flexibility enables SJG
to respond to changes in its requirements for gas due to weather and market
conditions. The initial term of the FS agreement extends through March 31,
2001.
In addition to FS service, SJG has also secured a second merchant service
from Transco under Transco's Rate Schedule NS. NS service is also provided by
WESCO acting as agent for Transco. Under this service, SJG can purchase up to
30,000 Mcf per day of NS gas with 24 hours advance notice.
SJG has a long term gas purchase agreement with Vastar Gas Marketing
("Vastar") which provides for the delivery of up to 14,618 Mcf/d to SJG's
service area on a year round basis by way of Transco FT service. The initial
term of the gas purchase agreement with Vastar extends through March 31, 2000.
SJG also has a winter season firm transportation service on the Transco
system which is available for the period December 1 through the last day of
February of each year. SJG's maximum entitlement under this service is 2,900
Mcf/d. SJG has contracted with Amerada Hess Corporation ("Hess") to provide the
gas supply to fill this transportation capacity during each winter season
through October 31, 2007.
SJG may deliver up to 24,700 Mcf per day of gas under a firm transportation
agreement as part of Transco's Texas Gas-CNG-Transco FT project. This project
was developed to provide additional firm pipeline capacity which would deliver
gas to the U.S. Northeast via a bundled service provided by Transco under its
Rate Schedule FT-NT. SJG has also contracted with Hess for a
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15 year gas supply service to fill this capacity which extends through October
31, 2007.
CNG
- ---
SJG has entered into separate gas sales and capacity management agreements
with CNG Energy Services Corporation ("CNGES"), a non-jurisdictional affiliate
of CNG, through which SJG has assigned to CNGES its pipeline FT and storage
entitlements on the CNG system to provide SJG with up to 9,662 Mcf per day of
gas during the period November 16 through March 31 of each year.
Columbia
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SJG has three (3) firm transportation agreements with Columbia which, when
combined, provide for 43,500 Mcf/d of firm deliverability.
SJG has four long term gas purchase agreements, for periods ranging from
1999 to 2003, with major non-jurisdictional producer/suppliers for gas delivered
into the Columbia pipeline system which, in aggregate, provide SJG with up to
43,500 Mcf/d via the Columbia pipe line system during the winter season. Such
agreements also provide for delivery in non-winter months at lower quantities.
SJG also subscribes to a firm storage service from Columbia, to March 31,
2009, which provides a maximum withdrawal quantity of 19,807 Mcf/d during the
winter season with an associated 1,121,095 Mcf of storage capacity.
As part of addressing future winter season requirements, SJG has entered
into an agreement with Columbia to subscribe to an incremental 31,296 Mcf per
day of storage deliverability with an additional 2,234,482 Mcf of storage
capacity to begin in November 1998. The term of the agreement expires October
31, 2013. The FERC has recently approved Columbia's arrangements to provide such
services subject to review of environmental issues.
Equitrans
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SJG has a long term storage service provided by Equitrans, to April 1,
2002, under which up to 500,000 Mcf of gas may be stored during the summer
season and up to 4,783 Mcf/d may be withdrawn during the winter season. The gas
is delivered to SJG under firm transportation agreements with Equitrans, CNG and
Transco.
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Supplemental Gas Supplies
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SJG has a long term LNG purchase agreement with Distrigas of Massachusetts
Corporation ("DOMAC") which extends through October 31, 2000. For the 1996-97
contract year, SJG's annual contract quantity under the DOMAC agreement is
186,047 Mcf. LNG purchases from DOMAC are transported to SJG's LNG storage
facility in McKee City, New Jersey via over-the-road trucks.
SJG operates peaking facilities which can store and vaporize both LNG and
propane for injection into its distribution system. SJG's LNG facility has a
storage capacity equivalent to 404,000 Mcf of natural gas and has an installed
capacity to vaporize up to 90,000 Mcf of LNG per day for injection into its
distribution system.
SJG also maintains three propane-air plants that are located in McKee City,
Middle Township and Ocean City, New Jersey. The combined maximum storage
capacity of these plants is 450,000 gallons of liquefied propane or the
equivalent of approximately 33,834 Mcf of natural gas.
SJG also operates a high pressure pipe storage field at its McKee City
facility which is capable of storing 12,000 Mcf of gas and injecting up to
10,000 Mcf of gas per day into SJG's distribution system.
SJG has a LNG peaking service agreement with the Philadelphia Gas Works
("PGW") which provides up to 250,000 Mcf per year of peaking service gas on a
firm basis at a rate of up to 25,000 Mcf per day when taken as vapor and
delivered through the Transco pipeline system or up to twelve truckloads per day
(approximately 10,200 Mcf) when taken as liquid and trucked to SJG's LNG storage
facility in McKee City, NJ. The initial term of this agreement extends through
the 1997-98 winter season, however it may be extended by mutual agreement of the
parties.
Peak-Day Supply
- ---------------
SJG plans for a winter season peak-day demand on the basis of an average
daily temperature of 2 degrees F. Gas demand on such a design day was estimated
for the 1996-97 winter season to be 386,585 Mcf versus a design day supply of
416,922 Mcf. On January 19, 1994, SJG experienced its highest peak-day demand of
370,582 Mcf with an average temperature of 2.68 degrees F. In 1996, SJG
experienced a high peak-day demand of 325,463 Mcf with an average temperature of
12.0 degrees F.
Gas Prices
During 1996, SJG purchased and had delivered to it approximately 50.6 Bcf
of natural gas for distribution to its
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customers. Of this total, 34.3 Bcf was transported on the Transco pipeline
system and 16.3 Bcf was transported on the Columbia pipeline system.
SJG's average commodity cost of gas purchased in 1996 was $2.93 per Mcf.
Patents and Franchises
SJG holds nonexclusive franchises granted by municipalities in the seven-
county area of southern New Jersey that it serves. No other natural gas public
utility presently serves the territory covered by SJG's franchises. Otherwise,
patents, trademarks, licenses, franchises and concessions are not material to
the business of SJG or any of its subsidiaries.
Seasonal Aspects
SJG experiences seasonal fluctuations in sales when selling natural gas for
heating purposes. SJG meets this seasonal fluctuation in demand from its firm
customers by buying and storing gas during the summer months, and by drawing
from storage and purchasing supplemental supplies during the heating season. As
a result of this seasonality, SJG experiences reductions of revenues and net
income during the second and third quarters of the year.
Working Capital Practices
As previously indicated under Seasonal Aspects, SJG buys and stores natural
gas during the summer months. These purchases are financed by short-term loans
which are substantially paid down during the winter months when gas revenues are
higher. Reference is also made to "Liquidity" on pages 16 and 17.
Customers
No material part of SJG's business or that of any of its subsidiaries is
dependent upon a single customer or a few customers, the loss of which would
have a material adverse effect on any such business.
Backlog
Backlog is not material to an understanding of SJG's business or that of
any of its subsidiaries.
Government Contracts
No material portion of the business of SJG or any of its subsidiaries is
subject to renegotiation of profits or
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termination of contracts or subcontracts at the election of any government.
Competition
SJG franchises are non-exclusive, however, currently no other utility is
providing service within its territory. SJG competes with oil, propane and
electricity suppliers for residential, commercial and industrial users. The
market for natural gas sales is subject to competition as a result of
deregulation. Through its tariff, SJG has promoted competition while maintaining
its margins. Substantially all of SJG's profits are from the transportation
rather than the sale of the commodity. SJG believes it has been a leader in
addressing the changing marketplace. It maintains its focus on being a low-cost
provider of natural gas and energy services.
Research
During the last three fiscal years, SJG did not engage in research
activities to any material extent.
Environmental Matters
Environmental Remediation Costs - SJG has incurred and recorded certain
-------------------------------
costs for environmental remediation of sites where SJG or predecessor companies
operated gas manufacturing plants. Manufactured gas operations were terminated
at all SJG sites more than 30 years ago.
Since the early 1980s, SJG has recorded environmental remediation costs of
$70.8 million, of which $29.1 million has been expended as of December 31, 1996.
SJG, with the assistance of an outside consulting firm, estimates that total
future expenditures to remediate the sites will range from $41.7 million to
$150.2 million. The lower end of this range has been recorded as a liability
and is reflected on the balance sheet under the captions "Current Liabilities"
and "Deferred Credits and Other Non-Current Liabilities". Recorded
environmental remediation costs do not directly affect earnings because those
costs are deferred and, when expended, recovered through rates over 7-year
amortization periods. Amounts accrued for future expenditures have not been
adjusted for future insurance recoveries, which management is pursuing. SJG has
received $4.2 million of insurance recoveries as of December 31, 1996. These
proceeds were first used to offset legal fees incurred in connection with those
recoveries and the excess was used to reduce the balance of deferred
environmental remediation costs. Recorded amounts include estimated costs to be
incurred based on projected investigation and remediation work plans using
existing technologies. Actual expenditures could differ from the estimates due
to the long-term nature of the projects and
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changing technology, government regulations and site specific requirements.
SJG has established a regulatory asset for these costs and is recovering
amounts expended over 7-year amortization periods, as authorized by the BPU. As
of December 31, 1996, SJG has unamortized remediation expenditures of $15.6
million which are reflected on the balance sheet under the caption "Deferred
Debits". Since BPU approval of the RAC mechanism in August 1992, SJG has
recovered $9.3 million through rates as of December 31, 1996.
Employees
SJG had a total of 674 employees as of December 31, 1996.
Financial Information About Foreign and Domestic Operations and Export Sales
SJG has no foreign operations and export sales have not been a significant
part of SJG's business.
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Item 2. Financial Information.
<TABLE>
<CAPTION>
FIVE-YEAR SUMMARY OF SELECTED
FINANCIAL DATA Year Ended December 31
(In Thousands Where Applicable) -----------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING DATA 1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ----------
Operating Revenues:
Utility...................................... $ 252,146 $ 274,497 $ 308,253 $ 279,764 $ 327,317
Other........................................ 3,112 3,084 3,206 2,955 3,018
---------- ---------- ---------- ---------- ----------
Total Operating Revenues........................ 255,258 277,581 311,459 282,719 330,335
---------- ---------- ---------- ---------- ----------
Total Operating Expenses........................ 225,639 248,026 283,456 247,281 291,486
---------- ---------- ---------- ---------- ----------
Operating Income................................ 29,619 29,555 28,003 35,438 38,849
---------- ---------- ---------- ---------- ----------
Interest Charges:...............................
Long-Term Debt............................... 9,696 10,771 11,471 14,490 13,636
Other-Net.................................... 4,344 3,165 3,057 4,957 5,824
---------- ---------- ---------- ---------- ----------
Total Interest Charges (1)...................... 14,040 13,936 14,528 19,447 19,460
---------- ---------- ---------- ---------- ----------
Customer Refund Obligation, net of Taxes........ (2,275)
---------- ---------- ---------- ---------- ----------
Income before Cumulative Effect of a Change in
Accounting Principle............................ 15,579 15,619 11,200 15,991 19,389
Change in Accounting Principle (2).............. 1,235
---------- ---------- ---------- ---------- ----------
Income before Preferred Stock Dividend
Requirements.................................... 15,579 16,854 11,200 15,991 19,389
Preferred Stock Dividends....................... 192 187 183 178 174
---------- ---------- ---------- ---------- ----------
Net Income Applicable to Common Stock........... $ 15,387 $ 16,667 $ 11,017 $ 15,813 $ 19,215
========== ========== ========== ========== ==========
Average Shares of Common Stock Outstanding...... 2,339,139 2,339,139 2,339,139 2,339,139 2,339,139
Earnings Per Common Share....................... $6.58 $7.13 $4.71 $6.76 $8.21
========== ========== ========== ========== ==========
Dividends Paid Per Common Share................. $5.228 $1.069 $5.787 $6.840 $6.437
========== ========== ========== ========== ==========
<CAPTION>
BALANCE SHEET DATA At December 31,
------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Property, Plant and Equipment - Net............. 329,849 351,844 375,093 396,770 421,622
Total Current Assets............................ 54,729 64,426 64,978 79,338 85,650
Accounts Receivable - Merchandise............... 2,736 2,221 2,015 2,305 1,999
Total Deferred Debits........................... 28,863 64,293 67,901 71,537 90,655
Total Assets.................................... $416,177 $482,784 $509,987 $549,950 $599,926
</TABLE>
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<TABLE>
<CAPTION>
At December 31,
------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Retained Earnings............. 35,905 50,071 47,551 47,364 51,522
Total Preferred Stock......... 2,674 2,584 2,494 2,404 2,314
Long-Term Debt, Net of 102,794 130,446 138,594 156,784 149,736
Current Maturities...........
Current Maturities of 5,697 5,570 6,852 11,811 6,603
Long-Term Debt...............
Interest and Other Accrued 4,624 4,990 4,829 5,631 2,161
Liabilities..................
Total Deferred Credits........ 70,907 92,073 110,271 114,647 132,474
Total Liabilities............. 310,556 363,087 382,900 417,140 463,048
</TABLE>
(1) Includes credits for allowance for funds used during construction.
(2) Represents the cumulative effect of change in accounting principle for
Income Taxes.
Management's Discussion and Analysis of Results of Operations and Financial
Condition
Overview
SJG is a natural gas distribution company serving 253,874 customers at
December 31, 1996, compared with 248,022 customers at December 31, 1995.
Seasonal aspects affect reported revenues, inventories, receivables, operating
expenses and cash flows, which are usually greater during the first and fourth
quarters of the year.
Competition
- -----------
SJG franchises are non-exclusive, however, currently no other utility is
providing service within its territory. SJG competes with oil, propane and
electricity suppliers for residential, commercial and industrial users. The
market for natural gas sales is subject to competition as a result of
deregulation. Through its tariff, SJG has promoted competition while maintaining
its margins. Substantially all of SJG's profits are from the transportation
rather than the sale of the commodity. SJG believes it has been a leader in
addressing the changing marketplace. It maintains its focus on being a low-cost
provider of natural gas and energy services.
Energy Adjustment Clauses
- -------------------------
SJG's tariff includes a Levelized Gas Adjustment Clause ("LGAC"), a
Temperature Adjustment Clause ("TAC") and a Remediation Adjustment Clause
("RAC"). Such clauses are designed to permit adjustments for changes in gas
supply costs, reduce the impact of extreme fluctuations in temperatures on SJG
and its customers, and recover costs incurred in the remediation of former gas
manufacturing plants. The BPU approved LGAC and RAC
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adjustments do not directly affect earnings because revenues are adjusted to
match costs. TAC adjustments do affect revenue, income and cash flows since
extremely cold weather can generate credits to customers, while extremely warm
weather during the winter season can result in additional billings to customers.
Results of Operations
Operating Revenues
- ------------------
In 1996, revenues increased $47.6 million over 1995. Revenues decreased
$28.7 million when comparing 1995 with 1994. In 1996, the revenue increase is
principally due to greater firm sales resulting from weather which was 6.4
percent colder than 1995 and a net increase of approximately 5,900 customers.
Total sales margin (revenues less cost of gas, gross receipts and income taxes)
was lower in 1996 principally due to increased revenues from off-system sales
and capacity release programs. While off-system sales decreased in 1996, those
sales had a positive impact due to increased margins. Utility revenues
decreased in 1995 principally due to lower off-system and firm gas sales,
partially offset by the impact of a rate increase effective December 14, 1994
(See Regulatory Matters). However, sales margin increased in 1995 principally
------------------
due to that rate increase and the addition of approximately 6,600 customers in
1995.
Utility revenue changes also reflect the impact of commodity
prices for purchased gas as implemented through the LGAC. Average commodity
prices were as follows (per Mcf):
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Twelve month period
ended December 31, $2.93 $1.91 $2.18
</TABLE>
Gas Purchased for Resale
- ------------------------
Gas purchased for resale increased $39.9 million in 1996 compared with 1995
and decreased by $41.5 million in 1995 compared with 1994. Sources of gas supply
include both contract and open-market purchases. The principal causes are based
on price and volume changes as described under Operating Revenues. SJG is
------------------
responsible for securing and maintaining its own gas supplies to serve its
customers.
SJG has entered into long-term contracts for natural gas supplies, firm
transportation, and firm gas storage service. The earliest expiration of any of
these contracts is 1998. All of the transportation and storage service
agreements between SJG and its interstate pipeline suppliers are provided under
tariffs approved
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<PAGE>
by the Federal Energy Regulatory Commission. SJG's cumulative obligation for
demand charges for all of these services is approximately $5.3 million per month
which is recovered on a current basis through its LGAC.
Operation and Maintenance
- -------------------------
A summary of net changes for the years ended December 31, 1996 and 1995
compared with the year preceding is as follows (in thousands):
<TABLE>
<CAPTION>
1996 vs. 1995 1995 vs. 1994
------------- -------------
<S> <C> <C>
Other Production Expense $ 171 $ (2)
Transmission 83 (32)
Distribution 474 15
Customer Accounts and Services 186 573
Sales (32) (36)
Administration and General (994) 2,930
Other (244) 17
------- -------
$ (356) $3,465
======= =======
</TABLE>
Distribution costs increased in 1996 principally due to greater
distribution main markout and leak survey activities. The 1996 reduction in
administrative and general costs was principally due to decreased data
processing, employee welfare and regulatory costs. Increased administrative and
general expense for 1995 was principally due to higher labor, employee welfare
and regulatory costs. The increase in employee welfare costs was principally
related to the recording of approximately $1.2 million of additional post-
retirement benefit costs other than pension. However, this cost is offset by
revenues as provided in SJG's 1994 rate increase (See Regulatory Matters).
------------------
Other Operating Expenses
- ------------------------
A summary of principal changes in other expenses for the years ended
December 31, 1996 and 1995 compared with the preceding year is as follows (in
thousands):
<TABLE>
<CAPTION>
1996 vs. 1995 1995 vs. 1994
------------- --------------
<S> <C> <C>
Depreciation 1,019 1,016
Federal Income Taxes - Net 1,349 2,172
Gross Receipts & Franchise
and Other Taxes 2,290 (1,321)
</TABLE>
Depreciation is higher in 1996 and 1995 principally due to increased
investment in property, plant and equipment by SJG.
15
<PAGE>
Federal Income Tax changes reflect the impact of changes in pre-tax income. The
changes in Gross Receipts & Franchise Taxes in 1996 and 1995 are due to changes
in volumes of gas sold, which are subject to those taxes.
In December 1994, the BPU ordered a $3.5 million customer refund which
resulted in an unfavorable impact of $2.3 million, net of taxes. Customers
received this refund through the 1994-1995 LGAC.
Interest and Other Charges
- --------------------------
Interest charges increased slightly in 1996 compared with 1995. The
increase is principally due to the effects of higher levels of short-term debt
outstanding, partially offset by lower levels of long-term debt outstanding and
LGAC overcollections. Interest charges increased by $4.9 million in 1995
compared with 1994, principally due to increased levels of long-term debt,
higher interest rates and levels of LGAC overcollections.
Net Income Applicable to Common Stock
- -------------------------------------
Net income (in thousands) and earnings per common share reflect the
following changes:
1996 vs. 1995 1995 vs. 1994
------------- -------------
Net Income Increase $3,402 $4,796
======= =======
Earnings per Share Increase $1.45 $2.05
======= =======
The details affecting the increase in net income and earnings per share are
discussed under the appropriate captions above.
Liquidity
- ---------
The seasonal nature of gas operations, the timing of construction and
remediation expenditures and related permanent financing, as well as mandated
tax and sinking fund payment dates require large short-term cash requirements.
These are generally met by cash from operations and short-term lines of credit.
SJG maintains short-term lines of credit with a number of banks, aggregating
$133.0 million at December 31, 1996. The credit lines are uncommitted and
unsecured with interest rates below the prime rate.
Depreciation and Amortization are non-cash charges to income and do not
-----------------------------
impact cash flow. Increases in depreciation cost reflect the effect of additions
to fixed assets.
16
<PAGE>
Increases in Revenues and Fuel Costs Deferred - Net reflect the impact of
--------------------------------------
overcollection of fuel costs or the recovery of previously deferred fuel costs.
Decreases reflect the impact of payments or credits to customers for amounts
previously overcollected or the undercollection of fuel costs resulting from
increases in natural gas costs.
Increases in Deferred and Non-Current Federal Income Taxes and Credits -
-----------------------------------------------------------
Net represent the excess of taxes accrued over amounts paid. Decreases reflect
- ---
the impact of taxes paid in excess of amounts accrued. Generally, deferred
income taxes related to deferred fuel costs will be paid in the next year.
Changes in Environmental Remediation Costs - Net represent the difference
-------------------------------------
between amounts collected under the RAC and through insurance recoveries, and
remediation expenditures.
Changes in Accounts Receivable are generally weather and price related.
-------------------
Increases generate cash flows when collected in subsequent periods.
Changes in Inventory reflect the impact of seasonal requirements,
---------
temperature and price changes.
Changes in Gross Receipts & Franchise Taxes reflect the impact of the
--------------------------------
excess of taxes paid over taxes accrued. However, there are significant timing
differences in cash flows during the year since SJG must pay the full year's tax
on April 1 of each year and amortize any prepaid tax over the remainder of the
year, on the basis of gas volumes sold. SJG uses short-term borrowings to make
these tax payments and, accordingly, this results in a temporary increase in the
short-term debt level. The carrying costs for these timing differences are
recognized in base utility rates.
Changes in Accounts Payable and Other Current Liabilities reflect the
----------------------------------------------
impact of timing differences between the accrual and payment of costs.
Regulatory Matters
On December 14, 1994, the BPU granted SJG a rate increase of $12.1 million
based on a 9.51 percent return on rate base, which included an 11.5 percent
return on equity. Nearly the entire increase came from the residential,
commercial and small industrial customer classes. In addition, SJG was allowed
to retain the first $4.0 million of combined pre-tax interruptible and off-
system margins and 20 percent of margins above that level.
On January 27, 1997, the BPU granted SJG a rate increase of $6.0 million
based on a rate of return of 9.62 percent including
17
<PAGE>
an 11.25 percent return on equity. As part of this rate increase, SJG is allowed
to retain the first $5.0 million of combined pre-tax margins generated by
interruptible and off-system sales and 20 percent of pre-tax margins generated
by sales above that level. In 1997 and 1998, this $5.0 million threshold will be
increased by the annual revenue requirement associated with completed major
construction projects. These sharing formula improvements are projected to
result in additional rate relief of approximately $1.4 million in 1997 and $1.8
million beginning in 1998. In 1997, SJG will file to recover additional post-
retirement benefit costs of approximately $1.1 million annually. This recovery
is expected to begin in 1998.
Also on January 27, 1997, the BPU approved SJG's request for a $2.5 million
revenue reduction through the TAC.
In April 1996, SJG received BPU approval to increase its rates to recover
approximately $8.0 million of increased natural gas costs through the LGAC.
The adoption of FASB No. 109, "Accounting for Income Taxes" in 1993
primarily resulted in the creation of a regulatory asset and a deferred income
tax liability. As a result of positions taken in the 1994 rate case, the
amortization of the asset is being recovered through rates over an 18-year
period which began in December 1994. Also, FASB No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", adopted by SJG in
1993, requires an accrual basis of accounting for retiree benefit payments
during the years of employment. SJG has elected to recognize the unfunded
transition obligation over a 20-year period which began in 1993. SJG had
previously recovered these costs through rates on a pay-as-you-go basis. A
December 1994 BPU order provided for partial recovery of costs associated with
FASB No. 106 and prescribes continued deferral of unrecovered costs. SJG was
initially seeking recovery of this asset in its current rate proceedings;
however, the BPU initiated a generic proceeding to address the recovery of these
costs by all utilities in the State. Also, beginning in 1995, an external trust
was established for the purpose of contributing costs recovered from ratepayers
resulting from a settlement with the BPU. Contributions to the trust amounted
to $2.1 million in both 1996 and 1995. The balance of the regulatory asset
amounted to $5.2 million at December 31, 1996.
SJG has incurred and recorded certain costs for environmental remediation
of sites where SJG or predecessor companies operated gas manufacturing plants.
Manufactured gas operations were terminated at all SJG sites more than 30 years
ago.
Since the early 1980s, SJG recorded environmental remediation costs of
$70.8 million, of which $29.1 million has
18
<PAGE>
been expended as of December 31, 1996. SJG, with the assistance of an outside
consulting firm, estimates that total future expenditures to remediate the sites
will range from $41.7 million to $150.2 million. The lower end of this range
has been recorded as a liability and is reflected on the balance sheet under the
captions "Current Liabilities" and "Deferred Credits and Other Non-Current
Liabilities." Recorded environmental remediation costs do not directly affect
earnings because those costs are deferred and, when expended, recovered through
rates over 7-year amortization periods. Amounts accrued for future expenditures
have not been adjusted for future insurance recoveries, which management is
pursuing. SJG has received $4.2 million of insurance recoveries as of December
31, 1996. These proceeds were first used to offset legal fees incurred in
connection with those recoveries and the excess was used to reduce the balance
of deferred environmental remediation costs. Recorded amounts include estimated
costs to be incurred based on projected investigation and remediation work plans
using existing technologies. Actual expenditures could differ from the
estimates due to the long-term nature of the projects and changing technology,
government regulations and site specific requirements.
SJG has established a regulatory asset for these costs and is recovering
amounts expended over 7-year amortization periods, as authorized by the BPU. As
of December 31, 1996, SJG has unamortized remediation expenditures of $15.6
million which are reflected on the balance sheet under the caption "Deferred
Debits." Since BPU approval of the RAC mechanism in August 1992, SJG has
recovered $9.3 million through rates as of December 31, 1996.
SJG is subject to claims which arise in the ordinary course of its business
and other legal proceedings. A group of Atlantic City casinos filed a petition
with the BPU on January 16, 1996, alleging overcharges of over $10.0 million,
including interest. Management believes that the ultimate liability with respect
to these actions will not materially affect SJG's financial position or results
of operations.
Capital Resources
SJG has a continuing need for cash resources and capital, primarily to
invest in new and replacement facilities and equipment for the remediation of
former coal gas manufacturing sites. Total construction and remediation
expenditures for 1997 are estimated at $57.7 million. 1998 and 1999 costs are
estimated at approximately $65.0 million and $58.9 million, respectively. These
investments are expected to be funded from several sources, which may include
cash generated by operations, temporary use of short-term debt, sale of first
mortgage bonds, sale of preferred stock and capital leases. SJG's specific
19
<PAGE>
financing plans for 1997 include an expected equity investment of approximately
$25.6 million from SJI.
In January 1996, SJG redeemed a total of $5,258,000 of its 8-1/4% Series
First Mortgage Bonds maturing in 1996 and 1998. In April 1996, SJG redeemed the
remaining balance of its 9.2% Series First Mortgage Bonds due 1998, amounting to
$2,667,000. In January 1995, SJG issued $30.0 million of 8.6% Debenture Notes
maturing February 1, 2010.
Inflation
The ratemaking process provides that only the original cost of utility
plant is recoverable in revenues as depreciation. Therefore, the excess cost of
utility plant, stated in terms of current cost over the original cost of utility
plant, is not presently recoverable. While the ratemaking process gives no
recognition to the current cost of replacing utility plant, based on past
practices, SJG believes it will be allowed to earn on the increased cost of its
net investment as replacement of facilities actually occurs.
Summary
The company is confident it will have sufficient cash flow to meet its
operating, capital and dividend needs and is taking and will take such actions
necessary to employ its resources effectively.
Item 3. Properties.
The principal property of SJG consists of its gas transmission and
distribution systems that include mains, service connections and meters. The
transmission facilities carry the gas from the connections with Transco and
Columbia to SJG's distribution systems for delivery to customers. As of
December 31, 1996, there were approximately 343 miles of mains in the
transmission systems and 4,598 miles of mains in the distribution systems.
SJG owns office and service buildings, including its corporate
headquarters, at eight locations in the territory, a liquefied natural gas
storage and vaporization facility, and three propane-air vaporization plants.
As of December 31, 1996, the SJG utility plant had a gross book value of
$579,304,259 and a net book value, after accumulated depreciation, of
$421,621,668. In 1996, $39,385,175 was spent on additions to utility plant and
there were retirements of property having an aggregate gross book cost of
20
<PAGE>
$2,730,526. Construction expenditures for 1997 are currently expected to
approximate $48.3 million.
Virtually all of the SJG transmission pipeline, distribution mains and
service connections are in streets or highways or on the property of others. The
SJG transmission and distribution systems are maintained under franchises or
permits or rights-of-way, many of which are perpetual. The SJG properties
(other than property specifically excluded) are subject to a lien of mortgage
under which its first mortgage bonds are outstanding. Such properties are well-
maintained and in good operating condition.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
All issued and outstanding Common Stock of SJG is owned by South Jersey
Industries, Inc.
Item 5. Directors and Officers.
William F. Ryan is Chairman of the Board, President and Chief Executive
Officer of SJI. Has been a director since 1977. Age 62. Chairman of SJI's
Executive Committee. President of SJI since 1980, Chief Executive Officer since
1981 and Chairman of the Board since 1995; President of SJG since 1977, Chief
Executive Officer of SJG since 1981 and Chairman of the Board of SJG since April
1989; Chairman of the Board and Chief Executive Officer of Energy & Minerals,
Inc. ("EMI") since 1981; Chairman and Chief Executive Officer of R&T Group, Inc.
("R&T") since October 1989; director of South Jersey Energy Company ("Energy
Company") since 1973; director of New Jersey Manufacturers Insurance Company and
New Jersey Re-Insurance Company of West Trenton, NJ. (Each of EMI, R&T and
Energy Company are wholly-owned subsidiaries of SJI.)
Frank L. Bradley, Jr. has been a director since 1986. Age 71. Chairman of
SJG's and member of SJI's Executive Committees and member of SJG's and SJI's
Compensation/Pension Committees. Retired; formerly Chairman, President and CEO
(1988-1992), Chairman (1980-1988), of Stone & Webster Management Consultants,
Inc., New York, NY.
Anthony G. Dickson has been a director since 1995. Age 48. Member of SJG's
and SJI's Audit Committees and Management Development Committees and member of
SJI's Environmental Committee. President (1991 to date), Vice President (1984-
1991), of New Jersey Manufacturers Insurance Company and New Jersey Re-Insurance
Company, West Trenton, NJ; director of CoreStates New Jersey National Bank and
New Jersey National Corporation, Pennington, NJ; director of New Jersey State
Safety Council, Cranford, NJ; director Alliance of American Insurers,
Schaumburg, IL; trustee, Rider University.
21
<PAGE>
Richard L. Dunham has been a director since 1984. Age 67. Member of SJG's
and SJI's Executive Committees and Chairman of SJG's and SJI's
Compensation/Pension Committees. Retired;formerly Chairman (1988-1995),
President (1980-1988), of Zinder Companies, Inc. and affiliated companies,
economic and regulatory consulting firms, Washington, DC; Member (1986-1995) of
Advisory Council of Gas Research Institute, Chicago, Il; Former Chairman (1975-
1977) of the Federal Power Commission (now FERC), Washington, DC.
Peter M. Mitchell, Ph.D. has been a director since 1981. Age 62. Member of
SJG's and SJI's Executive Committees, Compensation/Pension Committees and
Management Development Committees. President Massachusetts Maritime Academy,
Buzzards Bay, MA (1994 to date); Vice Chancellor (1983-1994), Higher Education
Coordinating Council, formerly the Board of Regents of Higher Education, Boston,
MA; director, Banc Boston, Regional Board, Boston, MA.
Jackson Neall has been a director since 1990. Age 71. Member of SJG's
and SJI's Audit Committees and Management Development Committees. Retired;
former Real estate appraiser (1977-1992); registered builder (1989-1992); former
President of South Jersey Fuel, Inc.; director of Shore Memorial Hospital;
Chairman (1989 to date) of Shore Properties, Inc., Somers Point, NJ.
Shirli M. Vioni, Ph.D. has been a director since 1983. Age 56. Chairman of
SJG's and member of SJI's Audit Committees and Chairman of SJG's and SJI's
Management Development Committees. Superintendent, Oberlin City Schools (1994-
1996), Oberlin, OH; President, Billings-Vioni Management Associates (1990-1994),
Columbus OH, a human resource consulting firm; Director, Corporate Human
Resource Development (1987-1990), of Honeywell, Inc., Minneapolis, MN.
Executive Officers (Other Than Directors) of the Registrant
<TABLE>
<CAPTION>
Name Age Positions with SJG
---------------------------------------------------------
<S> <C> <C>
George L. Baulig 55 Secretary
Charles Biscieglia 52 Executive Vice
President, Chief
Operating Officer
Gerald S. Levitt 53 Executive Vice
President, Chief
Staff Officer
Albert V. Ruggiero 48 Vice President
William J. Smethurst, Jr. 50 Vice President and
Treasurer
</TABLE>
There is no family relationship among the officers of the registrant.
22
<PAGE>
George L. Baulig was elected Assistant Secretary of SJG and SJI from
September 1973 to May 1975 and Assistant Vice President of SJG from May 1975 to
May 1980. Effective May 1, 1980, he was elected Assistant Secretary and
Assistant Treasurer of SJG and SJI. Effective November 1, 1980, Mr. Baulig was
elected Secretary and Assistant Treasurer of SJI, SJG and EMI. Mr. Baulig also
serves as Secretary of R&T and SJE, effective October 1989 to date. He was
elected Secretary of SJG, effective April 18, 1996.
Charles Biscieglia was elected Assistant Vice President of SJG effective
May 1, 1981, Vice President effective November 1, 1983, Senior Vice President
effective May 1, 1987 and Executive Vice President, Chief Operating Officer
effective May 1, 1991.
Gerald S. Levitt was elected Vice President of SJI and Senior Vice
President of SJG effective November 1, 1983. He has served as Chief Financial
Officer of SJI since October 1, 1989. He was elected Executive Vice President
of SJG on November 1, 1986. Mr. Levitt was Vice President of EMI from November
1983 to November 1986. Mr. Levitt was also a member of the Board of Directors
of Morie Company from November 1986 to December 1995.
Albert V. Ruggiero was elected Vice President of SJG effective October 1,
1989.
William J. Smethurst, Jr. was elected Assistant Secretary and Assistant
Treasurer of SJG, EMI and SJI effective November 1, 1981, Treasurer and
Assistant Secretary of SJG effective November 1, 1983, Controller and Assistant
Secretary of SJG effective April 1, 1988 and Vice President, Treasurer and
Assistant Secretary of SJG effective April 23, 1992.
Executive officers of SJG are elected annually and serve at the pleasure of
the Board of Directors.
23
<PAGE>
Item 6. Executive Compensation.
EXECUTIVE COMPENSATION
Summary Compensation Table (1)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Annual Compensation
----------------------------
(a) (b) (c) (d) (e) (i)
Other All Other
Name and Principal Annual Compen-
Position Compen- sation
Year Salary Bonus sation(1) (3)(4)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
William F. Ryan, 1996 $405,000 - $13,903 $19,586
Chairman,
President and CEO
(2)
Gerald S. Levitt, 1996 167,000 - 872 9,555
Executive Vice
President and CSO
(2)
Charles 1996 159,500 - 359 9,504
Biscieglia,
Executive Vice
President, Chief
Operating Officer
Albert V. 1996 114,000 - - 4,212
Ruggiero, Vice
President
George L. Baulig, 1996 110,000 - - 7,030
Secretary (2)
- --------------------------------------------------------------------------------
</TABLE>
Footnotes to Summary Compensation Table
(1) Columns (f) (g) and (h) have been omitted from the table because no
long term compensation was awarded to, earned by or paid to the named executives
for any year covered by the table.
(2) Compensation is paid to the named executive officers in consideration
for services rendered for both SJG and SJI.
(3) The Internal Revenue Code limits the contributions that may be made by
or on behalf of an individual under defined contribution plans such as SJI's
Thrift Plan. SJI has adopted a policy of currently reimbursing its executive
officers with the
24
<PAGE>
amount of SJI contributions that may not be made because of this limitation
(including the tax liability incurred by the additional income). Pursuant to
this policy, Messrs. Ryan, Levitt, and Biscieglia were paid $13,903, $872 and
$359, respectively, in 1996, which amounts are included in column (e) of the
Summary Compensation Table.
(4) Column (i) includes Employer Contributions to Thrift Plan, income value
of group life insurance and increase in vested benefit level of deferred
compensation contract. 1996 values for these items are:
<TABLE>
<CAPTION>
Ryan Levitt Biscieglia Ruggiero Baulig
----- ------ ---------- -------- ------
<S> <C> <C> <C> <C> <C>
Thrift Plan $4,500 $4,500 $4,785 $3,420 $3,300
Group Life 9,547 1,930 1,834 792 1,248
Insurance
Deferred 5,539 3,125 2,885 - 2,482
Compensation
</TABLE>
Aggregated Option Exercises in Last Fiscal
Year and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of SJI
Securities Value
Underlying of Unexercised
Unexercised In-The-Money
Shares of Options at SJI Options at
SJI Acquired Value Fiscal Year-End Fiscal Year-End
Name on Exercise Realized All Exercisable All Exercisable
<S> <C> <C> <C> <C>
William F. Ryan - - 15,300 $99,187
Gerald S. Levitt 3,330 $19,298 - -
Charles Biscieglia 2,550 14,141 4,000 -
Albert V. Ruggiero - - 1,520 7,363
George L. Baulig - - 1,530 9,919
</TABLE>
In 1987, SJI adopted a stock option and stock appreciation rights plan for
its and its subsidiaries, officers and other key employees. Of the 304,475
options authorized, 87,750 options have been awarded. 53,780 of these awarded
options have been exercised.
SJI has employment agreements with certain officers of SJG, including
Messrs. Ryan, Levitt, Biscieglia, Ruggiero, Smethurst and Baulig. Each agreement
with officers other than Messrs. Ryan and Levitt is for a three-year
25
<PAGE>
period ending September 30, 1999, and provides for a base salary that will be
reviewed periodically, but will be not less than was being paid at the beginning
of the period. If a change of control (as defined in the agreement) occurs
during the period of the agreement, the agreement is automatically extended for
three years from the date the change of control occurs. If, during the extended
term of the agreement, the officer's employment is terminated for other than
cause, or he resigns after there has been a significant adverse change in his
employment arrangements, he is entitled to a severance payment equal to
300% of his average annual compensation during the preceding five calendar
years. If the officer's employment agreement is terminated for other than cause
without a change in control, he is entitled to a severance payment equal to 150%
of his average annual compensation during the preceding five calendar years.
The term of the three-year agreement with Mr. Levitt ends December 31, 1998. The
agreement with Mr. Ryan, which is for a five year term ending July 31, 1999,
provides a base salary of $375,000 to be reviewed annually. Mr. Ryan and his
spouse are entitled to the continuation of certain medical benefits after his
employment ends. The agreement may be terminated by SJI only for cause, death,
disability or retirement. Mr. Ryan may terminate the agreement if SJI makes
certain specified adverse changes in his employment arrangements such as
reducing his salary (other than in connection with company-wide reductions
applicable the companies' executives generally). If Mr. Ryan elects to terminate
the agreement and the adverse change has occurred after a change in control of
SJI, Mr. Ryan is entitled to a severance payment equal to 300% of his average
annual compensation during the three years preceding his termination. If Mr.
Ryan elects to terminate the agreement under these circumstances, except that
there has not been a change of control of SJI, Mr. Ryan is entitled to receive a
termination payment of $974,000. As part of these overall arrangements, Mr. Ryan
agreed to a five year contract term in order to address SJI's concern that he
remain available as chief executive officer to age 65, even though his
retirement benefit will be fully vested before that date.
Pension Plans For Executives
The following table illustrates the current retirement benefits under the
salaried employee pension plan, and the supplemental executive retirement plan,
assuming the executive was born in 1935 and retires at the normal retirement age
of 62.
26
<PAGE>
<TABLE>
<CAPTION>
Years of Service
Remuneration 15 20 25 30 35
40
- ------------ ---------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$125,000 $ 23,518 $ 34,556 $ 47,056 $ 59,556 $ 59,556 $ 59,556
150,000 29,556 44,556 59,556 74,556 74,556 74,556
175,000 37,056 54,556 72,056 89,556 89,556 89,566
200,000 44,556 64,556 84,556 104,556 104,556 104,556
225,000 52,056 74,556 97,056 119,556 119,556 119,556
250,000 59,556 84,556 109,556 134,556 134,556 134,556
300,000 74,556 104,556 134,556 164,556 164,556 164,556
400,000 104,556 144,556 184,556 224,556 224,556 224,556
450,000 119,556 164,556 209,556 254,556 254,556 254,556
500,000 134,556 184,556 234,556 284,556 284,556 284,556
</TABLE>
As employees, the executive officers of SJI and its subsidiaries are
eligible for benefits under a tax-qualified pension plan for salaried employees
provided by SJI. Compensation considered under the pension plan consists of base
salary only, which in the case of the executive officers is equal to the cash
compensation reported in column (c) of the Summary Compensation Table.
Employees do not make contributions to the plan, and the employer
contributions (which are based on aggregate actuarial calculations without
individual allocation) are held and invested by insurance companies of
recognized standing until they are used to provide retirement benefits. Under
certain circumstances, early retirement with reduced annual benefits is
permitted (but not before age 55). Executive officers who are 50 years of age or
older are also covered by an unfunded supplemental retirement plan that is
designed in general to provide the officer with a minimum retirement benefit
from the salaried employee pension plan, the basic Social Security benefit and
the supplemental plan that aggregates 2% of average final five years salary (as
defined in the plan), for each year of service. Pursuant to Mr. Ryan's
agreement, he will retire at age 65 with 33 years of service and his retirement
benefit under the supplemental plan will be based on the average of his final
three years salary. Assuming continued employment and retirement at age 62,
Messrs. Biscieglia, Levitt, Ruggiero and Baulig will have, respectively, 38, 24,
21 and 44 years of credited service. No credit is provided under the
supplemental plan for more than 30 years of service.
COMPENSATION OF OUTSIDE DIRECTORS
- ---------------------------------
Directors of SJI who are not officers of SJI and who are not members of the
Executive Committee of the Board are paid an annual retainer of $7,500 plus 50
shares of restricted stock and fees of $950 per meeting for each meeting of the
Boards of SJI, SJG, EMI, R&T and Energy, respectively, that they attend, except
that the maximum fee paid to any person for attendance at one or more meetings
of these Boards held on the same day is $950. Members of the Executive Committee
of the Board who are not
27
<PAGE>
officers of SJI are paid an annual retainer of $10,000 plus 50 shares of common
stock and receive the same attendance fees as the other non-officer directors.
SJI has established a policy to recognize exceptional service to SJI beyond that
service normally provided by a board member. In 1996 no payments were made under
this policy. Directors who are also officers of SJI receive no compensation
other than their regular compensation. Members of all the Committees of SJI or
of a subsidiary are paid $475 for each meeting of those Committees that they
attend if the meeting is held on the same day as a Board meeting or $950 if the
meeting is held on any other day. Chairmen of each of those committees are paid
an additional $200 for each meeting of their Committee that they attend. In 1996
SJI established a Restricted Stock Program for Directors which is intended to
provide directors with a form of compensation that will, in a tangible way, more
closely align their personal interests with the financial interests of SJI's
shareholders. Initial grants were made to each incumbent director who has not
attained seventy years of age. Subsequent grants will be in the amount of 50
shares per year. SJI has established a plan whereby directors may elect to defer
the receipt of fees until a specified date or until retirement from the Board.
The deferred amount, together with interest, may be paid in a lump sum or in
equal annual installments, as the director elects.
tem 7. Certain Relationships and Related Transactions.
SJG and other subsidiaries of SJI have maintained banking relationships for a
number of years with The Farmers and Merchants National Bank of Bridgeton, of
which Mr. McCormick, a director of SJI, is Chairman, and a director, and expect
to continue such relationships. The highest aggregate indebtedness of SJG and
other subsidiaries of SJI to that bank during 1996 was $7,000,000 and the amount
of such indebtedness at December 31, 1996 was $5,000,000. Loans made to SJG and
other subsidiaries by that bank are made on terms that are usual and customary
at the time they are made. During 1996, SJI and its subsidiaries paid $412,580
in legal fees and expenses to the law firm of which Mr. Ryan's son-in-law,
Michael J. Fitzgerald, is a member. Mr. Ryan is a director of SJI. During 1996
SJG paid $255,139 for purchases of pipe and fittings from Seashore Supply
Company of which Mr. Raring, a director of SJI, is President.
Item 8. Legal Proceedings.
SJG and SJI are subject to claims which arise in the ordinary course of its
business and other legal proceedings. Included therewith, a group of Atlantic
City casinos have filed a petition with the BPU alleging overcharges of over $10
million, including interest. Management of SJG believes that any pending
28
<PAGE>
or potential legal proceedings will not materially affect its operations or
consolidated financial position. On January 27, 1997, the BPU granted SJG a
rate increase of $6.0 million based on an overall return of 9.62% including an
11.25% return on equity.
Item 9. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
There is no market for SJG's Common Stock. SJI owns all of the issued
and outstanding Common Stock of SJG. From time to time, at the discretion of
the Board of Directors of SJG, SJG pays dividends to SJI out of retained
earnings
Item 10. Recent Sales of Unregistered Securities.
$30,000,000 aggregate principal amount of Debenture Notes, 8.60% Series,
Due February 1, 2010 (the "Notes") were issued on January 31, 1995. The Notes
were sold in a private transaction to Prudential Securities Incorporated by
competitive bid. The Notes were later resold to qualified purchasers pursuant
to Rule 144A under the Securities Act of 1933, as amended (the "Securities
Act"). The aggregate offering price of the Notes was $29,472,300 in cash,
representing 98.241% of the face amount of the Notes. The Notes were offered
and sold pursuant to Section 4(2) of the Securities Act, being a transaction by
an issuer not involving any public offering. Solicitations to bid for the Notes
were sent to five bidders.
Item 11. Description of Registrant's Securities to be Registered.
Subject to certain rights of preferred shareholders at law and with
regard to certain corporate actions, holders of Common Stock shall posses
exclusively full voting power for the election of directors and for all other
purposes. Holders of Common Stock are entitled to one vote per share on all
matters submitted to a vote of the stockholders, including the election of
directors. SJG's Restated Certificate of Incorporation provides for cumulative
voting for the election of directors. Subject to preferential rights of any
shares of preferred stock which may be issued, the holders of Common Stock are
be entitled to such dividends as may be declared from time to time by the Board
of Directors from funds legally available therefor, and are entitled to receive
pro rata all assets of SJG available for distribution to such holders upon
liquidation. No holder of shares of Common Stock shall be entitled as of right
to subscribe for, purchase, or receive any part of any new or additional issue
of any stock of SJG of any class, series or kind, whatsoever, or any bonds,
debentures, or other securities convertible into any such stock, provided
however, that SJG shall not, without first offering the same to the holders of
Common Stock then
29
<PAGE>
outstanding, issue for cash any shares of Common Stock or securities convertible
into Common Stock unless such shares of Common Stock or convertible securities
are offered publicly or would not exceed 5% of the sum of the number of shares
Common Stock outstanding plus the number of shares of Common Stock issuable upon
conversion of all convertible securities, immediately after such offering.
Item 12. Indemnification of Directors and Officers.
Under Section 14A:3-5 of the New Jersey Business Corporation Act, SJG:
(1) has power to indemnify each director and officer of SJG (as
well as its employees and agents) against expenses and liabilities in
connection with any proceeding involving him by reason of his being or
having been such director or officer, other than a proceeding by or in the
right of SJG, if (a) such director of officer acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests
of SJG, and (b) with respect to any criminal proceeding, such director or
officer had no reasonable cause to believe his conduct was unlawful;
(2) has power to indemnify each director and officer of SJG against
expenses in connection with any proceeding by or in the right of SJG to
procure a judgment in its favor which involves such director or officer by
reason of his being or having been such director or officer, if he acted in
good faith and in a manner he reasonably believed to be in or not opposed
to the best interest of SJG; however, in such proceeding no indemnification
may be provided in respect to any claim, issue or matter as to which such
director or officer shall have been adjudged to be liable to SJG, unless
and only to the extent that the court determines that the director or
officer is fairly and reasonably entitled to indemnity for such expenses as
the court shall deem proper;
(3) must indemnify each director and officer against expenses to
the extent that he has been successful on the merits or otherwise in any
proceeding referred to in (1) and (2) above or in defense of any claim,
issue or matter therein; and
(4) has power to purchase and maintain insurance on behalf of a
director or officer against any expenses incurred in any proceeding and any
liabilities asserted against him by reason of his being or having been a
director or officer, whether or not SJG would have the power to indemnify
him against such expenses and liabilities under the statute.
30
<PAGE>
As used in the statute, "expenses" means reasonable costs,
disbursements and counsel fees, "liabilities" means amounts paid or
incurred in satisfaction of settlements, judgments, fines and penalties,
and "proceedings" means any pending, threatened or completed civil,
criminal, administrative or arbitrative action, suit or proceeding, and any
appeal therein and any inquiry or investigation which could lead to such
action, suit or proceeding.
Indemnification may be awarded by a court under (1) or (2) as well as
under (3) above, notwithstanding a prior determination by SJG that the
director or officer has not met the applicable standard of conduct.
Indemnification under the statute does not exclude any other rights to
which a director or officer may be entitled under a certificate of
incorporation, by-law, or otherwise.
Article VII of SJG's Bylaws provides, in pertinent part, as follows:
(1) SJG shall indemnify any corporate agent against his expenses and
liabilities in connection with any proceedings involving the corporate
agent by reason of his being or having been such a corporate agent to the
extent that (a) such corporate agent is not otherwise indemnified; and (b)
the power to do so has been or may be granted by statute; and for this
purpose the Board of Directors of SJG may, and on request of any such
corporate agent shall be required to, determine in each case whether or not
the applicable standards in any such statute have been met, or such
determination shall be made by independent legal counsel if the Board so
directs or if the Board is not empowered by statute to make such
determination;
(2) to the extent that the power to do so has been or may be granted
by statute, SJG shall pay expenses incurred by a corporate agent in
connection with a proceeding in advance of the final disposition of the
proceeding upon receipt of an undertaking by or on behalf of such corporate
agent to repay such amount unless it shall ultimately be determined that he
is entitled to be indemnified as provided by statute;
(3) the indemnification provided in SJG's Bylaws shall not be
exclusive of any other rights to which a corporate agent may be entitled,
both as to any action in his official capacity or as to any action in
another capacity while holding such office, and shall inure to the benefits
of the heirs, executors, or administrators of any such corporate agent; and
31
<PAGE>
(4) the Board of Directors of SJG shall have the power to (a) purchase
and maintain, at SJG's expense, insurance on behalf of SJG and on behalf of
others to the extent that power to do so has been or may be granted by
statute and (b) give other indemnification to the extent permitted by law.
SJG, as sponsor, has agreed to indemnify the Issuer Trustees for, and
to hold the Issuer Trustees harmless against, any loss, damage, claims,
liability, penalty or expense incurred without negligence or bad faith on
the part of any Issuer Trustee, arising out of or in connection with the
acceptance or administration of the Trust Agreement, including the costs of
expenses of any Issuer Trustee of defending itself against any claim or
liability in connection with the exercise and performance of any of its
powers or duties under the Trust Agreement.
SJI maintains and pays all premiums on directors and officers
liability insurance policies on behalf of its subsidiaries, including SJG
with a liability limit of $25,000,000.
Item 13. Financial Statements and Supplementary Data.
The Financial Statements required by this item are filed as part of this
Form 10. See Index to Financial Statement Information at page F-1 of this
Form 10. The Supplementary Data is not applicable.
Item 14. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
Item 15. Financial Statements and Exhibits.
(a) List separately all financial statements filed as part of the
Registration Statement.
The financial statements and notes to financial statements together
with the report thereon of Deloitte & Touche LLP, dated February 19,
1997.
(All Schedules are omitted because the information called for is
included in the financial statements filed or because they are not
applicable or are required.)
(b) Furnish the exhibits required by Item 601 of Regulation S-K (Exhibit
Number is in Accordance with the Exhibit Table in Item 601 of
Regulation S-K)
32
<PAGE>
<TABLE>
<CAPTION>
Exhibit Incorporated by Reference From
Number Exhibit Reference Document
<S> <C> <C> <C>
(3)(a) Certificate of Incorporation
of SJG (filed herewith).
(3)(b) Bylaws of SJG (filed
herewith).
(4)(a) Form of Stock Certificate
for common stock (filed
herewith).
(4)(b)(i) First Mortgage Indenture (4)(b)(i) Form 10-K of
dated October 1, 1947. SJI for 1987
(1-6364)
(4)(b)(ii) Form of South Jersey Gas (4)(b)(vii) Form 10-K of
Company First Mortgage SJI for 1980
Bond, 8-1/4% Series due 1996. (1-6364)
(4)(b)(iii) Form of South Jersey Gas (4)(b)(viii) Form 10-K of
Company First Mortgage SJI for 1980
Bond, 8-1/4% Series due 1998. (1-6364)
(4)(b)(iv) Twelfth Supplemental Inden- 5(b) Form S-7 of
ture, dated as of June 1, SJI (2-68038)
1980.
(4)(b)(v) Fifteenth Supplemental (4)(b)(xiii) Form 10-K of
Indenture, dated July SJI for 1986
1, 1986, 9.2% Series (1-6364)
due 1998.
(4)(b)(vi) Sixteenth Supplemental (4)(b)(xv) Form 10-Q of
Indenture dated as of SJI for
April 1, 1988, 10-1/4% quarter ended
Series due 2008. March 31,
1988 (1-6364)
(4)(b)(vii) Seventeenth Supplemental (4)(b)(xv) Form 10-K of
Indenture dated as of SJI for 1989
May 1, 1989. (1-6364)
(4)(b)(viii) Eighteenth Supplemental (4)(e) Form S-3 of
Indenture, dated as of SJI(33-36581)
March 1, 1990.
(4)(b)(ix) Nineteenth Supplemental (4)(b)(xvii) Form 10-K of
Indenture, dated as of SJI for 1992
April 1, 1992. (1-6364)
(4)(b)(x) Twentieth Supplemental (4)(b)(xviii) Form 10-K of
Indenture, dated as of SJI for 1993
June 1, 1993. (1-6364)
(4)(c) Indenture dated as of (4)(c) Form 10-K of
January 31, 1995; 8.60% SJI for 1994
Debenture Notes due (1-6364)
February 1, 2010
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Exhibit Incorporated by Reference From
Number Exhibit Reference Document
<S> <C> <C> <C>
(9) None
(10)(a) Gas storage agreement (GSS) (10)(d) Form 10-K of
between South Jersey Gas SJI for 1993
Company and Transco, (1-6364)
dated October 1, 1993.
(10)(b) Gas storage agreement (S-2) (5)(h) Form S-7 of
between South Jersey Gas SJI (2-56223)
Company and Transco,
dated December 16, 1953.
(10)(c) Gas storage agreement (LG-A) (5)(f) Form S-7 of
between South Jersey Gas SJI (2-56223)
Company and Transco,
dated June 3, 1974.
(10)(d) Gas storage agreement (WSS) (10)(h) Form 10-K of
between South Jersey Gas SJI for 1991
Company and Transco, dated (1-6364)
August 1, 1991.
(10)(e)(i) Gas storage agreement (LSS) (10)(i) Form 10-K of
between South Jersey Gas SJI for 1993
Company and Transco, (1-6364)
dated October 1, 1993.
(10)(e)(ii) Gas storage agreement (10)(i)(a) Form 10-K of
(SS-1) between South Jersey SJI for 1988
Gas Company and Transco, (1-6364)
dated May 10, 1987 (effective
April 1, 1988).
(10)(e)(iii) Gas storage agreement (10)(i)(b) Form 10-K of
(ESS) between South Jersey SJI for 1993
Gas Company and Transco, (1-6364)
dated November 1, 1993.
(10)(e)(iv) Gas transportation service (10)(i)(c) Form 10-K of
agreement between South SJI for 1989
Jersey Gas Company and (1-6364)
Transco, dated April 1, 1986.
(10)(e)(v) Service agreement (FS) (10)(i)(e) Form 10-K of
between South Jersey Gas SJI for 1991
Company and Transco, dated (1-6364)
August 1, 1991.
(10)(e)(vi) Service agreement (FT) (10)(i)(f) Form 10-K of
between South Jersey Gas SJI for 1991
Company and Transco, dated (1-6364)
February 1, 1992.
(10)(e)(vii) Service agreement (10)(i)(g) Form 10-K of
(Incremental FT) SJI for 1991
between South Jersey Gas (1-6364)
Company and Transco,
dated August 1, 1991.
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
Exhibit Incorporated by Reference From
Number Exhibit Reference Document
<S> <C> <C> <C>
(10)(e)(viii) Gas storage agreement (SS-2) (10)(i)(i) Form 10-K of
between South Jersey Gas SJI for 1991
company and Transco, dated (1-6364)
July 25, 1990.
(10)(e)(ix) Gas Transportation (10)(i)(j) Form 10-K of
Service Agreement between SJI for 1993
South Jersey Gas Company (1-6364)
and Transco, dated
December 20, 1991.
(10)(e)(x) Amendment to Gas (10)(i)(k) Form 10-K of
Transportation Agreement, SJI for 1993
dated December 20, 1991 (1-6364)
between South Jersey Gas
Company and Transco, dated
October 5, 1993.
(10)(f) Gas Transportation Service (10)(j)(a) Form 10-K of
Agreement (FTS) between SJI for 1989
South Jersey Gas Company (1-6364)
and Equitable Gas Company,
dated November 1, 1986.
(10)(g)(i) Gas Transportation Service (10)(k)(h) Form 10-K of
Agreement (TF) between SJI for 1993
South Jersey Gas Company (1-6364)
CNG Transmission Corporation
dated October 1, 1993.
(10)(g)(ii) Gas purchase agreement (10)(k)(i) Form 10-K of
between South Jersey Gas SJI for 1989
Company and ARCO Gas Market- (1-6364)
ing, Inc., dated March 5,
1990.
(10)(g)(iii) Gas Transportation (10)(k)(k) Form 10-K of
Service Agreement (FTS SJI for 1993
1) between South Jersey (1-6364)
Gas Company and Columbia Gulf
Transmission Company, dated
November 1, 1993.
(10)(g)(iv) Assignment Agreement (10)(k)(i) Form 10-K of
capacity and service SJI for 1993
rights (FTS-2) between South (1-6364)
Jersey Gas Company and Columbia
Gulf Transmission Company,
dated November 1, 1993.
(10)(g)(v) FTS Service Agreement (10)(k)(m) Form 10-K of
No. 39556 between South SJI for 1993
Jersey Gas Company and (1-6364)
Columbia Gas Transmission
Corporation, dated
November 1, 1993.
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Exhibit Incorporated by Reference From
Number Exhibit Reference Document
<S> <C> <C> <C>
(10)(g)(vi) FTS Service Agreement (10)(k)(n) Form 10-K of
No. 38099 between South SJI for 1993
Jersey Gas Company and (1-6364)
Columbia Gas Transmission
Corporation, dated
November 1, 1993.
(10)(g)(vii) NTS Service Agreement (10)(k)(o) Form 10-K of
No. 39305 between South SJI for 1993
Jersey Gas Company and (1-6364)
Columbia Gas Transmission
Corporation, dated
November 1, 1993.
(10)(g)(viii) FSS Service Agreement (10)(k)(p) Form 10-K of
No. 38130 between South SJI for 1993
Jersey Gas Company and (1-6364)
Columbia Gas Transmission
Corporation, dated
November 1, 1993.
(10)(g)(ix) SST Service Agreement (10)(k)(q) Form 10-K of
No. 38086 between South SJI for 1993
Jersey Gas Company and (1-6364)
Columbia Gas Transmission
Corporation, dated
November 1, 1993.
(10)(g)(x) NS (Negotiated Sales) (10)(k)(r) Form 10-K of
Service Agreement dated SJI for 1994
December 1, 1994 between (1-6364)
South Jersey Gas Company
and Transco Gas Marketing
Company as agent for
Transcontinental Gas Pipe
Line
(10)(h)(i) Deferred Payment Plan for (10)(l) Form 10-K of
Directors of South Jersey SJI for 1994
Industries, Inc., South (1-6364)
Jersey Gas Company, Energy
& Minerals, Inc., R&T Group,
Inc. and South Jersey Energy
Company as amended and
restated October 21, 1994
(10)(h)(ii) Form of Deferred Compen- (10)(j)(a) Form 10-K of
sation Agreement between SJI for 1980
the Company and/or a sub- (1-6364)
sidiary and eleven of its
officers.
(10)(h)(iii) Schedule of Deferred (10)(l)(b) Form 10-K of
Compensation Agreements. SJI for 1992
(1-6364)
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Exhibit Incorporated by Reference From
Number Exhibit Reference Document
<S> <C> <C> <C>
(10)(h)(iv) Supplemental Executive (10)(l)(c) Form 10-K of
Retirement Program, as SJI for 1992
amended and restated ef- (1-6364)
fective September 1, 1991,
and form of Agreement
between certain Company
or subsidiary Company
officers
(10)(h)(v) Form of Officer Employment (10)(l)(d) Form 10-K of
Agreement between certain SJI for 1994
officers and either the (1-6364)
Company or its Subsidiaries
(10)(h)(vi) Schedule of Officer (10)(l)(e) Form 10-K of
Employment Agreements SJI for 1994
(1-6364)
(10)(h)(vii) Officer Severance Benefit (10)(l)(g) Form 10-K of
Program for all officers SJI for 1985
(1-6364)
(10)(h)(viii) Discretionary Incentive (10(l)(h) Form 10-K of
Bonus Program for all SJI for 1985
officers and management (1-6364)
employees
(10)(h)(ix) The 1987 Stock Option and (10)(l)(i) Form 10-K of
Stock Appreciation Rights SJI for 1987
Plan including Form of (1-6364)
Agreement
(10)(i) Retirement Plan for (10)(p) Form 10-K of
Non-employee Members of SJI for 1988
the Board of Directors (1-6364)
(10)(j) Executive Employment (10)(q) Form 10-K of
Agreement dated SJI for 1994
June 17, 1994 between (1-6364)
the Company and William
F. Ryan, President and
Chief Executive Officer
(11) Not Applicable
(12) Not Applicable
(16) Not Applicable
(21) Subsidiaries of the
Registrant: None.
(24) Not applicable.
(27) Financial Data Schedule
(Submitted only in electronic
format to the Securities
and Exchange Commission)
(99) None
</TABLE>
37
<PAGE>
South Jersey Gas Company
------------------------
Index to Financial Statement Information
Independent Auditors' Report............................................. F-2
Balance Sheet as of December 31, 1996 and 1995........................... F-3
Statements of Income and Retained Earnings for the Years Ended
December 31, 1996, 1995 and 1994....................................... F-5
Statements of Cash Flows for the Years Ended December 31, 1996,
1995, 1994............................................................. F-6
Notes to Financial Statements............................................ F-7
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholder and Board of Directors of
South Jersey Gas Company:
We have audited the balance sheet of South Jersey Gas Company as of
December 31, 1996 and 1995 and the related statements of income and retained
earnings and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of South Jersey Gas Company as of December 31,
1996 and 1995, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Philadelphia, PA 19103-3984
February 19, 1997
F-2
<PAGE>
SOUTH JERSEY GAS COMPANY
BALANCE SHEET
(In Thousands)
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT: (Notes 1, 3 & 7)
Utility Plant, at original cost . . . . . . . . . . . . . $ 577,304 $ 540,649
Accumulated Depreciation. . . . . . . . . . . . . . . . (157,682) (145,954)
Gas Plant Acquisition Adjustment - Net. . . . . . . . . . 2,000 2,075
Property, Plant and Equipment - Net. . . . . . . . 421,622 396,770
CURRENT ASSETS:
Cash & Cash Equivalents (Notes 1 & 9) . . . . . . . . . . 7,469 2,193
Accounts Receivable:
Customers (Note 3). . . . . . . . . . . . . . . . . . . 28,733 25,454
Unbilled Revenues (Note 1). . . . . . . . . . . . . . . 17,855 20,860
Merchandise . . . . . . . . . . . . . . . . . . . . . . 2,260 2,433
Other . . . . . . . . . . . . . . . . . . . . . . . . . 508 4,869
Provision for Uncollectibles. . . . . . . . . . . . . . (1,032) (737)
Natural Gas in Storage, average cost. . . . . . . . . . . 22,638 14,763
Materials and Supplies, average cost. . . . . . . . . . . 4,055 3,842
Prepaid Gross Receipts and Franchise Taxes (Notes 2 & 6). 1,602 3,649
Prepayments and Other . . . . . . . . . . . . . . . . . . 1,562 2,012
Total Current Assets . . . . . . . . . . . . . . . 85,650 79,338
ACCOUNTS RECEIVABLE - Merchandise. . . . . . . . . . . . . . 1,999 2,305
DEFERRED DEBITS:
Environmental Remediation Costs: (Note 12)
Expended - Net. . . . . . . . . . . . . . . . . . . . . 15,566 11,773
Liability for Future Expenditures . . . . . . . . . . . 41,700 24,823
Gross Receipts and Franchise Taxes (Note 6) . . . . . . . 4,468 4,868
Income Taxes - Flowthrough Depreciation (Note 6). . . . . 14,977 15,955
Deferred Postretirement Benefit Costs (Notes 2 & 11). . . 5,153 4,726
Deferred Fuel Costs . . . . . . . . . . . . . . . . . . . 404 0
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 8,387 9,392
Total Deferred Debits. . . . . . . . . . . . . . . 90,655 71,537
TOTAL . . . . . . . . . . . . . . . . . . . . $ 599,926 $ 549,950
</TABLE>
The accompanying notes to the financial statements are an integral part
of these statements.
F-3
<PAGE>
SOUTH JERSEY GAS COMPANY
BALANCE SHEET
(In Thousands Except for Share Data)
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
SHAREHOLDER'S EQUITY AND LIABILITIES
COMMON EQUITY: (Notes 10 & 13)
Common Stock, Par Value $2.50 a share:
Authorized - 4,000,000 shares
Outstanding - 2,339,139 shares . . . . . . . . . . . . $ 5,848 $ 5,848
Other Paid-In Capital and Premium on
Common Stock . . . . . . . . . . . . . . . . . . . . . 77,194 77,194
Retained Earnings . . . . . . . . . . . . . . . . . . . . 51,522 47,364
Total Common Equity. . . . . . . . . . . . . . . . 134,564 130,406
REDEEMABLE CUMULATIVE PREFERRED STOCK: (Note 4)
Par Value $100 a share,
Authorized 48,204 and 49,104 shares, respectively
Outstanding:
Series A, 4.70% - 3,900 and 4,800 shares. . . . . . . 390 480
Series B, 8.00% - 19,242 shares. . . . . . . . . . . . 1,924 1,924
Total Preferred Stock. . . . . . . . . . . . . . . 2,314 2,404
LONG-TERM DEBT (Notes 7 & 8) . . . . . . . . . . . . . . . . 149,736 156,784
CURRENT LIABILITIES:
Notes Payable to Banks. . . . . . . . . . . . . . . . . . 108,300 76,300
Current Maturities of Long-Term Debt (Note 7) . . . . . . 6,603 11,811
Accounts Payable (Note 3) . . . . . . . . . . . . . . . . 48,347 39,235
Customer Deposits . . . . . . . . . . . . . . . . . . . . 6,050 5,707
Environmental Remediation Costs (Note 12) . . . . . . . . 9,377 7,025
Interest and Other Accrued Current Liabilities. . . . . . 2,161 5,631
Total Current Liabilities. . . . . . . . . . . . . 180,838 145,709
DEFERRED CREDITS AND OTHER NON-CURRENT LIABILITIES:
Deferred Income Taxes - Net (Notes 5 & 6) . . . . . . . . 78,415 68,010
Investment Tax Credits (Note 6) . . . . . . . . . . . . . 6,025 6,417
Deferred Revenues: (Note 1) 0 7,315
Pension and Other Postretirement Benefits (Note 11) . . . 9,551 8,366
Environmental Remediation Costs (Note 12) . . . . . . . . 32,323 17,798
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 6,160 6,741
Total Deferred Credits
and Other Non-Current Liabilities. . . . . . . . 132,474 114,647
COMMITMENTS AND CONTINGENCIES (Note 12)
TOTAL . . . . . . . . . . . . . . . . . . . . $ 599,926 $ 549,950
</TABLE>
The accompanying notes to the financial statements are an integral part
of these statements.
F-4
<PAGE>
SOUTH JERSEY GAS COMPANY
STATEMENTS OF INCOME AND RETAINED EARNINGS
(In Thousands Except for Share Data)
<TABLE>
<CAPTION>
Year Ended
December 31,
1996 1995 1994
<S> <C> <C> <C>
OPERATING REVENUES:
Utility (Notes 1 & 3) . . . . . . . . . . . . . . . $ 327,317 $ 279,764 $ 308,253
Other . . . . . . . . . . . . . . . . . . . . . . . 3,018 2,955 3,206
Total Operating Revenues . . . . . . . . . . . . 330,335 282,719 311,459
OPERATING EXPENSES:
Gas Purchased for Resale. . . . . . . . . . . . . . 186,141 146,238 187,745
Operation - Utility . . . . . . . . . . . . . . . . 38,413 38,772 35,393
- Other . . . . . . . . . . . . . . . . . 2,240 2,484 2,467
Maintenance . . . . . . . . . . . . . . . . . . . . 5,405 5,158 5,089
Depreciation (Note 1) . . . . . . . . . . . . . . . 14,839 13,820 12,804
Federal Income Taxes (Notes 1 & 5). . . . . . . . . 640 5,238 8,833
Deferred and Non-current Federal
Income Taxes (Credits) (Notes 1 & 5) . . . . . . . 10,379 4,430 (1,350)
Investment Tax Credit Deferred - Net (Note 6) . . . (392) (390) (377)
Gross Receipts and Franchise Taxes (Note 6) . . . . 31,419 29,115 30,376
Other Taxes . . . . . . . . . . . . . . . . . . . . 2,402 2,416 2,476
Total Operating Expenses . . . . . . . . . . . . 291,486 247,281 283,456
OPERATING INCOME . . . . . . . . . . . . . . . . . . . 38,849 35,438 28,003
INTEREST CHARGES (Note 1). . . . . . . . . . . . . . . 19,460 19,447 14,528
CUSTOMER REFUND OBLIGATION - NET (Notes 2 & 5) . . . . 0 0 2,275
INCOME BEFORE PREFERRED STOCK DIVIDEND REQUIREMENTS. . 19,389 15,991 11,200
PREFERRED STOCK DIVIDEND REQUIREMENTS. . . . . . . . . 174 178 183
NET INCOME APPLICABLE TO COMMON STOCK. . . . . . . . . 19,215 15,813 11,017
RETAINED EARNINGS AT BEGINNING OF YEAR . . . . . . . . 47,364 47,551 50,071
TOTAL. . . . . . . . . . . . . . . . . . . . . . 66,579 63,364 61,088
COMMON STOCK DIVIDENDS DECLARED. . . . . . . . . . . . 15,057 16,000 13,537
RETAINED EARNINGS AT END OF YEAR (Note 10) . . . . . . $ 51,522 $ 47,364 $ 47,551
AVERAGE SHARES OF COMMON STOCK OUTSTANDING . . . . . . 2,339,139 2,339,139 2,339,139
EARNINGS PER COMMON SHARE. . . . . . . . . . . . . . . $ 8.21 $ 6.76 $ 4.71
DIVIDENDS PAID PER COMMON SHARE. . . . . . . . . . . . $ 6.437 $ 6.840 $ 5.787
</TABLE>
The accompanying notes to the financial statements are an integral part
of these statements.
F-5
<PAGE>
SOUTH JERSEY GAS COMPANY
STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year Ended
December 31,
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income Applicable to Common Stock. . . . . . . . .$ 19,215 $ 15,813 $ 11,017
Adjustments to Reconcile Net Income to Cash Flows
Provided by Operating Activities:
Depreciation and Amortization. . . . . . . . . . . . 17,540 16,672 14,741
Provision for Losses on Accounts Receivable. . . . . 1,615 1,275 1,166
Revenues and Fuel Costs Deferred - Net . . . . . . . (7,719) (5,523) 18,183
Deferred and Non-Current Federal Income Taxes
and Credits - Net . . . . . . . . . . . . . . . . . 9,987 4,040 (1,727)
Environmental Remediation Costs - Net. . . . . . . . (3,793) 1,588 609
Changes in:
Accounts Receivable. . . . . . . . . . . . . . . . 2,940 (15,046) 809
Inventories. . . . . . . . . . . . . . . . . . . . (8,088) 2,423 (5,754)
Prepayments and Other Current Assets . . . . . . . 450 (394) 3,380
Accounts Payable and Other Accrued Liabilities . . 5,985 8,910 4,411
Prepaid Gross Receipts and Franchise Taxes - Net . 2,047 (3,845) (13,276)
Other - Net. . . . . . . . . . . . . . . . . . . . . 871 4,875 (2,140)
Net Cash Provided by Operating Activities. . . . . . . 41,050 30,788 31,419
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures, Cost of Removal & Salvage. . . . (40,371) (40,978) (36,119)
Net Cash Used in Investing Activities. . . . . . . . . (40,371) (40,978) (36,119)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Borrowings from (Repayments of) Lines of Credit. . 32,000 (3,900) (950)
Principal Repayments of Long-Term Debt . . . . . . . . (12,256) (6,851) (5,570)
Dividends on Common Stock. . . . . . . . . . . . . . . (15,057) (16,000) (13,537)
Repurchase of Preferred Stock. . . . . . . . . . . . . (90) (90) (90)
Proceeds from Sale of Long-Term Debt . . . . . . . . . 0 30,000 15,000
Additional Investment by Shareholder . . . . . . . . . 0 6,000 10,000
Net Cash Provided by Financing Activities. . . . . . . 4,597 9,159 4,853
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . 5,276 (1,031) 153
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . 2,193 3,224 3,071
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . .$ 7,469 $ 2,193 $ 3,224
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (Net of Amounts Applicable to LGAC
Overcollections and Amounts Capitalized). . . . .$ 19,985 $ 16,632 $ 15,427
Income Taxes (Net of Refunds). . . . . . . . . . .$ 1,733 $ 5,976 $ 4,023
</TABLE>
The accompanying notes to the financial statements are an integral part
of these statements.
F-6
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Entity - These financial statements present the accounts of
South Jersey Gas Company (SJG). SJG has no subsidiaries. South
Jersey Industries, Inc. (Industries) owns all of the outstanding common
stock of SJG. Certain reclassifications have been made of previously
reported amounts to conform with classifications used in the current year.
Estimates and Assumptions - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and related disclosures. Therefore,
actual results could differ from those estimates.
Regulation - SJG is subject to the rules and regulations of the New
Jersey Board of Public Utilities (BPU) and maintains its accounts in
accordance with the prescribed Uniform System of Accounts of that Board
(See Notes 2 & 13).
Utility Revenues - SJG bills most of its customers on a monthly cycle
basis, although certain commercial and industrial customers are billed at
or near the end of each month. An accrual is made to recognize the unbilled
revenues from the date of the last bill to the end of period.
In accordance with a BPU order, SJG is allowed to recover the excess
cost of gas sold over the cost included in base rates through the Levelized
Gas Adjustment Clause (LGAC). This collection is made on a forecasted basis
upon BPU order. Under-recoveries and over-recoveries of gas costs are
deferred and included in the determination of the following year's LGAC.
Interest is paid on overcollected LGAC balances based on SJG's return on
rate base as determined in its base rate proceedings.
SJG's tariff also includes a Temperature Adjustment Clause (TAC) and a
Remediation Adjustment Clause (RAC). These clauses are designed to reduce
the impact of extreme fluctuations in temperatures on SJG and its
customers, and recover costs incurred in the remediation of former gas
manufacturing plants, respectively. TAC adjustments affect revenue, income
and cash flows since extremely cold weather can generate credits to
customers, while extremely warm weather during the winter season can result
in additional billings to customers (See Note 13). RAC adjustments do not
directly affect earnings because costs are deferred and recovered through
rates over 7-year amortization periods (See Note 12).
Property, Plant & Equipment - Utility plant is stated at original cost
as defined for regulatory purposes.
F-7
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
The cost of additions, replacements and renewals of property is charged to
the appropriate plant account.
Utility plant by major classes as December 31, 1996 and 1995 is as follows
(in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Utility Plant:
Production Plant $ 996 $ 993
Storage Plant 8,092 7,979
Transmission Plant 61,169 59,102
Distribution Plant 477,968 445,305
General Plant 25,142 24,578
Intangible Plant 181 181
-------- --------
Utility Plant in Service 573,548 538,138
Construction Work in Progress 2,434 1,189
Gas Stored - Base Gas 1,322 1,322
-------- --------
Total Utility Plant $577,304 $540,649
======== ========
</TABLE>
Depreciation and Amortization - Depreciation of gas utility plant is
provided on a straight-line basis over the estimated remaining lives of the
various classes of property. These estimates are periodically reviewed and
adjustments are made as required after BPU approval. The composite rate per
annum for all depreciable utility property was approximately 2.8% in 1996,
1995 and 1994. Generally, with the exception of extraordinary retirements,
accumulated depreciation is charged with the cost of depreciable utility
property retired, together with removal costs less salvage. The gas plant
acquisition adjustment is being amortized on a straight-line basis over a
40-year period. The unamortized balance amounting to $2.0 million at
December 31, 1996 is not included in rate base.
New Accounting Pronouncement - In March 1995, the Financial Accounting
Standards Board (FASB) issued FASB No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of". SJG
adopted this statement in 1996. It requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The
adoption of FASB No. 121 had no impact on the financial statements.
Federal Income Taxes - Deferred Income Taxes are provided for
temporary differences between book and taxable income (See Notes 5 & 6).
Statements of Cash Flows - For purposes of reporting cash flows, all
highly liquid investments with original maturities of three months or less
are considered cash equivalents.
2. RECENT REGULATORY ACTIONS:
On December 14, 1994, the BPU granted SJG a rate increase of $12.1
million based on a 9.51% rate of return on rate base, which included an
11.5% return on equity. Nearly the entire amount of the increase comes from
the residential, commercial and small industrial customer classes. In
addition, SJG is allowed to retain the first $4.0 million of pre-tax
interruptible and off-system margins combined and 20% of margins above that
level. As part of the tariff changes approved, SJG also implemented tariffs
which give large industrial and commercial customers more opportunities to
manage their own gas supplies. These changes do not have a negative impact
on SJG's net income.
F-8
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
2. RECENT REGULATORY ACTIONS: (Continued)
In December 1994, the BPU ordered a $3.5 million customer refund which
resulted in an unfavorable impact of $2.3 million (net of taxes), or $0.97
per share, in 1994 net income. This refund was part of a global settlement
which expedited the resolution of a series of matters pending before the
BPU, including SJG's 1994 rate case and 1993-1994 LGAC. Customers received
the $3.5 million refund through the 1994-1995 LGAC.
On April 10, 1996, SJG received approval from the BPU to increase its
rates by approximately $8.0 million, or 2.9%, through its LGAC. The primary
reason for the LGAC increase was higher natural gas costs incurred by the
Company during November and December 1995 due to weather that was colder
than normal. The BPU also approved an agreement among the parties to the
case that the renegotiations of its gas supply agreements were reasonable
and that the parties will not challenge the reasonableness or prudence of
the agreements as originally made or as renegotiated.
On June 20, 1996, SJG received approval from the BPU to recover
environmental remediation costs incurred during the two-year period ended
July 31, 1995 totaling $1.5 million, net of insurance recoveries (See
Note 12).
On September 6, 1996, SJG made its annual LGAC and TAC filings with
the BPU. SJG proposed a decrease to the LGAC of $1.4 million. In addition,
a credit resulting from the TAC of $2.5 million was filed and, on January
27, 1997, the BPU approved a revenue reduction for this credit (See Note
13). Also filed with the BPU on September 6, 1996, was an update to SJG's
RAC which proposed an increase of approximately $655,000.
3. RELATED PARTY TRANSACTIONS:
SJG has contracted with R & T Group, Inc., a wholly owned subsidiary
of Industries, for general utility construction and environmental
remediation services costing approximately $7,257,800, $6,852,700 and
$6,187,200 for the years ended December 31, 1996, 1995 and 1994,
respectively. The amount payable to R & T Group, Inc. relating to these
services was $1,445,100 and $902,700 at December 31, 1996 and 1995,
respectively.
SJG engages in sales of natural gas for resale pursuant to Section
284.402 of the Regulations of the Federal Energy Regulatory Commission
which included sales to South Jersey Energy Company (SJE) and South Jersey
Fuel Company (SJF), affiliates by common ownership of Industries. Sales to
SJE approximated $339,700, $2,365,400 and $13,311,200 for the years ended
December 31, 1996, 1995 and 1994, respectively. The amount due from SJE
relating to these sales was $771,800
F-9
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
3. RELATED PARTY TRANSACTIONS: (Continued)
at December 31, 1995. SJG began engaging in sales with SJF during December
1995. Such sales approximated $663,800 and $25,000 for the years ended
December 31, 1996 and 1995, respectively.
4. REDEEMABLE CUMULATIVE PREFERRED STOCK:
The shares of Cumulative Preferred Stock, Series A and Series B, are
redeemable at the option of SJG in whole or in part, plus accrued
dividends, at a premium of 1.5% of par value on the Series A shares and at
par value on the Series B shares.
SJG is required to offer annually to purchase 900 and 1,500 shares of
its Cumulative Preferred Stock, Series A and Series B, respectively, at par
value, plus accrued dividends.
If preferred stock dividends are in arrears, no dividends may be
declared or paid, or other distribution made on the Common Stock of SJG. If
four or more quarterly dividends are in arrears, the Preferred Shareholders
may elect a majority of SJG's Directors.
5. FEDERAL INCOME TAXES:
SJG is included in the consolidated Federal Income tax return filed by
Industries. The actual taxes, including credits, are allocated by
Industries to its subsidiaries generally on a separate return basis. Income
tax expense applicable to operations differs from the tax that would have
resulted by applying the statutory rate to income from operations before
Federal Income Tax for the following reasons (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Tax at Statutory Rate $10,506 $ 8,844 $ 7,203
Increase (Decrease)
Resulting from:
Amortization of Investment
Tax Credits (ITC) (392) (390) (377)
Liberalized Depreciation
Under Book Depreciation
on Utility Plant 664 664 264
Other - Net (151) 160 16
Subtotal 10,627 9,278 7,106
Tax on Customer
Refund Obligation 0 0 (1,225)
Net Federal Income Taxes $10,627 $ 9,278 $ 5,881
======= ======= =======
</TABLE>
F-10
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. FEDERAL INCOME TAXES: (Continued)
The provision for Federal Income Taxes is comprised of the following
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Current $ 640 $ 5,238 $ 8,833
Deferred:
Excess of Tax Depreciation
Over Book Depreciation - Net 4,608 4,262 3,787
Deferred Fuel Costs 3,340 1,380 (5,536)
Environmental Remediation
Costs - Net 1,214 (556) (207)
Amortization of Gross
Receipts Taxes (140) (136) (136)
Alternative Minimum Tax 1,929 0 380
Other - Net (572) (520) 362
Total Deferred 10,379 4,430 (1,350)
ITC (392) (390) (377)
Tax on Customer Refund
Obligation 0 0 (1,225)
Net Federal Income Taxes $10,627 $ 9,278 $ 5,881
======= ======= =======
</TABLE>
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of SJG's net deferred tax liability at December 31,
1996 and 1995, are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred Tax Liabilities:
Tax Depreciation over
Book Depreciation $60,123 $57,071
Difference between Book and
Tax Basis of Property 5,215 4,756
Deferred Fuel Costs 4,720 1,380
Deferred Regulatory Costs 1,189 1,335
Environmental Remediation Costs 5,332 4,118
Excess Protected 3,550 3,632
</TABLE>
F-11
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
5. FEDERAL INCOME TAXES: (Continued)
<TABLE>
<S> <C> <C>
Gross Receipts Taxes 1,564 1,704
Other 1,984 2,214
Total Deferred
Tax Liabilities 83,677 76,210
Deferred Tax Assets:
Alternative Minimum Tax 694 3,192
ITC Basis Gross Up 3,207 3,409
Other 1,361 1,599
Total Deferred Tax Assets 5,262 8,200
Net Deferred Tax Liability $78,415 $68,010
======= =======
</TABLE>
As of December 31, 1996 and 1995, income taxes due from Industries
were approximately $2,387,700 and $491,000, respectively.
6. DEFERRED DEBITS AND CREDITS - FEDERAL AND OTHER TAXES:
The primary asset created as a result of adopting FASB No. 109,
"Accounting for Income Taxes", was income taxes - flowthrough depreciation
in the amount of $17.6 million as of January 1, 1993. This amount
represented the recording of the net tax effect of excess liberalized
depreciation over book depreciation on utility plant because of temporary
differences for which, prior to FASB No. 109, deferred taxes had not
previously been provided. These tax benefits were previously flowed through
in rates. As a result of positions taken in the 1994 rate case, the
amortization of the asset is being recovered through rates over an 18-year
period which began in December 1994.
The ITC attributable to SJG were deferred and continue to be amortized
at the annual rate of 3%, which approximates the life of the related
assets.
Effective March 1, 1978, SJG began and continued to accrue through
1991 for Gross Receipts and Franchise Taxes (GRAFT) on current revenues
rather than on the previous basis of prior period revenues. The one-time
increase resulting from this change has been deferred and is being
amortized on a straight-line basis to operations over a 30-year period. In
June 1991, New Jersey adopted GRAFT legislation
F-12
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
6. DEFERRED DEBITS AND CREDITS - FEDERAL AND OTHER TAXES:
(Continued)
accelerating tax payments, the carrying costs on which are being recovered
from ratepayers. The legislation also changed the basis to gas volumes
rather than percentage of revenue.
7. LONG-TERM DEBT: (A)
<TABLE>
<CAPTION>
Principal Outstanding
December 31,
(In Thousands)
1996 1995
<S> <C> <C>
First Mortgage Bonds: (B)
8 1/4% Series due 1996 (C). . . . $ 0 $ 1,998
8 1/4% Series due 1998 (C). . . . 0 3,260
9.2% Series due 1998 (D). . . . 0 2,667
8.19% Series due 2007. . . . . . 25,000 25,000
10 1/4% Series due 2008. . . . . . 25,000 25,000
9% Series due 2010. . . . . . 30,625 32,813
6.95% Series due 2013. . . . . . 35,000 35,000
Unsecured Notes:
Term Note, 8.47% due 2001 (E). . . 10,714 12,857
Debenture Notes, 8.6% due 2010 . . 30,000 30,000
Total Long-Term Debt Outstanding . . 156,339 168,595
Less Current Maturities. . . . . . . 6,603 11,811
Long-Term Debt . . . . . . . . . . . $149,736 $156,784
======== ========
</TABLE>
(A) Long-Term Debt Maturities and Sinking Fund Requirements for the
succeeding five years as of December 31, 1996, are as follows: 1997,
$6,603,357; 1998, $8,876,357; 1999, $8,876,357; 2000, $8,876,357; and
2001, $11,876,358.
(B) SJG's First Mortgage dated October 1, 1947, as supplemented, securing
the First Mortgage Bonds constitutes a direct first mortgage lien on
substantially all utility plant. The First Mortgage Bonds also require
an annual replacement fund, which may be met by the deposit of cash
funds with the Trustee or by the utilization of bondable property
additions at 166.67% of cash requirements. SJG expects to continue
to satisfy this requirement with property additions in each of the
next five years.
(C) On January 31, 1996, SJG redeemed $1,998,000 of its 8 1/4% Series
First Mortgage Bonds due 1996, without premium, and $3,260,000 of its
8 1/4% Series First Mortgage Bonds due 1998, with a premium of
$22,168.
F-13
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
7. LONG-TERM DEBT: (Continued)
(D) On April 1, 1996, SJG redeemed $2,666,668 of its 9.2% Series First
Mortgage Bonds due 1998, with a premium of $62,874.
(E) An additional $5,000,000 revolving credit facility is available under
the terms of this agreement.
8. FINANCIAL INSTRUMENTS:
Long-Term Debt - The fair values of SJG's long-term debt, including
current maturities, as of December 31, 1996 and 1995, are estimated to be
$166.6 million and $189.1 million, respectively, (carrying amounts $156.3
million and $168.6 million, respectively). They are estimated based on the
interest rates available to SJG at each respective balance sheet date for
debt with similar terms and remaining maturities. SJG retires higher cost
debt whenever it is cost effective to do so within the constraints of the
respective debt covenants.
Other Financial Instruments - The carrying amounts of SJG's other
financial instruments approximate their fair values at December 31, 1996
and 1995, respectively.
9. UNUSED LINES OF CREDIT AND COMPENSATING BALANCES:
Unused lines of credit available at December 31, 1996 were
$24,700,000. Borrowings under these lines of credit are at market rates
which approximated 5.85% and 6.0% at December 31, 1996 and 1995,
respectively. Demand deposits are maintained with lending banks on an
informal basis and do not constitute compensating balances.
10. SHAREHOLDER'S EQUITY:
SJG is restricted under its First Mortgage Indenture, as supplemented,
as to the amount of cash dividends or other distributions that may be paid
on its common stock. SJG had retained earnings free of such restriction of
approximately $49,511,200 at December 31, 1996.
On February 28, 1995 and July 29, 1994, SJG received $6.0 million and
$10.0 million, respectively, as contributions of capital from Industries.
Contributions of capital are credited to Other Paid-In Capital and Premium
on Common Stock. There have been no other changes in Common Stock or Other
Paid-In Capital and Premium on Common Stock during 1996, 1995 and 1994.
F-14
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
11. RETIREMENT BENEFIT PLANS:
Pensions - SJG has defined benefit retirement plans that provides
annuity payments to substantially all full-time regular employees upon
retirement. SJG pays the entire cost of the plans. Approximately 60% of the
plans' assets are invested in securities which provide for fixed income and
a return of principal. The remaining assets are invested in professionally
managed common stock portfolios. Net periodic pension cost, including the
amortization of the cost of past service benefits over a period of
approximately 30 years, included the following components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost - benefits
earned during the period $ 1,589 $ 1,443 $ 1,432
Interest cost on projected
benefit obligation 2,839 2,610 2,392
Actual return on
plan assets (2,782) (2,669) (950)
Net amortization
and deferral 458 575 (1,093)
Net periodic pension cost $ 2,104 $ 1,959 $ 1,781
======= ======= =======
<CAPTION>
Assumptions as of December 31 were:
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 7.5%
Rate of increase in
compensation levels 4.6% 4.6% 4.6%
Expected long-term rate
of return on assets 8.5% 8.5% 8.5%
</TABLE>
The following table sets forth the plans' funded status at
December 31, 1996 and 1995.
Actuarial present value of benefit obligations (in thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Vested benefit obligation $(35,094) $(32,837)
======== ========
Accumulated benefit obligation $(35,379) $(33,043)
======== ========
Projected benefit obligation $(45,002) $(41,802)
Plan assets at fair value 36,326 33,257
Projected benefit obligation
in excess of plan assets (8,676) (8,545)
</TABLE>
F-15
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
11. RETIREMENT BENEFIT PLANS: (Continued)
<TABLE>
<S> <C> <C>
Unrecognized net loss 4,226 4,085
Prior service cost not yet
recognized in net periodic
pension cost 1,612 1,756
Unrecognized net obligation
at January 1 609 697
Pension liability recognized in
the balance sheet $ (2,229) $ (2,007)
======== ========
</TABLE>
Postretirement Benefits Other Than Pensions - SJG provides
postretirement health care and life insurance benefits to certain retired
employees. Effective January 1, 1993, SJG adopted FASB No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". This statement
requires SJG to accrue the estimated cost of retiree benefit payments
during the years the employee provides services. SJG previously expensed
the cost of these benefits, which are principally health care, on a
pay-as-you-go (PAYGO) basis. SJG has elected to recognize the unfunded
transition obligation over a period of 20 years.
SJG has previously recovered these costs on a PAYGO basis through its
rates. As part of SJG's 1994 base rate case settlement, SJG was granted
full recovery of the current service cost component of the annual cost in
addition to continued recovery of PAYGO costs. The BPU also approved
recovery of previously deferred 1993 and 1994 service costs over a 5-year
period beginning in December 1994. Beginning in 1995, an external trust was
established to fund a portion of the obligation recovered from ratepayers
as a part of the BPU settlement. Gross contributions to this trust totaled
$2.1 million in both 1996 and 1995. However, due to the timing of 1995
contributions, the return stated in the table below does not reflect a full
year's return. SJG is also authorized to continue recording a regulatory
asset for the amount by which the cost exceeds the current level recovered
in rates. The recovery of this regulatory asset, which amounted to
approximately $5.2 million at December 31, 1996, is being addressed in
SJG's current base rate case proceeding and a BPU generic proceeding. It is
expected that the regulatory asset will be recovered from ratepayers (See
Note 13).
Net postretirement benefit cost for 1996, 1995 and 1994 consisted of
the following components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Service cost - benefits
earned during the period $ 883 $ 841 $ 798
Actual return on plan assets (164) (26) 0
</TABLE>
F-16
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
11. RETIREMENT BENEFIT PLANS: (Continued)
<TABLE>
<S> <C> <C> <C>
Interest cost on accumulated
postretirement benefit
obligation 1,381 1,287 1,190
Amortization of transition
obligation 779 779 779
Subtotal 2,879 2,881 2,767
Other Adjustments 0 (2,630) 655
Net postretirement
benefit costs as
reported in the
financial statements $ 2,879 $ 251 $ 3,422
======= ======= =======
</TABLE>
The amounts expensed in 1996, 1995 and 1994 were $1.6 million, $1.6
million and $0.5 million, respectively.
The following table sets forth the life and health care plans' funded
status at December 31, 1996 and 1995.
Actuarial present value of accumulated postretirement benefit obligations
(in thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Retirees $ (4,739) $ (4,590)
Other active plan participants (16,163) (14,820)
Accumulated postretirement
benefit obligation (20,902) (19,410)
Fair value of plan assets 2,835 1,433
Accumulated postretirement
benefit obligation in
excess of plan assets (18,067) (17,977)
Unrecognized net loss/(gain) 75 (45)
Unrecognized transition obligation 12,471 13,250
Postretirement benefit liability
recognized in the balance sheet $ (5,521) $ (4,772)
======== ========
</TABLE>
In 1995, SJG recalculated the net postretirement benefit cost and
present value of accumulated postretirement benefit for the years 1994 and
1993 utilizing assumptions based on corrected data. The effects of the
recalculation were recorded in 1995 since the changes did not materially
affect previously reported net income or retained earnings.
F-17
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
11. RETIREMENT BENEFIT PLANS: (Continued)
The assumed health care cost trend rates used in measuring the
accumulated postretirement benefit obligation as of December 31, 1996 are
as follows: Medical and Drug - 7.55% for participants age 65 or older and
10.55% for participants under age 65 in 1996, both grading to 5.75% in
2008. Dental - 7.69% in 1996, grading to 5.75% in 2003. If the health care
cost trend rate assumptions were increased by 1%, the accumulated
postretirement benefit obligation as of December 31, 1996, would be
increased by $2.9 million. The effect of this change on the sum of the
service cost and interest cost would be an increase of $0.4 million. An
assumed discount rate of 7.5% and an expected return on plan assets of
8.5% were used in determining the accumulated postretirement benefit
obligation as of December 31, 1996 and 1995.
12. COMMITMENTS AND CONTINGENCIES:
Construction Commitments - The estimated cost of construction and
environmental remediation programs of SJG for the year 1997 aggregates
$57.7 million and, in connection therewith, certain commitments have been
made.
Gas Supply Contracts - SJG, in the normal course of conducting
business, has entered into long-term contracts for natural gas supplies,
firm transportation, and firm gas storage service. The earliest expiration
of any of the gas supply contracts is 1998. All of the transportation and
storage service agreements between SJG and its interstate pipeline
suppliers are provided under Federal Energy Regulatory Commission (FERC)
approved tariffs. SJG's cumulative obligation for demand charges paid to
its suppliers for all of these services is approximately $5.3 million per
month which is recovered on a current basis through the LGAC.
Pending Litigation - The Company is subject to claims which arise in
the ordinary course of its business and other legal proceedings. A group of
Atlantic City casinos filed a petition with the BPU on January 16, 1996,
alleging overcharges of over $10.0 million including interest. Management
believes that the ultimate liability with respect to these actions will not
materially affect SJG's financial position or results of operations.
Environmental Remediation Costs - SJG has incurred and recorded
certain costs for environmental remediation of sites where SJG or
predecessor companies operated gas manufacturing plants. Manufactured gas
operations were terminated at all SJG sites more than 30 years ago.
F-18
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
12. COMMITMENTS AND CONTINGENCIES: (Continued)
Since the early 1980s, SJG has recorded environmental remediation
costs of $70.8 million, of which $29.1 million has been expended as of
December 31, 1996. SJG, with the assistance of an outside consulting firm,
estimates that total future expenditures to remediate the sites will range
from $41.7 million to $150.2 million. The lower end of this range has been
recorded as a liability and is reflected on the balance sheet under the
captions "Current Liabilities" and "Deferred Credits and Other Non-Current
Liabilities". Recorded environmental remediation costs do not directly
affect earnings because those costs are deferred and, when expended,
recovered through rates over 7-year amortization periods. Amounts accrued
for future expenditures have not been adjusted for future insurance
recoveries, which management is pursuing. SJG has received $4.2 million of
insurance recoveries as of December 31, 1996. These proceeds were first
used to offset legal fees incurred in connection with those recoveries and
the excess was used to reduce the balance of deferred environmental
remediation costs. Recorded amounts include estimated costs to be incurred
based on projected investigation and remediation work plans using existing
technologies. Actual expenditures could differ from the estimates due to
the long-term nature of the projects and changing technology, government
regulations and site specific requirements.
SJG has established a regulatory asset for these costs and is
recovering amounts expended over 7-year amortization periods, as authorized
by the BPU. As of December 31, 1996, SJG has unamortized remediation
expenditures of $15.6 million which are reflected on the balance sheet
under the caption "Deferred Debits". Since BPU approval of the RAC
mechanism in August 1992, SJG has recovered $9.3 million through rates as
of December 31, 1996.
13. SUBSEQUENT EVENTS:
On January 27, 1997, the BPU granted SJG a rate increase of $6.0
million based on a 9.62% rate of return on rate base, which included an
11.25% return on equity. The majority of this increase will come from
residential and small commercial customers. As part of this rate
increase, SJG now retains the first $5.0 million of pre-tax margins
generated by interruptible and off-system sales and transportation, as
well as 20% of pre-tax margins above that level. In 1997 and 1998, this
$5.0 million threshold will be increased by the annual revenue
requirement associated with specified major construction projects. In
1997, SJG will file to recover additional postretirement benefit costs of
approximately $1.1 million annually. This recovery is expected to begin
in 1998 (See Note 11).
F-19
<PAGE>
SOUTH JERSEY GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
(Continued)
13. SUBSEQUENT EVENTS: (Continued)
As part of the tariff changes approved, SJG further expanded the
choices available to commercial and industrial customers. During 1997, SJG
will also implement a firm transportation pilot program for up to 10,000
residential customers. This program will have no impact on net income.
In addition to the rate increase, the BPU approved a revenue reduction
in SJG's Temperature Adjustment Clause, a mechanism designed to reduce the
impact of extreme fluctuations in temperature on SJG and its customers. For
the period ended May 31, 1996, weather in SJG's service area was
significantly colder than the 20-year average resulting in a $2.5 million
credit due to customers' bills which is already reflected in the 1996
results of operations.
F-20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
South Jersey Gas Company
-------------------------------
(Registrant)
Date: March 7, 1997 By: /s/ George L. Baulig
---------------- ----------------------------------
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Page
Number ------
<S> <C> <C>
(3)(a) Certificate of Incorporation
of SJG (filed herewith).
(3)(b) Bylaws of SJG (filed
herewith).
(4)(a) Form of Stock Certificate
for common stock (filed
herewith).
(4)(b)(i) First Mortgage Indenture *
dated October 1, 1947.
(4)(b)(ii) Form of South Jersey Gas *
Company First Mortgage
Bond, 8-1/4% Series due 1996.
(4)(b)(iii) Form of South Jersey Gas *
Company First Mortgage
Bond, 8-1/4% Series due 1998.
(4)(b)(iv) Twelfth Supplemental Inden- *
ture, dated as of June 1,
1980.
(4)(b)(v) Fifteenth Supplemental *
Indenture, dated July
1, 1986, 9.2% Series
due 1998.
(4)(b)(vi) Sixteenth Supplemental *
Indenture dated as of
April 1, 1988, 10-1/4%
Series due 2008.
(4)(b)(vii) Seventeenth Supplemental *
Indenture dated as of
May 1, 1989.
(4)(b)(viii) Eighteenth Supplemental *
Indenture, dated as of
March 1, 1990.
(4)(b)(ix) Nineteenth Supplemental *
Indenture, dated as of
April 1, 1992.
(4)(b)(x) Twentieth Supplemental *
Indenture, dated as of
June 1, 1993.
(4)(c) Indenture dated as of *
January 31, 1995; 8.60%
Debenture Notes due
February 1, 2010
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Incorporated by Reference From
Number Exhibit Reference Document
<S> <C> <C> <C>
(3)(a) Certificate of Incorporation
of SJG (filed herewith).
(3)(b) Bylaws of SJG (filed
herewith).
(4)(a) Form of Stock Certificate
for common stock (filed
herewith).
(4)(b)(i) First Mortgage Indenture (4)(b)(i) Form 10-K of
dated October 1, 1947. SJI for 1987
(1-6364)
(4)(b)(ii) Form of South Jersey Gas (4)(b)(vii) Form 10-K of
Company First Mortgage SJI for 1980
Bond, 8-1/4% Series due 1996. (1-6364)
(4)(b)(iii) Form of South Jersey Gas (4)(b)(viii) Form 10-K of
Company First Mortgage SJI for 1980
Bond, 8-1/4% Series due 1998. (1-6364)
(4)(b)(iv) Twelfth Supplemental Inden- 5(b) Form S-7 of
ture, dated as of June 1, SJI (2-68038)
1980.
(4)(b)(v) Fifteenth Supplemental (4)(b)(xiii) Form 10-K of
Indenture, dated July SJI for 1986
1, 1986, 9.2% Series (1-6364)
due 1998.
(4)(b)(vi) Sixteenth Supplemental (4)(b)(xv) Form 10-Q of
Indenture dated as of SJI for
April 1, 1988, 10-1/4% quarter ended
Series due 2008. March 31,
1988 (1-6364)
(4)(b)(vii) Seventeenth Supplemental (4)(b)(xv) Form 10-K of
Indenture dated as of SJI for 1989
May 1, 1989. (1-6364)
(4)(b)(viii) Eighteenth Supplemental (4)(e) Form S-3 of
Indenture, dated as of SJI(33-36581)
March 1, 1990.
(4)(b)(ix) Nineteenth Supplemental (4)(b)(xvii) Form 10-K of
Indenture, dated as of SJI for 1992
April 1, 1992. (1-6364)
(4)(b)(x) Twentieth Supplemental (4)(b)(xviii) Form 10-K of
Indenture, dated as of SJI for 1993
June 1, 1993. (1-6364)
(4)(c) Indenture dated as of (4)(c) Form 10-K of
January 31, 1995; 8.60% SJI for 1994
Debenture Notes due (1-6364)
February 1, 2010
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
Exhibit Page
Number ----
<S> <C> <C>
(9) None
(10)(a) Gas storage agreement (GSS) *
between South Jersey Gas
Company and Transco,
dated October 1, 1993.
(10)(b) Gas storage agreement (S-2) *
between South Jersey Gas
Company and Transco,
dated December 16, 1953.
(10)(c) Gas storage agreement (LG-A) *
between South Jersey Gas
Company and Transco,
dated June 3, 1974.
(10)(d) Gas storage agreement (WSS) *
between South Jersey Gas
Company and Transco, dated
August 1, 1991.
(10)(e)(i) Gas storage agreement (LSS) *
between South Jersey Gas
Company and Transco,
dated October 1, 1993.
(10)(e)(ii) Gas storage agreement *
(SS-1) between South Jersey
Gas Company and Transco,
dated May 10, 1987 (effective
April 1, 1988).
(10)(e)(iii) Gas storage agreement *
(ESS) between South Jersey
Gas Company and Transco,
dated November 1, 1993.
(10)(e)(iv) Gas transportation service *
agreement between South
Jersey Gas Company and
Transco, dated April 1, 1986.
(10)(e)(v) Service agreement (FS) *
between South Jersey Gas
Company and Transco, dated
August 1, 1991.
(10)(e)(vi) Service agreement (FT) *
between South Jersey Gas
Company and Transco, dated
February 1, 1992.
(10)(e)(vii) Service agreement *
(Incremental FT)
between South Jersey Gas
Company and Transco,
dated August 1, 1991.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Page
Number ----
<S> <C> <C>
(10)(e)(viii) Gas storage agreement (SS-2) *
between South Jersey Gas
company and Transco, dated
July 25, 1990.
(10)(e)(ix) Gas Transportation *
Service Agreement between
South Jersey Gas Company
and Transco, dated
December 20, 1991.
(10)(e)(x) Amendment to Gas *
Transportation Agreement,
dated December 20, 1991
between South Jersey Gas
Company and Transco, dated
October 5, 1993.
(10)(f) Gas Transportation Service *
Agreement (FTS) between
South Jersey Gas Company
and Equitable Gas Company,
dated November 1, 1986.
(10)(g)(i) Gas Transportation Service *
Agreement (TF) between
South Jersey Gas Company
CNG Transmission Corporation
dated October 1, 1993.
(10)(g)(ii) Gas purchase agreement *
between South Jersey Gas
Company and ARCO Gas Market-
ing, Inc., dated March 5,
1990.
(10)(g)(iii) Gas Transportation *
Service Agreement (FTS
1) between South Jersey
Gas Company and Columbia Gulf
Transmission Company, dated
November 1, 1993.
(10)(g)(iv) Assignment Agreement *
capacity and service
rights (FTS-2) between South
Jersey Gas Company and Columb
Gulf Transmission Company,
dated November 1, 1993.
(10)(g)(v) FTS Service Agreement *
No. 39556 between South
Jersey Gas Company and
Columbia Gas Transmission
Corporation, dated
November 1, 1993.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Page
----
<S> <C> <C>
(10)(g)(vi) FTS Service Agreement *
No. 38099 between South
Jersey Gas Company and
Columbia Gas Transmission
Corporation, dated
November 1, 1993.
(10)(g)(vii) NTS Service Agreement *
No. 39305 between South
Jersey Gas Company and
Columbia Gas Transmission
Corporation, dated
November 1, 1993.
(10)(g)(viii) FSS Service Agreement *
No. 38130 between South
Jersey Gas Company and
Columbia Gas Transmission
Corporation, dated
November 1, 1993.
(10)(g)(ix) SST Service Agreement *
No. 38086 between South
Jersey Gas Company and
Columbia Gas Transmission
Corporation, dated
November 1, 1993.
(10)(g)(x) NS (Negotiated Sales) *
Service Agreement dated
December 1, 1994 between
South Jersey Gas Company
and Transco Gas Marketing
Company as agent for
Transcontinental Gas Pipe
Line
(10)(h)(i) Deferred Payment Plan for *
Directors of South Jersey
Industries, Inc., South
Jersey Gas Company, Energy
& Minerals, Inc., R&T Group
Inc. and South Jersey Energ
Company as amended and
restated October 21, 1994
(10)(h)(ii) Form of Deferred Compen- *
sation Agreement between
the Company and/or a sub-
sidiary and eleven of its
officers.
(10)(h)(iii) Schedule of Deferred *
Compensation Agreements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit Page
Number ----
<S> <C> <C>
(10)(h)(iv) Supplemental Executive *
Retirement Program, as
amended and restated ef-
fective September 1, 1991,
and form of Agreement
between certain Company
or subsidiary Company
officers
(10)(h)(v) Form of Officer Employment *
Agreement between certain
officers and either the
Company or its Subsidiaries
(10)(h)(vi) Schedule of Officer *
Employment Agreements
(10)(h)(vii) Officer Severance Benefit *
Program for all officers
(10)(h)(viii) Discretionary Incentive *
Bonus Program for all
officers and management
employees
(10)(h)(ix) The 1987 Stock Option and *
Stock Appreciation Rights
Plan including Form of
Agreement
(10)(i) Retirement Plan for *
Non-employee Members of
the Board of Directors
(10)(j) Executive Employment *
Agreement dated
June 17, 1994 between
the Company and William
F. Ryan, President and
Chief Executive Officer
(11) Not Applicable *
(12) Not Applicable *
(16) Not Applicable *
(21) Subsidiaries of the *
Registrant: None.
(24) Not applicable. *
(27) Financial Data Schedule
(Submitted only in electronic
format to the Securities
and Exchange Commission)
(99) None
* Not Applicable
</TABLE>
<PAGE>
EXHIBIT 3(a)
RESTATED CERTIFICATE OF INCORPORATION
OF
SOUTH JERSEY GAS COMPANY
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
SOUTH JERSEY GAS COMPANY
To: THE SECRETARY OF STATE
State of New Jersey
Pursuant to the provisions of Section 14A:9-5, Corporations, General, of
the New Jersey Statutes, the undersigned corporation hereby executes the
following Restated Certificate of Incorporation:
FIRST: The name of the corporation is SOUTH JERSEY GAS COMPANY.
SECOND: The purpose or purposes for which the corporation is organized are:
The manufacture and sale of gas and the products thereof and other like
articles.
In furtherance, and not in limitation, of the powers hereinabove stated, and
the general powers conferred by the laws of the State of New Jersey, it is
hereby expressly provided that the corporation shall have also the following
powers:
(a) To buy, sell, use, or manufacture gas of any type or composition
for fuel, heat, light and other purposes, and to manufacture, use, sell and
lease gas and vapor manufacturing and consuming machines, merchandise and
appliances; to buy, sell and refine oils, hydrocarbons, or other materials
for the manufacture of gas or vapor, or for the production of heat and
light; and to construct and maintain pipe lines, mains and conduits for the
storage, transportation, distribution, and sale of any such gas, oil or
other liquids.
(b) To mine, dig for, drill, explore, or otherwise obtain from the
earth, petroleum, rock or carbon oils, gas, natural gas and other mineral
substances; to store, manufacture, refine, prepare for market, buy, sell
and transport the same in the crude or refined condition; to acquire for
these purposes gas and oil lands, lease-
<PAGE>
2
holds, rights and other interests in real estate, to construct and maintain pipe
lines, mains and conduits for the transportation of gas or oil for the use of
the public generally or of said corporation; to lay, buy, lease, sell and
operate pipes, pipe lines, storage tanks and underground storage areas to be
used for the purpose of transporting and storing gas and oil, and of doing a
general pipe line and storage business; to construct and maintain gas wells, oil
wells and refineries, and to buy, sell and deal in gas, oil and mineral
substances, and to carry on in connection with any or all of said purposes the
business of buying and selling goods, wares and merchandise.
(c) To manufacture, purchase or otherwise acquire, hold, own, sell, assign
and transfer, invest, trade, deal in and deal with goods, wares and merchandise
and property of every class and description.
(d) To carry on any other business (whether manufacturing, commercial, or
otherwise) which may, in the discretion of the directors seem advantageous and
capable of being carried on in conjunction with the above or calculated directly
or indirectly to enhance the value of the corporation's property or rights.
(e) To acquire the good will, business, property and assets, and to assume
or undertake the whole or any part of the liabilities of any person, firm,
association, or corporation, and to pay for the same in cash, stock, bonds,
debentures or other securities of this corporation, or otherwise, as the
directors may determine.
(f) To purchase or otherwise acquire and to hold, sell, assign, transfer,
mortgage, pledge or otherwise dispose of shares of the capital stock and bonds,
debentures or other evidences of indebtedness created by any other corporation
or corporations, domestic or foreign, and, while the holder thereof, to exercise
all the rights and privileges of ownership, including the right to vote thereon.
(g) To purchase or otherwise acquire, to hold, own, maintain, work, mine
and develop, and to sell, convey, mortgage, lease or otherwise dispose of,
without limit as to amount, within or without the State of New Jersey, real
estate and real property, and any interest and rights therein.
<PAGE>
3
(h) To do all and everything necessary, suitable, convenient or proper
for the accomplishment of any of the purposes, or the attainment of any one
or more of the objects herein enumerated, or incidental to the powers
herein named, or which shall at any time appear conducive or expedient for
the protection or benefit of the corporation.
It is the intention that the objects, purposes and powers specified and
clauses contained in this ARTICLE SECOND, shall be nowise limited or restricted
by reference to or inference from the terms of any other clause of this or any
other paragraph in this Restated Certificate of Incorporation, but that the
objects, purposes and powers specified in each of the clauses of this paragraph
shall be regarded as independent objects, purposes and powers.
THIRD: The authorized capital stock of the corporation is four million
ninety-six thousand four hundred (4,096,400) shares, of which ninety-six
thousand four hundred (96,400) shares are Cumulative Preferred Stock of the par
value of one hundred dollars ($100) per share (hereinafter called "Preferred
Stock"), and four million shares (4,000,000) are Common Stock of the par value
of two dollars and fifty cents ($2.50) per share.
The designations, preferences, relative, participating, optional and other
special rights, qualifications, limitations and restrictions of the shares of
the capital stock of this corporation shall be as follows or as determined in
accordance with the following provisions:
Division A--The Preferred Stock
Section 1. Issue in Series.
(A) The corporation may, by resolution of its Board of Directors at any
time or from time to time, within the then total authorized amount of the
Preferred Stock, create an issue one or more series of the Preferred Stock and
fix the designations, descriptions and terms of any such series in the respects
in which the shares thereof may vary from the shares of other series of the
Preferred Stock as hereinafter provided, fix the authorized amount of any series
and increase or
<PAGE>
4
decrease such authorized amount from time to time, and establish or re-establish
any unissued shares of the Preferred Stock as shares of any series or as
authorized Preferred Stock which is not part of an existing series.
(B) The shares of the Preferred Stock may be divided into and issued in
series, from time to time, as herein provided, each of such series to be
distinctively designated. All shares of the Preferred Stock of all series shall
be of equal rank and all shares of any particular series of the Preferred Stock
shall be identical except as to the date or dates from which dividends thereon
shall be cumulative as provided in Section 2 of this Division A. The shares of
the Preferred Stock of different series, subject to any applicable provision of
law, may vary as to the following terms, which shall be fixed in the case of
each series, at any time prior to the issuance of the shares thereof, in the
resolutions of the Board of Directors providing for the creation of such series:
(i) The annual dividend rate (within such limits as shall be
permitted by law) for the particular series and the date from which
dividends shall be initially cumulative on all shares of such series;
(ii) The terms, including the redemption price or prices, on which
the particular series may be redeemed;
(iii) The amount or amounts per share for the particular series
payable to the holders thereof upon any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the
corporation, which may be different for voluntary and involuntary
liquidation, dissolution or winding up;
(iv) The terms and amount of the sinking fund or purchase fund, if
any, provided for the redemption or purchase of shares of the particular
series; and
(v) The terms and conditions, if any, upon which the holders of any
shares of a particular series may convert such shares into capital stock
of the corporation of any other class or classes or of any one or more
series of the same class or of another class or classes.
<PAGE>
5
Section 2. Dividends and Restrictions Thereon.
(A) The holders of each series of the Preferred Stock at the time
outstanding shall be entitled to receive, but only when and as declared by the
Board of Directors, out of funds legally available for the payment of dividends,
cumulative preferential dividends, at the annual dividend rate for the
particular series fixed therefor, and no more, as herein provided, payable
quarterly on the first days of January, April, July and October in each year, to
shareholders of record on the respective dates, not exceeding forty (40) days
preceding such dividend payment dates, fixed for the purpose by the Board of
Directors. No dividends shall be declared on any series of the Preferred Stock
in respect of any quarterly dividend period unless there shall likewise be
declared on all shares of all series of Preferred Stock at the time outstanding,
like proportionate dividends, ratably, in proportion to the respective annual
dividend rates fixed therefor, in respect of the same quarterly dividend period,
to the extent that such shares are entitled to receive dividends for such
quarterly dividend period be issued.
(B) If any dividends are declared or paid on the Preferred Stock in an
amount less than the full cumulative dividends accrued or in arrears on all
shares of Preferred Stock of all series outstanding, such amount shall be
divided between the different series in proportion to the aggregate amounts
which would be distributed to the Preferred Stock of each series if full
cumulative dividends were declared and paid thereon. The amount of any
deficiency for past dividend periods may be paid or declared and set apart at
any time without reference to any quarterly dividend payment date. No
accumulation of unpaid dividends on the Preferred Stock shall bear interest.
(C) Dividends remaining unclaimed by the holders of shares of Preferred
Stock for four and one-half (4 1/2) years after having been declared and made
available for payment to such holders of Preferred
<PAGE>
6
Stock shall revert to this corporation for its general corporate purposes and
the obligation of this corporation to pay such dividends shall at that time
cease and determine.
(D) So long as any shares of the Preferred Stock shall be outstanding,
this corporation shall not declare or pay any dividends on any shares of Common
Stock or on any other class of stock ranking junior as to dividends to the
Preferred Stock (other than dividends payable in stock ranking junior, as to
dividends and assets in liquidation, to the Preferred Stock), or make any other
distribution on any shares of such junior stock or make any expenditures for
the purchase, redemption or other retirement for a consideration of shares of
this corporation's stock of any class ranking junior as to assets in liquidation
to the Preferred Stock (other than in exchange for, or from the proceeds of any
substantially concurrent sale made of, other shares of stock of this corporation
ranking junior to the Preferred Stock as to dividends and assets in
liquidations), unless accrued dividends on all shares of the Preferred Stock for
all past quarterly dividend periods shall have been paid or declared and a sum
sufficient for the payment thereof set apart and the full dividend for the then
current quarterly dividend period shall have been or concurrently shall be paid
or declared and a sum sufficient for the payment thereof set apart.
(E) So long as any shares of the Preferred Stock shall be outstanding,
this corporation shall not declare or pay any dividends on any shares of Common
Stock or any other class ranking junior as to dividends to the Preferred Stock
(other than dividends payable in shares ranking junior, as to dividends and
assets in liquidation, to the Preferred Stock) or make any other distribution on
any shares of such junior stock, or make any expenditures for the purchase,
redemption or other retirement for a consideration of shares of this
corporation's stock of any class ranking junior as to assets in liquidation to
the Preferred Stock (other than in exchange for, or from the proceeds of any
substantially concurrent sale made of, other shares of stock of this corporation
ranking junior to the Preferred Stock as to dividends and assets in
liquidation), if the aggregate amount of all such dividends, distributions and
expenditures paid or made by this corporation after December 31, 1964, would
exceed the aggregate amount of this corporation's net income available for
dividends on junior stock accumulated after December 31, 1964, by this
corporation plus the sum of $1,000,000.
<PAGE>
7
Section 3. Redemption and Repurchase of Preferred Stock.
(A) The corporation may, at its option, expressed by resolution of its
Board of Directors, at any time or from time to time, redeem the whole or any
part of any series of the Preferred Stock which by its terms shall be redeemable
at the redemption price fixed for such series. Notice of any proposed
redemption of Preferred Stock shall be given by this corporation by mailing a
copy of such notice, at least thirty (30) days but not more than ninety (90)
days prior to the date fixed for such redemption, to holders of record of the
Preferred Stock to be redeemed at their respective addresses then appearing on
the books of the corporation. Any such redemption of shares of Preferred Stock
shall be in such amount, at such place and by such method, whether by lot or
pro rata, as shall from time to time be determined by resolution of the Board of
Directors. On or after the date specified in such notice, each holder of shares
of Preferred Stock called for redemption shall be entitled to receive, upon
presentation and surrender at the place designated in such notice of the
certificates for such shares of Preferred Stock held by him, the redemption
price thereof. Such certificates shall, if required by the corporation, be
properly endorsed in blank for transfer or accompanied by proper instruments of
assignment or transfer in blank, and bear all necessary stock transfer tax
stamps thereto affixed and cancelled.
(B) On and after the date fixed for redemption, if notice is given as
aforesaid, unless default is made by this corporation in providing funds
sufficient for such redemption at the time and place specified for the payment
thereof pursuant to such notice, all dividends on the shares called for
redemption shall cease to accrue; and on and after such redemption date, unless
default be made as aforesaid, or on and after the date of earlier deposit by
this corporation, in trust for the benefit of the holders of the shares of
Preferred Stock so called for redemption, of all funds necessary for such
redemption with a bank or trust company doing business in Atlantic City, New
Jersey or New York City, New York and having, according to its last published
statement, capital, surplus and undivided profits aggregating at least
$3,000,000 (provided, in the latter case, that such notice of redemption shall
have been mailed to the holders of record of the shares of Preferred Stock to be
redeemed or that the corporation shall have executed and delivered to the bank
or trust company with
<PAGE>
8
which such deposit of funds is made an instrument irrevocably authorizing it to
mail such notice at this corporation's expense), all rights of the holders of
the shares of Preferred Stock so called for redemption as shareholders of this
corporation, except only the right to receive when due the redemption funds to
which they are entitled without interest, shall cease and determine.
(C) Any funds deposited with a bank or trust company for the redemption of
shares of Preferred Stock, which shall remain unclaimed by the holders of such
Preferred Stock at the end of four and one-half (4 1/2) years after the
redemption date shall be paid over by such bank or trust company to this
corporation and thereby revert to the general funds of this corporation, to be
used by it for its general corporate purposes, and therefor such holders shall
have no claim against such bank or trust company or this corporation thereof.
Any interest which shall have been allowed by such bank or trust company on any
funds deposited with a bank or trust company for the redemption of shares of
Preferred Stock shall belong to this corporation and shall be paid to it from
time to time.
(D) Except as otherwise herein provided, the corporation may also from time
to time purchase shares of Preferred Stock of any series for any sinking or
purchase fund or otherwise at not exceeding the then applicable current
redemption prices for such series, including accrued dividends thereon to the
date of purchase, plus customary brokerage commissions.
(E) If and so long as there are dividends in arrears on any shares of
Preferred Stock of any series or a default exists in any sinking or purchase
fund obligation provided for the benefit of any series of Preferred Stock, the
corporation shall not redeem any shares of any series of Preferred Stock, unless
in connection therewith all of the then outstanding Preferred Stock of all
series is redeemed, or purchase any shares of any series of Preferred Stock
unless an offer to purchase all of the then outstanding shares of Preferred
Stock of all series is made to all of the holders thereof at the same percentage
of the then applicable current redemption prices for each such series.
(F) All or any shares of Preferred Stock at any time redeemed, purchased or
acquired by the corporation may thereafter, in the discretion of the Board of
Directors, be reissued or otherwise disposed
<PAGE>
9
of at any time or from time to time to the extent and in the manner permitted by
law, subject, however, to the limitations herein contained, or imposed by action
of the Board of Directors creating any series, upon the issue or reissue of
shares of such series of Preferred Stock.
Section 4. Liquidation Rights.
Before any amount shall be paid to, or any assets distributed among, the
holders of the Common Stock or of any other stock of the corporation ranking
junior as to dividends or assets to the Preferred Stock upon any involuntary
liquidation, dissolution or winding up of the corporation, and after paying or
providing for the payment of all creditors of the corporation, the holders of
all shares of each series of the Preferred Stock at the time outstanding shall
be entitled to receive, for each share of each series thereof, the par value
thereof together with accrued dividends, or, if such liquidation, dissolution or
winding up shall have been voluntary, an amount per share equal to the then
applicable current redemption price fixed for such series, including accrued
dividends. No payments on account of such distributive amounts shall be made to
the holders of shares of any series of the Preferred Stock unless there shall
likewise be paid at the same time to the holders of shares of each other series
of the Preferred Stock at the time outstanding like proportionate distributive
amounts ratably, in proportion to the full distributive amounts to which they
are respectively entitled as herein provided. If the assets of the corporation
available for distribution to holders of Preferred Stock shall not be sufficient
to make the full payment herein required, such assets shall be distributed to
the holders of the shares of the respective series of Preferred Stock then
outstanding, ratably, in proportion to the amounts payable on each share
thereof, including accrued dividends. The holders of the Preferred Stock of any
series shall not be entitled to receive any amounts with respect thereto upon
any liquidation, dissolution or winding up of the corporation other than the
amounts referred to in this Section. Neither the consolidation nor merger of the
corporation with or into any other corporation or corporations, nor the sale,
conveyance, exchange or transfer by the corporation of all or any part of its
assets, shall be deemed to be a liquidation, dissolution or winding up of the
corporation for the purposes of this Section.
<PAGE>
10
Section 5. Restrictions on Certain Corporate Action.
(A) So long as any shares of Preferred Stock of any series are outstanding,
the corporation shall not, without the consent (given in writing or by vote at a
meeting duly called and held for that purpose in the manner prescribed by the
by-laws of the corporation) of the holders of record of at least two-thirds in
interest of the shares of Preferred Stock then outstanding (any consent so given
to be binding upon subsequent holders of shares of Preferred Stock, whether
theretofore or thereafter issued):
(i) create or authorize or increase the authorized amount of any
shares of any class of stock ranking prior to the Preferred Stock as to
dividends or as to assets in liquidation, or create or authorize or
increase the authorized amount of any security convertible into, or
evidencing the right to purchase, shares of stock ranking prior to the
Preferred Stock; or
(ii) amend, alter, change or repeal any of the express terms of the
Preferred Stock or of any series of Preferred Stock then outstanding in a
manner prejudicial to the holders thereof, provided, however, that if any
such amendment, alteration, change or repeal would be prejudicial to the
holders of shares of one or more, but not all, of the series of Preferred
Stock at the time outstanding, such consent shall be required only from the
holders of record of two-thirds in interest of the outstanding shares of
any such series so affected; or
(iii) sell, lease, transfer, convey or otherwise dispose of all or
substantially all of the property or business of the corporation, unless
such sale, lease, transfer, conveyance or other disposition shall have been
required by order of a regulatory authority having jurisdiction in the
premises, provided, however, that no consent of the holders of Preferred
Stock shall be required under this provision in connection with the
creation of, or amendment to, any mortgage or other encumbrance securing
indebtedness upon any or all of the property of this corporation; or
(iv) merge or consolidate with or into any other corporation or
corporations, unless such merger or consolidation, or the issuance and
assumption of all securities to be issued or assumed in
<PAGE>
11
connection with any such merger or consolidation, shall have been ordered,
approved, authorized or permitted by a regulatory authority having
jurisdiction in the premises, provided, however, that no such consent of
the holders of Preferred Stock shall be required in connection with the
purchase or other acquisition by this corporation of franchises or assets
of another corporation in any manner which does not involve a merger or
consolidation or in connection with the merger into this corporation of
another corporation, all of the stock and other securities of which are at
the time owned by this corporation.
(B) So long as any shares of Preferred Stock of any series are
outstanding, the corporation shall not, without the consent (given in writing or
by vote at a meeting duly called and held for that purpose in the manner
prescribed by the by-laws of the corporation) of the holders of record of at
least a majority in interest of the shares of Preferred Stock then outstanding
(any consent so given to be binding upon subsequent holders of shares of
Preferred Stock, whether theretofore or thereafter issued):
(i) increase the total authorized amount of Preferred Stock or create
or authorize or increase the authorized amount of any shares of any class
of stock ranking on a parity with the Preferred Stock as to dividends or as
to assets in liquidation, or create or authorize or increase the authorized
amount of any security convertible into, or evidencing the right to
purchase, shares of any such parity stock; or
(ii) reclassify into Preferred Stock, or into a class ranking on a
parity with the Preferred Stock as to dividends or as to assets in
liquidation, any shares of any class of stock ranking junior as to
dividends or assets to the Preferred Stock; or
(iii) issue any shares of the Preferred Stock or issue any stock of
any class ranking as to dividends or as to assets in liquidation on a
parity with the Preferred Stock or dispose of any shares of Preferred Stock
or of such parity stock previously reacquired, unless
(a) the net income available for dividends on Preferred Stock, as
defined herein, for a period of twelve (12) consecutive
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12
calendar months within the fifteen (15) calendar months immediately
preceding the calendar month within which such additional shares of stock
are to be issued or disposed of, shall have been at least two and one-half
(2 1/2) times the aggregate annual dividend requirements upon the entire
amount of Preferred Stock and any stocks of this corporation of any class
ranking as to dividends or assets in liquidation prior to or on a parity
with the Preferred Stock to be outstanding after giving effect to the
issuance or disposition of such additional shares,
(b) the gross income available for payment of interest charges, as
defined herein, for a period of twelve (12) consecutive calendar months
within the fifteen (15) calendar months immediately preceding the calendar
month within which such additional shares of stock are to be issued or
disposed of, shall have been at least one and one-half (1 1/2) times the
sum of (1) the aggregate annual interest charges on all indebtedness of
this corporation to be outstanding after giving effect to the issuance or
disposition of such additional shares, and (2) the aggregate annual
dividend requirements upon the entire amount of Preferred Stock and any
stocks of this corporation of any class ranking as to dividends or assets
in liquidation or prior to or on a parity with the Preferred Stock to be
outstanding after giving effect to the issuance or disposition of such
additional shares, and
(c) the aggregate of the capital of this corporation applicable to all
stock ranking as to dividends and assets in liquidation junior to the
Preferred Stock, plus capital surplus and earned surplus of this
corporation, including premiums on stock of this corporation of any class,
shall be not less than the aggregate amount payable upon involuntary
liquidation, dissolution or winding up of this corporation to the holders
of shares of Preferred Stock and of stock ranking as to assets in
liquidation prior to or on a parity with the Preferred Stock to be
outstanding after giving effect to the issuance or disposition of such
additional shares.
There shall be excluded from the foregoing computations (a) all indebtedness
and all shares of stock which are to be retired in connection with
<PAGE>
13
the issuance or disposition of such additional shares and (b) interest charges
on all indebtedness and dividend requirements on all shares of stock which are
to be retired in connection with the issuance or disposition of such additional
shares. The gross income of any property acquired by this corporation during or
after the period for which income is computed, or of any property which is to be
acquired in connection with the issuance or disposition of any such additional
shares, if capable of being separately determined or estimated, may be included
on a pro forma basis in the foregoing computations; and the gross income of any
property disposed of by this corporation during or after the period for which
income is computed, if capable of being separately determined or estimated,
shall be excluded on a pro forma basis in the foregoing computations.
(C) No consent of the holders of the shares of any series of Preferred
Stock shall be required in respect of any actions to be taken by this
corporation hereinabove set forth in paragraphs (A) or (B) of this Section if
irrevocable provision is contemporaneously made for the redemption or retirement
of all shares of such series of Preferred Stock at the time outstanding, or if
provision is made that the proposed action shall not be effective unless
irrevocable provision is made for the prompt redemption or retirement of all
shares of such series of Preferred Stock at the time outstanding or until all
said shares shall have been purchased by the corporation.
Section 6. Voting Rights of Preferred Stock.
(A) The holders of the Preferred Stock shall not be entitled to vote
except
(i) as provided in a resolution of the Board of Directors, or in any
amendment thereto, creating and issuing one or more series of the
Preferred Stock;
(ii) as otherwise provided above in Section 5;
(iii) as to matters for which a class vote of the shareholders of
the corporation is required under the laws of the State of New Jersey;
and
<PAGE>
14
(iv) if and whenever dividends payable on any of the Preferred Stock
shall be in arrears in an amount equivalent to or exceeding four (4) full
quarterly dividends, the holders of the shares of Preferred Stock voting
separately as a class shall be entitled to elect the smallest number of
directors necessary to constitute a majority of the full Board of Directors
(the holders of the Common Stock voting separately as a class being
entitled to elect the remaining directors), provided, however, that when
all arrears in dividends on the Preferred Stock and the current dividend
thereon shall have been paid or declared and a sum sufficient for the
payment thereof set apart, all voting rights given by this clause (iv)
shall be divested from the Preferred Stock (subject, however, to being at
any time or from time to time similarly revived and divested) and provided
further that, so long as the holders of Preferred Stock shall have the
right to elect directors under the terms of this clause (iv), the number of
directors constituting a full Board shall be an odd number fixed by the
Board of Directors and stated in the notice of each meeting at which a full
Board of Directors is to be elected.
(B) Whenever, under the provisions of clause (iii) of paragraph (A) above,
the rights of holders of the Preferred Stock to elect directors shall accrue or
shall terminate, a proper officer of this corporation may, and within ten (10)
days after delivery to this corporation at its principal office in the State of
New Jersey of a request or requests to such effect signed by the holders of at
least ten percent (10%) in interest of the outstanding shares of any class of
stock entitled to vote shall, call a special meeting in accordance with the by-
laws of this corporation of the holders of the class or classes of stock of this
corporation entitled to vote, to be held within forty (40) days from the
delivery of such request, for the purpose of electing a full Board of Directors
to serve until the next annual meeting and until their respective successors
shall be elected and shall qualify; provided, however, that if the annual
meeting of shareholders for the election of directors is to be held within sixty
(60) days after the delivery of such request, the Board of Directors need not
act thereon. If, at any meeting called as aforesaid or at any annual meeting of
shareholders after accrual or termination of the right of holders of the
Preferred Stock to elect directors as in clause (iii) of paragraph (A) above
provided, any director shall not be re-elected,
<PAGE>
15
his term of office shall end upon the election and qualification of his
successor, notwithstanding that the term for which such director was originally
elected shall not at the time have expired.
(C) If, during any interval between annual meetings of shareholders for the
election of directors while holders of the Preferred Stock shall be entitled to
elect any director pursuant to clause (iii) of paragraph (A) above, the number
of directors in office who have been elected by the holders of the Preferred
Stock, or by the holders of the Common Stock, as the case may be, shall become
less than the total number of directors subject to election by holders of shares
of such class, whether by reason of resignation, death, or removal of any
director or directors, or an increase in the total number of directors, the
vacancy or vacancies shall be filled (i) by the remaining directors or director,
if any, then in office who either were or was elected by the votes of shares of
such class or succeeded to a vacancy originally filled by the votes of shares of
such class or (ii), if there is no such director remaining in office, at a
special meeting of holders of shares of such class which shall be called by a
proper officer of this corporation to be held within forty (40) days after there
shall have been delivered to this corporation at its principal office in the
State of New Jersey a request or requests signed by the holders of at least ten
percent (10%) in interest of the outstanding shares of such class.
(D) Any director may be removed from office for cause, or without cause, by
vote of the holders of a majority in interest of the shares of the class of
stock which voted for his election (or for his predecessor in case such director
was elected by directors). A special meeting of the holders of shares of any
class may be called by a majority vote of the Board of Directors or by the
President for the purpose of removing a director in accordance with the
provisions of the preceding sentence, and shall be called within forty (40) days
after there shall have been delivered to this corporation at its principal
office in the State of New Jersey a request or requests to such effect signed by
the holders of at least ten percent (10%) in interest of the outstanding shares
of the class entitled to vote with respect to the removal of such director.
(E) At all meetings of shareholders held for the purpose of electing
directors during such time as the holders of the shares of the
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16
Preferred Stock shall have the special right, voting separately and as
a class, to elect directors pursuant to clause (iii) of paragraph (A)
above, the presence in person or by proxy of the holders of a majority
in interest of the outstanding shares of the Common Stock shall be
required to constitute a quorum of such class for the election of the
directors which they are entitled to elect, and the presence in person
or by proxy of the holders of a majority in interest of the outstanding
shares of the Preferred Stock shall be required to constitute a quorum
of such class for the election of the directors which they are entitled
to elect; provided, however, that the absence of a quorum of the holders
of stock of either such class shall not prevent the election at any such
meeting of directors by the other such class if the necessary quorum of
the holders of stock of such class is present in person or by proxy at
such meeting; and provided further that in the event such a quorum of the
holders of the shares of the Common Stock is present but such a quorum of
the holders of the shares of the Preferred Stock is not present then the
election of the directors elected by the holders of the Common Stock shall
not become effective and the directors so elected by the holders of the
shares of the Common Stock shall not assume their offices and duties until
the holders of the shares of the Preferred Stock, with such a quorum
present, shall have elected the directors they shall be entitled to elect;
and provided further, however, that in the absence of a quorum of the
holders of stock of either such class, a majority in interest of those
holders of the stock of such class who are present in person or by proxy
shall have power to adjourn the election of the directors to be elected by
such class from time to time without notice other than announcement at the
meeting until the requisite amount of holders of such class shall be
present in person or by proxy, but such adjournment shall not be made
beyond the date of the next annual meeting of the corporation or a special
meeting in lieu thereof.
(F) Whenever, under the provisions of this Restated Certificate of
Incorporation, the right of the holders of Preferred Stock to elect
directors shall accrue and be exercised, the amount of all dividends on the
Preferred Stock which shall be in arrears shall be paid out of any assets
of this corporation available therefor as soon as shall be reasonably
practicable. Upon the termination of any such voting right entitling the
holders of Preferred Stock to elect any director pursuant
<PAGE>
17
to clause (iii) of paragraph (A) above, upon the payment, or the declaration and
setting apart for payment, of all dividends on the shares of the Preferred Stock
in arrears, the terms of office of all persons who may have been elected
directors of the corporation by vote of the holders of the shares of the
Preferred Stock, as a class, pursuant to such voting right shall forthwith
terminate, and the resulting vacancies shall be filled by the vote of a majority
of the remaining directors.
(G) Holders of Preferred Stock of any series and holders of stock of any
other class shall not be entitled to receive notice of any meeting of holders of
any class of stock at which they are not entitled to vote.
(H) Each holder of Preferred Stock, as to all matters in respect of which
such stock has voting power, is entitled to one vote for each share of stock
standing in his name.
Section 7. Preemptive Rights.
No holder of shares of any series of the Preferred Stock of the corporation
shall be entitled as of right to subscribe for, purchase, or receive any part of
any new or additional issue of any stock of the corporation of any class,
series, or kind, whatsoever, or any bonds, debentures or other securities
convertible into any such stock, whether now or hereafter authorized, and
whether issued for cash, property, services, by way of dividends, or otherwise.
Section 8. Definitions.
(A) The term "gross income available for payment of interest charges" shall
mean the total operating revenues of this corporation, less the total operating
expenses, taxes (including income, excess profits and other taxes based on or
measured by income or undistributed earnings or undistributed income), and other
appropriate items, including provision for maintenance, and provision for
retirements, depreciation or obsolescence, plus or minus, as the case may be,
any net non-operating income or deductions, but excluding any charges on account
of interest on debt or on account of debt discount and expense, all to be
determined in accordance with sound accounting practice. In determining such
"gross income available for payment of interest charges", no deduction or
adjustment shall be made for or in respect of (1)
<PAGE>
18
profits or losses from the sale, abandonment or other disposition of property
properly carried in the plan or investment accounts of this corporation, or
taxes paid on or in respect of any such profits, or (2) charges for the
elimination or amortization of utility plant adjustment accounts or other
intangibles.
(B) The term "net income available for dividends on Preferred Stock" shall
mean the total operating revenues of this corporation, less the total operating
expenses, taxes (including income, excess profits and other taxes based on or
measured by income or undistributed earnings or undistributed income), interest
charges, dividend requirements on any stock ranking prior as to dividends or
assets in liquidation to the Preferred Stock and other appropriate items,
including provision for maintenance, and provision for retirements, depreciation
or obsolescence, and including charges for amortization of debt discount and
expense, plus or minus, as the case may be, any net non-operating income or
deductions, all to be determined in accordance with sound accounting practice.
In determining such "net income available for dividends on Preferred Stock", no
deduction or adjustment shall be made for or in respect of (1) expenses in
connection with the issuance, redemption or retirement of any securities of
this corporation, including any amount paid in excess of the principal amount or
par or stated value of securities redeemed or retired and, in the event that
such redemption or retirement is effected with the proceeds of sale of other
securities of this corporation, interest or dividends on the securities redeemed
or retired from the date on which the funds required for retirement are
deposited in trust for such purpose to the date of redemption or retirement, (2)
profits or losses from the sale, abandonment or other disposition of property
properly carried in the plant or investment accounts of this corporation, or
taxes paid on or in respect of any such profits, (3) charges for the elimination
or amortization of utility plant adjustment accounts or other intangibles, or
(4) any earned surplus adjustment (including tax adjustments) applicable to any
period prior to January 1, 1965.
(C) The term "net income available for dividends on junior stock" shall
mean "net income available for dividends on Preferred Stock", as defined and
determined above, less the sum of all dividends paid and all dividends accrued
and unpaid on any outstanding Pre-
<PAGE>
19
ferred Stock and only other class of stock ranking on a parity with the
Preferred Stock as to dividends.
(D) The term "sound accounting practice" shall mean recognized principles
of accounting practice followed by companies engaged in a business similar to
that of this corporation, provided that any applicable rules, regulations or
orders of any public regulatory authority having jurisdiction over the accounts
of this corporation shall be controlling, except to the extent that this
corporation, at that time, shall be contesting in good faith the validity or
applicability to this corporation of any such rule, regulation or order,
(E) The term "accrued dividends" means, in respect of each share of the
Preferred Stock, that amount which shall be equal to simple interest upon the
par value thereof at the annual dividend rate thereon and no more from the date
upon which cumulative dividends on such share commence to accrue to the date
fixed for payment of any amount to be distributed in liquidation or upon
redemption less the aggregate amount of all dividends theretofore paid or
declared and set apart for payment thereon.
DIVISION B--THE COMMON STOCK
Section 1. Dividends.
Out of any assets of this corporation legally available for dividends
remaining after full cumulative dividends upon any shares of Preferred Stock and
of any other class of stock ranking as to dividends prior to the Common Stock of
the corporation then outstanding shall have been paid or declared and set apart
for all past quarterly dividend periods and for the current quarterly dividend
period, then and not otherwise, dividends may be paid upon the Common Stock to
the exclusion of the Preferred Stock and any such other class of priority stock.
Section 2. Liquidation Rights.
In the event of any liquidation, dissolution or winding up of the
corporation, after there shall have been paid to or set aside for the holders of
all series of Preferred Stock and of any other class of stock ranking prior as
to assets to the Common Stock the full preferential amounts, including accrued
dividends, to which they are respectively
<PAGE>
20
entitled, the holders of the Common Stock shall be entitled to receive, pro
rata, all of the remaining assets of the corporation available for distribution
to its shareholders. The Board of Directors, by vote of a majority of the
members thereof, may distribute in kind to the holders of the Common Stock such
remaining assets of the corporation or may sell, transfer, or otherwise dispose
of all or any of the remaining property and assets of the corporation to any
other corporation and receive payment therefor wholly or partly in cash or in
stock or in obligations of such corporation and may sell all or any part of the
consideration received therefor or distribute the same or the balance thereof in
kind to the holders of the Common Stock.
Section 3. Voting Rights.
Subject to the voting rights expressly conferred upon the Preferred Stock
under Division A of this ARTICLE THIRD and by law, the holders of the Common
Stock shall possess exclusively full voting power for the election of directors
and for all other purposes. At all elections of the directors of this
corporation each holder of shares of Common Stock shall be entitled to as many
votes as shall equal the number of his shares of Common Stock, multiplied by
the number of directors to be elected by holders of Common Stock, and he may
cast all of such votes for a single director, or may distribute them among the
number to be voted for, or any two or more of them, as he may see fit. At any
meeting of shareholders, at which any action is to be taken which requires the
vote, assent or consent of the holders of record of two-thirds in interest of
the outstanding shares of Common Stock, or which requires such assent or consent
in writing to be filed, such action may be taken upon the vote, assent or
consent of the holders of record of two-thirds in interest of the Common Stock
present and voting at such meeting in person or proxy; provided that not less
than a majority in interest of the shares of Common Stock then outstanding shall
be present and voting at such meeting.
Section 4. Preemptive Rights.
No holder of shares of Common Stock of the corporation shall be entitled as
of right to subscribe for, purchase, or receive any part of any new or
additional issue of any stock of the corporation of any class,
<PAGE>
21
series, or kind, whatsoever, or any bonds, debentures, or other securities
convertible into any such stock, whether now or hereafter authorized, and
whether issued for cash, property, services, by way of dividends or otherwise;
provided, however, that the corporation shall not, without first offering the
same to the holders of Common Stock then outstanding, issue for cash any shares
of Common Stock or securities convertible into Common Stock unless (a) such
shares of Common Stock or such convertible securities are securities offered
publicly, or (b)
(1) the sum of (i) the aggregate number of shares of Common Stock then
being issued for cash or issued for cash during the 24 calendar months next
preceding such then current issuance plus (ii) the maximum aggregate number
of shares of Common Stock issued or issuable upon conversion of any
convertible securities then being issued for cash or issued for cash during
the 24 calendar months next preceding such then current issuance (excluding
for purpose of this subparagraph (1) securities offered publicly)
would not exceed five percent (5%) of
(2) the sum of (iii) the aggregate number of shares of Common Stock to be
outstanding immediately after the issuance of the Common Stock or
convertible securities then being issued for cash, plus (iv) the maximum
aggregate number of shares of Common Stock issuable upon conversion of all
convertible securities to be outstanding immediately after such then current
issuance.
The term "securities offered publicly", as used in Section 4, shall mean shares
of Common Stock, or securities (including bonds and debentures) convertible into
Common Stock, which are sold by a public offering through competitive bidding or
by an offering to or through underwriters or investment bankers who shall have
agreed promptly to make a public offering thereof.
Fourth: The address of the corporation's current registered office is
Number One South Jersey Plaza, Route 54, Folsom, New Jersey 08037 and the name
of the corporation's current registered agent at such address is E. S. Keepers,
Jr.
<PAGE>
22
Fifth: The number of directors constituting the current Board of
Directors of the corporation is nine (9); and the names and addresses of the
directors constituting its Board are:
Name Address
---- -------
Paul L. Aiken...................... 8700 Ventor Avenue
Margate City, New Jersey 08406
Edward O. Boshell.................. 322 River Drive
Tequesta, Florida 33458
Fred W. Dieffenbach................ 8 Woodhill Road
Tenafly, New Jersey 07670
William A. Gemmel.................. 235 E. Cambridge Avenue
Linwood, New Jersey 08221
H. Richard Heilman................. 1534 Mt. Pleasant Road
Villanova, Pennsylvania 19085
Elwood F. Kirkman.................. Flanders Hotel
Ocean City, New Jersey 08226
Al A. Lippe........................ 120 Cooper Drive
Great Neck, Long Island 11023
Clarence B. McCormick.............. 40 West Avenue
Bridgeton, New Jersey 08302
John M. Seabrook................... R.D.1
Griscomb Road
Salem, New Jersey 08079
Dated this 18th day of February, 1971.
South Jersey Gas Company
By /s/ W.A. Gemmel
------------------------------
W.A. Gemmel, President
[SEAL]
WITNESS:
/s/ E.S. Keepers, Jr.
- -----------------------
E.S. Keepers, Jr.
<PAGE>
23
State of New Jersey }
} ss.:
County of Atlantic }
BE IT REMEMBERED, that on this 18th day of February, 1971, before me,
the subscriber, a Notary Public of the State of New Jersey, personally appeared
E.S. Keepers, Jr., Secretary of South Jersey Gas Company, the corporation named
in and which executed the foregoing certificate, who, being by me duly sworn
according to law, does depose and say and make proof to my satisfaction that he
is the Secretary of said corporation; that the seal affixed to said certificate
is the corporate seal of said corporation, the same being well known to him;
that it was affixed by order of said corporation; that W.A. Gemmel is the
President of said corporation; that he saw the said W.A. Gemmel as such
President sign said certificate and affix said seal thereto and deliver said
certificate, and heard him declare that he signed, sealed and delivered such
certificate as the voluntary act and deed of said corporation, by its order and
by authority of its Board of Directors; and that the said E.S. Keepers, Jr.,
signed his name thereto at the same time as subscribing witness.
/s/ E.S. Keepers Jr.
----------------------------------
E.S. Keepers, Jr.
Subscribed and sworn to before }
me the day and year aforesaid. }
[Notarial Seal]
[SIGNATURE APPEARS HERE]
- -----------------------------------
Notary Public of New Jersey
My commission expires: July 29, 1971
<PAGE>
24
CERTIFICATE REQUIRED TO BE FILED WITH THE
RESTATED CERTIFICATE OF INCORPORATION
OF
SOUTH JERSEY GAS COMPANY
Pursuant to the provisions of Section 14A:9-5(5), Corporations, General, of
the New Jersey Statutes, the undersigned corporation hereby executes the
following certificate:
FIRST: The name of the corporation is SOUTH JERSEY GAS COMPANY.
SECOND: The Restated Certificate of Incorporation was adopted on the 18th
day of February, 1971.
THIRD: This Restated Certificate of Incorporation only restates and
integrates and does not further amend the provisions of the Certificate of
Incorporation of this corporation as heretofore amended or supplemented and
there is no discrepancy between those provisions and the provisions of this
Restated Certificate of Incorporation.
Dated this 18th day of February, 1971.
SOUTH JERSEY GAS COMPANY
By /s/ W.A. Gemmel
-------------------------------
W.A. Gemmel, President
ENDORSED
FILED AND RECORDED
JUL 26 1971
PAUL J. SHERWIN
Secretary of State
<PAGE>
[STATE SEAL OF NEW JERSEY APPEARS HERE]
I, the Secretary of State of the State of New Jersey,
do hereby Certify that the foregoing is a true copy of a Restated Certificate of
Incorporation of SOUTH JERSEY GAS COMPANY
______________________________and the endorsements thereon, as the same is taken
from and compared with the original filed in my office on the 26th day of July
A.D. 1971 , and now remaining on file and of record therein.
In Testimony Whereof, I have hereunto set my hand and
[SEAL OF SECRETARY affixed my Official Seal at Trenton, this 26th day of
OF STATE OF NEW July A.D. 1971
JERSEY APPEARS
HERE]
/s/ Paul J. Sherwin
----------------------------------------
Secretary of State
<PAGE>
AFFIDAVIT
County of Mercer
State of New Jersey
The undersigned, Stuart T. Saunders, Jr., being duly sworn, does hereby
depose and say that he is counsel to SOUTH JERSEY GAS COMPANY ("Gas Company")
and that as such counsel he does depose and say that it was necessary to correct
Article Third of Gas Company's Restated Certificate of Incorporation, dated
February 18, 1971, due to an error contained therein with respect to Gas
Company's authorized capital.
Dated: July 26, 1971 /s/ Stuart T. Saunders, Jr.
--------------------------------------
Stuart T. Saunders, Jr.
Attorney for South Jersey Gas Company
Sworn to and subscribed to before me
this 26th day of July, 1971.
/s/ Joseph A. Gervasio
--------------------------------------
Notary Public
My Commission Expires:
JOSEPH A. GERVASIO
NOTARY PUBLIC OF N.J.
My Commission Expires Sept. 2, 1974
<PAGE>
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
OF
SOUTH JERSEY GAS COMPANY
To: The Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:7-2(4), Corporations,
General, of the New Jersey Statutes, the undersigned corporation hereby amends
its Restated Certificate of Incorporation to add as a part of such Restated
Certificate the resolutions referred to in subparagraph (b) below:
(a) The name of the corporation is SOUTH JERSEY GAS COMPANY;
(b) A copy of the resolutions of the Company's board of directors, as
required by Subsection 14A:7-2(3), Corporations, General, of the New Jersey
Statutes, is attached hereto and is entitled "RESTATED CERTIFICATE SETTING
FORTH THE DESIGNATION, DESCRIPTION AND TERMS OF CUMULATIVE PREFERRED STOCK,
SERIES A";
(c) Such resolutions were duly adopted by the Company's board of
directors on July 7, 1965 and such resolutions were duly amended by the
Company's board of directors on November 20, 1969; and
(d) The Company's Restated Certificate of Incorporation is amended so
that the designation and number of shares of the class and series of the
Company's preferred stock acted upon in the attached resolutions, and the
relative rights, preferences and limitations of the Company's Cumulative
Preferred Stock, Series A, are as stated in the attached resolutions.
IN WITNESS WHEREOF, South Jersey Gas Company has caused this
Certificate of Amendment to be signed on its behalf by its President and its
corporate seal to be affixed and attested by its Secretary this 3rd day of April
1972.
[Corporate Seal] SOUTH JERSEY GAS COMPANY
By /s/ W. A. Gemmel
------------------------
W. A. Gommel, President
Attest:
/s/ E. S. Keepers, Jr.
Secretary
<PAGE>
ACKNOWLEDGEMENT
STATE OF NEW JERSEY
ss.:
COUNTY OF ATLANTIC
BE IT REMEMBERED, that on this 3rd day of April 1972, before me, the
subscriber, a Notary Public of the State of New Jersey, personally appeared
E. S. Keepers. Jr., Secretary of South Jersey Gas Company, the corporation named
in and which executed the foregoing Certificate of Amendment, who, being by me
duly sworn according to law, does depose and say and make proof to my
satisfaction that he is the Secretary of said corporation; that the seal affixed
to said certificate is the corporate seal of said corporation, the same being
well known to him; that it was affixed by order of said corporation; that W.A.
Gemmel is the President of said corporation; that he saw the said W. A. Gemmel
as such President sign said certificate and affix said seal thereto and deliver
said certificate, and heard him declare that he signed, sealed and delivered
such certificate as the voluntary act and deed of said corporation, by its order
and by authority of its Board of Directors; and that the said E. S. Keepers,
Jr., signed his name thereto at the same time as subscribing witness.
/s/ E. S. Keepers, Jr.
..............................
E. S. Keepers, Jr.
Subscribed and sworn to before
me the day and year aforesaid.
[SIGNATURE APPEARS HERE]
Notary Public of New Jersey
My commission expires July 29, 1976
<PAGE>
SOUTH JERSEY GAS COMPANY
-----------
RESTATED CERTIFICATE SETTING FORTH THE DESIGNA-
TION. DESCRIPTION AND TERMS OF CUMULATIVE
PREFERRED STOCK SERIES A.
Pursuant to the Provisions of Section 14:7-2 of the Earned Statutes
of the State of New Jersey
-----------
SOUTH JERSEY Gas Company, a corporation organized and existing under the
laws of the State of New Jersey (hereinafter called the "Corporation") and
being a public utility corporation as defined by Section 48:2-13 of the Revised
Statutes of New Jersey by its President and Secretary DOES HEREBY CERTIFY THAT:
The following resolutions were duly adopted by the Board of Directors of
the corporation, pursuant to authority expressly vested in it by the provisions
of the Certificate of Incorporation, as amended, at a meeting of said Board,
duly convened and held on the 7th day of July 1965, at which meeting a quorum
for the transaction of business was present and acting throughout; and that such
resolutions have been since duly amended by the Board of Directors at a meeting
of said Board, duly convened and held on the 20th day of November, 1969, at
which meeting a quorum for the transaction of business was present and acting
throughout:
RESOLVED, that pursuant to the authority expressly vested in the
Board of Directors of this corporation by the Certificate of
Incorporation as amended, the Board of Directors does hereby establish a
series of the Cumulative Preferred Stock, $100 par value, of the
corporation consisting of 30,000 shares of the presently authorized
shares of Cumulative Preferred Stock, which shall be designated as
"Cumulative Preferred Stock, Series A" (hereinafter called the "Series A
Preferred Stock"); and
FURTHER RESOLVED, that the designation, description and terms
for the Series A Preferred Stock in respect of which the shares
<PAGE>
2
of such series may vary from shares of other series of Cumulative Preferred
Stock shall be as follows:
(a) Dividends. The annual dividend rate for such series shall be
4.70% per annum; and the date from which such dividends shall be
cumulative shall be the date of original issue of such shares.
(b) Redemption. The redemption prices for Series A Preferred Stock
shall be as follows:
If redeemed on or before January 1, 1975--$104.70 per share; if
redeemed thereafter and on or before January 1, 1980--$102.85 per share; if
redeemed thereafter, $101.50 per share; together with, in each case, an
amount equal to dividends (whether or not earned or declared) accrued and
unpaid to the date of redemption. The shares of Series A Preferred Stock
shall not be redeemable prior to January 1, 1970, directly or indirectly,
as part of, out of the proceeds of, or in anticipation of, the incurring of
debt or the issuance of shares of Cumulative Preferred Stock or other stock
ranking prior thereto or on a parity therewith if such debt has an interest
rate or cost to the corporation or such shares have a dividend rate or cost
to the corporation, calculated in accordance with generally accepted
financial practice, of less than 4.70% per annum.
In the event the Corporation shall elect to redeem less than all of
the outstanding shares of Series A Preferred Stock, the particular shares
to be redeemed shall be selected in the following manner:
(i) The corporation shall first allocate the number of shares to
be redeemed between (1) all shares then held by Original Holders (as
hereinafter defined) and (2) all shares then held by persons other
than Original Holders, in proportion, as nearly as may be, to the
aggregate number of shares held by said Original Holders and the
aggregate number of shares held by said other persons.
(ii) The corporation shall then designate for redemption (1) on a
pro rata basis among all Original Holders, on the basis of the
proportion which the number of shares of Series A
<PAGE>
3
Preferred Stock initially issued to each Original Holder bears to the
aggregate number of shares of Series A Preferred Stock initially issued by the
corporation, the aggregate number of shares allocated to the Original Holders
pursuant to (i) above and (2) in such manner as the Board of Directors may
determine, whether by lot or otherwise, shares held by persons other than
Original Holders in an aggregate amount equal to the number of shares
allocated to the aggregate number of shares held by such persons pursuant to
(i) above. Fractional shares resulting from such method of selection may be
disregarded or adjusted to the nearest whole share at the discretion of the
Corporation.
(c) Liquidation. The amounts payable on the shares of Series A Preferred
Stock in the event of any liquidation, dissolution or winding up of the
corporation shall be as to any such share (i) in the event of voluntary
liquidation, dissolution or winding up, the current redemption price; and
(ii) in the event of involuntary liquidation, dissolution or winding up, the sum
of $100; together with in each case an amount equal to dividends (whether or not
earned or declared) accrued and unpaid thereon.
(d) Purchase Fund. So long as any of the shares of Series A Preferred Stock
created by these resolutions shall be outstanding, as and for a Purchase Fund
for the retirement of shares of such series, the Corporation shall, except as
hereinafter provided, between May 1 and May 10 in each year commencing 1968,
offer to purchase on the next ensuing June 15th, 900 shares of such Series A
Preferred Stock at the par value thereof together with accrued dividends to the
date of purchase. Such offer shall state that it is made pursuant to the
Purchase Fund for the retirement of Series A Preferred Stock and shall contain a
brief summary of the terms upon which tenders will be accepted, as herein
provided, including a statement that all tenders of shares for sale in response
to the offer may be accepted in part, as herein provided. Tenders pursuant to
any such offer must be made in a writing received by the corporation at least
five business days before the next ensuing June 15th. The corporation may
require, and in such event the notice of the corporation's offer to purchase
shares shall so specify, that all
<PAGE>
4
tenders of shares of Series A Preferred Stock shall be accompanied by the
certificates for the shares tendered, together with evidence, satisfactory to
the corporation, of the right of the holders thereof to sell the same to the
corporation.
If the aggregate number of shares of Series A Preferred Stock tendered
for sale in any year equals or exceeds 900 shares, the corporation shall
allocate its purchases among the holders of the shares so tendered as nearly as
possible on a pro rata basis, on the basis of the total number of shares of
Series A Preferred Stock owned of record at the close of business on the
previous June 1 by the several shareholders tendering shares; provided, however,
that so long as an Original Holder of Series A Preferred Stock shall hold all of
the shares of such Series A Preferred Stock initially issued to such Original
Holder (other than shares which have theretofore been redeemed by the
corporation or purchased by the corporation pursuant to the Purchase Fund) the
number of shares of Series A Preferred Stock to be allocated by the corporation
to such Original Holder in any year shall be that number of shares which bears
the same ratio to 900 as the number of shares initially issued to such Original
Holder bears to 30,000. If, by reason of the allocation of purchases among
Original Holders and other holders of Series A Preferred Stock on the foregoing
basis, the number of shares to be purchased by the corporation would not equal
900, the balance of the purchasees by the corporation shall be allocated among
all of the several holders tendering shares, including Original Holders, on the
basis of their actual holdings as of such June 1.
If the aggregate number of shares tendered for sale as aforesaid in any
year is less than 900 shares, the corporation's obligation in respect of such
Purchase Fund for such year shall be discharged by the purchase of the shares
tendered, and the fact that the remainder of the 900 shares are not tendered or
purchased shall not increase the number of shares of Series A Preferred Stock to
be purchased in subsequent years.
The corporation shall not make any offer to purchase shares of Series A
Preferred Stock pursuant to the Purchase Fund at any time when dividends are in
arrears on any shares of Cumulative Preferred Stock. If in any year the full
purchase obliga-
<PAGE>
5
tion of the corporation shall not have been satisfied by the making and carrying
out of a purchase offer, any deficiency in the satisfaction of the corporation's
obligations under the Purchase Fund shall be made good, in the manner
hereinafter in this paragraph set forth, before any dividends shall be paid on,
or declared and set apart for, any shares of Common Stock of the corporation or
any shares of any class of stock ranking junior to the Cumulative Preferred
Stock or before any sums shall be applied to the purchase, redemption or other
retirement of the Common Stock or any shares of any class of stock ranking
junior to the Cumulative Preferred Stock. The obligation of the corporation to
offer to purchase 900 shares of Series A Preferred Stock in each year shall be
cumulative, and, if the corporation shall not offer to purchase such 900 shares
of Series A Preferred Stock in any year by reason of an arrearage of dividends,
it shall make a special purchase offer to purchase such shares promptly after
all dividends on shares shall have been paid, or declared and funds sufficient
for the payment thereof set apart. Such special purchase offer shall state that
the corporation will purchase such shares on a date forty-five days after the
date of such special purchase offer at the par value thereof, plus accrued
dividends thereon to the date of purchase, and shall otherwise be upon the same
terms and conditions and shall contain the same statements hereinabove in this
paragraph (d) provided in respect of other offers made pursuant to the Purchase
Fund.
(e) Conversion Privileges. Shares of the Series A Preferred Stock
shall not be convertible into capital stock of the corporation of any other
class or classes of any one or more series of the same class or of another class
or classes.
(f) Cancellation of Shares. All shares of Series A Preferred Stock at
any time redeemed pursuant to paragraph (b) hereof or purchased by the
corporation pursuant to the Purchase Fund as set forth in paragraph (d) hereof
shall forthwith be retired and cancelled, and may not be reissued.
(g) Definition of Original Holder. For the purposes of paragraphs (b)
and (d) hereof, the term "Original Holder" shall mean each person in whose name
shares of Series A Preferred
<PAGE>
- --------------------------------------------------------------------------------
6
Stock shall have been initially registered on the original issuance
thereof and shall have remained so registered (registration or re-
registration in the name of such nominee's principal and certificates
representing shares of Series A Preferred Stock issued in exchange for
other certificates for shares of Series A Preferred Stock and registered
in the same or a nominee's name being deemed shares of Series A
Preferred Stock which shall have remained registered in the name of the
Original Holder thereof).
(h) Voting Rights. The holders of Series A Preferred Stock shall
be entitled to vote share for share with the holders of the Common Stock
in all matters requiring the vote of shareholders of the Corporation
except as otherwise provided in Article Third of the Corporation's
Restated Certificate of Incorporation as amended.
IN WITNESS WHEREOF, South Jersey Gas Company has caused this Certificate
to be signed on its behalf by its President and its corporate seal to be affixed
and attested by its Secretary this 1st day of March, 1972.
[Corporate Seal] South Jersey Gas Company
/s/ W. A. Gemmel
By W. A. Gemmel
President
Attest:
/s/ E. S. Keepers, Jr.
E. S. Keepers, Jr.
Secretary
<PAGE>
7
++
State of New Jersey +
+ ss:
County of Atlanta +
++
BE IT REMEMBERED, that on this 24 day of March, 1972, before me, the
subscriber, a Notary Public of the State of New Jersey, personally appeared E.S.
Keepers, Jr., Secretary of South Jersey Gas Company, the corporation named in
and which executed the foregoing certificate, who, being by me duly sworn
according to law, does depose and say and make proof to my satisfaction that he
is the Secretary of said corporation, that the seal affixed to said certificate
is the corporate seal of said corporation, the same being well known to him;
that it was affixed by order of said corporation; that W.A. Gemmel is the
President of said corporation; that he saw the said W.A. Gemmel as such
President sign said certificate and affix said seal thereto and deliver said
certificate, and heard him declare that he signed, sealed and delivered such
certificate as the voluntary act and deed of said corporation, by its order and
by authority of its Board of Directors; and that the said E.S. Keepers, Jr.
signed his name thereto at the same time as subscribing witness.
/s/ E.S. Keepers, Jr.
-------------------------------
E.S. Keepers, Jr.
++
Subscribed and sworn to before +
me the day and year aforesaid.+
++
/s/ signature appears here
Notary Public of New Jersey
My commission expires July 29, 1976
<PAGE>
SOUTH JERSEY GAS COMPANY
----------
CERTIFICATE SETTING FORTH THE DESIGNATION,
DESCRIPTION AND TERMS OF CUMULATIVE
PREFERRED STOCK, SERIES B
Pursuant to the Provisions of Section 14A:7-2 of the
New Jersey Business Corporation Act
----------
SOUTH JERSEY Gas Company, a corporation organized and existing under the
laws of the State of New Jersey (hereinafter called the "Corporation") and being
a public utility corporation as defined by Section 48:2-13 of the Revised
Statutes of New Jersey by its President and Secretary DOES HEREBY CERTIFY that:
The Board of Directors of the Corporation, pursuant to authority expressly
vested in it by the provisions of the Certificate of Incorporation, as amended
and restated, has at a meeting of said Board, duly convened and held on June
22, 1972 at which meeting a quorum for the transaction of business was present
and acting throughout, duly adopted the following resolutions:
RESOLVED, that pursuant to the authority expressly vested in the Board
of Directors of this Corporation by the Certificate of Incorporation, as
amended and restated, the Board of Directors does hereby establish a series
of the Cumulative Preferred Stock, $100 par value, of the Corporation
consisting of 50,000 shares of the presently authorized shares of
Cumulative Preferred Stock, which shall be designated as "Cumulative
Preferred Stock, Series B" (hereinafter called the "Series B Preferred
Stock"); and
FURTHER RESOLVED, that the designation, description and terms for the
Series B Preferred Stock in respect of which the shares of such series may
vary from shares of other series of Cumulative Preferred Stock shall be as
follows:
(a) Dividends. The annual dividend rate for such series shall be
8% per annum; and the date from which such dividends shall be payable and
cumulative shall be the date of original issue of such shares.
<PAGE>
2
(b) Redemption. The redemption prices for Series B Preferred Stock shall
be as follows:
If redeemed on or before June 1, 1977--$108.00 per share; if redeemed
thereafter and on or before June 1, 1980--$106.67 per share; if redeemed
thereafter and on or before June 1, 1983--$105.33 per share; if redeemed
thereafter and on or before June 1, 1986--$104.00 per share; if redeemed
thereafter and on or before June 1, 1989--$102.67 per share; if redeemed
thereafter and on or before June 1, 1992--$101.33 per share; if redeemed
thereafter, $100.00 per share; together with, in each case, an amount equal to
dividends (whether or not earned or declared) accrued and unpaid to the date of
redemption. Notwithstanding the foregoing provisions of this paragraph (b), the
shares of Series B Preferred Stock shall not be redeemable prior to June 1,
1977, directly or indirectly, as part of, out of the proceeds of, or in
anticipation of, the incurring of debt or the issuance of shares of Cumulative
Preferred Stock or other stock ranking prior thereto or on a parity therewith if
such debt has an interest rate or cost to the Corporation or such shares have a
dividend rate or cost to the Corporation, calculated in accordance with
generally accepted financial practice, of less than 8% per annum; and if
thereafter and on or before June 1, 1982, the Corporation shall so redeem Series
B Preferred Stock, the redemption price shall be $112.00 per share, together
with an amount equal to dividends (whether or not earned or declared) accrued
and unpaid to the date of redemption.
In the event the Corporation shall elect to redeem less than all of the
outstanding shares of Series B Preferred Stock, the particular shares to be
redeemed shall be selected on a pro rata basis or by lot in such manner as the
Board of Directors may determine. Fractional shares resulting from such method
of selection may be disregarded or adjusted to the nearest whole share at the
discretion of the Corporation.
(c) Liquidation. The amounts payable on the shares of Series B Preferred
Stock in the event of any liquidation, dissolution or winding up of the
Corporation shall be as to any such share (i) in the event of voluntary
liquidation, dissolution or winding up, the current redemption price; and (ii)
in the event
<PAGE>
3
of involuntary liquidation, dissolution or winding up, the sum of $100;
together with in each case an amount equal to dividends (whether or not
earned or declared) accrued and unpaid thereon.
(d) Purchase Fund. So long as any of the shares of Series B Preferred
Stock created by these resolutions shall be outstanding, as and for a
Purchase Fund for the retirement of shares of such series, the Corporation
shall, except as hereinafter provided, between April 15 and April 30 in
each year commencing 1975, offer to purchase on the next ensuing July 1,
1500 shares of such Series B Preferred Stock at the par value thereof
together with accrued dividends to the date of purchase. Such offer shall
state it is made pursuant to the Purchase Fund for the retirement of Series
B Preferred Stock and shall contain a brief summary of the terms upon which
tenders will be accepted, as herein provided, including a statement that
all tenders of shares for sale in response to the offer may be accepted in
part, as herein provided. Tenders pursuant to any such offer must be made
in a writing received by the Corporation at least five business days before
the next ensuing July 1. The Corporation may require, and in such event the
notice of the Corporation's offer to purchase shares shall so specify, that
all tenders of shares of Series B Preferred Stock shall be accompanied by
the certificates for the shares tendered, together with evidence,
satisfactory to the Corporation, of the right of the holders thereof to
sell the same to the Corporation.
If the aggregate number of shares of Series B Preferred Stock tendered
for sale in any year exceeds 1500 shares, the Corporation shall allocate
its purchases among the holders of the shares so tendered as nearly as
possible on a pro rata basis, on the basis of the total of 1) the number of
shares of Series B Preferred Stock owned of record at the close of business
on the previous June 15 and 2) the number of shares theretofore tendered to
and purchased by the Company pursuant to this paragraph (d), by each of the
several shareholders tendering shares.
If the aggregate number of shares tendered for sale as aforesaid in
any year is less than 1500 shares, the Corporation's obligation in respect
of such Purchase Fund for such year shall be discharged by the purchase of
the shares tendered, and the fact that the remainder of the 1500 shares are
not tendered
<PAGE>
4
or purchased shall not increase the number of shares of Series B Preferred Stock
to be purchased in subsequent years.
The Corporation shall not make any offer to purchase shares of Series B
Preferred Stock pursuant to the Purchase Fund at any time when dividends are in
arrears on any shares of Cumulative Preferred Stock. If in any year the full
purchase obligation of the Corporation shall not have been satisfied by the
making and carrying out of a purchase offer, any deficiency in the satisfaction
of the Corporation's obligations under the Purchase Fund shall be made good, in
the manner hereinafter in this paragraph set forth, before any dividends shall
be paid on, or declared and set apart for, any shares of Common Stock of the
Corporation or any shares of any class of stock ranking junior to the Cumulative
Preferred Stock or before any sums shall be applied to the purchase, redemption
or other retirement of the Common Stock or any shares of any class of stock
ranking junior to the Cumulative Preferred Stock. The obligation of the
Corporation to offer to purchase 1,500 shares of Series B Preferred Stock in
each year shall be cumulative, and, if the Corporation shall not offer to
purchase such 1,500 shares of Series B Preferred Stock in any year by reason of
an arrearage of dividends, it shall make a special purchase offer to purchase
such shares promptly after all dividends on shares of Cumulative Preferred Stock
shall have been paid, or declared and funds sufficient for the payment thereof
set apart. Such special purchase offer shall state that the Corporation will
purchase such shares on a date forty-five days after the date of such special
purchase offer at the par value thereof, plus accrued dividends thereon to the
date of purchase, and shall otherwise be upon the same terms and conditions and
shall contain the same statements hereinabove in this paragraph (d) provided in
respect of other offers made pursuant to the Purchase Fund.
(e) Conversion Privileges. Shares of the Series B Preferred Stock shall
not be convertible into capital stock of the Corporation of any other class or
classes or of any one or more series of the same class or of another class or
classes.
<PAGE>
5
(f) Cancellation of Shares. All shares of Series B Preferred Stock at
any time redeemed pursuant to paragraph (b) hereof or purchased by the
Corporation pursuant to the Purchase Fund as set forth in paragraph (d)
hereof shall forthwith be retired and cancelled, and may not be reissued.
(g) Voting Rights. The holders of Series B Preferred Stock shall be
entitled to vote share for share with the holders of the Common Stock in
all matters requiring the vote of shareholders of the Corporation except as
otherwise provided in Article Third of the Corporation's Restated
Certificate of Incorporation as amended.
(h) Dividend Restriction. So long as any shares of the New Preferred
Stock shall be outstanding, the Corporation shall not declare or pay any
dividends on any shares of Common Stock or any other class ranking junior
as to dividends to the New Preferred Stock (other than dividends payable in
shares ranking junior, as to dividends and assets in liquidation, to the
New Preferred Stock) or make any other distribution on any shares of such
junior stock, or make any expenditures for the purchase, redemption or
other retirement for a consideration of shares of the Corporation's stock
of any class ranking junior as to assets in liquidation to the New
Preferred Stock (other than in exchange for, or from the proceeds of any
substantially concurrent sale made of, other shares of stock of the
Corporation ranking junior to the New Preferred Stock as to dividends and
assets in liquidation), if the aggregate amount of all such dividends,
distributions and expenditures paid or made by the Corporation after
December 31, 1971, would exceed the aggregate amount of the Corporation's
net income available for dividends on junior stock accumulated after
December 31, 1971, by the Corporation plus the sum of $3,000,000.
IN WITNESS WHEREOF, South Jersey Gas Company has caused this Certificate to
be signed on its behalf by its President and its corporate
<PAGE>
6
seal to be affixed and attested by its Secretary this 10th day of July, 1972.
SOUTH JERSEY GAS COMPANY
[Corporate Seal]
By W.A. Gemmel
President
ATTEST:
E. S. KEEPERS, JR.
Secretary
<PAGE>
7
STATE OF NEW JERSEY )
) ss.:
COUNTY OF ATLANTIC )
BE IT REMEMBERED, that on this 10th day of July, 1972, before me, the
subscriber, a Notary Public of the State of New Jersey, personally appeared
E. S. Keepers, Jr., Secretary of South Jersey Gas Company, the corporation named
in and which executed the foregoing certificate, who, being by me duly sworn
according to law, does depose and say and make proof to my satisfaction that he
is the Secretary of said corporation; that the seal affixed to said certificate
is the corporate seal of said corporation, the same being well known to him;
that it was affixed by order of said corporation; the same being well known to
him; that it was affixed by order of said corporation; that W. A. Gemmel is the
President of said corporation; that he saw the said W. A. Gemmel as such
President sign said certificate and affix said seal thereto and deliver said
certificate, and heard him declare that he signed, sealed and delivered such
certificate as the voluntary act and deed of said corporation, by its order and
by authority of its Board of Directors; and that the said E. S. Keepers, Jr.,
signed his name thereto at the same time as subscribing witness.
E. S. KEEPERS, JR.
E. S. Keepers, Jr.
Subscribed and sworn to before )
me the day and year aforesaid. )
DANIEL C. HAUSCHILD
Notary Public of New Jersey
My commission expires July 29, 1976
<PAGE>
[STATE SEAL OF NEW JERSEY APPEARS HERE]
I, the Secretary of State of the State of New Jersey, do
hereby Certify that the foregoing is a true copy of Certificate of Amendment of
SOUTH JERSEY GAS COMPANY.
_______________________________ and the endorsements thereon, as the same is
taken from and compared with the original filed in my office on the 10th day of
July A.D. 1972, and now remaining on file and of record therein.
In Testimony Whereof, I have hereunto set my hand and
[SEAL APPEARS HERE] affixed my Official Seal at Trenton, this 10th day of
July A.D. 1972
/s/ Robert M. Falcey
-------------------------------------
ASSISTANT Secretary of State
<PAGE>
Exhibit 3(b)
BYLAWS
(AMENDED AND RESTATED THROUGH JUNE 21, 1996)
SOUTH JERSEY GAS COMPANY
ARTICLE I
SHAREHOLDERS
------------
Section 1. Annual Meeting. The Company shall hold annually a regular
---------------
meeting of its shareholders for the election of directors and for the
transaction of general business at the principal office of the Company in
Folsom, New Jersey, or at such other place in the State of New Jersey (within or
outside the Boro of Folsom) as may be designated by the Board of Directors, at
9:00 in the forenoon prevailing time, or at such other hour as may be designated
by the Board of Directors, on the next to the last Thursday in April of each
year, if not a legal holiday, and if a legal holiday, then on the first day
following which is not a legal holiday. Such annual meetings shall be general
meetings, that is to say, open for the transaction of any business within the
powers of the Company without special notice of such business except in cases in
which special notice is required by Statute, by the Charter or by the Bylaws.
Section 2. Special Meetings. At any time in the interval between annual
-----------------
meetings, special meetings of the shareholders may be called by the Chairman of
the Board, the President or by a majority of the Board of Directors by vote at a
meeting or in writing with or without a meeting, or may be called by three or
more shareholders having voting powers as provided for under the Corporation
Law of the State of New Jersey.
Section 3. Notice of Meetings. Written or printed notice of every meeting
-------------------
of the shareholders shall be given to each shareholder entitled to vote at such
meeting, not less than ten days before such meeting, by the Chairman of the
Board, the President or any Vice President, or by the Secretary or any Assistant
Secretary, by leaving the same with him or at his residence or usual place of
business, or by mailing it, postage prepaid and addressed to him at his address
as it appears upon the books of the Company on the record date for such meeting,
as provided in Section 3 of Article V of these Bylaws. In the event of the
transfer of stock after the giving of such notice and prior to the holding of
the meeting, it shall not be necessary to give notice of the meeting to the
transferee. Notice of every special meeting shall state the place, day, and
hour of such meeting and the general nature of the business proposed to be
transacted thereat. Failure to give notice of any annual meeting or any
irregularity in such notice of any annual meeting or any irregularity in such
notice shall not affect the validity of such annual meeting or of any
proceedings at
1
<PAGE>
such meeting (other than proceedings of which special notice is required by law,
by the Charter, or by the Bylaws). It shall not be requisite to the validity of
any meeting of shareholders that notice thereof, whether prescribed by law, by
the Charter or by the Bylaws, shall have been given to any shareholder who
attends in person or by proxy, or to any shareholder who in writing, executed
and filed with the records of the meeting either before or after the holding
thereof, waives such notice. No notice other than by oral announcement need be
given of any adjourned meetings of shareholders.
Section 4. Quorum. At all meetings of shareholders, a majority of the
-------
outstanding shares of capital stock entitled to vote, represented by
shareholders in person or by proxy, shall constitute a quorum for the
transaction of business; but in the absence of a quorum the shareholders present
in person or by proxy at the time and place fixed by Section 1 of this Article I
for an annual meeting, or designated in the notice of a special meeting, or at
the time and place of any adjournment thereof, by majority vote may adjourn the
meeting from time to time without notice other than by oral announcement at the
meeting, until a quorum shall attend. At any such adjourned meeting at which a
quorum shall be present, any business may be transacted which might have been
transacted at the original meeting.
Section 5. Judges of Election. Judges of election, who need not be
-------------------
shareholders, shall be appointed by the Board of Directors for any meeting of
shareholders for the election of directors and may be so appointed for any other
meeting of shareholders. In case any of the judges of election shall be absent
or unable or unwilling to serve, all such vacancies may be filled by appointment
made by the Board of Directors in advance of the convening of the meeting, or at
the meeting by the person acting as chairman. Every election of directors shall
be conducted by ballot by two judges and, after the election, they shall file
with the Secretary a certificate of the results thereof, with the names of the
directors elected. The judges of election, at the request of the chairman of the
meeting, shall act as tellers of any other vote by ballot taken at the meeting
and shall certify the result thereof.
Section 6. Voting and Proxies. Any shareholder having the right to vote at
-------------------
any meeting shall be entitled to one vote for each share of stock held by him,
provided that, at all meetings for the election of directors, each shareholder
entitled to vote thereat shall be entitled to as many votes as shall equal the
number of shares held by him, multiplied by the number of directors to be
elected, and each such shareholder may cast all of such votes for a single
director or may distribute them amoung the total number of directors to be
voted for, or among any two or more of such directors as such shareholder may
see fit.
2
<PAGE>
Any shareholder entitled to vote at any meeting of shareholders may vote
either in person or by proxy, but no proxy which is dated more than two months
prior to the meeting at which it is offered shall confer the right to vote
thereat. Every proxy shall be in writing, subscribed by a shareholder or his
duly authorized attorney in fact, and dated, but need not be sealed, witnessed,
or acknowledged.
Section 7. List of Shareholders. A complete list of the shareholders
---------------------
entitled to vote at the annual meeting of the shareholders or at any special
meeting of shareholders, arranged in alphabetical order, with the mailing
address of each according to the records of the Company and the number of voting
shares held by each, shall be prepared by the Secretary or any Assistant
Secretary and filed in the office where the meeting is to be held, at least ten
days before each meeting of shareholders, shall be subject to inspection by any
shareholder during usual business hours, shall be produced and kept open at the
time and place of meeting, and shall be subject to the inspection of any
shareholder during the whole time of the meeting.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Election and Powers. The business and property of the Company
--------------------
shall be conducted and managed by its Board of Directors, consisting of seven
directors, which Board may exercise all the powers of the Company except such as
are by statute, by the Charter, or by these Bylaws conferred upon or reserved to
the shareholders. The members of the Board of Directors shall be elected by the
shareholders at their annual meeting or at any meeting held in lieu thereof,
except as provided in Section 8 of this Article II. Each director shall hold
office until the annual meeting held next after his or her election and until
his or her successor shall have been duly chosen and qualified, or until he or
she shall have resigned, or shall have been removed in the manner provided in
Section 10 of this Article II. The Board of Directors shall keep full and fair
account of its transactions.
Section 2. First Regular Meeting. After each meeting of shareholders at
----------------------
which a Board of Directors shall have been elected, the Board of Directors so
elected shall meet at the same place immediately following adjournment of the
shareholders' meeting for the purpose of organization and the transaction of
other business, unless some other time and place shall be designated by the
shareholders at their meeting.
3
<PAGE>
Section 3. Additional Regular Meetings. In addition to the first regular
----------------------------
meeting, regular meetings of the Board of Directors shall be held on such dates
as may be fixed, from time to time, by the Board of Directors, or by a majority
of the directors in writing without a meeting.
Section 4. Special Meetings. Special meetings of the Board of Directors
-----------------
shall be held whenever called by the Chairman of the Board, the President or by
the Board of Directors or by a majority of the Board of Directors in writing,
with or without a meeting.
Section 5. Place of Meetings. Subject to the provisions of Section 2 of
------------------
this Article II, the Board of Directors may hold its regular and special
meetings at such place or places within or without the State of New Jersey as it
may, from time to time, determine. In the absence of any such determination,
such regular and special meetings of the Board of Directors shall be held at
such places as may be designated in the calls therefor.
Section 6. Notice of Meetings. Notice of the place, day and hour of every
-------------------
meeting shall be given to each director at least two days before the meeting, by
delivering the same to him personally, or by sending the same to him by
telegraph, or by leaving the same at his residence or usual place of business,
or, in the alternative, upon three days' notice, by mailing it, postage prepaid,
and addressed to him at his last known mailing address, according to the records
of the Company. It shall not be requisite to the validity of any meetings of the
Board of Directors, that notice thereof shall have been given to any director
who attends, or to any director who, in writing executed and filed with the
records of the meeting either before or after the holding thereof, waives such
notice. No notice other than by oral announcement need be given of any adjourned
meetings of the Board of Directors. All regular meetings of the Board of
Directors shall be general meetings, that is to say, open for the transaction of
any business within the powers of the Company without special notice of such
business, except in cases in which special notice is required by law, by the
Charter, by these Bylaws, or by the call of such meeting.
Section 7. Quorum. At all meetings of the Board of Directors, a majority
-------
of the total number of the directors shall constitute a quorum for the
transaction of business. Except in cases in which it is by law, by the Charter,
or by these Bylaws otherwise provided, a majority of such quorum shall decide
any questions that may come before the meeting. In the absence of a quorum, the
directors present by majority vote may adjourn the meeting from time to time
without notice other than by oral announcement at the meeting until a quorum
shall attend. At any such adjourned meeting at which a quorum shall be present,
any business may be transacted which might have been transacted at the meeting
as originally notified.
4
<PAGE>
Section 8. Vacancies. Vacancies occurring in the Board of Directors,
----------
through any cause other than removal by the shareholders, including vacancies
created by an increase in the number of directors, may be filled by the vote of
a majority of the remaining directors.
Section 9. Compensation. The directors may be compensated for their
-------------
services on an annual basis and/or they may receive a fixed sum for attendance
at each regular or special meeting and every adjournment thereof; such
compensation or fixed sum to be fixed from time to time by resolution by the
Board of Directors. The directors shall be reimbursed for all reasonable
traveling expenses incurred in attending meetings. Directors who are employees
of the Company shall not receive compensation for their services as directors;
but nothing in this Section shall preclude any director from serving the Company
in any other capacity and receiving compensation therefor.
Section 10. Removal. At any meeting of the shareholders called for the
--------
purpose, any director may, by vote of the shareholders entitled to cast a
majority in number of all the votes, be removed from office, with or without
cause, and another be elected in the place of the person so removed, to serve
for the remainder of his term.
ARTICLE III
COMMITTEES
Section 1. Executive Committee. The Board of Directors, by resolution
--------------------
adopted by a majority of the whole Board of Directors, may designate an
Executive Committee of three or more directors and shall appoint one of the
directors so designated to be Chairman of the Executive Committee. The Chief
Executive Officer of the Company shall be ex officio a member of the Executive
Committee. The Executive Committee shall formulate policies to be followed in
planning and conducting the business and affairs of the Company. During the
intervals between the meetings of the Board of Directors, the Executive
Committee shall have and may exercise all the powers of the Board of Directors
in the management of the business and affairs of the Company conferred by these
Bylaws or otherwise. The Executive Committee shall keep full and fair account of
its transactions. All action by the Executive Committee shall be reported to the
Board of Directors at its meeting next succeeding such action, and shall be
subject to revision and alteration by the Board of Directors; provided that no
rights of third persons shall be affected by any such revision or alteration.
Vacancies in the Executive Committee shall be filled by the Board of Directors.
5
<PAGE>
Section 2. Compensation. Members of the Executive Committee may be
-------------
compensated for their services on an annual basis and/or they may receive a
fixed sum for attendance at each meeting of the Executive Committee and every
adjournment thereof; such compensation or fixed sum to be fixed from time to
time by resolution of the Board of Directors. The members of the Executive
Committee shall be reimbursed for all reasonable traveling expenses incurred in
attending meetings. Members of the Executive Committee who are employees of the
Company shall not receive compensation for their services as members of such
Committee; but nothing in this Section shall preclude a member of the Executive
Committee from serving the Company in any other capacity and receiving
compensation therefor or shall preclude the Chairman of the Executive Committee
from receiving compensation for his services as such Chairman.
Section 3. Meetings of the Executive Committee. The Executive Committee
------------------------------------
shall fix its own rules of procedure and shall meet as provided by such rules or
by resolution of the Board of Directors, and it shall also meet at the call of
the Chairman of the Executive Committee or any two members of the Committee.
Unless otherwise provided by such rules or by such resolutions, the provisions
of Section 5 and Section 6 of Article II relating to the place of holding and
notice required of meetings of the Board of Directors shall govern the Executive
Committee. A majority of the Executive Committee shall be necessary to
constitute a quorum.
Section 4. Other Committees. The Board of the Directors may by resolution
-----------------
designate such other standing or special committees as it deems desirable and
discontinue the same at pleasure. Each such committee shall have such powers
and perform such duties, not inconsistent with law, as may be assigned to it by
the Board of Directors.
ARTICLE IV
OFFICERS
Section 1. Executive Officers. The Executive Officers of the Company
-------------------
shall be a President, one or more Vice Presidents (one or more of whom may be
designated as Executive Vice President or Senior Vice President), a Secretary, a
Treasurer, and a Controller. The Board of Directors may also designate the
Chairman of the Board as an Executive Officer, which designation may be
cancelled by the Board at any time. The Executive Officers shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of the shareholders and each such Officer shall hold office until the
corresponding meeting in the next year and until his successor shall have
6
<PAGE>
been duly chosen and qualified, or until he shall have resigned or shall have
been removed, in the manner provided in Section 12 of this Article IV. Whether
or not the Chairman of the Board has been designated as an Executive Officer, he
shall be elected and hold office as set forth in the preceding sentence. Any
vacancy in any of the above-mentioned offices may be filled for the unexpired
portion of the term by the Board of Directors at any regular or special meeting.
Section 2. Chairman of the Board. The Chairman of the Board shall have
----------------------
such powers and duties as from time to time may be conferred upon or assigned to
him by the Board of Directors. He may, from time to time, delegate to any other
Officer such powers and such duties as he deems advisable. The Chairman of the
Board shall preside at all meetings of the Board of Directors and shareholders
at which he is present (except as he may request the President to so preside).
If the Chairman of the Board is designated as the Chief Executive Officer, he
shall have the powers and duties of the Chief Executive Officer referred to in
the next section of these Bylaws.
Section 3. President. The President shall be the Chief Executive
----------
Officer, unless the Board of Directors designates the Chairman of the Board as
the Chief Executive Officer. As Chief Executive Officer, the President shall
carry out policies adopted or approved by the Board of Directors and shall have
general charge and supervision of the business of the Company, subject to the
control of the Board of Directors. The President, if not designated the Chief
Executive Officer, shall have such powers and duties as from time to time may be
conferred upon or assigned to him by the Board of Directors or by the Chief
Executive Officer.
Section 4. Vice Presidents. At the request of the President, or in his
----------------
absence or disability, any Vice President shall perform all the duties of the
President, and when so acting shall have the powers of the President, unless
otherwise determined by the Board of Directors. Each Vice President shall also
have and exercise such powers and duties as from time to time may be conferred
upon or assigned to him by the Board of Directors or the Chief Executive
Officer.
Section 5. Secretary. The Secretary shall record the proceedings of the
----------
meeting of the Board of Directors and, if so directed, of the Executive
Committee, in books provided for that purpose; he shall see that all notices of
meetings of the Directors are duly given in accordance with the provisions of
these Bylaws, or as required by law; he shall be custodian of the Directors'
minutes and of the corporate
7
<PAGE>
seal or seals of the Company; he shall see that the corporate seal is affixed to
all documents, the execution of which, on behalf of the Company, under its seal,
is duly authorized, and when so affixed may attest the same; and, in general, he
shall perform all duties incident to the office of a Secretary of a corporation,
and such other duties as from time to time may be assigned to him by the Board
of Directors or the Chief Executive Officer.
Section 6. Treasurer. The Treasurer shall serve as the chief financial
----------
officer and shall have charge of and be responsible for procuring capital and
maintaining financial arrangements as shall, from time to time, be selected by
the Board of Directors; he shall manage the level of funds deposited in banks,
trust companies, or other depositories so as to minimize the cost of borrowing
such funds as shall be periodically required and to maximize the return on the
investment of Company funds as shall from time to time, be available; and, in
general, he shall perform all the duties incident to the office of a Treasurer
of a corporation, and such other duties as from time to time may be assigned to
him by the Board of Directors or the Chief Executive Officer.
Section 7. Controller. The Controller shall serve as the chief
-----------
accounting officer and shall have charge of the accounting books and records of
the Company; he shall render to the Chief Executive Officer and to the Board of
Directors, whenever requested, an account of the financial condition of the
Company; he shall have charge of and be responsible for the receipt and
disbursement of all funds of the Company and shall deposit or cause to be
deposited, in the name of the Company, all moneys or valuable effects in such
banks, trust companies, or other depositories as shall from time to time be
selected by the Board of Directors; and, in general, he shall perform all the
duties incident to the duties of a Chief Accounting Officer of a corporation,
and such other duties as from time to time may be assigned to him by the Board
of Directors or the Chief Executive Officer.
Section 8. Assistant Officers. The Board of Directors may elect one or
-------------------
more Assistant Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers and one or more Assistant Controllers. Each Assistant Vice
President, if any, each Assistant Secretary, if any, each Assistant Treasurer,
if any, and each Assistant Controller, if any, shall hold office for such period
and shall have such authority and perform such duties as the Board of Directors
or the Chief Executive Officer may prescribe.
Section 9. Subordinate Officers. The Board of Directors may select such
---------------------
subordinate Officers as it may deem desirable. Each such Officer shall hold
office for such period, have such authority, and perform such duties as the
Board of Directors or the Chief Executive Officer may
8
<PAGE>
prescribe. The Board of Directors may, from time to time, authorize any Officer
to appoint and remove subordinate Officers and prescribe the powers and duties
thereof.
Section 10. Certain Powers of Officers. Certificates of Stock of the
--------------------------
Company shall be signed by the President or any Vice President and by the
Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary
or the Controller or any Assistant Controller of the Company. The President may
sign and execute in the name of the Company all authorized deeds, mortgages,
bonds, contracts, or other instruments, except in cases in which the signing and
execution thereof shall have been expressly delegated to some other Officer or
Agent of the Company.
Section 11. Officers Holding Two or More Offices. Any two of the
------------------------------------
above-mentioned offices, except those of President and Secretary or Assistant
Secretary, may be held by the same person, but no officer shall execute,
acknowledge, or verify any instrument in more than one capacity, if such
instrument be required by Statute, by the Charter, or by these Bylaws, to be
executed, acknowledged, or verified by any two or more Officers.
Section 12. Compensation. The Board of Directors shall have power to fix
------------
the compensation of all Officers of the Company. It may authorize any Officer,
upon whom the power of appointing subordinate Officers may have been conferred,
to fix the compensation of such subordinate Officers.
Section 13. Removal. Any Officer of the Company may be removed, with or
-------
without cause, by vote of a majority of the entire board of Directors at a
meeting called for that purpose, or (except in case of an Officer elected by the
Board of Directors) by an Officer upon whom such power of removal may have been
conferred.
ARTICLE V
STOCK
Section 1. Certificates. Every shareholder shall be entitled to a
------------
certificate or certificates of stock of the Company in form prescribed by the
Board of Directors, duly numbered and sealed with the corporate seal of the
Company, and setting forth the number and kind of shares represented thereby to
which each shareholder is entitled. Such certificates shall be signed by the
Chairman of the Board or the President or any Vice President and by the
Treasurer or any Assistant Treasurer or the Secretary or any Assistant Secretary
or the Controller or any Assistant Controller of the Company. The Board of
Directors may also appoint one or more Transfer Agents and/or Registrars for its
stock of any class or classes and may require stock certificates to be
9
<PAGE>
countersigned and/or registered by one or more of such Transfer Agents and/or
Registrars. If certificates of capital stock of the Company are signed by a
Transfer Agent and by a Registrar, the signature of the officers of the Company
and the seal of the Company thereon may be facsimiles, engraved or printed. Any
provisions of these Bylaws with reference to the signing and sealing of stock
certificates shall include, in cases above permitted, such facsimiles. In case
any officer or officers who shall have signed, or whose facsimile signature or
signatures shall have been used on any such certificate or certificates shall
cease to be such officer or officers of the Company, whether because of death,
resignation, or otherwise, before such certificate or certificates shall have
been delivered by the Company, such certificate or certificates may nevertheless
be adopted by the Board of Directors of the Company and be issued and delivered
as though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall have been used thereon had not
ceased to be such officer or officers of the Company.
Section 2. Transfer of Shares. The Board of Directors shall have power
-------------------
and authority to make all such rules and regulations as it may deem expedient
concerning the issue, transfer, and registration of certificates of stock.
Section 3. Record Dates. The Board of Directors is hereby authorized to
-------------
fix the time, not exceeding fifty (50) days preceding the date of any meeting
of shareholders, or the date for payment of any dividend, or the date for the
allotment of rights, or the date when any change, or conversion, or exchange of
capital stock shall go into effect, during which the books of the Company shall
be closed against transfers of stock; provided, however, that in case of any
such closing of the stock transfer books, notice thereof shall be mailed to the
shareholders at their last known address as the same appears upon the books of
the Company, at least ten (10) days before the closing thereof. In lieu of
providing for the closing of the books against transfers of stock as aforesaid,
the Board of Directors shall have the authority to fix in advance a date, not
exceeding fifty (50) days preceding (1) the date of any meeting of shareholders,
(2) the date for the payment of any dividend, (3) the date for the allotment of
rights, or (4) the date when any change or conversion or exchange of capital
stock shall go into effect, as a record date for the determination of the
shareholders entitled to notice of, or to vote at, any such meeting, or entitled
to receive payment of any such dividend, or to any such allotment of rights, or
to exercise the rights in respect of any such change, conversion, or exchange of
capital stock, and in such case such shareholders and only such shareholders as
shall be shareholders of record on the date so fixed, shall be entitled to such
notice of, and to vote at such meeting, or to receive payment of such
10
<PAGE>
divided, or to receive such allotment of rights, or to exercise such rights, as
the case may be, notwithstanding any transfer of any stock on the books of the
Company after any such record date fixed as aforesaid. In any case in which the
Board of Directors does not provide for the closing of the Books against
transfer of stock as aforesaid, or fix a record date as aforesaid, the twentieth
day preceding the date of the meeting of shareholders, the dividend payment
date or the date for the allotment of rights, shall be the record date for the
determination of the shareholders entitled to notice of and to vote at such
meeting, or to receive such dividends or rights, as the case may be.
Section 4. Mutilated, Lost or Destroyed Certificates. The holder of any
-----------------------------------------
certificate representing shares of stock of the Company shall immediately notify
the Company of any mutilation, loss, or destruction thereof, and the Board of
Directors may, in its discretion, cause one or more new certificates, for the
same number of shares in the aggregate, to be issued to such holder upon the
surrender of the mutilated certificate, or in case of loss or destruction of the
certificate, upon satisfactory proof of such loss or destruction, and the
deposit of indemnity by way of bond or otherwise, in such form and amount and
with such sureties or securities as the Board of Directors may require to
indemnify the Company against loss or liability by reason of the issuance of
such new certificate or certificates, and the failure of such holder to comply
with the requirements of this Section 4 shall constitute a waiver by such holder
of any right to receive such new certificate or certificates, provided however
that no deposit of indemnity, other than personal bond, shall be required for
the issuance of one or more new certificates where the value of the number of
shares in the aggregate does not exceed $200.00. The Board of Directors may, in
its discretion, refuse to issue such new certificates, save upon the order of
some Court having jurisdiction in such matters.
ARTICLE VI
DIVIDENDS AND FINANCE
Section 1. Dividends. Subject to the provisions of the Charter, the Board
---------
of Directors may, in its discretion, declare what, if any, dividends shall be
paid upon the stock of the Company, or upon any class of such stock. Except as
otherwise provided by the Charter, dividends shall be payable upon such dates as
the Board of Directors may designate. Before payment of any dividend there may
be set aside out of any funds of the Company available for dividends such sum or
sums as the directors, from time to time, in their absolute discretion, think
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Company, or for such other
11
<PAGE>
purposes as the directors shall think conducive to the interest of the Company,
and the directors may abolish any such reserve in the manner in which it was
created.
Section 2. Checks, Drafts, Etc. All checks, drafts, or orders for the
--------------------
payment of money, notes, and other evidences of indebtedness, issued in the name
of the Company, shall unless otherwise provided by the Board of Directors, be
signed by the Treasurer or an Assistant Treasurer, or the Controller or an
Assistant Controller and countersigned by the Chairman of the Board or the
President or a Vice President or the Secretary.
Section 3. Annual Reports. A report on the affairs of the Company
---------------
shall be submitted at the annual meeting of the shareholders. Such statement
shall be prepared by such executive officer of the Company as may be designated
by the Board of Directors. If no other executive officer is so designated, it
shall be the duty of the Chairman of the Board to prepare such statement.
Section 4. Fiscal Year. The fiscal year of the Company shall be the
------------
calendar year, unless otherwise provided by the Board of Directors.
ARTICLE VII
INDEMNIFICATION
Section 1. Right to Indemnification. The Company shall indemnify any
-------------------------
corporate agent against his expenses and liabilities in connection with any
proceedings involving the corporate agent by reason of his being or having been
such a corporate agent to the extent that (a) such corporate agent is not
otherwise indemnified; and (b) the power to do so has been or may be granted by
statute; and for this purpose the Board of Directors may, and on request of any
such corporate agent shall be required to, determine in each case whether or not
the applicable standards in any such statute have been met, or such
determination shall be made by independent legal counsel if the Board so directs
or if the Board is not empowered by statute to make such determination.
Section 2. Prepayment of Expenses. To the extent that the power to do
-----------------------
so has been or may be granted by statute, the Company shall pay expenses
incurred by a corporate agent in connection with a proceeding in advance of the
final disposition of the proceeding upon receipt of an undertaking by or on
behalf of such corporate agent to repay such amount unless it shall ultimately
be determined that he is entitled to be indemnified as provided by statute.
12
<PAGE>
Section 3. Indemnification Not Exclusive. This indemnification shall not
-----------------------------
be exclusive of any other rights to which a corporate agent may be entitled,
both as to any action in his official capacity or as to any action in another
capacity while holding such office, and shall inure to the benefits of the
heirs, executors, or administrators of any such corporate agent.
Section 4. Insurance and Other Indemnification. The Board of Directors
-----------------------------------
shall have the power to (a) purchase and maintain, at the Company's expense,
insurance on behalf of the Company and on behalf of others to the extent that
power to do so has been or may be granted by statute and (b) give other
indemnification to the extent permitted by law.
Section 5. Definitions. As used in this Article,
-----------
(a) "corporate agent" means any person who is or was a Director, officer,
employee or agent of the Company and any person who is or was a Director,
officer, trustee, employee or agent of any other enterprise, serving as such at
the request of the Company, or the legal representative of any such Director,
officer, trustee, employee or agent;
(b) "other enterprises" means any domestic or foreign corporation, other
than the Company, and any partnership, joint venture, sole proprietorship, trust
or other enterprise whether or not for profit, served by a corporate agent;
(c) "expenses" means reasonable costs, disbursements, and counsel fees;
(d) "liabilities" means amounts paid or incurred in satisfaction of
settlements, judgements, fines, and penalties;
(e) "proceedings" means any pending, threatened or completed civil,
criminal, administrative or arbitrative action, suit or proceeding, and any
appeal therein and any inquiry or investigation which could lead to such action,
suit or proceeding.
ARTICLE VIII
SUNDRY PROVISIONS
Section 1. Seal. The Corporate Seal of the Company shall contain within a
----
circle the words "South Jersey Gas Company," and in an inner circle the word
"SEAL." If deemed advisable by the Board of Directors, a duplicate seal or
duplicate seals may be provided and kept for the necessary purposes of the
Company.
13
<PAGE>
Section 2. Books and Records. The Board of Directors may determine from
------------------
time to time whether and, if allowed, when and under what conditions and
regulations, the books and records of the Company, or any of them, shall be open
to the inspection of shareholders and the rights of shareholders in this respect
are and shall be limited accordingly, except as otherwise provided by Statute.
Under no circumstances shall any shareholder have the right to inspect any book
or record or receive any statement for an illegal or improper purpose.
Section 3. Bonds. The Board of Directors may require any officer, agent,
------
or employee of the Company to give a bond to the Company, conditioned upon the
faithful discharge of his duties, with one or more sureties and in such amount
as may be satisfactory to the Board of Directors.
Section 4. Voting upon Stock in Other Corporations. Any Stock in other
----------------------------------------
corporations, which may from time to time be held by the Company, may be
represented and voted at any meeting of shareholders of such other corporations
by the Chairman of the Board, the President or a Vice President of the Company
or by proxy executed in the name of the Company by the Chairman of the Board,
the President or a Vice President with the corporate seal affixed and attested
by the Secretary or an Assistant Secretary.
Section 5. Amendments. These Bylaws may be altered or amended at any
-----------
annual meeting of the shareholders or at any special meeting called for that
purpose, by a majority vote of all the shareholders entitled to vote at such
meeting, or at any meeting of the Board of Directors, by a majority vote of the
directors, provided notice of any such proposed alteration or amendment shall be
given in the notice of any such meeting.
14
<PAGE>
Amendments
----------
Article II, Section 1 amended February 19, 1959.
Article I, Section 1 amended February 19, 1960.
Article I, Section 1 amended February 21, 1963
Article IV, Section 8 amended August 19, 1965.
Article V, Section 1 amended August 19, 1965.
Article I, Section 1 amended June 20, 1968.
Article I, Section 1 amended April 16, 1970.
Article II, Section 1 amended August 19, 1971.
Article II, Section 1 amended June 22, 1972.
Article II, Section 1 amended August 23, 1973.
Article II, Section 1 amended February 20, 1975.
Article II, Section 11 repealed August 21, 1975.
Article VII, Renum. Article VIII August 21, 1975.
Article VII, Newly added August 21, 1975.
Article I, Section 1 amended December 18, 1975.
Article II, Section 1 amended February 19, 1976.
Article II, Section 1 amended February 17, 1977.
Article IV, Section 3-11 renum. April 21, 1977.
Article IV, Section 3 newly added April 21, 1977.
Article VI, Section 1 amended April 21, 1977.
Bylaws restated in their entirety.
Article II, Section 1 amended February 16, 1978.
Article II, Section 1 amended February 15, 1979.
Article II, Section 1 amended August 23, 1979.
Article III, Section 1 amended October 24, 1980.
Article IV, Section 1,2 & 3 amended October 24, 1980.
Article II, Section 1 amended April 22, 1981.
Article II, Section 1 amended October 23, 1981.
Article IV, Section 1-12 amended October 23, 1981.
Article II, Section 1 amended January 21, 1983.
Article II, Section 1 amended May 22, 1985.
Article II, Section 1 amended April 17, 1986.
Article IV, Section 1 & 6-13 amended March 18, 1988.
effective April 1, 1988.
Article V, Section 1 amended March 18, 1988, effective
April 1, 1988.
Article VI, Section 2 amended March 18, 1988, effective
April 1, 1988.
Article II, Section 1 amended April 18, 1989, effective
April 19, 1989 (Spl. Mtg.)
Article II, Section 1 amended October 20, 1989.
Article II, Section 1 amended April 19, 1990.
Article II, Section 1 amended October 1, 1990.
Article II, Section 1 amended April 23, 1992.
Article II, Section 1 amended April 22, 1993.
Article II, Section 1 amended October 21, 1994.
Article II, Section 1 amended April 20, 1995.
Article II, Section 1 amended June 21, 1996.
15
<PAGE>
Exhibit 4(a)
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+REGISTERED: REGISTERED: +
+MANUFACTURERS HANOVER TRUST COMPANY, GUARANTEE BANK AND TRUST COMPANY, +
+ REGISTRAR, (ATLANTIC CITY, N.J.) REGISTRAR,+
+ 0R +
+ -- +
+ AUTHORIZED OFFICER AUTHORIZED SIGNATURE+
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
CERTIFICATE FOR LESS THAN 100 SHARES
NUMBER SHARES
______ ______
[PHOTO APPEARS HERE]
COMMON STOCK COMMON STOCK
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY
SOUTH JERSEY GAS COMPANY
THIS CERTIFICATE IS TRANSFERABLE EITHER IN THE CITY OF NEW YORK OR IN
ATLANTIC CITY, N.J.
This Certifies That __________________________________________ is the owner of
SEE REVERSE
FOR CERTAIN
DEFINITIONS
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF THE PAR
VALUE OF $2.50 EACH OF
CERTIFICATE OF STOCK
South Jersey Gas Company transferable on the books of the Company by the holder
hereof in person or by duly authorized attorney upon surrender of this
certificate properly indorsed. This certificate and the shares represented
hereby are issued and shall be held subject to all of the provisions of the
agreement of merger and consolidation forming the Company as from time to time
amended copies of which are on file at the office of the Transfer Agents, to
which the holder by acceptance hereof accepts. This certificate is not valid
until countersigned by the Transfer Agent and registered by the Registerar,
Witness the seal of the Company and the facsimile signatures of the duly
authorized officers of the Company.
SPECIMEN [SEAL APPEARS HERE] SPECIMEN
/s/ [SIGNATURE APPEARS HERE] /S/ [SIGNATURE APPEARS HERE]
TREASURER PRESIDENT
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ OR +
+ -- +
+ AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE+
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
<PAGE>
SOUTH JERSEY GAS COMPANY
A COPY OF THE PROVISIONS SETTING FORTH THE RIGHTS AND PREFERENCES OF ALL
CLASSES OF CAPITAL STOCK OF THE COMPANY MAY BE OBTAINED WITHOUT CHARGE FROM
EITHER TRANSFER AGENT OR FROM THE SECRETARY OF THE COMPANY IN ATLANTIC CITY, NEW
JERSEY.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM --as tenants in common UNIF GIFT MIN ACT--............Custodian...........
(Cust) (Minor)
TEN ENT --as tenants by the entireties under Uniform Gifts to Minors
JT TEN --as joint tenants with right of
survivorship and not as tenants Act......................
in common (State)
Additional abbreviations may also be
used though not in the above list.
</TABLE>
For value received, ______ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- -------------------------------------- ----------------------------------------
- -------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________________
________________________________________________________________________________
Attorney to transfer the said stock on the books of the within named Company
with full power of substitution in the premises.
Dated,
--------
---------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<MULTIPLIER> 1000
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 421,622
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 85,650
<TOTAL-DEFERRED-CHARGES> 90,655
<OTHER-ASSETS> 1,999
<TOTAL-ASSETS> 599,926
<COMMON> 5,848
<CAPITAL-SURPLUS-PAID-IN> 77,194
<RETAINED-EARNINGS> 51,522
<TOTAL-COMMON-STOCKHOLDERS-EQ> 134,564
0
2,314
<LONG-TERM-DEBT-NET> 149,736
<SHORT-TERM-NOTES> 108,300
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 6,603
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 198,409
<TOT-CAPITALIZATION-AND-LIAB> 599,926
<GROSS-OPERATING-REVENUE> 330,335
<INCOME-TAX-EXPENSE> 10,627
<OTHER-OPERATING-EXPENSES> 280,859
<TOTAL-OPERATING-EXPENSES> 291,486
<OPERATING-INCOME-LOSS> 38,849
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 38,849
<TOTAL-INTEREST-EXPENSE> 19,460
<NET-INCOME> 19,389
174
<EARNINGS-AVAILABLE-FOR-COMM> 19,215
<COMMON-STOCK-DIVIDENDS> 15,057
<TOTAL-INTEREST-ON-BONDS> 13,636
<CASH-FLOW-OPERATIONS> 41,050
<EPS-PRIMARY> 8.21
<EPS-DILUTED> 8.21
</TABLE>
