<PAGE>
Registration No. 333-24065
As filed with the Securities and Exchange Commission on April 18, 1997
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________
SJG CAPITAL TRUST SOUTH JERSEY GAS COMPANY
(Exact name of Registrant as (Exact name of Registrant
specified in its Trust Certificate) as specified in its Charter)
DELAWARE NEW JERSEY
(State of Organization) (State of Incorporation)
22-6720144 21-0398330
(I.R.S. Employer (I.R.S. Employer
Identification Number) Identification Number)
NUMBER ONE SOUTH JERSEY PLAZA, ROUTE 54
FOLSOM, NEW JERSEY 08037
(609) 561-9000
________________
(Address, including zip code, and telephone number, including area code, of
Registrants' principal executive offices)
________________
GEORGE L. BAULIG, SECRETARY
SOUTH JERSEY GAS COMPANY
NUMBER ONE SOUTH JERSEY PLAZA, ROUTE 54
FOLSOM, NEW JERSEY 08037
(609) 561-9000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
________________
Copies to:
GEORGE W. PATRICK, ESQUIRE WILLIAM P. ROGERS, JR., ESQUIRE
DECHERT PRICE & RHOADS CRAVATH, SWAINE & MOORE
4000 BELL ATLANTIC TOWER 825 EIGHTH AVENUE
1717 ARCH STREET NEW YORK, NEW YORK 10019-7475
PHILADELPHIA, PENNSYLVANIA 19103-2793 (212) 474-1122
(215) 994-2631
________________
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC:
After this Registration Statement becomes effective, as determined by market
conditions and other factors.
________________
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act of 1933 registration statement number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act of 1933, please check the following box: [X]
________________
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAW OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1997
1,400,000 PREFERRED SECURITIES
SJG CAPITAL TRUST
% PREFERRED SECURITIES (LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT SJG CAPITAL TRUST HAS AVAILABLE FUNDS AS SET FORTH
HEREIN BY
SOUTH JERSEY GAS COMPANY
-----------
The % Preferred Securities (the "Preferred Securities") offered hereby
represent undivided beneficial interests in the assets of SJG Capital Trust, a
statutory business trust created under the laws of the State of Delaware (the
"Issuer"). South Jersey Gas Company ("SJG") is the owner of the beneficial
interests represented by the common securities of the Issuer (the "Common
Securities"). SJG is a wholly owned subsidiary of South Jersey Industries, Inc.
("SJI"). The Bank of New York is the Property Trustee of the Issuer (the
"Property Trustee"). The Issuer exists for the sole purpose of issuing
beneficial interests in the assets of the Issuer and investing the proceeds
thereof in Deferrable Interest Subordinated Debentures to be issued by SJG (the
"Debentures"). The Preferred Securities have a preference over the Common
Securities under certain circumstances with respect to cash distributions and
amounts payable on redemption or liquidation. See "Description of the Preferred
Securities--Subordination of Common Securities" in the accompanying Prospectus.
(continued on next page)
SEE "RISK FACTORS" COMMENCING ON PAGE S-4 FOR CERTAIN INFORMATION RELEVANT TO
AN INVESTMENT IN THE PREFERRED SECURITIES, INCLUDING THE PERIOD DURING WHICH
AND CIRCUMSTANCES UNDER WHICH PAYMENTS OF DISTRIBUTIONS ON THE PREFERRED
SECURITIES MAY BE DEFERRED AND THE RELATED FEDERAL INCOME TAX CONSEQUENCES.
The Preferred Securities have been approved for listing on the New York Stock
Exchange, subject to official notice of issuance. Trading of the Preferred
Securities is expected to commence within a 30-day period after the initial
delivery thereof.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
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<TABLE>
<CAPTION>
Initial Public Underwriting Proceeds to
Offering Price(1) Commissions(2) the Issuer(3)(4)
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<S> <C> <C> <C>
Per Preferred Security........ $25.00 (3) $25.00
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Total......................... $35,000,000 (3) $35,000,000
</TABLE>
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(1) Plus accumulated Distributions, if any, from the date of original issuance.
(2) SJG and the Issuer have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting."
(3) In view of the fact that the proceeds of the sale of the Preferred
Securities will be used to purchase the Debentures under the Underwriting
Agreement, SJG will pay to the Underwriters an underwriting commission of
$ per Preferred Security (or $ in the aggregate), except that such
commission will be $ per Preferred Security sold to certain institutions.
See "Underwriting."
(4) Expenses of the offering, which are payable by SJG, are estimated to be
$ .
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Preferred Securities will be made in book-entry-
only form through the facilities of The Depository Trust Company ("DTC") in New
York, New York on or about , 1997 against payment therefor in immediately
available funds.
-----------
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
-----------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 1997.
<PAGE>
(continued from previous page)
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions ("Distributions") at an annual rate of % of the liquidation
amount of $25 per Preferred Security, accumulating from the date of original
issuance and payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year, commencing June 30, 1997. So long as no
Debenture Event of Default has occurred and is continuing, SJG has the right
to defer payments of interest on the Debentures by extending the interest
payment period in respect thereof for up to 20 consecutive quarters (each, an
"Extension Period"), but not beyond the maturity or any redemption date of the
Debentures. See "Certain Terms of the Preferred Securities--Distributions"
herein and "Description of the Debentures--Option to Extend Interest Payment
Period" in the accompanying Prospectus. If and for so long as interest
payments are deferred, Distributions on the Preferred Securities will also be
deferred. During an Extension Period, Distributions will continue to
accumulate and owners of Preferred Securities will be required to accrue
interest income for Federal income tax purposes. See "United States Taxation--
Potential Extension of Interest Payment Period and Original Issue Discount."
SJG has, through the Guarantee, the Trust Agreement, the Indenture and the
Debentures, taken together, fully, irrevocably and unconditionally guaranteed
all of the Issuer's obligations under the Preferred Securities. Under the
Guarantee Agreement, SJG agrees to make payments of Distributions and payments
on redemption or liquidation with respect to the Preferred Securities, but
only to the extent that the Issuer holds funds available therefor and has not
made such payments. See "Description of the Guarantee" in the accompanying
Prospectus. If SJG fails to make a payment on the Debentures, the Issuer will
not have sufficient funds to make the related payment, including
Distributions, on the Preferred Securities. The Guarantee does not cover any
such payment when the Issuer does not have sufficient funds available
therefor. In such event, the Property Trustee or holders of the Preferred
Securities may enforce the rights of the Issuer under the Debentures. See
"Description of the Guarantee--Guarantee Events of Default" in the
accompanying Prospectus.
The obligations of SJG under the Guarantee are subordinate and junior in
right of payment to all general liabilities of SJG, and the obligations of SJG
under the Debentures are subordinate and junior in right of payment to all
present and future Senior Indebtedness of SJG (as defined in the accompanying
Prospectus). At February 28, 1997, the Senior Indebtedness of SJG aggregated
approximately $251.5 million.
The Preferred Securities are subject to mandatory redemption upon payment of
the Debentures at maturity on April 30, 2037, or upon earlier redemption. See
"Certain Terms of the Preferred Securities--Redemption." SJG has the option at
any time on or after April 30, 2002, to redeem, in whole or in part, the
Debentures. In addition, the Debentures are subject to redemption, in whole
but not in part, at the option of SJG upon the occurrence of certain special
events described under "Certain Terms of the Preferred Securities--Special
Event Redemption."
SJG has the right, at any time, subject to certain conditions, to terminate
the Issuer and cause the Debentures to be distributed to the holders of the
Preferred Securities and the Common Securities. See "Certain Terms of the
Preferred Securities--Distribution of Debentures." If the Debentures are so
distributed, SJG will use its best efforts to list them on the New York Stock
Exchange, Inc. (the "New York Stock Exchange").
In the event of the termination and liquidation of the Issuer, holders of
Preferred Securities will be entitled to receive a liquidation amount of $25
per Preferred Security plus accumulated and unpaid Distributions to the date
of payment, unless, in connection therewith, the Debentures are distributed to
the holders of the Preferred Securities and the Common Securities. See
"Description of the Preferred Securities--Liquidation Distribution Upon
Termination" in the accompanying Prospectus.
The Preferred Securities are represented by global securities registered in
the name of DTC or its nominee. Beneficial interests in the Preferred
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by participants in DTC. Except as described in the
accompanying Prospectus, Preferred Securities in certificated form will not be
issued in exchange for the global securities. See "Description of the
Preferred Securities--Book-Entry-Only Issuance--The Depository Trust Company"
in the accompanying Prospectus.
S-2
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE PREFERRED
SECURITIES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH PREFERRED SECURITIES, AND THE IMPOSITION OF A PENALTY
BID, IN CONNECTION WITH THE OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING".
The following information supplements, and should be read in conjunction
with, the information contained in the accompanying Prospectus. Each of the
capitalized terms used in this Prospectus Supplement and not defined herein
has the meaning set forth in the accompanying Prospectus.
S-3
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RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following
matters.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND THE DEBENTURES
The obligations of South Jersey Gas Company ("SJG") under the Guarantee
issued by SJG (the "Guarantee") for the benefit of the holders of the %
Preferred Securities (the "Preferred Securities") issued by SJG Capital Trust
(the "Issuer") are unsecured and rank subordinate and junior in right of
payment to all general liabilities of SJG. The obligations of SJG under its %
Deferrable Interest Subordinated Debentures (the "Debentures") issued pursuant
to the Indenture dated as of , 1997 (as amended and supplemented from
time to time, the "Indenture") between SJG and The Bank of New York, as
trustee (the "Debenture Trustee"), are unsecured and rank subordinate and
junior in right of payment to all Senior Indebtedness of SJG. At February 28,
1997 the Senior Indebtedness of SJG aggregated approximately $251.5 million.
No terms of the Preferred Securities, the Debentures or the Guarantee limit
SJG'S ability to incur additional indebtedness, including indebtedness that
ranks senior to the Debentures and the Guarantee. See "Description of the
Guarantee--Status of the Guarantee" and "Description of the Debentures--
Subordination" in the accompanying Prospectus.
The ability of the Issuer to pay cash distributions ("Distributions") on the
Preferred Securities and the redemption price or liquidation amount of the
Preferred Securities is solely dependent upon SJG making the related payments
on the Debentures when due.
OPTION TO EXTEND INTEREST PAYMENT PERIOD; TAX CONSEQUENCES
So long as no event of default with respect to the Debentures (a "Debenture
Event of Default") under the Indenture has occurred and is continuing, SJG has
the right at any time and from time to time to defer payments of interest on
the Debentures by extending the interest payment period on the Debentures for
up to 20 consecutive quarters (each, an "Extension Period"), but not beyond
the maturity or any redemption date of the Debentures. As a consequence,
Distributions on the Preferred Securities would be deferred by the Issuer
during any Extension Period (but the amount of Distributions to which holders
of the Preferred Securities would be entitled would continue to accumulate at
the rate of % per annum, compounded quarterly). During any Extension Period,
SJG may not declare or pay any dividend on, or redeem, purchase, acquire or
make a liquidation payment with respect to, any shares of SJG's capital stock.
Prior to the termination of any Extension Period, SJG may shorten or further
extend the interest payment period on the Debentures; provided that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters or extend beyond the maturity
or any redemption date of the Debentures. Upon the termination of any
Extension Period and the payment of all amounts then due, SJG may elect to
begin a new Extension Period, subject to the above requirements.
See "Certain Terms of the Preferred Securities--Distributions" herein and
"Description of the Debentures--Option to Extend Interest Payment Period" in
the accompanying Prospectus.
Should an Extension Period occur, an owner of Preferred Securities (which
represent undivided beneficial interests in the Debentures) will continue to
accrue interest income for Federal income tax purposes in respect of its pro
rata share of the Debentures held by the Issuer. As a result, an owner of
Preferred Securities will include such interest in gross income for Federal
income tax purposes in advance of the receipt of cash and will not receive the
cash related to such income from the Issuer if such owner disposes of the
Preferred Securities prior to the record date for the payment of Distributions
following such Extension Period. See "United States Taxation--Potential
Extension of Interest Payment Period and Original Issue Discount."
SJG has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Debentures. However,
should SJG exercise such right in the future, the market price of
S-4
<PAGE>
the Preferred Securities is likely to be affected. An owner who disposes of
Preferred Securities during an Extension Period might not receive the same
return on investment as an owner who continues to hold Preferred Securities.
In addition, as a result of the mere existence of SJG's right to defer
interest payments on the Debentures, the market price of the Preferred
Securities may be more volatile than other securities on which original issue
discount accrues that are not subject to such deferrals.
TRADING CHARACTERISTICS OF THE PREFERRED SECURITIES; TAX CONSEQUENCES
The Preferred Securities may trade at a price that does not fully reflect
the value of accrued but unpaid interest with respect to the Debentures. An
owner of Preferred Securities who disposes of Preferred Securities prior to
the record date for the payment of Distributions will nevertheless be required
to include accrued but unpaid interest on the Debentures through the date of
disposition in income as ordinary income and to add such amount to its
adjusted tax basis of the Preferred Securities so disposed. Such owner will
recognize a capital loss to the extent the selling price (which may not fully
reflect the value of accrued but unpaid interest) is less than its adjusted
tax basis (which will include accrued but unpaid interest). Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for Federal income tax purposes. See "United States Taxation."
SPECIAL EVENT REDEMPTION AND PROPOSED FEDERAL INCOME TAX LAW CHANGES
Upon the occurrence and continuation of a Tax Event or an Investment Company
Event (each as defined in "Certain Terms of the Preferred Securities--Special
Event Redemption"), SJG has the right to redeem the Debentures, in whole but
not in part, and therefore cause a mandatory redemption of the Preferred
Securities and common securities of the Issuer (the "Common Securities"
together with the Preferred Securities, the "Trust Securities"), at a
redemption price equal to the liquidation amount plus accumulated and unpaid
Distributions following the occurrence of such Tax Event or Investment Company
Event.
On February 6, 1997, President Clinton proposed certain tax law changes (the
"Proposed Legislation") that would, among other things, generally deny
interest deductions to corporate issuers if the debt instrument has a term
exceeding 15 years and is not reflected as indebtedness on such issuer's
consolidated balance sheet. Because the term of the Debentures exceeds 15
years, this proposal, were it to become effective, would prevent SJG from
deducting interest on the Debentures. The Proposed Legislation is proposed to
be effective for instruments issued on or after the date of "first committee
action," which has not yet taken place and may not take place before the
Debentures are issued. In the opinion of counsel to SJG and the Issuer, under
current law, interest on the Debentures is deductible. There can be no
assurance, however, that the effective date contained in the Proposed
Legislation will not be changed if such legislation were enacted, or that
subsequent proposals or final legislation will not affect the ability of SJG
to deduct interest on the Debentures which, in turn, could give rise to a Tax
Event and, accordingly, SJG's optional right to redeem the Debentures, as
described under "Certain Terms of the Preferred Securities--Special Event
Redemption."
DISTRIBUTION OF DEBENTURES; POSSIBLE ADVERSE EFFECT ON MARKET PRICE
At any time, SJG may, in its sole discretion, terminate the Issuer and cause
the Debentures to be distributed to the holders of the Trust Securities,
provided that SJG shall have delivered to the Issuer Trustees (as defined
herein) a written opinion of nationally recognized independent counsel that
any such distribution will not be a taxable event to the owners of the Trust
Securities. Although SJG has agreed to use its best efforts to list the
Debentures so distributed on the New York Stock Exchange, there can be no
assurance that the Debentures will be approved for listing on the New York
Stock Exchange or that a trading market will exist for the Debentures.
There can be no assurance as to the market prices for the Debentures that
may be distributed in exchange for the Preferred Securities if a termination
of the Issuer were to occur. Accordingly, the Debentures that a holder of
Preferred Securities may receive upon such a distribution, or the Preferred
Securities held pending such a
S-5
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distribution, may trade at a discount to the price that the investor paid to
purchase such Preferred Securities. Because holders of Preferred Securities
may receive Debentures at SJG's sole discretion, prospective purchasers of
Preferred Securities are also making an investment decision with regard to the
Debentures and should carefully review all the information regarding the
Debentures contained herein. See "Certain Terms of the Preferred Securities--
Distribution of Debentures" herein and "Description of the Debentures" in the
accompanying Prospectus.
RIGHTS UNDER THE GUARANTEE
The Guarantee has been qualified as an indenture under the Trust Indenture
Act of 1939, as amended (the "Trust Indenture Act"). The Bank of New York is
the indenture trustee under the Guarantee (the "Guarantee Trustee") for the
purposes of compliance with the Trust Indenture Act and holds the Guarantee
for the benefit of the holders of the Preferred Securities. Under the
Guarantee, SJG agrees to make the following payments to the holders of the
Preferred Securities, to the extent not paid by the Issuer (i) any accumulated
and unpaid Distributions on the Preferred Securities to the extent that the
Issuer has funds available therefor, (ii) the redemption price of any
Preferred Securities called for redemption to the extent that the Issuer has
funds available therefor, and (iii) upon a voluntary or involuntary
termination, winding-up or liquidation of the Issuer, unless the Debentures
are distributed to holders of the Preferred Securities, the lesser of (a) the
liquidation amount of $25 per Preferred Security plus accumulated and unpaid
Distributions to the date of payment, and (b) the amount of assets of the
Issuer available for distribution to holders of Preferred Securities upon such
termination and liquidation of the Issuer. See "Description of the Guarantee--
General" in the accompanying Prospectus. The holders of at least a majority in
aggregate liquidation amount of the Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of the Guarantee and to direct
the exercise of any trust power conferred upon the Guarantee Trustee under the
Guarantee. Any holder of the Preferred Securities may institute a legal
proceeding directly against SJG to enforce its rights under the Guarantee
without first instituting a legal proceeding against the Issuer, the Guarantee
Trustee or any other person or entity. If SJG defaults on its obligation to
pay amounts payable on the Debentures, the Issuer will not have sufficient
funds for the payment of Distributions, amounts payable on redemption of the
Preferred Securities or amounts payable upon liquidation of the Issuer and,
accordingly, holders of the Preferred Securities will not be able to rely upon
the Guarantee for payment of such amounts. Instead, the Property Trustee or
holders of the Preferred Securities may enforce the rights of the Issuer under
the Debentures against SJG pursuant to the terms of the Debentures. The
Amended and Restated Trust Agreement of the Issuer (the "Trust Agreement")
provides that each holder of Preferred Securities, by acceptance thereof,
agrees to the provisions of the Trust Agreement, the Guarantee and the
Indenture.
LIMITED VOTING RIGHTS
Holders of Preferred Securities have limited voting rights under the Trust
Agreement. Holders of Preferred Securities will not be entitled to vote to
appoint, remove or replace the Issuer Trustees, which voting rights are vested
exclusively in SJG as the holder of the Common Securities, except that upon
the occurrence of an event of default under the Trust Agreement, the holders
of at least a majority in aggregate liquidation amount of the Preferred
Securities may replace The Bank of New York as the Property Trustee for the
Issuer (the "Property Trustee") and The Bank of New York (Delaware) as the
Delaware Trustee for the Issuer (the "Delaware Trustee"). See "Description of
the Preferred Securities--Voting Rights; Amendment of Trust Agreement" and "--
Removal of Issuer Trustees" in the accompanying Prospectus.
SJG CAPITAL TRUST
The Issuer is a statutory business trust created under the laws of the State
of Delaware pursuant to the Trust Agreement. The exclusive business of the
Issuer is to issue and sell the Trust Securities representing undivided
beneficial interests in the assets of the Issuer and to use the proceeds
therefrom to purchase the Debentures, to maintain the status of the Issuer as
a grantor trust for Federal income tax purposes and to engage in only those
activities that are necessary, convenient or incidental to the foregoing.
Accordingly, the Debentures will be the sole assets of the Issuer and payments
on the Debentures will be the sole revenues of the Issuer. Pursuant to the
S-6
<PAGE>
Trust Agreement, SJG will be obligated to pay all expenses and liabilities of
the Issuer except the Issuer's obligations under the Preferred Securities. The
Issuer has a term of 41 years, but may be terminated earlier as provided in
the Trust Agreement. See "Description of the Preferred Securities--Liquidation
Distribution Upon Termination" in the accompanying Prospectus.
The business and affairs of the Issuer are conducted by three trustees: (i)
The Bank of New York, as Property Trustee; (ii) The Bank of New York
(Delaware), as Delaware Trustee; and (iii) one individual who is an employee
and officer of or affiliated with SJG, as Administrative Trustee (the
"Administrative Trustee"). The Property Trustee, the Delaware Trustee and the
Administrative Trustee are collectively referred to herein as the "Issuer
Trustees." The Trust Agreement is qualified as an indenture under the Trust
Indenture Act and the Property Trustee is the indenture trustee thereunder for
the purposes of compliance with the Trust Indenture Act.
Concurrently with the issuance of the Preferred Securities, SJG will acquire
Common Securities of the Issuer with a liquidation amount equal to 3% of the
aggregate liquidation amount of all of the Trust Securities of the Issuer. The
Common Securities rank pari passu, and payments will be made thereon pro rata,
with the Preferred Securities, except that upon the occurrence and continuance
of a Debenture Event of Default, the rights of SJG, as holder of the Common
Securities, to payment of Distributions and payments upon redemption and
liquidation will be subordinated to the rights of the holders of the Preferred
Securities.
The principal place of business of the Issuer is Number One South Jersey
Plaza, Route 54, Folsom, New Jersey 08037, and its telephone number is (609)
561-9000.
SOUTH JERSEY GAS COMPANY
GENERAL
SJG is a regulated New Jersey public utility and is the principal subsidiary
of SJI. SJG is a gas distribution utility that supplies natural gas to
residential, commercial and industrial customers 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.
At December 31, 1996, the Company served 253,874 residential, commercial and
industrial customers throughout 112 municipalities in Atlantic, Cape May,
Cumberland, and Salem counties and portions of Burlington, Camden and
Gloucester Counties. The Company's service territory covers approximately
2,500 square miles and has an estimated permanent population of 1.1 million.
Gas sales and transportation for 1996 amounted to 66,814,000 Mcf (thousand
cubic feet), of which 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 other and 25.3% transportation. SJG is regulated as to rates and other
matters by the New Jersey Board of Public Utilities.
RATIO OF EARNINGS TO FIXED CHARGES
SJG's ratio of earnings to fixed charges for each of the periods indicated is
as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
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1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
2.6 2.7 2.2 2.3 2.5
</TABLE>
The ratio of earnings to fixed charges represents, on a pre-tax basis, the
number of times earnings cover fixed charges. Earnings consist of net income,
to which has been added fixed charges and taxes based on income of SJG,
excluding the cumulative effect of an accounting change. Fixed charges consist
of interest charges and an interest factor in rentals.
S-7
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES PLUS PREFERRED SECURITIES DIVIDEND
REQUIREMENTS
SJG's ratio of earnings to fixed charges plus preferred securities dividend
requirements for each of the periods indicated is as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
2.6 2.6 2.1 2.3 2.5
</TABLE>
The ratio of earnings to fixed charges plus preferred securities dividend
requirements represents, on a pre-tax basis, the number of times earnings
cover fixed charges plus preferred securities dividend requirements. Earnings
consist of net income, to which has been added fixed charges and taxes based
on income of SJG, excluding the cumulative effect of an accounting change.
Fixed charges consist of interest charges and an interest factor in rentals.
Preferred securities dividend requirements represent the pre-tax earnings
necessary to pay dividends on outstanding preferred securities, computed at
the effective tax rates for the applicable periods.
USE OF PROCEEDS
The net proceeds to be received by the Issuer from the sale of the Preferred
Securities offered hereby and the Common Securities will be used by the Issuer
to purchase Debentures from SJG. The net proceeds from the sale of the
Debentures will be used by SJG to retire short-term debt and for general
corporate purposes. At December 31, 1996, SJG had $108.3 million of short-term
debt outstanding with a weighted-average interest cost of 5.854%.
CAPITALIZATION
The following table sets forth the consolidated capitalization of SJG and
the Trust as of February 28, 1997 and as adjusted to give effect to the
consummation of the offering of the Preferred Securities and the use of
proceeds therefrom. The following data should be read in conjunction with the
consolidated financial statements and notes thereto of SJG, incorporated
herein by reference.
<TABLE>
<CAPTION>
AS OF FEBRUARY 28,
1997
--------------------
AS
ACTUAL ADJUSTED(1)
-------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Common Equity
Common Stock.............................................. $ 5,848 $ 5,848
Other Paid In Capital(2).................................. 77,194 77,194
Retained Earnings......................................... 58,514 58,514
-------- --------
Total Common Equity...................................... 141,556 141,556
Preferred Stock Without Mandatory Redemption............... 2,314 2,314
% Preferred Trust Securities(3)........................... -- 35,000
Long-Term Debt, Net of Current Maturities.................. 149,736 184,736
-------- --------
Total Capitalization..................................... $293,606 $363,606
======== ========
</TABLE>
- --------
(1) Includes $35,000 principal amount of First Mortgage Bonds 7.70% Series due
April 1, 2027 issued by SJG on March 21, 1997.
(2) Does not include a cash capital contribution of $25,623 to be made to SJG
by SJI on March 26, 1997, as authorized by SJI's Board of Directors.
(3) The sole asset of the Issuer is the % Debentures in an aggregate
principal amount of $36,082 with a stated maturity date of April 30, 2037.
The financial statements of the Issuer will be consolidated with SJG's
financial statements pursuant to Staff Accounting Bulletin No. 53 ("SAB
53"), with the Preferred Securities issued by the Issuer shown on SJG's
consolidated financial statements as company-obligated mandatorily
redeemable preferred securities of a subsidiary trust holding solely the
Debentures.
S-8
<PAGE>
CERTAIN TERMS OF THE PREFERRED SECURITIES
The following summary of certain terms and provisions of the Preferred
Securities supplements the description of the terms and provisions of the
Preferred Securities set forth in the accompanying Prospectus under the
heading "Description of the Preferred Securities," to which description
reference is hereby made.
DISTRIBUTIONS
The Preferred Securities represent undivided beneficial interests in the
assets of the Issuer, the sole assets of which will be the Debentures.
Distributions on the Preferred Securities are cumulative and will accumulate
from the date of original issuance at the annual rate of % of the liquidation
amount of $25 per Preferred Security. Distributions will be payable quarterly
in arrears on March 31, June 30, September 30 and December 31 of each year,
commencing June 30, 1997. Distributions in arrears after the quarterly payment
date therefor will accumulate additional Distributions (to the extent
permitted by law) compounded quarterly at the annual rate of % thereof. The
term "Distributions," as used herein, shall include any such additional
Distributions. The amount of Distributions payable for any full quarterly
period will be computed on the basis of a 360-day year of twelve 30-day
months, and for any period shorter than a full month, shall be computed on the
basis of the actual number of days elapsed in such period based on 30-day
months.
So long as no Debenture Event of Default has occurred and is continuing, SJG
in its sole discretion has the right at any time and from time to time to
defer the payment of interest by extending the interest payment period on the
Debentures for up to 20 consecutive quarters, provided that any such Extension
Period shall not extend beyond the maturity or any redemption date of the
Debentures. As a consequence, quarterly Distributions on the Preferred
Securities would be deferred by the Issuer during any Extension Period, but
the amount of Distributions to which holders of the Preferred Securities would
be entitled would continue to accumulate at the rate set forth above,
compounded quarterly. During any Extension Period, SJG may not declare or pay
any dividend on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any shares of SJG's capital stock. Within five business days
after receipt by the Property Trustee of notice of an Extension Period, the
Property Trustee shall give notice thereof to the holders of Trust Securities
by first class mail, postage prepaid. Prior to the termination of any
Extension Period, SJG may shorten or further extend the interest payment
period on the Debentures, provided that such Extension Period, together with
all such previous and further extensions thereof, may not exceed 20
consecutive quarters or extend beyond the maturity or any redemption date of
the Debentures. Upon the termination of any Extension Period and the payment
of all amounts then due, SJG may elect to begin a new Extension Period,
subject to the above requirements. See "United States Taxation--Potential
Extension of Interest Payment Period and Original Issue Discount" herein and
"Description of the Debentures--Option to Extend Interest Payment Period" in
the accompanying Prospectus. SJG has no current intention of exercising its
right to defer payments of interest by extending the interest payment period
on the Debentures.
The Preferred Securities are issued in the form of one or more global
securities and DTC or any successor depositary will act as depositary for the
Preferred Securities. See "Description of the Preferred Securities--Book-
Entry-Only Issuance--The Depository Trust Company" in the accompanying
Prospectus. Payments on the Preferred Securities represented by a global
security will be made in immediately available funds to DTC, as the depositary
for the Preferred Securities. In the event that the Preferred Securities are
issued in certificated form, the payment of Distributions and payments on
redemption or liquidation will be payable, the transfer of the Preferred
Securities will be registerable and Preferred Securities will be exchangeable
at the corporate office of the Property Trustee in New York, New York, or at
the offices of any other paying agent or transfer agent appointed by the
Administrative Trustee; provided, however, that the payment of Distributions
may be made at the option of the Property Trustee by check mailed to the
address of the persons entitled thereto or by wire transfer. In addition, if
the Preferred Securities are issued in certificated form, the record dates for
the payment of Distributions will be the 15th day of the last month of each
quarter, whether or not a Business Day.
REDEMPTION
Upon the payment of the Debentures at maturity or upon redemption as
provided in the Indenture, the proceeds from such payment will be applied by
the Property Trustee to redeem a Like Amount (as defined below)
S-9
<PAGE>
of the Trust Securities, upon not less than 30 nor more than 60 days' notice,
at a redemption price equal to the aggregate liquidation amount plus
accumulated and unpaid Distributions to the date of redemption (the
"Redemption Price"). See "Certain Terms of the Debentures--Redemption."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having an aggregate liquidation amount equal to
the principal amount of Debentures to be repaid in accordance with the
Indenture and (ii) with respect to a distribution of Debentures to holders of
Trust Securities in connection with a termination and liquidation of the
Issuer, Debentures having a principal amount equal to the aggregate
liquidation amount of the Trust Securities in exchange for which such
Debentures are distributed.
SPECIAL EVENT REDEMPTION
If a Tax Event or an Investment Company Event (each, a "Special Event") has
occurred and is continuing, SJG has the right to redeem the Debentures, in
whole but not in part, and therefore cause a mandatory redemption of the Trust
Securities, in whole but not in part, at the Redemption Price within 90 days
following the occurrence of such Special Event.
"Tax Event" means that SJG shall have received a written opinion of
nationally recognized independent tax counsel (which must be acceptable to the
Property Trustee) experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in
the laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting taxation, or as a
result of any official administrative pronouncement, administrative action, or
judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or which pronouncement, action or decision is
announced or taken on or after the date of original issuance of the Preferred
Securities, there is more than an insubstantial risk that (i) the Issuer is,
or will be within 90 days of the date thereof, subject to Federal income tax
with respect to interest on the Debentures, (ii) interest payable by SJG on
the Debentures is not, or will not be within 90 days of the date thereof,
deductible by SJG for Federal income tax purposes or (iii) the Issuer is, or
will be within 90 days of the date thereof, subject to more than a de minimis
amount of other taxes, duties, assessments or other governmental charges.
"Investment Company Event" means the occurrence of a change in law or
regulation or a change in interpretation or application of law or regulation
by any legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law") to the effect that the Issuer is or will be
considered an "Investment Company" that is required to be registered under the
Investment Company Act of 1940, as amended, which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Preferred
Securities.
DISTRIBUTION OF DEBENTURES
At any time, SJG may, in its sole discretion, terminate the Issuer and cause
a Like Amount of Debentures to be distributed to the holders of the Trust
Securities in liquidation of the Issuer upon 30 days' prior notice to the
holders of the Trust Securities, provided that SJG shall have delivered to the
Issuer Trustees a written opinion of nationally recognized independent counsel
that any such distribution will not be a taxable event to the owners of the
Trust Securities for Federal income tax purposes. In addition, the Debentures
may be distributed to holders of Trust Securities in certain other
circumstances as described under "Certain Terms of the Preferred Securities--
Liquidation Distribution Upon Termination" in the accompanying Prospectus.
LIQUIDATION AMOUNT
The amount payable on the Preferred Securities in the event of the
termination and liquidation of the Issuer is $25 per Preferred Security plus
accumulated and unpaid Distributions to the date of payment, unless, in
connection therewith, the Debentures are distributed to the holders of the
Trust Securities.
S-10
<PAGE>
CERTAIN TERMS OF THE DEBENTURES
The following summary of certain terms and provisions of the Debentures
supplements the description of the terms and provisions of the Debentures set
forth in the accompanying Prospectus under the heading "Description of the
Debentures," to which description reference is hereby made.
The Debentures are unsecured and rank subordinate and junior in right of
payment to all Senior Indebtedness of SJG.
INTEREST RATE; MATURITY
Concurrently with the issuance of the Preferred Securities, the Issuer is
investing the proceeds thereof, together with the consideration paid by SJG
for the Common Securities, in the Debentures. The Debentures will be issued
under the Indenture. The Debentures will mature on April 30, 2037. The
Debentures will bear interest at the annual rate of % of the principal amount
thereof, payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year, commencing June 30, 1997. Interest which is accrued
and unpaid after the quarterly payment date therefor will bear additional
interest on the amount thereof (to the extent permitted by law) at the annual
rate of % thereof, compounded quarterly. The term "interest," as used herein,
shall include quarterly interest payments and interest on quarterly interest
payments in arrears, as applicable. The interest payment provisions for the
Debentures correspond to the Distribution provisions of the Preferred
Securities.
REDEMPTION
The Debentures are redeemable prior to maturity at the option of SJG at a
redemption price equal to 100% of the principal amount thereof plus accrued
and unpaid interest to the redemption date (i) at any time on or after April
30, 2002, in whole or in part, or (ii) if a Special Event has occurred and is
continuing, in whole but not in part.
DISTRIBUTION OF DEBENTURES
If Debentures are distributed to the holders of the Trust Securities upon
the termination and liquidation of the Issuer, the Debentures will be issued
in denominations of $25 and integral multiples thereof. It is anticipated that
the Debentures would be distributed in the form of one or more global
securities and DTC, or any successor depositary for the Preferred Securities,
would act as depositary for the Debentures. The depositary arrangements for
the Debentures would be substantially similar to those in effect for the
Preferred Securities. Neither SJG, the Debenture Trustee, any paying agent nor
any other agent of SJG or the Debenture Trustee will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in a global security for such
Debentures or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests. For a description of DTC and the terms
of the depositary arrangements relating to payments, transfers, voting rights,
redemption and other notices and other matters, see "Description of the
Preferred Securities--Book-Entry-Only Issuance--The Depository Trust Company"
in the accompanying Prospectus.
Payments on the Debentures represented by a global security will be made in
immediately available funds to DTC, as the depositary for the Debentures. In
the event that the Debentures are issued in certificated form, principal and
interest will be payable, the transfer of the Debentures will be registrable
and the Debentures will be exchangeable for Debentures of other authorized
denominations of a like aggregate principal amount, at the corporate office of
the Debenture Trustee in New York, New York, or at the offices of any other
paying agent or transfer agent appointed by SJG; provided, however, that
payment of interest may be made at the option of SJG by check mailed to the
address of the persons entitled thereto or by wire transfer. In addition, if
the Debentures are issued in certificated form, the record dates for payment
of interest will be the 15th day of the last month of each quarter, whether or
not a Business Day.
If the Debentures are distributed to the holders of the Trust Securities
upon the termination and liquidation of the Issuer, SJG will use its best
efforts to list the Debentures on the New York Stock Exchange.
S-11
<PAGE>
UNITED STATES TAXATION
GENERAL
This section is a summary of certain Federal income tax considerations that
may be relevant to prospective purchasers of Preferred Securities and is the
opinion of Dechert Price & Rhoads, counsel to SJG and the Issuer, insofar as
it relates to matters of law and legal conclusions. This section is based upon
current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing regulations thereunder and current administrative rulings
and court decisions, all of which are subject to change (possibly on a
retroactive basis). Subsequent changes may cause tax consequences to vary
substantially from the consequences described below. This summary does not
describe all the possible Federal tax consequences of the purchase, ownership,
or disposition of the Preferred Securities and is not intended to reflect the
particular tax position of any holder. The parties do not intend to seek a
ruling from the Internal Revenue Service on any of the issues described below.
Moreover, there can be no assurance that the Internal Revenue Service will not
take contrary positions. Unless otherwise stated, this summary deals only with
Preferred Securities held as capital assets and does not deal with special
classes of holders, such as banks, dealers in securities or currencies,
insurance companies, persons holding Preferred Securities as a hedge against
or which are hedged against currency risks or as a part of a straddle with
other investments or as part of a "synthetic security" or other integrated
investment (including a "conversion transaction") comprised of Preferred
Securities and one or more other investments, or persons whose functional
currency is not the United States dollar.
POTENTIAL INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE OF PREFERRED
SECURITIES PURSUANT TO THE OFFERING MADE HEREBY AND OF THE OWNERSHIP AND
DISPOSITION OF PREFERRED SECURITIES IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL, FOREIGN OR OTHER
LAWS.
In the opinion of Dechert Price & Rhoads, the Debentures will be treated as
indebtedness for Federal income tax purposes. However, holders of Preferred
Securities should note that the Internal Revenue Service (the "IRS") may
attempt to treat the Debentures as equity rather than indebtedness for tax
purposes, as described below. If the IRS were successful in such attempt, the
Debentures would be subject to redemption at the option of SJG as described
under "Certain Terms of the Debentures--Redemption" and "Certain Terms of the
Preferred Securities--Special Event Redemption."
On February 6, 1997, President Clinton proposed certain tax law changes that
would, among other things, generally deny interest deductions to corporate
issuers if the debt instrument has a term exceeding 15 years and is not
reflected as indebtedness on such issuer's consolidated balance sheet. Because
the term of the Debentures exceeds 15 years, this proposal, were it to become
effective, would prevent SJG from deducting interest on the Debentures. The
Proposed Legislation is proposed to be effective for instruments issued on or
after the date of "first committee action," which has not yet taken place and
may not take place before the Debentures are issued. As a result, it is
expected that the Proposed Legislation will not apply to the Debentures. In
the opinion of Dechert Price & Rhoads, under current law, interest on the
Debentures is deductible. There can be no assurance, however, that the
effective date contained in the Proposed Legislation will not be changed if
such legislation is enacted, or that subsequent proposals or final legislation
will not affect the ability of SJG to deduct interest on the Debentures which,
in turn, could give rise to a Tax Event and, accordingly, SJG's optional right
to redeem the Debentures, as described under "Certain Terms of the Preferred
Securities--Special Event Redemption."
INCOME FROM PREFERRED SECURITIES
In connection with the issuance of the Debentures, in the opinion of Dechert
Price & Rhoads, under current law and assuming full compliance with the terms
of the Trust Agreement, the Issuer will be classified as a grantor trust and
not as an association taxable as a corporation or partnership for Federal
income tax purposes.
S-12
<PAGE>
As a consequence, each owner of Preferred Securities will be considered the
owner of a pro rata portion of the Debentures held by the Issuer. As a further
consequence, each owner of Preferred Securities will be required to include in
gross income his or her pro rata share of the income accrued on the Debentures
held by the Issuer. Such income should not exceed Distributions received by
the owners of Preferred Securities on the Preferred Securities except in
limited circumstances described under "--Potential Extension of Interest
Payment Period and Original Issue Discount." No portion of such income will be
eligible for the dividends-received deduction. By their acceptance of a Trust
Security, each holder will agree to treat and to take no action inconsistent
with the treatment of the Trust Securities (or beneficial interest therein) as
interests in a grantor trust for purposes of Federal, state and local income
and franchise taxes.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD AND ORIGINAL ISSUE DISCOUNT
Under the Indenture, under certain circumstances, SJG has the right at any
time and from time to time to extend the interest payment period on the
Debentures for up to 20 consecutive quarters but not beyond the maturity or
any redemption date of the Debentures. SJG's right to defer payments of
interest by extending the interest payment period will cause the Debentures to
be treated as issued with "original issue discount" for Federal income tax
purposes. Accordingly, an owner of Preferred Securities will accrue interest
income (i.e., original issue discount) under a constant yield basis over the
term of the Debentures (including any Extension Period), regardless of the
receipt of cash with respect to the period to which such income is
attributable.
As a result, owners of Preferred Securities during an Extension Period will
include interest in gross income in advance of the receipt of cash, and any
owners of Preferred Securities who dispose of Preferred Securities prior to
the record date for the payment of Distributions following such Extension
Period will include interest in gross income, but will not receive any cash
related thereto.
Because the original issue discount rules apply, actual distributions of
stated interest will not be separately reported as income. The tax basis of a
Preferred Security will be increased by the amount of any original issue
discount that is included in income without a receipt of cash and will be
decreased when and if such cash is subsequently received by the owner of the
Preferred Security.
DISPOSITION OF THE PREFERRED SECURITIES
Gain or loss will be recognized on a sale, exchange, or other taxable
disposition, including a redemption for cash, of Preferred Securities (which
represent undivided beneficial interests in the Debentures) (but excluding the
distribution of the Debentures) in an amount equal to the difference between
the amount realized and the tax basis of an owner of Preferred Securities in
his or her pro rata share of the Debentures. An owner's adjusted tax basis in
the Preferred Securities generally will be its initial purchase price
increased by interest income (i.e., original issue discount) previously
includable in such owner's gross income to the date of disposition and
decreased by payments received on the Preferred Securities. Gain or loss
recognized by an owner of Preferred Securities on the sale or exchange of
Preferred Securities held for more than one year generally will be taxable as
long-term capital gain or loss.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder or beneficial owner who or which is (i) a nonresident alien individual
or (ii) a foreign corporation, partnership, estate or trust, in either case
not subject to Federal income tax on a net income basis in respect of a
Preferred Security.
Under present Federal income tax law, subject to the discussion below with
respect to backup withholding:
(i) payments by the Issuer or any of its paying agents to any United
States Alien Holder will not be subject to Federal withholding tax,
provided that (a) the owner of the Preferred Security does not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of SJG, (b) the
S-13
<PAGE>
owner of the Preferred Securities is not a controlled foreign-corporation
that is related to SJG through stock ownership, and (c) either (1) the
owner of the Preferred Securities certifies to the Issuer or its agent,
under penalties of perjury, that it is a United States Alien Holder and,
provides its name and address or (2) the holder of the Preferred Securities
is a securities clearing organization, bank or other financial institution
that holds customers' securities in the ordinary course of its trade or
business (a "financial institution"), and such holder certifies to the
Issuer or its agent, under penalties of perjury, that such statement has
been received from the owner by it or by a financial institution between it
and the owner and furnishes the payor with a copy thereof; and
(ii) a United States Alien Holder of a Preferred Security will not be
subject to Federal income or withholding tax on any gain realized on the
sale or exchange of a Preferred Security unless such person is present in
the United States for 183 days or more in the taxable year of sale and such
person has a "tax home" in the United States or certain other requirements
are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments to
noncorporate United States holders of the proceeds of the sale of the
Preferred Securities within the United States and "backup withholding" at a
rate of 31% will apply to such payments if the seller fails to provide a
correct taxpayer identification number. Any withheld amounts will generally be
allowed as a credit against the owner's Federal income tax, provided the
required information is timely filed with the Internal Revenue Service.
Information reporting requirements and backup withholding will also apply to
original issue discount allocable to noncorporate United States holders of the
Preferred Securities if the seller fails to provide a correct taxpayer
identification number.
Payments of the proceeds from the sale by a United States Alien Holder of
Preferred Securities made to or through a foreign office of a broker will not
be subject to information reporting or backup withholding, except that, if the
broker is a United States person, a controlled foreign corporation for United
States tax purposes or a foreign person 50% or more of whose gross income is
effectively connected with a United States trade or business for a specified
three-year period, information reporting may apply to such payment. Payments
of the proceeds from a sale of Preferred Securities to or through the United
States office of a broker is subject to information reporting and backup
withholding unless the holder or beneficial owner certifies as to its non-
United States status or otherwise establishes an exemption from information
reporting and backup withholding.
RECEIPT OF DEBENTURES UPON LIQUIDATION OF THE ISSUER
SJG may cause the Issuer to be terminated and cause the Debentures to be
distributed to the holders of Preferred Securities in liquidation of such
holders' interests in the Issuer, provided that SJG has delivered to the
Issuer Trustees a written opinion of nationally recognized independent counsel
that any such distribution will not be a taxable event to the owners of the
Preferred Securities for Federal income tax purposes. Under current Federal
income tax law and interpretation and assuming the Issuer is treated as a
grantor trust, such a distribution should not be treated as a taxable event to
owners of the Preferred Securities. Such a tax-free transaction would result
in the owner of Preferred Securities receiving an aggregate tax basis in the
Debentures equal to such owner's aggregate tax basis in such owner's Preferred
Securities. An owner's holding period for such Debentures would include the
period during which such owner had a beneficial interest in the Preferred
Securities. If, however, the Special Event giving rise to the distribution is
a Tax Event which results in the Issuer being treated as an association
taxable as a corporation, the distribution would constitute a taxable event to
owners of the Preferred Securities.
S-14
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Issuer has agreed to sell to each of the Underwriters named below, for whom
PaineWebber Incorporated is acting as representative (the "Representative"),
and each of the Underwriters has severally agreed to purchase from the Issuer,
the respective number of Preferred Securities set forth opposite its name
below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
PaineWebber Incorporated..................................
Prudential Securities Incorporated........................
---------
Total................................................... 1,400,000
=========
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all of the Preferred Securities
offered hereby if any are taken.
The Underwriters propose to offer the Preferred Securities in part directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement, and in part to certain securities dealers at
such price less a concession of $ per Preferred Security, except that such
concession will be $ per Preferred Security sold to certain institutions.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per Preferred Security to certain other brokers and dealers.
After the Preferred Securities are released for sale to the public, the
offering price and other selling terms may from time to time be varied by the
Representative.
In view of the fact that the proceeds from the sale of the Preferred
Securities will be used to purchase the Debentures, under the Underwriting
Agreement, SJG has agreed to pay to the Underwriters an underwriting
commission of $ per Preferred Security, except that such commission will be
$ per Preferred Security sold to certain institutions.
Prior to this offering, there has been no public market for the Preferred
Securities. The Preferred Securities have been approved for listing on the New
York Stock Exchange, subject to official notice of issuance. Trading on the
Preferred Securities is expected to commence within a 30-day period after the
initial delivery thereof. In order to meet one of the requirements for listing
the Preferred Securities on the New York Stock Exchange, the Underwriters have
undertaken to sell the Preferred Securities to a minimum of [400 beneficial
owners]. The Representative has advised SJG that it intends to make a market
in the Preferred Securities prior to commencement of trading on the New York
Stock Exchange, but is not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Preferred Securities.
In connection with the offering, the Underwriters may purchase and sell the
Preferred Securities in the open market. These transactions may include
overallotment and stabilizing transactions and purchases to cover syndicate
short positions created by the Underwriters in connection with the offering.
Stabilizing transactions consist of certain bids or purchases for the purpose
of preventing or retarding a decline in the market price of the Preferred
Securities; and syndicate short positions created by the Underwriters involve
the sale by the Underwriters of a greater number of Preferred Securities than
they are required to purchase from the Issuer in the offering. The
Underwriters also may impose a penalty bid, whereby selling concessions
allowed to syndicate members or other broker-dealers in respect of the
Preferred Securities sold in the offering for their account may be reclaimed
by the syndicate if such Preferred Securities are repurchased by the syndicate
in stabilizing or covering transactions. These activities may stabilize,
maintain or otherwise affect the market price of the Preferred Securities,
which may be higher than the price that might otherwise prevail in the open
market; and these activities, if commenced, may be discontinued at any time.
These transactions may be effected on the New York Stock Exchange, in the
over-the-counter market or otherwise.
S-15
<PAGE>
SJG and the Issuer have agreed, during the period beginning from the date of
the Underwriting Agreement and continuing to and including the earlier of (i)
the date on which the distribution of the Preferred Securities ceases, as
determined by the Representative, or (ii) 30 days after the closing date, not
to offer, sell, contract to sell or otherwise dispose of any Preferred
Securities or any preferred stock or any other securities of SJG which are
substantially similar to the Preferred Securities, including any guarantee of
such securities, or any securities convertible into or exchangeable for or
representing the right to receive any of the foregoing securities, without the
prior written consent of the Representative.
SJG and the Issuer have agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act.
The Underwriters or their affiliates have provided from time to time, and
expect to continue to provide in the future, investment banking services to
SJG, SJI and their affiliates, for which the Underwriters or their affiliates
have received or will receive customary fees and commissions.
S-16
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION DATED , 1997
SJG CAPITAL TRUST
PREFERRED SECURITIES
guaranteed to the extent the Issuer thereof has available funds as set forth
herein by
SOUTH JERSEY GAS COMPANY
----------------
SJG Capital Trust, a statutory business trust created under the laws of the
State of Delaware (the "Issuer") may offer, from time to time, its preferred
securities (the "Preferred Securities") representing undivided beneficial
interests in the assets of the Issuer. South Jersey Gas Company, a New Jersey
corporation ("SJG"), will be the owner of beneficial interests represented by
the common securities (the "Common Securities") of the Issuer. SJG is a
wholly-owned subsidiary of South Jersey Industries, Inc., a New Jersey
corporation ("SJI"). The Bank of New York is the Property Trustee of the
Issuer. Concurrently with the issuance by the Issuer of its Preferred
Securities, the Issuer will invest the proceeds thereof, together with the
consideration paid by SJG for the Common Securities of the Issuer, in a
corresponding series of SJG's deferrable interest subordinated debentures (the
"Debentures"). The Debentures will be subordinate and junior in right of
payment to all Senior Indebtedness (as defined herein) of SJG. The Debentures
will be the sole assets of the Issuer and payments in respect of the
Debentures will be the only revenues of the Issuer.
Pursuant to a guarantee agreement to be entered into by SJG with respect to
the Preferred Securities (the "Guarantee"), SJG will agree to make payments of
cash distributions ("Distributions") with respect to the Preferred Securities
of the Issuer and payments on liquidation or redemption with respect to such
Preferred Securities but only to the extent that the Issuer holds funds
available therefor and has not made such payments. The obligations of SJG
under the Guarantee will be subordinate and junior in right of payment to all
Senior Indebtedness of SJG. As described herein, the Guarantee, together with
SJG's obligations under the Debentures, the Indenture relating to such
Debentures and the Amended and Restated Trust Agreement for the Issuer, will
provide for SJG's full, irrevocable and unconditional guarantee of the
Preferred Securities.
The Preferred Securities may be offered in amounts, at prices and on terms
to be determined at the time of offering; provided, however, that the
aggregate initial public offering price of all Preferred Securities issued
pursuant to the Registration Statement of which this Prospectus forms a part
shall not exceed $35,000,000. Certain specific terms of the Issuer's Preferred
Securities will be set forth in an accompanying Prospectus Supplement,
including where applicable and to the extent not set forth herein, the
specific title, the aggregate number, the Distribution rate (or the method for
determining such rate), the liquidation amount, redemption provisions, the
right, if any, of SJG to terminate the Issuer and cause the corresponding
series of Debentures to be distributed to the holders of the Issuer's
Preferred Securities and Common Securities, the period during which interest
on the corresponding series of Debentures may be deferred, the initial public
offering price, and any other special terms, as well as any planned listing on
a securities exchange, of such Preferred Securities.
The Preferred Securities may be sold in a public offering to or through
underwriters or dealers designated from time to time. See "Plan of
Distribution." The names of any such underwriters or dealers involved in the
sale of the Preferred Securities of the Issuer, the number of Preferred
Securities to be purchased by any such underwriters or dealers and any
applicable commissions or discounts will be set forth in the accompanying
Prospectus Supplement. The net proceeds to the Issuer will also be set forth
in the accompanying Prospectus Supplement.
The accompanying Prospectus Supplement will contain information concerning
material Federal income tax considerations applicable to the Preferred
Securities offered thereby.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is , 1997.
<PAGE>
STATEMENT OF AVAILABLE INFORMATION
South Jersey Gas Company, a New Jersey corporation ("SJG"), will be the
owner of beneficial interests represented by the Common Securities (the
"Common Securities") of SJG Capital Trust, a statutory business trust created
under the laws of the State of Delaware (the "Issuer"). SJG is a wholly owned
subsidiary of South Jersey Industries, Inc., a New Jersey corporation ("SJI").
SJG and SJI are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, file reports and other information with the Securities and Exchange
Commission (the "SEC"). Such reports and other information can be inspected
and copied at the public reference facilities maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C. and at its regional offices at 500 West
Madison Street, Chicago, Illinois and 7 World Trade Center, New York, New
York. Copies of such reports and other information may also be obtained from
the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549-1004 at prescribed rates. Such reports and other information can
also be inspected at the New York Stock Exchange, Inc. (the "New York Stock
Exchange") where certain of SJI's securities are listed. The SEC also
maintains a site on the World Wide Web that contains reports, proxies and
information statements and other materials that are filed with the SEC's
Electronic Data Gathering Analysis and Retrieval System ("EDGAR"). This site
can be accessed at http:\\www.sec.gov.
No separate financial statements of the Issuer have been included herein
pursuant to Staff Accounting Bulletin No. 53 ("SAB 53"). SJG and the Issuer do
not consider that such financial statements would be material to holders of
the Issuer's preferred securities (the "Preferred Securities") because the
Issuer is a newly formed special purpose entity, has no operating history or
independent operations and is not engaged in and does not propose to engage in
any activity other than holding as trust assets the corresponding series of
deferrable interest subordinated debentures (the "Debentures") of SJG and
issuing Preferred Securities and Common Securities (the Common Securities,
together with the Preferred Securities, the "Trust Securities") representing
undivided beneficial interests in such Debentures. See "The Issuer,"
"Description of the Preferred Securities" and "Description of the Debentures."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
SJG's Form 10, filed with the SEC pursuant to the Exchange Act on March 7,
1997 (File No. 000-22211), is incorporated herein by reference.
Each document filed by SJG and the Issuer subsequent to the date of this
Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
and prior to the termination of the offering of the related Preferred
Securities shall be deemed to be incorporated by reference in this Prospectus
and the accompanying Prospectus Supplement and shall be a part hereof and
thereof from the date of filing of such document. Any statement contained
herein or therein or in a document all or a portion of which is incorporated
or deemed to be incorporated by reference herein and therein shall be deemed
to be modified or superseded for purposes of this Prospectus and the
accompanying Prospectus Supplement to the extent that a statement contained
herein or therein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein and therein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus or the accompanying Prospectus Supplement.
SJG undertakes to provide without charge to each person, including any
beneficial owner, to whom this Prospectus and the accompanying Prospectus
Supplement are delivered, upon written or oral request of such person, a copy
of any or all documents described above under "Incorporation of Certain
Documents by Reference," other than exhibits to such documents not
specifically incorporated by reference therein. Such requests should be
directed to George L. Baulig, Secretary, South Jersey Gas Company, Number One
South Jersey Plaza, Route 54, Folsom, New Jersey 08037 (609) 561-9000.
2
<PAGE>
THE ISSUER
The Issuer is a statutory business trust created under Delaware law pursuant
to (i) a trust agreement executed by SJG, as sponsor for the Issuer, and the
Issuer Trustees (as defined below) and (ii) the filing of a certificate of
trust with the Delaware Secretary of State. The trust agreement will be
amended and restated in its entirety (as so amended and restated, the "Trust
Agreement") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The Trust Agreement will be
qualified as an indenture under the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act").
The Issuer exists for the exclusive purposes of issuing and selling its
Trust Securities and using the proceeds from the sale of its Trust Securities
to acquire a corresponding series of Debentures, maintaining the status of the
Issuer as a grantor trust for Federal income tax purposes and engaging in
those activities necessary, convenient or incidental to the foregoing. All of
the Common Securities of the Issuer will be owned by SJG. The Common
Securities of the Issuer will rank pari passu, and payments will be made
thereon pro rata, with the Preferred Securities of the Issuer, except that
upon the occurrence and continuance of an event of default with respect to the
corresponding series of Debentures (a "Debenture Event of Default") under the
Indenture dated as of April , 1997 (as amended and supplemented from time
to time, the "Indenture") between SJG and The Bank of New York, as trustee
(the "Debenture Trustee"), the rights of the holders of such Common Securities
to payment of cash distributions ("Distributions") and payments upon
redemption and liquidation will be subordinated to the rights of the holders
of such Preferred Securities. The Indenture will be qualified as an indenture
under the Trust Indenture Act.
The Issuer's business and affairs are conducted by three trustees, each
appointed by SJG as holder of the Common Securities: (i) The Bank of New York
as property trustee (the "Property Trustee"); (ii) The Bank of New York
(Delaware) as Delaware trustee (the "Delaware Trustee"); and (iii) one
individual trustee who is an employee or officer of or affiliated with SJG
(the "Administrative Trustee," and together with the Property Trustee and the
Delaware Trustee, the "Issuer Trustees"). The holder of the Common Securities,
or the holders of at least a majority in aggregate liquidation amount of the
Issuer's Preferred Securities if an event of default under the Trust Agreement
(a "Trust Agreement Event of Default") has occurred and is continuing, will be
entitled to remove and replace the Property Trustee. In no event will the
holders of the Preferred Securities have the right to vote to appoint, remove
or replace the Administrative Trustee, which voting rights are vested
exclusively in the holder of the Common Securities. The duties and obligations
of each of the Issuer Trustees are governed by the Trust Agreement.
Pursuant to the Trust Agreement, SJG will pay all fees and expenses related
to the Issuer and the offering of its Preferred Securities and will pay,
directly or indirectly, all ongoing costs, expenses and liabilities of the
Issuer except such Issuer's obligations under its Preferred Securities.
The principal place of business of the Issuer is Number One South Jersey
Plaza, Route 54, Folsom, New Jersey 08037, and its telephone number is (609)
561-9000.
3
<PAGE>
SOUTH JERSEY GAS COMPANY
SJG is a regulated New Jersey public utility and is the principal subsidiary
of SJI. SJG is a gas distribution utility that supplies natural gas to
residential, commercial and industrial customers 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.
At December 31, 1996, the Company served 253,874 residential, commercial and
industrial customers throughout 112 municipalities in Atlantic, Cape May,
Cumberland, and Salem counties and portions of Burlington, Camden and
Gloucester Counties. The Company's service territory covers approximately
2,500 square miles and has an estimated permanent population of 1.1 million.
Gas sales and transportation for 1996 amounted to 66,814,000 Mcf (thousand
cubic feet), of which 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 other and 25.3% transportation. SJG is regulated as to rates and other
matters by the New Jersey Board of Public Utilities.
SJG's executive offices are located at Number One South Jersey Plaza, Route
54, Folsom, New Jersey, 08037, and its telephone number is (609) 561-9000.
USE OF PROCEEDS
Unless otherwise specified in the accompanying Prospectus Supplement, the
proceeds to be received by the Issuer from the sale of the Preferred
Securities offered hereby will be used by the Issuer to purchase Debentures
from SJG. The proceeds from the sale of the Debentures will be used by SJG to
retire short-term debt and for general corporate purposes. At December 31,
1996, SJG had $108.3 million of short-term debt outstanding with a weighted-
average interest cost of 5.854%.
DESCRIPTION OF THE PREFERRED SECURITIES
Pursuant to the terms of the Trust Agreement, the Issuer will issue the
Preferred Securities and the Common Securities. The Preferred Securities of
the Issuer will represent undivided beneficial interests in the assets of the
Issuer and the holders thereof will be entitled to a preference in certain
circumstances with respect to the payment of Distributions and amounts payable
on redemption or liquidation over the Common Securities of the Issuer, as well
as other benefits as described in the Trust Agreement.
GENERAL
The Preferred Securities of the Issuer will rank pari passu, and payments
will be made thereon pro rata, with the Common Securities of the Issuer except
as described under "--Subordination of Common Securities." The proceeds from
the sale of the Preferred Securities and the Common Securities will be used by
the Issuer to purchase a corresponding series of Debentures from SJG. The
Debentures will be held in trust by the Property Trustee for the benefit of
the holders of the related Trust Securities. The Guarantee Agreement executed
by SJG for the benefit of the holders of the Issuer's Preferred Securities
(the "Guarantee") will be subordinate and junior in right of payment to all
general liabilities of SJG. Pursuant to the Guarantee, SJG will agree to make
payments of Distributions and payments on redemption or liquidation with
respect to such Preferred Securities, but only to the extent the Issuer holds
funds available therefor and has not made such payments. See "Description of
the Guarantee."
It is anticipated that the assets of the Issuer available for distribution
to the holders of its Preferred Securities will be limited to payments from
SJG under the corresponding series of Debentures in which the Issuer will
invest the proceeds from the issuance and sale of its Trust Securities. See
"Description of the Debentures." If SJG fails to make a payment on a series of
Debentures, the Issuer will not have sufficient funds to make related
payments, including Distributions, on the corresponding series of Preferred
Securities.
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<PAGE>
DISTRIBUTIONS
Distributions on the Preferred Securities of the Issuer will be payable at a
rate specified in the accompanying Prospectus Supplement for such Preferred
Securities. The amount of Distributions payable for any full quarterly period
will be computed on the basis of a 360-day year of twelve 30-day months and
for any period shorter than a full month shall be computed on the basis of the
actual number of days elapsed in such period based on 30-day months.
Distributions on the Preferred Securities will be cumulative and will
accumulate from the date of original issuance and will be payable quarterly in
arrears on the dates specified in the accompanying Prospectus Supplement
except as otherwise described below. In the event that any date on which
Distributions are otherwise payable on the Preferred Securities is not a
Business Day (as defined below), payment of such Distributions will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect to any such delay), except that if such Business Day
is in the next succeeding calendar year, payment of such Distributions shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date (each date on which Distributions are
payable in accordance with the foregoing is referred to herein as a
"Distribution Date"). A "Business Day" shall mean any day other than a
Saturday, Sunday or a day on which banking institutions in The City of New
York or the State of New Jersey are required by law or executive order to
remain closed.
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the securities register of the Issuer on the
relevant record date, which, as long as the Preferred Securities remain in
book-entry-only form, will be one Business Day prior to the relevant
Distribution Date. Subject to any applicable laws and regulations and the
provisions of the Trust Agreement, each such payment will be made as described
under "--Book-Entry-Only Issuance--The Depository Trust Company." In the event
that any Preferred Securities are not in book-entry-only form, the relevant
record date for such Preferred Securities will be the 15th day of the last
month of each calendar quarter, whether or not a Business Day.
So long as no Debenture Event of Default has occurred and is continuing with
respect to a series of Debentures, SJG in its sole discretion will have the
right at any time and from time to time to defer payments of interest by
extending the interest payment period on such series of Debentures for up to
the maximum period specified in the accompanying Prospectus Supplement for
such series of Debentures (each, an "Extension Period"), provided that any
such Extension Period shall not extend beyond the maturity or any redemption
date of the Debentures of such series. As a consequence, quarterly
Distributions on the corresponding Preferred Securities would be deferred by
the Issuer during such Extension Period, but the amount of Distributions to
which holders of the Preferred Securities would be entitled will continue to
accumulate at the annual rate applicable to quarterly Distributions thereon,
compounded quarterly. During an Extension Period for the Debentures, the rate
per annum at which Distributions on the Trust Securities accumulate shall be
increased by an amount such that the aggregate amount of Distributions that
accumulate on all Trust Securities during any such Extension Period is equal
to the aggregate amount of interest (including interest payable on unpaid
interest at the rate per annum set forth in the Prospectus Supplement for such
Preferred Securities, compounded quarterly) that accrues during any such
Extension Period on the Debentures. During any Extension Period, SJG may not
declare or pay any dividend on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any shares of SJG's capital stock. Within
five business days after receipt by the Property Trustee of notice of an
Extension Period, the Property Trustee shall give notice thereof to the
holders of Trust Securities by first class mail, postage prepaid. Prior to the
termination of any Extension Period, SJG may shorten or further extend the
interest payment period on a series of Debentures, provided that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed the maximum Extension Period or extend beyond the
maturity or any redemption date of such Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, SJG may elect to
begin a new Extension Period, subject to the above requirements. See
"Description of the Debentures--Option to Extend Interest Payment Period."
REDEMPTION
Upon the repayment of the Debentures at maturity or upon redemption, the
proceeds from such repayment will be applied by the Property Trustee to redeem
a like amount of the corresponding Trust Securities of the
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<PAGE>
Issuer at a redemption price (the "Redemption Price") equal to the liquidation
amount of such Trust Securities plus all accumulated and unpaid Distributions
to the redemption date (the "Redemption Date"). The redemption terms of the
Debentures and the corresponding Trust Securities will be set forth in the
accompanying Prospectus Supplement.
If less than all the Trust Securities of the Issuer are to be redeemed on a
Redemption Date, then the aggregate amount of such Trust Securities to be
redeemed shall be selected by the Property Trustee among the Issuer's
Preferred Securities and Common Securities pro rata based on the respective
aggregate liquidation amounts of such Preferred Securities and Common
Securities, subject to the provisions described under "--Subordination of
Common Securities."
REDEMPTION PROCEDURES
Notice of any redemption of Trust Securities will be given by the Property
Trustee to the holders of such Trust Securities to be redeemed not less than
30 nor more than 60 days prior to the Redemption Date. If a notice of
redemption is given with respect to any Trust Securities, then, to the extent
funds are available therefor, the Issuer will irrevocably deposit with the
paying agent for such Trust Securities funds sufficient to pay the applicable
Redemption Price for the Trust Securities being redeemed on the Redemption
Date and will give such paying agent irrevocable instructions and authority to
pay the Redemption Price to the holders of such Trust Securities upon
surrender thereof. Notwithstanding the foregoing, Distributions payable on or
prior to the Redemption Date for any Trust Securities called for redemption
shall be payable to the holders of such Trust Securities on the relevant
record dates for the related Distribution Dates.
If notice of redemption shall have been given and funds irrevocably
deposited as required, then upon the date of such deposit, all rights of the
holders of such Trust Securities so called for redemption will cease, except
the right of the holders of such Trust Securities to receive the Redemption
Price, but without interest thereon, and such Trust Securities will cease to
be outstanding. In the event that any Redemption Date for Trust Securities is
not a Business Day, then the Redemption Price will be payable on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay), except that if such Business Day is in
the next succeeding calendar year, the Redemption Price will be payable on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date. In the event that payment of the Redemption
Price in respect of any Trust Securities called for redemption is improperly
withheld or refused and not paid either by the Issuer thereof or by SJG
pursuant to the Guarantee as described under "Description of the Guarantee,"
Distributions on such Trust Securities will continue to accumulate at the then
applicable rate from the original Redemption Date to the date of payment, in
which case the actual payment date will be considered the Redemption Date for
purposes of calculating the Redemption Price.
Subject to applicable law, SJG, SJI or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
SUBORDINATION OF COMMON SECURITIES
Payment of Distributions on, and the Redemption Price of, the Issuer's Trust
Securities, as applicable, shall be made pro rata based on the respective
aggregate liquidation amounts of such Trust Securities; provided, however,
that if a Debenture Event of Default has occurred and is continuing with
respect to the Debentures, no payment of any Distribution on, or Redemption
Price of, any of the Issuer's Common Securities, and no other payment on
account of the liquidation of such Common Securities, shall be made unless
payment in full in cash of all accumulated and unpaid Distributions on all of
the Issuer's outstanding Preferred Securities for all Distribution periods
terminating on or prior thereto, or in the case of a redemption, the full
amount of such Redemption Price on all of the Issuer's outstanding Preferred
Securities then being redeemed shall have been made or provided for, and all
funds available to the Property Trustee shall first be applied to the payment
in full in cash of all Distributions on, or Redemption Price of, all of the
Issuer's outstanding Preferred Securities then due and payable.
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If a Debenture Event of Default has occurred and is continuing with respect
to the Debentures, the holder of the Issuer's Common Securities will be deemed
to have waived any right to act with respect to such Debenture Event of
Default or any related Trust Agreement Event of Default until the effect of
such Debenture Event of Default and related Trust Agreement Event of Default
has been cured, waived or otherwise eliminated. Until any such Debenture Event
of Default has been so cured, waived or otherwise eliminated, the Property
Trustee shall act solely on behalf of the holders of the corresponding
Preferred Securities and not on behalf of SJG, as holder of such Common
Securities, and only the holders of such Preferred Securities will have the
right to direct the Property Trustee to act on their behalf.
LIQUIDATION DISTRIBUTION UPON TERMINATION
Pursuant to the Trust Agreement, the Issuer shall be terminated on the
earliest to occur of (i) the expiration of the term of the Issuer; (ii) the
bankruptcy, dissolution or liquidation of SJG or an acceleration of the
maturity of the Debentures held by the Issuer; (iii) if provided for in the
accompanying Prospectus Supplement, upon the election of SJG to terminate the
Issuer and cause the distribution of the Debentures to the holders of the
Issuer's Trust Securities; (iv) the redemption of all of the Issuer's Trust
Securities; and (v) an order for the termination of the Issuer shall have been
entered by a court of competent jurisdiction. The election of SJG pursuant to
clause (iii) above shall be made by SJG giving written notice to the Issuer
Trustees not less than 30 days prior to the date of distribution of the
Debentures and shall be accompanied by a written opinion of nationally
recognized independent counsel that such event will not be a taxable event to
the holders of the Trust Securities for Federal income tax purposes.
If a termination event occurs as described in clause (i), (ii) or (v) above
with respect to the Issuer, the Issuer shall be liquidated by the
Administrative Trustee as expeditiously as the Issuer Trustees determine to be
possible by distributing, after satisfaction of liabilities to creditors of
the Issuer as provided by applicable law, to the holders of its Trust
Securities a like amount of the Debentures, unless such distribution is
determined by the Property Trustee not to be practical, in which event such
holders will be entitled to receive out of the assets of the Issuer available
for distribution to holders, after satisfaction of liabilities to creditors of
the Issuer as provided by applicable law, an amount equal to, in the case of
holders of Preferred Securities, the aggregate liquidation amount per
Preferred Security specified in the accompanying Prospectus Supplement plus
accumulated and unpaid Distributions thereon to the date of payment (such
amount, the "Liquidation Distribution"). If the Liquidation Distribution with
respect to the Issuer's Preferred Securities can be paid only in part because
the Issuer has insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable by the Issuer on such
Preferred Securities shall be paid on a pro rata basis. The holders of the
Issuer's Common Securities will be entitled to receive the Liquidation
Distribution upon any such liquidation pro rata with the holders of its
Preferred Securities, except that if a Debenture Event of Default has occurred
and is continuing, the Preferred Securities shall have a priority over the
Common Securities with respect to payment of such Liquidation Distribution.
TRUST AGREEMENT EVENT OF DEFAULT; NOTICE
A Debenture Event of Default shall constitute a Trust Agreement Event of
Default with respect to the Preferred Securities issued by the Issuer under
the Trust Agreement.
Within 90 days after the occurrence of any Trust Agreement Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Trust Agreement Event of Default to the holders of the
corresponding Trust Securities, the Administrative Trustee and SJG, unless
such Trust Agreement Event of Default shall have been cured or waived. SJG and
the Administrative Trustee are required to file annually with the Property
Trustee a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under the Trust Agreement.
Under the Trust Agreement, if the Property Trustee has failed to enforce its
rights under the Trust Agreement or the Indenture to the fullest extent
permitted by law and subject to the terms of the Trust Agreement and the
Indenture, any holder of the corresponding Preferred Securities may institute
a legal proceeding directly
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<PAGE>
to enforce the Property Trustee's rights under the Trust Agreement or the
Indenture with respect to Debentures having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such holder
without first instituting a legal proceeding against the Property Trustee or
any other person. To the extent that any action under the Indenture is
entitled to be taken by the holders of at least a specified percentage of the
principal amount of the Debentures, holders of the Preferred Securities may
take such action if such action is not taken by the Property Trustee.
Notwithstanding the foregoing, if a Trust Agreement Event of Default
attributable to SJG's failure to pay principal of or premium, if any, or
interest on the Debentures has occurred and is continuing, then each holder of
Preferred Securities may institute a legal proceeding directly against SJG for
enforcement of payment to such holder, all as provided in the Indenture.
If a Debenture Event of Default has occurred and is continuing with respect
to the Debentures, the Preferred Securities shall have a preference over the
Issuer's Common Securities with respect to the payment of Distributions and
amounts payable on redemption and liquidation as described above. See "--
Liquidation Distribution Upon Termination" and "--Subordination of Common
Securities."
REMOVAL OF ISSUER TRUSTEES
Unless a Trust Agreement Event of Default has occurred and is continuing,
any Issuer Trustee may be removed and replaced at any time by SJG, as the
holder of the Common Securities. If a Trust Agreement Event of Default has
occurred and is continuing, the Property Trustee and the Delaware Trustee may
be removed and replaced at such time only by the holders of at least a
majority in aggregate liquidation amount of the outstanding Preferred
Securities. In no event will the holders of the Preferred Securities have the
right to vote to appoint, remove or replace the Administrative Trustee, which
voting rights are vested exclusively in SJG, as the holder of the Common
Securities. No resignation or removal of an Issuer Trustee and no appointment
of a successor trustee shall be effective until the acceptance of appointment
by the successor trustee in accordance with the provisions of the Trust
Agreement.
CO-TRUSTEES AND SEPARATE PROPERTY TRUSTEE
Unless a Trust Agreement Event of Default has occurred and is continuing, at
any time and from time to time, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in which any
part of the Trust Property (as defined in the Trust Agreement) may at such
time be located, SJG, as the holder of the Common Securities, and the
Administrative Trustee shall have the power (i) to appoint one or more persons
approved by the Property Trustee either to act as co-trustee, jointly with the
Property Trustee, of all or any part of such Trust Property, or to act as
separate trustee of any such Trust Property, in either case with such powers
as may be provided in the instrument of appointment, and (ii) to vest in such
person or persons in such capacity any property, title, right or power deemed
necessary or desirable, subject to the provisions of the Trust Agreement. If a
Trust Agreement Event of Default has occurred and is continuing, or if SJG
does not join with the Administrative Trustee in making such appointment, only
the Property Trustee shall have power to make such appointment.
MERGER OR CONSOLIDATION OF ISSUER TRUSTEES
Any corporation or other entity into which any Issuer Trustee may be merged
or converted or with which it may be consolidated, or any corporation or other
entity resulting from any merger, conversion or consolidation to which any
Issuer Trustee shall be a party, or any corporation or other entity succeeding
to all or substantially all the corporate trust business of any Issuer
Trustee, shall be the successor of such Issuer Trustee under the Trust
Agreement, provided such corporation or other entity shall be otherwise
qualified and eligible.
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE ISSUER
The Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any corporation or other entity,
except as described below. The Issuer may, at the request of SJG, with the
consent of the Administrative Trustee
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and without the consent of the holders of the Preferred Securities, merge with
or into, consolidate, amalgamate, or be replaced by a trust organized as such
under the laws of any state, provided that (i) such successor entity either
(a) expressly assumes all of the obligations of the Issuer with respect to the
Preferred Securities or (b) substitutes for the Preferred Securities other
securities substantially similar to the Preferred Securities (the "Successor
Securities") so long as the Successor Securities rank the same as the
Preferred Securities rank with respect to the payment of Distributions and
payments upon redemption and liquidation, (ii) SJG expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee as the holder of the Debentures, (iii) the Successor
Securities are listed, or any Successor Securities will be listed upon
notification of issuance, on any national securities exchange or other
organization on which the Preferred Securities are then listed, (iv) such
merger, consolidation, amalgamation or replacement does not cause the
Preferred Securities (including any Successor Securities) to be downgraded by
any nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the
rights, preferences and privileges of the holders of the Preferred Securities
(including any Successor Securities) in any material respect, (vi) such
successor entity has a purpose substantially similar to that of the Issuer,
(vii) prior to such merger, consolidation, amalgamation or replacement, SJG
has received an opinion of nationally recognized independent counsel to the
Issuer to the effect that (a) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and privileges
of the holders of the Preferred Securities (including any Successor
Securities) in any material respect, and (b) following such merger,
consolidation, amalgamation or replacement, neither the Issuer nor such
successor entity will be required to register as an investment company under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
and (viii) SJG or any permitted successor assignee owns all of the common
securities of such successor entity and guarantees the obligations of such
successor entity under the Successor Securities at least to the extent
provided by the Guarantee and Trust Agreement. Notwithstanding the foregoing,
the Issuer shall not, except with the consent of all holders of the Preferred
Securities, consolidate, amalgamate, merge with or into, or be replaced by,
any other entity, or permit any other entity to consolidate, amalgamate, merge
with or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Issuer or the successor entity not to be
classified as a grantor trust for Federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below and under "--Mergers, Consolidations, Amalgamations
or Replacements of the Issuer" and "Description of the Guarantee--Amendments
and Assignment" and as otherwise required by law and the Trust Agreement, the
holders of the Preferred Securities will have no voting rights.
The Trust Agreement may be amended from time to time by SJG and any Issuer
Trustee, without the consent of the holders of the Preferred Securities, (i)
to cure any ambiguity, defect or inconsistency or (ii) to make any other
change that does not adversely affect in any material respect the interests of
any holder of the Preferred Securities. The Trust Agreement may be amended by
SJG and the Issuer Trustees in any other respect, with the consent of the
holders of at least a majority in aggregate liquidation amount of the
Preferred Securities affected thereby, provided that no such modification,
without the consent of each holder of such Preferred Securities, may (i)
change the amount, timing or currency or otherwise adversely affect the method
of payment of any Distribution or Liquidation Distribution required to be made
as of a specified date, (ii) restrict the right of a holder of any Preferred
Security to institute suit for enforcement of any Distribution, Redemption
Price or Liquidation Distribution, (iii) change the purpose of the Issuer,
(iv) authorize the issuance of any additional beneficial interests in the
Issuer other than as contemplated by the Trust Agreement, (v) change the
redemption provisions, (vi) change the conditions precedent for SJG to elect
to terminate the Issuer and distribute the Debentures to the holders of the
Preferred Securities, (vii) affect the limited liability of any holder of the
Preferred Securities, or (viii) alter the amendment provisions described by
this sentence only. No amendment may be made without receipt by the Issuer of
an opinion of nationally recognized independent counsel experienced in such
matters to the effect that such amendment will not affect the Issuer's status
as a grantor trust for Federal income tax purposes or its exemption from
regulation as an investment company under the Investment Company Act.
Notwithstanding the foregoing, no additional duties may be imposed upon the
Delaware Trustee or the Property Trustee without such Trustee's consent.
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The Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee or
executing any trust or power conferred on the Debenture Trustee with respect
to the corresponding series of Debentures, (ii) waive any past default
pursuant to Section 6.04 of the Indenture, (iii) exercise any right to rescind
or annul an acceleration of the principal of the Debentures or (iv) consent to
any amendment or modification of the Indenture, where such consent shall be
required, without, in each case, obtaining the consent of the holders of at
least a majority in aggregate liquidation amount of all outstanding Preferred
Securities; provided, however, that where a consent under the Indenture would
require the consent of each holder of Debentures affected thereby, no such
consent shall be given by the Property Trustee without the prior consent of
each holder of the Preferred Securities. The Issuer Trustees shall not revoke
any action previously authorized or approved by a vote of the holders of the
Preferred Securities except by subsequent vote of the holders thereof. The
Property Trustee shall notify all holders of Preferred Securities of any
notice received from the Debenture Trustee as a result of the Issuer being the
holder of the corresponding Debentures. In addition to obtaining the consent
of the holders of the Preferred Securities, prior to taking any of the
foregoing actions, the Issuer Trustees shall obtain an opinion of nationally
recognized independent counsel experienced in such matters to the effect that
the Issuer will not be classified as an association taxable as a corporation
or a partnership for Federal income tax purposes on account of such action and
will continue to be classified as a grantor trust for Federal income tax
purposes.
Any required consent of holders of Preferred Securities may be given at a
meeting of holders of the Preferred Securities convened for such purpose, by
proxy or pursuant to written consent. The Property Trustee will cause a notice
of any meeting at which holders of Preferred Securities are entitled to vote,
or of any matter upon which action by written consent of such holders is to be
taken, to be given to each holder of record of the Preferred Securities in the
manner set forth in the Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under certain circumstances, any Preferred Securities that are owned
by SJG, the Issuer Trustees or any affiliate of SJG or any Issuer Trustee
shall, for purposes of such vote or consent, be treated as if they were not
outstanding.
BOOK-ENTRY-ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
all of the Preferred Securities. The Preferred Securities will be issued only
as fully-registered securities registered in the name of Cede & Co. (DTC's
nominee) as the holder thereof. One or more fully-registered global securities
will be issued for the Preferred Securities of the Issuer, representing in the
aggregate the total number of the Issuer's Preferred Securities, and will be
deposited with DTC.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the New York Stock
Exchange, the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain custodial relationships with Direct Participants, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the SEC.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser
of each Preferred Security ("Beneficial Owner") is in turn to be recorded on
the Direct and Indirect
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Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchases, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as
periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred
Securities. Transfers of ownership interests in the Preferred Securities are
to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Preferred Securities, except in the
event that use of the book-entry system for the Preferred Securities of the
Issuer is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct
and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements
as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the Preferred Securities. If less than all of the Issuer's Preferred
Securities are being redeemed, DTC's practice is to determine by lot the
amount of the interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to the Preferred Securities. Under its usual procedures, DTC would
mail an omnibus proxy (the "Omnibus Proxy") to the Property Trustee as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts
such Preferred Securities are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Distributions on the Preferred Securities will be made in immediately
available funds by the Property Trustee on behalf of the Issuer to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed
by standing instructions and customary practices and will be the
responsibility of such Participant and not of DTC, the Property Trustee, the
Issuer or SJG, subject to any statutory or regulatory requirements as may be
in effect from time to time. Payment of Distributions to DTC is the
responsibility of the Property Trustee on behalf of the Issuer, disbursement
of such payments to Direct Participants is the responsibility of DTC and
disbursements of such payments to the Beneficial Owners is the responsibility
of the Direct and Indirect Participants. The securities registrar and the
Issuer Trustees may conclusively rely on, and shall be protected in relying
on, transfer instructions delivered by DTC (or any successor depository) in
issuing such definitive Preferred Securities. Neither the securities registrar
nor the Issuer Trustees shall be liable for any delay in delivery of transfer
instructions by DTC (or any successor depository).
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
the Property Trustee and SJG. In the event that a successor securities
depositary is not obtained, SJG elects to terminate the book-entry system or a
Trust Agreement Event of Default occurs and is continuing, definitive
Preferred Security certificates representing such Preferred Securities are
required to be printed and delivered. SJG, at its option, may decide to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary) as a result of such discontinuance or as a result of
DTC's ineligibility to so act. Upon distribution of definitive Preferred
Securities certificates, owners of such Preferred Securities will become the
registered holders of such Preferred Securities.
The information set forth above concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuer and SJG believe to be accurate,
but the Issuer and SJG assume no responsibility for the accuracy thereof.
Neither the Issuer nor SJG has any responsibility for the performance by DTC
or its
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Participants of their respective obligations as described herein or under the
rules and procedures governing their respective operations.
In the event that the book-entry-only system is discontinued, the payment of
any Distribution, Redemption Price and Liquidation Distribution in respect of
the Preferred Securities will be payable in the manner described in the
accompanying Prospectus Supplement, and the following provisions would apply.
The Property Trustee shall keep the registration books for the Preferred
Securities at its corporate office. The Preferred Securities may be
transferred or exchanged for one or more Preferred Securities upon surrender
thereof at the corporate office of the Property Trustee by the holders or
their duly authorized attorneys or legal representatives. Upon surrender of
any Preferred Securities to be transferred or exchanged, the Property Trustee
shall record the registration of transfer or exchange in the registration
books and shall deliver new Preferred Securities appropriately registered. The
Property Trustee shall not be required to register the transfer of any
Preferred Securities that have been called for redemption or on or after the
liquidation date. The Issuer and the Property Trustee shall be entitled to
treat the holders of the Preferred Securities, as their names appear in the
registration books, as the owners of those Preferred Securities for all
purposes under the Trust Agreement.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee is the sole Trustee under the Trust Agreement for
purposes of the Trust Indenture Act and shall have and be subject to all of
the duties and responsibilities specified with respect to an indenture trustee
under the Trust Indenture Act. The Property Trustee, other than during the
occurrence and continuance of a Trust Agreement Event of Default, undertakes
to perform only such duties as are specifically set forth in the Trust
Agreement and, upon a Trust Agreement Event of Default, must use the same
degree of care and skill in the exercise thereof as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the Property Trustee is under no obligation to exercise any of the
powers vested in it by the Trust Agreement at the request of any holder of
Preferred Securities unless it is offered reasonable security or indemnity
against the costs, expenses and liabilities that might be incurred thereby. If
no Trust Agreement Event of Default has occurred and is continuing, and the
Property Trustee is required to decide between alternative courses of action,
construe ambiguous provisions in the Trust Agreement or is unsure of the
application of any provision of the Trust Agreement, and the matter is not one
on which holders of Preferred Securities are entitled under the Trust
Agreement to vote, then the Property Trustee shall take such action as is
directed by SJG and, if not so directed, may take such action as it deems
advisable and in the best interests of the holders of the corresponding Trust
Securities and will have no liability except for its own negligent action,
negligent failure to act or willful misconduct.
TAX STATUS OF THE TRUST
The Trust, the Depositor, the Property Trustee, the Administrative Trustee
and the Delaware Trustee will enter into the Trust Agreement, and the Trust
Securities will be issued, with the intention that (i) the Trust will be
classified as a grantor trust under subpart E, part I of subchapter J of the
Internal Revenue Code of 1986, as amended and not as a corporation or a
publicly traded partnership taxable as a corporation for purposes of Federal
income tax law, and (ii) the Holders will be treated as the owners of a pro
rata undivided interest in each asset of the Trust. The Trust, the Depositor,
the Property Trustee, the Administrative Trustee and the Delaware Trustee will
agree to treat and to take no action inconsistent with the treatment of the
Trust Securities (or beneficial interest therein) as interests in a grantor
trust for purposes of federal, state and local income and franchise taxes. The
Trust, the Depositor, the Property Trustee, the Administrative Trustee and the
Delaware Trustee will agree in the Trust Agreement to take no action with
respect to the Trust or any interest therein that would cause the Trust to be
treated as an association or publicly traded partnership taxable as a
corporation for purposes of Federal income tax law. Each holder of Trust
Securities, by acquisition of a Trust Security (or a beneficial interest
therein), will agree to this tax treatment. Notwithstanding any other
provision in the Trust Agreement to the contrary, the Issuer Trustees shall
have no power to vary the investment of the Holders within the meaning of
Treasury Department Regulation (S)301.7701-4(c) or to engage in business
unless the Issuer Trustees shall have received a written opinion of nationally
recognized counsel that such activity shall not cause the Trust to fail to be
a grantor trust for federal income tax purposes. The provisions of the Trust
Agreement will be construed in light of the foregoing intended tax treatment.
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MISCELLANEOUS
The Administrative Trustee is authorized and directed to conduct the affairs
of and to operate the Issuer in such a way that (i) the Issuer will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or to be taxed as a corporation or partnership for
Federal income tax purposes, (ii) the Issuer will be classified as a grantor
trust for Federal income tax purposes and (iii) the Debentures held by the
Issuer will be treated as indebtedness of SJG for Federal income tax purposes.
In this connection, SJG and the Administrative Trustee are authorized to take
any action, not inconsistent with applicable law, the certificate of trust of
the Issuer or the Trust Agreement, that each of SJG and the Administrative
Trustee determine in their discretion to be necessary or desirable for such
purposes, even if such action adversely affects the interests of the holders
of the corresponding Preferred Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
The Issuer may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
Except as otherwise provided in the Trust Agreement, any action requiring
the consent or vote of the Issuer Trustees shall be approved by the
Administrative Trustee.
GOVERNING LAW
The Trust Agreement will be governed by and construed in accordance with the
laws of the State of Delaware.
DESCRIPTION OF THE GUARANTEE
The Guarantee will be executed and delivered by SJG concurrently with the
issuance by the Issuer of its Preferred Securities for the benefit of the
holders of the Preferred Securities. The Guarantee will be qualified as an
indenture under the Trust Indenture Act and The Bank of New York will act as
indenture trustee (the "Guarantee Trustee") under the Guarantee for the
purposes of compliance with the Trust Indenture Act. The Guarantee Trustee
will hold the Guarantee for the benefit of the holders of the Issuer's
Preferred Securities.
GENERAL
SJG will irrevocably and unconditionally agree, to the extent set forth in
the Guarantee, to pay in full, to the holders of the Issuer's Preferred
Securities, the Guarantee Payments (as defined below) (except to the extent
previously paid), as and when due, regardless of any defense, right of set-off
or counterclaim which the Issuer may have or assert. The following payments,
to the extent not paid by the Issuer (the "Guarantee Payments"), will be
subject to the Guarantee (without duplication): (i) any accumulated and unpaid
Distributions required to be paid on such Preferred Securities, to the extent
that the Issuer has funds available therefor, (ii) the Redemption Price to the
extent that the Issuer has funds available therefor, and (iii) upon a
voluntary or involuntary termination, winding-up or liquidation of the Issuer,
unless the Debentures are distributed to holders of such Preferred Securities,
the lesser of (a) the aggregate of the liquidation amount specified in the
Prospectus Supplement per Preferred Security plus all accumulated and unpaid
Distributions on the Preferred Securities to the date of payment, to the
extent the Issuer has funds available therefor and (b) the amount of assets of
the Issuer remaining available for distribution to holders of Preferred
Securities upon a termination and liquidation of the Issuer. SJG's obligation
to make a Guarantee Payment may be satisfied by direct payment of the required
amounts by SJG to the holders of the corresponding Preferred Securities or by
causing the Issuer to pay such amounts to such holders. While the assets of
SJG will not be available pursuant to the Guarantee for the payment of any
Distribution, Liquidation Distribution or Redemption Price on any Preferred
Securities if the Issuer does not have funds available therefor as described
above, SJG has agreed under the Trust Agreement to pay all expenses of the
Issuer except the Issuer's obligations under its Preferred Securities.
Accordingly, the Guarantee, together with the backup undertakings consisting
of SJG's obligations under the Trust Agreement, the Debentures and the
Indenture, provide for SJG's full, irrevocable and unconditional guarantee of
the Preferred Securities.
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No single document executed by SJG in connection with the issuance of the
Preferred Securities will provide for SJG's full, irrevocable and
unconditional guarantee of the Preferred Securities. It is only the combined
operation of SJG's obligations under the Guarantee, the Trust Agreement, the
Debentures and the Indenture that has the effect of providing a full,
irrevocable and unconditional guarantee of the Issuer's obligations under its
Preferred Securities. See "Relationship Among the Preferred Securities, the
Debentures and the Guarantee."
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of SJG and will rank
subordinate and junior in right of payment to all general liabilities of SJG.
The Trust Agreement provides that each holder of Preferred Securities by
acceptance thereof agrees to the subordination provisions and other terms of
the Guarantee. The Guarantee will constitute a guarantee of payment and not of
collection (i.e., the guaranteed party may institute a legal proceeding
directly against SJG to enforce its rights under the Guarantee without first
instituting a legal proceeding against any other person or entity). The
Guarantee will not be discharged except by payment of the Guarantee Payments
in full to the extent not previously paid or upon distribution to the holders
of the Preferred Securities of the Debentures pursuant to the Trust Agreement.
The Guarantee shall rank pari passu with any similar guarantee agreements
issued by SJG on behalf of the holders of preferred or capital securities
issued by the Issuer and with any other security, guarantee, or other
obligation that is expressly stated to rank pari passu with the obligations of
SJG under the Guarantee.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes which do not materially adversely affect
the rights of holders of the Preferred Securities (in which case no consent of
the holders will be required), the Guarantee may not be amended without the
prior approval of the holders of at least a majority in aggregate liquidation
amount of the Preferred Securities (excluding any Preferred Securities held by
SJG or an affiliate thereof). The manner of obtaining any such approval will
be as set forth under "Description of the Preferred Securities--Voting Rights;
Amendment of Trust Agreement." All agreements contained in the Guarantee shall
bind the successors, assigns, receivers, trustees and representatives of SJG
and shall inure to the benefit of the holders of the Preferred Securities.
GUARANTEE EVENTS OF DEFAULT
An event of default under the Guarantee (a "Guarantee Event of Default")
will occur upon the failure of SJG to perform any of its payment or other
obligations thereunder, provided that except with respect to a Guarantee Event
of Default resulting from a failure to make any of the Guarantee Payments, SJG
shall have received notice of such Guarantee Event of Default from the
Guarantee Trustee and shall not have cured such Guarantee Event of Default
within 60 days after receipt of such notice. The holders of at least a
majority in aggregate liquidation amount of the Preferred Securities will have
the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee in respect of the Guarantee
or to direct the exercise of any trust power conferred upon the Guarantee
Trustee under the Guarantee.
Any holder of the Preferred Securities may institute a legal proceeding
directly against SJG to enforce such holder's rights under the Guarantee
without first instituting a legal proceeding against the Issuer, the Guarantee
Trustee or any other person or entity.
SJG, as guarantor, will be required to file annually with the Guarantee
Trustee a certificate as to whether or not SJG is in compliance with all the
conditions and covenants applicable to it under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than during the occurrence and continuance of a
Guarantee Event of Default, undertakes to perform only such duties as are
specifically set forth in the Guarantee (and no implied covenants
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shall be read into the Guarantee against the Guarantee Trustee) and, upon a
Guarantee Event of Default, must exercise such of the rights and powers vested
in it by the Guarantee and use the same degree of care and skill in the
exercise thereof as a prudent person would exercise or use in the conduct of
his or her own affairs. Subject to this provision, the Guarantee Trustee is
under no obligation to exercise any of the powers vested in it by the
Guarantee at the request of any holder of Preferred Securities unless it is
offered reasonable indemnity as would satisfy a reasonable person in the
position of the Guarantee Trustee against the costs, expenses and liabilities
that might be incurred thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon full
payment of the Redemption Price or Liquidation Distribution for the Preferred
Securities or upon distribution of the Debentures to the holders of the
Preferred Securities. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of the Preferred
Securities must restore payment of any sums paid under such Preferred
Securities or the Guarantee.
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the laws
of the State of New Jersey.
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DESCRIPTION OF THE DEBENTURES
GENERAL
The Debentures will be issued under the Indenture. All Debentures will rank
pari passu with all other Debentures. The Debentures will be unsecured and
will rank subordinate and junior in right of payment, to the extent and in the
manner set forth in the Indenture, to all Senior Indebtedness (as defined
below) of SJG. See "--Subordination." The Indenture does not limit the
incurrence or issuance of Senior Indebtedness by SJG.
The accompanying Prospectus Supplement will describe the following terms of
the Debentures: (i) the title of such Debentures; (ii) the aggregate principal
amount of such Debentures; (iii) the date or dates on which the principal of
such Debentures shall be payable or the method of determination thereof; (iv)
the rate or rates, if any, at which such Debentures shall bear interest, the
interest payment dates on which any such interest shall be payable or the
method by which any of the foregoing shall be determined; (v) any terms
regarding redemption; (vi) the maximum Extension Period for such Debentures;
and (vii) any other terms of such Debentures not inconsistent with the
provisions of the Indenture.
Certain Federal income tax consequences and special considerations relating
to the Debentures will be described in the accompanying Prospectus Supplement.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Under the Indenture, SJG shall have the right in its sole and absolute
discretion at any time and from time to time, so long as no Debenture Event of
Default has occurred and is continuing with respect to the Debentures, to
defer payments of interest by extending the interest payment period for the
Debentures for up to the maximum Extension Period provided for in the
Debentures, provided that no Extension Period shall extend beyond the maturity
or any redemption date of such Debentures. At the end of the Extension Period,
SJG shall be obligated to pay all interest then accrued and unpaid (together
with interest thereon to the extent permitted by applicable law). During any
Extension Period, SJG may not declare or pay any dividend on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any shares
of SJG's capital stock. Prior to the termination of any Extension Period, SJG
may shorten or further extend the interest payment period, provided that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed the maximum Extension Period for the Debentures or
extend beyond the maturity or any redemption date of the Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due,
SJG may elect to begin a new Extension Period, subject to the above
requirements. SJG shall be required to give notice to the Debenture Trustee
and cause the Debenture Trustee to give notice to the holders of the
Debentures of its election to begin an Extension Period, or any shortening or
extension thereof, at least five Business Days prior to the date the notice of
the record or payment date of the related Distribution on the Preferred
Securities or payment of interest on such Debentures is required to be given
to any national securities exchange on which the Debentures or the Preferred
Securities are then listed or other applicable self-regulatory organization
but in any event not less than five Business Days prior to such record date.
RIGHTS OF EXISTING PREFERRED SHAREHOLDERS OF SJG
If during any Extension Period, SJG fails to pay dividends on any shares of
SJG's preferred stock in an amount equal to or exceeding four full quarterly
dividend payments, pursuant to SJG's Restated Certificate of Incorporation, as
amended, the holders of SJG's preferred stock, voting separately as a single
class, shall be entitled to elect the smallest number of directors necessary
to constitute a majority of SJG's Board of Directors. Such voting rights of
the holders of preferred stock to elect directors shall continue until all
accumulated and unpaid dividends thereon have been paid.
SUBORDINATION
All payments by SJG of the principal of, premium, if any, and interest on
the Debentures shall be subordinated to the prior payment in full of all
amounts payable on, under, or in connection with Senior
16
<PAGE>
Indebtedness. The term "Senior Indebtedness" means: (i) the principal of and
premium, if any, in respect of (a) indebtedness of SJG for money borrowed and
(b) indebtedness evidenced by securities, debentures, bonds or other similar
instruments issued by SJG; (ii) all capital lease obligations of SJG; (iii)
all obligations of SJG issued or assumed as the deferred purchase price of
property, all conditional sale obligations of SJG and all obligations of SJG
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business); (iv) all obligations of SJG for
the reimbursement of any obligation, any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction (other
than obligations with respect to letters of credit securing obligations (other
than obligations described in (i) through (iii) above) entered into in the
ordinary course of business by SJG to the extent such letters of credit are
not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed
no later than the third business day following payment on the applicable
letter of credit); (v) all obligations of the type referred to in clauses (i)
through (iv) of other persons and all dividends of other persons (other than
the Preferred Securities or similar securities) for the payment of which, in
either case, SJG is responsible or liable as obligor, guarantor or otherwise
(other than the Guarantee and obligations ranking pari passu with the
Guarantee); and (vi) certain obligations of the type referred to in clauses
(i) through (v) of other persons secured by any lien on any property or asset
of SJG (whether or not such obligation is assumed by SJG), the amount of such
obligation being deemed to be the lesser of the value of such property or
assets or the amount of the obligation so secured; provided, however, that
Senior Indebtedness will not include endorsements of negotiable instruments
for collection in the ordinary course of business.
Upon any payment or distribution of assets or securities of SJG, as the case
may be, of any kind or character, whether in cash, property or securities,
upon any dissolution or winding-up or total or partial liquidation or
reorganization of SJG, whether voluntary or involuntary, or in bankruptcy,
insolvency, receivership or other proceedings, all amounts payable on Senior
Indebtedness (including any interest accruing on such Senior Indebtedness
subsequent to the commencement of a bankruptcy, insolvency or similar
proceeding) shall first be paid in full in cash, or payment provided for in
cash or cash equivalents before the holders of the Debentures or the Debenture
Trustee on behalf of such holders shall be entitled to receive from SJG any
payment of principal of, premium, if any, or interest on, the Debentures or
distributions of any assets or securities.
No direct or indirect payment by or on behalf of SJG of principal of,
premium, if any, or interest on, the Debentures, whether pursuant to the terms
of the Debentures or upon acceleration or otherwise, shall be made if, at the
time of such payment, there exists (i) a default in the payment of all or any
portion of any Senior Indebtedness or (ii) any other default pursuant to which
the maturity of Senior Indebtedness has been accelerated and, in either case,
requisite notice has been given to the Debenture Trustee and such default
shall not have been cured or waived by or on behalf of the holders of such
Senior Indebtedness.
If the Debenture Trustee or any holder of the Debentures shall have received
any payment on account of the principal of, premium, if any, or interest on,
the Debentures when such payment is prohibited and before all amounts payable
on, under, or in connection with Senior Indebtedness are paid in full, then
such payment shall be received and held in trust for the holders of Senior
Indebtedness and shall be paid to the holders of the Senior Indebtedness
remaining unpaid to the extent necessary to pay such Senior Indebtedness in
full.
Nothing in the Indenture shall limit the right of the Debenture Trustee or
the holders of the Debentures to take any action to accelerate the maturity of
the Debentures or to pursue any rights or remedies against SJG, provided that
all Senior indebtedness shall be paid before holders of the Debentures are
entitled to receive any payment from SJG of principal of, premium, if any, or
interest on, the Debentures.
Upon the payment in full of all Senior Indebtedness, the holders of the
Debentures shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of assets of SJG made on
such Senior Indebtedness until the Debentures shall be paid in full.
CERTAIN COVENANTS OF SJG
SJG will covenant that it may not declare or pay any dividend on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any shares of
SJG's capital stock (i) during an Extension Period, (ii) if there has occurred
and is continuing any event that is, or, with the giving of notice or the
lapse of time or both would
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<PAGE>
constitute, a Debenture Event of Default or (iii) if SJG is in default with
respect to its payment or other obligations under the Guarantee. See "--
Debenture Events of Default" and "Description of the Guarantee--Guarantee
Events of Default."
Any waiver of any Debenture Event of Default will require the approval of
the holders of at least a majority of the aggregate principal amount of the
Debentures or, if such Debentures are held by the Issuer, the approval of the
holders of at least a majority in aggregate liquidation amount of the
Preferred Securities of the Issuer; provided, however, that a Debenture Event
of Default resulting from the failure to pay the principal of, premium, if
any, or interest on, such Debentures may not be waived.
MODIFICATION OF THE INDENTURE
From time to time, SJG and the Debenture Trustee, without notice to or the
consent of any holders of Debentures, may amend or supplement the Indenture
for any of the following purposes: (i) to cure any ambiguity, defect or
inconsistency; (ii) to comply with the provisions of the Indenture regarding
consolidation, merger or sale, conveyance, transfer or lease of the properties
as an entirety or substantially as an entirety of SJG; (iii) to provide for
uncertificated Debentures in addition to or in place of certificated
Debentures; (iv) to make any other change that does not in the reasonable
judgment of SJG adversely affect the rights of any holder of the Debentures;
or (v) to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the Trust Indenture Act.
In addition, SJG and the Debenture Trustee may modify the Indenture or any
supplemental indenture or waive future compliance by SJG with the provisions
of the Indenture, with the consent of the holders of at least a majority of
the aggregate principal amount of the Debentures affected thereby, provided
that no such modification, without the consent of each holder of such
Debentures, may (i) reduce the principal amount of such Debentures, (ii)
reduce the principal amount of outstanding Debentures the holders of which
must consent to an amendment of the Indenture or a waiver, (iii) change the
stated maturity of the principal of, or interest on, or the rate of interest
on, such Debentures, (iv) change the redemption provisions applicable to such
Debentures adversely to the holders thereof, (v) impair the right to institute
suit for the enforcement of any payment with respect to such Debentures, (vi)
change the currency in which payments with respect to such Debentures are to
be made, or (vii) change the subordination provisions applicable to such
Debentures adversely to the holders thereof, provided that if such Debentures
are held by the Issuer, no modification shall be made that adversely affects
the holders of the Preferred Securities of the Issuer, and no waiver of any
Debenture Event of Default with respect to such Debentures or compliance with
any covenant under the Indenture shall be effective, without the prior consent
of the holders of at least a majority of the aggregate liquidation amount of
the Preferred Securities of the Issuer or the holder of each such Preferred
Security, as applicable.
DEBENTURE EVENTS OF DEFAULT
The following are "Debenture Events of Default" with respect to the
Debentures: (i) default for 30 days in payment of any interest on the
Debentures (other than the payment of interest during an Extension Period),
(ii) default in payment of principal of or premium, if any, on the Debentures
when the same becomes due and payable, (iii) default for 60 days after receipt
by SJG of a "Notice of Default" in the performance of or failure to comply
with any other covenant or agreement for the Debentures or in the Indenture or
any supplemental indenture under which the Debentures may have been issued, or
(iv) certain events of bankruptcy, insolvency or reorganization of SJG. In
case a Debenture Event of Default has occurred and is continuing, other than
one relating to bankruptcy, insolvency or reorganization of SJG, in which case
the principal of, premium, if any, and any interest on, all of the Debentures
shall become immediately due and payable, the Debenture Trustee or the holders
of at least 25% in aggregate principal amount of the Debentures may declare
the principal, together with interest accrued thereon, of all the Debentures
to be due and payable; provided, however, that if a Debenture Event of Default
has occurred and is continuing with respect to such Debentures and the
Debenture Trustee or the holders of at least 25% in aggregate principal amount
of such Debentures fail to declare the principal of the Debentures to be
immediately due and payable, then, if such Debentures are held by the Issuer,
the holders of at least 25% in aggregate liquidation amount of the Preferred
Securities shall have such right by written notice to
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<PAGE>
SJG and the Debenture Trustee. The holders of at least a majority in aggregate
principal amount of such Debentures, by notice to the Debenture Trustee, may
rescind an acceleration and its consequences if the rescission would not
conflict with any judgment or decree and if all existing Debenture Events of
Default have been cured or waived except non-payment of principal or interest
that has become due solely because of acceleration, provided that if the
principal of such Debentures has been declared due and payable by the holders
of the Preferred Securities, no rescission of such acceleration will be
effective unless consented to by the holders of at least a majority in
aggregate liquidation amount of the Preferred Securities.
SJG will be required to furnish to the Debenture Trustee annually a
statement as to the compliance by SJG with all conditions and covenants under
the Indenture and the Debentures and as to any Debenture Event of Default.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
SJG may not consolidate with or merge with or into any other person or sell,
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to any person, unless (i) the successor person
shall be organized and existing under the laws of the United States or any
state thereof or the District of Columbia and shall expressly assume by a
supplemental indenture all of the obligations of SJG under the Debentures and
the Indenture, (ii) immediately after giving effect to such transaction, no
Debenture Event of Default, and no event which after notice or lapse of time
or both would become a Debenture Event of Default, has occurred and is
continuing, and (iii) certain other conditions prescribed in the Indenture are
met.
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, SJG will be discharged from any and all
obligations in respect of the Debentures if SJG (i) deposits with the
Debenture Trustee, in trust, (a) cash and/or (b) United States Government
Obligations (as defined in the Indenture), which through the payment of
interest thereon and principal thereof in accordance with their terms will
provide cash in an amount sufficient to pay all the principal of, premium, if
any, and interest on, the Debentures on the dates such payments are due in
accordance with the terms of such Debentures and (ii) complies with other
provisions described in the Indenture.
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
Subject to the provisions of the Indenture relating to its duties, the
Debenture Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request, order or direction of the holders
of any Debentures or the holders of the Preferred Securities, unless such
holders shall have offered to the Debenture Trustee reasonable security and
indemnity (including reasonable counsel fees). Subject to such provision for
indemnification, the holders of at least a majority in aggregate principal
amount of Debentures affected or the holders of at least a majority in
aggregate liquidation amount of the Preferred Securities, as applicable, will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Debenture Trustee with respect to
the Debentures or exercising any trust or power conferred on the Debenture
Trustee.
The Indenture will contain limitations on the right of the Debenture
Trustee, as a creditor of SJG, to obtain payment of claims in certain cases,
or to realize on certain property received in respect of any such claim as
security or otherwise. In addition, the Debenture Trustee may be deemed to
have a conflicting interest and may be required to resign as Debenture Trustee
if at the time of a Debenture Event of Default (i) it is a creditor of SJG or
(ii) there is a default under either of the indentures referred to below.
The Debenture Trustee is also Indenture Trustee under SJG's Indenture dated
October 1, 1947 with respect to SJG's First Mortgage Bonds and SJG's Indenture
dated January 31, 1995 with respect to SJG's 8.60% Debenture Notes.
GOVERNING LAW
The Indenture will be governed by and construed in accordance with the laws
of the State of New Jersey.
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RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE DEBENTURES AND THE GUARANTEE
Payments of Distributions and redemption and liquidation payments due on
Preferred Securities (to the extent the Issuer has funds available for such
payments) will be guaranteed by SJG as and to the extent set forth under
"Description of the Guarantee." No single document executed by SJG in
connection with the issuance of Preferred Securities will provide for SJG's
full, irrevocable and unconditional guarantee of the Preferred Securities. It
is only the combined operation of SJG's obligations under the Guarantee, the
Trust Agreement, the Debentures and the Indenture that has the effect of
providing a full, irrevocable and unconditional guarantee of the Issuer's
obligations under the Preferred Securities.
A holder of any Preferred Security may institute a legal proceeding directly
against SJG to enforce its rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee, the Issuer or
any other person or entity.
As long as SJG makes payments of interest and other payments when due on the
Debentures, such payments will be sufficient to cover the payment of
Distributions and redemption and liquidation payments due on the Preferred
Securities, primarily because (i) the aggregate principal amount of such
Debentures will be equal to the sum of the aggregate liquidation amount of the
Preferred Securities and Common Securities, (ii) the interest rate and
interest and other payment dates on Debentures will match the Distribution
rate and Distribution and other payment dates for the Preferred Securities,
(iii) the Trust Agreement provides that SJG shall pay for all and any costs,
expenses and liabilities of the Issuer of the Preferred Securities except the
Issuer's obligations under the Preferred Securities, and (iv) the Trust
Agreement provides that the Issuer will not engage in any activity that is
inconsistent with the limited purposes of the Issuer. If and to the extent
that SJG does not make payments on any Debentures, the Issuer will not have
funds available to make payments of Distributions or other amounts due on the
corresponding Preferred Securities.
A principal difference between the rights of a holder of a Preferred
Security (which represents an undivided beneficial interest in the assets of
the Issuer) and a holder of a Debenture is that a holder of a Debenture will
accrue, and (subject to the permissible extension of the interest payment
period) is entitled to receive, interest on the principal amount of Debentures
held, while a holder of Preferred Securities is entitled to receive
Distributions only if and to the extent the Issuer has funds available for the
payment of such Distributions.
Upon any voluntary or involuntary termination or liquidation of the Issuer
not involving a distribution of the Debentures, the holders of the Preferred
Securities will be entitled to receive, out of assets held by the Issuer, the
Liquidation Distribution in cash. See "Description of the Preferred
Securities--Liquidation Distribution Upon Termination." Upon any voluntary
liquidation or bankruptcy of SJG, the Issuer, as holder of the Debentures,
would be a creditor of SJG, subordinated in right of payment to all Senior
Indebtedness but entitled to receive payment in full of principal, premium, if
any, and interest, before any stockholders of SJG receive payments or
distributions. Since SJG will be the guarantor under the Guarantee and has
agreed to pay for all costs, expenses and liabilities of the Issuer (other
than the Issuer's obligations to the holders of its Preferred Securities), the
positions of a holder of such Preferred Securities and a holder of such
Debentures relative to other creditors and to stockholders of SJG in the event
of liquidation or bankruptcy of SJG would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a Debenture Event of Default. However, in the event of payment
defaults under, or acceleration of, Senior Indebtedness, the subordination
provisions of the Debentures provide that no payments may be made in respect
of the Debentures until such Senior Indebtedness has been paid in full or any
payment default thereunder has been cured or waived. Failure to make required
payments on any Debentures would constitute a Debenture Event of Default.
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PROPOSED TAX LAW CHANGES
On February 6, 1997, President Clinton proposed certain tax law changes (the
"Proposed Legislation") that would, among other things, generally deny
interest deductions to corporate issuers if the debt instrument has a term
exceeding 15 years and is not reflected as indebtedness on such issuer's
consolidated balance sheet. The Proposed Legislation is proposed to be
effective for instruments issued on or after the date of "first committee
action," which has not yet taken place and may not take place before the
Debentures are issued. The term of the Debentures may exceed 15 years. SJG
cannot predict what effect, if any, the Proposed Legislation or any other
legislative proposals will have on the Debentures; however, if such proposals
are adopted and apply to the Debentures, SJG might not be able to deduct
interest paid on such Debentures which could, depending on the specific terms
of such Debentures and the Preferred Securities, give rise to the right of SJG
to redeem such Debentures and thereby cause a mandatory redemption of the
Preferred Securities. Federal income tax information and consequences and
redemption provisions, if any, relating to the Debentures and Preferred
Securities will be discussed as applicable in the accompanying Prospectus
Supplement.
PLAN OF DISTRIBUTION
The Issuer may offer or sell the Preferred Securities offered hereby to one
or more underwriters for public offering and sale by them. The Issuer may sell
Preferred Securities as soon as practicable after effectiveness of the
Registration Statement. Any such underwriter involved in the offer and sale of
the Preferred Securities will be named in an accompanying Prospectus
Supplement.
Underwriters may offer and sell the Preferred Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices relating to such prevailing market prices or at
negotiated prices. In connection with the sale of Preferred Securities,
underwriters may be deemed to have received compensation from SJG in the form
of underwriting, discounts or commissions and may also receive commissions.
Underwriters may sell Preferred Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from such underwriters.
Any underwriting compensation paid by SJG on behalf of the Issuer to
underwriters in connection with the offering of Preferred Securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in an accompanying Prospectus Supplement.
Underwriters and dealers participating in the distribution of the Preferred
Securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Preferred
Securities may be deemed to be underwriting discounts and commissions, under
the Securities Act of 1933, as amended (the "Securities Act"). Underwriters
and dealers may be entitled, under agreement with SJG and the Issuer, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by SJG
for certain expenses.
Underwriters and dealers may engage in transactions with, or perform
services for, SJG and/or any of its affiliates in the ordinary course of
business.
The Preferred Securities will be a new issue of securities and will have no
established trading market. Any underwriters to whom Preferred Securities are
sold by the Issuer for public offering and sale may make a market in such
Preferred Securities but such underwriters will not be obligated to do so and
may discontinue any market making at any time without notice. The Preferred
Securities may or may not be listed on a national securities exchange. No
assurance can be given as to the liquidity of or the existence of trading
markets for any Preferred Securities.
LEGAL MATTERS
Certain legal matters will be passed upon for SJG and the Issuer by Dechert
Price & Rhoads, Philadelphia, Pennsylvania, counsel to SJG and the Issuer, and
by Richards, Layton & Finger, special Delaware counsel to SJG and the Issuer,
and for the underwriters by Cravath, Swaine & Moore, New York, New York, who
may rely on the opinion of Dechert Price & Rhoads as to matters of New Jersey
law and on the opinion of Richards, Layton & Finger as to matters of Delaware
Law.
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ACCOUNTING TREATMENT
The financial statements of the Issuer will be consolidated with SJG's
financial statements pursuant to SAB 53, with the Preferred Securities issued
by the Issuer shown on SJG's consolidated financial statements as company-
obligated mandatorily redeemable preferred securities of a subsidiary trust
holding solely the Debentures. SJG's financial statements will include a
footnote that discloses, among other things, that the sole asset of the Issuer
included therein consists of the Debentures and will specify the principal
amount, interest rate and maturity date of the Debentures.
EXPERTS
The financial statements and related financial statement schedules of SJG
incorporated by reference in this Prospectus have been audited by Deloitte &
Touche LLP, independent auditors, for the periods indicated in their report
thereon which is included in SJG's Registration Statement on Form 10. The
financial statements and related financial statement schedules audited by
Deloitte & Touche LLP have been incorporated herein by reference in reliance
on their report given on their authority as experts in accounting and
auditing.
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UNTIL THE TWENTY-FIFTH DAY FOLLOWING THE DATE HEREOF ALL DEALERS EFFECTING
TRANSACTIONS IN THE PREFERRED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS SUPPLEMENT AND
THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES DESCRIBED IN THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS OR AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR
THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUER, SJG OR SJI SINCE THE DATE
HEREOF OR THEREOF OR THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Risk Factors............................................................... S-4
SJG Capital Trust.......................................................... S-6
South Jersey Gas Company................................................... S-7
Use of Proceeds............................................................ S-8
Capitalization............................................................. S-8
Certain Terms of the Preferred Securities.................................. S-9
Certain Terms of the Debentures............................................ S-11
United States Taxation..................................................... S-12
Underwriting............................................................... S-15
</TABLE>
PROSPECTUS
<TABLE>
<S> <C>
Statement of Available Information......................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Issuer................................................................. 2
South Jersey Gas Company................................................... 4
Use of Proceeds............................................................ 4
Description of the Preferred Securities.................................... 4
Description of the Guarantee............................................... 13
Description of the Debentures.............................................. 16
Relationship Among the Preferred Securities, the Debentures and the
Guarantee................................................................. 20
Proposed Tax Law Changes................................................... 21
Plan of Distribution....................................................... 21
Legal Matters.............................................................. 21
Accounting Treatment....................................................... 22
Experts.................................................................... 22
</TABLE>
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TRUST PREFERRED SECURITIES
SJG CAPITAL TRUST
% PREFERRED SECURITIES
GUARANTEED TO THE EXTENT
SJG CAPITAL TRUST HAS AVAILABLE FUNDS
AS SET FORTH HEREIN BY
LOGO
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
REPRESENTATIVES OF THE UNDERWRITERS
PROSPECTUS SUPPLEMENT
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC Registration Fee.................................. $ 10,606
Legal Fees and Expenses............................... 190,000
Accounting Fees and Expenses.......................... 25,000
Rating Agency Fees.................................... 50,000
Printing and Certificate Engraving.................... 24,500
Stock Exchange Listing Fees........................... 14,750
Miscellaneous (including Blue Sky Fees and Expenses).. 35,144
Total................................................. $350,000
========
</TABLE>
Each amount set forth above, except for the SEC registration fee, is
estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 14A:3-5 of the New Jersey Business Corporation Act, 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.
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.
II-1
<PAGE>
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
(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.
The Company maintains and pays all premiums on directors and officers
liability insurance policies with a primary liability limit of $25,000,000.
Pursuant to Section 7.06 of the Trust Agreement, SJG has agreed to
indemnify and hold harmless each of the Issuer Trustees against any and all
loss, damage, claims, liability, penalty or expense, including taxes (other than
taxes based on the income of such Issuer Trustee) incurred without its own
negligent action, its own negligent failure to act or its own wilful misconduct
(or in the case of the Administrative Trustee, incurred without gross negligence
or bad faith), arising out of or in connection with the acceptance or
administration of the Trust Agreement, including any costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of any of its powers or duties under the Trust Agreement.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description
- ---------- --------------------------------------------------------------------
<S> <C>
** 1(a) Form of Underwriting Agreement.
** 3(a) Certificate of Trust for SJG Capital Trust.
** 3(b) Trust Agreement of SJG Capital Trust.
** 3(c) Form of Amended and Restated Trust Agreement for SJG Capital Trust.
</TABLE>
II-2
<PAGE>
<TABLE>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ------------ ------------------------------------------------------------------
<S> <C>
** 4(a) Form of Preferred Security Certificate for SJG Capital Trust.
** 4(b) Form of Deferrable Interest Subordinated Debenture.
** 4(c) Form of Deferrable Interest Subordinated Debenture Indenture.
** 4(d) Form of Guarantee Agreement between South Jersey Gas Company and SJG
Capital Trust.
4(e) First Mortgage Indenture dated as of October 1, 1947 between South
Jersey Gas Company and Guarantee Bank and Trust Company and
succeeded by The Bank of New York, as Trustee, incorporated herein
by reference to Exhibit 4(b)(i) to Form 10-K report of South Jersey
Industries, Inc. ("SJI") for 1987.
4(f) Sixteenth Supplemental Indenture dated as of April 1, 1988 between
South Jersey Gas Company and the Trustee, incorporated herein by
reference to Exhibit 4(b)(xv) to Form 10-Q report of SJI for quarter
ended March 31, 1988.
4(g) Seventeenth Supplemental Indenture dated as of May 1, 1989 between
South Jersey Gas Company and the Trustee, incorporated herein by
reference to Exhibit 4(b)(xv) to Form 10-K report of SJI for 1989.
4(h) Eighteenth Supplemental Indenture dated as of March 1, 1990 between
South Jersey Gas Company and the Trustee, incorporated herein by
reference to Exhibit 4(e) to Form S-3 of SJI, Registration No. 33-
36581.
4(i) Nineteenth Supplemental Indenture dated as of April 1, 1992 between
South Jersey Gas Company and the Trustee, incorporated herein by
reference to Exhibit 4(b)(xvii) to Form 10-K report of SJI for 1992.
4(j) Twentieth Supplemental Indenture dated as of June 1, 1992 between
South Jersey Gas Company and the Trustee, incorporated herein by
reference to Exhibit 4(b)(xviii) to Form 10-K report of SJI for
1993.
4(k) Indenture dated as of January 31, 1995 between South Jersey Gas
Company and New Jersey National Bank, succeeded by The Bank of New
York (NJ), as Trustee, incorporated herein by reference to Exhibit
4(c) to Form 10-K of SJI for 1994.
** 5(a) Opinion of Dechert Price & Rhoads (see page II-8 hereof).
** 5(b) Opinion of Richards Layton & Finger, P.A., special Delaware counsel
(see page II-9 hereof).
** 8 Opinion of Dechert Price & Rhoads as to tax matters (included in
Exhibit 5(a)).
** 12(a) Computations of Ratios of Earnings to Fixed Charges.
** 12(b) Computations of Ratios of Earnings to Combined Fixed Charges plus
Preferred Securities Dividend Requirements.
** 23(a) Consent of Deloitte & Touche LLP (see page II-11 hereof).
** 23(b) Consent of Dechert Price & Rhoads (included in Exhibit 5(a)).
** 23(c) Consent of Richards Layton & Finger, P.A. (included in Exhibit 5
(b)).
** 24 Power of Attorney of Directors and Officers of South Jersey Gas
Company (see Page II-6 hereof).
</TABLE>
II-3
<PAGE>
<TABLE>
EXHIBIT NO. EXHIBIT DESCRIPTION
- ------------ -------------------------------------------------------------------
<S> <C>
** 25(a) Statement of Eligibility under the Trust Indenture Act of 1939 of
The Bank of New York, as Indenture Trustee under the Deferrable
Interest Subordinated Debenture Indenture.
** 25(b) Statement of Eligibility under the Trust Indenture Act of 1939 of
The Bank of New York, as Property Trustee under the Amended and
Restated Trust Agreement.
** 25(c) Statement of Eligibility under the Trust Indenture Act of 1939 of
The Bank of New York, as Guarantee Trustee under the Guarantee
Agreement.
</TABLE>
- ---------------------
** Previously filed.
ITEM 17. UNDERTAKINGS.
A. Undertaking required by Item 512(a) of Regulation S-K.
-----------------------------------------------------
Each Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement;
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and
(3) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
B. Undertaking required by Item 512(b) of Regulation S-K.
-----------------------------------------------------
Each Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of South Jersey
Industries, Inc.'s ("SJI") annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
C. Undertaking required by Item 512(f) of Regulation S-K.
-----------------------------------------------------
Each Registrant hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
D. Undertaking required by Item 512(h) of Regulation S-K.
-----------------------------------------------------
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of each
Registrant pursuant to the foregoing provisions, or otherwise, each Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrants of expenses incurred or paid by a director, officer
or controlling person of the Registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrants will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
II-4
<PAGE>
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
E. Undertaking required by Item 512(i) of Regulation S-K.
-----------------------------------------------------
Each Registrant hereby undertakes that:
(1) For purposes of determining the liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrants pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, SJG Capital Trust
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Folsom, New Jersey, on the 17th day of April, 1997.
SJG CAPITAL TRUST
By: SOUTH JERSEY GAS COMPANY, as Sponsor
By: /s/ GEORGE L. BAULIG
----------------------------------
George L. Baulig, Secretary
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, South Jersey Gas
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Folsom, New Jersey, on the 17th day of April, 1997.
SOUTH JERSEY GAS COMPANY
By: /s/ GEORGE L. BAULIG
---------------------------------
George L. Baulig, Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
NAME TITLE DATE SIGNATURE
---- ----- ---- ---------
W. F. Ryan President, Chief April 17, 1997 *
--------------
Executive
Officer and
Chairman of the
Board of
Directors
II-6
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE SIGNATURE
---- ----- ---- ---------
<S> <C> <C> <C>
G. S. Levitt Executive Vice April 17, 1997 *
--------------
President (Chief
Financial
Officer)
W. J. Smethurst, Jr. Vice President April 17, 1997 *
--------------
and Treasurer
(Chief
Accounting
Officer)
F. L. Bradley, Jr. Director April 17, 1997 *
--------------
A. G. Dickson Director April 17, 1997 *
--------------
R. L. Dunham Director April 17, 1997 *
--------------
P. M. Mitchell Director April 17, 1997 *
--------------
J. Neall Director April 17, 1997 *
--------------
S. M. Vioni Director April 17, 1997 *
--------------
</TABLE>
*By: /s/ GEORGE L. BAULIG
--------------------
George L. Baulig
Attorney-in-Fact
II-7
<PAGE>
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement of
SJG Capital Trust and South Jersey Gas Company on Form S-3 of our report dated
February 19, 1997 appearing in the Registration Statement on Form 10 of
South Jersey Gas Company, and to the reference to us under the heading
"Experts" in the Prospectus which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
April 16, 1997
II-8
<PAGE>
EXHIBIT INDEX
Exhibit Numbers are in accordance with the Exhibit Table in Item 601 of
Regulation S-K:
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description Page
- ------------ ------------------------------------------------------------------------------- -------
<S> <C> <C>
** 1(a) Form of Underwriting Agreement................................................. *
** 3(a) Certificate of Trust for SJG Capital Trust..................................... *
** 3(b) Trust Agreement of SJG Capital Trust........................................... *
** 3(c) Form of Amended and Restated Trust Agreement for SJG Capital Trust............. *
** 4(a) Form of Preferred Security Certificate for SJG Capital Trust................... *
** 4(b) Form of Deferrable Interest Subordinated Debenture............................. *
** 4(c) Form of Deferrable Interest Subordinated Debenture Indenture................... *
** 4(d) Form of Guarantee Agreement between South Jersey Gas Company and SJG
Capital Trust.................................................................. *
4(e) First Mortgage Indenture dated as of October 1, 1947 between South Jersey Gas
Company and Guarantee Bank and Trust Company and succeeded by The Bank
of New York, as Trustee, incorporated herein by reference to Exhibit 4(b)(i) to
Form 10-K report of South Jersey Industries, Inc. ("SJI") for 1987............ *
4(f) Sixteenth Supplemental Indenture dated as of April 1, 1988 between South
Jersey Gas Company and the Trustee, incorporated herein by reference to
Exhibit 4(b)(xv) to Form 10-Q report of SJI for quarter ended March 31, 1988... *
4(g) Seventeenth Supplemental Indenture dated as of May 1, 1989 between South
Jersey Gas Company and the Trustee, incorporated herein by reference to
Exhibit 4(b)(xv) to Form 10-K report of SJI for 1989........................... *
4(h) Eighteenth Supplemental Indenture dated as of March 1, 1990 between South
Jersey Gas Company and the Trustee, incorporated herein by reference to
Exhibit 4(e) to Form S-3 of SJI, Registration No. 33-36581..................... *
4(i) Nineteenth Supplemental Indenture dated as of April 1, 1992 between South
Jersey Gas Company and the Trustee, incorporated herein by reference to
Exhibit 4(b)(xvii) to Form 10-K report of SJI for 1992......................... *
4(j) Twentieth Supplemental Indenture dated as of June 1, 1992 between South
Jersey Gas Company and the Trustee, incorporated herein by reference to
Exhibit 4(b)(xviii) to Form 10-K report of SJI for 1993........................ *
4(k) Indenture dated as of January 31, 1995 between South Jersey Gas Company and
New Jersey National Bank, succeeded by The Bank of New York (NJ), as
Trustee, incorporated herein by reference to Exhibit 4(c) to Form 10-K of SJI *
for 1994.......................................................................
** 5(a) Opinion of Dechert Price & Rhoads.............................................. *
** 5(b) Opinion of Richards Layton & Finger, P.A., special Delaware counsel............ *
** 8 Opinion of Dechert Price & Rhoads as to tax matters (included in Exhibit 5(a)). *
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
** 12(a) Computations of Ratios of Earnings to Fixed Charges............................. *
** 12(b) Computations of Ratios of Earnings to Combined Fixed Charges plus Preferred
Securities Dividend Requirements................................................ *
23(a) Consent of Deloitte & Touche LLP (see page II-8 hereof)......................... *
** 23(b) Consent of Dechert Price & Rhoads (included in Exhibit 5(a)).................... *
** 23(c) Consent of Richards Layton & Finger, P.A. (included in Exhibit 5 (b))........... *
** 24 Power of Attorney of Directors and Officers of South Jersey Gas Company......... *
** 25(a) Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of
New York, as Indenture trustee under the Deferrable Interest Subordinated
Debenture Indenture............................................................. *
** 25(b) Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of
New York, as Property Trustee under the Amended and Restated Trust
Agreement....................................................................... *
** 25(c) Statement of Eligibility under the Trust Indenture Act of 1939 of The Bank of
New York, as Guarantee Trustee under the Guarantee Agreement.................... *
</TABLE>
* Not applicable.
** Previously filed.
