SOUTH JERSEY GAS COMPANY Distribution Agreement

 

 

                            SOUTH JERSEY GAS COMPANY

 

                       Secured Medium Term Notes, Series C

                        Due From One Year to Forty Years

                               From Date of Issue

 

 

                             Distribution Agreement

 

UBS Securities LLC

Wachovia Capital Markets, LLC

Edward D. Jones & Co., L.P.

A.G. Edwards & Sons, Inc.

c/o UBS Securities LLC

677 Washington Blvd.

Stamford, Connecticut    06901

 

                                                         ________________, 2005

 

Ladies and Gentlemen:

 

         South Jersey Gas Company, a New Jersey corporation (the "Company"),

confirms its agreement with each of you with respect to the issue and sale by

the Company from time to time of up to $150,000,000 aggregate principal amount

of its Secured Medium Term Notes, Series C, Due from One Year to Forty Years

from Date of Issue (the "Notes"). The Notes will be issued under an indenture of

trust (the "Original Indenture") dated as of October 5, 1998 between the Company

and The Bank of New York, as trustee (the "Trustee"), as supplemented by the

First Supplement to Indenture, dated as of June 29, 2000, the Second Supplement

to Indenture, dated as of July 5, 2000, and the Third Supplement to Indenture,

dated as of July 9, 2001, each between the Company and the Trustee (the Original

Indenture, as supplemented, the "Indenture"). Prior to the Substitution Date (as

defined in the Indenture), the Notes will be secured by the delivery to the

Trustee of one or more first mortgage bonds issued under the Company's mortgage

indenture, as specified in the Prospectus referred to below (collectively, the

"Pledged Bonds"). Unless otherwise set forth in a supplement to the Prospectus

referred to below, the Notes will be issued in fully registered form in minimum

denominations of $1,000 and in denominations exceeding such amount by integral

multiples of $1,000 and will have the annual interest rates, maturities and, if

appropriate, other terms set forth in such supplement to the Prospectus. The

Notes will be issued, and the terms thereof established, in accordance with the

Indenture and, in the case of Notes sold pursuant to Section 2(a), the Secured

Medium Term Note Administrative Procedures attached hereto as Exhibit A (the

"Procedures") (unless a Terms Agreement (as defined in Section 2(b)), modifies

or supersedes such Procedures with respect to the Notes issued pursuant to such

Terms Agreement). The Procedures may only be amended by written agreement of the

Company and you after notice to, and with the approval of, the Trustee. For the

purposes of this Agreement, the term "Agent" shall refer to any of you acting

solely in the capacity as agent for the Company pursuant to Section 2(a) and not

as principal (collectively, the "Agents"), the term the "Purchaser" shall refer

to any one of you acting solely as principal pursuant to Section 2(b) and not as

agent, and the term "you" shall refer to you collectively whether at any time

any of you is acting in both such capacities or in either such capacity.

 

1. REPRESENTATIONS AND WARRANTIES.

 

         The Company represents and warrants to, and agrees with, you as set

forth below in this Section 1. Certain terms used in this Section 1 are defined

in paragraph (y) hereof.

 

                   (a) At the time of filing and the Effective Date, the Company

         meets the requirements for use of Form S-3 under the Securities Act of

         1933, as amended (the "Act"), for purposes of registering the Notes and

         has filed with the Securities and Exchange Commission (the

         "Commission") a registration statement on such Form (File Number:

         333-_____), including a prospectus, which registration statement, as

         amended, has become effective, for the registration under the Act of

         the issuance of $150,000,000 aggregate principal amount of the Notes.

         Such registration statement, as amended at the date of this Agreement,

         meets the requirements set forth in Rule 415(a)(1)(ix) or (x) under the

          Act and complies in all other material respects with said Rule. In

         connection with the sale of Notes, the Company proposes to file with

         the Commission pursuant to the applicable paragraph of Rule 424(b)

         under the Act supplements to the Prospectus (as defined by Section

         1(y)) specifying the interest rates, maturity dates and, if

         appropriate, other terms of the Notes sold pursuant hereto or the

         offering thereof.

 

                   (b) As of the Execution Time (as defined by Section 1(y)), on

         the Effective Date (as defined by Section 1(y)), when any supplement to

         the Prospectus is filed with the Commission, as of the date of any

         Terms Agreement (as defined by Section 2(b)) and at the date of

         delivery by the Company of any Notes sold hereunder (a "Closing Date"),

         (i) the Registration Statement (as defined by Section 1(y)), as amended

         as of any such time, and the Prospectus, as supplemented as of any such

         time, and the Indenture will comply in all material respects with the

         applicable requirements of the Act, the Trust Indenture Act of 1939, as

         amended (the "Trust Indenture Act"), and the Securities Exchange Act of

         1934, as amended (the "Exchange Act"), and the respective rules

         thereunder; (ii) the Registration Statement, as amended as of any such

         time, did not or will not contain any untrue statement of a material

         fact or omit to state any material fact required to be stated therein

         or necessary in order to make the statements therein not misleading;

         and (iii) the Prospectus, as supplemented as of any such time, will not

         contain any untrue statement of a material fact or omit to state a

         material fact necessary in order to make the statements therein, in the

         light of the circumstances under which they were made, not misleading;

         provided, however, that the Company makes no representations or

          warranties as to (i) the Statement of Eligibility on Form T-1 or (ii)

         the information contained in or omitted from the Registration Statement

         or the Prospectus (or any supplement thereto) in reliance upon and in

         conformity with information furnished in writing to the Company by any

         of you specifically for use in connection with the preparation of the

         Registration Statement or the Prospectus (or any supplement thereto).

 

                   (c) As of the time any Notes are issued and sold hereunder,

         each of the Indenture and the Indenture of First Mortgage, dated

         October 1, 1947, as supplemented and amended by twenty four

         supplemental indentures, including the Twenty-Fourth Supplemental

         Indenture, dated as of __________, 2005 (the "New Supplement"), between

         the Company and The Bank of New York, as trustee (as so supplemented

         and amended, the "Mortgage" and such trustee being the "Mortgage

         Trustee"), assuming the due execution and delivery thereof by the

         Trustee and the Mortgage Trustee, respectively, will constitute a

         legal, valid and binding instrument enforceable against the Company in

         accordance with its terms except, in each case, as enforceability may

         be limited by bankruptcy, reorganization, moratorium, insolvency or

         other laws now or hereafter in effect relating to or affecting

         mortgagees' or other creditors' rights or general principles of equity

         (whether asserted in a proceeding at law or in equity), and the Notes

         and the Pledged Bonds will have been duly authorized, executed,

         authenticated and, when the Notes have been paid for by the purchasers

         thereof, the Notes and the Pledged Bonds will constitute legal, valid

         and binding obligations of the Company entitled to the benefits of the

         Indenture or the Mortgage, respectively, except, in each case, as

         enforceability may be limited by bankruptcy, reorganization,

         moratorium, insolvency or other laws now or hereafter in effect

         relating to or affecting mortgagees' or other creditors' rights or

         general principles of equity (whether asserted in a proceeding at law

         or in equity); the Notes, the Indenture, the Mortgage and the Pledged

         Bonds will conform in all material respects to all statements relating

         thereto contained in the Prospectus.

 

                (d)(i) The Company has been duly incorporated and is validly

         existing as a corporation in good standing under the laws of the

         jurisdiction in which it is incorporated, with full corporate power and

         authority to own or lease its properties and conduct its business as

         described in the Prospectus. The properties now owned or leased and the

         business now transacted by the Company do not require it to be

         qualified as a foreign corporation in any jurisdiction.

 

               (d)(ii) SJG Capital Trust (the "Subsidiary") has been duly

         organized and is validly existing as a statutory trust in good standing

         under the laws of the jurisdiction in which it is organized, with full

         power and authority to own its properties and conduct its business as

         described in the Prospectus, and is duly qualified to do business as a

         foreign organization and is in good standing under the laws of each

         jurisdiction which requires such qualification wherein it owns or

         leases material properties or conducts material business, except where

         the failure to be so qualified would not materially adversely affect

         the Company and its Subsidiary taken as a whole.

 

                   (e) All the outstanding shares of capital stock of the

         Subsidiary have been duly authorized and validly issued and are fully

         paid and nonassessable, and, except as otherwise set forth in the

         Prospectus, all outstanding shares of common stock of the Subsidiary

         are owned directly by the Company free and clear of any perfected

         security interest and, to the knowledge of the Company, any other

         security interests, claims, liens or encumbrances.

 

                   (f) The Company's authorized equity capitalization is as set

         forth in the Registration Statement; and the Notes and the Pledged

         Bonds conform to the descriptions thereof contained in the Prospectus

         (subject to the insertion in the Notes and the Pledged Bonds of the

         maturity dates, the interest rates and other terms thereof which will

         be described in supplements to the Prospectus as contemplated by the

         last sentence of Section l(a) of this Agreement).

 

                    (g) No consent, approval, authorization or order of any court

         or governmental agency or body (other than authorization from the New

         Jersey Board of Public Utilities, referred to below) is required for

         the consummation of the transactions contemplated herein except such as

         have been obtained under the Act, the Exchange Act and the Trust

         Indenture Act, and such as may be required under the blue sky laws of

         any jurisdiction in connection with the sale of the Notes as

         contemplated by this Agreement and such other approvals as have been

         obtained. The New Jersey Board of Public Utilities (the "BPU") has

         entered an order, dated _________, 2005, authorizing the issuance and

          sale of the Notes and the issuance of the Pledged Bonds by the Company

         on terms and conditions not inconsistent with the terms and conditions

         set forth in or contemplated by this Agreement. The Notes, when issued

         and sold by the Company, and the Pledged Bonds, when issued by the

         Company, will comply in all material respects with the terms,

         conditions and limitations set forth in such order. Such order is in

         full force and effect and has not been amended, supplemented or

         otherwise modified without the consent of the Agents, and the period

         has expired during which any proceeding to review, suspend, limit,

         modify, restrict or revoke such order may be instituted as of right by

          any Person other than the BPU.

 

                   (h) Any accounting firm which audited the financial

         statements included or incorporated by reference in the Registration

         Statement and the Prospectus are independent accountants within the

         meaning of the Act and the rules and regulations thereunder.

 

                   (i) The financial statements, selected financial information

         and any supporting schedules of the Company and its consolidated

         subsidiaries included or incorporated by reference in the Registration

         Statement and the Prospectus fairly present the consolidated financial

         position of the Company and its Subsidiary as of the dates indicated

         and the consolidated results of their operations for the periods

         specified; and, except as stated therein, said financial statements

         have been prepared in conformity with generally accepted accounting

         principles in the United States applied on a consistent basis; and the

         supporting schedules included or incorporated by reference in the

         Registration Statement present fairly the information required to be

         stated therein. No other financial statements or schedules of the

         Company are required by the Act or the rules and regulations

         thereunder, or Exchange Act or the rules and regulations thereunder, to

         be included in the Registration Statement or the Prospectus.

 

                  The Company maintains a system of internal accounting controls

                  sufficient to provide reasonable assurance that (i)

                  transactions are executed in accordance with management's

                  general or specific authorization, (ii) transactions are

                   recorded as necessary to permit preparation of financial

                  statements in conformity with generally accepted accounting

                  principles and to maintain asset accountability, (iii) access

                  to assets is permitted only in accordance with management's

                  general or specific authorization and (iv) amounts reflected

                  on the Company's balance sheet for assets is compared with the

                  existing assets at reasonable intervals and appropriate action

                  is taken with respect to any differences.

 

                   (j) This Agreement has been duly and validly authorized,

         executed and delivered by the Company and, upon execution and delivery

          by the Agents, will be a valid and binding agreement of the Company,

         enforceable in accordance with its terms except as enforceability may

         be limited by bankruptcy, reorganization, moratorium, insolvency or

         other laws now or hereafter in effect relating to or affecting

         mortgagees' or other creditors' rights or general principles of equity

         (whether asserted in a proceeding at law or in equity).

 

                   (k) Since the respective dates as of which information is

         given in the Registration Statement and the Prospectus, except as may

         otherwise be stated therein or contemplated thereby, (a) there has been

         no material adverse change, or any development known to the Company

          involving a prospective material adverse change, in the condition,

         financial or otherwise, or in the earnings or business affairs of the

         Company and its Subsidiary taken as a whole, whether or not arising in

         the ordinary course of business and (b) there has not been any material

         transaction entered into by the Company or its Subsidiary, other than

         transactions in the ordinary course of business and transactions

         contemplated by the Registration Statement and the Prospectus.

 

                   (l) Neither the Company nor its Subsidiary is in violation of

         its articles of incorporation, by-laws or other organizational

         documents. No default exists, and no event has occurred which, with

          notice or lapse of time or both, would constitute a default in the due

         performance and observance of any obligation, agreement or condition by

         the Company or its Subsidiary contained in any mortgage, indenture,

         deed of trust, note, loan agreement or other agreement or instrument to

         which the Company or its Subsidiary is a party or by which the Company

         or its Subsidiary is bound or to which any property or asset of the

         Company or its Subsidiary is subject, except for defaults the effect of

         which would not materially adversely affect the Company and its

         Subsidiary taken as a whole. The execution and delivery of this

         Agreement, the Indenture and the New Supplement and the consummation of

         the transactions contemplated herein, therein and pursuant to any

         applicable Terms Agreement have been or will be duly authorized by all

         necessary corporate action and will not conflict with, result in a

         breach of any of the terms or provisions of, or constitute a default

         under, or, except for the issuance of Notes and the Pledged Bonds,

         secured by the lien of the Mortgage, result in the creation or

         imposition of any lien, charge or encumbrance upon any property or

         assets of the Company or its Subsidiary pursuant to the terms or

         provisions of, or give any party a right to terminate any of its

         obligations under, or result in the acceleration of any obligation

         under: (i) the articles of incorporation or bylaws (or equivalent

         documents) of the Company or its Subsidiary; or (ii) any indenture,

         mortgage, deed of trust, loan agreement, bond, debenture, note or other

         evidence of indebtedness, lease, contract or other material agreement

         or instrument to which the Company or its Subsidiary is a party or by

         which it or any of them may be bound or to which any of the property or

         assets of the Company or any such Subsidiary is subject, except, in the

         case of clause (ii) only, where the effect of which would not

         materially adversely affect the Company and its Subsidiary taken as a

         whole, nor will such action, to the knowledge of the Company, violate

         or conflict with any judgment, ruling, decree, order, statute, rule or

         regulation of any court or other governmental agency or body applicable

         to the business or properties of the Company or its Subsidiary.

 

                    (m) The Company has good and marketable title to all the real

         properties described in the granting clauses of the Mortgage, subject

         (other than properties released from the lien of the Mortgage pursuant

         to the terms thereof) to the lien of the Mortgage and no other liens or

         encumbrances except liens permitted under the Mortgage. No further

         deeds, conveyances, transfers or instruments, other than the New

         Supplement and related documents, are necessary for the purpose of

         effectively subjecting such properties to the direct lien and operation

         of the Mortgage.

 

                   (n) As of the time any Notes are issued and sold hereunder,

         the Mortgage will constitute a valid first mortgage lien of record upon

         all real and personal property of the Company (including easements,

         rights-of-way, and other rights relating to real estate and franchises)

         specifically or generally described or referred to in the Mortgage as

         subject to the lien thereof and owned by the Company at the time of the

         actual issue of the Pledged Bonds, subject to no liens or encumbrances

         other than "excepted encumbrances" (as defined in Subdivision A of

         Section 3.04 of the Mortgage).

 

                   (o) As of the time any Notes are issued and sold hereunder,

         the Mortgage will have been duly filed for recording in such manner and

         in such places as are required by law in order to establish, preserve,

         and protect the first lien of the Mortgage on all real and personal

         property of the Company specifically or generally described or referred

         to in the Mortgage as subject to the lien of the Mortgage (except that

         (a) additional filings and recordings of the Mortgage will be required

         if property is acquired by the Company subsequent to the date hereof

         which is located in a county where the Mortgage has not previously been

          filed for recording and (b) the Mortgage will not be a first lien on

         property hereafter acquired by the Company which at the time of

         acquisition is subject to prior liens or other encumbrances), and all

         taxes, fees and other charges payable in connection therewith have been

         paid in full.

 

                   (p) Except as may be set forth in the Registration Statement

         and Prospectus, there is no action, suit or proceeding before or by any

         court or governmental agency or body, domestic or foreign, now pending,

         or, to the knowledge of the Company, threatened against or affecting,

         the Company or its Subsidiary, wherein an unfavorable ruling, decision

         or finding would be expected to materially and adversely affect the

         Company and its Subsidiary taken as a whole or the business,

         properties, condition (financial or otherwise) or results of operations

         of the Company and its Subsidiary as a whole or which in the aggregate

         might affect the ability of the Company to enter into this Agreement,

         the Indenture or the New Supplement or issue and sell the Notes or

         issue the Pledged Bonds; and there are no contracts or documents of the

          Company or its Subsidiary which are required to be described in or

         filed as exhibits to the Registration Statement by the Act or the rules

         and regulations thereunder, or the Exchange Act or the rules and

         regulations thereunder, which have not been so described or filed as

         required.

 

                   (q) Each of the Company and its Subsidiary has valid and

         sufficient grants, franchises, licenses and permits, adequate for the

         conduct of its business in the territories in which it is now

         conducting such business and the ownership of the properties now owned

         by it and, except as otherwise set forth in the Registration Statement

         and the Prospectus, there are no legal or governmental proceedings

         pending or, to the knowledge of the Company, threatened which might

         result in a material modification, suspension or revocation thereof.

         Each of the Company and its Subsidiary has, and is operating in

         compliance with, in all material respects, all material and necessary

         authorizations, approvals, orders, licenses, certificates and permits

         of and from all governmental regulatory officials and bodies, to own,

         lease, license and operate its properties and conduct its business as

         presently conducted and as contemplated by the Registration Statement

         and the Prospectus, and the Company and its Subsidiary have filed all

         material reports and taken all other action required by the authority

         issuing the same where the failure to file or take other action would

         be expected to give rise to a right in such authority to seek to

         revoke, suspend or materially limit any such material license,

         certificate or permit. The Company has all requisite power, authority,

         authorizations, approvals, orders, licenses, certificates and permits

         to enter into this Agreement and to carry out the provisions and

         conditions hereof. Neither the Company nor its Subsidiary has received

         any notice of conflict with asserted rights of others in any respect

         (nor is the Company aware of any existing violation or breach of any

         authorizations, approvals, orders, licenses, certificates or permits by

         the Company or its Subsidiary providing a basis therefor) which would

         be expected to materially adversely affect its business, except as

         described in the Registration Statement and Prospectus.

 

                   (r) Except as set forth in the Registration Statement and the

         Prospectus, no labor disturbance by the employees of the Company or its

         Subsidiary exists or is imminent which would be expected to materially

         adversely affect the conduct of the business, operations, financial

         condition or income of the Company and its Subsidiary, taken as a

         whole.

 

                   (s) South Jersey Industries, Inc., a New Jersey corporation

         ("SJI"), owns all of the common stock of the Company. SJI is a "holding

         company" and the Company is a "subsidiary" of a "holding company" as

         such terms are defined under the Public Utility Holding Company Act of

         1935, as amended (the "1935 Act"). The Company SJI are exempt from all

         provisions of the 1935 Act (except Section 9(a)(2) thereof) pursuant to

         Section 3(a)(1) and Rule 2 of the 1935 Act and SJI has duly filed all

         exemption statements required by Rule 2 of such Act. There are no

         actions, proceedings or investigations pending or (to the knowledge of

         the Company) threatened to terminate such exemptions.

 

                   (t) Except as set forth in the Registration Statement and the

          Prospectus, neither the Company nor its Subsidiary (in the case of

         matters relating to environmental protection, occupational safety and

         health and equal employment opportunity, to its knowledge) is in

         violation of any laws, ordinances, governmental rules and regulations

         to which it is subject, which violation would be expected to materially

         adversely affect the financial condition, business or operations of the

         Company and the Subsidiary taken as a whole.

 

                   (u) The Company is not an "investment company" or an

         "affiliated person" of, or "promoter" or "principal underwriter" for,

         an "investment company," as such terms are defined in the Investment

         Company Act of 1940, as amended.

 

                   (v) No stop order suspending the effectiveness of the

         Registration Statement has been issued and no proceedings for that

         purpose are pending or, to the knowledge of the Company, threatened by

          the Commission.

 

                   (w) Immediately after any sale of Notes by the Company

         hereunder or under any Terms Agreement, the aggregate amount of debt

         securities which shall have been issued and sold by the Company

         hereunder will not exceed the aggregate amount of debt securities

         registered under the Registration Statement.

 

                   (x) Except as set forth in the Registration Statement, to the

         knowledge of the Company, the Company is not in violation of any

         applicable federal, state, or local laws, statutes, rules, regulations

         or ordinances relating to public health, safety or the environment,

         including, without limitation, relating to releases, discharges,

          emissions or disposals to air, water, land or ground water, to the

         withdrawal or use of ground water, to the use, handling or disposal of

         polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde, to the

         treatment, storage, disposal or management of hazardous substances

         (including, without limitation, petroleum, crude oil or any fraction

         thereof, or other hydrocarbons), pollutants or contaminants, to

         exposure to toxic, hazardous or other controlled, prohibited or

         regulated substances or to the use and restoration of land, which

         violation would be expected to have a material adverse effect on the

         business, financial condition or results of operations of the Company.

          Except as set forth in the Registration Statement and the Prospectus,

         the Company does not know of any liability or class of liability of the

         Company under the Comprehensive Environmental Response, Compensation

         and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et seq.),

         the Resource Conservation and Recovery Act of 1976, as amended (42

         U.S.C. Section 6901 et seq.), the New Jersey Spill Compensation and

         Control Act, as amended (N.J.S.A. 58:10-23.11 et seq.), or the

         Environmental Cleanup Responsibility Act, as amended (N.J.S.A. 13:1 K-6

         et seq.), for the release of a non-deminimus quantity of hazardous or

         toxic substances or wastes.

 

                   (y) The terms which follow, when used in this Agreement,

         shall have the meanings indicated. The term "the Effective Date" shall

         mean each date that the Registration Statement and any subsequent post

         effective amendment or amendments thereto became or become effective.

         "Execution Time" shall mean the date and time that this Agreement is

         executed and delivered by the parties hereto. "Prospectus" shall mean

         the form of prospectus relating to the Notes contained in the

         Registration Statement at the Effective Date. "Registration Statement"

         shall mean the registration statement referred to in paragraph (a)

         above, including incorporated documents, exhibits and financial

         statements, as amended at the Execution Time. "Rule 415" and "Rule 424"

         refer to such rules under the Act. Any reference herein to the

         Registration Statement or the Prospectus shall be deemed to refer to

         and include the documents incorporated by reference therein pursuant to

         Item 12 of Form S-3 which were filed under the Exchange Act on or

         before the Effective Date of the Registration Statement or the issue

         date of the Prospectus, as the case may be; and any reference herein to

         the terms "amend," "amendment" or "supplement" with respect to the

         Registration Statement or the Prospectus shall be deemed to refer to

         and include the filing of any document under the Exchange Act after the

         Effective Date of the Registration Statement or the issue date of the

         Prospectus, as the case may be, deemed to be incorporated therein by

         reference.

 

                   (z) The Company is aware of no reason that its quarterly

         report on Form 10-Q for the quarter ended June 30, 2005 would not be

         accompanied by the certifications required to be filed or submitted by

         the Company's chief executive officer and chief financial officer

         pursuant to the Sarbanes-Oxley Act of 2002 and the rules and

         regulations promulgated thereunder.

 

2. APPOINTMENT OF AGENTS; SOLICITATION BY THE AGENTS OF OFFERS TO PURCHASE;

SALES OF NOTES TO A PURCHASER.

 

         (a) Subject to the terms and conditions set forth herein, the Company

hereby authorizes each of the Agents to act as its agent to solicit offers for

the purchase of all or part of the Notes from the Company.

 

         On the basis of the representations and warranties, and subject to the

terms and conditions set forth herein, each of the Agents agrees, as agent of

the Company, to use its reasonable best efforts to solicit offers to purchase

the Notes from the Company upon the terms and conditions set forth in the

Prospectus (and any supplement thereto) and in the Procedures. Each Agent shall

make reasonable efforts to assist the Company in obtaining performance by each

purchaser whose offer to purchase Notes has been solicited by such Agent and

accepted by the Company, but such Agent shall not, except as otherwise provided

in this Agreement, have any liability to the Company in the event any such

purchase is not consummated for any reason. Except as provided in Section 2(b),

under no circumstances will any Agent be obligated to purchase any Notes for its

own account. It is understood and agreed, however, that any Agent may purchase

Notes as principal pursuant to Section 2(b).

 

         The Company shall have the sole right to accept offers to purchase

Notes in whole or, if permitted by the terms thereof, in part. The Company

reserves the right, in its sole discretion, to instruct the Agents to suspend at

any time, for any period of time or permanently, the solicitation of offers to

purchase the Notes. Upon receipt of instructions from the Company, the Agents

will forthwith suspend solicitation of offers to purchase Notes from the Company

until such time as the Company has advised them that such solicitation may be

resumed.

 

         The Company agrees to pay each Agent a commission, on the Closing Date

with respect to each sale of Notes by the Company as a result of a solicitation

made by such Agent, in an amount equal to that percentage specified in Schedule

I hereto of the aggregate principal amount of the Notes so sold by the Company.

Such commission shall be payable as specified in the Procedures.

 

         Subject to the provisions of this Section and to the Procedures, offers

for the purchase of Notes may be solicited by an Agent as agent for the Company

at such time and in such amounts as such Agent deems advisable. The Company may

from time to time offer Notes for sale otherwise than through an Agent;

provided, however, that so long as this Agreement shall be in effect the Company

shall not solicit or accept offers to purchase Notes in this registered offering

through any agent other than an Agent.

 

         If the Company shall default in its obligations to deliver Notes to a

purchaser whose offer it has accepted, the Company shall indemnify and hold each

Agent harmless against any loss, claim or damage arising from or as a result of

such default by the Company.

 

         (b) Subject to the terms and conditions stated herein, whenever the

Company and any Agent determine that the Company shall sell Notes directly to

such Agent as Purchaser, each such sale of Notes shall be made in accordance

with the terms of this Agreement, unless otherwise agreed by the Company and

such Agent, and any supplemental agreement relating thereto (which may be an

oral or written agreement) between the Company and the Purchaser. Each such

supplemental agreement (which shall be substantially in the form of Exhibit B)

is herein referred to as a "Terms Agreement." Each Terms Agreement shall

describe (whether orally or in writing) the Notes to be purchased by the

Purchaser pursuant thereto, and shall specify the principal amount of such

Notes, the maturity date of such Notes, the rate at which interest will be paid

on the Notes and the record dates for each payment of interest, the Closing Date

for the purchase of such Notes, the place of delivery of the Notes and payment

therefor, the method of payment and any requirements for the delivery of

opinions of counsel, certificates from the Company or its officers, or letter

from the Company's independent public accountants as described in Section 6(b).

Such Terms Agreement shall also specify the period of time referred to in

Section 4(m). The Purchaser's commitment to purchase Notes pursuant to any Terms

Agreement shall be deemed to have been made on the basis of the representations

and warranties of the Company herein contained and shall be subject to the terms

and conditions herein set forth.

 

         Delivery of the certificates for Notes sold to the Purchaser pursuant

to any Terms Agreement shall be made as agreed to between the Company and the

Purchaser as set forth in the respective Terms Agreement, not later than the

Closing Date set forth in such Terms Agreement, against payment of funds to the

Company in the net amount due to the Company for such Notes by the method and in

the form set forth in the Procedures unless otherwise agreed to between the

Company and the Purchaser in such Terms Agreement.

 

         Unless otherwise agreed to between the Company and the Purchaser in a

Terms Agreement, any Note sold to a Purchaser (i) shall be purchased by such

Purchaser at a price equal to 100% of the principal amount thereof less a

percentage equal to the commission applicable to an agency sale of a Note of

identical maturity and (ii) may be resold by such Purchaser at varying prices

related to prevailing market prices at the time of resale or, if so agreed, at a

fixed public offering price, as determined by such Purchaser. In connection with

any resale of Notes purchased, a Purchaser may use a selling or dealer group and

may reallow any portion of the discount or commission payable pursuant hereto to

dealers or purchasers.

 

3. OFFERING AND SALE OF NOTES.

 

         Each Agent and the Company agree to perform the respective duties and

obligations specifically provided to be performed by them in the Procedures.

 

4. AGREEMENTS.

 

         The Company agrees with you that:

 

         (a) Prior to the termination of the offering of the Notes, the Company

will not file any amendment to the Registration Statement or supplement to the

Prospectus except (i) periodic or current reports filed under the Exchange Act

(including, without limitation, pursuant to Sections 13 and 15 of the Exchange

Act) or (ii) a supplement relating to any offering of Notes providing solely for

the specification of or a change in the maturity dates, interest rates, issuance

prices or other similar terms of any Notes, unless the Company shall have

furnished to each of you a copy for your review prior to filing and given each

of you a reasonable opportunity to comment on such proposed amendment or

supplement. Subject to the foregoing sentence, the Company will cause each

supplement to the Prospectus to be filed with the Commission pursuant to the

applicable paragraph of Rule 424(b) within the time period prescribed and will

provide evidence satisfactory to you of such filing. The Company will promptly

advise each of you (i) when the Prospectus, and any supplement thereto, shall

have been filed with the Commission pursuant to Rule 424(b), (ii) when, prior to

the termination of the offering of the Notes, any amendment of the Registration

Statement shall have been filed or become effective, (iii) of any request by the

Commission for any amendment of the Registration Statement or supplement to the

Prospectus or for any additional information, (iv) of the issuance by the

Commission of any stop order suspending the effectiveness of the Registration

Statement, or any part thereof, or the institution of any proceeding for that

purpose, or if the Company has knowledge that any such action is contemplated by

the Commission, and (v) of the receipt by the Company of any notification with

respect to the suspension of the qualification of the Notes for sale in any

jurisdiction or the initiation or threatening of any proceeding for such

purpose. The Company will use its reasonable best efforts to prevent the

issuance of any such stop order and, if issued, to obtain as soon as reasonably

possible the withdrawal thereof.

 

         (b) If, at any time when a prospectus relating to the Notes is required

to be delivered under the Act, any event occurs as a result of which the

Prospectus as then supplemented would include any untrue statement of a material

fact or omit to state any material fact necessary to make the statements

therein, in the light of the circumstances under which they were made, not

misleading, or if it shall be necessary to amend the Registration Statement or

to supplement the Prospectus to comply with the Act or the Exchange Act or the

respective rules thereunder, the Company promptly will (i) notify each of you to

suspend solicitation of offers to purchase Notes (and, if so notified by the

Company, each of you shall forthwith suspend such solicitation and cease using

the Prospectus as then supplemented), (ii) prepare and file with the Commission,

subject to the first sentence of paragraph (a) of this Section 4, an amendment

or supplement which will correct such statement or omission or effect such

compliance and (iii) supply any supplemented Prospectus to each of you in such

quantities as you may reasonably request. If such amendment or supplement, and

any documents, certificates and opinions furnished to each of you pursuant to

paragraph (g) of this Section 4 in connection with the preparation or filing of

such amendment or supplement are reasonably satisfactory in all respects to you,

you will, upon the filing of such amendment or supplement with the Commission

and upon the effectiveness of an amendment to the Registration Statement, if

such an amendment is required, resume your obligation to solicit offers to

purchase Notes hereunder.

 

         (c) The Company, during the period when a prospectus relating to the

Notes is required to be delivered under the Act, will file promptly all

documents required to be filed with the Commission pursuant to Section 13(a),

13(c), 14 or 15(d) of the Exchange Act and will furnish to each of you copies of

such documents. In addition, except as otherwise provided in Section 4(n)

hereof, on or prior to the date on which the Company makes any announcement to

the general public concerning earnings or concerning any other event which is

required to be described, or which the Company proposes to describe, in a

document filed pursuant to the Exchange Act, the Company will furnish to each of

you the information contained or to be contained in such announcement and will

also furnish to each of you copies of all other press releases or announcements

to the general public. The Company will immediately notify each of you of any

downgrading in the rating of the Notes or any other debt securities or preferred

stock of the Company, or any proposal to downgrade the rating of the Notes or

any other debt securities or preferred stock of the Company, by any "nationally

recognized statistical rating organization" (as defined for purposes of Rule

436(g) under the Act), as soon as the Company learns of any such downgrading or

proposal to downgrade.

 

         (d) As soon as practicable, the Company will make generally available

to its security holders and to each of you an earnings statement or statements

of the Company and its Subsidiary which will satisfy the provisions of Section

11(a) of the Act and Rule 158 under the Act.

 

         (e) The Company will furnish to each of you and your counsel, without

charge, copies of the Registration Statement (including all amendments and

exhibits thereto) and, so long as delivery of a prospectus may be required by

the Act, as many copies of the Prospectus and any supplement thereto as you may

reasonably request.

 

         (f) The Company will arrange for the qualification of the Notes for

sale under the laws of such jurisdictions as any of you may designate, will

maintain such qualifications in effect so long as required for the distribution

of the Notes, and will provide access to information to assist in the

determination of the legality of the Notes for purchase by institutional

investors; provided, that the Company shall not be required to qualify as a

foreign corporation or to consent generally to the service of process or

taxation under the laws of any such jurisdiction.

 

         (g) The Company shall furnish to each of you such information,

documents, certificates of officers of the Company and opinions of counsel for

the Company relating to the business, operations and affairs of the Company, the

Registration Statement, the Prospectus, and any amendments thereof or

supplements thereto, the Indenture, the Notes, this Agreement, the Procedures

and the performance by the Company and you of its and your respective

obligations hereunder and thereunder as any of you may from time to time and at

any time prior to the termination of this Agreement reasonably request.

 

         (h) The Company shall, whether or not any sale of the Notes is

consummated, (i) pay all expenses incident to the performance of its obligations

under this Agreement, including the fees and disbursements of its accountants

and counsel, the cost of printing or other production and delivery of the

Registration Statement, the Prospectus, all amendments thereof and supplements

thereto, the Indenture, the New Supplement, this Agreement and all other

documents relating to the offering, the cost of preparing, printing, packaging

and delivering the Notes, the fees and disbursements, including reasonable fees

of counsel, incurred in compliance with Section 4(f), the fees and disbursements

of the Trustee and the fees of any agency that rates the Notes, (ii) reimburse

each of you on a monthly basis for all reasonable out-of-pocket expenses

(including without limitation advertising expenses), if any, incurred by you in

connection with this Agreement, but not during a period when the Company has

instructed the Agents not to solicit purchasers for the Notes and (iii) pay the

reasonable fees and expenses of your counsel incurred in connection with this

Agreement.

 

         (i) Each acceptance by the Company of an offer to purchase Notes will

be deemed to be an affirmation that its representations and warranties contained

in this Agreement are true and correct at the time of such acceptance, as though

made at and as of such time, and a covenant that such representations and

warranties will be true and correct at the time of delivery to the purchaser of

the Notes relating to such acceptance, as though made at and as of such time (it

being understood that for purposes of the foregoing affirmation and covenant

such representations and warranties shall relate to the Registration Statement

and Prospectus as amended or supplemented at each such time). Each such

acceptance by the Company of an offer for the purchase of Notes shall be deemed

to constitute an additional representation, warranty and agreement by the

Company that, as of the settlement date for the sale of such Notes, after giving

effect to the issuance of such Notes and of any other Notes to be issued on or

prior to such settlement date, the aggregate amount of Notes which have been

issued and sold by the Company will not exceed the amount of Notes registered

pursuant to the Registration Statement.

 

         (j) Each time that the Registration Statement or the Prospectus is

amended or supplemented (other than by an amendment or supplement providing

solely for the specification of or a change in the maturity dates, the interest

rates, the issuance prices or other similar terms of any Notes sold pursuant

hereto), the Company will deliver or cause to be delivered promptly to each of

you a certificate of the Company, signed by the Chairman of the Board or the

President and the principal financial or accounting officer of the Company,

dated the date of the effectiveness of such amendment or the date of the filing

of such supplement, in form reasonably satisfactory to you, of the same tenor as

the certificate referred to in Section 5(d) but modified to relate to the last

day of the fiscal quarter for which financial statements of the Company were

last filed with the Commission and to the Registration Statement and the

Prospectus as amended and supplemented to the time of the effectiveness of such

amendment or the filing of such supplement.

 

         (k) Each time that the Registration Statement or the Prospectus is

amended or supplemented (other than by an amendment or supplement (i) providing

solely for the specification of or a change in the maturity dates, the interest

rates, the issuance prices or other similar terms of any Notes sold pursuant

hereto or (ii) consisting of a current or periodic report under the Exchange Act

unless, in the case of clause (ii) above, in the reasonable judgment of any of

you, such financial statements or other information are of such a nature that an

opinion of counsel should be furnished), the Company shall furnish or cause to

be furnished promptly to each of you written opinions of counsel to the Company

reasonably satisfactory to each of you, dated the date of the effectiveness of

such amendment or the date of the filing of such supplement, in form reasonably

satisfactory to each of you, of the same tenor as the opinions referred to in

Sections 5(b) and 5(c) but modified to relate to the Registration Statement and

the Prospectus as amended and supplemented to the time of the effectiveness of

such amendment or the filing of such supplement or, in lieu of such opinion,

counsel last furnishing such an opinion to you may furnish each of you with a

letter to the effect that you may rely on such last opinion to the same extent

as though it were dated the date of such letter authorizing reliance (except

that statements in such last opinion will be deemed to relate to the

Registration Statement and the Prospectus as amended and supplemented to the

time of the effectiveness of such amendment or the filing of such supplement).

 

         (l) Each time that the Registration Statement or the Prospectus is

amended or supplemented to set forth amended or supplemental financial

information (except for current reports on Form 8-K which only announce

quarterly earnings), the Company shall cause its independent public accountants

promptly to furnish to each of you a letter, dated the date of the effectiveness

of such amendment or the date of the filing of such supplement, in form

satisfactory to each of you, of the same tenor as the letter referred to in

Section 5(e) with such changes as may be necessary to reflect the amended and

supplemental financial information included or incorporated by reference in the

Registration Statement and the Prospectus, as amended or supplemented to the

date of such letter; provided, however, that, if the Registration Statement or

the Prospectus is amended or supplemented solely to include or incorporate by

reference financial information as of and for a fiscal quarter, the Company's

independent public accountants may limit the scope of such letter, which shall

be reasonably satisfactory in form to each of you, to the unaudited financial

statements, the related "Management's Discussion and Analysis of Financial

Condition and Results of Operations" and any other information of an accounting,

financial or statistical nature included in such amendment or supplement,

unless, in the reasonable judgment of any of you, such letter should cover other

information or changes in specified financial statement line items.

 

         (m) If required pursuant to any Terms Agreement, during the period, if

any, specified (whether orally or in writing) in such Terms Agreement, the

Company shall not, without the prior consent of the Purchaser thereunder, offer,

sell, contract to sell or announce the proposed issuance of any debt securities,

including Notes (other than the Notes being sold under such Terms Agreement),

with terms substantially similar to the Notes being purchased pursuant to such

Terms Agreement, other than borrowings under its revolving credit agreement and

lines of credit and issuances of its commercial paper.

 

         (n) The Company shall not be required to comply with the second

sentence of Section 4(c) and the provisions of Sections 4(g), 4(j), 4(k) and

4(l) hereof during any period (x) from any time when (i) the Agents shall have

suspended solicitation of purchasers of the Notes, in their capacity as agents

pursuant to Section 2(a) hereof, and (ii) the Agents shall not then hold any

Notes as principal purchased pursuant to a Terms Agreement, (y) to the time the

Company shall determine that solicitation of purchasers of the Notes should be

resumed or shall subsequently enter into a new Terms Agreement with any or all

of the Agents, at which time all such action specified in the aforementioned

provisions will be taken, as applicable.

 

5. CONDITIONS TO THE OBLIGATIONS OF THE AGENTS.

 

         The obligation of each Agent to solicit offers to purchase the Notes

shall be subject to the accuracy of the representations and warranties on the

part of the Company contained herein as of the Execution Time, on the Effective

Date, when any supplement to the Prospectus is filed with the Commission, as of

each Closing Date and on the date of each solicitation, to the accuracy of the

statements of the Company made in any certificates pursuant to the provisions

hereof, to the performance by the Company of its obligations hereunder and to

the following additional conditions:

 

         (a) If filing of the Prospectus, or any supplement thereto, is required

pursuant to Rule 424(b), the Prospectus, and any such supplement, shall have

been filed in the manner and within the time period required by Rule 424(b); and

no stop order suspending the effectiveness of the Registration Statement, or any

part thereof, shall have been issued and no proceedings for that purpose shall

have been instituted or threatened, or, to the knowledge of the Company or any

Agent, be contemplated by the Commission.