-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KDxLofG3mKidBqSJ1l8u6Miw9DSOwYe9Io0+Q6vS8m24Xmj6G/kZwa7ntp9HxUIf 7AaPPeu+IhMldQlTAjzriA== 0000891092-02-000177.txt : 20020414 0000891092-02-000177.hdr.sgml : 20020414 ACCESSION NUMBER: 0000891092-02-000177 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 20020212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUBLIC SERVICE ELECTRIC & GAS CO CENTRAL INDEX KEY: 0000081033 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 221212800 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-76020 FILM NUMBER: 02539285 BUSINESS ADDRESS: STREET 1: 80 PARK PLZ STREET 2: PO BOX 570 CITY: NEWARK STATE: NJ ZIP: 07101-0570 BUSINESS PHONE: 9734307000 MAIL ADDRESS: STREET 1: 80 PARK PLZ STREET 2: PO BOX 570 CITY: NEWARK STATE: NJ ZIP: 07101-0570 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PSE&G CAPITAL TRUST IV CENTRAL INDEX KEY: 0001164083 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-76020-01 FILM NUMBER: 02539286 BUSINESS ADDRESS: STREET 1: 80 PARK PLZ T-9 CITY: NEWARK STATE: NJ ZIP: 07102 BUSINESS PHONE: 9734307000 MAIL ADDRESS: STREET 1: 80 PARK PLZ T-9 CITY: NEWARK STATE: NJ ZIP: 07102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PSE&G CAPITAL TRUST III CENTRAL INDEX KEY: 0001012536 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-76020-02 FILM NUMBER: 02539287 BUSINESS ADDRESS: STREET 1: 80 PARK PLZ STREET 2: PO BOX 1171 CITY: NEWARK STATE: NJ ZIP: 07101 BUSINESS PHONE: 2014307000 MAIL ADDRESS: STREET 1: 80 PARK PLAZA STREET 2: PO BOX 1171 CITY: NEWARK STATE: NJ ZIP: 07101 S-3/A 1 e13009_s-3.txt FORM S-3/A As Filed with the Securities And Exchange Commission on February 12, 2002 Registration No. 333-76020 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Amendment No. 1 to FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------- Public Service Electric PSE&G Capital Trust III and Gas Company PSE&G Capital Trust IV (Exact name of registrant (Exact name of registrants as specified in charter) as specified in Trust Agreements) New Jersey (State or other Delaware 22-1212800 jurisdiction of 22-6691384 incorporation or organization) (I.R.S. Employer Identification No.) 01-6175275 80 Park Plaza P.O. Box 570 Newark, New Jersey 07101-0570 (973) 430-7000 (Address, including zip code, and telephone number, including area code, of registrants' principal executive offices) ---------- Robert E. Busch Senior Vice President and Chief Financial Officer 80 Park Plaza P.O. Box 570 Newark, New Jersey 07101-0570 (973) 430-7000 (Name, address, including zip code, and telephone number, including area code, of agent for service for each registrant) with copies to: James T. Foran, Esquire Howard G. Godwin, Jr., Esquire General Corporate Counsel Sidley Austin Brown & Wood LLP 80 Park Plaza 875 Third Avenue P.O. Box 570 New York, New York 10022 Newark, New Jersey 07101-0570 Approximate date of commencement of proposed sale to the public: From time to time after the 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, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. |_| 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 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, 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, please check the following box. |_| CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------- Proposed Maximum Proposed Maximum Title Of Each Class Of Amount To Be Offering Price Per Aggregate Offering Amount of Securities To Be Registered (1) Registered (2) Unit (3)(4) Price (3)(4) Registration Fee - ----------------------------------------------------------------------------------------------------------------- Public Service Electric and Gas Company Senior Debt Securities ...................... - ----------------------------------------------------------------------------------------------------------------- PSE&G Capital Trust III and IV Trust Preferred Securities ...... - ----------------------------------------------------------------------------------------------------------------- Public Service Electric and Gas Company Guarantees with respect to Trust Preferred Securities (5) ........ - ----------------------------------------------------------------------------------------------------------------- Public Service Electric and Gas Company Deferrable Interest Subordinated Debentures ...................... - ----------------------------------------------------------------------------------------------------------------- Total ............................. $1,000,000,000 100% $1,000,000,000 $239,000 (6) =================================================================================================================
(1) Securities registered hereunder may be sold separately, together or as units with other securities registered hereunder. (2) There is being registered hereunder (a) a presently indeterminate principal amount of Public Service Electric and Gas Company Senior Debt Securities and (b) a presently indeterminate number of Trust Preferred Securities of PSE&G Capital Trust III and IV and related Guarantees and Deferrable Interest Subordinated Debentures of Public Service Electric and Gas Company for which no separate consideration will be received, all with an aggregate initial offering price not to exceed $1,000,000,000. (3) Estimated solely for the purpose of determining the registration fee. (4) Pursuant to Rule 457(n) and (o), the registration fee is calculated on the basis of the proposed maximum offering price of the securities being offered. (5) This registration is deemed to include the rights of holders of the Trust Preferred Securities under the Guarantees and certain backup undertakings as described in the Registration Statement. (6) As permitted by Rule 429 under the Securities Act of 1933, the prospectus included herein is a combined prospectus which also relates to Registration Statement No. 333-2763 previously filed by the registrants on Form S-3 and declared effective on June 12, 1996 as to which securities having an aggregate offering price of $47,000,000 remain unsold. The registration fee of $11,233 associated with such securities was previously paid. Accordingly, the registration fee consists of $227,767 paid herewith and the $11,233 previously paid. This registration statement constitutes Post-Effective Amendment No. 1 to Registration Statement No. 333-2763, which shall become effective concurrently with this registration statement in accordance with section 8(c) of the Securities Act of 1933. ---------- 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. ================================================================================ EXPLANATORY NOTE This Registration Statement contains the following two separate prospectuses: 1. A form of prospectus to be used in connection with offerings by Public Service Electric and Gas Company of its Senior Debt Securities. 2. A form of prospectus to be used in connection with offerings by PSE&G Capital Trust III and PSE&G Capital Trust IV of Trust Preferred Securities, together with related debt securities and guarantees of Public Service Electric and Gas Company. The Information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted Subject to Completion, Dated February 12, 2002 PROSPECTUS Public Service Electric and Gas Company 80 Park Plaza, P.O. Box 570 Newark, New Jersey 07101-0570 (973) 430-7000 $1,000,000,000 [LOGO] PSE&G Debt Securities ---------- We may offer from time to time, together or separately, one or more series of our unsecured senior debt. The Debt Securities will rank equally with all of our other unsubordinated and unsecured indebtedness. When a particular series of Debt Securities is offered, we will prepare a prospectus supplement setting forth the particular terms of the offered Debt Securities. You should read this prospectus and any prospectus supplement carefully before you make any decision to invest in the Debt Securities. The aggregate initial public offering price of all Debt Securities which may be sold under this prospectus shall not exceed $1,000,000,000 less the aggregate initial public offering price of any securities of certain of our funding entities which are sold under a separate prospectus which also constitutes a part of the registration statement of which this prospectus constitutes a part. We will sell the Debt Securities through competitive bidding procedures set forth in our Statement of Terms and Conditions Relating to Bids for New Senior Debt Securities. See "Plan of Distribution" for a description of the applicable competitive bidding procedures. This prospectus may not be used to consummate sales of the Debt Securities without the delivery of one or more prospectus supplements. These Securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has any of these organizations determined that this prospectus is accurate and complete. Any representation to the contrary is a criminal offense. The date of this prospectus is , 2002 About This Prospectus This prospectus is part of a registration statement that Public Service Electric and Gas Company filed with the Securities and Exchange Commission (the "SEC") utilizing a "shelf" registration process. Under this shelf process, we may, from time to time, sell any combination of the Debt Securities described in this prospectus in one or more offerings of one or more series. The aggregate principal amount of Debt Securities which we may offer under this prospectus is $1,000,000,000 less the aggregate initial public offering price of any securities of certain of our funding entities which are sold under a separate prospectus filed with the same registration statement. Each time we sell Debt Securities, we will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with the additional information described under the heading "Where You Can Find More Information". We believe that we have included or incorporated by reference all information material to investors in this prospectus, but certain details that may be important for specific investment purposes have not been included. To see more detail, you should read the exhibits filed with or incorporated by reference into the registration statement. Where You Can Find More Information We file annual, quarterly and special reports, proxy statements and other information with the SEC. Our filings are available to the public over the Internet at the SEC's web site at http://www.sec.gov. You may read and copy any material on file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. You may also inspect these documents at the New York Stock Exchange, Inc. (the "New York Stock Exchange") where certain of our securities are listed. The SEC allows us to "incorporate by reference" information that we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference or deemed incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will be deemed to automatically update and supersede this incorporated information. We incorporate by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 prior to the termination of any particular offering of Debt Securities. o Our Annual Report on Form 10-K for the year ended December 31, 2000. o Our Amended Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2001. o Our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2001 and September 30, 2001. You can get a free copy of any of the documents incorporated by reference by making an oral or written request directed to: J. Brian Smith Director, Investor Relations PSEG Services Corporation 80 Park Plaza, 6th Floor Newark, NJ 07101 Telephone (973) 430-6564 You should rely only on the information contained or incorporated in this prospectus or in the prospectus supplement. We have not authorized anyone else to provide you with different or additional information. You should not rely on any other representations. Our affairs may change after this prospectus and the prospectus supplement are distributed. You should not assume that the information in this prospectus and the prospectus supplement are accurate as of any date other than the dates on the front of those documents. You should read all information supplementing this prospectus. 2 FORWARD-LOOKING STATEMENTS This prospectus, any prospectus supplement and the documents incorporated by reference into this prospectus include certain forward-looking statements. The forward-looking statements reflect our expectations, objectives and goals with respect to future events and financial performance and are based on assumptions and estimates that we believe are reasonable. However, actual results could differ materially from anticipated results. Important factors which may affect the actual results include, but are not limited to, commodity prices, political developments, market and economic conditions, industry competition, the weather, changes in financial markets and changing legislation and regulations. The forward-looking statements contained in this prospectus, any prospectus supplement and the documents incorporated by reference into this prospectus and any prospectus supplement are intended to qualify for the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. PUBLIC SERVICE ELECTRIC AND GAS COMPANY We are an operating public utility company engaged principally in the transportation, distribution and sale of electric energy and gas service in New Jersey. We currently supply electric energy and gas service in areas of New Jersey where approximately 5.5 million people, about 70% of the State's population, reside. Our electric and gas service area is a corridor of approximately 2,600 square miles running diagonally across New Jersey from Bergen County in the northeast to an area below the City of Camden in the southwest. The greater portion of this area is served with both electricity and gas, but some parts are served with electricity only and other parts with gas only. As of September 30, 2001, we provided service to approximately 2.0 million electric customers and approximately 1.6 million gas customers. This heavily populated, commercialized and industrialized territory encompasses most of New Jersey's largest municipalities, including its six largest cities--Newark, Jersey City, Paterson, Elizabeth, Trenton and Camden--in addition to approximately 300 suburban and rural communities. This service territory contains a diversified mix of commerce and industry, including major facilities of many corporations of national prominence. Our load requirements are almost evenly split among residential, commercial and industrial customers. We believe that we have all the franchises (including consents) necessary for our electric and gas distribution operations in the territory we serve. Such franchise rights are not exclusive. We are a New Jersey corporation. Our principal office is located at 80 Park Plaza, Newark, New Jersey 07101; our telephone number is 973-430-7000. In this prospectus, unless otherwise indicated, "we", "our" and "us" refer to Public Service Electric and Gas Company and its consolidated subsidiaries. You can obtain additional information about us in the reports and other documents incorporated by reference in this prospectus. See "Where You Can Find More Information." USE OF PROCEEDS Unless we state otherwise in the accompanying prospectus supplement, net proceeds from the sale of the Debt Securities will be added to our general funds and will be used for general corporate purposes including the redemption or refunding of our outstanding indebtedness. DESCRIPTION OF DEBT SECURITIES We may issue our Debt Securities from time to time. The Debt Securities will be issued under an Indenture (the "Indenture") dated as of December 1, 2000 between us and First Union National Bank, as Trustee (the "Trustee"). The Indenture is filed as an exhibit to the registration statement. The Indenture is subject to and governed by the Trust Indenture Act of 1939, as amended (the "TIA"). Selected provisions of the Indenture have been summarized below. This summary is not complete. You should read the Indenture for provisions that may be important to you. In the summary below, references to section numbers of the Indenture are included so that you can easily locate these provisions. Capitalized terms used in the summary have the meanings specified in the Indenture. Parenthetical references below are to the Indenture or to the TIA, as applicable. 3 General The Debt Securities will be our unsecured obligations. They will rank equally with all of our other unsecured and unsubordinated indebtedness. The Indenture (Section 301) provides that the Debt Securities which are the subject of this prospectus and any of our additional unsecured debt securities, unlimited as to aggregate principal amount, may be issued in one or more series thereunder, in each case as authorized from time to time by or pursuant to authority granted by our Board of Directors. Debt Securities issued under the Indenture are herein collectively referred to, when a single trustee is acting for all debt securities issued under the Indenture, as the "Indenture Securities". We have the ability to issue Indenture Securities with terms different from those of Indenture Securities previously issued and, without the consent of the holders thereof, to reopen a previous issue of a series of Indenture Securities and issue additional Indenture Securities of such series (unless such reopening was restricted when such series was created). Provisions Applicable to Particular Series The Indenture provides that any Debt Securities proposed to be sold pursuant to this prospectus and an accompanying prospectus supplement, as well as other of our unsecured debt securities, may be issued under the Indenture in one or more series, as authorized by us from time to time. The particular terms of such Offered Securities and any modifications of or additions to the general terms of the Debt Securities as described in this prospectus that may be applicable in the case of the Offered Securities will be described in the applicable prospectus supplement. Accordingly, for a description of the terms of any Offered Securities, you should refer to both the prospectus supplement for that series and the description of Debt Securities set forth in this prospectus. You should refer to the prospectus supplement for the following information for each particular series of Offered Securities: (1) The title of such Debt Securities. (2) The aggregate principal amount of such Debt Securities and any limit on the aggregate principal amount of Debt Securities of such series. (3) If other than the principal amount thereof, the portion of the principal amount thereof payable upon declaration of acceleration of the maturity thereof or the method by which such portion will be determined. (4) The date or dates, or the method by which such date or dates will be determined or extended, on which the principal of such Debt Securities will be payable. (5) The rate or rates at which such Debt Securities will bear interest, if any, or the method by which such rate or rates will be determined, the date or dates from which such interest will accrue or the method by which such date or dates will be determined, the date or dates on which such interest, if any, will be payable and the Regular Record Date or Dates, if any, for the interest payable on any Registered Security on any Interest Payment Date, or the method by which any such date will be determined, and the basis upon which interest will be calculated if other than that of a 360-day year of twelve 30-day months. (6) The date or dates on which or the period or periods within which, the price or prices at which and the other terms and conditions upon which, such Debt Securities may be redeemed, in whole or in part, at our option and whether we are to have that option. (7) Our obligation, if any, to redeem, repay or purchase such Debt Securities, in whole or in part, pursuant to any sinking fund or analogous provision or at the option of a holder thereof and the period or periods within which or the date or dates on which, the price or prices at which and the other terms and conditions upon which, such Debt Securities will be so redeemed, repaid or purchased. (8) Whether such Debt Securities are to be issuable as Registered Securities, Bearer Securities (with or without coupons) or both, any restrictions applicable to the offer, sale or delivery 4 of Bearer Securities and the terms, if any, upon which Bearer Securities of the series may be exchanged for Registered Securities of the series and vice versa (if permitted by applicable laws and regulations), whether such Debt Securities will be issuable initially in temporary global form, whether any such Debt Securities will be issuable in permanent global form with or without coupons and, if so, whether beneficial owners of interests in any such permanent global security may exchange such interests for Debt Securities of such series in certificated form and of like tenor of any authorized form and denomination and the circumstances under which any such exchanges may occur, if other than in the manner provided in the Indenture, and, if Registered Securities are to be issuable as a global security, the identity of the depositary for such Debt Securities. (9) Whether the amount of payments of principal of (or premium, if any) or interest, if any, on such Debt Securities may be determined with reference to an index, formula or other method (which index, formula or method may be based on one or more Currencies, commodities, equity indices or other indices) and the manner in which such amounts will be determined. (10) The place or places, if any, other than or in addition to The City of New York, where the principal of (and premium, if any) and interest, if any, on such Debt Securities will be payable, where any Registered Securities may be surrendered for registration of transfer, where such Debt Securities may be surrendered for exchange, where Debt Securities of a series that are convertible or exchangeable may be surrendered for conversion or exchange, as applicable, and where notices or demands to or upon us in respect of such Debt Securities and the Indenture may be served. (11) The denomination or denominations in which such Debt Securities will be issuable, if other than $1,000, or any integral multiple thereof, in the case of Registered Securities and $5,000 in the case of Bearer Securities. (12) If other than the Trustee, the identity of each Security Registrar and/or Paying Agent. (13) The date as of which any Bearer Securities of the series and any temporary Debt Security issued in global form representing Outstanding Securities of the series will be dated if other than the date of original issuance of the first Debt Security of the series to be issued. (14) The applicability, if at all, to such Debt Securities of the provisions of Article Fourteen of the Indenture described under " - Satisfaction and Discharge, Defeasance and Covenant Defeasance" and any provisions in modification of, in addition to or in lieu of any of the provisions of such Article. (15) The Person to whom any interest on any Registered Security of the series will be payable, if other than the Person in whose name such Registered Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, the manner in which, or the Person to whom, any interest on any Bearer Security of the series shall be payable, if otherwise than upon presentation and surrender of the coupons appertaining thereto as they severally mature, and the extent to which, or the manner in which, any interest payable on a temporary Debt Security issued in global form will be paid if other than in the manner provided in the Indenture. (16) If such Debt Securities are to be issuable in definitive form (whether upon original issue or upon exchange of a temporary Debt Security of such series) only upon receipt of certain certificates or other documents or satisfaction of other conditions, the form and/or terms of such certificates, documents or conditions. (17) Whether and under what circumstances we will pay Additional Amounts, as contemplated by Section 1004 of the Indenture, on such Debt Securities to any holder who is not a United States person (including any modification to the definition of such term as contained in the Indenture as originally executed) in respect of any tax, assessment or governmental charge and, if so, whether we will have the option to redeem such Debt Securities rather than pay such Additional Amounts (and the terms of any such option). 5 (18) The provisions, if any, granting special rights to the holders of such Debt Securities upon the occurrence of such events as may be specified. (19) Any deletions from, modifications of or additions to the Events of Default or covenants with respect to such Debt Securities (which Events of Default or covenants are consistent with the Events of Default or covenants set forth in the general provisions of the Indenture). (20) Whether such Debt Securities will be convertible into or exchangeable for any other securities and, if so, the terms and conditions upon which such Debt Securities will be so convertible or exchangeable. (21) Any other terms of such Debt Securities. If applicable, the prospectus supplement will also set forth a discussion of federal income tax considerations relevant to the Debt Securities being offered. For purposes of this prospectus, any reference to the payment of principal of (or premium, if any) or interest, if any, on such Debt Securities will be deemed to include mention of the payment of any Additional Amounts required by the terms of such Debt Securities. Debt Securities may provide for less than the entire principal amount thereof to be payable upon declaration of acceleration of the maturity thereof ("Original Issue Discount Securities"). Federal income tax and other considerations pertaining to any such Original Issue Discount Securities will be discussed in the applicable prospectus supplement. The Indenture also provides that there may be more than one Trustee thereunder, each with respect to one or more different series of Indenture Securities. See also "- Resignation and Removal of Trustee" herein. At a time when two or more Trustees are acting under the Indenture, each with respect to only certain series, the term Indenture Securities, as used herein, will mean the one or more series with respect to which each respective Trustee is acting. In the event that there is more than one Trustee under the Indenture, the powers and trust obligations of each Trustee as described herein will extend only to the one or more series of Indenture Securities for which it is Trustee. If two or more Trustees are acting under the Indenture, then the Indenture Securities for which each Trustee is acting would in effect be treated as if issued under separate indentures. The general provisions of the Indenture do not contain any provisions that would limit our ability to incur indebtedness or that would afford holders of Debt Securities protection in the event of a highly leveraged or similar transaction. Reference is made to the prospectus supplement for information with respect to any deletions from, modifications of or additions to the Events of Default or the covenants that are described below, including any addition of a covenant or other provision providing event risk or similar protection. Denominations, Registration and Transfer Debt Securities of a series may be issuable solely as Registered Securities, solely as Bearer Securities or as both Registered Securities and Bearer Securities. The Indenture also provides that Debt Securities of a series may be issuable in global form. (Section 203) See "Book-Entry Debt Securities". Unless otherwise provided in the prospectus supplement, Debt Securities denominated in U.S. dollars (other than Global Securities, which may be of any denomination) are issuable in denominations of $1,000, or any integral multiples of $1,000 (in the case of Registered Securities), and in the denomination of $5,000 (in the case of Bearer Securities). (Section 302) Unless otherwise indicated in the prospectus supplement, Bearer Securities will have interest coupons attached. (Section 201) Registered Securities will be exchangeable for other Registered Securities of the same series. If (but only if) provided in the prospectus supplement, Bearer Securities (with all unmatured coupons, except as provided below, and all matured coupons which are in default) of any series may be similarly exchanged for Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor. If so provided, Bearer Securities surrendered in exchange for Registered Securities between a Regular Record Date or a Special Record Date and the relevant date 6 for payment of interest will be surrendered without the coupon relating to such date for payment of interest, and interest will not be payable in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the holder of such coupon when due in accordance with the terms of the Indenture. Unless otherwise specified in the prospectus supplement, Bearer Securities will not be issued in exchange for Registered Securities. (Section 305) Registered Securities of a series may be presented for registration of transfer and Debt Securities of a series may be presented for exchange (1) at each office or agency required to be maintained by us for payment of such series as described in "Payment and Paying Agents", and (2) at each other office or agency that we may designate from time to time for such purposes. No service charge will be made for any transfer or exchange of Debt Securities, but we may require payment of any tax or other governmental charge payable in connection therewith. (Section 305) We will not be required to (1) issue, register the transfer of or exchange Debt Securities during a period beginning at the opening of business 15 days before any selection of Debt Securities of that series to be redeemed and ending at the close of business on (A) if Debt Securities of the series are issuable only as Registered Securities, the day of mailing of the relevant notice of redemption and (B) if Debt Securities of the series are issuable as Bearer Securities, the day of the first publication of the relevant notice of redemption, or, if Debt Securities of the series are also issuable as Registered Securities and there is no publication, the day of mailing of the relevant notice of redemption; (2) register the transfer of or exchange any Registered Security, or portion thereof, called for redemption, except the unredeemed portion of any Registered Security being redeemed in part; (3) exchange any Bearer Security called for redemption, except to exchange such Bearer Security for a Registered Security of that series and like tenor that is simultaneously surrendered for redemption; or (4) issue, register the transfer of or exchange any Debt Security which has been surrendered for repayment at the option of the holder, except the portion, if any, of such Debt Security not to be so repaid. (Section 305) Payment and Paying Agents Unless otherwise provided in the prospectus supplement, premium, if any, and interest, if any, and Additional Amounts, if any, on Registered Securities will be payable at any office or agency to be maintained by us in Newark, New Jersey and New York, New York, except that at our option interest (including Additional Amounts, if any) may be paid (1) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (2) by wire transfer to an account maintained by the Person entitled thereto as specified in the Security Register. (Sections 301, 1001 and 1002) Unless otherwise provided in the prospectus supplement, payment of any installment of interest on Registered Securities will be made to the Person in whose name such Registered Security is registered at the close of business on the Regular Record Date for such interest. (Section 307) If Debt Securities of a series are issuable solely as Bearer Securities or as both Registered Securities and Bearer Securities, unless otherwise provided in the prospectus supplement, we will be required to maintain an office or agency (1) outside the United States at which, subject to any applicable laws and regulations, the principal of (and premium, if any) and interest, if any, on such series will be payable and (2) in The City of New York for payments with respect to any Registered Securities of such series (and for payments with respect to Bearer Securities of such series in the limited circumstances described below, but not otherwise); provided that, if required in connection with any listing of such Debt Securities on the Luxembourg Stock Exchange or any other stock exchange located outside the United States, we will maintain an office or agency for such Debt Securities in any city located outside the United States required by such stock exchange. (Section 1002) The initial locations of such offices and agencies will be specified in the prospectus supplement. Unless otherwise provided in the prospectus supplement, principal of (and premium, if any) and interest, if any, on Bearer Securities may be paid by wire transfer to an account maintained by the Person entitled thereto with a bank located outside the United States. (Sections 307 and 1002) Unless otherwise provided in the prospectus supplement, payment of installments of interest on any Bearer Securities on or before Maturity will be made only against surrender of coupons for such interest installments as they severally mature. (Section 1001) Unless otherwise provided in the prospectus supplement, no payment with respect to any Bearer Security will be made at any office or agency we maintain in the United States or by check mailed to 7 any address in the United States or by transfer to an account maintained with a bank located in the United States. Notwithstanding the foregoing, payments of principal of (and premium, if any) and interest, if any, on Bearer Securities payable in U.S. dollars will be made at the office of our Paying Agent in The City of New York if (but only if) payment of the full amount thereof in U.S. dollars at all offices or agencies outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions. (Section 1002) We may from time to time designate additional offices or agencies, approve a change in the location of any office or agency and, except as provided above, rescind the designation of any office or agency. Events of Default The following will constitute Events of Default under the Indenture (Section 501): 1. default in the payment of any interest on or of any coupon upon or any Additional Amounts payable in respect of any Debt Security of that series or of any coupon appertaining thereto and continuance of such default for a period of 30 days; 2. default in the payment of the principal of (or premium, if any, on) any Debt Security of that series when the same becomes due and payable, whether at its maturity, earlier redemption or repayment or otherwise; 3. default in the deposit of any sinking fund payment when due by the terms of any Debt Security of that series; 4. default in the performance, or breach, of any covenant or agreement of ours in the Indenture with respect to any Debt Security of that series, continued for 60 days after written notice to us; 5. certain events in bankruptcy, insolvency or reorganization affecting us; and 6. any other Event of Default provided with respect to Debt Securities of that series. We are required to file with the Trustee, annually, an officer's certificate as to our compliance with all conditions and covenants under the Indenture. (Section 1005) The Indenture provides that the Trustee may withhold notice to the holders of Debt Securities of a series of any default (except payment defaults on such Debt Securities of that series) if it considers it in the interest of the holders of Debt Securities of such series to do so. (Section 601) If an Event of Default with respect to Debt Securities of a series has occurred and is continuing, the Trustee or the holders of not less than 25% in principal amount of Outstanding Debt Securities of that series may declare the principal amount (or, if the Debt Securities of that series are Original Issue Discount Securities or Indexed Securities, such portion of the principal amount as may be specified in the terms thereof) of all of the Debt Securities of that series due and payable immediately. (Section 502) Subject to the provisions of the Indenture relating to the duties of the Trustee thereunder, in case an Event of Default with respect to Debt Securities of a series has occurred and is continuing, the Trustee is under no obligation to exercise any of its rights or powers under the Indenture at the request, order or direction of the holders of Debt Securities of that series, unless such holders have offered such Trustee reasonable indemnity against the expenses and liabilities which might be incurred by it in compliance with such request. (Section 507 and TIA Section 315) Subject to such provisions for the indemnification of the Trustee, the holders of a majority in principal amount of the Outstanding Debt Securities of a series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to the Debt Securities of that series. (Section 512) The holders of a majority in principal amount of the Outstanding Debt Securities of a series may, on behalf of the holders of all Debt Securities of such series and any related coupons, waive any past default under the Indenture with respect to such series and its consequences, except a default (1) in the payment of the principal of (or premium, if any) or interest, if any, on or Additional Amounts payable in respect of any Debt Security of such series or any related coupons or (2) in respect of a covenant or 8 provision that cannot be modified or amended without the consent of the holder of each Outstanding Debt Security of such series affected thereby. (Section 513) Merger or Consolidation The Indenture provides that we may not consolidate with or merge with or into any other corporation or convey or transfer our properties and assets as an entirety or substantially as an entirety to any Person, unless either we are the continuing corporation or such corporation or Person assumes by supplemental indenture all of our obligations under the Indenture and the Indenture Securities issued thereunder and immediately after the transaction no default shall exist. (Section 801) Modification or Waiver Modification and amendment of the Indenture may be made by us and the Trustee with the consent of the holders of a majority in principal amount of all Outstanding Indenture Securities that are affected by such modification or amendment; provided that no such modification or amendment may, without the consent of the holder of each Outstanding Indenture Security affected thereby, among other things: 1. change the Stated Maturity of the principal of (or premium, if any, on) or any installment of principal of or interest on any such Indenture Security; 2. reduce the principal amount of, or the rate or amount of interest in respect of, or any premium payable upon the redemption of, any such Indenture Security; 3. change any of our obligations to pay Additional Amounts in respect of any such Indenture Security; 4. reduce the portion of the principal of an Original Issue Discount Security or Indexed Security that would be due and payable upon a declaration of acceleration of the Maturity thereof or provable in bankruptcy; 5. adversely affect any right of repayment at the option of the holder of any such Indenture Security; 6. change the place or Currency of payment of principal of, or any premium or interest on, any such Indenture Security; 7. impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof or on or after any Redemption Date or Repayment Date therefor; 8. adversely affect any right to convert or exchange any Indenture Security; 9. reduce the percentage in principal amount of such Outstanding Indenture Securities, the consent of whose holders is required to amend or waive compliance with certain provisions of the Indenture or to waive certain defaults thereunder; 10. reduce the requirements for voting or quorum described below; or 11. modify any of the foregoing requirements or any of the provisions relating to waiving past defaults or compliance with certain restrictive provisions, except to increase the percentage of holders required to effect any such waiver or to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the holder of each Indenture Security affected thereby. (Section 902) The holders of a majority in aggregate principal amount of Outstanding Indenture Securities have the right to waive our compliance with certain covenants in the Indenture. (Section 1006) Modification and amendment of the Indenture may be made by us and the Trustee thereunder, without the consent of any holder, for any of the following purposes: 1. to evidence the succession of another Person to us as obligor under the Indenture; 9 2. to add to our covenants for the benefit of the holders of all or any series of Indenture Securities issued under the Indenture and any related coupons or to surrender any right or power conferred upon us by the Indenture; 3. to add Events of Default for the benefit of the holders of all or any series of Indenture Securities; 4. to add to or change any provisions of the Indenture to facilitate the issuance of, or to liberalize the terms of, Bearer Securities, or to permit or facilitate the issuance of Indenture Securities in uncertificated form, provided that any such actions do not adversely affect the holders of such Indenture Securities or any related coupons; 5. to change or eliminate any provisions of the Indenture, provided that any such change or elimination will become effective only when there are no Indenture Securities Outstanding of any series created prior thereto which are entitled to the benefit of such provisions; 6. to secure the Indenture Securities under the Indenture pursuant to the requirements of Section 801, or otherwise; 7. to establish the form or terms of the Indenture Securities of any series and any related coupons; 8. to provide for the acceptance of appointment by a successor Trustee or facilitate the administration of the trusts under the Indenture by more than one Trustee; 9. to cure any ambiguity, defect or inconsistency in the Indenture, provided such action does not adversely affect the interests of holders of Indenture Securities of any series or any related coupons in any material respect; or 10. to supplement any of the provisions of the Indenture to the extent necessary to permit or facilitate defeasance and discharge of any series of Indenture Securities, provided that such action shall not adversely affect the interests of the holders of any such Indenture Securities and any related coupons in any material respect. (Section 901) In determining whether the holders of the requisite principal amount of Outstanding Indenture Securities have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture or whether a quorum is present at a meeting of holders of Indenture Securities, (1) the principal amount of an Original Issue Discount Security that will be deemed to be outstanding will be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the Maturity thereof, (2) the principal amount of an Indexed Security that may be counted in making such determination or calculation and that will be deemed outstanding for such purpose will be equal to the principal face amount of such Indexed Security at original issuance, unless otherwise provided with respect to such Indexed Security pursuant to Section 301 of the Indenture and (3) Indenture Securities owned by us or any other obligor upon the Indenture Securities or any Affiliate of ours or of such other obligor shall be disregarded. (Section 101) The Indenture contains provisions for convening meetings of the holders of Indenture Securities of a series if Indenture Securities of that series are issuable as Bearer Securities. (Section 1501) A meeting may be called at any time by the Trustee, and also, upon request, by us or the holders of at least 10% in principal amount of the Outstanding Indenture Securities of that series, in any such case upon notice given as provided in the Indenture. (Section 1502) Except for any consent that must be given by the holder of each Indenture Security affected thereby, as described above, any resolution presented at a meeting (or an adjourned meeting duly reconvened) at which a quorum is present may be adopted by the affirmative vote of the holders of a majority in principal amount of the Outstanding Indenture Securities of that series; provided, however, that any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that may be made, given or taken by the holders of a specified percentage which is less than a majority in principal amount of the Outstanding Indenture Securities of a series may be adopted at a meeting (or an adjourned meeting duly reconvened) at which a quorum is present by the affirmative vote of the holders of such specified percentage in principal amount of the Outstanding Indenture Securities of that series. Any resolution passed or decision taken at any meeting of holders of Indenture Securities of a series duly held in accordance with the Indenture will be binding on all holders of Indenture Securities of that series and 10 any related coupons. The quorum at any meeting called to adopt a resolution will be persons holding or representing a majority in principal amount of the Outstanding Indenture Securities of a series; provided, however, that, if any action is to be taken at such meeting with respect to a consent or waiver which may be given by the holders of not less than a specified percentage in principal amount of the Outstanding Indenture Securities of a series, the persons holding or representing such specified percentage in principal amount of the Outstanding Indenture Securities of that series will constitute a quorum. (Section 1504) Notwithstanding the foregoing provisions, if any action is to be taken at a meeting of holders of Indenture Securities of a series with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that the Indenture expressly provides may be made, given or taken by the holders of a specified percentage in principal amount of all Outstanding Indenture Securities affected thereby or of the holders of such series and one or more additional series: (1) there shall be no minimum quorum requirement for such meeting and (2) the principal amount of the Outstanding Indenture Securities of such series that vote in favor of such request, demand, authorization, direction, notice, consent, waiver or other action will be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under the Indenture. (Section 1504) Satisfaction and Discharge, Defeasance and Covenant Defeasance We may discharge certain obligations to holders of Debt Securities of a series that have not already been delivered to the Trustee for cancellation and that either have become due and payable or are by their terms due and payable within one year (or scheduled for redemption within one year) by irrevocably depositing with the Trustee, in trust, funds in an amount sufficient to pay the entire indebtedness on such Debt Securities for principal (and premium, if any) and interest, if any, and any Additional Amounts with respect thereto, to the date of such deposit (if such Debt Securities have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be. (Section 401) The Indenture provides that, if the provisions of Article Fourteen are made applicable to the Debt Securities of or within any series and any related coupons pursuant to Section 301 thereunder, we may elect either o to defease and be discharged from any and all obligations with respect to such Debt Securities and any related coupons (except for the obligations to pay Additional Amounts, if any, upon the occurrence of certain events of tax, assessment or governmental charge with respect to payments on such Debt Securities and the obligations to register the transfer or exchange of such Debt Securities and any related coupons, to replace temporary or mutilated, destroyed, lost or stolen Debt Securities and any related coupons, to maintain an office or agency in respect of such Debt Securities and any related coupons, and to hold moneys for payment in trust) (defeasance) (Section 1402) or o to be released from its obligations under any covenant specified pursuant to Section 301 with respect to such Debt Securities and any related coupons, and any omission to comply with such obligations shall not constitute a default or an Event of Default with respect to such Debt Securities and any related coupons (covenant defeasance) (Section 1403), in either case upon the irrevocable deposit by us with the Trustee (or other qualifying trustee), in trust, of: o an amount in U.S. dollars; o Government Obligations (as defined below) applicable to such Debt Securities and coupons that through the payment of principal and interest in accordance with their terms will provide money in an amount; or o a combination thereof in an amount, sufficient to pay the principal of (and premium, if any) and interest, if any, on such Debt Securities and any related coupons, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. 11 Such a trust may only be established if, among other things, we have delivered to the Trustee an Opinion of Counsel (as specified in the Indenture) to the effect that the holders of such Debt Securities and any related coupons will not recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred, and such Opinion of Counsel, in the case of defeasance under the first clause above, must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable United States federal income tax law occurring after the date of the Indenture. (Section 1404) Government Obligations means securities which are (1) direct obligations of the United States or (2) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States, which are not callable or redeemable at the option of the issuer thereof. Government Obligations also include a depositary receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depositary receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from the amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depositary receipt. (Section 101) In the event we effect covenant defeasance with respect to any Debt Securities and any related coupons and such Debt Securities and coupons are declared due and payable because of the occurrence of any Event of Default other than the Events of Default described in clause 4 or 6 under "-Events of Default" (Section 501) with respect to any covenant to which there has been defeasance, the amount of Government Obligations and funds on deposit with the Trustee will be sufficient to pay amounts due on such Debt Securities and coupons at the time of their Stated Maturity but may not be sufficient to pay amounts due on such Debt Securities and coupons at the time of the acceleration resulting from such Event of Default. In such case, we would remain liable to make payment of such amounts due at the time of, acceleration. (Section 501) If the Trustee or any Paying Agent is unable to apply any money in accordance with the Indenture by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then our obligations under the Indenture and such Debt Securities and any related coupons shall be revived and reinstated as though no deposit had occurred pursuant to the Indenture, until such time as such Trustee or Paying Agent is permitted to apply all such money in accordance with the Indenture; provided, however, that if we make any payment of principal of (or premium, if any) or interest, if any, on any such Debt Security or any related coupon following the reinstatement of its obligations, we shall be subrogated to the rights of the holders of such Debt Securities and any related coupons to receive such payment from the money held by the Trustee or Paying Agent. The prospectus supplement may further describe the provisions, if any, permitting such defeasance or covenant defeasance, including any modifications to the provisions described above, with respect to the Debt Securities of or within a particular series and any related coupons. Book-Entry Debt Securities Debt Securities of a series may be issued, in whole or in part, in global form that will be deposited with, or on behalf of, a depositary identified in the prospectus supplement. Global securities may be issued in either registered or bearer form and in either temporary or permanent form (a "Global Security"). Unless otherwise provided in the prospectus supplement, Debt Securities that are represented by a Global Security will be issued in denominations of $1,000 and any integral multiple thereof, and will be issued in registered form only, without coupons. Payments of principal of (and premium, if any) and interest, if any, on Debt Securities represented by a Global Security will be made by us to the Trustee, and then by such Trustee to the depositary. 12 We anticipate that any Global Securities will be deposited with, or on behalf of, The Depository Trust Company (the "DTC"), New York, New York, that such Global Securities will be registered in the name of DTC's nominee, and that the following provisions will apply to the depositary arrangements with respect to any such Global Securities. Additional or differing terms of the depositary arrangements will be described in the prospectus supplement. So long as DTC or its nominee is the registered owner of a Global Security, DTC or its nominee, as the case may be, will be considered the sole holder of the Debt Securities represented by such Global Security for all purposes under the Indenture. Except as provided below, owners of beneficial interests in a Global Security will not be entitled to have Debt Securities represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of Debt Securities in certificated form and will not be considered the owners or holders thereof under the Indenture. The laws of some states require that certain purchasers of securities take physical delivery of such securities in certificated form; such laws may limit the transferability of beneficial interests in a Global Security. If (1) DTC is at any time unwilling, unable or ineligible to continue as depositary and a successor depositary is not appointed by us within 90 days following notice to us; (2) we determine, in our sole discretion, not to have any Debt Securities represented by one or more Global Securities, or (3) an Event of Default under the Indenture has occurred and is continuing, then we will issue individual Debt Securities in certificated form in exchange for the relevant Global Securities. In any such instance, an owner of a beneficial interest in a Global Security will be entitled to physical delivery of individual Debt Securities in certificated form of like tenor and rank, equal in principal amount to such beneficial interest and to have such Debt Securities in certificated form registered in its name. Unless otherwise provided in the prospectus supplement, Debt Securities so issued in certificated form will be issued in denominations of $1,000 or any integral multiple thereof and will be issued in registered form only, without coupons. The following is based on information furnished by DTC and applies to the extent that it is the depositary, unless otherwise provided in the prospectus supplement: Registered Owner. The Debt Securities will be issued as fully registered securities in the name of Cede & Co., which is DTC's partnership nominee. The Trustee will deposit the Global Securities with the depositary. The deposit with the depositary and its registration in the name of Cede & Co. will not change the nature of the actual purchaser's ownership interest in the Debt Securities. DTC's Organization. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of that law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC is owned by a number of its direct participants and the New York Stock Exchange, the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Direct participants include securities brokers and dealers, banks, trust companies, clearing corporations and some other organizations who directly participate in DTC. Other entities may access DTC's system by clearing transactions through or maintaining a custodial relationship with direct participants. The rules applicable to DTC and its participants are on file with the SEC. DTC's Activities. DTC holds securities that its participants deposit with it. 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. Doing so eliminates the need for physical movement of securities certificates. Participants' Records. Except as otherwise provided in this prospectus or a prospectus supplement, purchases of Debt Securities must be made by or through a direct participant, which will receive a credit for the Debt Securities on the depositary's records. The purchaser's interest is in turn to be recorded on the participants' records. Actual purchasers will not receive written confirmation from 13 the depositary of their purchase, but they generally receive confirmations along with periodic statements of their holdings from the participants through which they entered into the transaction. Transfers of interest in the Global Securities will be made on the books of the participants on behalf of the actual purchasers. Certificates representing the interest in Debt Securities will not be issued unless the use of Global Securities is suspended. The depositary has no knowledge of the actual purchasers of Global Securities. The depositary's records only reflect the identity of the direct participants, who are responsible for keeping account of their holdings on behalf of their customers. Notices Among the Depositary, Participants and Actual Owners. Notices and other communications by the depositary, its participants and the actual purchasers will be governed by arrangements among them, subject to any legal requirements in effect. Voting Procedures. Neither DTC nor Cede & Co. will give consents for or vote the Global Securities. The depositary generally mails an omnibus proxy to us just after the applicable record date. That proxy assigns Cede & Co.'s voting rights to the direct participants to whose accounts the Debt Securities are credited at that time. Payments. Principal and interest payments made by us will be delivered to the depositary. DTC's practice is to credit direct participants' accounts on the applicable payment date unless it has reason to believe that it will not receive payment on that date. Payments by participants to actual purchasers will be governed by standing instructions and customary practices, as is the case with securities held for customers in bearer form or registered in "street name." Those payments will be the responsibility of that participant and not the depositary, the Trustee or us, subject to any legal requirements in effect at that time. We are responsible for payment of principal, interest and premium, if any, to the Trustee who is responsible for paying it to the depositary. The depositary is responsible for disbursing those payments to direct participants. The participants are responsible for disbursing payments to the actual purchasers. DTC may discontinue providing its services as securities depositary with respect to the Debt Securities at any time by giving reasonable notice to the applicable Paying Agent or us. Under such circumstances, in the event that a successor securities depositary is not appointed, Debt Security certificates are required to be printed and delivered. We may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depositary). In that event, Debt Security certificates will be printed and delivered. The information in this section concerning DTC and DTC's book-entry system has been obtained from sources (including DTC) that we believe to be reliable, but we take no responsibility for the accuracy thereof. Unless stated otherwise in the prospectus supplement, the underwriters or agents with respect to a series of Debt Securities issued as Global Securities will be direct participants in DTC. None of any underwriter or agent, the Trustee, any applicable Paying Agent or us will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial interests in a Global Security, or for maintaining, supervising or reviewing any records relating to such beneficial interests. Resignation and Removal of Trustee The Trustee may resign or be removed with respect to one or more series of Indenture Securities and a successor Trustee may be appointed to act with respect to such series. (Section 608) In the event that two or more persons are acting as Trustee with respect to different series of Indenture Securities under the Indenture, each such Trustee shall be a Trustee of a trust thereunder separate and apart from the trust administered by any other such Trustee (Section 609), and any action described herein to be 14 taken by the Trustee may then be taken by each such Trustee with respect to, and only with respect to, the one or more series of Indenture Securities for which it is Trustee. The Trustee We maintain ordinary banking relationships with First Union National Bank, including credit facilities and lines of credit. First Union National Bank also serves as trustee under the Indenture dated August 1, 1924, with respect to our First and Refunding Mortgage Bonds and under other indentures under which we or our affiliates are the obligor. PLAN OF DISTRIBUTION We will sell the Offered Securities through competitive bidding procedures set forth in our Statement of Terms and Conditions Relating to Bids for New Senior Debt Securities (the "Terms and Conditions") filed as Exhibit 1-1a to this registration statement. Written notice of bidding for any series of Offered Securities will be provided, in accordance with the Terms and Conditions, to prospective bidders or, in the case of a group of bidders, to the representative of the group, who have notified us that they intend to submit a bid and wish to be provided with notice of the time and date of bidding, at least twenty-four hours prior to the time designated for the opening of bids for a new series or issue of Offered Securities. Such notice will advise bidders of: (1) the date and time for receipt of bids, (2) whether bids will be received in writing, by telephone confirmed in writing or either in writing or by telephone confirmed in writing, (3) the principal amount of the particular series or issue of the Offered Securities, (4) the series designation of the Offered Securities, (5) the minimum and maximum percentages of principal amount which may be specified in the bid as the purchase price for the Offered Securities, (6) the term of the Offered Securities, (7) the terms and conditions upon which such Offered Securities may be redeemed, either at our option, pursuant to any sinking fund or otherwise, and (8) such other provisions that we may set to establish the terms and conditions of the Offered Securities and the terms of the bidding therefore. Thereafter, we may also notify such bidders or representative, orally, confirmed in writing, not less than 30 minutes prior to the time designated for receiving bids, of any reduced principal amount of the Offered Securities for which we may elect to receive bids. Upon the acceptance of a bid for a series or issue of the Offered Securities, a Purchase Agreement, substantially in the form of Exhibit 1-1b to this registration statement, will become effective providing for the issuance and sale of such Offered Securities pursuant to a firm commitment underwriting on the terms set forth therein. The prospectus supplement will set forth the terms of the offering of the particular series or issue of Offered Securities to which such prospectus supplement relates, including, as applicable: 1. the name or names of the successful bidders with whom we have entered into the Purchase Agreement; 2. the initial public offering or purchase price of such Offered Securities; 3. any underwriting discounts, commissions and other items constituting underwriters' compensation from us and any other discounts, concessions or commissions allowed or reallowed or paid by any underwriters to other dealers; 4. the net proceeds to us; and 5. the securities exchanges, if any, on which such Offered Securities will be listed. 15 Some of the underwriters, dealers or agents and some of their affiliates who participate in the distribution of Offered Securities may engage in other transactions with, and perform other services for, us and our affiliates in the ordinary course of business. The form of the Purchase Agreement provides that the consummation of the purchase of each series or issue of the Offered Securities will be subject to certain conditions precedent and that we will indemnify each underwriter or purchaser against certain civil liabilities, including liabilities under the Securities Act. LEGAL OPINIONS The validity of the Debt Securities will be passed upon for us by James T. Foran, Esquire, General Corporate Counsel or R. Edwin Selover, Esquire, Senior Vice President and General Counsel, and for any underwriters, dealers or agents by Sidley Austin Brown & Wood LLP, New York, New York. Messrs. Selover and Foran are also employees of our affiliate, PSEG Services Corporation. EXPERTS Our consolidated financial statements and the related consolidated financial statement schedule incorporated in this prospectus by reference from our Annual Report on Form 10-K for the year ended December 31, 2000 have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report which is incorporated herein by reference and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 16 The Information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted Subject to Completion, Preliminary Prospectus Dated February 12, 2002 PROSPECTUS PSE&G CAPITAL TRUST III PSE&G CAPITAL TRUST IV TRUST PREFERRED SECURITIES GUARANTEED TO THE EXTENT THE ISSUER THEREOF HAS AVAILABLE FUNDS AS SET FORTH HEREIN BY PUBLIC SERVICE ELECTRIC AND GAS COMPANY ---------- PSE&G Capital Trust III and PSE&G Capital Trust IV may severally offer, from time to time, their respective trust preferred securities (the "Preferred Securities") representing undivided beneficial interests in the assets of such Issuer. Public Service Electric and Gas Company ("PSE&G") will be the owner of beneficial interests represented by the common securities of each Issuer. Pursuant to a guarantee agreement to be entered into by PSE&G with respect to each series of Preferred Securities, PSE&G will agree to make payments of cash distributions with respect to the Preferred Securities of each Issuer and payments on liquidation or redemption with respect to such Preferred Securities but only to the extent that such Issuer holds funds available therefor and has not made such payments as more fully described herein. 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 $1,000,000,000, less the aggregate initial public offering price of any securities of PSE&G which are sold under a separate prospectus which also constitutes a part of the registration statement of which this prospectus constitutes a part. Certain specific terms of an Issuer's Preferred Securities will be set forth in an accompanying prospectus supplement. 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 a particular 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 each Issuer will also be set forth in the accompanying prospectus supplement. These Securities have not been approved or disapproved by the Securities and Exchange Commission or any state securities commission nor has any of these organizations determined that this prospectus is accurate and complete. Any representation to the contrary is a criminal offense. The date of this prospectus is , 2002. ABOUT THIS PROSPECTUS This prospectus is part of a registration statement that Public Service Electric and Gas Company and the Issuers filed with the Securities and Exchange Commission (the "SEC") utilizing a "shelf" registration process. Under this shelf process, the Issuers may, from time to time, sell any amount of the Preferred Securities described in this prospectus in one or more offerings of one or more series. The aggregate principal amount of Preferred Securities that the Issuers may offer under this prospectus is $1,000,000,000 less the aggregate principal amount of any PSE&G debt securities that are sold under a separate prospectus filed with the same registration statement. Each time the Issuers sell Preferred Securities, they will provide a prospectus supplement that will contain specific information about the terms of that offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with the additional information described under the heading "Where You Can Find More Information". The Issuers believe that they have included or incorporated by reference all information material to investors in this prospectus, but certain details that may be important for specific investment purposes have not been included. To see more detail, you should read the exhibits filed with or incorporated by reference into this registration statement. WHERE YOU CAN FIND MORE INFORMATION PSE&G files annual, quarterly and special reports, proxy statements and other information with the SEC. PSE&G's filings are available to the public over the Internet at the SEC's web site at http://www.sec.gov. You may read and copy any material on file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. You may also inspect these documents at the New York Stock Exchange, Inc. (the "New York Stock Exchange") where certain of PSE&G's securities are listed. The SEC allows the Issuers to "incorporate by reference" information that PSE&G files with the SEC, which means that the Issuers can disclose important information to you by referring you to those documents. The information incorporated by reference or deemed incorporated by reference is an important part of this prospectus, and information that PSE&G files later with the SEC will be deemed to automatically update and supersede this incorporated information. PSE&G incorporates by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 prior to the termination of any particular offering of Preferred Securities. o PSE&G's Annual Report on Form 10-K for the year ended December 31, 2000. o PSE&G's Amended Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2001. o PSE&G's Quarterly Reports on Form 10-Q for the quarters ended June 30, 2001 and September 30, 2001. You can get a free copy of any of the documents incorporated by reference by making an oral or written request directed to: J. Brian Smith Director, Investor Relations PSEG Services Corporation 80 Park Plaza, 6th Floor Newark, NJ 07101 Telephone (973) 430-6564 You should rely only on the information contained or incorporated by reference in this prospectus or in the prospectus supplement. Neither the Issuers nor PSE&G have authorized anyone else to provide you with different or additional information. You should not rely on any other representations. PSE&G's affairs may change after this prospectus and any prospectus supplement is distributed. You should not assume that the information in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front of those documents. You should read all information supplementing this prospectus. 2 FORWARD-LOOKING STATEMENTS This prospectus, any prospectus supplement and the documents incorporated by reference into this prospectus include certain forward-looking statements. The forward-looking statements reflect the Issuers' and PSE&G's expectations, objectives and goals with respect to future events and financial performance and are based on assumptions and estimates that the Issuers and PSE&G believe are reasonable. However, actual results could differ materially from anticipated results. Important factors which may affect the actual results include, but are not limited to, commodity prices, political developments, market and economic conditions, industry competition, the weather, changes in financial markets and changing legislation and regulations. The forward-looking statements contained in this prospectus, any prospectus supplement and the documents incorporated by reference into this prospectus and any prospectus supplement are intended to qualify for the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. THE ISSUERS Each of PSE&G Capital Trust III and PSE&G Capital Trust IV (each, an "Issuer" and jointly, the "Issuers") is a statutory business trust created under Delaware law pursuant to (1) a trust agreement executed by PSE&G, as sponsor for each Issuer, and the Issuer Trustees (as defined below) (except for the Property Trustee with respect to PSE&G Capital Trust IV) and (2) the filing of a certificate of trust with the Delaware Secretary of State. Each trust agreement will be amended and restated in its entirety (each, as so amended and restated, a "Trust Agreement") substantially in the form filed as an exhibit to the Registration Statement of which this prospectus forms a part. Each Trust Agreement will be qualified as an indenture under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). Each 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 beneficial interests represented by common securities (the "Common Securities") of each Issuer will be owned by PSE&G. The Common Securities of an Issuer will rank pari passu, and payments will be made thereon pro rata, with the Preferred Securities of that 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 June 1, 1996 (as amended and supplemented from time to time, the "Indenture") between PSE&G and First Union National Bank, 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. Each Issuer's business and affairs are conducted by three trustees, each appointed by PSE&G as holder of the Common Securities: (1) First Union National Bank (the "Property Trustee"); (2) an affiliate of the Property Trustee that has its principal place of business in the State of Delaware (the "Delaware Trustee"); and (3) one individual trustee who is an employee or officer of or affiliated with PSE&G (the "Administrative Trustee", and collectively 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 an 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 and the Delaware 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 applicable Trust Agreement. Pursuant to the Trust Agreement of each Issuer, PSE&G will pay all fees and expenses related to that Issuer and the offering of its Preferred Securities and will pay, directly or indirectly, all ongoing costs, expenses and liabilities of that Issuer except such Issuer's obligations under its Preferred Securities. 3 The principal place of business of each Issuer is 80 Park Plaza, Newark, New Jersey 07101, and its telephone number is (973) 430-7000. PUBLIC SERVICE ELECTRIC AND GAS COMPANY PSE&G is an operating public utility company engaged principally in the transportation, distribution and sale of electric energy and gas service in New Jersey. It currently supplies electric energy and gas service in areas of New Jersey where approximately 5.5 million people, about 70% of the State's population, reside. Its electric and gas service area is a corridor of approximately 2,600 square miles running diagonally across New Jersey from Bergen County in the northeast to an area below the City of Camden in the southwest. The greater portion of this area is served with both electricity and gas, but some parts are served with electricity only and other parts with gas only. As of September 30, 2001, PSE&G provided service to approximately 2.0 million electric customers and approximately 1.6 million gas customers. This heavily populated, commercialized and industrialized territory encompasses most of New Jersey's largest municipalities, including its six largest cities--Newark, Jersey City, Paterson, Elizabeth, Trenton and Camden--in addition to approximately 300 suburban and rural communities. This service territory contains a diversified mix of commerce and industry, including major facilities of many corporations of national prominence. PSE&G's load requirements are almost evenly split among residential, commercial and industrial customers. PSE&G believes that it has all the franchises (including consents) necessary for its electric and gas distribution operations in the territory it serves. Such franchise rights are not exclusive. It is a New Jersey corporation. Its principal office is located at 80 Park Plaza, Newark, New Jersey 07101; its telephone number is 973-430-7000. You can obtain additional information about PSE&G in the reports and other documents incorporated by reference in this prospectus. See "Where You Can Find More Information." USE OF PROCEEDS The proceeds to be received by the Issuers from the sale of the Preferred Securities offered hereby will be used by the Issuers to purchase Debentures from PSE&G. Unless otherwise specified in the accompanying prospectus supplement, the proceeds from the sale of the Debentures will be added to PSE&G's corporate funds and used by PSE&G for general corporate purposes including the redemption or refunding of its outstanding indebtedness. DESCRIPTION OF THE PREFERRED SECURITIES Pursuant to the terms of each Trust Agreement, the Issuers will issue the Preferred Securities and the Common Securities. The Preferred Securities of an Issuer will represent undivided beneficial interests in the assets of such 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 such Issuer, as well as other benefits as described in the applicable Trust Agreement. Each of the Issuers is a legally separate entity and the assets of one are not available to satisfy the obligations of the other. General The Preferred Securities of each Issuer will rank pari passu, and payments will be made thereon pro rata, with the Common Securities of that 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 related Issuer to purchase a corresponding series of Debentures from PSE&G. The Debentures will be held in trust by the Property Trustee for the benefit of the holders of the related Trust Securities. Each Guarantee Agreement executed by PSE&G for the benefit of the holders of each Issuer's Preferred Securities (each, a "Guarantee") will be subordinate and junior in right of payment to all general liabilities of PSE&G. Pursuant to each Guarantee, PSE&G 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 related Issuer holds funds available therefor and has not made such payments. See "Description of the Guarantee." 4 It is anticipated that the assets of each Issuer available for distribution to the holders of its Preferred Securities will be limited to payments from PSE&G under the corresponding series of Debentures in which such Issuer will invest the proceeds from the issuance and sale of its Trust Securities. See "Description of the Debentures." If PSE&G fails to make a payment on a series of Debentures, the related Issuer will not have sufficient funds to make related payments, including Distributions, on its Preferred Securities. Distributions Distributions on the Preferred Securities of each Issuer will be payable at a rate specified (or at a rate whose method of determination is described) in the accompanying prospectus supplement for such Preferred Securities. Unless otherwise specified in such prospectus supplement, the amount of Distributions payable for any period will be computed on the basis of a 360-day year of twelve 30-day months. Unless otherwise specified in such prospectus supplement, distributions on the Preferred Securities will be cumulative and will accumulate from the date of original issuance and will be payable in arrears on the dates specified in the accompanying prospectus supplement except as otherwise described below. Unless otherwise specified in such prospectus supplement, 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"). Unless otherwise specified in such prospectus supplement, 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 related 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 applicable 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 specified in the applicable prospectus supplement. So long as no Debenture Event of Default has occurred and is continuing with respect to a series of Debentures, PSE&G 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, Distributions on the corresponding Preferred Securities would be deferred by the Issuer thereof 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 Distributions thereon, compounded with the same frequency with which Distributions are payable. During any Extension Period, PSE&G may not declare or pay any dividend on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any shares of PSE&G's capital stock. Prior to the termination of any Extension Period, PSE&G 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, PSE&G may elect to begin a new Extension Period, subject to the above requirements. See "Description of the Debentures -- Option to Extend Interest Payment Period." 5 Redemption Upon the payment of any series of Debentures at maturity or upon redemption, the proceeds from such payment will be applied by the Property Trustee to redeem a like amount of the corresponding Trust Securities of the Issuer thereof 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 a particular series of 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 thereof 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 such 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 of "-- 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 thereof 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 PSE&G 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, PSE&G 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, each 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 corresponding series of Debentures, no payment of any Distribution on, or Redemption Price of, any of such 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 such 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 such Issuer's outstanding Preferred Securities 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 6 Distributions on, or Redemption Price of, all of such Issuer's outstanding Preferred Securities then due and payable. If a Debenture Event of Default has occurred and is continuing with respect to a series of Debentures, the holder of the related Issuer's Common Securities will be deemed to have waived any right to act with respect to such Debenture Event of Default until the effect of such Debenture Event of Default has been cured, waived or otherwise eliminated with respect to the Preferred Securities. 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 PSE&G, 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 Dissolution Pursuant to its Trust Agreement, each Issuer shall be dissolved on the earliest to occur of: (1) the expiration of the term of such Issuer; (2) the bankruptcy, dissolution or liquidation of PSE&G or an acceleration of the maturity of the corresponding series of Debentures held by such Issuer; (3) if provided for in the accompanying prospectus supplement, upon PSE&G's election to dissolve such Issuer and, after satisfaction of liabilities to creditors of such Issuer, cause the distribution of the corresponding series of Debentures to the holders of such Issuer's Trust Securities; (4) the redemption of all of such Issuer's Trust Securities; and (5) an order for the dissolution of such Issuer shall have been entered by a court of competent jurisdiction. PSE&G's election pursuant to clause (3) above shall be made by giving written notice to the Issuer Trustees not less than 30 days prior to the date of distribution of the corresponding series of Debentures and shall be accompanied by an opinion of counsel that such event will not be a taxable event to the holders of the Trust Securities for federal income tax purposes. If a dissolution event occurs as described in clause (1), (2) or (5) above with respect to any Issuer, such Issuer shall be liquidated by the Issuer Trustees as expeditiously as the Issuer Trustees determine to be possible by distributing, after satisfaction of liabilities to creditors of such Issuer as provided by applicable law, to the holders of its Trust Securities a like amount of the corresponding series of 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 such Issuer available for distribution to holders, after satisfaction of liabilities to creditors of such Issuer as provided by applicable law, an amount equal to, in the case of holders of Trust Securities, the aggregate liquidation amount per Trust 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 an Issuer's Preferred Securities can be paid only in part because such Issuer has insufficient assets available to pay in full the aggregate Liquidation Distribution, then the amounts payable by such Issuer on such Preferred Securities shall be paid on a pro rata basis. The holders of such 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 related Issuer under its 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 7 to the holders of the corresponding Trust Securities, the Administrative Trustee and PSE&G, unless such Trust Agreement Event of Default shall have been cured or waived. PSE&G 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 each Trust Agreement. Under each 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 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 a series of Debentures, holders of the corresponding 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 PSE&G's failure to pay principal of or premium, if any, or interest on the Debentures of any series has occurred and is continuing, then each holder of Preferred Securities of the corresponding series may institute a legal proceeding directly against PSE&G for enforcement of any such payment to such holder, all as provided in the Indenture. If a Debenture Event of Default has occurred and is continuing with respect to a series of Debentures, the corresponding Preferred Securities shall have a preference over the related 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 Dissolution" 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 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 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 applicable 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 each Trust Agreement) may at such time be located, the holder of the Common Securities and the Administrative Trustee shall have the power (1) 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 (2) 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 applicable Trust Agreement. If a Trust Agreement Event of Default has occurred and is continuing, 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 8 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 applicable Trust Agreement, provided such corporation or other entity shall be otherwise qualified and eligible. Mergers, Consolidations, Amalgamations or Replacements of the Issuers An 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 or in "-- Liquidation Distribution Upon Dissolution." An Issuer may, at PSE&G's request, with the consent of the Administrative Trustee and without the consent of the holders of its 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 (1) such successor entity either (a) expressly assumes all of the obligations of such Issuer with respect to such Preferred Securities or (b) substitutes for such Preferred Securities other securities substantially similar to such Preferred Securities (the "Successor Securities") so long as the Successor Securities rank the same as such Preferred Securities rank with respect to the payment of Distributions and payments upon redemption and liquidation; (2) PSE&G expressly appoints a trustee of such successor entity possessing the same powers and duties as the Property Trustee with respect to the corresponding series of Debentures; (3) 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 such Preferred Securities are then listed; (4) such merger, consolidation, amalgamation or replacement does not cause such Preferred Securities (including any Successor Securities) to be downgraded by any nationally recognized statistical rating organization; (5) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the holders of such Preferred Securities (including any Successor Securities) in any material respect; (6) such successor entity has a purpose substantially similar to that of such Issuer; (7) prior to such merger, consolidation, amalgamation or replacement, PSE&G has received an opinion of counsel to such 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 such Preferred Securities (including any Successor Securities) in any material respect, and (b) following such merger, consolidation, amalgamation or replacement, neither such 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 (8) PSE&G 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 related Guarantee and Trust Agreement. Notwithstanding the foregoing, an Issuer shall not, except with the consent of all holders of its 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 such 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 Issuers" and "Description of the Guarantee - -- Amendments and Assignment" and as otherwise required by law and the applicable Trust Agreement, the holders of the Preferred Securities will have no voting rights. 9 A Trust Agreement may be amended from time to time by PSE&G and the Issuer Trustees, without the consent of the holders of the corresponding Preferred Securities, (1) to cure any ambiguity, defect or inconsistency or (2) to make any other change that does not adversely affect in any material respect the interests of any holder of such Preferred Securities. A Trust Agreement may be amended by PSE&G and the Issuer Trustees in any other respect, with the consent of the holders of at least a majority in aggregate liquidation amount of such Preferred Securities, except to (1) change the amount, timing or currency or otherwise adversely affect the method of payment of any Distribution or Liquidation Distribution, (2) restrict the right of a holder of any such Preferred Security to institute suit for enforcement of any Distribution, Redemption Price or Liquidation Distribution, (3) change the purpose of the related Issuer, (4) authorize the issuance of any additional beneficial interests in the related Issuer, (5) change the redemption provisions, (6) change the conditions precedent for PSE&G to elect to dissolve the related Issuer and distribute the corresponding series of Debentures to the holders of such Preferred Securities or (7) affect the limited liability of any holder of such Preferred Securities, which amendment requires the consent of each holder of the related Preferred Securities affected thereby. Notwithstanding the foregoing, no amendment may be made without receipt by the related Issuer of an opinion of counsel to the effect that such amendment will not affect such 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. The Issuer Trustees shall not (1) 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, (2) waive any past default under the Indenture, (3) exercise any right to rescind or annul an acceleration of the principal of the corresponding series of Debentures or (4) 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 of the related Issuer; 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 corresponding Preferred Securities. The Issuer Trustees shall not revoke any action previously authorized or approved by a vote of the holders of such 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 thereof being the holder of the corresponding Debentures. In addition to obtaining the consent of the holders of the Preferred Securities of the corresponding series, prior to taking any of the foregoing actions, the Issuer Trustees shall obtain an opinion of counsel to the effect that the related 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. 10 Any required consent of holders of Preferred Securities may be given at a meeting of holders of such Preferred Securities convened for such purpose 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 such Preferred Securities in the manner set forth in the applicable Trust Agreement. Notwithstanding that holders of Preferred Securities are entitled to vote or consent under certain circumstances, any Preferred Securities that are owned by PSE&G, the Issuer Trustees or any affiliate of PSE&G 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 (the "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 each Issuer, representing in the aggregate the total number of such Issuer's Preferred Securities, and will be deposited with DTC. The Issuers anticipate that the following provisions will apply to the depositary arrangements with respect to any such global securities. Additional or differing terms of the depositary arrangements will be described in the prospectus supplement. So long as DTC or its nominee is the registered owner of a global security, DTC or its nominee, as the case may be, will be considered the sole holder of the Preferred Securities represented by such global security for all purposes under the applicable Trust Agreement. Except as provided below, owners of beneficial interests in a global security will not be entitled to have Preferred Securities represented by such global security registered in their names, will not receive or be entitled to receive physical delivery of Preferred Securities in certificated form and will not be considered the owners or holders thereof under the applicable Trust Agreement. The laws of some states require that certain purchasers of securities take physical delivery of such securities in certificated form; such laws may limit the transferability of beneficial interests in a global security. The following is based on information furnished by DTC and applies to the extent that it is the depositary, unless otherwise provided in the prospectus supplement: Registered Owner. The Preferred Securities will be issued as fully registered securities in the name of Cede & Co., which is DTC's partnership nominee. The Trustee will deposit the global securities with the depositary. The deposit with the depositary and its registration in the name of Cede & Co. will not change the nature of the actual purchaser's ownership interest in the Preferred Securities. DTC's Organization. DTC is a limited-purpose trust company organized under the New York Banking Law, a "banking organization" within the meaning of that law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "clearing agency" registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC is owned by a number of its direct participants and the New York Stock Exchange, the American Stock Exchange, Inc. and the National Association of Securities Dealers, Inc. Direct participants include securities brokers and dealers, banks, trust companies, clearing corporations and some other organizations who directly participate in DTC. Other entities may access DTC's system by clearing transactions through or maintaining a custodial relationship with direct participants. The rules applicable to DTC and its participants are on file with the SEC. DTC's Activities. DTC holds securities that its participants deposit with it. 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. Doing so eliminates the need for physical movement of securities certificates. 11 Participants' Records. Except as otherwise provided in this prospectus or a prospectus supplement, purchases of Preferred Securities must be made by or through a direct participant, which will receive a credit for the Preferred Securities on the depositary's records. The purchaser's interest is in turn to be recorded on the participants' records. Actual purchasers will not receive written confirmation from the depositary of their purchase, but they generally receive confirmations along with periodic statements of their holdings from the participants through which they entered into the transaction. Transfers of interest in the global securities will be made on the books of the participants acting on behalf of the actual purchasers. Certificates representing the interest of the actual purchasers in Preferred Securities will not be issued unless the use of global securities is suspended. The depositary has no knowledge of the actual purchasers of the Preferred Securities. The depositary's records only reflect the identity of the direct participants who are responsible for keeping account of their holdings on behalf of their customers. Notices Among the Depositary, Participants and Actual Owners. Notices and other communications by the depositary, its participants and the actual purchasers will be governed by arrangements among them, subject to any legal requirements in effect. Redemption notices shall be sent to Cede & Co. as the registered holder of the Preferred Securities. If less than all of an 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. Voting Procedures. Neither DTC nor Cede & Co. will give consents for or vote the Preferred Securities. The depositary generally mails an omnibus proxy to the Issuer just after the applicable record date. That proxy assigns Cede & Co.'s voting rights to the direct participants to whose accounts the Preferred Securities are credited at that time. Payments. Payments in respect of the Preferred Securities made by us will be delivered to the depositary. DTC's practice is to credit direct participants' accounts on the applicable payment date unless it has reason to believe that it will not receive payment on that date. Payments by participants to actual purchasers will be governed by standing instructions and customary practices, as is the case with securities held for customers in bearer form or registered in "street name." Those payments will be the responsibility of that participant, not the depositary, the Issuer Trustees or us, subject to any legal requirements in effect at that time. We are responsible for payment in respect of the Preferred Securities to the Issuer Trustees who are responsible for payment to the depositary. The depositary is responsible for disbursing those payments to direct participants. The participants are responsible for disbursing payments to the actual purchasers. DTC may discontinue providing its services as securities depositary with respect to any series of Preferred Securities at any time by giving reasonable notice to the Property Trustee and PSE&G. In the event that a successor securities depositary is not obtained, definitive Preferred Security certificates representing such Preferred Securities are required to be printed and delivered. PSE&G, 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, in which case definitive certificates for such Preferred Securities will be issued. After a Trust Agreement Event of Default, the related Issuer will issue definitive certificates for such Issuer's Preferred Securities. 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 Issuers and PSE&G believe to be accurate, but the Issuers and PSE&G assume no responsibility for the accuracy thereof. Neither the Issuers nor PSE&G has any responsibility for the performance by DTC or its 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 such of Preferred Securities will be payable in the manner described in the accompanying prospectus supplement, and the following provisions 12 would apply. The Property Trustee shall keep the registration books for such Preferred Securities at its corporate office. Such Preferred Securities may be transferred or the Preferred Securities certificates representing such Preferred Securities may be exchanged for one or more Preferred Securities certificates 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 or certificates for Preferred Securities to be transferred or for Preferred Securities certificates to be 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 Issuers and the Property Trustee shall be entitled to treat the holders of the related Preferred Securities, as their names appear in the registration books, as the owners of those Preferred Securities for all purposes under the applicable Trust Agreement. Information Concerning the Property Trustee The Property Trustee is the sole Trustee under each 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 each 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 any 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 a Trust Agreement or is unsure of the application of any provision of a Trust Agreement, and the matter is not one on which holders of Preferred Securities are entitled under such Trust Agreement to vote, then the Property Trustee shall take such action as is directed by PSE&G 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. Miscellaneous The Administrative Trustee is authorized and directed to conduct the affairs of and to operate the Issuers in such a way that (1) no Issuer will 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, (2) each Issuer will be classified as a grantor trust for federal income tax purposes and (3) the Debentures held by such Issuers will be treated as PSE&G's indebtedness for federal income tax purposes. In this connection, PSE&G and the Administrative Trustee are authorized to take any action, not inconsistent with applicable law, the applicable certificate of trust of the related Issuer or the applicable Trust Agreement, that PSE&G 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. No Issuer may borrow money, issue debt, execute mortgages or pledge any of its assets. Except as otherwise provided in the Trust Agreements, any action requiring the consent or vote of the Issuer Trustees shall be approved by the Administrative Trustee. 13 Governing Law The Trust Agreements will be governed by and construed in accordance with the laws of the State of Delaware. DESCRIPTION OF THE GUARANTEE Each Guarantee will be executed and delivered by PSE&G concurrently with the issuance by each Issuer of its Preferred Securities for the benefit of the holders from time to time of such Preferred Securities. Each Guarantee will be qualified as an indenture under the Trust Indenture Act and First Union National Bank will act as indenture trustee (the "Guarantee Trustee") under each Guarantee for the purposes of compliance with the Trust Indenture Act. Reference under this caption to Preferred Securities means the Preferred Securities to which a Guarantee relates. The Guarantee Trustee will hold each Guarantee for the benefit of the holders of the related Issuer's Preferred Securities. General PSE&G will irrevocably agree, to the extent set forth in each Guarantee, to pay in full, to the holders of the related 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 such Issuer may have or assert. The following payments, to the extent not paid by an Issuer (the "Guarantee Payments"), will be subject to the applicable Guarantee (without duplication): (1) any accumulated and unpaid Distributions required to be paid on such Preferred Securities, to the extent that such Issuer has funds available therefor, (2) the Redemption Price to the extent that such Issuer has funds available therefor, and (3) upon a voluntary or involuntary dissolution and liquidation of such Issuer (unless the corresponding series of 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 such Issuer remaining available for distribution to holders of Preferred Securities upon a dissolution and liquidation of such Issuer. PSE&G's obligation to make a Guarantee Payment may be satisfied by direct payment by it of the required amounts the holders of the corresponding Preferred Securities or by causing the related Issuer to pay such amounts to such holders. While PSE&G's assets 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 related Issuer does not have funds available therefor as described above, PSE&G has agreed under the applicable Trust Agreement to pay all expenses of such Issuer except such Issuer's obligations under its Preferred Securities. Accordingly, the applicable Guarantee, together with the backup undertakings consisting of PSE&G's obligations under the applicable Trust Agreement, the corresponding series of Debentures and the Indenture, provide for PSE&G's full, irrevocable and unconditional guarantee of the Preferred Securities. No single document executed by PSE&G in connection with the issuance of a series of Preferred Securities will provide for PSE&G's full, irrevocable and unconditional guarantee of the Preferred Securities. It is only the combined operation of PSE&G's obligations under the applicable Guarantee, the applicable Trust Agreement, the corresponding series of Debentures and the Indenture that has the effect of providing a full, irrevocable and unconditional guarantee of an Issuer's obligations under its Preferred Securities. See "Relationship Among the Preferred Securities, the Debentures and the Guarantee." Status of the Guarantee Each Guarantee will constitute PSE&G's unsecured obligation and will rank subordinate and junior in right of payment to all of PSE&G's general liabilities. The Trust Agreements provide that each holder of Preferred Securities by acceptance thereof agrees to the subordination provisions and other terms 14 of the related Guarantee. Each Guarantee will rank pari passu with all other Guarantees issued by PSE&G. Each Guarantee will constitute a guarantee of payment and not of collection (i.e., the guaranteed party may institute a legal proceeding directly against PSE&G to enforce its rights under the Guarantee without first instituting a legal proceeding against any other person or entity). Each 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 corresponding series of Debentures pursuant to the applicable Trust Agreement. Amendments and Assignment Except with respect to any changes which do not materially adversely affect the rights of holders of the corresponding Preferred Securities (in which case no consent of the holders will be required), no Guarantee may be amended without the prior approval of the holders of at least a majority in aggregate liquidation amount of such Preferred Securities (excluding any Preferred Securities held by PSE&G 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 each Guarantee shall bind the successors, assigns, receivers, trustees and representatives of PSE&G and shall inure to the benefit of the holders of the corresponding Preferred Securities. Guarantee Events of Default An event of default under a Guarantee (a "Guarantee Event of Default") will occur upon the failure of PSE&G 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, PSE&G 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 corresponding Preferred Securities (excluding any Preferred Securities held by PSE&G or an affiliate thereof) 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 such Guarantee or to direct the exercise of any trust or power conferred upon the Guarantee Trustee under such Guarantee. Any holder of the corresponding Preferred Securities may institute a legal proceeding directly against PSE&G to enforce such holder's rights under such Guarantee without first instituting a legal proceeding against the related Issuer, the Guarantee Trustee or any other person or entity. PSE&G, as guarantor, will be required to file annually with the Guarantee Trustee a certificate as to whether or not it is in compliance with all the conditions and covenants applicable to it under each 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 each Guarantee and, upon a Guarantee Event of Default, must exercise such of the rights and powers vested in it by the Guarantee and to 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 any Guarantee at the request of any holder of Preferred Securities unless it is offered reasonable indemnity against the costs, expenses and liabilities that might be incurred thereby. Termination of the Guarantee Each Guarantee will terminate and be of no further force and effect upon full payment of the Redemption Price or Liquidation Distribution for the corresponding Preferred Securities or upon distribution of the corresponding series of Debentures to the holders of the corresponding Preferred Securities. Each Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any holder of the corresponding Preferred Securities must restore payment of any sums paid under such Preferred Securities or such Guarantee. 15 Governing Law Each Guarantee will be governed by and construed in accordance with the laws of the State of New Jersey. DESCRIPTION OF THE DEBENTURES General The Debentures will be issued in one or more series under the Indenture. Each series of Debentures will rank pari passu with all other series of Debentures. Each series of 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 of PSE&G's Senior Indebtedness (as defined below). See " -- Subordination". The Indenture does not limit the incurrence or issuance of Senior Indebtedness by PSE&G. The accompanying prospectus supplement will describe the following terms of any series of Debentures: (1) the title of such series of Debentures; (2) the aggregate principal amount of such series of Debentures; (3) the date or dates on which the principal of such series of Debentures shall be payable or the method of determination thereof; (4) the rate or rates, if any, at which such series of 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; (5) any terms regarding redemption; (6) the maximum Extension Period for such series of Debentures; and (7) any other terms of such series of Debentures not inconsistent with the provisions of the Indenture. Certain federal income tax consequences and special considerations relating to the applicable series of Debentures will be described in the accompanying prospectus supplement. Option to Extend Interest Payment Period Under the Indenture, PSE&G shall have the right at any time and from time to time, so long as no Debenture Event of Default has occurred and is continuing with respect to such series of Debentures, to defer payments of interest by extending the interest payment period for such series of Debentures for up to the maximum Extension Period provided for such series of Debentures, provided that no Extension Period shall extend beyond the maturity or any redemption date of such series of Debentures. At the end of the Extension Period, PSE&G 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, PSE&G may not declare or pay any dividend on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any shares of its capital stock. Prior to the termination of any Extension Period, PSE&G 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 such series of Debentures or extend beyond the maturity or any redemption date of such series of Debentures. Upon the termination of any Extension Period and the payment of all amounts then due, PSE&G may elect to begin a new Extension Period, subject to the above requirements. PSE&G shall be required to give notice to the Debenture Trustee and cause the Debenture Trustee to give notice to the holders of the applicable series of Debentures of its election to begin an Extension Period, or any shortening or extension thereof, at least one Business Day prior to the date the notice of the record or payment date of the related Distribution on the corresponding series of Preferred Securities or payment of interest on such Debentures is required to be given to any national securities exchange on which such Debentures or such Preferred Securities are then listed or other applicable self-regulatory organization but in any event not less than two Business Days prior to such record date. Subordination All payments by PSE&G in respect of the Debentures shall be subordinated to the prior payment in full of all amounts payable on Senior Indebtedness. The term "Senior Indebtedness" means: (1) the principal of and premium, if any, in respect of (a) indebtedness of PSE&G for money borrowed and (b) indebtedness evidenced by securities, debentures, bonds or other similar instruments issued by PSE&G; 16 (2) all capital lease obligations of PSE&G; (3) all obligations of PSE&G issued or assumed as the deferred purchase price of property, all conditional sale obligations of PSE&G and all obligations of PSE&G under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (4) certain obligations of PSE&G for the reimbursement of any obligation, any letter of credit, banker's acceptance, security purchase facility or similar credit transaction entered into in the ordinary course of business of PSE&G; (5) all obligations of the type referred to in clauses (1) through (4) 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, PSE&G is responsible or liable as obligor, guarantor or otherwise (other than each Guarantee and obligations ranking pari passu with such Guarantee); and (6) certain obligations of the type referred to in clauses (1) through (5) of other persons secured by any lien on any property or asset of PSE&G (whether or not such obligation is assumed by PSE&G), except for any such indebtedness that is by its terms subordinated to or pari passu with the Debentures and for indebtedness between or among PSE&G and its affiliates. Upon any payment or distribution of PSE&G's assets or securities, upon any dissolution or winding-up or total or partial liquidation or reorganization of PSE&G, 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 be paid in full before the holders of the Debentures or the Debenture Trustee on behalf of such holders shall be entitled to receive from PSE&G 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 PSE&G 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 (1) a default in the payment of all or any portion of any Senior Indebtedness or (2) 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 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 PSE&G, provided that all Senior Indebtedness shall be paid before holders of the Debentures are entitled to receive any payment from PSE&G 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 PSE&G made on such Senior Indebtedness until the Debentures shall be paid in full. Certain PSE&G Covenants PSE&G 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 its capital stock (1) during an Extension Period, (2) if there has occurred and is continuing any event that is, or, with the giving of notice or the 17 lapse of time or both would constitute, a Debenture Event of Default or (3) if it is in default with respect to its payment or other obligations under any 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 at least a majority of the aggregate principal amount of the corresponding series of Debentures or, if such Debentures are held by an Issuer, the approval of at least a majority in aggregate liquidation amount of the Preferred Securities of such 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, PSE&G 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: (1) to cure any ambiguity, defect or inconsistency; (2) 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 PSE&G; (3) to provide for uncertificated Debentures in addition to or in place of certificated Debentures; (4) to make any other change that does not in PSE&G's reasonable judgment adversely affect the rights of any holder of the Debentures; (5) to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act; or (6) to set forth the terms and conditions, which shall not be inconsistent with the Indenture, of any series of Debentures and the form of Debentures of such series. In addition, PSE&G and the Debenture Trustee may modify the Indenture or any supplemental indenture or waive future compliance by PSE&G 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 of each series affected thereby, provided that no such modification, without the consent of each holder of such Debentures, may (1) reduce the principal amount of such Debentures, (2) reduce the principal amount of outstanding Debentures of any series the holders of which must consent to an amendment of the Indenture or a waiver, (3) change the stated maturity of the principal of, or interest on, or the rate of interest on, such Debentures, (4) change the redemption provisions applicable to such Debentures adversely to the holders thereof, (5) impair the right to institute suit for the enforcement of any payment with respect to such Debentures, (6) change the currency in which payments with respect to such Debentures are to be made, or (7) change the subordination provisions applicable to such Debentures adversely to the holders thereof, provided that if such Debentures are held by an Issuer, no modification shall be made that adversely affects the holders of the Preferred Securities of such 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 such Issuer or the holder of each such Preferred Security, as applicable. 18 Debenture Events of Default The following are Debenture Events of Default with respect to the Debentures of any series: (1) default for 30 days in payment of any interest on any Debenture of that series (other than the payment of interest during an Extension Period); (2) default in payment of principal of or premium, if any, on any Debenture of that series when the same becomes due and payable; (3) default for 60 days after receipt by PSE&G of a Notice of Default in the performance of or failure to comply with any other covenant or agreement for such series of Debentures or in the Indenture or any supplemental indenture under which such series of Debentures may have been issued or (4) certain events of bankruptcy, insolvency or reorganization of PSE&G. In case a Debenture Event of Default has occurred and is continuing, other than one relating to bankruptcy, insolvency or reorganization of PSE&G, in which case the principal of, premium, if any, and any interest on, all of the Debentures of the applicable series shall become immediately due and payable, the Debenture Trustee or the holders of at least 25% in aggregate principal amount of the Debentures of that series may declare the principal, together with interest accrued thereon, of all the Debentures of that series 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 series of Debentures fail to declare the principal of such series of Debentures to be immediately due and payable, then, if such Debentures are held by an Issuer, the holders of at least 25% in aggregate liquidation amount of the corresponding Preferred Securities shall have such right by written notice to PSE&G and the Debenture Trustee. The holders of at least a majority in aggregate principal amount of such series of Debentures, by notice to the Debenture Trustee, may rescind an acceleration, provided that if the principal of such Debentures has been declared due and payable by the holders of the corresponding 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 corresponding Preferred Securities. PSE&G will be required to furnish to the Debenture Trustee annually a statement as to the compliance by PSE&G with all conditions and covenants under the Indenture and the Debentures and as to any Debenture Event of Default. Consolidation, Merger, Sale or Conveyance PSE&G 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 (1) 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 PSE&G's obligations under the Debentures, the Guarantees and the Indenture; (2) 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 (3) certain other conditions prescribed in the Indenture are met. Defeasance and Discharge Under the terms of the Indenture, PSE&G will be discharged from any and all obligations in respect of the Debentures of any series if PSE&G deposits with the Debenture Trustee, in trust, (1) cash and/or (2) 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 of such series on the dates such payments are due in accordance with the terms of such Debentures. 19 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 series of Debentures or the holders of the corresponding Preferred Securities, unless such holders shall have offered to the Debenture Trustee reasonable security and indemnity. Subject to such provision for indemnification, the holders of at least a majority in aggregate principal amount of any series of Debentures affected or the holders of at least a majority in aggregate liquidation amount of the corresponding Preferred Securities (with each such series voting as a class), 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 such series of 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 PSE&G, 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 (1) it is a creditor of PSE&G or (2) there is a default under the indenture(s) referred to below. First Union National Bank is the Trustee under PSE&G's Indenture dated August 1, 1924, with respect to PSE&G's First and Refunding Mortgage Bonds and on various indentures relating to PSE&G. PSE&G, its subsidiaries and its affiliates maintain other normal banking relationships, including credit facilities and lines of credit, with First Union National Bank. Governing Law The Indenture will be governed by and construed in accordance with the laws of the State of New Jersey. RELATIONSHIP AMONG THE PREFERRED SECURITIES, THE DEBENTURES AND THE GUARANTEE Payments of Distributions and redemption and liquidation payments due on a series of Preferred Securities (to the extent the Issuer thereof has funds available for such payments) will be guaranteed by PSE&G as and to the extent set forth under "Description of the Guarantee". No single document executed by PSE&G in connection with the issuance of a series of Preferred Securities will provide for PSE&G's full, irrevocable and unconditional guarantee of the Preferred Securities. It is only the combined operation of PSE&G's obligations under the applicable Guarantee, the applicable Trust Agreement, the corresponding series of Debentures and the Indenture that has the effect of providing a full, irrevocable and unconditional guarantee of an Issuer's obligations under its Preferred Securities. A holder of any corresponding Preferred Security may institute a legal proceeding directly against PSE&G to enforce its rights under the applicable Trust Agreement, Indenture or Guarantee without first instituting a legal proceeding against the Property Trustee, Debenture Trustee or Guarantee Trustee, the related Issuer or any other person or entity if the applicable Trustee fails to enforce that particular holder's rights thereunder. As long as PSE&G makes payments of interest and other payments when due on a series of Debentures, such payments will be sufficient to cover the payment of Distributions and redemption and Liquidation Distributions due on the corresponding Preferred Securities, primarily because (1) the aggregate principal amount of such series of Debentures will be equal to the sum of the aggregate liquidation amount of the corresponding Preferred Securities and Common Securities, (2) the interest rate and interest and other payment dates on such series of Debentures will match the Distribution rate and Distribution and other payment dates for the corresponding Preferred Securities, 20 (3) the applicable Trust Agreement provides that PSE&G shall pay for all and any costs, expenses and liabilities of the Issuer of such Preferred Securities except such Issuer's obligations under its Preferred Securities and Common Securities, and (4) the applicable Trust Agreements provide that no Issuer will engage in any activity that is not consistent with the limited purposes of such Issuer. If and to the extent that PSE&G does not make payments on any series of Debentures, such 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 thereof) 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 such Issuer has funds available for the payment of such Distributions. Upon any voluntary or involuntary dissolution or liquidation of any Issuer not involving a distribution of any series of Debentures, after satisfaction of liabilities to creditors of such Issuer, the holders of the corresponding Preferred Securities will be entitled to receive, out of assets held by such Issuer, the Liquidation Distribution in cash. See "Description of the Preferred Securities -- Liquidation Distribution Upon Dissolution". Upon any voluntary liquidation or bankruptcy of PSE&G, each Issuer, as holder of the Debentures, would be a creditor of PSE&G, 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 PSE&G receive payments or distributions. Since PSE&G will be the guarantor under each Guarantee and has agreed to pay for all costs, expenses and liabilities of each Issuer (other than an Issuer's obligations to the holders of its Preferred Securities and Common Securities), the positions of a holder of such Preferred Securities and a holder of such Debentures relative to other creditors and to stockholders of PSE&G in the event of liquidation or bankruptcy of PSE&G 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 series of Debentures would constitute a Debenture Event of Default. UNITED STATES TAXATION General This section is a summary of certain Federal income tax considerations that may be relevant to prospective purchasers of the Preferred Securities and represents the opinion of Ballard Spahr Andrews & Ingersoll, LLP, special tax counsel to PSE&G and the Issuers, 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 is limited to the tax consequences to the initial owners of the Preferred Securities who are treated as having purchased the related Debentures at their "issue price" within the meaning of Section 1273 of the Code and does not address the tax consequences to subsequent purchasers of the Preferred Securities. This summary does not purport to be a complete analysis of all of the potential Federal income tax consequences relating to the purchase of the Preferred Securities, nor does it describe any Federal estate and gift tax consequences or any state, local or foreign tax consequences. There can be no assurance that the Internal Revenue Service (the "IRS") will take a similar view of the 21 tax consequences described herein. This summary deals only with Preferred Securities held as capital assets. Furthermore, this summary does not address all aspects of taxation that might be relevant to particular purchasers in light of their individual circumstances (for example, the alternative minimum tax) or special rules applicable to certain categories of purchasers, such as Foreign Holders (as defined below), dealers in securities or currencies, life insurance companies, regulated investment companies, persons holding Preferred Securities as part of a hedge, straddle, conversion, constructive ownership or constructive sale transaction or other risk reduction transaction, 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 OR OTHER LAWS. Classification of the Debentures as Indebtedness Ballard Spahr Andrews & Ingersoll, LLP has advised PSE&G that, in its opinion, the Debentures will be classified as indebtedness for Federal income tax purposes. PSE&G will agree, and each owner of the Preferred Securities will agree by its purchase of the Preferred Securities, to treat the related Debentures held by the Issuer as indebtedness for Federal, state and local income and franchise tax purposes. However, this opinion is not binding on the IRS or any court. The discussion below assumes that the Debentures are classified as indebtedness for Federal income tax purposes. Income from Preferred Securities In connection with the issuance of the Debentures, Ballard Spahr Andrews & Ingersoll LLP will render its opinion to the effect that, under then current law and assuming full compliance with the terms of the Trust Agreement, the applicable Issuer will be classified as a grantor trust and not as an association taxable as a corporation or partnership for Federal income tax purposes. As a consequence, each owner of Preferred Securities will be considered the owner of a pro rata portion of the related series of Debentures held by the Issuer. As a further consequence, each owner of Preferred Securities will be required to include in gross income its pro rata share of the income accrued on the Debentures held by the Issuer. Such income should not exceed the 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 available to C corporations. Potential Extension of Interest Payment Period and Original Issue Discount Under the Debenture Indenture, PSE&G has the right at any time from time to time to extend the interest payment periods on a series of Debentures for up to 20 consecutive quarters but not beyond the maturity or any redemption date of such Debentures. PSE&G's right to defer payments of interest by extending the interest payment periods will cause the Debentures to be treated as issued with "original issue discount" for Federal income tax purposes. Accordingly, an owner of a related 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 whether the owner receives cash during the period to which such income is attributable and/or the method of tax accounting the owner normally uses. 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. The tax basis of a series of 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 that series of Preferred Security. 22 Disposition of the Preferred Securities Gain or loss will be recognized on a sale, including a redemption for cash, of Preferred Securities in an amount equal to the difference between the amount realized and the tax basis of an owner of Preferred Securities in its pro rata share of the related Debentures represented by such series of Preferred Securities. Gain or loss recognized by an owner of Preferred Securities on the sale or exchange of those Preferred Securities held for more than one year generally will be taxable as long-term capital gain or loss. Foreign Holders For purposes of this discussion, a "Foreign Holder" is any holder or beneficial owner who or which is (1) a nonresident alien individual or (2) 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 series of Preferred Security. Under present Federal income tax law, subject to the discussion below with respect to backup withholding: (1) payments by the Issuer or any of its paying agents to any Foreign Holder will not be subject to Federal income or 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 PSE&G, (b) the owner of the Preferred Securities is not a controlled foreign corporation that is related to PSE&G through stock ownership or a bank receiving interest described in Section 881(c)(3)(A) of the Code, and (c) either (i) the owner of the Preferred Securities certifies to the applicable Issuer or its agent, under penalties of perjury, that it is a Foreign Holder and provides its name and address or (ii) 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 (2) a Foreign 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 calendar year of sale, such person is subject to United States Federal income tax under certain rules applicable to certain United States expatriates, or such income is effectively connected with a United States trade or business. Backup Withholding and Information Reporting In general, information reporting requirements will apply to payments to non-corporate United States holders of interest and the proceeds of the sale of the Preferred Securities within the United States and "backup withholding" will apply to such payments if the seller fails to provide a correct taxpayer identification number or is otherwise subject to backup withholding. Payments of the proceeds from the sale by a Foreign 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 the 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 reporting and backup withholding. 23 Receipt of Debentures Upon Liquidation of an Issuer PSE&G may cause an Issuer to be terminated and cause the related series of Debentures to be distributed to the holders of Preferred Securities in liquidation of such holders' interests in the Issuer, provided that PSE&G has delivered to the Issuer Trustees an opinion of nationally recognized tax counsel (which may be regular tax counsel to PSE&G or an affiliate but not an employee of PSE&G and which must be acceptable to the Property Trustee) 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 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 its aggregate tax basis in the owner's Preferred Securities. An owner's holding period for such Debentures would include the period during which it had a beneficial interest in the Preferred Securities. PLAN OF DISTRIBUTION The Issuers may sell the Preferred Securities to or through underwriters, dealers, or agents or directly to one or more other purchasers. The prospectus supplement will set forth the terms of the offering of the particular series or issue of Preferred Securities to which such prospectus supplement relates, including, as applicable: o the name or names of any underwriters or agents with whom we have entered into arrangements with respect to the sale of such Preferred Securities; o the initial public offering or purchase price of such Preferred Securities; o any underwriting discounts, commissions and other items constituting underwriters' compensation from the Issuers and any other discounts, concessions or commissions allowed or reallowed or paid by any underwriters to other dealers; o any commissions paid to any agents; o the net proceeds to the Issuers; and o the securities exchanges, if any, on which such Preferred Securities will be listed. Any underwriting compensation paid by PSE&G on behalf of the Issuers 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 PSE&G and the Issuers, to indemnification against and contribution toward certain civil liabilities, including liabilities under the Securities Act, and to reimbursement by PSE&G for certain expenses. Underwriters and dealers and their affiliates may engage in transactions with, or perform services for, the Issuers and PSE&G and/or their affiliates in the ordinary course of business. The Preferred Securities of each Issuer will be a new issue of securities and will have no established trading market. Any underwriters to whom Preferred Securities are sold by the Issuers 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. 24 LEGAL MATTERS Certain legal matters will be passed upon for PSE&G by James T. Foran, Esquire, General Corporate Counsel of PSE&G or R. Edwin Selover, Esquire, Vice President and General Counsel of PSE&G, by Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania, special tax counsel to PSE&G and the Issuers, and by Richards, Layton & Finger, P.A., special Delaware counsel to PSE&G and the Issuers, and for any underwriters, dealers or agents by Sidley Austin Brown & Wood LLP, New York, New York, who may rely on the opinion of Mr. Selover or Mr. Foran as to matters of New Jersey law. Mr. Selover or Mr. Foran and Sidley Austin Brown & Wood LLP may rely on the opinion of Ballard Spahr Andrews & Ingersoll, LLP as to matters of Pennsylvania law and on the opinion of Richards, Layton & Finger, P.A. as to matters of Delaware law. Messrs. Selover and Foran are also employees of PSE&G's affiliate, PSEG Services Corporation. EXPERTS PSE&G's consolidated financial statements and the related consolidated financial statement schedule, incorporated in this prospectus by reference from its Annual Report on Form 10-K for the year ended December 31, 2000, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report which is incorporated herein by reference and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 25 PART II. INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The following table sets forth the expenses in connection with the issuance and distribution of the securities being registered, other than underwriting discounts and commissions. All of the amounts shown are estimates, except the SEC registration fee. SEC registration fee ........................................ $ 227,767 Printing and engraving ...................................... 318,000 Legal fees and expenses ..................................... 500,000 Fees of accountants ......................................... 95,000 Fees of trustees and transfer agents ........................ 125,000 Blue sky fees and expenses .................................. 5,000 NYSE Listing Fee ............................................ 212,000 Rating agency fees .......................................... 555,000 Miscellaneous ............................................... 12,233 ---------- Total ....................................................... $2,050,000 ========== Item 15. Indemnification of Directors and Officers. Under Section 14A:3-5 of the New Jersey Business Corporation Act, PSE&G (1) has power to indemnify each of its directors and officers (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 PSE&G, if (a) such director or officer acted in good faith and in a manner he reasonably believed to be in or not opposed to PSE&G's best interest, 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 of its directors and officers against expenses in connection with any proceeding by or in the right of PSE&G 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 interests of PSE&G; 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 PSE&G, unless and only to the extent that the court determines that the director or officer is fairly 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 PSE&G 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 proceeding 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 PSE&G that the director or officer has not met the applicable standard of conduct. Indemnification under the statute does not exclude any other rights to which a director or officer may be entitled under a certificate of incorporation, by-law, or otherwise. II-1 Article 8, Section 1 of PSE&G's Certificate of Amendment of Certificate of Incorporation provides as follows: 1. Indemnification: The corporation shall indemnify to the full extent from time to time permitted by law any person made, or threatened to be made, a party to 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) by reason of the fact that he is or was a director, officer or employee of the corporation or serves or served any PSE&G subsidiary as a director, officer or employee at the request of the corporation. Such right of indemnification shall inure to the benefit of the legal representative of any such person. Article 8, Section 2 of PSE&G's Certificate of Amendment of Certificate of Incorporation provides as follows: 2. Limitation of Liability: To the full extent from time to time permitted by law, directors and officers of the corporation shall not be personally liable to the corporation or its shareholders for damages for breach of any duty owed to the corporation or its shareholders. No amendment or repeal of this provision shall adversely affect any right or protection of a director or officer of the corporation existing at the time of such amendment or repeal. Each form of Underwriting Agreement between PSE&G and the Underwriters contains a provision under which each Underwriter agrees to indemnify the directors of PSE&G and each of its officers who signed the registration statement against certain liabilities which might arise under the Securities Act of 1933 (the "1933 Act") from information furnished to PSE&G in writing by or on behalf of such Underwriter. The directors and officers of PSE&G are insured under policies of insurance, within the limits and subject to the limitations of the policies, against claims made against them for acts in the discharge of their duties, and PSE&G is insured to the extent that it is required or permitted by law to indemnify the directors and officers for such loss. The premiums for such insurance are paid by PSE&G. Item 16. List of Exhibits. Exhibit - ------- 1-1a Form of Terms and Conditions Relating to Bids for Senior Debt Securities. 1-1b Form of Bid with Form of Purchase Agreement Attached. 1-2 Form of Underwriting Agreement for Trust Preferred Securities. 3-1 Certificate of Trust for PSE&G Capital Trust III.* 3-2 Certificate of Trust for PSE&G Capital Trust IV.* 3-3 Trust Agreement for PSE&G Capital Trust III.* 3-4 Trust Agreement for PSE&G Capital Trust IV.* 3-5 Form of Amended and Restated Trust Agreement for PSE&G Capital Trust III.* 3-6 Form of Amended and Restated Trust Agreement for PSE&G Capital Trust IV. 4-1 Form of Preferred Security Certificate for PSE&G Capital Trust III (included in Exhibit 3-5). 4-2 Form of Preferred Security Certificate for PSE&G Capital Trust IV (included in Exhibit 3-6). 4-3 Form of Deferrable Interest Subordinated Debenture (included in Exhibit 4-5). 4-4 Deferrable Interest Subordinated Debenture Indenture.* 4-5 Form of Deferrable Interest Subordinated Debenture Supplemental Indenture.* 4-6 Indenture dated as of December 1, 2000 between PSE&G and First Union National Bank, as Trustee, providing for Senior Debt Securities.* 4-7 Form of Senior Debt Security.* 4-8 Form of Guarantee Agreement for PSE&G Capital Trust III.* 4-9 Form of Guarantee Agreement for PSE&G Capital Trust IV. 5-1 Opinion of James T. Foran, Esquire relating to the validity of the Debt Securities, the Debentures and the Guarantees, including consent.* II-2 5-2 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel, relating to the validity of the Preferred Securities of PSE&G Capital Trust III, including consent.* 5-3 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel, relating to the validity of the Preferred Securities of PSE&G Capital Trust IV, including consent.* 8 Opinion of Ballard Spahr Andrews & Ingersoll, LLP, special tax counsel, as to tax matters, including consent.* 12-1 Computations of Ratios of Earnings to Fixed Charges (incorporated by reference to Exhibit 12(a) to PSE&G's Annual Report on Form 10-K for the year ended December 31, 2000). 12-2 Computations of Ratios of Earnings to Fixed Charges plus Preferred Stock Dividend Requirements (incorporated by reference to Exhibit 12(b) to PSE&G's Annual Report on Form 10-K for the year ended December 31, 2000). 23-1 Consent of Independent Auditors. 23-2 Consent of James T. Foran, Esquire (included in Exhibit 5-1). 23-3 Consents of Richards, Layton & Finger, P.A. (included in Exhibits 5-2 and 5-3). 23-4 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 8). 24 Power of Attorney.* 25-1 Statement of Eligibility under the Trust Indenture Act of 1939 of First Union National Bank, as Indenture Trustee under the Senior Indenture for Public Service Electric and Gas Company.* 25-2 Statement of Eligibility under the Trust Indenture Act of 1939 of First Union National Bank, as Indenture Trustee under the Deferrable Interest Subordinated Debenture Indenture and Deferrable Interest Subordinated Debenture Supplemental Indenture.* 25-3 Statement of Eligibility under the Trust Indenture Act of 1939 of First Union National Bank, as Property Trustee under the Amended and Restated Trust Agreement for PSE&G Capital Trust III.* 25-4 Statement of Eligibility under the Trust Indenture Act of 1939 of First Union National Bank, as Property Trustee under the Amended and Restated Trust Agreement for PSE&G Capital Trust IV.* 25-5 Statement of Eligibility under the Trust Indenture Act of 1939 of First Union National Bank, as Guarantee Trustee under the Guarantee Agreement for PSE&G Capital Trust III.* 25-6 Statement of Eligibility under the Trust Indenture Act of 1939 of First Union National Bank, as Guarantee Trustee under the Guarantee Agreement for PSE&G Capital Trust IV.* - ---------- * Previously filed. Item 17. Undertakings. The undersigned registrants hereby undertake: (a)(1)To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; (iii) 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; PROVIDED, HOWEVER, that paragraphs (a)(1) (i) and (a)(1) (ii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrants pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. II-3 (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such 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. (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) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrants' 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 thereby, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the provisions referred to in Item 15 of this registration statement, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the 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 question whether such indemnification by them is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (d) The registrants hereby undertake 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. (e) The registrants hereby undertake that: (1) For purposes of determining any 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 registrant 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-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrants, PSE&G Capital Trust III and PSE&G Capital Trust IV each certifies that it has reasonable grounds to believe it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to Registration Statement No. 333-76020 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newark, State of New Jersey, on this 12th day of February, 2002. PSE&G CAPITAL TRUST III BY: PUBLIC SERVICE ELECTRIC AND GAS COMPANY, AS DEPOSITOR BY: /s/ ROBERT E. BUSCH ------------------------------------- Robert E. Busch PSE&G CAPITAL TRUST IV BY: PUBLIC SERVICE ELECTRIC AND GAS COMPANY, AS DEPOSITOR BY: /s/ ROBERT E. BUSCH ------------------------------------- Robert E. Busch II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant, Public Service Electric and Gas Company, certifies that it has reasonable grounds to believe it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to Registration Statement No. 333-76020 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newark, State of New Jersey, on this 12th day of February, 2002. Public Service Electric and Gas Company BY: /s/ ROBERT E. BUSCH ------------------------------------- Robert E. Busch Senior Vice President Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to Registration Statement No. 333-76020 has been signed by Robert E. Busch in the capacity indicated on February 12, 2002. Signature Capacity --------- -------- /s/ Robert E. Busch Principal Financial Officer In addition, pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to Registration Statement No. 333-76020 has been signed by Robert E. Busch, Attorney-in-Fact on behalf of the following persons in the capacities indicated on February 12, 2002. Name Capacity ---- -------- E. James Ferland Chief Executive Officer and Director Patricia A. Rado Chief Accounting Officer Albert R. Gamper, Jr. Director Conrad K. Harper Director Marilyn M. Pfaltz Director BY: /s/ ROBERT E. BUSCH -------------------------------------- Robert E. Busch Attorney-in-Fact II-6 EXHIBIT INDEX Exhibit - ------- 1-1a Form of Terms and Conditions Relating to Bids for Senior Debt Securities. 1-1b Form of Bid with Form of Purchase Agreement Attached. 1-2 Form of Underwriting Agreement for Trust Preferred Securities. 3-1 Certificate of Trust for PSE&G Capital Trust III.* 3-2 Certificate of Trust for PSE&G Capital Trust IV.* 3-3 Trust Agreement for PSE&G Capital Trust III.* 3-4 Trust Agreement for PSE&G Capital Trust IV.* 3-5 Form of Amended and Restated Trust Agreement for PSE&G Capital Trust III.* 3-6 Form of Amended and Restated Trust Agreement for PSE&G Capital Trust IV. 4-1 Form of Preferred Security Certificate for PSE&G Capital Trust III (included in Exhibit 3-5). 4-2 Form of Preferred Security Certificate for PSE&G Capital Trust IV (included in Exhibit 3-6). 4-3 Form of Deferrable Interest Subordinated Debenture (included in Exhibit 4-5). 4-4 Deferrable Interest Subordinated Debenture Indenture.* 4-5 Form of Deferrable Interest Subordinated Debenture Supplemental Indenture.* 4-6 Indenture dated as of December 1, 2000 between Public Service Electric and Gas Company and First Union National Bank, as Trustee, providing for Senior Debt Securities.* 4-7 Form of Senior Debt Security.* 4-8 Form of Guarantee Agreement for PSE&G Capital Trust III.* 4-9 Form of Guarantee Agreement for PSE&G Capital Trust IV. 5-1 Opinion of James T. Foran, Esquire relating to the validity of the Debt Securities, the Debentures and the Guarantees, including consent.* 5-2 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel, relating to the validity of the Preferred Securities of PSE&G Capital Trust III, including consent.* 5-3 Opinion of Richards, Layton & Finger, P.A., special Delaware counsel, relating to the validity of the Preferred Securities of PSE&G Capital Trust IV, including consent.* 8 Opinion of Ballard Spahr Andrews & Ingersoll, LLP, special tax counsel, as to tax matters, including consent.* 12-1 Computations of Ratios of Earnings to Fixed Charges (incorporated by reference to Exhibit 12(a) to PSE&G's Annual Report on Form 10-K for the year ended December 31, 2000). 12-2 Computations of Ratios of Earnings to Fixed Charges plus Preferred Stock Dividend Requirements (incorporated by reference to Exhibit 12(b) to PSE&G's Annual Report on Form 10-K for the year ended December 31, 2000). 23-1 Consent of Independent Auditors. 23-2 Consent of James T. Foran, Esquire (included in Exhibit 5-1). 23-3 Consents of Richards, Layton & Finger, P.A. (included in Exhibits 5-2 and 5-3). 23-4 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 8). 24 Power of Attorney.* 25-1 Statement of Eligibility under the Trust Indenture Act of 1939 of First Union National Bank, as Indenture Trustee under the Senior Indenture for Public Service Electric and Gas Company.* 25-2 Statement of Eligibility under the Trust Indenture Act of 1939 of First Union National Bank, as Indenture Trustee under the Deferrable Interest Subordinated Debenture Indenture and Deferrable Interest Subordinated Debenture Supplemental Indenture.* 25-3 Statement of Eligibility under the Trust Indenture Act of 1939 of First Union National Bank, as Property Trustee under the Amended and Restated Trust Agreement for PSE&G Capital Trust III.* 25-4 Statement of Eligibility under the Trust Indenture Act of 1939 of First Union National Bank, as Property Trustee under the Amended and Restated Trust Agreement for PSE&G Capital Trust IV.* 25-5 Statement of Eligibility under the Trust Indenture Act of 1939 of First Union National Bank, as Guarantee Trustee under the Guarantee Agreement for PSE&G Capital Trust III.* 25-6 Statement of Eligibility under the Trust Indenture Act of 1939 of First Union National Bank, as Guarantee Trustee under the Guarantee Agreement for PSE&G Capital Trust IV.* - ---------- * Previously filed. EX-1.1(A) 3 e1300911a.txt FORM OF TERMS AND CONDITIONS RELATING TO BIDS Exhibit 1.1(a) PUBLIC SERVICE ELECTRIC AND GAS COMPANY Senior Debt Securities ---------- Terms and Conditions Relating to Bids Bid with Form of Purchase Agreement Attached Public Service Electric and Gas Company (the "Company") expects to issue from time to time in several series not more than $1,000,000,000 principal amount of its Senior Debt Securities. The Company will invite competitive bids, in accordance with the notice provisions and the other terms and conditions hereof, for the purchase of all or a portion of such Senior Debt Securities. The principal amount of such Senior Debt Securities to be issued after a bidding therefor is referred to herein as the "Debt Securities". Proposals for the purchase of the Debt Securities may be transmitted to the Company only in accordance with the terms and conditions hereof. Any communication received by the Company relating to the purchase of the Debt Securities other than as contemplated herein shall be treated as market information and not as a proposal. 1. Information Concerning the Company and the Debt Securities. Prospective bidders may examine at the office of the Company, 80 Park Plaza, Newark, NJ, at any time during business hours, copies of the following: (a) the Indenture between the Company and First Union National Bank, as Trustee, dated as of December 1, 2000 under which the Debt Securities are to be issued (the "Indenture"); (b) the Registration Statement (including exhibits, the Prospectus and the documents incorporated therein by reference), and any further amendments thereto relating to the Debt Securities, filed with the Securities and Exchange Commission under the Securities Act of 1933; (c) the Petitions, and any amendments or supplements thereto (including exhibits), of the Company relating to the issuance and sale of the Debt Securities, as filed with the Board of Public Utilities of the State of New Jersey, and the Order or Orders of such Board authorizing the sale of the Debt Securities through competitive bidding; (d) the Form of Bid to be used by bidders in offering to purchase the Debt Securities, which includes the form of Purchase Agreement for the purchase of the Debt Securities (the "Purchase Agreement"); (e) a preliminary survey by Sidley Austin Brown & Wood LLP, which is the firm referred to in Section 8 hereof, with respect to the qualification of the Debt Securities for sale under the securities laws of various states; and (f) a statement, when available, with respect to the bidding for the Debt Securities and the terms of the Debt Securities, which statement shall specify (1) the date and time for the receipt of bids for the Debt Securities, (2) whether bids will be received (i) in writing, (ii) by telephone confirmed in writing or (iii) either in writing or by telephone confirmed in writing, (3) the principal amount of the Debt Securities, (4) the series designation of the Debt Securities, (5) the minimum and maximum percentages of principal amount which may be specified in the Bid as the purchase price for the Debt Securities, (6) the term of the Debt Securities, (7) the terms and conditions upon which the Debt Securities may be redeemed, either at the option of the Company, pursuant to any sinking fund for the Debt Securities, or otherwise, and (8) such other provisions as may be necessary or desirable to establish the terms and conditions of the Debt Securities and the terms of bidding therefor. Copies of items (d) and (e), copies of the Indenture and copies of the Prospectus relating to the Debt Securities, will be supplied in reasonable quantities to prospective bidders on request. The Company will make copies of item (f) above available to prospective bidders as soon as practicable, but in no event later than 24 hours prior to the time for the opening of bids. The Company reserves the right to amend the Registration Statement and Prospectus and the aforesaid Petition, and to make changes in the form of any documents relating to the issuance and sale of the Debt Securities, at any time and from time to time with the approval of Sidley Austin Brown & Wood LLP prior to the time the Purchase Agreement becomes effective, or as may be provided in such agreement after it has become effective. The Company will give telephonic notice confirmed in writing of the date and time for the receipt of bids, any postponements thereof and of any such amendments and changes, which in its opinion are material, made prior to the opening of bids, to any person who intends to submit a bid and who notifies the Company at its office, 80 Park Plaza, T6B, P.O. Box 570, Newark, NJ. 07101, attention Morton A. Plawner, Vice President and Treasurer, that it desires such notice and furnishes the name, address and telephone number of the person to whom such notice shall be given. The notice of any such amendment or change need not include the text thereof, but the text thereof may be examined at said office. The Debt Securities will be issuable only in fully registered form. 2. Form and Content of Bids. Each bid must be for the purchase of the entire principal amount of Debt Securities for which bids are being received, and shall specify (i) the interest rate (which shall be stated in the manner specified in the statement referred to in Section 1(f) hereof) on the Debt Securities and (ii) the price to be paid to the Company for the Debt Securities, which price shall be stated as a percent of the principal amount of the Debt Securities and shall be not less than nor more than the minimum and maximum percentages of the principal amount thereof specified in the statement referred to in Section l(f) hereof, plus accrued interest from the first day of the month in which the Debt Securities are issued to the date of delivery of and payment for the Debt Securities or as otherwise specified in the statement referred to in Section 1(f). Bids may be made by a single bidder or by a group of bidders. No bidder who bids singly may participate in a group bid, and no bidder who participates in one group bid may participate in another group bid. In the case of a bid by a group of bidders, the several members of the group shall act through a duly authorized representative or representatives (herein referred to as the "Representative"), who shall be named as Representative in the bid by the group for the purchase of the Debt Securities and who may be included in the group. If a bid of a group of bidders is accepted, the obligations of the members of the group shall be several and not joint, including the obligation to purchase the principal amounts of Debt Securities set forth opposite the respective names of such members in Schedule A to the bid. If a bid is submitted by a Representative on behalf of a group of bidders, and the principal amount of Debt Securities to be purchased by any member of the group is incorrectly stated in Schedule A to such bid, the Representative may correct any such error or errors forthwith upon discovery thereof. If no such correction is made, or if after all such corrections are made, the total of the amounts set forth in said Schedule A is more or less than the principal amount of Debt Securities for which bids are being received, then the amount of Debt Securities offered to be purchased by the Representative shall be deemed to be increased or decreased, as the case may be, to the extent of the discrepancy. All bids must be signed by a single bidder, or in the case of a bid by a group of bidders, by their Representative on behalf of the group, and should be submitted in duplicate. 3. Certain Representations by the Bidders to be Furnished to the Company. By submitting a bid for the Debt Securities, each bidder shall be deemed to represent to the Company, as of the date of the bidding for the Debt Securities, that, except as stated to the Company in writing prior to the time for receipt of bids for the Debt Securities: (a) neither such bidder nor any of its directors, officers or partners has a material relationship with the Company or its parent Public Service Enterprise Group Incorporated ("PSEG"); (b) such bidder and its directors and officers or partners, as a group, do not own beneficially 10% or more of any class of capital stock of the Company or PSEG; (c) such bidder is not a "holding company", a "subsidiary" of a "holding company", or an "affiliate" of a "holding company" or of a "public utility company", each as defined in the Public Utility Holding Company Act of 1935; (d) such bidder has not prepared any report or memorandum for external use in connection with the proposed offering; (e) such bidder's commitment to purchase the Debt Securities will not result in a violation of the financial responsibility requirements of Rule 15c3-1 under the Securities Exchange Act of 1934, and is not prohibited or restricted by any action of the Securities and Exchange Commission or of any national securities exchange applicable to such bidder, and (f) such bidder has not assumed or guaranteed any securities of others and has no securities outstanding other than those issued in its present name. 4. Submission of Bids. As set forth below and in the statement to be furnished to prospective bidders pursuant to Section 1(f) hereof, the Company will receive bids in writing and/or by telephone confirmed in writing. (a) Written Bids. Each bid in writing must be delivered to the Company on the Bid with Schedule A completed, at the Blake Room, Fourth Floor, 80 Park Plaza, Newark, NJ. 07101, on the date and at the time specified by the Company in the statement pursuant to Section 1(f) hereof, enclosed and sealed in an envelope addressed as follows: "Public Service Electric and Gas Company, 80 Park Plaza, Newark, NJ. 07101 - Private and Confidential - Not to be opened except in accordance with the Terms and Conditions Relating to Bids dated February , 2002 for the purchase of Debt Securities." Each such envelope, when delivered, must indicate the name and address of the bidder or, in the case of a group of bidders, of the Representative, and shall bear no indication of the amount of the bid or any inscription other than herein permitted. (b) Telephonic bids confirmed in Writing. Each telephonic bid confirmed in writing for the Debt Securities must be received by the Company on the date and no later than the time designated by the Company in the statement furnished to bidders pursuant to Section 1(f) hereof. Such telephonic bids must be directed to the person and telephone number specified by the Company to each prospective bidder and must provide the Company with (i) the name of any single bidder, the name(s) of the Representative(s) and the names of all members of a group of bidders, (ii) a telephone number at which such bid may be immediately confirmed and the name of the individual who will provide confirmation, (iii) the interest rate to be borne by the Debt Securities and (iv) the price to be paid to the Company for the Debt Securities. Such telephonic bids must be confirmed in writing by means of a duly executed bid in writing on the Bid (with Schedule A thereto completed) or by other similar written instrument acceptable to the Company and providing the information required in this paragraph to be set forth, which must either be delivered to the offices of Sidley Austin Brown & Wood LLP, 875 Third Avenue, New York, N.Y. 10022, or to the Company, 80 Park Plaza, Newark, New Jersey 07101, to the attention of the persons designated in the statement furnished to bidders pursuant to Section l(f) hereof or telecopied to the offices of the Company at the telephone number specified by the Company in the statement furnished to bidders pursuant to Section 1(f) hereof, as soon as possible, but in no event more than one hour after the time specified as the deadline for receipt of bids. Except as set forth in the fourth paragraph of Section 2 hereof, any failure by a bidder to confirm a telephonic bid in a timely manner by a duly executed bid in writing on the Bid or other similar written instrument acceptable to the Company, with all information properly specified thereon, may result in such telephonic bid being rejected as not in the proper form as specified by the Company. (c) The Company reserves the right, in its discretion from time to time, to postpone the time or date for delivery and opening of bids, and will give telephonic notice confirmed in writing of any such postponement to any prospective bidder who shall have furnished its name to the Company for such purpose pursuant to the third paragraph of Section 1 hereof. (d) The Company reserves the right to designate, not less than 30 minutes prior to the time, or postponed time, specified for delivery and opening of bids, a principal amount less than the principal amount originally specified for the Debt Securities as the principal amount of the Debt Securities, in which event the principal amount so designated shall be deemed to be the principal amount of the Debt Securities. 5. Acceptance or Rejection of Bids. Subject to the reservations set forth below, all bids will be announced or opened by the Company at its office, 80 Park Plaza, Newark, NJ, on the date and at the time designated for receipt of bids specified by the Company in the statement furnished to bidders pursuant to Section 1(f) hereof, or at such later time or date as may be fixed by the Company as provided in Section 4(c) hereof. Within three hours of the receipt of bids, the Company will (subject to the provisions and reservations stated below) accept the bid that will provide the Company with the lowest "annual cost of money". Said "annual cost of money" in respect of each bid shall be determined by the Company in accordance with the method specified in the statement referred to in Section 1(f) hereof. The decision of the Company with respect to the lowest "annual cost of money" shall in all cases be final. Each bid will be accepted or rejected in its entirety. All bids shall be irrevocable until three hours after the receipt of bids, unless sooner returned unopened or rejected. In case two or more such bids provide an identical lowest "annual cost of money" to the Company, the Company (unless it shall reject all bids) shall by oral announcement give the makers of such identical bids the opportunity (the duration of which shall be in the Company's discretion, but shall not extend beyond three hours after the opening of bids) to improve their bids. The Company will accept, subject to the reservations stated below, the improved bid that will provide the lowest "annual cost of money" to the Company. If no improved bid is so made, or if on rebidding two or more bids providing an identical lowest "annual cost of money" to the Company are again received, the Company may, in its sole discretion and without liability to the maker of any other bid, accept any one of the identical bids providing the lowest "annual cost of money" to the Company. Notwithstanding the foregoing provisions hereof, the Company reserves the right (a) to return all bids unopened either at or prior to the time specified for the opening thereof, (b) to reject all bids (at or after the opening thereof irrespective of the terms named therein), and (c) to reject the bid of any bidder or of any group of bidders (i) if such bidder or any member of such group of bidders is in such relationship with any of the trustees under the Company's indentures as would disqualify any of said trustees from acting as such trustee, if the bid of such bidder or group of bidders shall be accepted, (ii) if the Company, in the opinion of its counsel, may not lawfully sell the Debt Securities to such bidder or to any member of such group of bidders, and, in either such event, in the case of a group of bidders, if within one hour after the opening of bids, the member or members of such group causing such disqualification or illegality have not withdrawn from the group and the remaining members, including substituted members, if any are permitted by the Company, have not agreed to purchase the Debt Securities which such withdrawing member or members have offered to purchase, (iii) if the Company is not reasonably satisfied with the financial responsibility of such bidder or any member of any such group of bidders, or (iv) if the acceptance of such bid might, in the judgment of the Company, bring about the risk of a delay in the sale of the Debt Securities. 6. Determination of Redemption Prices of the Debt Securities. As soon as practicable after the acceptance of a bid, any applicable redemption prices of the Debt Securities will be determined by the Company in accordance with the statement referred to in Section 1(f) hereof. Such determination by the Company shall be final. 7. Purchase Agreement. Upon the acceptance of a bid for the Debt Securities, the Company will forthwith signify such acceptance by a duplicate, reproduction or facsimile copy of the bid of the successful bidder, or, in the case of a bid by a group of bidders, of the Representative on behalf of such group. Upon such acceptance of a bid, the Purchase Agreement shall become effective without any separate execution thereof, and thereafter all rights of the Company and of the successful bidder, or group of bidders, shall be determined solely in accordance with the terms of the bid and such Purchase Agreement. Forthwith upon such acceptance of any bid, the successful bidder or, in the case of a bid by a group of bidders, the Representative on behalf of such group, shall furnish to the Company in writing the information which is (i) required to supplement the Prospectus and for the filing thereof, and (ii) required to be filed by the Company with the Board of Public Utilities of the State of New Jersey. 8. Opinion of Counsel for the Bidders Sidley Austin Brown & Wood LLP, 875 Third Avenue, New York, N.Y. 10022 has been selected by the Company as counsel to give to the successful bidder or bidders an opinion with respect to the legal matters specified in Section 6(c) of the Purchase Agreement. Such firm has participated from the standpoint of possible underwriters of the Debt Securities in the preparation of the competitive bidding papers and the documents under which the Debt Securities are to be issued and has reviewed or will review the corporate proceedings and the registration procedure with respect to the authorization and issuance of the Debt Securities. It has also prepared the survey referred to in Section 1(e) hereof. Prospective bidders may confer with Sidley Austin Brown & Wood LLP with respect to any of the foregoing matters. The compensation and disbursements of such firm are to be paid by the successful bidder or bidders, except as otherwise provided in the Purchase Agreement, and any prospective bidder and any Representative of a group of prospective bidders may obtain from such firm, upon request, a statement of the amount of such compensation and an estimate of the amount of such disbursements. 9. Miscellaneous. The Company reserves the right to waive any irregularity, which it deems to be immaterial, in complying with any of the foregoing terms and conditions. The validity, construction and interpretation of the Terms and Conditions and any bid submitted pursuant hereto shall be governed by the substantive laws of the State of New Jersey. Public Service Electric and Gas Company By E. James Ferland ---------------------------- Chairman of the Board and Chief Executive Officer February , 2002 EX-1.1(B) 4 e13009ex11b.txt FORM OF BID WITH FORM OF PURCHASE AGREEMENT Exhibit 1.1(b) BID for the purchase of $ principal amount of PUBLIC SERVICE ELECTRIC AND GAS COMPANY * Senior Debt Securities due ------------------------------------------------------- Interest Rate:* Price: * % of principal amount 20__ Public Service Electric and Gas Company 80 Park Plaza Newark, NJ. 07101 Dear Sirs: Referring to the Statement of Terms and Conditions Relating to Bids dated February , 2002 for the purchase in one or more series of not more than $1,000,000,000 principal amount of Senior Debt Securities of Public Service Electric and Gas Company (the "Company"), the persons, firms and corporations named in Schedule A attached hereto (the "Bidders") submit herewith the following Bid for the above series of Senior Debt Securities of the Company (the "Debt Securities"): 1. Each of the Bidders, severally and not jointly, hereby offers to purchase from the Company, at the price (expressed as a percentage of the principal amount of the Debt Securities) specified in the space provided therefor above, plus accrued interest from the first day of the month in which the Debt Securities are issued to the date of delivery of and payment for the Debt Securities, and upon the terms and conditions set forth in the Company's Statement of Terms and Conditions Relating to Bids for the Debt Securities dated February , 2002, including the statement relating to the Debt Securities furnished to bidders by the Company pursuant to Section 1(f) thereof (the "Terms and Conditions") and in the form of Purchase Agreement attached hereto, the principal amount of Debt Securities set forth opposite the name of such Bidder in said Schedule A (unless corrected or deemed to have been corrected as provided in Section 2 of the Terms and Conditions, in which case said principal amount shall be as so corrected or deemed to have been corrected). The interest rate for the Debt Securities shall be that specified in the space provided therefor above. 2. If this Bid shall be accepted by the Company, the Purchase Agreement with the Company in the form attached hereto as Schedule B shall thereupon become effective as of the date of the acceptance of this Bid without any separate execution thereof, with the blanks therein deemed to be appropriately filled in, in accordance with the terms of this Bid and with such modifications therein as may be necessary and as are contemplated by the Terms and Conditions. 3. This Bid is independent of all other bids which may be presented to the Company pursuant to the Terms and Conditions. - ---------- * Insert the interest rate and price determined in accordance with the statement furnished to bidders by the Company pursuant to Section 1(f) of the Terms and Conditions. 4. Each of the Bidders acknowledges receipt of a copy of the Terms and Conditions and the Prospectus relating to the Debt Securities. 5. By making this Bid each of the Bidders confirms its representations to the Company as set forth in Section 3 of the Terms and Conditions. The Representative represents and warrants that it has all necessary power and authority to bid for each of the Bidders in respect of the matters referred to in this Bid and to act on behalf of each of the Bidders in any purchase of the Debt Securities if this Bid is accepted as contemplated by the Terms and Conditions. Yours very truly, -------------------------------------- Representative(s) By ___________________________________ Acting on behalf of the several bidders named in Schedule A annexed hereto, including itself, or single bidder. Accepted , 20 Public Service Electric and Gas Company By ______________________ Vice President SCEUEDULE A Name of Bidder Principal Amount Total _____________________________________________________________ $ SCHEDULE B PUBLIC SERVICE ELECTRIC AND GAS COMPANY Senior Debt Securities PURCHASE AGREEMENT This Agreement is made as of the date of acceptance of the bid (which includes Schedule A thereto) to which this Agreement is attached as Schedule B (the "Bid") between Public Service Electric and Gas Company, a New Jersey corporation (the "Company") and the several persons, firms or corporations named in the Bid as Underwriters (herein referred to as "Underwriters" or singly as "Underwriter" and the Underwriter or Underwriters named as Representative(s) in the Bid being herein referred to as "Representative") of the Company's senior debt securities (the "Securities") of the designated series, in the principal amount and with the interest rate and maturity specified in the Bid. The Securities will be issued in one or more series as senior indebtedness under an indenture, dated as of December 1, 2000 (the "Indenture"), between the Company and First Union National Bank, as trustee (the "Trustee"). Each series of Securities may vary, as applicable, as to title, aggregate principal amount, rank, interest rate or formula and timing of payments thereof, stated maturity date, redemption and/or repayment provisions, sinking fund requirements, conversion provisions and any other variable terms established by or pursuant to the Indenture. As more fully described in the Statement of Terms and Conditions Relating to Bids to which the Bid is attached, the Bid relating to the offering of Securities shall specify the aggregate principal amount of Securities to be initially issued (the "Initial Underwritten Securities"), the name of each Underwriter participating in such offering (subject to substitution as provided in Section 10 hereof), the aggregate principal amount of Initial Underwritten Securities which each such Underwriter severally agrees to purchase, whether such offering is on a fixed or variable price basis and, if on a fixed price basis, the initial offering price and the price at which the Initial Underwritten Securities are to be purchased by the Underwriters. In addition, if applicable, the Bid shall specify whether the Company has agreed to grant to the Underwriters an option to purchase additional Securities to cover over-allotments, if any, and the aggregate principal amount of Securities subject to such option (the "Option Underwritten Securities"). As used herein, the term "Underwritten Securities" shall include the Initial Underwritten Securities and all or any portion of any Option Underwritten Securities. 2 The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No. 333-76020) for the registration of the Securities under the Securities Act of 1933, as amended (the "1933 Act"), and the offering thereof from time to time in accordance with Rule 415 of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations"). Such registration statement, which also constitutes post-effective amendment no. 1 to registration statement on Form S-3 (No. 333-2763), has been declared effective by the Commission and the Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended (the "1939 Act"), and the Company has filed such post-effective amendments thereto as may be required prior to the execution of the Bid and each such post-effective amendment has been declared effective by the Commission. Such registration statement (as so amended, if applicable), including the information, if any, deemed to be a part thereof pursuant to Rule 430A(b) of the 1933 Act Regulations (the "Rule 430A Information") or Rule 434(d) of the 1933 Act Regulations (the "Rule 434 Information"), together with registration statement on Form S-3 (No. 333-2763), is referred to herein as the "Registration Statement"; and the final prospectus and the final prospectus supplement relating to the offering of the Underwritten Securities, in the form first furnished to the Underwriters by the Company for use in connection with the offering of the Underwritten Securities, are collectively referred to herein as the "Prospectus"; provided, however, that all references to the "Registration Statement" and the "Prospectus" shall also be deemed to include all documents incorporated therein by reference pursuant to the Securities Exchange Act of 1934, as amended (the "1934 Act"), prior to the execution of the Bid; provided, further, that if the Company files a registration statement with the Commission pursuant to Rule 462(b) of the 1933 Act Regulations (the "Rule 462(b) Registration Statement"), then, after such filing, all references to "Registration Statement" shall also be deemed to include the Rule 462 Registration Statement; and provided, further, that if the Company elects to rely upon Rule 434 of the 1933 Act Regulations, then all references to "Prospectus" shall also be deemed to include the final or preliminary prospectus and the applicable term sheet or abbreviated term sheet (the "Term Sheet"), as the case may be, in the form first furnished to the Underwriters by the Company in reliance upon Rule 434 of the 1933 Act Regulations, and all references in this Agreement to the date of the Prospectus shall mean the date of the Term Sheet. A "preliminary prospectus" shall be deemed to refer to any prospectus used before the Registration Statement became effective and any prospectus that omitted, as applicable, the Rule 430A Information, the Rule 434 Information or other information to be included upon pricing in a form of prospectus filed with the Commission pursuant to Rule 424(b) of the 1933 Act Regulations and was used after such effectiveness and prior to the execution and delivery of the Bid. For purposes of this Agreement, all references to the Registration Statement, Prospectus, Term Sheet or preliminary prospectus or to any amendment or supplement to any of the foregoing shall be deemed to include any copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" (or other references of like import) in the Registration Statement, Prospectus or preliminary prospectus shall be deemed to mean and include all such financial statements and schedules and other information which is incorporated by reference in the Registration Statement, Prospectus or preliminary prospectus, as the case may be, prior to the execution of the Bid; and all references in this Agreement to amendments or supplements to the Registration Statement, Prospectus or preliminary prospectus shall be deemed 3 to mean and include the filing of any document under the 1934 Act which is incorporated by reference in the Registration Statement, Prospectus or preliminary prospectus, as the case may be, after the execution of the Bid. SECTION 1. Representations and Warranties. (a) Representations and Warranties by the Company. The Company represents and warrants to each Underwriter named in the Bid, as of the date thereof, as of the Closing Time (as defined below) and, if applicable, as of each Date of Delivery (as defined below) (in each case, a "Representation Date"), as follows: (1) Compliance with Registration Requirements. The Company meets the requirements for use of Form S-3 under the 1933 Act. The Registration Statement (including any Rule 462(b) Registration Statement) has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement (or such Rule 462(b) Registration Statement) has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. In addition, the Indenture has been duly qualified under the 1939 Act. At the respective times the Registration Statement (including any Rule 462(b) Registration Statement) and any post-effective amendments thereto (including the filing of the Company's most recent Annual Report on Form 10-K with the Commission (the "Annual Report on Form 10-K")) became effective and at each Representation Date, the Registration Statement (including any Rule 462(b) Registration Statement) and any amendments thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and the 1939 Act and the rules and regulations of the Commission under the 1939 Act (the "1939 Act Regulations") and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. At the date of the Prospectus, at the Closing Time and at any Date of Delivery, neither the Prospectus nor any amendments and supplements thereto included or will include an untrue statement of a material fact or omitted or will 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. If the Company elects to rely upon Rule 434 of the 1933 Act Regulations, the Company will comply with the requirements of Rule 434. Notwithstanding the foregoing, the representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or the Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by any Underwriter through the Representative expressly for use in the Registration Statement or the Prospectus. Each preliminary prospectus and prospectus filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all material respects with the 1933 Act Regulations and each preliminary prospectus and the Prospectus delivered to the 4 Underwriters for use in connection with the offering of Underwritten Securities will, at the time of such delivery, be identical to any electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. No order preventing or suspending the use of any preliminary prospectus has been issued by the Commission, and each preliminary prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the 1933 Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through the Representative expressly for use therein. (2) Incorporated Documents. The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectus, when they became effective or at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations") and, when read together with the other information in the Prospectus, at the date of the Prospectus, at the Closing Time and at any Date of Delivery, did not and will not include an 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. (3) The Company is a subsidiary of Public Service Enterprise Group Incorporated, which is a public utility holding company exempt from the provisions of the Public Utility Holding Company Act of 1935 (except Section 9(a)(2) thereof). (4) The franchises of the Company are sufficient authority for it to carry on its business as described in the Prospectus. (5) All approvals, consents, and orders of the Board of Public Utilities of the State of New Jersey legally required for the issuance and sale of the Underwritten Securities have been obtained, and no approval, consent or order of any other commission or other governmental authority is legally required for such execution, delivery, issuance and sale (except that the sale of the Underwritten Securities in certain states may be subject to the provisions of the securities laws of such states) and the issuance and sale of the Underwritten Securities are in accordance with the approvals, consents or orders obtained. (6) Independent Accountants. The accountants who certified the financial statements and any supporting schedules thereto included in the Registration Statement and the Prospectus are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. 5 (7) Financial Statements. The financial statements of the Company included in the Registration Statement and the Prospectus, together with the related schedules and notes, as well as those financial statements, schedules and notes of any other entity included therein, present fairly the financial position of the Company and its consolidated subsidiaries, or such other entity, as the case may be, at the dates indicated and the statement of operations, stockholders' equity and cash flows of the Company and its consolidated subsidiaries, or such other entity, as the case may be, for the periods specified. Such financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included in the Registration Statement and the Prospectus present fairly in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Prospectus present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement and the Prospectus. (8) No Material Adverse Change in Business. Since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as otherwise stated therein, (A) there has been no material adverse change in the business, properties, earnings or financial condition of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"), (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those arising in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise and (C) except for regular dividends on the Company's common stock or preferred stock, in amounts per share that are consistent with past practice or the applicable charter document or supplement thereto, respectively, there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (9) Good Standing of the Company. The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of New Jersey, with due corporate authority to own and operate its properties and to conduct its business as described in the Prospectus and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect. (10) Good Standing of Subsidiaries. Each "significant subsidiary" of the Company (as such term is defined in Rule 1-02 of Regulation S-X promulgated under the 1933 Act) (each, a "Subsidiary" and, collectively, the "Subsidiaries") has been duly organized and is validly existing as a corporation or limited liability company in good standing under the laws of the jurisdiction of its organization, has power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and is duly qualified as a foreign corporation/ limited liability company to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of 6 business, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect. Except as otherwise stated in the Registration Statement and the Prospectus, all of the issued and outstanding capital stock of each Subsidiary that is a corporation has been duly authorized and is validly issued, fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. None of the outstanding shares of capital stock of any Subsidiary was issued in violation of preemptive or other similar rights of any security holder of such Subsidiary. (11) Capitalization. If the Prospectus contains a "Capitalization" section, the authorized, issued and outstanding shares of capital stock of the Company is as set forth in the column entitled "Actual" under such section (except for subsequent issuances thereof, if any, pursuant to reservations, agreements or employee benefit plans referred to in the Prospectus or pursuant to the exercise of convertible securities or options referred to in the Prospectus). Such shares of capital stock have been duly authorized and validly issued by the Company and are fully paid and non-assessable, and none of such shares of capital stock was issued in violation of preemptive or other similar rights of any security holder of the Company. (12) Authorization of this Agreement and the Bid. This Agreement and the Bid have been duly authorized, executed and delivered by the Company. (13) Authorization of Underwritten Securities. The Underwritten Securities being sold pursuant to this Agreement have been duly authorized by the Company for issuance and sale pursuant to this Agreement. Such Underwritten Securities, when issued and authenticated in the manner provided for in the Indenture and delivered against payment of the consideration therefor specified in this Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally or by general equitable principles (regardless of whether enforcement is considered in a proceeding in equity or at law), and except further as enforcement thereof may be limited by requirements that a claim with respect to any Underwritten Securities payable in a foreign or composite currency (or a foreign or composite currency judgment in respect of such claim) be converted into U.S. dollars at a rate of exchange prevailing on a date determined pursuant to applicable law or by governmental authority to limit, delay or prohibit the making of payments outside the United States. Such Underwritten Securities will be in the form contemplated by, and each registered holder thereof is entitled to the benefits of, the Indenture. (14) Authorization of the Indenture. The Indenture has been duly authorized, executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally or by general 7 equitable principles (regardless of whether enforcement is considered in a proceeding in equity or at law). (15) Descriptions of the Underwritten Securities and the Indenture. The Underwritten Securities being sold pursuant to this Agreement and the Indenture, as of each Representation Date, when issued and delivered in accordance with the terms of the related Underwritten Securities, will conform in all material respects to the statements relating thereto contained in the Prospectus and will be substantially in the form filed or incorporated by reference, as the case may be, as an exhibit to the Registration Statement. (16) Absence of Defaults and Conflicts. Neither the Company nor any of its Subsidiaries is in violation of its Restated Certificate of Incorporation, as amended, other organization document or by-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which it or any of them may be bound, or to which any of the assets, properties or operations of the Company or any of its Subsidiaries is subject (collectively, "Agreements and Instruments"), except for such defaults that would not result in a Material Adverse Effect. The execution, delivery and performance of this Agreement, the Bid, the Indenture and any other agreement or instrument entered into or issued or to be entered into or issued by the Company in connection with the transactions contemplated hereby or thereby or in the Registration Statement and the Prospectus and the consummation of the transactions contemplated herein and in the Registration Statement and the Prospectus (including the issuance and sale of the Underwritten Securities and the use of the proceeds from the sale of the Underwritten Securities as described under the caption "Use of Proceeds") and compliance by the Company with its obligations hereunder and thereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any assets, properties or operations of the Company or any of its subsidiaries pursuant to, any Agreements and Instruments, nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its subsidiaries. (17) Absence of Labor Dispute. No labor dispute with the employees of the Company or any of its Subsidiaries exists or, to the knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any Subsidiary's principal suppliers, manufacturers, 8 customers or contractors, which, in either case, may reasonably be expected to result in a Material Adverse Effect. (18) Absence of Proceedings. Other than as set forth in or contemplated by the Prospectus, there is no action, suit, proceeding, inquiry or investigation before or brought 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 any of its subsidiaries which is required to be disclosed in the Registration Statement and the Prospectus (other than as stated therein), or which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the consolidated assets, properties or operations thereof or the consummation of the transactions contemplated under the Prospectus, this Agreement, the Bid, or the Indenture or the performance by the Company of its obligations hereunder and thereunder. The aggregate of all pending legal or governmental proceedings to which the Company or any of its subsidiaries is a party or of which any of their respective assets, properties or operations is the subject which are not described in the Registration Statement and the Prospectus, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect. (19) Accuracy of Exhibits. There are no contracts or documents which are required to be described in the Registration Statement, the Prospectus or the documents incorporated by reference therein or to be filed as exhibits thereto which have not been so described and filed as required. (20) Absence of Further Requirements. No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency, domestic or foreign, is necessary or required for the due authorization, execution and delivery by the Company of this Agreement or the Bid or for the performance by the Company of the transactions contemplated under the Prospectus, this Agreement, the Bid, or the Indenture, except the registration of the Securities under the 1933 Act, the qualification of the Indenture under the 1939 Act and such consents, approvals, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the issuance and sale, as the case may be, of the Underwritten Securities and except such as have been already made, obtained or rendered, as applicable. (21) Possession of Licenses and Permits. The Company and its Subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, "Governmental Licenses") issued by the appropriate federal, state, local or foreign regulatory agencies or bodies necessary to conduct the business now operated by them. The Company and its Subsidiaries are in compliance with the terms and conditions of all such Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, result in a Material Adverse Effect. All of the Governmental Licenses are valid and in full force and effect, except where the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not result in a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has received any notice of proceedings relating to the revocation or modification of any 9 such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (22) Title to Property. The Company and its Subsidiaries have good and marketable title to all real property owned by the Company and its Subsidiaries and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind, except (A) as otherwise stated in the Registration Statement and the Prospectus or (B) those which do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its Subsidiaries. All of the leases and subleases material to the business of the Company and its Subsidiaries considered as one enterprise, and under which the Company or any of its Subsidiaries holds properties described in the Prospectus, are in full force and effect, and neither the Company nor any of its Subsidiaries has received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any of its Subsidiaries under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such Subsidiary of the continued possession of the leased or subleased premises under any such lease or sublease. (23) Environmental Laws. Except as otherwise stated in the Registration Statement and the Prospectus and except as would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither the Company nor any of its Subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"), (B) the Company and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries and (D) there are no events or circumstances that might reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or governmental body or agency, against or affecting the Company or any of its subsidiaries relating to Hazardous Materials or any Environmental Laws. (b) Officers' Certificates. Any certificate signed by any officer of the Company or any of its Subsidiaries and delivered to any Underwriter or to counsel for the Underwriters in connection with the offering of the Underwritten Securities shall be deemed a representation and 10 warranty by the Company to each Underwriter as to the matters covered thereby on the date of such certificate and, unless subsequently amended or supplemented, at each Representation Date subsequent thereto. SECTION 2. Public Offering The Company is advised by the Representative that the Underwriters propose to make a bona fide public offering of the Securities as soon as practicable. The Representative is contemporaneously advising the Company of such details of the offering, including the initial price to the public and the concessions and discounts, if any, to dealers, brokers and others, as are needed to complete the filing of any supplement to the Prospectus. The Representative and the Underwriters will cooperate fully with the Company towards making such supplement filing within the time period required by the applicable rules of the Commission. SECTION 3. Sale and Delivery to Underwriters; Closing. (a) Underwritten Securities. Subject to the terms and conditions herein set forth, the Company agrees to sell to the Underwriters, severally and not jointly, and each of the Underwriters, upon the basis of the representations and warranties herein set forth, agrees to purchase from the Company, severally and not jointly, the principal amount of Underwritten Securities set forth opposite its name in the Bid at the price specified in the Bid. (b) Option Underwritten Securities. Subject to the terms and conditions herein set forth, the Company may grant, if so provided in the Bid, an option to the Underwriters, severally and not jointly, to purchase up to the aggregate principal amount of the Option Underwritten Securities set forth therein at a price per Option Underwritten Security equal to the price per Initial Underwritten Security. Such option, if granted, will expire 30 days after the date of such Bid, and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial Underwritten Securities upon notice by the Representative to the Company setting forth the aggregate principal amount of Option Underwritten Securities as to which the several Underwriters are then exercising the option and the time, date and place of payment and delivery for such Option Underwritten Securities. Any such time and date of payment and delivery (each, a "Date of Delivery") shall be determined by the Representative, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, unless otherwise agreed upon by the Representative and the Company. If the option is exercised as to all or any portion of the Option Underwritten Securities, each of the Underwriters, severally and not jointly, will purchase that proportion of the total aggregate principal amount of Option Underwritten Securities then being purchased which the aggregate principal amount of Initial Underwritten Securities each such Underwriter has severally agreed to purchase as set forth in such Bid bears to the total aggregate principal amount of Initial Underwritten Securities. (c) Payment. Payment of the purchase price for the Underwritten Securities, shall be made by or on behalf of the several Underwriters by wire transfer of immediately available funds to the order of the Company, at the office of the Company, 80 Park Plaza, Newark, N.J. (or such other place or places of payment as may be agreed upon between the Company and the Representative), at 9:00 A.M., New York Time, on the date which is three business days after the 11 date on which the Bid is accepted by the Company, or at such later time as shall be agreed upon by the Company and the Representative, upon delivery of the Underwritten Securities to the Representative at the office of First Union National Bank, 21 South Street, Morristown, N.J. (or such other place or places of delivery as shall be agreed upon between the Company and the Representative) for the account of the several Underwriters. The time and date of such payment and delivery is herein referred to as the "Closing Time". Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company, against delivery to the Representative as set forth above for the respective accounts of the Underwriters of the Underwritten Securities to be purchased by them. It is understood that each Underwriter has authorized the Representative, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Underwritten Securities which it has severally agreed to purchase. The Representative, individually and not as representative of the Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Underwritten Securities to be purchased by any Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Underwriter from its obligations hereunder. (d) Denominations; Registration. The Underwritten Securities will be delivered to the Representative for the respective accounts of the Underwriters in fully registered form in the dominations of $1,000 and any multiple of $1,000 and registered in such names as the Representative may reasonably request in writing not later than 10 A.M., New York Time, on the business day prior to the Closing Time, or to the extent not so requested, registered in the names of the respective Underwriters in such denominations as the Company may determine. For the purpose of examining the Underwritten Securities, the Company agrees to make such Underwritten Securities available to the Representative not later than 12 Noon, New York Time, on the business day next preceding the Closing Time at the above-mentioned office of First Union National Bank (or such other place or places as shall be agreed upon between the Company and the Representative). SECTION 4. Covenants of the Company. The Company covenants with the Representative and with each Underwriter participating in the offering of Underwritten Securities, as follows: (a) Compliance with Securities Regulations and Commission Requests. The Company, subject to Section 4(b), will comply with the requirements of Rule 430A of the 1933 Act Regulations and/or Rule 434 of the 1933 Act Regulations, if and as applicable, and will notify the Representative(s) promptly, and confirm the notice in writing, of (i) the effectiveness of any post-effective amendment to the Registration Statement or the filing of any supplement or amendment to the Prospectus, (ii) the receipt of any comments from the Commission, (iii) any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information, and (iv) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the Underwritten Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes. The Company will 12 promptly effect the filings necessary pursuant to Rule 424 and will take such steps as it deems necessary to ascertain promptly whether the Prospectus transmitted for filing under Rule 424 was received for filing by the Commission and, in the event that it was not, it will promptly file the Prospectus. The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, promptly to use its best efforts to obtain its withdrawal. (b) Filing of Amendments. The Company will give the Representative notice of its intention to file or prepare any amendment to the Registration Statement (including any filing under Rule 462(b) of the 1933 Act Regulations), any Term Sheet or any amendment, supplement or revision to either the prospectus included in the Registration Statement at the time it became effective or to the Prospectus, whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the Representative with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document of which the Representative or counsel for the Underwriters shall reasonably disapprove. (c) Delivery of Registration Statements. The Company has furnished or will deliver to the Representative and counsel for the Underwriters, in such quantities as the Representative may reasonably request, without charge, signed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated or deemed to be incorporated by reference therein) and signed copies of all consents and certificates of experts, and will also deliver to the Representative, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the Underwriters. The Registration Statement and each amendment thereto furnished to the Underwriters will be identical to any electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (d) Delivery of Prospectuses. The Company will deliver to each Underwriter, without charge, as many copies of each preliminary prospectus as such Underwriter may reasonably request, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each Underwriter, without charge, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of the Prospectus as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to any electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (e) Continued Compliance with Securities Laws. The Company will comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations so as to permit the completion of the distribution of the Underwritten Securities as contemplated in this Agreement and in the Registration Statement and the Prospectus. If at any time when the Prospectus is required by the 1933 Act or the 1934 Act to be delivered in connection with sales of the Underwritten Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to amend the Registration Statement in order that the Registration Statement will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading or to amend or supplement the 13 Prospectus in order that the Prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or amend or supplement the Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and file with the Commission, subject to Section 4(b), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectus comply with such requirements, and the Company will furnish to the Underwriters, without charge, such number of copies of such amendment or supplement as the Underwriters may reasonably request. (f) Blue Sky Qualifications. The Company will use its best efforts, in cooperation with the Underwriters, to qualify the Underwritten Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representative may designate and to maintain such qualifications in effect for a period of not less than one year from the date of acceptance of the Bid; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each jurisdiction in which the Underwritten Securities have been so qualified, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than one year from the date of acceptance of the Bid. (g) Earnings Statement. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its security holders as soon as practicable an earnings statement for the purposes of, and to provide the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act. (h) Use of Proceeds. The Company will use the net proceeds received by it from the sale of the Underwritten Securities in the manner specified in the Prospectus under "Use of Proceeds". (i) Listing. The Company will use its best efforts to effect the listing of the Underwritten Securities, prior to the Closing Time, on any national securities exchange or quotation system if and as specified in the Bid. (j) Restriction on Sale of Securities. Between the date of acceptance of the Bid and the Closing Time or such other date specified in the Bid, the Company will not, without the prior written consent of the Representative, directly or indirectly, issue, sell, offer or contract to sell, grant any option for the sale of, or otherwise dispose of, any of its senior debt securities. (k) Reporting Requirements. The Company, during the period when the Prospectus is required to be delivered under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. 14 SECTION 5. Payment of Expenses. (a) Expenses. The Company will pay all expenses incident to the performance of its obligations under this Agreement or the Bid, including (i) the preparation, printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of this Agreement, the Bid, any Agreement Among Underwriters, the Indentures and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Underwritten Securities, (iii) the preparation, issuance and delivery of the Underwritten Securities to the Underwriters, including any transfer taxes and any stamp or other duties payable upon the sale, issuance or delivery of the Underwritten Securities to the Underwriters, (iv) the fees and disbursements of the Company's counsel, accountants and other advisors or agents (including transfer agents and registrars), as well as the fees and disbursements of the Trustees and their respective counsel, (v) the qualification of the Underwritten Securities under state securities laws in accordance with the provisions of Section 4(f) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation, printing and delivery of the Blue Sky Survey, and any amendment thereto, (vi) the printing and delivery to the Underwriters of copies of each preliminary prospectus, any Term Sheet, and the Prospectus and any amendments or supplements thereto, (vii) the fees charged by nationally recognized statistical rating organizations for the rating of the Underwritten Securities, (viii) the fees and expenses incurred with respect to the listing of the Underwritten Securities, (ix) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review, if any, by the National Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Underwritten Securities, (x) all other costs and expenses incident to the performance of obligations hereunder which are not otherwise specifically provided for in this Section and (xi) the fees and expenses of any Underwriter acting in the capacity of a "qualified independent underwriter" (as defined in Rule 2720(b)(15) of the Conduct Rules of the NASD), if applicable. (b) Termination of Agreement. If this Agreement is terminated by the Representative in accordance with the provisions of Section 5 hereof, the Company shall reimburse the Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters. SECTION 6. Conditions of Underwriters' Obligations. The obligations of the Underwriters to purchase and pay for the Underwritten Securities pursuant to this Agreement and the Bid are subject to the accuracy of the representations and warranties of the Company contained in Section 1 hereof or in certificates of any officer of the Company or any of its subsidiaries delivered pursuant to the provisions hereof, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions: (a) Effectiveness of Registration Statement. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act and no proceedings for that purpose shall have been instituted or be pending or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel for the Underwriters. A prospectus containing information relating to the description of the Underwritten Securities, the 15 specific method of distribution and similar matters shall have been filed with the Commission in accordance with Rule 424(b)(1), (2), (3), (4) or (5), as applicable (or any required post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A), or, if the Company has elected to rely upon Rule 434 of the 1933 Act Regulations, a Term Sheet including the Rule 434 Information shall have been filed with the Commission in accordance with Rule 424(b)(7). (b) At Closing Time, the Representative shall be furnished with an opinion of counsel for the Company, which may be given by R. Edwin Selover, Esq., Senior Vice President and General Counsel, or by James T. Foran, Esq., General Corporate Counsel, of the Company, dated the day of the Closing Time and with copies thereof for each of the other Underwriters, to the effect that: (1) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of New Jersey. (2) The Company has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and to enter into and perform its obligations under, or as contemplated under, this Agreement and the Bid. (3) The Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect. (4) The Company is a subsidiary of Public Service Enterprise Group Incorporated, which is a public utility holding company exempt from the provisions of the Public Utility Holding Company Act of 1935 (except Section 9(a)(2) thereof). (5) Each Subsidiary has been duly organized and is validly existing as a corporation or limited liability company in good standing under the laws of the jurisdiction of its organization, has power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectus and is duly qualified as a foreign corporation/ limited liability company to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect. Except as otherwise stated in the Registration Statement and the Prospectus, all of the issued and outstanding capital stock of each Subsidiary has been duly authorized and is validly issued, fully paid and non-assessable and, to the best of such counsel's knowledge, is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. None of the outstanding shares of capital stock of any Subsidiary was issued in violation of preemptive or other similar rights of any security holder of such Subsidiary. 16 (6) This Agreement and the Bid have been duly authorized, executed and delivered by the Company. (7) The Underwritten Securities conform as to legal matters to the statements concerning them in the Prospectus and are in substantially the form filed or incorporated by reference, as the case maybe, as an exhibit to the Registration Statement and the summary of certain provisions of the Indenture contained in the Prospectus constitutes a correct summary thereof for use in the Prospectus. (8) The franchises of the Company are sufficient authority for it to carry on its business as described in the Prospectus. (9) All approvals, consents, and orders of the Board of Public Utilities of the State of New Jersey legally required for the issuance and sale of the Underwritten Securities have been obtained, and no approval, consent or order of any other commission or other governmental authority is legally required for such execution, delivery, issuance and sale (except that the sale of the Underwritten Securities in certain states may be subject to the provisions of the securities laws of such states) and the issuance and sale of the Underwritten Securities are in accordance with the approvals, consents or orders obtained. (10) The Underwritten Securities have been duly authorized by the Company for issuance and sale pursuant to this Agreement and the Bid. The Underwritten Securities, when issued and authenticated in the manner provided for in the Indenture and delivered against payment of the consideration therefor specified in this Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally or by general equitable principles (regardless of whether enforcement is considered in a proceeding in equity or at law), and except further as enforcement thereof may be limited by requirements that a claim with respect to any debt securities payable in a foreign or corporate currency (or a foreign or composite currency judgment in respect of such claim) be converted into U.S. dollars at a rate of exchange prevailing on a date determined pursuant to applicable law or by governmental authority to limit, delay or prohibit the making of payments outside the United States. The Underwritten Securities are in the form contemplated by, and each registered holder thereof is entitled to the benefits of, the Indenture. (11) The Indenture has been duly authorized, executed and delivered by the Company and (assuming due authorization, execution and delivery thereof by the Trustee) constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally or by general equitable principles (regardless of whether enforcement is considered in a proceeding in equity or at law). 17 (12) The information in the Prospectus under "Description of Debt Securities" or any caption purporting to describe any such securities, in the Annual Report on Form 10-K under "Rate Matters" and "Environmental Controls" in Item 1 - Business and under Item 3 - Legal Proceedings, to the extent that it constitutes matters of law, summaries of legal matters or the Company's charter, bylaws or legal proceedings, or legal conclusions, has been reviewed by such counsel and is correct in all material respects. (13) To the best of such counsel's knowledge, neither the Company nor any of its Subsidiaries is in violation of its charter or by-laws and no default by the Company or any of its Subsidiaries exists in the due performance or observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other agreement or instrument that is described or referred to in the Registration Statement or the Prospectus or filed or incorporated by reference as an exhibit to the Registration Statement. (14) The execution, delivery and performance of this Agreement, the Bid, the Indenture and any other agreement or instrument entered into or issued or to be entered into or issued by the Company in connection with the transactions contemplated in the Registration Statement and the Prospectus and the consummation of the transactions contemplated in this Agreement and the Bid and in the Registration Statement and the Prospectus (including the issuance and sale of the Underwritten Securities and the use of the proceeds from the sale of the Underwritten Securities as described under the caption "Use of Proceeds" in the Prospectus) and compliance by the Company with its obligations hereunder or thereunder do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event under, or result in the creation or imposition of any lien, charge or encumbrance upon any assets, properties or operations of the Company or any of its subsidiaries pursuant to, any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any other agreement or instrument, known to me, to which the Company or any of its subsidiaries is a party or by which it or any of them may be bound, or to which any of the assets, properties or operations of the Company or any of its subsidiaries is subject, nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any applicable law, statute, rule, regulation, judgment, order, writ or decree, known to me, of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their assets, properties or operations. (15) To the best of such counsel's knowledge, there is not pending or threatened any action, suit, proceeding, inquiry or investigation to which the Company or any of its subsidiaries is a party or to which the assets, properties or operations of the Company or any of its subsidiaries is subject, before or by any court or governmental agency or body, domestic or foreign, which might reasonably be expected to result in a Material Adverse Effect or which might reasonably be expected to materially and adversely affect the assets, properties or operations thereof or the consummation of the transactions contemplated under this Agreement, the Bid, or the Indenture or the performance by the Company of its obligations hereunder or thereunder. 18 (16) All descriptions in the Prospectus of contracts and other documents to which the Company or its subsidiaries are a party are accurate in all material respects. To the best of such counsel's knowledge, there are no franchises, contracts, indentures, mortgages, loan agreements, notes, leases or other instruments required to be described or referred to in the Prospectus or to be filed as exhibits to the Registration Statement other than those described or referred to therein or filed or incorporated by reference as exhibits thereto, and the descriptions thereof or references thereto are correct in all material respects. (17) To the best of such counsel's knowledge, there are no statutes or regulations that are required to be described in the Prospectus that are not described as required. (18) The Registration Statement (including any Rule 462(b) Registration Statement) has been declared effective under the 1933 Act. Any required filing of the Prospectus pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b). To the best of such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement (or such Rule 462(b) Registration Statement) has been issued under the 1933 Act and no proceedings for that purpose have been initiated or are pending or threatened by the Commission. (19) The Registration Statement (including any Rule 462(b) Registration Statement) and the Prospectus, excluding the documents incorporated by reference therein, and each amendment or supplement to the Registration Statement (including any Rule 462(b) Registration Statement) and Prospectus, excluding the documents incorporated by reference therein, as of their respective effective or issue dates (other than the financial statements and supporting schedules included therein or omitted therefrom and each Trustee's Statement of Eligibility on Form T-1 (the "Form T-1s"), as to which such counsel expresses no opinion) complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. (20) The documents incorporated by reference in the Prospectus (other than the financial statements and supporting schedules therein or omitted therefrom, as to which such counsel expresses no opinion), when they became effective or were filed with the Commission, as the case may be, complied as to form in all material respects with the requirements of the 1933 Act or the 1934 Act, as applicable, and the rules and regulations of the Commission thereunder. (21) No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any court or governmental authority or agency, domestic or foreign, is necessary or required for the due authorization, execution (if applicable) or delivery by the Company of this Agreement or the Bid or for the performance by the Company of the transactions contemplated under the Prospectus, this Agreement, the Bid, or the Indenture, other than under the 1933 Act, the 1933 Act Regulations, the 1939 Act and the 1939 Act Regulations, which have already been made, obtained or rendered, as applicable and other than as addressed in paragraph 9 hereof. 19 (22) The Indenture has been duly qualified under the 1939 Act. Nothing has come to such counsel's attention that would lead such counsel to believe that the Registration Statement (including any Rule 462(b) Registration Statement) or any post-effective amendment thereto (except for financial statements and supporting schedules and other financial data included therein or omitted therefrom and for the Form T-1s, as to which such counsel makes no statement), at the time the Registration Statement (including any Rule 462(b) Registration Statement) or any post-effective amendment thereto (including the filing of the Company's Annual Report on Form 10-K with the Commission) became effective or at the date of the Bid, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus or any amendment or supplement thereto (except for financial statements and supporting schedules and other financial data included therein or omitted therefrom, as to which such counsel makes no statement), at the time the Prospectus was issued, at the time any such amended or supplemented prospectus was issued or at the Closing Time, included or includes an untrue statement of a material fact or omitted or omits 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. In rendering such opinion, such counsel may rely as to matters of fact (but not as to legal conclusions), to the extent he deems proper, on certificates of responsible officers of the Company and public officials. Such opinion shall not state that it is to be governed or qualified by, or that it is otherwise subject to, any treatise, written policy or other document relating to legal opinions, including, without limitation, the Legal Opinion Accord of the ABA Section of Business Law (1991). (c) Opinion of Counsel for Underwriters. At Closing Time, the Representative shall have received the favorable opinion, dated as of Closing Time, of Sidley Austin Brown & Wood LLP, counsel for the Underwriters, together with signed or reproduced copies of such letter for each of the other Underwriters, with respect to the matters set forth in subparagraphs (7), (9), (10), (11), (12) (with respect to certain matters set forth under "Description of Debt Securities" only), (19), (22) and the penultimate paragraph of subsection (b) of this Section 6. In giving such opinion, Counsel for the Underwriters may rely as to all matters of New Jersey law and legal conclusions based thereon upon the opinion of counsel of the Company called for by subsection (b) of this Section 6. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers of the Company and its subsidiaries and certificates of public officials. (d) Officer's Certificate. At Closing Time, there shall not have been, since the date of the Bid or since the respective dates as of which information is given in the Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and the Representative shall have received a certificate of the Chairman, the President or any Vice President of the Company, dated as of Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties in Section 1(a) are true and correct with the same force and effect as though expressly made at and as of the Closing Time, (iii) the Company has complied with all 20 agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted, are pending or, to the best of such officer's knowledge, are threatened by the Commission. (e) Accountant's Comfort Letter. At the time of acceptance of the Bid and at the Closing Time, the Representative shall be furnished with a letter from Deloitte & Touche LLP dated such respective dates and addressed to the Board of Directors of the Company and the Representative (on its own behalf and as representative of the Underwriters) with copies thereof for each of the Underwriters, to the effect that (i) they are independent public accountants with respect to the Company and its subsidiaries within the meaning of the 1933 Act and the 1933 Act Regulations; (ii) in their opinion, the audited consolidated financial statements and financial statement schedule(s) incorporated by reference in the Registration Statement and the Prospectus and included in the Company's most recent Annual Report on Form 10-K filed with the Commission under Section 13 of the 1934 Act (the "Form 10-K") comply as to form in all material respects with the applicable accounting requirements of the 1933 Act, the 1933 Act Regulations, the 1934 Act and the 1934 Act Regulations; (iii) on the basis of (1) the performance of the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in Statement on Auditing Standards No. 71, Interim Financial Information, on the unaudited consolidated balance sheets, the unaudited consolidated statements of income and retained earnings, and the unaudited consolidated statements of cash flows, of PSE&G and its subsidiaries included in PSE&G's quarterly reports on Form 10-Q filed with the Commission under Section 13 of the Exchange Act (the "Form 10-Q's") subsequent to the Form 10-K, (2) a reading of the latest available unaudited financial statements of the Company, (3) a reading of the latest Consent of the Sole Shareholder in Lieu of Annual Meeting, the minutes of Meetings of the Board of Directors of the Company as set forth in the minute books for the current year and certain draft resolutions for subsequent meetings, and (4) inquiries of the officers of the Company who have responsibility for financial and accounting matters (it being understood that the foregoing procedures do not constitute an audit made in accordance with generally accepted auditing standards and would not necessarily reveal matters of significance with respect to the comments made in such letter, and accordingly that Deloitte & Touche LLP makes no representation as to the sufficiency of such procedures for the purposes of the Underwriters), nothing has come to their attention which caused them to believe that (A) any material modifications should be made to the unaudited financial statements included in the Forms 10-Q for them to be in conformity with generally accepted accounting principles; (B) the unaudited financial statements included in the Forms 10-Q do not comply as to form in all material respects with the applicable accounting requirements of the 1934 Act and the 1934 Act Regulations or (C) at the date of the latest available financial statements and at a specified date not more than three days prior to the date of such letter, there was any change in the common stock or preferred stock or increase in long-term debt (except for such stock and long-term debt acquired for sinking fund purposes or redeemed pursuant to optional redemption or sinking fund provisions, or changes in capital lease obligations incurred in the ordinary course of the Company's business) of the Company or any decrease in the consolidated net assets of the Company (except as occasioned by the declaration of dividends), in each case as compared with the amounts shown on the most recent consolidated balance sheet of the Company incorporated by reference in the Registration Statement and the Prospectus or, during the period from the date of such balance sheet to a specified date not more than three days prior to the date of such letter, 21 there were any decreases, as compared with the corresponding period in the preceding year, in consolidated revenues or net income of the Company, except in each such case as set forth in or contemplated by the Registration Statement and the Prospectus or except for such exceptions enumerated in such letter as shall have been agreed to by the Underwriters and the Company; (iv) in addition to the audit referred to in their report included or incorporated by reference in the Registration Statement and the Prospectus, and the limited procedures referred to in clause (iii) above, they have carried out certain other specified procedures, not constituting an audit, with respect to certain amounts, percentages and financial information which are included or incorporated by reference in the Registration Statement and the Prospectus and which are specified by the Underwriters, and have found such amounts, percentages and financial information to be in agreement with the relevant accounting, financial and other records of the Company and its subsidiaries identified in such letter, provided, that said letter may vary from requirements specified above in such manner as the Representative may deem not to be material or as may be acceptable to the Representative with the consent of Underwriters who, together with the Representative, have agreed to purchase in the aggregate 50% or more of the Underwritten Securities. (f) Bring-down Comfort Letter. At Closing Time, the Representative shall have received from Deloitte & Touche LLP a letter, dated as of Closing Time, in form and substance satisfactory to the Representative, together with signed or reproduced copies of such letter for each of the other Underwriters to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section 6, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time. (g) BPU Order. At Closing Time and at any relevant Date of Delivery, there shall be in full force and effect an order or orders of the Board of Public Utilities of the State of New Jersey permitting the issuance and sale of the Underwritten Securities substantially in accordance with the terms and conditions herein set forth and containing no provision unacceptable to the Representative (it being understood that any such order in effect as of the date of this Agreement does not contain any such unacceptable provision and that no subsequent order shall be deemed to contain any such unacceptable provision, unless the Representative within 24 hours after receiving a copy thereof from the Company shall have given notice to the Company to the effect that such order contains an unacceptable provision or unacceptable provisions). (h) Ratings. At Closing Time and at any relevant Date of Delivery, the Underwritten Securities shall have the ratings accorded by any "nationally recognized statistical rating organization", as defined by the Commission for purposes of Rule 436(g)(2) of the 1933 Act Regulations, as specified in the Bid, and the Company shall have delivered to the Representative a letter, dated as of such date, from each such rating organization, or other evidence satisfactory to the Representative, confirming that the Underwritten Securities have such ratings. Since the time of execution of the Bid, there shall not have occurred a downgrading in, or withdrawal of, the rating assigned to the Underwritten Securities or any of the Company's other securities by any such rating organization, and no such rating organization shall have publicly announced that it has under surveillance or review its rating of the Underwritten Securities or any of the Company's other securities. 22 (i) Approval of Listing. At Closing Time and at any relevant Date of Delivery, the Underwritten Securities shall have been approved for listing, subject only to official notice of issuance, if and as specified in the Bid. (j) No Objection. If the Registration Statement or an offering of Underwritten Securities has been filed with the NASD for review, the NASD shall not have raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements. (k) Lock-up Agreements. On the date of the Bid, the Representative shall have received, in form and substance satisfactory to it, each lock-up agreement, if any, specified in Bid as being required to be delivered by the persons listed therein. (l) Over-Allotment Option. In the event that the Underwriters are granted an over-allotment option by the Company in the Bid and the Underwriters exercise their option to purchase all or any portion of the Option Underwritten Securities, the representations and warranties of the Company contained herein and the statements in any certificates furnished by the Company or any of its subsidiaries hereunder shall be true and correct as of each Date of Delivery, and, at the relevant Date of Delivery, the Representative shall have received: (1) A certificate, dated such Date of Delivery, of the Chairman, the President or any Vice President of the Company, confirming that the certificate delivered at the Closing Time pursuant to Section 6(d) hereof remains true and correct as of such Date of Delivery. (2) The favorable opinion of either James T. Foran, Esquire, General Corporate Counsel or R. Edwin Selover, Esquire, Senior Vice President and General Counsel for the Company, each in form and substance satisfactory to counsel for the Underwriters, dated such Date of Delivery, relating to the Option Underwritten Securities and otherwise to the same effect as the opinion required by Section 6(b) hereof. (3) The favorable opinion of Sidley Austin Brown & Wood LLP, counsel for the Underwriters, dated such Date of Delivery, relating to the Option Underwritten Securities and otherwise to the same effect as the opinion required by Section 6(c) hereof. (4) A letter from Deloitte & Touche LLP, in form and substance satisfactory to the Representative and dated such Date of Delivery, substantially in the same form and substance as the letter furnished to the Representative pursuant to Section 6(e) hereof, except that the "specified date" in the letter furnished pursuant to this paragraph shall be a date not more than three business days prior to such Date of Delivery. (5) Since the time of execution of the Bid, there shall not have occurred a downgrading in, or withdrawal of, the rating assigned to the Underwritten Securities or any of the Company's other securities by any such rating organization, and no such rating organization shall have publicly announced that it has under surveillance or review its rating of the Underwritten Securities or any of the Company's other securities. (m) Additional Documents. At Closing Time and at each Date of Delivery, counsel for the Underwriters shall have been furnished with such documents and opinions as they may 23 reasonably require for the purpose of enabling them to pass upon the issuance and sale of the Underwritten Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Underwritten Securities as herein contemplated shall be satisfactory in form and substance to the Representative and counsel for the Underwriters. (n) Termination of Agreement. If any condition specified in this Section 6 shall not have been fulfilled when and as required to be fulfilled, this Agreement (or, with respect to the Underwriters' exercise of any applicable over-allotment option for the purchase of Option Underwritten Securities on a Date of Delivery after the Closing Time, the obligations of the Underwriters to purchase the Option Underwritten Securities on such Date of Delivery) may be terminated by the Representative by notice to the Company at any time at or prior to the Closing Time (or such Date of Delivery, as applicable), and such termination shall be without liability of any party to any other party except as provided in Section 5 and except that Sections 1, 7, 8 and 9 shall survive any such termination and remain in full force and effect. SECTION 7. Indemnification. (a) Indemnification of Underwriters. the Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information deemed to be a part thereof, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such untrue statement or omission or such alleged untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Company by an Underwriter through the Representative expressly for use in the Registration Statement, such preliminary prospectus or the Prospectus, or any amendment or supplement thereto; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission or any alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred, reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, 24 or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; provided, however, that this indemnity agreement shall not apply (i) to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representative expressly for use in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information deemed to be a part thereof, if applicable, or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) or (ii) to any Underwriter in connection with any preliminary prospectus to the extent that any such loss, claim, damage or liability of such Underwriter results solely from the fact that such Underwriter sold Underwritten Securities to a person to whom it is established that there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Prospectus (excluding documents incorporated by reference) in any case where such delivery is required by the 1933 Act, if the Company has previously furnished to the Representative on behalf of the Underwriters, including such Underwriter, the copies thereof theretofore requested by the Representative, and the loss, claim, damage or liability of such Underwriter results from an untrue statement or omission of a material fact contained in a preliminary prospectus that was corrected in the Prospectus. (b) In no case shall the Company be liable under the indemnity agreement set forth in Section 7(a) hereof with respect to any claim made against any Underwriter or any such controlling person unless such party shall be notified in writing of the nature of the claim promptly after the assertion thereof, but failure to so notify such party shall not relieve it from any liability which it may have otherwise than on account of said indemnity agreement. the Company shall be entitled to participate at its own expense in the defense, or, if it so elects, within a reasonable time after receipt of such notice, to assume the defense of any suit brought to enforce any such claim, but if it so elects to assume the defense, such defense shall be conducted by counsel chosen by it and approved by the Underwriter or Underwriters or controlling person or persons, defendant or defendants in any suit so brought, which approval shall not be unreasonably withheld. In the event that the Company elects to assume the defense of any such suit and retains such counsel, the Underwriter or Underwriters or controlling person or persons, defendant or defendants in the suit shall bear the fees and expenses of any additional counsel thereafter retained by them. In the event that the parties to any such action (including impleaded parties) include the Company and one or more Underwriters and any such Underwriter shall have been advised by counsel chosen by it and satisfactory to the Company, as the case may be, that there may be one or more legal defenses available to it which are different from or additional to those available to the Company, the Company shall not have the right to assume the defense of such action on behalf of such Underwriter and the Company will reimburse such Underwriter and any person controlling such Underwriter as aforesaid for the reasonable fees and expenses of any counsel retained by them, it being understood that the Company shall not, in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for all such Underwriters and controlling persons, which firm shall be designated by the Representative in writing. the Company agrees to notify the 25 Representative promptly after the assertion of any claim against it, any of its directors, any of its officers who signed the Registration Statement, or any person who controls it within the meaning of Section 15 of the 1933 Act, in connection with the issuance and sale, as the case may be, of the Securities. (c) Indemnification of the Company, Directors and Officers. Each Underwriter severally agrees to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information deemed to be a part thereof, if applicable, or any preliminary prospectus or the Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such Underwriter through the Representative expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the Prospectus (or any amendment or supplement thereto). In case any action shall be brought against the Company or any person so indemnified based on the Registration Statement, such preliminary prospectus or the Prospectus, or any amendment or supplement thereto and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each person so indemnified shall have the rights and duties given to the Underwriters by the provisions of Section 7(b) hereof. (d) The indemnity agreements contained in this Section 7 shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Company, or any Underwriter or any controlling person, and shall survive the delivery of the Securities to the Underwriters. (e) Settlement. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 7 or Section 8 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. SECTION 8. Contribution. In order to provide for just and equitable contribution in circumstances in which the indemnity agreement provided for in Section 7 is for any reason held to be unenforceable by the indemnified parties although applicable in accordance with its terms, the Company and the Underwriters shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by said indemnity agreements incurred by the Company and one or more of the Underwriters, in such proportions that the Underwriters are responsible for that portion represented by the percentage that the underwriting discount in the 26 Bid or appearing on the cover page of the Prospectus relating to the Securities bears to the initial public offering price appearing thereon and the Company, is responsible for the balance; provided, however, that no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person, if any, who controls an Underwriter within the meaning of Section 15 of the 1933 Act shall have the same rights to contribution as such Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act shall have the same rights to contribution as the Company. The Underwriters' respective obligations to contribute pursuant to this Section 8 are several in proportion to the aggregate principal amount of Initial Underwritten Securities set forth opposite their respective names in the Bid and not joint. SECTION 9. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement or the Bid or in certificates of officers of the Company or any of its subsidiaries submitted pursuant hereto or thereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or controlling person, or by or on behalf of the Company, and shall survive delivery of and payment for the Underwritten Securities. If this Agreement shall be terminated pursuant to Section 10 hereof, the Company shall not be under any liability to any Underwriter except as provided in Sections 5, 7 and 8 hereof; but if, for any other reason the transactions contemplated herein are not consummated, the Company will reimburse the Underwriters for all out-of-pocket expenses, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Securities, but the Company shall then be under no further liability to the Underwriters in respect of the Securities not so delivered except as provided in Sections 5, 7 and 8 hereof. Except as provided above, the Company shall not be liable to the Underwriters for damages on account of any other consequential damages or loss of anticipated profits. In all dealings hereunder, the representatives shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by the representatives jointly or by the Representative on behalf of the representatives. SECTION 10. Termination. (a) Agreement. The Representative may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Time or any relevant Date of Delivery, if (a) (i) a general banking moratorium shall have been declared by either Federal or New York authorities, or (ii) there shall have occurred any new outbreak or unforeseen escalation of hostilities or other national or international calamity or crisis, or (iii) there shall have occurred a suspension or material limitation in (x) trading in securities generally on the New York Stock Exchange, (y) trading in any of the Company's securities on the New York Stock Exchange or (z) commercial banking or securities settlement or clearance services in the United States, and the effect of the occurrence of any event referred to in clause (i), (ii) or (iii) above is, in the reasonable judgment 27 of the Representative, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering of the Securities or the delivery of the Securities on the terms and in the manner contemplated in the Prospectus, or (b) the rating accorded the Securities or any of the Company's debt securities or preferred stock by any Rating Agency shall have been lowered since the time this Agreement was executed or if any Rating Agency shall have publicly announced since the time this Agreement was executed that it has placed its rating of the Securities or any of the Company's debt securities or preferred stock under surveillance or review, with possible negative implications. (b) ______ Liabilities. If this Agreement is terminated pursuant to this Section 10, such termination shall be without liability of any party to any other party except as provided in Section 5 hereof, and provided further that Sections 1, 7, 8 and 9 shall survive such termination and remain in full force and effect. SECTION 11. Default by One or More of the Underwriters. If one or more of the Underwriters shall fail at the Closing Time or the relevant Date of Delivery, as the case may be, to purchase the Underwritten Securities which it or they are obligated to purchase under the Bid (the "Defaulted Securities"), then the Representative shall have the right, within 36 hours thereafter, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representative shall not have completed such arrangements within such 36-hour period, then: (a) if the aggregate principal amount of Defaulted Securities does not exceed 10% of the aggregate principal amount of Underwritten Securities to be purchased on such date pursuant to the Bid, the non-defaulting Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations under the Bid bear to the underwriting obligations of all non-defaulting Underwriters, or (b) if the aggregate principal amount of Defaulted Securities exceeds 10% of the aggregate principal amount of Underwritten Securities to be purchased on such date pursuant to the Bid, this Agreement (or, with respect to the Underwriters' exercise of any applicable over-allotment option for the purchase of Option Underwritten Securities on a Date of Delivery after the Closing Time, the obligations of the Underwriters to purchase, and the Company to sell, such Option Underwritten Securities on such Date of Delivery) shall terminate without liability on the part of any non-defaulting Underwriter. No action taken pursuant to this Section 11 shall relieve any defaulting Underwriter from liability in respect of its default. In the event of any such default which does not result in (i) a termination of this Agreement or (ii) in the case of a Date of Delivery after the Closing Time, a termination of the obligations of the Underwriters and the Company with respect to the related Option Underwritten Securities, as the case may be, either the Representative or the Company shall have the right to postpone the Closing Time or the relevant Date of Delivery, as the case may be, for a 28 period not exceeding seven days in order to effect any required changes in the Registration Statement or the Prospectus or in any other documents or arrangements. SECTION 12. Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be directed to _____________________________________, attention of ______________; and notices to the Company shall be directed to it at 80 Park Plaza, P.O. Box 1171, Newark, New Jersey 07101, attention of James T. Foran, Esq., General Corporate Counsel. SECTION 13. Parties. This Agreement and the Bid shall each inure to the benefit of and be binding upon the Company and the Underwriters and their respective successors. Nothing expressed or mentioned in this Agreement or the Bid is intended or shall be construed to give any person, firm or corporation, other than the Underwriters and the Company and their respective successors and the controlling persons and officers and directors referred to in Sections 7 and 8 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or the Bid or any provision herein or therein contained. This Agreement and the Bid and all conditions and provisions hereof and thereof are intended to be for the sole and exclusive benefit of the parties hereto and thereto and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Underwritten Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase. SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT AND THE BID SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY (WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES). SPECIFIED TIMES OF DAY REFER TO NEWARK, NEW JERSEY TIME. SECTION 15. Effect of Headings. The Article and Section headings herein are for convenience only and shall not affect the construction hereof. 29 EX-1.2 5 e13009ex12.txt UNDERWRITING AGREEMENT Exhibit 1.2 PSE&G Capital Trust III _____ % [Trust Preferred Securities], Series _ (liquidation amount $25 per security) guaranteed to the extent the Trust has available funds by Public Service Electric and Gas Company ---------- Underwriting Agreement ---------- __________, 200_ [Name and Address of Underwriter(s)] Dear Sirs: PSE&G Capital Trust III, a Delaware statutory business trust (the "Trust"), and Public Service Electric and Gas Company, a New Jersey corporation ("PSE&G"), propose, subject to the terms and conditions stated herein, that the Trust issue and sell to the Underwriters named in Schedule I hereto (the "Underwriters") _________ _____% [Trust Preferred Securities], Series _ (liquidation amount $25 per security), representing undivided beneficial interests in the assets of the Trust (the "Preferred Securities"), guaranteed by PSE&G as to the payment of distributions and payments upon liquidation or redemption, and benefiting from certain additional undertakings of PSE&G to the extent set forth (i) in the Guarantee Agreement between PSE&G and First Union National Bank, National Association, as trustee thereunder (the "Guarantee Trustee"), to be dated as of the Time of Delivery (as defined in Section 4 hereof) (the "Guarantee"), (ii) PSE&G's _____% Deferrable Interest Subordinated Debentures, Series _ (the "Subordinated Debentures"), to be executed at the Time of Delivery, (iii) the Indenture between PSE&G and First Union National Bank, National Association, as trustee thereunder (the "Debenture Trustee"), dated as of June 1, 1996, as supplemented by the [______] Supplemental Indenture thereto, dated as of February 1, 1997, relating to the Subordinated Debentures (collectively, the "Indenture") and (iv) the trust agreement between PSE&G, as depositor, and the trustees named therein (as amended and restated from time to time, the "Trust Agreement"). Concurrently with the issuance of the Preferred Securities and PSE&G's investment in the common securities of the Trust (the "Common Securities") representing undivided beneficial interests in the assets of the Trust, the Trust will loan the proceeds thereof to PSE&G and, to evidence such loan, PSE&G will issue and deliver to the Trust the Subordinated Debentures, which will be issued under the Indenture. 1. Each of the Trust and PSE&G, jointly and severally, represents and warrants to, and agrees with, each of the Underwriters that: (a) A registration statement on Form S-3 (File No. 333-76020), in respect of, among other things, the Preferred Securities, the Guarantee and the Subordinated Debentures (collectively, the "Registered Securities") has been filed with the Securities and Exchange Commission (the "Commission") pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Act"), and delivered to the Representatives; such registration statement, which also constitutes post-effective amendment no. 1 to registration statement on Form S-3 (No. 333-2763), and any post-effective amendment thereto, each in the form heretofore delivered to the Representatives, have been declared effective by the Commission in such form; no other document with respect to such registration statement or document incorporated by reference therein has heretofore been filed, or transmitted for filing, with the Commission; and no stop order suspending the effectiveness of such registration statement, which also constitutes post-effective amendment no. 1 to registration statement on Form S-3 (No. 333-2763), has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in such registration statement or thereafter filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the Commission under the Act is referred to herein as a "Preliminary Prospectus"; the various parts of such registration statement, including (i) all exhibits thereto, (ii) if applicable, the information contained in the form of prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be a part of the registration statement at the time it was declared effective and (iii) the documents incorporated by reference in the prospectus contained in the registration statement at the time such part of such registration statement became effective, each as amended at the time such part of such registration statement became effective, are referred to herein collectively as the "Registration Statement"; the final prospectus, as supplemented by the related prospectus supplement, in the form first filed with respect to the Preferred Securities pursuant to Rule 424(b) under the Act, is referred to herein collectively as the "Prospectus"; any reference herein to any Preliminary Prospectus 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 under the Act, as of the date of such Preliminary Prospectus or Prospectus, as the case may be; and any reference to any amendment or supplement to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include any documents filed after the date of such Preliminary Prospectus or Prospectus, as the case may be, under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by reference in such Preliminary Prospectus or Prospectus, as the case may be; and any reference to any amendment to the Registration Statement shall be deemed to refer to and include PSE&G's most recent annual report on Form 10-K filed pursuant to Section 13(a) or 15(d) of the Exchange Act after the effective date of the Registration Statement that is incorporated by reference in the Registration Statement (the "Form 10-K")); (b) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which 2 they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Trust or PSE&G by an Underwriter through the Representatives expressly for use therein; (c) The documents incorporated by reference in the Prospectus, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Prospectus or any further amendment or supplement thereto, when such documents are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Trust or PSE&G by an Underwriter through the Representatives expressly for use therein; (d) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Act and the Trust Indenture Act of 1939, as amended (the "TIA"), and the rules and regulations of the Commission thereunder and do not and will not, (i) as of the applicable effective date as to the Registration Statement and any amendment thereto and (ii) as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Trust or PSE&G by an Underwriter through the Representatives expressly for use therein; (e) Deloitte & Touche LLP are independent public accountants with respect to PSE&G as required by the Act and the rules and regulations of the Commission thereunder; (f) Neither the Trust nor PSE&G has sustained since the date of the latest audited financial statements included or incorporated by reference in the Prospectus any material loss from fire, explosion, flood, accident or other calamity not fully covered by insurance, otherwise than as set forth or contemplated in the Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any material increase in long-term debt of PSE&G and its subsidiaries, considered as a whole, or any material adverse change in or affecting the 3 general affairs, financial position, stockholders' equity or results of operations of PSE&G and its subsidiaries, considered as a whole, or any material transaction (other than one entered into in the ordinary course of business) entered into by the Trust or PSE&G, in each case otherwise than as set forth in or contemplated by the Prospectus; (g) The Trust has been duly created and is validly existing as a statutory business trust in good standing under the Business Trust Act of the State of Delaware (the "Delaware Business Trust Act") with the trust power and authority to own property and conduct its business as described in the Prospectus, and has conducted and will conduct no business other than the transactions contemplated by this Agreement and described in the Prospectus; the Trust is not a party to or bound by any agreement or instrument other than this Agreement, the Trust Agreement and the agreements and instruments contemplated by the Trust Agreement and described in the Prospectus; the Trust has no liabilities or obligations other than those arising out of the transactions contemplated by this Agreement and the Trust Agreement and described in the Prospectus; and the Trust is not a party to or subject to any action, suit or proceeding of any nature: (h) PSE&G has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of New Jersey, with due corporate authority to own and operate its properties and conduct its business as described in the Prospectus; (i) The issuance and sale of the Preferred Securities and the Common Securities by the Trust, the compliance by the Trust with all of the provisions of this Agreement, the purchase of the Subordinated Debentures by the Trust from PSE&G, the distribution of the Subordinated Debentures upon the liquidation of the Trust in the circumstances contemplated by the Trust Agreement and described in the Prospectus, and the consummation by the Trust of the transactions contemplated herein and in the Trust Agreement, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any agreement or instrument to which the Trust is a party or by which the Trust is bound or to which any of the property or assets of the Trust is subject, nor will such action result in any violation of the provisions of the Trust Agreement or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Trust or any of its properties; (j) The issuance and sale of the Preferred Securities and the Common Securities by the Trust, the issuance by PSE&G of the Subordinated Debentures and the Guarantee, the compliance by PSE&G and the Trust with all of the provisions of this Agreement, the execution, delivery and performance by PSE&G of the Trust Agreement, the Guarantee, the Indenture and the Subordinated Debentures (collectively, the "PSE&G Agreements"), the distribution of the Subordinated Debentures upon the liquidation of the Trust in the circumstances contemplated by the Trust Agreement and described in the Prospectus, and the consummation of the transactions herein and therein contemplated, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which PSE&G is a party or by which PSE&G is bound or to which any of the property or assets of PSE&G is subject, nor will such action result in any violation of the provisions of the charter or by-laws of PSE&G or any statute 4 or any order, rule or regulation of any court or governmental agency or body having jurisdiction over PSE&G or any of its properties; (k) No consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body having jurisdiction over the Trust or PSE&G or any of their properties is required for the issuance and sale of the Preferred Securities and Common Securities by the Trust, the issuance by PSE&G of the Subordinated Debentures and the Guarantee, the purchase of the Subordinated Debentures by the Trust from PSE&G, the distribution of the Subordinated Debentures upon the liquidation of the Trust in the circumstances contemplated by the Trust Agreement and described in the Prospectus, the execution, delivery and performance by PSE&G of the PSE&G Agreements, or the consummation of the transactions contemplated herein or therein, except the approval, consent and order of the Board of Public Utilities of the State of New Jersey with respect to the issuance by PSE&G of the Subordinated Debentures and the Guarantee, registration of the Registered Securities under the Act, registration of the Preferred Securities under the Exchange Act, the qualification of the Trust Agreement, the Indenture and the Guarantee under the TIA and such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the issuance and sale, as the case may be, of the Registered Securities; and (l) Other than as set forth in or contemplated by the Prospectus, there are no legal or governmental proceedings pending to which PSE&G is a party or of which any property of PSE&G is the subject which is reasonably likely to have a material adverse effect on the consolidated financial position, stockholders' equity or results of operations of PSE&G and its subsidiaries; and, to the best of PSE&G's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others. 2. Subject to the terms and conditions herein set forth, the Trust agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase, at a purchase price per share of $25.00 per Preferred Security, the number of Preferred Securities set forth opposite the name of such Underwriter in Schedule I hereto. As compensation to the Underwriters for their commitments hereunder, and in view of the fact that the proceeds of the sale of the Preferred Securities will be used by the Trust. to purchase the Subordinated Debentures of PSE&G, PSE&G hereby agrees to pay at the Time of Delivery to [_______________], for the accounts of the several Underwriters, an amount equal to $______ per share for the Preferred Securities, except that such commission will be $____ per Preferred Security sold to certain institutions. 3. Upon the authorization by the Representatives of the release of the Preferred Securities, the several Underwriters propose to offer the Preferred Securities for sale upon the terms and conditions set forth in the Prospectus. 4. The Preferred Securities to be purchased by each Underwriter hereunder will be represented by a global certificate or certificates in book-entry form which will be deposited by 5 of on behalf of the Trust with The Depository Trust Company ("DTC") or its designated custodian and registered in the name of Cede & Co., as nominee of DTC. The Trust will deliver the Preferred Securities to [__________________], for the account of each Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of immediately available funds to the Trust, by causing DTC to credit the Preferred Securities to the account of [________________] at DTC. The time, date and location of such delivery and payment (the "Time of Delivery") shall be 10:00 a.m., New Jersey time, on __________, 200_, or at such other time and date as the Representatives, the Trust and PSE&G May agree upon in writing at the office of the Trust, 80 Park Plaza, Newark, New Jersey. At the Time of Delivery, PSE&G will pay, or cause to be paid, the compensation payable to the Underwriters under Section 2 hereof by wire transfer of immediately available funds to [_________________], on behalf of the Underwriters. 5. Each of the Trust and PSE&G, jointly and severally, agrees with each of the Underwriters: (a) To prepare the Prospectus in a form approved by the Representatives and to file such Prospectus pursuant to Rule 424(b) under the Act within the time prescribed under Rule 424(b) or Rule 430A(a)(3), as the case may be, under the Act; to make no further amendment or any supplement to the Registration Statement or the Prospectus prior to the Time of Delivery which shall be reasonably disapproved by the Representatives promptly after reasonable notice thereof; to advise the Representatives, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish the Representatives with copies thereof; in the case of PSE&G, prior to the termination of the offering of the Preferred Securities, to file promptly all reports and any definitive proxy or information statements required to be filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act; to advise the Representatives, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or Prospectus, of the suspension of the qualification of the Registered Securities for offering or sale in any jurisdiction of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any prospectus relating to the Registered Securities or suspending any such qualification, to use promptly its best efforts to obtain its withdrawal; (b) ______ To use its best efforts to qualify the Registered Securities for offering and sale under the securities laws of such jurisdictions of the United States as the Representatives may designate and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Preferred Securities, provided that in connection therewith neither the Trust nor PSE&G shall be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; 6 (c) To furnish the Underwriters with copies of the Prospectus in such quantities as the Representatives may reasonably request, and, if the delivery of a prospectus is required in connection with the offering or sale of the Preferred Securities and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would contain an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such Period to amend or supplement the Prospectus or to file under the Exchange Act any document incorporated by reference in the Prospectus in order to comply with the Act or the Exchange Act, to notify the Representatives and upon the request of the Representatives to file such document and to prepare and furnish without charge to each underwriter and to any dealer in securities as many copies as the Representatives may reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance, (d) In the case of PSE&G, to make generally available to its security holders as soon as practicable, but no later than 60 days after the close of the period covered thereby, an earnings statement in form complying with the provisions of Rule 158 under the Act) covering the l2-month period beginning not later than the first day of PSE&G's fiscal quarter next following the effective date (as defined in Rule 158) of the Registration Statement; (e) During the period beginning from the date hereof and continuing to and including the earlier of (i) the date, after the Time of Delivery, on which the distribution of the Preferred Securities ceases, as determined by the Representatives or (ii) 30 days after the Time of Delivery, not to offer, sell, contract to sell or otherwise dispose of any Preferred Securities, any other preferred beneficial interests in the Trust or any securities of PSE&G which are substantially similar to the Subordinated Debentures, the Guarantee or the Preferred Securities, or any securities convertible into or exchangeable for or representing the right to receive any of the aforementioned securities, without the prior written consent of the Representatives (other than the Preferred Securities or securities issued pursuant to PSE&G's stock option or other benefit or incentive plans maintained for its officers, directors, or employees); (f) In the case of PSE&G, to issue the Guarantee and the Subordinated Debentures concurrently with the issuance and sale of the Preferred Securities as contemplated herein; and (g) To use its best efforts to list, subject to notice of issuance, (i) the Preferred Securities and (ii) the Subordinated Debentures, upon any distribution upon the liquidation of the Trust to holders of the Preferred Securities, in each case on the New York Stock Exchange. 6. The Trust and PSE&G, jointly and severally, covenant and agree with the several Underwriters that they will pay the following: (i) the fees, disbursements and expenses of the Trust's and PSE&G's counsel and accountants in connection with the registration of the 7 Registered Securities under the Act and all other expenses in connection with the preparation, printing and filing of the registration Statement, any Preliminary Prospectus and the Prospectus and any amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing or producing any Agreement Among Underwriters, this Agreement, the Blue Sky Memoranda and any other documents in connection with the offering, purchase, sale and delivery of the Registered Securities: (iii) all expenses in connection with the qualification of the Registered Securities for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Underwriters (not to exceed [$___________]) in connection with such qualification and in connection with the Blue Sky Memoranda; (iv) any fees charged by Standard & Poor's Ratings Services, Moody's Investors Service, Inc. or Duff & Phelps Credit Rating Co. (each, a "Rating Agency") for rating the Preferred Securities; (v) the reasonable costs and charges of the transfer agent or registrar; (vi) the costs of any depositary arrangements for the Preferred Securities with DTC or any successor depositary; all fees and reasonable expenses of the Trustees, the Debenture Trustee and the Guarantee Trustee and any agent thereof and the fees and disbursements of their counsel; (viii) all fees and expenses in connection with the listing of the Preferred Securities and, if applicable, the Subordinated Debentures on the New York Stock Exchange and the cost of registering the Preferred Securities under Section 12 of the Exchange Act; (ix) the printing of the Preferred securities and the Subordinated Debentures in certificated form, if required; and (x) all other costs and expenses incident to the performance of obligations hereunder which are not otherwise specifically provided for in this Section. It is understood, however, that, except as provided in this Section, Section 8 and Section 12 hereof, the Underwriters will pay all of their own costs and expenses including the fees of their counsel, stock transfer taxes on resale of any of the preferred Securities by them, and any advertising expenses connected with any offers they may make. 7. The obligations of the Underwriters hereunder shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Trust and PSE&G herein are, at and as of the Time of Delivery, true and correct, the condition that the Trust and PSE&G shall have performed all of their obligations hereunder theretofore to be performed, and the following additional conditions: (a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) and Rule 430A(a)(3), if applicable, within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; and no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; (b) Sidley Austin Brown & Wood LLP, counsel for the Underwriters, shall have furnished to the Representatives their written opinion, dated the Time of Delivery, with respect to the matters referred to in clauses (iii), (iv), (v), (vii), (x), (xi) and (xv) of Section 7(c) hereof (it being understood that such counsel may rely as to all matters of New Jersey law and legal conclusions based thereon upon the opinion of counsel for PSE&G referred to in Section 7(c) hereof and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; 8 (c) R. Edwin Selover, Esq., Senior Vice President and General Counsel, or James T. Foran, Esq., General Corporate Counsel, of PSE&G, shall have furnished to the Representatives his written opinion, dated the Time of Delivery, to the effect that: (i) PSE&G has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of New Jersey, with due corporate authority to own and operate its properties and conduct its business as described in the Prospectus; (ii) PSE&G is a subsidiary of Public Service Enterprise Group Incorporated, which is a public utility holding company exempt from the provisions of the Public Utility Holding Company Act of 1935 (except Section 9(a)(2) thereof); (iii) The PSE&G Agreements each have been duly authorized, executed and delivered by PSE&G and constitute valid instruments or obligations, as the case may be, legally binding upon and enforceable against PSE&G (except as limited by bankruptcy, insolvency or other laws or equitable principles affecting creditors' rights generally); and the Subordinated Debentures are entitled to the benefits provided by the Indenture; (iv) The Trust Agreement, the Indenture and the Guarantee have been duly qualified under the TIA; (v) This Agreement has been duly authorized, executed and delivered by each of the Trust and PSE&G; (vi) The franchises of PSE&G are sufficient authority for it to carry on its business as described in the Prospectus; (vii) All approvals, consents and orders of the Board of Public Utilities of the State of New Jersey legally required for the issuance by PSE&G of the Guarantee and the Subordinated Debentures have been obtained and are in full force and effect; any approval, consent or order of any other commission or other governmental authority legally required for the issuance and sale, as the case may be, of the Registered Securities has been obtained (except that such issuance and sale may be subject to the provisions of the securities laws of certain states); and such issuance and sale is in accordance with the approvals, consents and orders obtained; (viii) The issuance and sale of the Preferred Securities and the Common Securities by the Trust, the compliance by the Trust with all of the provisions of this Agreement, the purchase of the Subordinated Debentures by the Trust from PSE&G, the distribution of the Subordinated Debentures upon the liquidation of the Trust in the circumstances contemplated by the Trust Agreement and described in the Prospectus, and the consummation of the transactions contemplated herein and in the Trust Agreement, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default 9 under, any agreement or instrument known to such counsel to which the Trust is a party or by which the Trust is bound or to which any of the property or assets of the Trust is subject, nor will such action result in any violation of the provisions of the Trust Agreement or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Trust or any of its properties; (ix) The issuance and sale of the Preferred Securities and the Common Securities by the Trust, the issuance by PSE&G of the Guarantee and the Subordinated Debentures, the compliance by PSE&G and the Trust with all of the provisions of this Agreement, the execution, delivery and performance by PSE&G of the PSE&G Agreements, the distribution of the Subordinated Debentures upon the liquidation of the Trust in the circumstances contemplated by the Trust Agreement and described in the Prospectus and the consummation of the transactions herein and therein contemplated, will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any agreement or instrument known to such counsel to which PSE&G is a party or by which PSE&G is bound or to which any of the property or assets of PSE&G is subject, nor will such action result in any violation of the provisions of the charter or by-laws of PSE&G or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over PSE&G or any of its properties; (x) The Registered Securities conform as to legal matters to the statements concerning them in the Prospectus; and the summaries of the PSE&G Agreements contained in the Prospectus constitute correct summaries thereof for use therein; (xi) The statements set forth in the Prospectus under the captions "Description of the Preferred Securities," "Certain Terms of the Series _ Preferred Securities," "Description of the Guarantee," "Description of the Debentures," "Certain Terms of the Series _ Debentures," and "Relationship among the Preferred Securities, the Debentures and the Guarantee," insofar as they constitute summaries or matters of law or legal conclusions, fairly present the information set forth therein; (xii) The statements made in PSE&G's Form 10-K under "Rate Matters" and "Environmental Matters" in Item 1"--Business" and under Item 3 "--Legal Proceedings" fairly present the information set forth therein; (xiii) To such counsel's knowledge, there are no legal or governmental proceedings pending to which the Trust is a party or of which any property of the Trust is the subject; and, to such counsel's knowledge, no such proceedings are threatened or contemplated by governmental authorities; (xiv) The documents incorporated by reference in the Prospectus or any further amendment or supplement thereto made by the Trust or PSE&G prior to 10 the Time of Delivery (other than the financial statements and related schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission, complied as to form in all material respects with the requirements of the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder; and, on the basis of a general review and discussion with certain officers and employees of PSE&G but without independent check or verification, such counsel has no reason to believe that any of such documents, when such documents were so filed, contained an untrue statement of a material fact or omitted 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; and (xv) The Registration Statement and the Prospectus and any further amendments and supplements thereto made by the Trust or PSE&G prior to the Time of Delivery (other than the financial statements and related schedules therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Act and the TIA and the rules and regulations thereunder; and on the basis of a general review and discussion with certain officers and employees of PSE&G but without independent check or verification except as indicated in Subsections (x) and (xi) of this Section 7(c), such counsel has no reason to believe that, as of its effective date, the Registration Statement or any further amendment thereto made by the Trust or PSE&G prior to the Time of Delivery (other than the financial statements and related schedules therein and other financial data therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that, as of its date or as of the Time of Delivery, the Prospectus or any further amendment or supplement thereto made by the Trust or PSE&G prior to the Time of Delivery (other than the financial statements and related schedules therein and other financial data therein, as to which such counsel need express no opinion) contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; Such counsel may rely as to all matters of Pennsylvania law and legal conclusions based thereon upon the opinion of such counsel referred to in Section 7(d) hereof and as to all matters of Delaware law and legal conclusions based thereon upon the opinion of such counsel referred to in Section 7(e) hereof. (d) Ballard Spahr Andrews & Ingersoll LLP, special counsel for the Trust and PSE&G, shall have furnished to the Representatives their written opinion, dated the Time of Delivery, in form and substance satisfactory to the Representatives, to the effect that: (i) Neither the Trust nor PSE&G is an "investment company" or an entity "controlled" by an "investment company" required to be registered under the Investment Company Act of 1940, as amended; and 11 (ii) The statements made in the Prospectus under the caption "United States Taxation," to the extent they constitute matters of law or legal conclusions, have been reviewed by such counsel and are accurate, complete and correct and fairly present the information set forth therein. (e) Richards, Layton & Finger P.A., special Delaware counsel for the Trust and PSE&G, shall have furnished to the Representatives their written opinion, dated the Time of Delivery, in form and substance satisfactory to the Representatives, to the effect that: (i) The Trust has been duly created and is validly existing in good standing as a business trust under the Delaware Business Trust Act, and all filings required under the laws of the State of Delaware with respect to the creation and valid existence of the Trust as a business trust have been made; (ii) Under the Delaware Business Trust Act and the Trust Agreement, the Trust has the trust power and authority to own property and conduct its business as described in the Prospectus; (iii) Under the Delaware Business Trust Act and the Trust Agreement, the Trust has the trust power and authority (a) to execute and deliver, and to perform its obligations under, this Agreement and (b) to issue and perform its obligations under the Preferred Securities and the Common Securities; (iv) Under the Delaware Business Trust Act and the Trust Agreement, the execution and delivery by the Trust of this Agreement, and the performance by the Trust of its obligations hereunder, have been duly authorized by all necessary trust action on the part of the Trust; (v) The Trust Agreement constitutes a valid and binding obligation of PSE&G and the Trustees, enforceable against PSE&G and the Trustees, in accordance with its terms, subject, as to enforcement, to the effect upon the Trust Agreement of (a) bankruptcy, insolvency, moratorium, receivership, liquidation, fraudulent conveyance, reorganization and other similar laws relating to or affecting the remedies and rights of creditors, (b) principles of equity, including applicable law relating to fiduciary duties (regardless of whether considered or applied in a proceeding in equity or at law) and (c) the effect of applicable public policy on the enforceability of provisions relating to indemnification or contribution; (vi) The Preferred Securities have been duly authorized by the Trust Agreement and are duly and validly issued and, subject to the qualifications set forth herein, fully paid and non-assessable undivided beneficial interests in the assets of the Trust; the holders of the Preferred Securities, as beneficial owners of the Trust (the "Securityholders"), are entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware; and provided that 12 such counsel may note that the Securityholders may be obligated, pursuant to the Trust Agreement, to (a) provide indemnity and/or security in connection with and pay a sum sufficient to cover any taxes or governmental charges arising from transfers or exchanges of Preferred Securities certificates and the issuance of replacement Preferred Securities certificates and (b) provide security, and/or indemnity in connection with requests of or directions to the Property Trustee (as defined in the Trust Agreement) to exercise its rights and powers under the Trust Agreement; and under the Delaware Business Trust Act and the Trust Agreement, the issuance of the Preferred Securities is not subject to preemptive or other similar rights; (vii) The Common Securities have been duly authorized by the Trust Agreement and are duly and validly issued and fully paid undivided beneficial interests in the assets of the Trust; and under the Delaware Business Trust Act and the Trust Agreement, the issuance of the Common Securities is not subject to preemptive or other similar rights; (viii) The issuance and sale by the Trust of the Preferred Securities and the Common Securities, the execution, delivery and performance by the Trust of this Agreement, the consummation by the Trust of the transactions contemplated herein and the compliance by the Trust with its obligations hereunder do not violate (a) any of the provisions of the Certificate of Trust of the Trust or the Trust Agreement or (b) any applicable Delaware law or Delaware administrative regulation; (ix) Assuming that the Trust derives no income from or connected with sources within the State of Delaware and has no assets, activities (other than having a Delaware trustee as required by the Delaware Business Trust Act and the filing of documents with the Secretary of State of the State of Delaware) or employees in the State of Delaware, no authorization, approval, consent or order of any Delaware court or Delaware governmental authority or Delaware agency is required to be obtained by the Trust solely as a result of the issuance and sale of the Preferred Securities, the consummation by the Trust of the transactions contemplated herein or the compliance by the Trust of its obligations hereunder; and (x) Assuming that the Trust derives no income from or connected with sources within the State of Delaware and has no assets, activities (other than having a Delaware trustee as required by the Delaware Business Trust Act and the filing of documents with the Secretary of State of the State of Delaware) or employees in the State of Delaware, and assuming that the Trust is treated as a grantor trust for federal income tax purposes, the Securityholders (other than those holders of the Preferred Securities who reside or are domiciled in the State of Delaware) will have no liability for income taxes imposed by the State of Delaware solely as a result of their participation in the Trust, and the Trust will not be liable for any income tax imposed by the State of Delaware (in rendering 13 the opinion expressed in this paragraph (x), such counsel need express no opinion concerning the securities laws of the State of Delaware). (f) On the date of this Agreement and also at the Time of Delivery, Deloitte & Touche LLP shall have furnished to the Representatives a letter, dated the respective date of delivery thereof, in form and substance satisfactory to the Representatives, to the effect that: (i) they are independent public accountants with respect to PSE&G and its subsidiaries within the meaning of the Act and the applicable published rules and regulations thereunder (the "Act Regulations"); (ii) in their opinion, the audited consolidated financial statements and financial statement schedule(s) incorporated by reference in the Registration Statement and the Prospectus and included in the Form 10-K comply as to form in all material respects with the applicable accounting requirements of the Act, the Act Regulations, the Exchange Act and the applicable published rules and regulations thereunder (the "Exchange Act Regulations"); (iii) on the basis of (1) the performance of the procedures specified by the American Institute of Certified Public Accountants for a review of interim financial information as described in Statement on Auditing Standards No. 71, Interim Financial Information, on the unaudited consolidated balance sheets, the unaudited consolidated statements of income and retained earnings, and the unaudited consolidated statements of cash flows, of PSE&G and its subsidiaries included in PSE&G's quarterly reports on Form 10-Q filed with the Commission under Section 13 of the Exchange Act (the "Form 10-Q's") subsequent to the Form 10-K, (2) a reading of the latest available unaudited financial statements of PSE&G, (3) a reading of the latest Consent of the Sole Shareholder in Lieu of Annual Meeting, the minutes of Meetings of the Board of Directors of PSE&G as set forth in the minute books for the current year and certain draft resolutions for subsequent meetings and (4) inquiries of the officers of PSE&G who have responsibility for financial and accounting matters (it being understood that the foregoing procedures do not constitute an audit made in accordance with generally accepted auditing standards and would not necessarily reveal matters of significance with respect to the comments made in such letter, and accordingly that Deloitte & Touche LLP makes no representation as to the sufficiency of such procedures for the purposes of the several Underwriters), nothing has come to their attention which caused them to believe that (A) any material modifications should be made to the unaudited consolidated financial statements included in the Form 10-Q's for them to be in conformity with generally accepted accounting principles; (B) the unaudited consolidated financial statements included in the Form 10-Q's do not comply as to form in all material respects with the applicable accounting requirements of the Exchange Act as they apply to Form 10-Q and Exchange Act Regulations or (C) at the date of the latest available consolidated financial statements and at a specified date not more than three business days prior to the date of such letter, there was any change in the common stock or 14 preferred stock or increase in long-term debt (except for such stock and long-term debt acquired for sinking fund purposes or redeemed pursuant to optional redemption or sinking fund provisions, or changes in capital lease obligations incurred in the ordinary course of PSE&G's business) of PSE&G or any decrease in the consolidated net assets of PSE&G (except as occasioned by the declaration of dividends), in each case as compared with the amounts shown on the most recent consolidated balance sheet of PSE&G incorporated by reference in the Registration Statement and the Prospectus or, during the period from the date of such balance sheet to a specified date not more than three business days prior to the date of such letter, upon inquiries of the appropriate officers of PSE&G, there were any decreases, as compared with the corresponding period in the preceding year, in consolidated revenues or net income of PSE&G, except in each such case as set forth in or contemplated by the Registration Statement and the Prospectus or except for such exceptions enumerated in such letter as shall have been agreed to by the Representatives and PSE&G; and (iv) in addition to the audit referred to in their report appearing in the Form 10-K incorporated by reference in the Registration Statement and the Prospectus, and the limited procedures referred to in clause (iii) above, they have carried out certain other specified procedures, not constituting an audit, with respect to certain amounts, percentages and financial information which are included or incorporated by reference in the Registration Statement and the Prospectus and which are specified by the Representatives, and have found such amounts, percentages and financial information to be in agreement with the relevant accounting, financial and other records of PSE&G and its subsidiaries identified in such letter, provided that said letter may vary from the requirements specified above in such manner as you may deem not to be material or as may be acceptable to the Representatives with the consent of Underwriters who have agreed to purchase in the aggregate 50% or more of the Preferred Securities. (g) The Trust Agreement, the Guarantee and the Indenture shall have been executed and delivered, in each case in a form reasonably satisfactory to the Representatives: (h) Neither the Trust nor PSE&G shall have sustained since the date of the latest audited financial statements included or incorporated by reference in the Prospectus any loss from fire, explosion, flood, accident or other calamity not fully covered by insurance, otherwise than as set forth or contemplated in the Prospectus, and (ii) since the respective dates as of which information is given in the Registration Statement and the Prospectus, there shall not have been any increase in long-term debt of PSE&G and its subsidiaries considered as a whole, or any change in or affecting the general affairs, financial position, or equity or results of operations of the Trust or PSE&G and its subsidiaries considered as a whole, or any transaction (other than one entered into in the ordinary course of business) entered into by the Trust or PSE&G, in each case otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in clause (i) or (ii), is in the reasonable judgment of the Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the public 15 offering of the Preferred Securities or the delivery of the Preferred Securities on the terms and in the manner contemplated in the Prospectus; (i) The Preferred Securities shall have been duly listed, subject to official notice of issuance, on the New York Stock Exchange; and (j) At the Time of Delivery, the Representatives shall have received certificates of duly authorized officers of the Trust and PSE&G, dated the Time of Delivery, to the effect that: (i) the Prospectus has been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with the provisions of this Agreement; and no stop order suspending the effectiveness of the Registration Statement or any part thereof has been issued and no proceeding for that purpose has been initiated or threatened by the Commission; (ii) the representations and warranties of the Trust and PSE&G contained herein are true and correct as if made at and as of the Time of Delivery; (iii) the Trust and PSE&G have performed all agreements contained herein to be performed by them at or prior to the Time of Delivery; and (iv) Neither the Trust nor PSE&G has sustained since the date of the latest audited financial statements included or incorporated by reference in the Prospectus any material loss from fire, explosion, flood, accident or other calamity not fully covered by insurance, otherwise than as set forth or contemplated in the Prospectus, and since the respective dates as of which information is given in the Registration Statement and the Prospectus, there shall not have been any material increase in long-term debt of PSE&G and its subsidiaries, considered as a whole, or any material adverse change in or affecting the general affairs, financial position, equity or results of operations of the Trust or PSE&G and its subsidiaries, considered as a whole, or any transaction (other than one entered into in the ordinary course of business) entered into by the Trust or PSE&G, in each case otherwise than as set forth or contemplated in the Prospectus. 8. (a) The Trust and PSE&G, jointly and severally, agree to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act, as follows: (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged statement of a material fact contained in the Registration Statement (or any amendment thereto), or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus or the Prospectus (or any amendment or 16 supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such untrue statement or omission or such alleged untrue statement or omission was made in reliance upon and in conformity with written information furnished to the Trust or PSE&G by an Underwriter through the Representatives expressly for use in the Registration Statement, such Preliminary Prospectus or the Prospectus, or any amendment or supplement thereto; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission or any alleged untrue statement or omission, if such settlement is effected with the written consent of the Trust and PSE&G; and (iii) against any and all expense whatsoever, as incurred, reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above. The Trust and PSE&G shall not be liable for indemnity under this Section 8(a) With respect to any Preliminary Prospectus to the extent that any such loss, claim, damage or liability of such Underwriter results solely from the fact that such Underwriter sold Preferred Securities to a person to whom it is established that there was not sent or given, at or prior to the written confirmation of such sale, a copy of the Prospectus (excluding documents incorporated by reference) in any case where such delivery is required by the Act, if the Trust and PSE&G has previously furnished to the Representatives on behalf of the Underwriters, including such Underwriter, the copies thereof theretofore requested by the Representatives, and the loss, claim, damage or liability of such Underwriter results from an untrue statement or omission of a material fact contained in the Preliminary Prospectus that was corrected in the Prospectus. (b) In no case shall the Trust or PSE&G be liable under the indemnity agreement set forth in Section 8(a) hereof with respect to any claim made against any Underwriter or any such controlling person unless such party shall be notified in writing of the nature of the claim promptly after the assertion thereof, but failure to so notify such party shall not relieve it from any liability which it may have otherwise than on account of said indemnity agreement. The Trust or PSE&G, as the case may be, shall be entitled to participate at its own expense in the defense, or, if it so elects, within a reasonable time after receipt of such notice, to assume the defense of any suit brought to enforce any such claim, but if it so elects to assume the defense shall be conducted by counsel chosen by it and approved by the Underwriter or Underwriters or controlling person or persons, defendant or defendants in any suit so brought, which approval shall not be unreasonably withheld. In the event that the Trust or PSE&G, as the case may be, elects to assume the defense of any such suit and retains such counsel, the Underwriter or Underwriters or controlling person or persons, defendant or defendants in the suit, shall bear the fees and 17 expenses of any additional counsel thereafter retained by them. In the event that the parties to any such action (including impleaded parties) include both the Trust or PSE&G, as the case may be, and one or more Underwriters and any such Underwriter shall have been advised by counsel chosen by it and satisfactory to the Trust or PSE&G, as the case may be, that there may be one or more legal defenses available to it which are different from or additional to those available to the Trust or PSE&G, as the case may be, neither the Trust nor PSE&G shall have the right to assume the defense of such action on behalf of such Underwriter and the Trust or PSE&G, as the case may be, will reimburse such Underwriter and any person controlling such Underwriter as aforesaid for the reasonable fees and expenses of any counsel retained by them, it being understood that neither the Trust nor PSE&G shall, in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys for all such Underwriters and controlling persons, which firm shall be designated by the Representatives in writing. The Trust and PSE&G agree to notify the Representatives promptly after the assertion of any claim against them, any of their directors, any of their officers who signed the Registration Statement, or any person who controls them within the meaning of Section 15 of the Act, in connection with the issuance and sale, as the case may be, of the Preferred Securities, the Guarantee and the Subordinated Debentures. (c) Each Underwriter severally agrees that it will indemnify and hold harmless the Trust and PSE&G, their directors, and each of their officers who signed the Registration Statement and each person, if any, who controls them within the meaning of Section 15 of the Act to the same extent as the indemnity agreement set forth in Section 8(a) hereof, but only with respect to statements or omissions made in the Registration Statement, any Preliminary Prospectus or the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Trust or PSE&G by such Underwriter expressly for use in the Registration Statement, such Preliminary Prospectus, or the Prospectus, or any amendment or supplement thereto. In case any action shall be brought against the Trust or any person so indemnified based on the Registration Statement, such Preliminary Prospectus or the Prospectus, or any amendment or supplement thereto and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Trust and PSE&G, and the Trust and PSE&G and each person so indemnified shall have the rights and duties given to the Underwriters by the provisions of Section 8(a) and (b) hereof. (d) The indemnity agreements contained in Section 8 shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Trust or PSE&G, or any Underwriter or any controlling person, and shall survive the delivery and settlement of the Preferred Securities to the Underwriters. (e) In order to provide for just and equitable contribution in circumstances in which the indemnity agreements provided for in Section 8 is for any reason held to be unenforceable by the indemnified parties although applicable in accordance with its terms, the Trust, PSE&G and the Underwriters shall contribute to the aggregate losses, 18 liabilities, claims, damages and expenses of the nature contemplated by said indemnity agreements incurred by the Trust, PSE&G and one or more of the Underwriters, in such proportions that the Underwriters are responsible for that portion represented by the percentage that the underwriting discount appearing on the cover page of the Prospectus relating to the Preferred Securities bears to the initial public offering price appearing thereon and the Trust and PSE&G, jointly and severally, is responsible for the balance; provided, however, that no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person, if any, who controls an Underwriter within the meaning of Section 15 of the Act shall have the same rights to contribution as such Underwriter, and each trustee of the Trust or director of PSE&G, each officer of the Trust or PSE&G who signed the Registration Statement, and each person, if any, who controls the Trust or PSE&G within the meaning of Section 15 of the Act shall have the same rights to contribution as the Trust and PSE&G. 9. (a) If any Underwriter shall default in its obligation to purchase the Preferred Securities which it has agreed to purchase hereunder at the Time of Delivery, the Representatives may in their discretion arrange for the Underwriters or another party or other parties to purchase such Preferred Securities on the terms contained herein. If within thirty-six hours after such default by any Underwriter the Representatives do not arrange for the purchase of such Preferred Securities, then the Trust and PSE&G shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to the Representatives to purchase such Preferred Securities on such terms. In the event that, within the respective prescribed periods, the Representatives notify the Trust and PSE&G that they have so arranged for the purchase of such Preferred Securities, or the Trust or PSE&G notifies the Representatives that it has so arranged for the purchase of such Preferred Securities, the Representatives or the Trust and PSE&G shall have the right to postpone the Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Trust and PSE&G agree to file promptly any amendments to the Registration Statement or the Prospectus which in the opinion of the Representatives may thereby be made necessary. The term "Underwriter," as used in this Agreement, shall include any person substituted under this Section with like effect as if such person had originally been a Party to this Agreement with respect to such Preferred Securities. (b) If, after giving effect to any arrangements for the purchase of the Preferred Securities of a defaulting Underwriter or Underwriters by the Representatives and the Trust and PSE&G as provided in Section 9(a) hereof, the aggregate number of such Preferred Securities which remains unpurchased does not exceed one-tenth of the aggregate number of all the Preferred Securities to be purchased at the Time of Delivery, then the Trust and PSE&G shall have the right to require each non-defaulting Underwriter to purchase the number of Preferred Securities which such Underwriter agreed to purchase hereunder at the Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Preferred Securities which such Underwriter agreed to purchase hereunder) of the Preferred Securities of such defaulting Underwriter or Underwriters for which such arrangements 19 have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Preferred Securities of a defaulting Underwriter or Underwriters by the Representatives and the Trust and PSE&G as provided in Section 9(a) hereof, the aggregate number of such Preferred Securities which remains unpurchased exceeds one-tenth of the aggregate number of all the Preferred Securities to be purchased at the Time of Delivery, or if the Trust and PSE&G shall not exercise be right described in Section 9(b) hereof to require non-defaulting Underwriters to purchase Preferred Securities of a defaulting Underwriter or Underwriters, then this Agreement shall thereupon terminate, without liability on the part of any non-defaulting Underwriter, the Trust or PSE&G, except for the expenses to be borne by the Trust, PSE&G and the Underwriters as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. 10. This Agreement may be terminated by notice to the Trust and PSE&G by the Representatives at any time prior to the Time of Delivery if (a) (i) a general banking moratorium shall have been declared by either Federal or New York authorities, or (ii) there shall have occurred any new outbreak or unforeseen escalation of hostilities or other national or international calamity or crisis, or (iii) there shall have occurred a suspension or material limitation in (x) trading in securities generally on the New York Stock Exchange or (y) trading in any of PSE&G's securities on the New York Stock Exchange, and the effect of the occurrence of any event referred to in clause (i), (ii) or (iii) above is, in the reasonable judgment of the Representatives, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering of the Preferred Securities or the delivery of the Preferred Securities on the terms and in the manner contemplated in the Prospectus, or (b) the rating accorded the Preferred Securities or any of PSE&G's debt securities or preferred stock by any Rating Agency shall have been lowered since the time this Agreement was executed or if any Rating Agency shall have publicly announced since the time this Agreement was executed that it has placed its rating of the Preferred Securities or any of PSE&G's debt securities or preferred stock under a surveillance or review, with possible negative implications. 11. The respective indemnities, agreements, representations, warranties and other statements of the Trust, PSE&G and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Trust, PSE&G or any officer or director or controlling person of the Trust or PSE&G, and shall survive delivery of and payment for the Preferred Securities. 12. If this Agreement shall be terminated pursuant to Section 9 hereof, neither the Trust nor PSE&G shall be under any liability to any Underwriter except as provided in Section 6 and Section 8 hereof; but if, for any other reason the transactions contemplated herein are not consummated, the Trust and PSE&G will reimburse the Underwriter for all out-of-pocket expenses, including fees and disbursements of counsel, reasonably incurred by the Underwriter in making preparations for the purchase, sale and delivery of the Preferred Securities, but the Trust and PSE&G shall then be under no further liability to the Underwriter in respect of the 20 Preferred Securities not so delivered except as provided in Section 6 and Section 8 hereof. Except as provided above, neither the Trust nor PSE&G shall be liable to the Underwriters for damages on account of any other consequential damages or loss of anticipated profits. In all dealings hereunder, the Representatives shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, voice or agreement on behalf of any Underwriter made or given by the Representatives jointly or by [________________] on behalf of the Representatives. 13. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to the Representatives in care of [___________________________________________________]; and if to the Trust or PSE&G by mail to it at the address of the Trust or PSE&G at 80 Park Plaza, P.O. Box 570, Newark, New Jersey 07101, Attention: James T. Foran, Esq., General Corporate Counsel. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 14. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Trust, PSE&G and, to the extent provided in Sections 8 and 11 hereof, the officers and directors of the Trust or PSE&G and each person who controls the Trust or PSE&G or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Preferred Securities from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 15. Time shall be of the essence of this Agreement. As used herein, the term "business day" shall mean any day when the Commission's office in Washington, D.C. is open for business. 16. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey (without regard to conflict of laws principles). 17. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. 21 If the foregoing is in accordance with your understanding. please sign and return to us two counterparts hereof, and upon the acceptance hereof by the Representatives, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement between each of the Underwriters, on the one hand, and the Trust and PSE&G, on the other hand. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement Among Underwriters, but without warranty on your part as to the authority of the signers thereof. Very truly yours, PSE&G Capital Trust III By: Public Service Electric and Gas Company, as Depositor By: ----------------------------------- Name: Title: Public Service Electric and Gas Company By: ----------------------------------- Name: Title: Accepted as of the date hereof: [Name of Representatives] By: Name of Lead Manager By:__________________________ Name: Title: On behalf of themselves and as Representatives for each of the Underwriters named in Schedule I hereto 22 SCHEDULE I Total Number of Securities Underwriters to be Purchased - ------------ --------------- EX-3.6 6 e13009ex36.txt TRUST AGREEMENT FOR PSEG Exhibit 3.6 Amended and Restated Trust Agreement for PSE&G Capital Trust IV among PUBLIC SERVICE ELECTRIC AND GAS COMPANY (as Depositor) FIRST UNION NATIONAL BANK (as Property Trustee) FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION (as Delaware Trustee) and THE ADMINISTRATIVE TRUSTEE NAMED HEREIN Dated as of ------- --, ---- TABLE OF CONTENTS Page ---- ARTICLE I Defined Terms........................................................1 Section 1.01. Definitions................................1 ARTICLE II Continuation of the Trust...........................................8 Section 2.01. Name.......................................8 Section 2.02. Office of the Delaware Trustee; Principal Place of Business................8 Section 2.03. Initial Contribution of Trust Property; Expenses of the Trust............9 Section 2.04. Issuance of the Trust Securities..........10 Section 2.05. Purchase of Debentures....................10 Section 2.06. Declaration of Trust......................10 Section 2.07. Authorization to Enter into Certain Transactions......................10 Section 2.08. Assets of Trust...........................13 Section 2.09. Title to Trust Property...................13 ARTICLE III Payment Account...................................................14 Section 3.01. Payment Account...........................14 ARTICLE IV Distributions; Redemption..........................................14 Section 4.01. Distributions.............................14 Section 4.02. Redemption................................15 Section 4.03. Subordination of Common Securities........17 Section 4.04. Payment Procedures........................17 Section 4.05. Tax Returns and Reports...................18 Section 4.06. Payments under Indenture..................18 ARTICLE V Trust Securities Certificates.......................................18 Section 5.01. Initial Ownership.........................18 Section 5.02. The Trust Securities Certificates.........18 Section 5.03. Delivery of Trust Securities Certificates..............................18 Section 5.04. Registration of Transfer and Exchange of Preferred Securities Certificates..............................19 Section 5.05. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates......19 Section 5.06. Persons Deemed Securityholders............20 Section 5.07. Access to List of Securityholders' Names and Addresses.......................20 Section 5.08. Maintenance of Office or Agency...........20 Section 5.09. Appointment of Paying Agent...............20 Section 5.10. No Transfer of Common Securities by Depositor..............................21 (i) Page ---- Section 5.11. Book-Entry Preferred Securities Certificates; Common Securities Certificate...............................21 Section 5.12. Definitive Preferred Securities Certificates..............................22 Section 5.13. Rights of Securityholders.................22 ARTICLE VI Acts of Securityholders; Meetings; Voting..........................22 Section 6.01. Limitations on Voting Rights..............22 Section 6.02. Notice of Meetings........................23 Section 6.03. Meetings of Preferred Securityholders.....23 Section 6.04. Voting Rights.............................24 Section 6.05. Proxies, etc..............................24 Section 6.06. Securityholder Action by Written Consent...........................24 Section 6.07. Record Date for Voting and Other Purposes............................24 Section 6.08. Acts of Securityholders...................24 Section 6.09. Inspection of Records.....................25 ARTICLE VII The Trustees......................................................25 Section 7.01. Certain Duties and Responsibilities.......25 Section 7.02. Notice of Defaults; Direct Action by Securityholders...........................26 Section 7.03. Certain Rights of Property Trustee........27 Section 7.04. Not Responsible for Recitals or Issuance of Securities....................28 Section 7.05. May Hold Securities.......................28 Section 7.06. Compensation; Indemnity; Fees.............28 Section 7.07. Corporate Property Trustee Required; Eligibility of Trustees...................29 Section 7.08. Conflicting Interests.....................29 Section 7.09. Co-Trustees and Separate Trustee..........29 Section 7.10. Resignation and Removal; Appointment of Successor..............................31 Section 7.11. Acceptance of Appointment by Successor....32 Section 7.12. Merger, Conversion, Consolidation or Succession to Business.................32 Section 7.13 Preferential Collection of Claims Against Depositor or Trust................33 Section 7.14. Reports by Property Trustee...............33 Section 7.15. Reports to the Property Trustee...........33 Section 7.16. Evidence of Compliance with Conditions Precedent......................33 Section 7.17. Statements Required in Officer's Certificate and Opinion of Counsel........33 Section 7.18. Number of Trustees........................34 Section 7.19. Delegation of Power.......................34 Section 7.20. Voting....................................35 ARTICLE VIII Termination and Liquidation......................................35 Section 8.01. Termination Upon Expiration Date..........35 Section 8.02. Early Termination.........................35 (ii) Page ---- Section 8.03. Termination...............................35 Section 8.04. Liquidation...............................35 ARTICLE IX Mergers, Etc.......................................................37 Section 9.01. Mergers, Consolidations, Amalgamations or Replacements of the Trust..............................37 ARTICLE X Miscellaneous Provisions............................................38 Section 10.01. Limitation of Rights of Securityholders...........................38 Section 10.02. Amendment.................................38 Section 10.03. Severability..............................39 Section 10.04. Governing Law.............................39 Section 10.05. Payments Due on Non-Business Day..........39 Section 10.06. Successors and Assigns....................40 Section 10.07. Headings..................................40 Section 10.08. Reports, Notices and Demands..............40 Section 10.09. Agreement Not to Petition.................40 Section 10.10. Trust Indenture Act; Conflict with Trust Indenture Act.......................41 Section 10.11. Acceptance of Terms of Trust Agreement, Guarantee and Indenture........41 (iii) PSE&G Capital Trust IV Certain Sections of this Trust Agreement relating to Sections 310 through 318 of the Trust Indenture Act of 1939 Trust Indenture Trust Agreement Act Section Section ----------- ------- ss.310(a)(1).............................................................7.07 (a)(2)..........................................................7.07 (a)(3)..........................................................7.09 (a)(4)...................................................2.07(a)(ii) (b).............................................................7.08 ss.311(a)................................................................7.13 (b).............................................................7.13 ss.312(a)................................................................5.07 (b).............................................................5.07 (c).............................................................5.07 ss.313(a)................................................................7.14 (b).............................................................7.14 (c).............................................................7.14 (d).............................................................7.14 ss.314(a)................................................................7.15 (b)...................................................Not Applicable (c)(1)....................................................7.16, 7.17 (c)(2)....................................................7.16, 7.17 (c)(3)................................................Not Applicable (d)...................................................Not Applicable (e)............................................................ 7.17 ss.315(a)....................................................7.01(a), 7.03(a) (b)......................................................7.02, 10.08 (c)..........................................................7.01(a) (d).......................................................7.01, 7.03 (e)...................................................Not Applicable ss.316(a)......................................................Not Applicable (a)(1)(A).............................................Not Applicable (a)(1)(B).............................................Not Applicable (a)(2)................................................Not Applicable (b)...................................................Not Applicable (c)...................................................Not Applicable ss.317(a)(1)...................................................Not Applicable (a)(2)................................................Not Applicable (iv) (b).............................................................5.09 ss.318(a)...............................................................10.10 - ---------- Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to be a part of the Trust Agreement. (v) AMENDED AND RESTATED TRUST AGREEMENT of PSE&G Capital Trust IV (the "Trust"), dated as of _ __, ____, among (i) Public Service Electric and Gas Company, a New Jersey corporation (the "Depositor"), (ii) First Union National Bank, a national banking association, as trustee (the "Property Trustee"), (iii) First Union Trust Company, National Association, a national banking association, whose address in Delaware is One Rodney Square, 920 King Street, Suite 102, Wilmington, Delaware 19801, as Delaware trustee (the "Delaware Trustee"), (iv) Mark G. Kahrer, an individual whose address is c/o Public Service Electric and Gas Company, 80 Park Plaza, P.O. Box 570, Newark, New Jersey 07101 (the "Administrative Trustee") (the Property Trustee, the Delaware Trustee and the Administrative Trustee are referred to collectively as the "Trustees"), and (v) the several Holders, as hereinafter defined. WITNESSETH: WHEREAS, the Depositor, the Property Trustee, the Delaware Trustee and the Administrative Trustee have heretofore duly declared and established a business trust pursuant to the Delaware Business Trust Act by entering into a Trust Agreement, dated as of December 21, 2001 (the "Original Trust Agreement"), and by executing and filing with the Secretary of State of the State of Delaware a Certificate of Trust on December 21, 2001, a form of which is attached hereto as Exhibit A; and WHEREAS, the Depositor, the Property Trustee, the Delaware Trustee and the Administrative Trustee desire to amend and restate the Original Trust Agreement in its entirety as set forth herein to provide for, among other things, (i) the issuance of the Common Securities, as hereinafter defined, by the Trust to the Depositor, (ii) the issuance and sale of the Preferred Securities, as hereinafter defined, by the Trust pursuant to the Underwriting Agreement, as hereinafter defined, and (iii) the acquisition by the Trust from the Depositor of the Debentures, as hereinafter defined. NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, each party, for the benefit of the other party and for the benefit of the Securityholders, as hereinafter defined, hereby amends and restates the Original Trust Agreement in its entirety and agrees as follows: ARTICLE I Defined Terms Section 1.01. Definitions. For all purposes of this Trust Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) each term defined in this Article I has the meaning assigned to it in this Article I and includes the plural as well as the singular; (b) each of the other terms used herein that is defined in the Trust Indenture Act, either directly or by reference therein, has the meaning assigned to it therein; (c) unless the context otherwise requires, any reference to an "Article" or a "Section" refers to an Article or a Section, as the case may be, of this Trust Agreement; and (d) the words "herein", "hereof" and "hereunder" and other words of similar import refer to this Trust Agreement as a whole and not to any particular Article, Section or other subdivision. "Act" has the meaning specified in Section 6.08. "Administrative Trustee" means the individual identified as the "Administrative Trustee" in the preamble to this Trust Agreement, solely in his/her capacity as Administrative Trustee of the Trust created and continued hereunder and not in his/her individual capacity, or such Administrative Trustee's successor in interest in such capacity, or any successor trustee appointed as herein provided. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Bankruptcy Event" means, with respect to any Person, the occurrence of any of the following events: (a) Such Person, pursuant to or within the meaning of any Bankruptcy Law: (i) commences a voluntary case or proceeding; (ii) consents to the entry of an order for relief against it in an involuntary case or proceeding; (iii) consents to the appointment of a Custodian, as hereinafter defined, of it or for all or substantially all of its property, and such Custodian is not discharged within 60 days; (iv) makes a general assignment for the benefit of its creditors; or (v) admits in writing its inability to pay its debts generally as they become due; or 2 (b) A court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against such Person in an involuntary case or proceeding; (ii) appoints a Custodian of such Person for all or substantially all of its properties; (iii) orders the liquidation of such Person; (iv) and in each case the order or decree remains unstayed and in effect for 60 days. "Bankruptcy Laws" means Title 11 of the United States Code, or similar federal or state law for the relief of debtors. "Custodian" means any receiver, trustee, assignee, liquidator, sequestrator, custodian or similar official under any Bankruptcy Law. "Board Resolution" means (i) a copy of a resolution certified by the Secretary or an Assistant Secretary of the Depositor to have been duly adopted by the Depositor's Board of Directors or a committee established thereby and to be in full force and effect on the date of such certification or (ii) a certificate signed by the authorized officer or officers of the Depositor to whom the Depositor's Board of Directors or a committee established thereby has delegated its authority, and in each case, delivered to the Trustees. "Book-Entry Preferred Securities Certificates" means certificates representing Preferred Securities issued in global, fully registered form with the Clearing Agency as described in Section 5.11. "Business Day" means a day other than (a) a Saturday or Sunday, or (b) 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. "Certificate Depository Agreement" means the agreement among the Trust, the Property Trustee and The Depository Trust Company, as the initial Clearing Agency, dated as of the Closing Date, relating to the Book-Entry Preferred Securities Certificates, substantially in the form attached hereto as Exhibit B, as the same may be amended and supplemented from time to time. "Clearing Agency" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. The Depository Trust Company will be the initial Clearing Agency. "Closing Date" means the Time of Delivery as defined in the Underwriting Agreement, which date is also the date of execution and delivery of this Trust Agreement. "Code" means the Internal Revenue Code of 1986, as amended. 3 "Commission" means the Securities and Exchange Commission, as from time to time constituted, created under the Securities Exchange Act of 1934, as amended, or, if at any time after the execution of this Trust Agreement such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time. "Common Security" means an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $_____ and having the rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Common Securities Certificate" means a certificate evidencing ownership of Common Securities, substantially in the form attached hereto as Exhibit C. "Corporate Trust Office" means the principal corporate trust office of the Property Trustee located in the State of New Jersey which at the date hereof is 21 South Street, Morristown, New Jersey 07960. "Creditor" has the meaning specified in Section 2.03. "Debenture Event of Default" means an "Event of Default" as defined in the Indenture with respect to the Debentures. "Debenture Redemption Date" means "Redemption Date" as defined in the Indenture with respect to the Debentures. "Debenture Trustee" means First Union National Bank, a national banking association, in its capacity as trustee under the Indenture, or any successor thereto, appointed in accordance with the terms and provisions of the Indenture. "Debentures" means the Depositor's _____% Deferrable Interest Subordinated Debentures, Series __, issued pursuant to the Indenture. "Definitive Preferred Securities Certificates" means certificates representing Preferred Securities issued in certificated, fully registered form as described in Section 5.12. "Delaware Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12 Del. C. ss. 3801, et seq., as it may be amended from time to time. "Delaware Trustee" means the entity identified as the "Delaware Trustee" in the preamble to this Trust Agreement solely in its capacity as Delaware Trustee of the Trust created and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor trustee appointed as herein provided. 4 "Depositor" has the meaning specified in the preamble to this Trust Agreement. "Distribution Date" has the meaning specified in Section 4.01(a). "Distributions" means amounts payable in respect of the Trust Securities as provided in Section 4.01. "Event of Default" means the occurrence of a Debenture Event of Default (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body). "Expiration Date" has the meaning specified in Section 8.01. "Extension Period" means the period or periods in which pursuant to the Indenture payments of interest on the Debentures are deferred by extending the interest payment periods thereof. "Guarantee" means the Guarantee Agreement executed and delivered by the Depositor to First Union National Bank, a national banking association, as trustee thereunder, contemporaneously with the execution and delivery of this Trust Agreement, for the benefit of the Holders of the Preferred Securities, as amended from time to time. "Indenture" means the Indenture, dated as of June 1, 1996, between the Depositor and the Debenture Trustee, as trustee thereunder, as amended or supplemented from time to time. "Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of trust, adverse ownership interest, hypothecation, assignment, security interest or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever. "Like Amount" means (a) with respect to a redemption of 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 (b) with respect to a distribution of Debentures to Holders of Trust Securities in connection with a termination and liquidation of the Trust, Debentures having a principal amount equal to the aggregate Liquidation Amount of the Trust Securities in exchange for which such Debentures are distributed. "Liquidation Amount" means the stated amount of $_____ per Trust Security. "Liquidation Date" means the date on which Debentures are to be distributed to Holders of Trust Securities in connection with a termination and liquidation of the Trust pursuant to Section 8.04(a). "Liquidation Distribution" has the meaning specified in Section 8.04(d). 5 "1940 Act" means the Investment Company Act of 1940, as amended. "Officers' Certificate" means a certificate signed by the Chairman, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Depositor. "Opinion of Counsel" means a written opinion of counsel, who may be counsel for the Trust, the Property Trustee or the Depositor or an Affiliate of the Depositor, but not an employee of any thereof, and who shall be acceptable to the Property Trustee. "Original Trust Agreement" has the meaning specified in the recitals to this Trust Agreement. "Outstanding", when used with respect to Trust Securities, means, as of the date of determination, all Trust Securities theretofore executed and delivered under this Trust Agreement, except: (a) Trust Securities theretofore cancelled by the Administrative Trustee or delivered to the Administrative Trustee for cancellation; (b) Trust Securities for whose redemption money in the necessary amount has been theretofore deposited with the Property Trustee or any Paying Agent for the Holders of such Trust Securities; provided that, if such Trust Securities are to be redeemed, notice of such redemption has been duly given pursuant to this Trust Agreement; (c) Trust Securities which have been paid or in exchange for or in lieu of which other Trust Securities have been executed and delivered pursuant to Section 5.05, other than any such Trust Securities in respect of which there shall have been presented to the Property Trustee proof satisfactory to it that such Trust Securities are held by a bona fide purchaser; and (d) as provided in Section 8.04(c); provided, however, that in determining whether the Holders of the requisite Liquidation Amount of the Outstanding Preferred Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Preferred Securities owned by the Depositor, any Trustee or any Affiliate of the Depositor or any Trustee shall be disregarded and deemed not to be Outstanding, except that (a) in determining whether any Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Preferred Securities which such Trustee actually knows to be so owned shall be so disregarded and (b) the foregoing shall not apply at any time when all of the Outstanding Preferred Securities are owned by the Depositor, one or more of the Trustees and/or any such Affiliate. Preferred Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Administrative Trustee the pledgee's right so to act with respect to such Preferred Securities and that the pledgee is not the Depositor or any Affiliate of the Depositor. 6 "Paying Agent" means the Property Trustee and any co-paying agent appointed pursuant to Section 5.09. "Payment Account" means a segregated non-interest-bearing corporate trust account maintained by the Property Trustee in its trust department for the benefit of the Securityholders in which all amounts paid to the Property Trustee in respect of the Debentures or the Guarantee will be held and from which the Property Trustee or such other Paying Agent shall make payments to the Securityholders in accordance with Article 4. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Security" means a __% Cumulative Quarterly Income Preferred Security, Series __ issued by the Trust, and having an undivided beneficial interest in the assets of the Trust, having a Liquidation Amount of $_____ and having rights provided therefor in this Trust Agreement, including the right to receive Distributions and a Liquidation Distribution as provided herein. "Preferred Securities Certificate" means a certificate evidencing ownership of one or more Preferred Securities, substantially in the form attached hereto as Exhibit D. "Property Trustee" means the commercial bank or trust company identified as the "Property Trustee" in the preamble to this Trust Agreement solely in its capacity as Property Trustee of the Trust heretofore created and continued hereunder and not in its individual capacity, or its successor in interest in such capacity, or any successor property trustee appointed as herein provided. "Redemption Date" means, with respect to any Trust Security to be redeemed, the date fixed for such redemption by or pursuant to this Trust Agreement; provided that each Debenture Redemption Date and the stated maturity of the Debentures shall be a Redemption Date for a Like Amount of Trust Securities. "Redemption Price" means, with respect to any Trust Security, the Liquidation Amount of such Trust Security, plus accumulated and unpaid Distributions thereon to the Redemption Date. "Securities Register" and "Securities Registrar" have the respective meanings specified in Section 5.04. "Securityholder" or "Holder" means a Person in whose name a Trust Security or Securities is registered in the Securities Register; any such Person is a beneficial owner within the meaning of the Delaware Business Trust Act. "Successor Securities" has the meaning specified in Section 8.05. 7 "Trust" means the Delaware business trust created and continued hereby and identified on the cover page to this Trust Agreement. "Trust Agreement" means this Amended and Restated Trust Agreement, as the same may be modified, amended or supplemented in accordance with the applicable provisions hereof, including all exhibits hereto, including, for all purposes of this Trust Agreement and any such modification, amendment or supplement, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this Trust Agreement and any such modification, amendment or supplement, respectively. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this Trust Agreement was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939 as so amended. "Trust Property" means (a) the Debentures, (b) any cash on deposit in, or owing to, the Payment Account and (c) all proceeds and rights in respect of the foregoing and any other property and assets for the time being held or deemed to be held by the Property Trustee pursuant to the trusts of this Trust Agreement. "Trust Security" means any one of the Common Securities or the Preferred Securities. "Trust Securities Certificate" means any one of the Common Securities Certificates or the Preferred Securities Certificates. "Underwriting Agreement" means the Underwriting Agreement, dated _______ __, ____, among the Trust, the Depositor and the Underwriters named therein. ARTICLE II Continuation of the Trust Section 2.01. Name. The Trust created and continued hereby shall be known as "PSE&G Capital Trust IV" as such name may be modified from time to time by the Administrative Trustee following written notice to the Holders of Trust Securities and the other Trustees, in which name the Trustees may conduct the business of the Trust, make and execute contracts and other instruments on behalf of the Trust and sue and be sued. Section 2.02. Office of the Delaware Trustee; Principal Place of Business. The address of the Delaware Trustee in the State of Delaware is One Rodney Square, 920 King Street, Suite 102, Wilmington, Delaware 19801 or such other address in the State of Delaware as the 8 Delaware Trustee may designate by written notice to the Securityholders and the Depositor. The principal place of business of the Trust is 80 Park Plaza, Newark, New Jersey 07101. Section 2.03. Initial Contribution of Trust Property; Expenses of the Trust. (a) The Property Trustee acknowledges receipt in trust from the Depositor in connection with the Original Trust Agreement of the sum of $10, which constituted the initial Trust Property. (b) The Depositor shall be responsible for and shall pay for all obligations (other than with respect to the Trust Securities) and all costs and expenses of the Trust (including, but not limited to, costs and expenses relating to the organization of the Trust, the issuance and sale of the Preferred Securities, the fees and expenses (including reasonable counsel fees and expenses) of the Trustees as provided in Section 7.06, the costs and expenses of accountants, attorneys, statistical or bookkeeping services, expenses for printing and engraving and computing or accounting equipment, Paying Agent(s), Securities Registrar, duplication, travel and telephone and other telecommunications expenses and costs and expenses incurred in connection with the disposition of Trust assets). (c) The Depositor will pay any and all taxes (other than United States withholding taxes attributable to the Trust or its assets) and all liabilities, costs and expenses with respect to such taxes of the Trust. (d) The Depositor's obligations under this Section 2.03 shall be for the benefit of, and shall be enforceable by, the Property Trustee and any Person to whom any such obligations, costs, expenses and taxes are owed (a "Creditor") whether or not such Creditor has received notice hereof. The Property Trustee and any such Creditor may enforce the Depositor's obligations under this Section 2.03 directly against the Depositor and the Depositor irrevocably waives any right or remedy to require that the Property Trustee or any such Creditor take any action against the Trust or any other Person before proceeding against the Depositor. The Depositor agrees to execute such additional agreements as may be necessary or desirable in order to give full effect to the provisions of this Section 2.03. (e) The Depositor shall make no claim upon the Trust Property for the payment of such expenses. Section 2.04. _____ Issuance of the Trust Securities. The Depositor, on behalf of the Trust and pursuant to the Original Trust Agreement, executed and delivered the Underwriting Agreement. Contemporaneously with the execution and delivery of this Trust Agreement, the Administrative Trustee, on behalf of the Trust, shall execute in accordance with Section 5.02 and deliver to the Underwriters named in the Underwriting Agreement one or more Book-Entry Preferred Securities Certificates, registered in the name of the nominee of the initial Clearing Agency, representing ______ Preferred Securities having an aggregate Liquidation Amount of $__________, against receipt by the Property Trustee of the aggregate purchase price of such Preferred Securities of $__________, which amount the Administrative Trustee shall promptly deliver to the Property Trustee. Contemporaneously therewith, the Administrative Trustee, on 9 behalf of the Trust, shall execute in accordance with Section 5.02 and deliver to the Depositor a Common Securities Certificate, registered in the name of the Depositor, representing _____ Common Securities having an aggregate Liquidation Amount of $__________, and in satisfaction of the purchase price of such Common Securities the Depositor shall deliver to the Property Trustee the sum of $----------. Section 2.05. Purchase of Debentures. Contemporaneously with the execution and delivery of this Trust Agreement (i) the Administrative Trustee, on behalf of the Trust, shall purchase $__________ aggregate principal amount of Debentures from the Depositor, registered in the name of the Trust and (ii) in satisfaction of the purchase price for such Debentures, the Property Trustee, on behalf of the Trust, shall deliver to the Depositor the sum of $__________. Section 2.06. Declaration of Trust. The exclusive purposes and functions of the Trust are (a) to issue and sell Trust Securities and use the proceeds from such sale to acquire the Debentures, (b) to maintain the status of the Trust as a grantor trust for United States Federal income tax purposes, and (c) except as otherwise limited herein, to engage in only those activities necessary, convenient or incidental thereto. The Depositor hereby appoints the Trustees as trustees of the Trust, to have all the rights, powers and duties to the extent set forth herein, and the Trustees hereby accept such appointment. The Property Trustee hereby declares that it will hold the Trust Property in trust upon and subject to the conditions set forth herein for the benefit of the Securityholders. The Administrative Trustee shall have all rights, powers and duties set forth herein. The Delaware Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Property Trustee or the Administrative Trustee set forth herein. The Delaware Trustee shall be one of the Trustees of the Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Delaware Business Trust Act. Section 2.07. Authorization to Enter into Certain Transactions. (a) The Trustees shall conduct the affairs of the Trust in accordance with the terms of this Trust Agreement. Subject to the limitations set forth in paragraph (b) of this Section, and in accordance with the following provisions (i) and (ii), the Trustees shall have the authority to enter into all transactions and agreements determined by the Trustees to be appropriate in exercising the authority, express or implied, otherwise granted to the Trustees under this Trust Agreement, and to perform all acts in furtherance thereof, including without limitation, the following: (i) As among the Trustees, the Administrative Trustee shall have the power and authority to act on behalf of the Trust with respect to the following matters: (A) executing and delivering the Trust Securities on behalf of the Trust; (B) causing the Trust to enter into, and executing, delivering and performing on behalf of the Trust, the Certificate Depository Agreement and such 10 other agreements as may be necessary or desirable in connection with the purposes and function of the Trust, including the appointment of a successor depositary; (C) assisting in registering the Preferred Securities under the Securities Act of 1933, as amended, and under state securities or blue sky laws, and qualifying this Trust Agreement as a trust indenture under the Trust Indenture Act; (D) assisting in the listing of the Preferred Securities upon such securities exchange or exchanges as the Depositor shall determine and the registration of the Preferred Securities under the Securities Exchange Act of 1934, as amended, and the preparation and filing of all periodic and other reports and other documents pursuant to the foregoing; (E) to the extent provided in this Trust Agreement, terminating and liquidating the Trust and preparing, executing and filing the certificate of cancellation with the Secretary of State of the State of Delaware; (F) sending notices or assisting the Property Trustee in sending notices and other information regarding the Trust Securities and the Debentures to Securityholders in accordance with this Trust Agreement; and (G) taking any action incidental to the foregoing as the Administrative Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder). (ii) As among the Trustees, the Property Trustee shall have the power, duty and authority to act on behalf of the Trust with respect to the following matters: (A) establishing and maintaining the Payment Account and appointing Paying Agents (subject to Section 5.09); (B) receiving payment of the purchase price of the Trust Securities; (C) receiving and holding the Debentures; (D) collecting interest, premium, if any, and principal payments on the Debentures and depositing them in the Payment Account; (E) making Distributions and other payments to the Securityholders in respect of the Trust Securities; (F) exercising all of the rights, powers and privileges of a holder of the Debentures; 11 (G) sending notices of defaults, redemptions, Extension Periods, liquidations and other information regarding the Trust Securities and the Debentures to the Securityholders in accordance with this Trust Agreement; (H) to the extent provided in this Trust Agreement, terminating and liquidating the Trust, including distributing the Trust Property in accordance with the terms of this Trust Agreement, and preparing, executing and filing the certificate of cancellation with the Secretary of State of the State of Delaware; (I) after an Event of Default, taking any action incidental to the foregoing as the Property Trustee may from time to time determine is necessary or advisable to give effect to the terms of this Trust Agreement and protect and conserve the Trust Property for the benefit of the Securityholders (without consideration of the effect of any such action on any particular Securityholder); and (J) registering transfers and exchanges of the Preferred Securities in accordance with this Trust Agreement (but only if at such time the Property Trustee shall be the Securities Registrar). (b) So long as this Trust Agreement remains in effect, the Trust (or the Trustees acting on behalf of the Trust) shall not undertake any business, activities or transaction except as expressly provided herein or contemplated hereby. In particular, the Trustees acting on behalf of the Trust shall not (i) acquire any assets or investments (other than the Debentures), reinvest the proceeds derived from investments, possess any power or otherwise act in such a way as to vary the Trust Property or engage in any activities not authorized by this Trust Agreement, (ii) sell, assign, transfer, exchange, mortgage, pledge, set-off or otherwise dispose of any of the Trust Property or interests therein, including to Securityholders, except as expressly provided herein, (iii) take any action that would cause the Trust to fail or cease to qualify as a grantor trust for United States Federal income tax purposes, (iv) incur any indebtedness for borrowed money or issue any other debt, (v) issue any securities or other evidences of beneficial ownership of, or beneficial interests in, the Trust other than the Trust Securities, or (vi) take or consent to any action that would result in the placement of a Lien on any of the Trust Property. The Administrative Trustee shall defend all claims and demands of all Persons at any time claiming any Lien on any of the Trust Property adverse to the interest of the Trust or the Securityholders in their capacity as Securityholders. (c) In connection with the issue and sale of the Preferred Securities, the Depositor shall have the right and responsibility to assist the Trust with respect to, or effect on behalf of the Trust, the following (and any actions taken by the Depositor in furtherance of the following prior to the date of this Trust Agreement are hereby ratified and confirmed in all respects): (i) preparing for filing with the Commission and executing on behalf of the Trust a registration statement on Form S-3 in relation to the Preferred Securities, including any amendments thereto; 12 (ii) determining the States in which to take appropriate action to qualify or register for sale all or part of the Preferred Securities and doing any and all such acts, other than actions which must be taken by or on behalf of the Trust, and advising the Trustees of actions they must take on behalf of the Trust, and preparing for execution and filing any documents to be executed and filed by the Trust or on behalf of the Trust, as the Depositor deems necessary or advisable in order to comply with the applicable laws of any such States; (iii) preparing for filing and executing on behalf of the Trust an application to the New York Stock Exchange or any other national stock exchange or The Nasdaq National Market for listing upon notice of issuance of any Preferred Securities; (iv) preparing for filing with the Commission and executing on behalf of the Trust a registration statement on Form 8-A relating to the registration of the Preferred Securities under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, including any amendments thereto; (v) negotiating the terms of, and executing and delivering, the Underwriting Agreement providing for the sale of the Preferred Securities; and (vi) taking any other actions necessary or desirable to carry out any of the foregoing activities. (d) Notwithstanding anything herein to the contrary, the Administrative Trustee is authorized and directed to conduct the affairs of the Trust and to operate the Trust so that (i) the Trust will not be deemed to be an "investment company" required to be registered under the 1940 Act, or taxed as a corporation or a partnership for United States Federal income tax purposes (ii) the Trust will qualify as a grantor trust for United States Federal income tax purposes and (iii) the Debentures will be treated as indebtedness of the Depositor for United States Federal income tax purposes. In this connection, the Depositor and the Administrative Trustee are authorized to take any action, not inconsistent with applicable law, the Certificate of Trust, as amended from time to time, or this Trust Agreement, that each of the Depositor and the Administrative Trustee determines in their discretion to be necessary or desirable for such purposes. Section 2.08. Assets of Trust. The assets of the Trust shall consist of the Trust Property. Section 2.09. Title to Trust Property. Legal title to all Trust Property shall be vested at all times in the Property Trustee (in its capacity as such) and shall be held and administered by the Property Trustee for the benefit of the Securityholders in accordance with this Trust Agreement. 13 ARTICLE III Payment Account Section 3.01. Payment Account. (a) On or prior to the Closing Date, the Property Trustee shall establish the Payment Account. All monies and other property deposited or held from time to time in the Payment Account shall be held by the Property Trustee for the exclusive benefit of the Securityholders. The Property Trustee shall have exclusive control of the Payment Account for the purpose of making deposits in and withdrawals from the Payment Account in accordance with this Trust Agreement; provided that any Paying Agent shall have the right of withdrawal with respect to the Payment Account solely for the purpose of making the payments contemplated under Article 4. (b) The Property Trustee shall deposit in the Payment Account, promptly upon receipt, all payments of principal of or premium, if any, or interest on the Debentures and any amounts paid to the Property Trustee pursuant to the Guarantee. Amounts held in the Payment Account shall not be invested pending distribution thereof. ARTICLE IV Distributions; Redemption Section 4.01. Distributions. (a) Distributions on the Trust Securities shall be cumulative, and will accumulate whether or not there are funds of the Trust available for the payment of Distributions. Distributions shall accumulate from _______ __, ____ and, except during an Extension Period for the Debentures pursuant to the Indenture, shall be payable quarterly in arrears on March 31, June 30, September 30 and December 31 of each year, commencing on _______ __, ____. If any date on which Distributions are otherwise payable on the Trust Securities is not a Business Day, then the payment of such Distributions shall be made on the next succeeding day which 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, 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 this Section 4.01(a) is referred to as a "Distribution Date"). Within two Business Days after receipt by the Property Trustee of notice of an Extension Period pursuant to Section 4.01 of the Indenture, the Property Trustee shall give notice thereof to the Securityholders by first class mail, postage prepaid. (b) The Trust Securities represent undivided beneficial interests in the Trust Property, and, subject to Sections 4.03 and 4.06 hereof, all Distributions will be made pro rata on each of the Trust Securities. Distributions on the Trust Securities shall be payable at a 14 rate of _____% per annum of the Liquidation Amount of the Trust Securities. The amount of Distributions payable for any full quarterly period shall 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. 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 above, compounded quarterly) that accrues during any such Extension Period on the Debentures. (c) Distributions on the Trust Securities shall be made from the Payment Account by the Property Trustee or any Paying Agent and shall be payable on each Distribution Date only to the extent that the Trust has funds then available in the Payment Account for the payment of such Distributions. (d) Distributions on the Trust Securities on each Distribution Date shall be payable to the Holders thereof as they appear on the Securities Register for the Trust Securities on the relevant record date, which shall be one Business Day prior to such Distribution Date; provided, however, that in the event that the Preferred Securities are not in book-entry-only form, the relevant record date shall be the 15th day of the last month of each calendar quarter, whether or not a Business Day. Section 4.02. Redemption. (a) Upon receipt by the Trust of a notice of redemption of Debentures, the Trust will call for redemption a Like Amount of Trust Securities at the Redemption Price on the Debenture Redemption Date and will call for redemption all Outstanding Trust Securities on the stated maturity date of the Debentures. (b) Notice of redemption shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption Date to each Holder of Trust Securities to be redeemed, at such Holder's address appearing in the Securities Register. All notices of redemption shall state: (i) the Redemption Date; (ii) the Redemption Price; (iii) the CUSIP number; (iv) the place or places where Trust Securities Certificates are to be surrendered for payment of the Redemption Price; (v) that on the Redemption Date the Redemption Price will become payable upon each such Trust Security to be redeemed and that Distributions thereon will cease to accumulate on and after such date; and 15 (vi) if less than all of the Outstanding Trust Securities are to be redeemed, the identification and total Liquidation Amount of the particular Trust Securities to be redeemed. (c) The Trust Securities redeemed on each Redemption Date shall be redeemed at the Redemption Price with the proceeds from the contemporaneous redemption or payment at maturity of Debentures. Redemptions of the Trust Securities shall be made and the Redemption Price shall be payable on each Redemption Date only to the extent that the Trust has funds then available in the Payment Account for the payment of such Redemption Price. (d) If the Trust, by action of the Property Trustee, gives a notice of redemption in respect of any Preferred Securities, then, on the Redemption Date, subject to Section 4.02(c), the Property Trustee will irrevocably deposit with the Paying Agent funds sufficient to pay the Redemption Price for the Preferred Securities being redeemed on such date and will give the Paying Agent irrevocable instructions and authority to pay the Redemption Price to the Holders of such Preferred Securities upon surrender of their Preferred Securities Certificates. 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 as they appear on the Securities Register for the Trust Securities on the 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 Securityholders holding Trust Securities so called for redemption will cease, except the right of such Securityholders to receive the Redemption Price, but without interest, and such Trust Securities will cease to be Outstanding. In the event that any date on which any Redemption Price is payable is not a Business Day, then payment of the Redemption Price payable on such date will be made on the next succeeding day which 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, such payment will be made 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 Trust or by the Depositor pursuant to the Guarantee, Distributions on such Trust Securities will continue to accumulate, at the then applicable rate, from the Redemption Date originally established by the Trust for such Trust Securities to the date such Redemption Price is actually paid, in which case the actual payment date will be the date fixed for redemption for purposes of calculating the Redemption Price. (e) If less than all the Outstanding Trust Securities are to be redeemed on a Redemption Date, then the aggregate Liquidation Amount of Trust Securities to be redeemed shall be allocated __% to the Common Securities and __% to the Preferred Securities. The particular Preferred Securities to be redeemed shall be selected by the Property Trustee from the Outstanding Preferred Securities not previously called for redemption, by such method as the Property Trustee shall deem fair and appropriate. The Property Trustee shall promptly notify the Securities Registrar in writing of the Preferred Securities selected for redemption. If fewer than all of the Trust Securities represented by a Trust Securities Certificate are redeemed, the Administrative Trustee shall execute for the Holder a new Trust Securities Certificate 16 representing the unredeemed Trust Securities. For all purposes of this Trust Agreement, unless the context otherwise requires, all provisions relating to the redemption of Preferred Securities shall relate, in the case of any Preferred Securities redeemed or to be redeemed only in part, to the portion of the Liquidation Amount of Preferred Securities which has been or is to be redeemed. Section 4.03. Subordination of Common Securities. (a) Payment of Distributions on, and the Redemption Price of, the Trust Securities, as applicable, shall be made pro rata based on the Liquidation Amount of the Trust Securities; provided, however, that if on any Distribution Date or Redemption Date, a Debenture Event of Default shall have occurred and be continuing, no payment of any Distribution on, or Redemption Price of, any Common Security, and no other payment on account of the liquidation of Common Securities, shall be made unless payment in full in cash of all accumulated and unpaid Distributions on all Outstanding Preferred Securities for all distribution periods terminating on or prior thereto, or in the case of payment of the Redemption Price, the full amount of such Redemption Price on all Outstanding Preferred Securities then being redeemed, shall have been made or provided for, and all funds immediately available to the Property Trustee shall first be applied to the payment in full in cash of all Distributions on, or the Redemption Price of, Preferred Securities then due and payable. (b) In the case of the occurrence of any Debenture Event of Default, the Holder of Common Securities will be deemed to have waived any right to act with respect to any related Event of Default under this Trust Agreement and such Debenture Event of Default until the effect of such related Event of Default and such Debenture Event of Default has been cured, waived or otherwise eliminated. Until any such Event of Default under this Trust Agreement and 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 Preferred Securities and not the Holder of the Common Securities, and only the Holders of the Preferred Securities will have the right to direct the Property Trustee to act on their behalf. Section 4.04. _____ Payment Procedures. Payments of Distributions pursuant to Section 4.01 in respect of the Preferred Securities shall be made by check mailed to the address of the Holder thereof as such address shall appear on the Securities Register or, if the Preferred Securities are held by a Clearing Agency, such Distributions shall be made to the Clearing Agency by wire transfer in immediately available funds. Payments of Distributions pursuant to Section 4.01 in respect of the Common Securities shall be made in such manner as shall be mutually agreed between the Property Trustee and the Holder of the Common Securities. Payment of the Redemption Price or Liquidation Distribution of the Trust Securities shall be made in immediately available funds upon surrender of the Preferred Securities Certificate representing such Preferred Securities at the Corporate Trust Office of the Property Trustee. Section 4.05. Tax Returns and Reports. The Administrative Trustee shall prepare (or cause to be prepared), at the Depositor's expense, and file all Federal, State and local tax and information returns and reports required to be filed by or in respect of the Trust. In this regard, the Administrative Trustee shall (a) prepare and file (or cause to be prepared or filed) the 17 appropriate Internal Revenue Service Form required to be filed in respect of the Trust in each taxable year of the Trust and (b) prepare and furnish (or cause to be prepared and furnished) to each Securityholder the related Internal Revenue Service Form 1099 OID, or any successor form or the information required to be provided on such form. The Administrative Trustee shall provide the Depositor and the Property Trustee with a copy of all such returns, reports and schedules promptly after such filing or furnishing. The Trustees shall comply with United States Federal withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Securityholders under the Trust Securities. Section 4.06. _____ Payments under Indenture. Any amount payable hereunder to any Holder of Preferred Securities shall be reduced by the amount of any corresponding payment such Holder has directly received pursuant to Section 6.07 of the Indenture or pursuant to the Guarantee. Notwithstanding the provisions hereunder to the contrary, Securityholders acknowledge that any Holder of Preferred Securities that receives payment under Section 6.07 of the Indenture may receive amounts greater than the amount such Holder may be entitled to receive pursuant to the other provisions of this Trust Agreement. ARTICLE V Trust Securities Certificates Section 5.01. Initial Ownership. Upon the creation of the Trust and the contribution by the Depositor pursuant to Section 2.03 and until the issuance of the Trust Securities, and at any time during which no Trust Securities are outstanding, the Depositor shall be the sole beneficial owner of the Trust. Section 5.02. The Trust Securities Certificates. The Trust Securities Certificates shall be issued representing one or more Preferred Securities. Preferred Securities Certificates representing fractional interests shall not be issued. The Trust Securities Certificates shall be executed on behalf of the Trust by manual signature of the Administrative Trustee or by a facsimile signature of the Administrative Trustee countersigned by the Securities Registrar. Trust Securities Certificates bearing the manual signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefits of this Trust Agreement, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the delivery of such Trust Securities Certificates or did not hold such offices at the date of delivery of such Trust Securities Certificates. A transferee of a Trust Securities Certificate shall become a Securityholder, and shall be entitled to the rights and subject to the obligations of a Securityholder hereunder, upon due registration of such Trust Securities Certificate in such transferee's name pursuant to Section 5.04. Section 5.03. Delivery of Trust Securities Certificates. On the Closing Date, the Administrative Trustee shall cause Trust Securities Certificates, in an aggregate Liquidation Amount as provided in Sections 2.04 and 2.05, to be executed on behalf of the Trust as provided in Section 5.02 and delivered to or upon a written order of the Depositor signed by its Chairman of the Board, its President, any Vice President or the Treasurer, without further corporate action 18 by the Depositor, in authorized denominations. The written order of the Depositor shall be accompanied by an Officer's Certificate and an Opinion of Counsel. Section 5.04. Registration of Transfer and Exchange of Preferred Securities Certificates. A registrar appointed by the Depositor (the "Securities Registrar") shall keep or cause to be kept, at the office or agency maintained pursuant to Section 5.08, a register (the "Securities Register") in which, subject to such reasonable regulations as it may prescribe, the Securities Registrar shall provide for the registration of Trust Securities Certificates (subject to Section 5.10 in the case of the Common Securities Certificates) and registration of transfers and exchanges of Preferred Securities Certificates as herein provided. The Property Trustee shall be the initial Securities Registrar; any successor Securities Registrar shall be appointed by the Administrative Trustee. Upon surrender for registration of transfer of any Preferred Securities Certificate at the office or agency maintained pursuant to Section 5.08, the Administrative Trustee shall execute and deliver, in the name of the designated transferee or transferees, one or more new Preferred Securities Certificates representing the same number of Preferred Securities dated the date of execution by the Administrative Trustee. At the option of a Holder, Preferred Securities Certificates may be exchanged for other Preferred Securities Certificates upon surrender of the Preferred Securities Certificates to be exchanged at the office or agency maintained pursuant to Section 5.08. The Securities Registrar shall not be required to register the transfer of any Preferred Securities that have been called for redemption or after the Liquidation Date. Preferred Securities presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in form satisfactory to the Administrative Trustee and the Securities Registrar duly executed by the Holder or such Holder's attorney duly authorized in writing. Each Preferred Securities Certificate surrendered for registration of transfer or exchange shall be cancelled and subsequently disposed of by the Property Trustee in accordance with its customary practice. No service charge shall be made for any registration of transfer or exchange of Preferred Securities, but the Securities Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Preferred Securities. Section 5.05. Mutilated, Destroyed, Lost or Stolen Trust Securities Certificates. If (a) any mutilated Trust Securities Certificate shall be surrendered to the Securities Registrar, or if the Securities Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Trust Securities Certificate, and (b) there shall be delivered to the Securities Registrar and the Administrative Trustee such security or indemnity as may be required by them to hold the Securities Registrar and the Trust harmless, then in the absence of notice that such Trust Securities Certificate shall have been acquired by a bona fide purchaser, the Administrative Trustee, on behalf of the Trust shall execute and make available for delivery, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities Certificate, a new Trust Securities Certificate of like tenor. In connection with the issuance of any new Trust Securities Certificate under this Section, the Administrative Trustee or the Securities Registrar may require 19 the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Trust Securities Certificate issued pursuant to this Section shall constitute conclusive evidence of an undivided beneficial interest in the assets of the Trust, as if originally issued, whether or not the lost, stolen or destroyed Trust Securities Certificate shall be found at any time. Section 5.06. Persons Deemed Securityholders. Prior to due presentation of a Trust Security Certificate for registration of transfer, the Administrative Trustee or the Securities Registrar shall treat the Person in whose name any Trust Securities Certificate shall be registered in the Securities Register as the owner and Holder of such Trust Securities Certificate for the purpose of receiving Distributions and for all other purposes whatsoever, and neither the Trustees nor the Securities Registrar shall be bound by any notice to the contrary. Section 5.07. Access to List of Securityholders' Names and Addresses. In the event that the Property Trustee is no longer the Securities Registrar, the Administrative Trustee or the Depositor shall furnish or cause to be furnished (a) to the Property Trustee, quarterly not later than 10 days prior to a Distribution Date, a list, in such form as the Property Trustee may reasonably require, of the names and addresses of the Securityholders as of the most recent record date and (b) to the Property Trustee, promptly after receipt by the Administrative Trustee or the Depositor of a request therefor from the Property Trustee in order to enable the Paying Agent to pay Distributions in accordance with Section 4.01 hereof), in each case to the extent such information is in the possession or control of the Administrative Trustee or the Depositor and is not identical to a previously supplied list or has not otherwise been received by the Property Trustee. The rights of Securityholders to communicate with other Securityholders with respect to their rights under this Trust Agreement or under the Trust Securities, and the corresponding rights of the Property Trustee shall be as provided in the Trust Indenture Act. Each Holder, by receiving and holding a Trust Securities Certificate, shall be deemed to have agreed not to hold the Depositor, the Property Trustee, the Administrative Trustee or the Delaware Trustee accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. Section 5.08. Maintenance of Office or Agency. The Property Trustee shall maintain in Morristown, New Jersey, an office or offices or agency or agencies where Preferred Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Trustees in respect of the Trust Securities Certificates may be served. The Property Trustee shall give prompt written notice to the Depositor and to the Securityholders of any change in the location of the Securities Register or any such office or agency, which shall initially be at the Corporate Trust Office of the Property Trustee. Section 5.09. Appointment of Paying Agent. The Paying Agent shall make Distributions to Securityholders from the Payment Account and shall report the amounts of such Distributions to the Property Trustee and the Administrative Trustee. Any Paying Agent shall have the revocable power to withdraw funds from the Payment Account for the purpose of making Distributions. The Administrative Trustee may revoke such power and remove the Paying Agent, provided that such revocation and removal with respect to the sole Paying Agent shall not become effective until the appointment of a successor. The Paying Agent shall initially 20 be the Property Trustee, and any co-paying agent chosen by the Property Trustee and acceptable to the Administrative Trustee and the Depositor. Any Person acting as Paying Agent shall be permitted to resign as Paying Agent upon 30 days' written notice to the Administrative Trustee and the Depositor, and, if applicable, the Property Trustee, provided that such resignation with respect to the sole Paying Agent shall not become effective until the appointment of a successor. In the event that the Property Trustee shall no longer be the Paying Agent or a successor Paying Agent shall resign or its authority to act be revoked, the Administrative Trustee shall appoint a successor that is acceptable to the Property Trustee (in the case of any other Paying Agent) and the Depositor to act as Paying Agent (which shall be a bank or trust company and have a combined capital and surplus of at least $50,000,000). The Administrative Trustee shall cause such successor Paying Agent or any additional Paying Agent appointed by the Administrative Trustee to execute and deliver to the Trustees an instrument in which such successor Paying Agent or additional Paying Agent shall agree with the Trustees that as Paying Agent, such successor Paying Agent or additional Paying Agent will hold all sums, if any, held by it for payment to the Securityholders in trust for the benefit of the Securityholders entitled thereto until such sums shall be paid to such Securityholders. The Paying Agent shall return all of such sums remaining unclaimed to the Property Trustee and upon removal of a Paying Agent such Paying Agent shall also return such sums in its possession to the Property Trustee. The provisions of Sections 7.01, 7.03 and 7.06 shall apply to the Property Trustee also in its role as Paying Agent, for so long as the Property Trustee shall act as Paying Agent and, to the extent applicable, to any other Paying Agent appointed hereunder. Any reference in this Trust Agreement to the Paying Agent shall include any co-paying agent unless the context requires otherwise. Section 5.10. No Transfer of Common Securities by Depositor. To the fullest extent permitted by law, any attempted transfer of the Common Securities shall be void. The Administrative Trustee shall cause each Common Securities Certificate issued to the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE". By execution of this Trust Agreement, the Depositor agrees to the foregoing provisions. Section 5.11. Book-Entry Preferred Securities Certificates; Common Securities Certificate. (a) The Preferred Securities, upon original issuance on the Closing Date, will not be engraved but will be issued in the form of one or more printed or typewritten Book-Entry Preferred Securities Certificates, to be delivered to The Depository Trust Company, the initial Clearing Agency, by, or on behalf of, the Trust. Such Book-Entry Preferred Securities Certificate or Certificates shall initially be registered on the Securities Register in the name of Cede & Co., the nominee of the initial Clearing Agency. (b) A single Common Securities Certificate representing the Common Securities shall be issued to the Depositor in the form of a definitive Common Securities Certificate. Section 5.12. Definitive Preferred Securities Certificates. If (a) the Depositor advises the Trustees in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities with respect to the Preferred Securities Certificates or the Clearing 21 Agency is no longer registered or in good standing under the Securities Exchange Act of 1934, as amended, or other applicable statute or regulation, and the Depositor is unable to locate a qualified successor, (b) the Depositor at its option advises the Trustees in writing that it elects to terminate the book-entry system through the Clearing Agency or (c) an Event of Default occurs and is continuing, then the Administrative Trustee shall issue Definitive Preferred Securities Certificates. Upon surrender to the Administrative Trustee of the Book-Entry Preferred Securities Certificates by the Clearing Agency, accompanied by registration instructions, the Administrative Trustee shall execute and deliver the Definitive Preferred Securities Certificates in accordance with the instructions of the Clearing Agency. Neither the Securities Registrar nor the Trustees shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. The Definitive Preferred Securities Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Administrative Trustee, as evidenced by the execution thereof by the Administrative Trustee. Section 5.13. Rights of Securityholders. The Securityholders shall not have any right or title to the Trust Property other than the undivided beneficial interest in the assets of the Trust conferred by their Trust Securities and they shall have no right to call for any partition or division of property, profits or rights of the Trust except as described below. The Trust Securities shall be personal property giving only the rights specifically set forth therein and in this Trust Agreement. The Trust Securities shall have no preemptive or similar rights and when issued and delivered to Securityholders against payment of the purchase price therefor will be fully paid and nonassessable by the Trust. The Holders of the Trust Securities, in their capacities as such, shall be entitled to the same limitation of personal liability extended to stockholders of private corporations for profit organized under the General Corporation Law of the State of Delaware. ARTICLE VI Acts of Securityholders; Meetings; Voting Section 6.01. Limitations on Voting Rights. (a) Except as provided herein and in the Indenture and as otherwise required by law, no Holder of Trust Securities shall have any right to vote or in any manner otherwise control the administration, operation and management of the Trust or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Trust Securities Certificates, be construed so as to constitute the Securityholders from time to time as partners or members of an association. (b) The 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 such Debentures, (ii) waive any past default which may be waived under Section 6.04 of the Indenture, (iii) exercise any right to rescind or annul an acceleration of the principal of all 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 prior consent of the Holders of at least a majority in aggregate 22 Liquidation Amount of all Outstanding Preferred Securities; provided, however, that where such 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 written consent of each Holder of Outstanding Preferred Securities. The Trustees shall not revoke any action previously authorized or approved by a vote of the Holders of Preferred Securities, except by a subsequent vote of the Holders of Preferred Securities. The Property Trustee shall notify all Holders of the Preferred Securities of any notice received from the Debenture Trustee as a result of the Trust being the holder of the Debentures. In addition to obtaining the consent of the Holders of the Preferred Securities, prior to taking any of the foregoing actions, the Trustees shall, at the expense of the Depositor, obtain an Opinion of Counsel experienced in such matters to the effect that the Trust will not be classified as an association taxable as a corporation or partnership for United States Federal income tax purposes on account of such action and will continue to be classified as a grantor trust for United States Federal income tax purposes. (c) Subject to Section 10.02(c) hereof, if any proposed amendment to the Trust Agreement provides for, or the Trustees otherwise propose to effect, (i) any action that would adversely affect in any material respect the powers, preferences or special rights of the Preferred Securities, whether by way of amendment to this Trust Agreement or otherwise, or (ii) the termination or liquidation of the Trust, other than pursuant to the terms of this Trust Agreement, then the Holders of Outstanding Preferred Securities will be entitled to vote on such amendment or proposal and such amendment or proposal shall not be effective except with the approval of the Holders of at least a majority in aggregate Liquidation Amount of the Outstanding Preferred Securities. Section 6.02. Notice of Meetings. Notice of all meetings of the Preferred Securityholders, stating the time, place and purpose of the meeting, shall be given by the Property Trustee pursuant to Section 10.08 to each Preferred Securityholder of record, at his/her registered address, at least 15 days and not more than 90 days before the meeting. At any such meeting, any business properly before the meeting may be so considered whether or not stated in the notice of the meeting. Any adjourned meeting may be held as adjourned without further notice. Section 6.03. Meetings of Preferred Securityholders. No annual meeting of Securityholders is required to be held. The Administrative Trustee, however, shall call a meeting of Securityholders to vote on any matter upon the written request of the Holders of at least 25% of the aggregate Liquidation Amount of the Outstanding Preferred Securities and the Administrative Trustee or the Property Trustee may, at any time in their discretion, call a meeting of Preferred Securityholders to vote on any matters as to which the Preferred Securityholders are entitled to vote. Holders of at least 50% of the aggregate Liquidation Amount of the Outstanding Preferred Securities, present in person or by proxy, shall constitute a quorum at any meeting of Securityholders. If a quorum is present at a meeting, an affirmative vote of the Holders of at least a majority of the aggregate Liquidation Amount of the Outstanding Preferred Securities present, 23 either in person or by proxy, at such meeting shall constitute the action of the Securityholders, unless this Trust Agreement requires a greater number of affirmative votes. Section 6.04. Voting Rights. A Securityholder shall be entitled to one vote for each Trust Security in respect of any matter as to which such Securityholder is entitled to vote. Section 6.05. Proxies, etc. At any meeting of Securityholders, any Securityholder entitled to vote thereat may vote by proxy, provided that no proxy shall be voted at any meeting unless it shall have been placed on file with the Administrative Trustee, or with such other officer or agent of the Trust as the Administrative Trustee may direct, for verification prior to the time at which such vote shall be taken. Pursuant to a resolution of the Property Trustee, proxies may be solicited in the name of the Property Trustee or one or more officers of the Property Trustee. Only Securityholders of record shall be entitled to vote. When Trust Securities are held jointly by several Persons, any one of them may vote at any meeting in person or by proxy in respect of such Trust Securities, but if more than one of them shall be present at such meeting in person or by proxy, and such joint owners or their proxies so present disagree as to any vote to be cast, such vote shall not be received in respect of such Trust Securities. A proxy purporting to be executed by or on behalf of a Securityholder shall be deemed valid unless challenged at or prior to its exercise, and the burden of proving invalidity shall rest on the challenger. No proxy shall be valid more than three years after its date of execution. Section 6.06. Securityholder Action by Written Consent. Any action which may be taken by Securityholders at a meeting may be taken without a meeting if Holders of the proportion of the Outstanding Preferred Securities required to approve such action shall consent to the action in writing. Section 6.07. Record Date for Voting and Other Purposes. For the purposes of determining the Securityholders who are entitled to notice of and to vote at any meeting or by written consent, or for the purpose of any other action, the Administrative Trustee may from time to time fix a date, not more than 90 days prior to the date of any meeting of Securityholders, as a record date for the determination of the identity of the Securityholders for such purposes. Section 6.08. Acts of Securityholders. Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Trust Agreement to be given, made or taken by Securityholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Securityholders in person or by an agent duly appointed in writing; and, except as otherwise expressly provided herein, such action shall become effective when such instrument or instruments are delivered to the Administrative Trustee. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "Act" of the Securityholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Trust Agreement and (subject to Section 7.02) conclusive, if made in the manner provided in this Section. The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public 24 or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him/her the execution thereof. Where such execution is by a signer acting in a capacity other than his/her individual capacity, such certificate or affidavit shall also constitute sufficient proof of his/her authority. The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which any Trustee receiving the same deems sufficient. The ownership of Preferred Securities shall be proved by the Securities Register. Any request, demand, authorization, direction, notice, consent, waiver or other act of the Securityholder of any Trust Security shall bind every future Securityholder of the same Trust Security and the Securityholder of every Trust Security issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustees or the Trust in reliance thereon, whether or not notation of such action is made upon such Trust Security. Without limiting the foregoing, a Securityholder entitled hereunder to take any action hereunder with regard to any particular Trust Security may do so with regard to all or any part of the Liquidation Amount of such Trust Security or by one or more duly appointed agents, each of which may do so pursuant to such appointment with regard to all or any part of such Liquidation Amount. If any dispute shall arise between the Securityholders and the Administrative Trustee or among such Securityholders or Trustees with respect to the authenticity, validity or binding nature of any request, demand, authorization, direction, consent, waiver or other Act of such Securityholder or Trustee under this Article VI, then the determination of such matter by the Property Trustee shall be conclusive with respect to such matter. Section 6.09. Inspection of Records. Upon reasonable notice to the Administrative Trustee and the Property Trustee, the records of the Trust shall be open to inspection by Securityholders during normal business hours for any purpose reasonably related to such Securityholder's interest as a Securityholder. ARTICLE VII The Trustees Section 7.01. Certain Duties and Responsibilities. (a) The duties and responsibilities of the Trustees shall be as provided by this Trust Agreement and, in the case of the Property Trustee, also by the Trust Indenture Act. The Property Trustee, other than during the occurrence and continuance of an Event of Default, undertakes to perform only such duties as are specifically set forth in this Trust Agreement and, upon an Event of Default, must exercise the same degree of care and skill as a prudent person would exercise or use in the conduct of his/her own affairs. The Trustees shall have all the privileges, rights and immunities provided by the Delaware Business Trust Act. 25 Notwithstanding the foregoing, no provision of this Trust Agreement shall require the Trustees to expend or risk their own funds or otherwise incur any financial liability in the performance of any of their duties hereunder, or in the exercise of any of their rights or powers, if they shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. Whether or not therein expressly so provided, every provision of this Trust Agreement relating to the conduct or affecting the liability of or affording protection to the Trustees shall be subject to the provisions of this Section. Nothing in this Trust Agreement shall be construed to release the Property Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct. To the extent that, at law or in equity, the Administrative Trustee has duties (including fiduciary duties) and liabilities relating thereto to the Trust or to the Securityholders, the Administrative Trustee shall not be liable to the Trust or to any Securityholder for the Administrative Trustee's good faith reliance on the provisions of this Trust Agreement. The provisions of this Trust Agreement, to the extent that they restrict the duties and liabilities of the Administrative Trustee otherwise existing at law or in equity, are agreed by the Depositor and the Securityholders to replace such other duties and liabilities of the Administrative Trustee. (b) All payments made by the Property Trustee or any other Paying Agent in respect of the Trust Securities shall be made only from the income and proceeds from the Trust Property. Each Securityholder, by its acceptance of a Trust Security, agrees that (i) it will look solely to the income and proceeds from the Trust Property to the extent available for distribution to it as herein provided and (ii) the Trustees are not personally liable to it for any amount distributable in respect of any Trust Security or for any other liability in respect of any Trust Security. This Section 7.01(b) does not limit the liability of the Trustees expressly set forth elsewhere in this Trust Agreement or, in the case of the Property Trustee, in the Trust Indenture Act. Section 7.02. Notice of Defaults; Direct Action by Securityholders. Within 90 days after the occurrence of any Event of Default actually known to the Property Trustee, the Property Trustee shall transmit, in the manner and to the extent provided in Section 10.08, notice of such Event of Default to the Securityholders, the Administrative Trustee and the Depositor, unless such Event of Default shall have been cured or waived. If the Property Trustee has failed to enforce its rights under this Trust Agreement or the Indenture to the fullest extent permitted by law and subject to the terms of this Trust Agreement and the Indenture, any Securityholder may institute a legal proceeding directly to enforce the Property Trustee's rights under this 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 Securityholder 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 outstanding Debentures, Holders of at least the same percentage of the Liquidation Amount of the Outstanding Preferred Securities may also take such action in the name of the Trust if such action has not been taken by the Property Trustee. To the fullest extent permitted by law, the foregoing shall be in addition to and not in limitation of any direct rights provided to the Holders of the Preferred Securities under the terms of the Indenture, including the right, without any notice or other demand on the Property Trustee, to 26 institute suit for the enforcement of any payment of the principal of and any premium and interest on Debentures as provided in Section 6.07 of the Indenture. Section 7.03. Certain Rights of Property Trustee. Subject to the provisions of Section 7.01: (a) the Property Trustee may rely and shall be protected in acting or refraining from acting in good faith upon any resolution, Opinion of Counsel, certificate, written representation of a Holder or transferee, certificate of auditors or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, appraisal, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) if, other than during the occurrence and continuance of an Event of Default, (i) in performing its duties under this Trust Agreement, the Property Trustee is required to decide between alternative courses of action or (ii) in construing any of the provisions in this Trust Agreement, the Property Trustee finds the same ambiguous or inconsistent with any other provisions contained herein or (iii) the Property Trustee is unsure of the application of any provision of this Trust Agreement, then, except as to any matter as to which the Preferred Securityholders are entitled to vote under the terms of this Trust Agreement, the Property Trustee shall deliver a notice to the Depositor requesting written instructions of the Depositor as to the course of action to be taken. The Property Trustee shall take such action, or refrain from taking such action, as the Property Trustee shall be instructed in writing to take, or to refrain from taking, by the Depositor; provided, however, that if the Property Trustee does not receive such instructions of the Depositor within ten Business Days after it has delivered such notice, or such reasonably shorter period of time set forth in such notice (which to the extent practicable shall not be less than two Business Days), it may, but shall be under no duty to, take or refrain from taking such action not inconsistent with this Trust Agreement as it shall deem advisable and in the best interests of the Securityholders, in which event the Property Trustee shall have no liability except for its own negligent action, its own negligent failure to act or its own willful misconduct; (c) the Property Trustee may consult with counsel or other experts of its selection and the advice or opinion of such counsel or other experts with respect to legal matters or advice within the scope of such experts' area of expertise shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon; (d) the Property Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Trust Agreement at the request or direction of any of the Securityholders pursuant to this Trust Agreement, unless such Securityholders shall have offered to the Property Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (e) the Property Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, 27 report, notice, request, direction, consent, order, approval, bond, debenture, note or other evidence of indebtedness or other paper or document, but the Property Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit; and (f) the Property Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys and the Property Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. Section 7.04. Not Responsible for Recitals or Issuance of Securities. The recitals contained herein and in the Trust Securities Certificates shall be taken as the statements of the Trust, and the Trustees do not assume any responsibility for their correctness. The Trustees shall not be accountable for the use or application by the Depositor of the proceeds of the Debentures. Section 7.05. May Hold Securities. Any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Trust Securities and, subject to Sections 7.08 and 7.13 and, except as provided in the definition of the term Outstanding in Article I, may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent. Section 7.06. Compensation; Indemnity; Fees. The Depositor agrees: (a) to pay to the Trustees from time to time such compensation as shall have been agreed in writing with the Depositor for all services rendered by them hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust); (b) except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance with any provision of this Trust Agreement (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its own negligent action, its own negligent failure to act or its own wilful misconduct (or, in the case of the Administrative Trustee, any such expense, disbursement or advance as may be attributable to his/her gross negligence); and (c) to indemnify each of the Trustees or any predecessor Trustee for, and to hold the Trustees harmless against, any and all loss, damage, claims, liability, penalty or expense including taxes (other than taxes based on the income of such Trustee) incurred without its own negligent action, its own negligent failure to act or its wilful misconduct (or, in the case of the Administrative Trustees, incurred without gross negligence or bad faith), arising out of or in connection with the acceptance or administration of this Trust Agreement, including the 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 hereunder. 28 No Trustee may claim any Lien or charge on any Trust Property as a result of any amount due pursuant to this Section 7.06. The provisions of this Section 7.06 shall survive the termination of this Trust Agreement. Section 7.07. Corporate Property Trustee Required; Eligibility of Trustees. (a) There shall at all times be a Property Trustee hereunder. The Property Trustee shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000. If any such Person publishes reports of condition at least annually, pursuant to law or to the requirements of its supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Property Trustee with respect to the Trust Securities shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article. (b) There shall at all times be one or more Administrative Trustees hereunder. Each Administrative Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity. (c) There shall at all times be a Delaware Trustee. The Delaware Trustee shall either be (i) a natural person who is at least 21 years of age and a resident of the State of Delaware or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law that shall act through one or more persons authorized to bind such entity. Section 7.08. Conflicting Interests. If the Property Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Property Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Trust Agreement. Section 7.09. Co-Trustees and Separate Trustee. Unless an Event of Default shall have occurred and be continuing, at any time or times, 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 may at the time be located, the Depositor and the Administrative Trustee (and if more than one Administrative Trustee, by agreed action of the majority of such Trustees) shall have power (i) to appoint, and upon the written request of the Administrative Trustee the Depositor shall for such purpose join with the Administrative Trustee in the execution, delivery, and performance of all instruments and agreements necessary or proper 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 the extent required by law to act as separate trustee of any such 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 the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions 29 of this Section. If the Depositor does not join in such appointment within 15 days after the receipt by it of a request so to do, or in case a Debenture Event of Default has occurred and is continuing, the Property Trustee alone shall have power to make such appointment. Any co-trustee or separate trustee appointed pursuant to this Section shall either be (i) a natural person who is at least 21 years of age and a resident of the United States or (ii) a legal entity with its principal place of business in the United States that shall act through one or more persons authorized to bind such entity. Should any written instrument from the Depositor be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such property, title, right, or power, any and all such instruments shall, on request, be executed, acknowledged, and delivered by the Depositor. Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms, namely: (a) The Trust Securities shall be executed and delivered and all rights, powers, duties, and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Trustees specified hereunder, shall be exercised, solely by such Trustees and not by such co-trustee or separate trustee. (b) The rights, powers, duties, and obligations hereby conferred or imposed upon the Property Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Property Trustee or by the Property Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Property Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee. (c) The Property Trustee at any time, by an instrument in writing executed by it, with the written concurrence of the Depositor, may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section, and, in case an Event of Default under the Indenture has occurred and is continuing, the Property Trustee shall have power to accept the resignation of, or remove, any such co-trustee or separate trustee without the concurrence of the Depositor. Upon the written request of the Property Trustee, the Depositor shall join with the Property Trustee in the execution, delivery, and performance of all instruments and agreements necessary or proper to effectuate such resignation or removal. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section. (d) No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Property Trustee, or any other trustee hereunder. 30 (e) The Property Trustee shall not be liable by reason of any act of a co-trustee or separate trustee. (f) Any Act of Holders delivered to the Property Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee. Section 7.10. Resignation and Removal; Appointment of Successor. No resignation or removal of any Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 7.11. Subject to the immediately preceding paragraph, any Trustee may resign at any time with respect to the Trust Securities by giving written notice thereof to the Securityholders. Unless an Event of Default shall have occurred and be continuing, any Trustee may be removed at any time by Act of the Holder of the Common Securities. If an Event of Default shall have occurred and be continuing, the Property Trustee or the Delaware Trustee, or both of them, may be removed at such time only by Act of the Holders of at least a majority in Liquidation Amount of the Outstanding Preferred Securities, delivered to such Trustee (in its individual capacity and on behalf of the Trust). The Administrative Trustee may only be removed by the Holder of Common Securities at any time. If the instrument of acceptance by the successor Trustee required by Section 7.11 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation or removal, the Trustee may petition, at the expense of the Depositor, any court of competent jurisdiction for the appointment of a successor Trustee. If any Trustee shall resign, be removed or become incapable of acting as Trustee, or if a vacancy shall occur in the office of any Trustee for any cause, at a time when no Event of Default shall have occurred and be continuing, the Holder of Common Securities, by Act of the Holder of Common Securities delivered to the retiring Trustee, shall promptly appoint a successor Trustee or Trustees and the Trust, and the retiring Trustee shall comply with the applicable requirements of Section 7.11. If the Property Trustee or the Delaware Trustee shall resign, be removed or become incapable of continuing to act as the Property Trustee or the Delaware Trustee, as the case may be, at a time when an Event of Default has occurred and is continuing, the Holders of Preferred Securities, by Act of the Securityholders of at least a majority in Liquidation Amount of the Outstanding Preferred Securities delivered to the retiring Trustee, shall promptly appoint a successor Trustee or Trustees, and such successor Trustee shall comply with the applicable requirements of Section 7.11. If any Administrative Trustee shall resign, be removed or become incapable of acting as Administrative Trustee at a time when an Event of Default shall have occurred and be continuing, the Holder of Common Securities shall appoint a successor Administrative Trustee. If no successor Trustee shall have been so appointed by the Holder of Common Securities or the Holders of Preferred Securities and accepted appointment in the manner required by Section 7.11, any Securityholder who has been a Securityholder of Trust Securities for 31 at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. The Property Trustee shall give notice of each resignation and each removal of a Trustee and each appointment of a successor Trustee to all Securityholders in the manner provided in Section 10.08 and shall give notice to the Depositor. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office if it is the Property Trustee. Notwithstanding the foregoing or any other provision of this Trust Agreement, in the event any Administrative Trustee or Delaware Trustee who is a natural person dies or becomes, in the opinion of the Depositor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by (a) the unanimous act of the remaining Administrative Trustees if there are at least two of them or (b) otherwise by the Depositor (with the successor in each case being a Person who satisfies the eligibility requirements for Administrative Trustee or for the Delaware Trustee, as the case may be, set forth in Section 7.07). Section 7.11. _____ Acceptance of Appointment by Successor. In case of the appointment hereunder of a successor Trustee, the retiring Trustee and each successor Trustee shall execute and deliver to the Trust and the retiring Trustee an amendment hereto wherein each successor Trustee shall accept such appointment and which (a) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee and (b) shall add to or change any of the provisions of this Trust Agreement as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such amendment shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee and upon the execution and delivery of such amendment the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee and the Trust; but, on request of the Trust or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all Trust Property, all proceeds thereof and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts referred to in the first or second preceding paragraph, as the case may be. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article. Section 7.12. Merger, Conversion, Consolidation or Succession to Business. Any Person into which any of the Trustees may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which 32 such Trustee shall be a party, or any Person succeeding to all or substantially all the corporate trust business of such Trustee, shall be the successor of such Trustee hereunder, provided such Person shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. Section 7.13. Preferential Collection of Claims Against Depositor or Trust. If and when the Property Trustee or the Delaware Trustee shall be or become a creditor (whether directly or indirectly, secured or unsecured) of the Depositor or the Trust (or any other obligor upon the Debentures or the Trust Securities), including under the terms of Section 7.05 hereof, the Property Trustee or the Delaware Trustee, as the case may be, shall be subject to and shall take all actions necessary in order to comply with the provisions of the Trust Indenture Act regarding the collection of claims against the Depositor or Trust (or any such other obligor). Section 7.14. Reports by Property Trustee. The Property Trustee shall transmit to Holders such reports concerning the Property Trustee and its actions under this Trust Agreement as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the Property Trustee shall, within 60 days after each May 31 following the date of this Trust Agreement deliver to Holders a brief report, dated as of such May 31, which complies with the provisions of such Section 313(a). A copy of each such report shall, at the time of such transmission to Holders, be filed by the Property Trustee with each stock exchange upon which any Preferred Securities are then listed, with the Commission and with the Trust. The Trust will promptly notify the Property Trustee when any Preferred Securities are listed on any stock exchange. Section 7.15. Reports to the Property Trustee. The Depositor and the Administrative Trustee on behalf of the Trust shall provide to the Property Trustee such documents, reports and information as required by Section 314 of the Trust Indenture Act (if any) and the compliance certificate required by Section 314(a) of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. Section 7.16. Evidence of Compliance with Conditions Precedent. The Depositor and the Administrative Trustee on behalf of the Trust shall provide to the Property Trustee evidence of compliance with the conditions precedent, if any, provided for in this Trust Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Section 7.17. Statements Required in Officer's Certificate and Opinion of Counsel. Each Officer's Certificate and Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Trust Agreement shall include: (1) a statement that each Person making such Officer's Certificate or Opinion of Counsel has read such covenant or condition; 33 (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officer's Certificate or Opinion of Counsel are based; (3) a statement that, in the opinion of each such Person, such Person has made such examination or investigation as is necessary to enable such Person to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement that, in the opinion of such Person, such covenant or condition has been complied with; provided, however, that with respect to matters of fact not involving any legal conclusion, an Opinion of Counsel may rely on an Officer's Certificate or certificates of public officials. Section 7.18. Number of Trustees. (a) The number of Trustees shall be three, provided that the Holder of all of the Common Securities by written instrument may increase the number of Administrative Trustees and, if so increased, may decrease the number of Administrative Trustees. (b) If a Trustee ceases to hold office for any reason and the number of Administrative Trustees is not reduced pursuant to Section 7.18(a), or if the number of Trustees is increased pursuant to Section 7.18(a), a vacancy shall occur. The vacancy shall be filled with a Trustee appointed in accordance with Section 7.10. (c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to perform the duties of a Trustee shall not operate to annul the Trust. Whenever a vacancy shall occur, until such vacancy is filled by the appointment of an Administrative Trustee in accordance with Section 7.10, the Administrative Trustees in office, regardless of their number (and notwithstanding any other provision of this Trust Agreement), shall have all the powers granted to the Administrative Trustee and shall discharge all the duties imposed upon the Administrative Trustees by this Trust Agreement. Section 7.19. Delegation of Power. (a) Any Administrative Trustee may, by power of attorney consistent with applicable law, delegate to any natural person over the age of 21 his/her power for the purpose of executing any documents contemplated in Section 2.07(a), including any registration statement or amendment thereto filed with the Commission, or making any other governmental filing; and (b) the Administrative Trustees shall have power to delegate from time to time to such of their number, if there is more than one Administrative Trustee, or to the Depositor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Administrative Trustees or otherwise as the Administrative Trustees may deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein. 34 Section 7.20. Voting. Except as otherwise provided in this Trust Agreement, the consent or vote of the Trustees shall be approved by not less than a majority of the Administrative Trustees. ARTICLE VIII Termination and Liquidation Section 8.01. Termination Upon Expiration Date. Unless earlier terminated, the Trust shall automatically terminate on _______ __, ____ (the "Expiration Date"), following the distribution of the Trust Property in accordance with Section 8.04. Section 8.02. Early Termination. The earliest to occur of any of the following events is an "Early Termination Event": (a) the occurrence of a Bankruptcy Event in respect of, or the dissolution or liquidation of the Depositor or an acceleration of the maturity of the Debentures pursuant to Section 6.02 of the Indenture; (b) upon the election of the Depositor to liquidate the Trust and cause the distribution of a Like Amount of Debentures to the Holders of the Trust Securities; (c) the redemption of all of the Trust Securities; and (d) an order for termination of the Trust shall have been entered by a court of competent jurisdiction. The election of the Depositor pursuant to Section 8.02(b) shall be made by the Depositor giving written notice to the Trustees not less than 30 days prior to the date of distribution of the Debentures. Such notice shall specify the date of distribution of the Debentures and shall be accompanied by an Opinion of Counsel that such event will not be a taxable event to the Holders of the Trust Securities for Federal income tax purposes. Section 8.03. Termination. The respective obligations and responsibilities of the Trustees and the Trust created and continued hereby shall terminate upon the latest to occur of the following: (a) the distribution by the Property Trustee to Securityholders upon the liquidation of the Trust pursuant to Section 8.04, or upon the redemption of all of the Trust Securities pursuant to Section 4.02, of all amounts required to be distributed hereunder upon the final payment of the Trust Securities; (b) the payment of any expenses owed by the Trust; and (c) the discharge of all administrative duties of the Administrative Trustee, including the performance of any tax reporting obligations with respect to the Trust or the Securityholders. Section 8.04. Liquidation. (a) If an Early Termination Event specified in clause (a), (c) or (d) of Section 8.02 occurs or upon the Expiration Date, the Trust shall be liquidated by the Trustees as expeditiously as the Trustees determine to be possible by distributing, after satisfaction of 35 liabilities to creditors of the Trust as provided by applicable law, to each Securityholder a Like Amount of Debentures, subject to Section 8.04(d). If an Early Termination Event specified in clause (b) occurs, the Trust shall be liquidated by the Trustee on the date of distribution of the Debentures specified by the Depositor in its notice delivered pursuant to Section 8.02. Notice of liquidation shall be given by the Property Trustee by first-class mail, postage prepaid, mailed not later than 30 nor more than 60 days prior to the Liquidation Date to each Holder of Trust Securities at such Holder's address appearing in the Securities Register. All notices of liquidation shall: (i) state the Liquidation Date; (ii) state that from and after the Liquidation Date, the Trust Securities will no longer be deemed to be Outstanding and any Trust Securities Certificates not surrendered for exchange will be deemed to represent a Like Amount of Debentures; and (iii) provide such information with respect to the mechanics by which Holders may exchange Trust Securities Certificates for certificates evidencing Debentures, or, if Section 8.04(d) applies, receive a Liquidation Distribution, as the Administrative Trustee or the Property Trustee shall deem appropriate. (b) In order to effect the liquidation of the Trust and distribution of the Debentures to Securityholders, the Property Trustee, either itself acting as exchange agent or through the appointment of a separate exchange agent, shall establish such procedures as it shall deem appropriate to effect the distribution of Debentures in exchange for the Outstanding Trust Securities Certificates. (c) Except where Section 8.02(c) or 8.04(d) applies, on or after the Liquidation Date, (i) the Trust Securities will no longer be deemed to be Outstanding, (ii) certificates representing a Like Amount of Debentures will be issued to Holders of Trust Securities Certificates, upon surrender of such certificates to the Administrative Trustee or its agent for exchange, (iii) the Depositor shall use its best efforts to have the Debentures listed on the New York Stock Exchange or such other exchange as the Preferred Securities are then listed and shall take any reasonable action necessary to effect the distribution of the Debentures, (iv) any Trust Securities Certificates not so surrendered for exchange will be deemed to represent a Like Amount of Debentures, accruing interest at the rate provided for in the Debentures from the last Distribution Date on which a Distribution was made on such Trust Certificates until such certificates are so surrendered (and until such certificates are so surrendered, no payments or interest or principal will be made to Holders of Trust Securities Certificates with respect to such Debentures) and (v) all rights of Securityholders holding Trust Securities will cease, except the right of such Securityholders to receive Debentures upon surrender of Trust Securities Certificates. (d) In the event that, notwithstanding the other provisions of this Section 8.04, whether because of an order for termination entered by a court of competent jurisdiction or otherwise, distribution of the Debentures in the manner provided herein is determined by the Property Trustee not to be practical, the Trust Property shall be liquidated, and the Trust shall be 36 terminated, by the Property Trustee in such manner as the Property Trustee determines. In such event, on the date of the termination of the Trust, Securityholders will be entitled to receive out of the assets of the Trust available for distribution to Securityholders, after satisfaction of liabilities to creditors of the Trust as provided by applicable law, an amount equal to the Liquidation Amount per Trust Security plus accumulated and unpaid Distributions thereon to the date of payment (such amount being the "Liquidation Distribution"). If, upon any such termination, the Liquidation Distribution can be paid only in part because the Trust has insufficient assets available to pay in full the aggregate Liquidation Distribution, then, subject to the next succeeding sentence, the amounts payable by the Trust on the Trust Securities shall be paid on a pro rata basis (based upon Liquidation Amounts). The Holder of the Common Securities will be entitled to receive Liquidation Distributions upon any such termination pro rata (determined as aforesaid) with Holders of 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, and no Liquidation Distribution will be paid to the Holders of the Common Securities unless and until receipt by all Holders of the Preferred Securities of the entire Liquidation Distribution payable in respect thereof. ARTICLE IX Mergers, Etc. Section 9.01. _____ Mergers, Consolidations, Amalgamations or Replacements of the Trust. The Trust 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 Trust may, at the request of the Depositor, with the consent of the Administrative Trustee 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 Trust with respect to the Preferred Securities or (b) substitutes for the Preferred Securities other securities having substantially the same terms as 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 liquidation and redemption, (ii) the Depositor 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 Trust, (vii) prior to such merger, consolidation, amalgamation or replacement, the Depositor has received an Opinion of Counsel to the effect that (a) such merger, consolidation, amalgamation or replacement does not adversely affect the rights, preferences and privileges of the Holders of 37 the Preferred Securities (including any Successor Securities) in any material respect, and (b) following such merger, consolidation, amalgamation or replacement, neither the Trust nor such successor entity will be required to register as an investment company under the 1940 Act and (viii) the Depositor 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 this Trust Agreement. Notwithstanding the foregoing, the Trust shall not, except with the consent of all Holders of the Preferred Securities, merge with or into, consolidate, amalgamate, 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 Trust or the successor entity not to be classified as a grantor trust for United States Federal income tax purposes. ARTICLE X Miscellaneous Provisions Section 10.01. Limitation of Rights of Securityholders. The death or incapacity of any Person having an interest, beneficial or otherwise, in Trust Securities shall not operate to terminate this Trust Agreement, nor entitle the legal representatives or heirs of such Person or any Securityholder for such Person, to claim an accounting, take any action or bring any proceeding in any court for a partition or winding-up of the arrangements contemplated hereby, nor otherwise affect the rights, obligations and liabilities of the parties hereto or any of them. Section 10.02. Amendment. (a) This Trust Agreement may be amended from time to time by the Trustees and the Depositor, without the consent of any Securityholders, to cure any ambiguity, defect or inconsistency or make any other change which does not adversely affect in any material respect the interests of any Holder of Preferred Securities. Any amendments of this Trust Agreement pursuant to Section 10.02(a) shall become effective when notice thereof is given to the Securityholders. (b) Except as provided in Section 10.02(a) and 10.02(c) hereof, any provision of this Trust Agreement may be amended by the Trustees and the Depositor with the consent of Holders of at least a majority of the aggregate Liquidation Amount of the Outstanding Preferred Securities. (c) In addition to and notwithstanding any other provision in this Trust Agreement, without the consent of each affected Securityholder (such consent being obtained in accordance with Section 6.03 or 6.06 hereof), this Trust Agreement may not be amended to (i) change the amount, timing or currency of any Distribution or Liquidation Distribution on the Trust Securities or otherwise adversely affect the method of payment of any Distribution or Liquidation Distribution required to be made in respect of the Trust Securities as of a specified date; (ii) change the redemption provisions of the Trust Securities; (iii) restrict the right of a Securityholder to institute suit for the enforcement of any such payment contemplated in (i) or (ii) above on or after the related date; (iv) modify the first sentence of Section 2.06 hereof; (v) authorize or issue any beneficial interest in the Trust other than as contemplated by this Trust 38 Agreement as of the date hereof; (vi) change the conditions precedent for the Depositor to elect to terminate the Trust and distribute the Debentures to Holders of Preferred Securities as set forth in Section 8.02; or (vii) affect the limited liability of any Holder of Preferred Securities, and, notwithstanding any other provision herein, without the unanimous consent of the Securityholders (such consent being obtained in accordance with Section 6.03 or 6.06 hereof), paragraphs (b) and (c) of this Section 10.02 may not be amended. (d) Notwithstanding any other provisions of this Trust Agreement, no amendment to this Trust Agreement shall be made without receipt by the Trust of an Opinion of Counsel experienced in such matters to the effect that such amendment will not affect the Trust's status as a grantor trust for United States Federal income tax purposes or its exemption from regulation as an "investment company" under the 1940 Act. (e) Notwithstanding anything in this Trust Agreement to the contrary, without the consent of the Depositor, this Trust Agreement may not be amended in a manner which imposes any additional obligation on the Depositor. (f) In the event that any amendment to this Trust Agreement is made, the Administrative Trustee shall promptly provide to the Depositor a copy of such amendment. (g) In executing any amendment to the Trust Agreement, the Property Trustee shall be entitled to receive, and (subject to Section 8.01) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Trust Agreement. Except as contemplated by Section 7.11, the Trustee may, but shall not be obligated to, enter into any amendment to this Trust Agreement which affects the Trustee's own rights, duties or immunities under this Trust Agreement or otherwise. Section 10.03. Severability. In case any provision in this Trust Agreement or in the Trust Securities Certificates shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 10.04. Governing Law. THIS TRUST AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE TRUST SECURITIES SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES. Section 10.05. Payments Due on Non-Business Day. If the date fixed for any payment on any Trust Security shall be a day which is not a Business Day, then such payment need not be made on such date but may be made on the next succeeding day which is a Business Day (except as otherwise provided therein, with the same force and effect as though made on the date fixed for such payment), and no interest shall accumulate thereon for the period after such date to the date of payment on such succeeding day. 39 Section 10.06. Successors and Assigns. This Trust Agreement shall be binding upon and shall inure to the benefit of any successor to the Trust or successor Trustee or both, including any successor by operation of law. Except in connection with a consolidation, merger or sale involving the Depositor that is permitted under Article V of the Indenture and pursuant to which the assignee agrees in writing to perform the Depositor's obligations hereunder, the Depositor shall not assign its obligations hereunder. Section 10.07. Headings. The Article and Section headings are for convenience only and shall not affect the construction of this Trust Agreement. Section 10.08. ____ Reports, Notices and Demands. Any report, notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon any Securityholder or the Depositor may be given or served in writing by deposit thereof, first-class postage prepaid in the United States mail, hand delivery or facsimile transmission, in each case, addressed, (a) in the case of a Holder of a Preferred Security, to such Holder of a Preferred Security as such Securityholder's name and address may appear on the Securities Register; and (b) in the case of the Holder of a Common Security or the Depositor, to Public Service Electric and Gas Company, 80 Park Plaza, Newark, New Jersey 07101, Attention: Treasurer, facsimile no.: 973-242-1651. Such notice, demand or other communication to or upon a Securityholder shall be deemed to have been sufficiently given or made, for all purposes, upon hand delivery, mailing or transmission. Any notice, demand or other communication which by any provision of this Trust Agreement is required or permitted to be given or served to or upon the Trust, the Property Trustee or the Administrative Trustee shall be given in writing addressed (until another address is published by the Trust) as follows: (a) with respect to the Property Trustee to First Union National Bank, 21 South Street, Morristown, New Jersey 07960, Attention: Corporate Trust Office; (b) with respect to the Delaware Trustee, to One Rodney Square, 920 King Street, Suite 102, Wilmington, Delaware 19801 Attention: Corporate Trust Department; and (c) with respect to the Administrative Trustee, to the address above for notices to the Depositor, marked "Attention: Administrative Trustee of PSE&G Capital Trust IV c/o Treasurer." Such notice, demand or other communication to or upon the Trust or the Property Trustee shall be deemed to have been sufficiently given or made only upon actual receipt of the writing by the Trust or the Property Trustee. Section 10.09. Agreement Not to Petition. Each of the Trustees and the Depositor agree for the benefit of the Securityholders that, until at least one year and one day after the Trust has been terminated in accordance with Article VIII, they shall not file, or join in the filing of, a petition against the Trust under any Bankruptcy Laws or otherwise join in the commencement of any proceeding against the Trust under any Bankruptcy Law. In the event the Depositor or any of the Trustees takes action in violation of this Section 10.09, the Property Trustee agrees, for the benefit of Securityholders, that at the expense of the Depositor, it shall file an answer with the bankruptcy court or otherwise properly contest the filing of such petition by the Depositor or any of the Trustees, as applicable, against the Trust or the commencement of such action and raise the defense that the Depositor has agreed in writing not to take such action and should be stopped and precluded therefrom and such other defenses, if any, as counsel for the Property 40 Trustee or the Trust may assert. The provisions of this Section 10.09 shall survive the termination of this Trust Agreement. Section 10.10. Trust Indenture Act; Conflict with Trust Indenture Act. (a) This Trust Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Trust Agreement and shall, to the extent applicable, be governed by such provisions. (b) The Property Trustee shall be the only Trustee which is a trustee for the purposes of the Trust Indenture Act. (c) If any provision hereof limits, qualifies or conflicts with another provision hereof which is required to be included in this Trust Agreement by any of the provisions of the Trust Indenture Act, such required provision shall control. If any provision of this Trust Agreement modifies or excludes any provision of the Trust Indenture Act which may be so modified or excluded, the latter provision shall be deemed to apply to this Trust Agreement as so modified or excluded, as the case may be. (d) The application of the Trust Indenture Act to this Trust Agreement shall not affect the nature of the Trust Securities as equity securities representing undivided beneficial interests in the assets of the Trust. Section 10.11. ____ Acceptance of Terms of Trust Agreement, Guarantee and Indenture. THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND AGREEMENT TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND THE INDENTURE, AND SHALL CONSTITUTE THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND SUCH OTHERS THAT THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT SHALL BE BINDING, OPERATIVE AND EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS. PUBLIC SERVICE ELECTRIC AND GAS COMPANY, as Depositor By: ________________________________________________ Name: Title: 41 FIRST UNION NATIONAL BANK, as Property Trustee By: ________________________________________________ Name: Title: FIRST UNION TRUST COMPANY, NATIONAL ASSOCIATION, as Delaware Trustee By: ________________________________________________ Name: Title: __________________________________, as Administrative Trustee Name: 42 EXHIBIT A CERTIFICATE OF TRUST OF PSE&G CAPITAL TRUST IV THIS CERTIFICATE OF TRUST of PSE&G Capital Trust IV (the "Trust"), dated December 21, 2001, is being duly executed and filed by the undersigned, as trustees, to form a business trust under the Delaware Business Trust Act (12 Del. C.ss. 3801 et seq.) (the "Act"). (i) Name. The name of the business trust being formed hereby is PSE&G Capital Trust IV. (ii) Delaware Trustee. The name and business address of the trustee of the Trust in the State of Delaware are First Union Trust Company, National Association, One Rodney Square, 920 King Street, Suite 102, Wilmington DE 19801; attn: Corporate Trust Department. (iii) Counterparts. This Certificate of Trust may be executed in one or more counterparts, all of which together shall constitute one and the same instrument. (iv) Effective Date. This Certificate of Trust shall be effective as of its filing with the Secretary of State of Delaware. IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have executed this Certificate of Trust as of the date first above written in accordance with Section 3811(a) of the Act. FIRST TRUST COMPANY, NATIONAL ASSOCIATION, as Trustee By: _________________________________________ Name: Title: MARK G. KAHRER, as Trustee _____________________________________ A-1 EXHIBIT B __________ ____, ____ The Depository Trust Company 55 Water Street, 49th Floor New York, New York 10041-0099 Attention: General Counsel's Office Re: PSE&G Capital Trust IV Preferred Securities Ladies and Gentlemen: The purpose of this letter is to set forth certain matters relating to the issuance and deposit with The Depository Trust Company ("DTC") of the PSE&G Capital Trust IV _____% Cumulative Quarterly Income Preferred Securities, Series __ (the "Preferred Securities"), of PSE&G Capital Trust IV, a Delaware business trust (the "Issuer"), created pursuant to a Trust Agreement between Public Service Electric and Gas Company ("PSE&G"), First Union National Bank, as Property Trustee, the Delaware Trustee named therein and the Administrative Trustee named therein. The payment of distributions on the Preferred Securities and payments due upon liquidation of the Issuer or redemption of the Preferred Securities are guaranteed by PSE&G, to the extent the Issuer has funds available for the payment thereof and to the extent set forth in a Guarantee Agreement dated _______ __, ____ by PSE&G and backup undertakings relating thereto with respect to the Preferred Securities. The Issuer proposes to sell the Preferred Securities to certain Underwriters (the "Underwriters") pursuant to an Underwriting Agreement dated _______ __, ____ by and among the Underwriters, the Issuer and PSE&G and the Underwriters wish to take delivery of the Preferred Securities through DTC. First Union National Bank is acting as transfer agent and registrar with respect to the Preferred Securities (the "Transfer Agent and Registrar"). To induce DTC to accept the Preferred Securities as eligible for deposit at DTC, and to act in accordance with DTC's Rules with respect to the Preferred Securities, the Issuer and the Transfer Agent and Registrar make the following representations to DTC: 1. Prior to the closing of the sale of the Preferred Securities to the Underwriters, which is expected to occur on or about _____________, there shall be deposited with DTC one or more global certificates (individually and collectively, the "Global Certificate") registered in the name of DTC's nominee, Cede & Co., representing an aggregate of __________ Preferred Securities and bearing the following legend: Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its agent for registration of transfer, exchange or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of DTC (and any payment hereon is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 2. The Amended and Restated Trust Agreement of the Issuer provides for the voting by holders of the Preferred Securities under certain limited circumstances. The Issuer shall establish a record date for such purposes and shall, to the extent possible, give DTC notice of such record date not less than 15 calendar days in advance of such record date. 3. In the event of a stock split, conversion, recapitalization, reorganization or any other similar transaction resulting in the cancellation of all or any part of the Preferred Securities outstanding, the Issuer or the Transfer Agent and Registrar shall send DTC a notice of such event at least 5 business days prior to the effective date of such event. 4. In the event of distribution on, or an offering or issuance of rights with respect to, the Preferred Securities outstanding, the Issuer or the Transfer Agent and Registrar shall send DTC a notice specifying: (a) the amount of and conditions, if any, applicable to the payment of any such distribution or any such offering or issuance of rights; (b) any applicable expiration or deadline date or any date by which any action on the part of the holders of Preferred Securities is required; and (c) the date any required notice is to be mailed by or on behalf of the Issuer to holders of Preferred Securities or published by or on behalf of the Issuer (whether by mail or publication, the "Publication Date"). Such notice shall be sent to DTC by a secure means (e.g., legible telecopy, registered or certified mail, overnight delivery) in a timely manner designed to assure that such notice is in DTC's possession no later than the close of business on the business day before the Publication Date. The Issuer or the Transfer Agent and Registrar will forward such notice either in a separate secure transmission for each CUSIP number or in a secure transmission of multiple CUSIP numbers (if applicable) that includes a manifest or list of each CUSIP number submitted in that transmission. (The party sending such notice shall have a method to verify subsequently the use of such means and the timeliness of such notice.) The Publication Date shall be not less than 20 calendar days nor more than 90 calendar days prior to the payment of any such distribution or any such offering or issuance of rights with respect to the Preferred Securities. After establishing the amount of payment to be made on the Preferred Securities, the Issuer or the Transfer Agent and Registrar will notify DTC's Dividend Department of such payment 5 business days prior to payment date. Notices to DTC's Dividend Department by telecopy shall be sent to (212) 709-1723. Such notices by mail or by any other means shall be sent to: 2 Manager, Announcements Dividend Department The Depository Trust Company 55 Water Street, 25th Floor New York, New York 10041-0099 The Issuer or the Transfer Agent and Registrar shall confirm DTC's receipt of such telecopy by telephoning the Dividend Department at (212) 709-1270. 5. In the event of a redemption by the Issuer of the Preferred Securities, notice specifying the terms of the redemption and the Publication Date of such notice shall be sent by the Issuer or the Transfer Agent and Registrar to DTC not less than 30 calendar days prior to such event by a secure means in the manner set forth in paragraph 4. Such redemption notice shall be sent to DTC's Call Notification Department at (516) 227-4164 or (516) 227-4190, and receipt of such notice shall be confirmed by telephoning (516) 227-4070. Notice by mail or by any other means shall be sent to: Manager, Call Notification Department The Depository Trust Company 711 Stewart Avenue Garden City, New York 11530-4719 6. In the event of any invitation to tender the Preferred Securities, notice specifying the terms of the tender and the Publication Date of such notice shall be sent by the Issuer or the Transfer Agent and Registrar to DTC by a secure means (e.g., legible telecopy, registered or certified mail, overnight delivery) and in a timely manner as described in paragraph 4. Notices to DTC pursuant to this paragraph and notices of other corporate actions (including mandatory tenders, exchanges and capital changes) shall be sent, unless notification to another department is expressly provided for herein, by telecopy to DTC's Reorganization Department at (212) 855-5488 and receipt of such notice shall be confirmed by telephoning (212) 855-5290, or by mail or any other means to: Manager, Reorganization Department Reorganization Window The Depository Trust Company 55 Water Street, 50th Floor New York, New York 10041-0099 7. All notices and payment advances sent to DTC shall contain the CUSIP number or numbers of the Preferred Securities and the accompanying designation of the Preferred Securities, which, as of the date of this letter, is "PSE&G Capital Trust IV _____% Cumulative Quarterly Income Preferred Securities, Series __". 8. Distribution payments or other cash payments with respect to the Preferred Securities evidenced by the Global Certificate shall be received by Cede & Co., as nominee of 3 DTC, or its registered assigns in same day funds on each payment date (or in accordance with existing arrangements between the Issuer or the Transfer Agent and Registrar and DTC). Such payments shall be made payable to the order of Cede & Co., and shall be addressed as follows: NDFS Redemption Department The Depository Trust Company 7 Hanover Square, 23rd Floor New York, New York 10004-2695 9. DTC may by prior written notice direct the Issuer and the Transfer Agent and Registrar to use any other telecopy number or address of DTC as the number or address to which notices or payments may be sent. 10. In the event of a conversion, redemption, or any other similar transaction (e.g., tender made and accepted in response to the Issuer's or the Transfer Agent and Registrar's invitation) necessitating a reduction in the aggregate number of Preferred Securities outstanding evidenced by a global certificate, DTC, in its discretion: (a) may request the Issuer or the Transfer Agent and Registrar to issue and countersign a new global certificate; or (b) may make an appropriate notation on such global certificate indicating the date and amount of such reduction. 11. DTC may discontinue its services as a securities depositary with respect to the Preferred Securities at any time by giving reasonable prior written notice to the Issuer and the Transfer Agent and Registrar (at which time DTC will confirm with the Issuer or the Transfer Agent and Registrar the aggregate number of Preferred Securities deposited with it) and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the Issuer may determine to make alternative arrangements for book-entry settlement for the Preferred Securities, make available one or more separate global certificates evidencing Preferred Securities to any Participant having Preferred Securities credited to its DTC account, or issue definitive Preferred Securities to the beneficial owners thereof, and in any such case, DTC agrees to cooperate fully with the Issuer and the Transfer Agent and Registrar and to return the global certificates duly endorsed for transfer as directed by the Issuer or the Transfer Agent and Registrar, together with any other documents of transfer reasonably requested by the Issuer or the Transfer Agent and Registrar. 12. In the event that the Issuer determines that beneficial owners of the global certificate(s) evidencing Preferred Securities shall be able to obtain definitive Preferred Securities, the Issuer or the Transfer Agent and Registrar shall notify DTC of the availability of such definitive Preferred Securities. In such event, the Issuer or the Transfer Agent and Registrar shall issue, transfer and exchange definitive Preferred Securities in appropriate amounts, as required by DTC and others, and DTC agrees to cooperate fully with the Issuer and the Transfer Agent and Registrar and to return the global certificate(s), duly endorsed for transfer as directed by the Issuer or the Transfer Agent and Registrar, together with any other documents of transfer reasonably requested by the Issuer or the Transfer Agent and Registrar. 4 13. This letter may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Nothing herein shall be deemed to require the Transfer Agent and Registrar to advance funds on behalf of the Issuer. Very truly yours, PSE&G CAPITAL TRUST IV (As Issuer) By: Name: ____________________, as Administrative Trustee ___________________ (As Transfer Agent and Registrar) By: __________________________________ Name: Title: RECEIVED AND ACCEPTED: THE DEPOSITORY TRUST COMPANY By: ___________________________________ Authorized Officer 5 EXHIBIT C THIS CERTIFICATE IS NOT TRANSFERABLE Certificate Number __-1 Number of Common Securities ______________ Certificate Evidencing Common Securities of PSE&G Capital Trust IV _____% Common Securities (liquidation amount $_____ per Common Security) PSE&G Capital Trust IV, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Public Service Electric and Gas Company (the "Holder") is the registered owner of ____________________ (__________) common securities of the Trust representing undivided beneficial interests in the assets of the Trust and designated as the _____% Common Securities (liquidation amount $_____ per Common Security) (the "Common Securities"). In accordance with Section 5.10 of the Trust Agreement (as defined below) the Common Securities are not transferable and any attempted transfer hereof shall be void. The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Common Securities are set forth in, and this certificate and the Common Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of _______ __, ____, as the same may be amended from time to time (the "Trust Agreement"). The Trust will furnish a copy of the Trust Agreement to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. IN WITNESS WHEREOF, the Administrative Trustee of the Trust has executed this certificate this _____ day of _______, ____. PSE&G CAPITAL TRUST IV By: _________________________________ Name: _____________________ Administrative Trustee 2 EXHIBIT D Certificate Number __________ Number of Preferred Securities CUSIP NO. __________ Certificate Evidencing Preferred Securities of PSE&G Capital Trust IV _____% Cumulative Quarterly Income Preferred Securities, Series __ (liquidation amount $_____ per Preferred Security) PSE&G Capital Trust IV, a statutory business trust created under the laws of the State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the "Holder") is the registered owner of _________, _________________________ (_________) preferred securities of the Trust representing an undivided beneficial interest in the assets of the Trust and designated the PSE&G Capital Trust IV _____% Cumulative Quarterly Income Preferred Securities, Series __ (liquidation amount $_____ per Preferred Security) (the "Preferred Securities"). The Preferred Securities are transferable on the books and records of the Trust, in person or by a duly authorized attorney, upon surrender of this certificate duly endorsed and in proper form for transfer as provided in Section 5.04 of the Trust Agreement (as defined below). The designations, rights, privileges, restrictions, preferences and other terms and provisions of the Preferred Securities are set forth in, and this certificate and the Preferred Securities represented hereby are issued and shall in all respects be subject to the terms and provisions of, the Amended and Restated Trust Agreement of the Trust dated as of __________, ____, as the same may be amended from time to time (the "Trust Agreement"). The Holder is entitled to the benefits of the Guarantee Agreement entered into by Public Service Electric and Gas Company, a New Jersey corporation, and First Union National Bank as guarantee trustee, dated as of_________, ____ (the "Guarantee") to the extent provided therein, together with the obligations of Public Service Electric and Gas Company under the Trust Agreement, its Deferrable Interest Subordinated Debentures and the Indenture related to such Deferrable Interest Subordinated Debentures. The Trust will furnish a copy of the Trust Agreement and the Guarantee to the Holder without charge upon written request to the Trust at its principal place of business or registered office. Upon receipt of this certificate, the Holder is bound by the Trust Agreement and is entitled to the benefits thereunder. IN WITNESS WHEREOF, the Administrative Trustee of the Trust has executed this certificate this _____ day of ______, ____. PSE&G CAPITAL TRUST IV By: ________________________________ Name: ____________________ Administrative Trustee [To be included in Book-Entry Preferred Securities Certificate] This Preferred Security is a Book-Entry Preferred Securities Certificate within the meaning of the Trust Agreement previously referred to and is registered in the name of The Depository Trust Company (the "Depository") or a nominee of the Depository. This Preferred Security is exchangeable for Preferred Securities registered in the name of a person other than the Depository or its nominee only in the limited circumstances described in the Trust Agreement and no transfer of this Preferred Security (other than a transfer of this Preferred Security as a whole by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository) may be registered except in limited circumstances. Unless this Preferred Security is presented by an authorized representative of The Depository Trust Company, a New York corporation, (55 Water Street, New York) to PSE&G Capital Trust IV or its agent for registration of transfer, exchange or payment, and any Preferred Security issued is registered in the name of Cede & Co. or such other name as requested by an authorized representative of The Depository Trust Company and any payment hereon is made to Cede & Co. or to such other entity as is requested by an authorized representative of The Depository Trust Company, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers to: (Insert assignee's social security or tax identification number) (Insert address and zip code of assignee) __________ Preferred Securities represented by this Preferred Securities Certificate and irrevocably appoints agent to transfer said Preferred Securities on the books of the Trust. The agent may substitute another to act for him or her. 2 Page ---- Date: Signature: (Sign exactly as your name appears on the other side of this Preferred Security Certificate) (iii) EX-4.9 7 e13009ex49.txt GUARANTEE AGREEMENT Guarantee Agreement between PUBLIC SERVICE ELECTRIC AND GAS COMPANY (as Guarantor) and FIRST UNION NATIONAL BANK (as Guarantee Trustee) Dated as of ---------- --, ----- TABLE OF CONTENTS Page ---- ARTICLE I DEFINITIONS..........................................................1 Section 1.01. Definitions................................1 ARTICLE II TRUST INDENTURE ACT.................................................3 Section 2.01. Trust Indenture Act; Application...........3 Section 2.02. List of Holders............................4 Section 2.03. Reports by the Guarantee Trustee...........4 Section 2.04. Periodic Reports to Guarantee Trustee......4 Section 2.05. Evidence of Compliance with Conditions Precedent................................4 Section 2.06. Events of Default; Waiver..................5 Section 2.07. Event of Default; Notice...................5 ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE.................5 Section 3.01. Powers and Duties of the Guarantee Trustee..................................5 Section 3.02. Certain Rights of Guarantee Trustee........7 Section 3.03. Indemnity..................................8 ARTICLE IV GUARANTEE TRUSTEE...................................................8 Section 4.01. Guarantee Trustee; Eligibility.............8 Section 4.02. Appointment, Removal and Resignation of the Guarantee Trustee.................9 ARTICLE V GUARANTEE............................................................9 Section 5.01. Guarantee..................................9 Section 5.02. Waiver of Notice and Demand...............10 Section 5.03. Obligations Not Affected..................10 Section 5.04. Rights of Holders.........................11 Section 5.05. Guarantee of Payment......................11 Section 5.06. Subrogation...............................11 Section 5.07. Independent Obligations...................11 ARTICLE VI COVENANTS AND SUBORDINATION........................................12 Section 6.01. Subordination.............................12 Section 6.02. Pari Passu Guarantees.....................12 ARTICLE VII TERMINATION.......................................................12 Section 7.01. Termination...............................12 ARTICLE VIII MISCELLANEOUS....................................................12 Section 8.01. Successors and Assigns....................12 Section 8.02. Amendments................................12 Section 8.03. Notices...................................13 Section 8.04. Benefit...................................14 Section 8.05. Interpretation............................14 Section 8.06. Governing Law.............................14 CROSS-REFERENCE TABLE* Section of Section of Trust Indenture Act Guarantee of 1939, as amended Agreement - ------------------- --------- 310(a) 4.01(a) 310(b) 4.01(c), 2.08 310(c) Inapplicable 311(a) 2.02(b) 311(b) 2.02(b) 311(c) Inapplicable 312(a) 2.02(a) 312(b) 2.02(b) 313 2.03 314(a) 2.04 314(b) Inapplicable 314(c) 2.05 314(d) Inapplicable 314(e) 1.01, 2.05, 3.02 314(f) 2.01, 3.02 315(a) 3.01(d) 315(b) 2.07 315(c) 3.01 315(d) 3.01(d) 316(a) 1.01, 2.06, 5.04 316(b) 5.03 316(c) 8.02 317(a) Inapplicable 317(b) Inapplicable 318(a) 2.01(b) 318(b) 2.01 318(c) 2.01(a) - ------------ * This Cross-Reference Table does not constitute part of the Guarantee Agreement and shall not affect the interpretation of any of its terms or provisions. (ii) Exhibit 4-9 GUARANTEE AGREEMENT This GUARANTEE AGREEMENT, dated as of _______ __, ____, is executed and delivered by Public Service Electric and Gas Company, a New Jersey corporation (the "Guarantor"), to First Union National Bank, a national banking association duly organized and existing under the laws of the United States of America, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined herein) from time to time of the Preferred Securities (as defined herein) of PSE&G Capital Trust IV, a Delaware statutory business trust (the "Issuer"). WHEREAS, pursuant to an Amended and Restated Trust Agreement for PSE&G Capital Trust IV (the "Trust Agreement"), dated as of _______ __, ____ among the Trustees named therein, the Guarantor, as Depositor, and the Holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing $________ aggregate liquidation amount of its ___% Cumulative Quarterly Income Preferred Securities, Series _ (liquidation amount of $_____ per preferred security) (the "Preferred Securities") representing undivided beneficial interests in the assets of the Issuer and having the terms set forth in the Trust Agreement; WHEREAS, the Preferred Securities will be issued by the Issuer and the proceeds thereof, together with the proceeds from the sale by the Issuer of its Common Securities will be used to purchase the Debentures (as defined in the Trust Agreement) of the Guarantor which will be deposited with First Union National Bank, as Property Trustee under the Trust Agreement, as Trust Property (as defined in the Trust Agreement); and WHEREAS, as incentive for the Holders to purchase Preferred Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth herein, to pay to the Holders of the Preferred Securities the Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the purchase by each Holder of Preferred Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for the benefit of the Holders from time to time of the Preferred Securities. ARTICLE I DEFINITIONS Section 1.01. Definitions. As used in this Guarantee Agreement, each of the terms set forth below shall, unless the context otherwise requires, have the following meaning. Each capitalized or otherwise defined term used but not otherwise defined herein shall have the meaning assigned to such terms in the Trust Agreement as in effect on the date hereof. "Affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. "Common Securities" means the securities representing undivided beneficial interests in the assets of the Issuer and having the rights provided therefor in the Trust Agreement. "Event of Default" means a default by the Guarantor on any of its payment or other obligations under this Guarantee Agreement; provided, that except with respect to a default resulting from a failure to pay any Guarantee Payment, the Guarantor shall have received notice of default and shall not have cured such default within 60 days after receipt of such notice. "Guarantee Payments" means the following payments or Distributions (as defined in the Trust Agreement), without duplication, with respect to the Preferred Securities, to the extent not paid or made by or on behalf of the Issuer: (i) any accumulated and unpaid Distributions required to be paid on the Preferred Securities, to the extent the Issuer shall have funds available therefor, (ii) the redemption price, including all accumulated and unpaid Distributions to the date of redemption (the "Redemption Price"), with respect to the Preferred Securities called for redemption by the Issuer, to the extent the Issuer shall have funds available therefor, and (iii) upon a voluntary or involuntary termination, winding-up or liquidation of the Issuer, unless Debentures are distributed to the Holders, the lesser of (a) the aggregate of the liquidation amount of $_____ per Preferred Security plus accumulated and unpaid Distributions on the Preferred Securities to the date of payment, to the extent the Issuer shall have funds available therefor and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case, the "Liquidation Distribution"). "Guarantee Trustee" means First Union National Bank, until a Successor Guarantee Trustee (as defined below) has been appointed and has accepted such appointment pursuant to the terms of this Guarantee Agreement and thereafter means each such Successor Guarantee Trustee. "Holder" means a Person in whose name a Preferred Security is registered in the Securities Register; provided, however, that in determining whether the holders of the requisite percentage of Preferred Securities have given any request, notice, consent or waiver hereunder, "Holder" shall not include the Guarantor, the Guarantee Trustee or any Affiliate of the Guarantor or the Guarantee Trustee. "Indenture" means the Indenture dated as of June 1, 1996, between Public Service Electric and Gas Company and First Union National Bank, as trustee thereunder. "List of Holders" has the meaning specified in Section 2.02(a). 2 "Majority in liquidation amount of the Preferred Securities" means, except as provided by the Trust Indenture Act, a vote by the Holders, of more than 50% of the aggregate liquidation amount of all then outstanding Preferred Securities issued by the Issuer. "Officers' Certificate" means a certificate signed by the Chairman, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Guarantor. "Person" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Responsible Officer" means, with respect to the Guarantee Trustee, any Vice President, any Assistant Vice President, any Trust Officer or Assistant Trust Officer or any other officer of the Corporate Trust Department of the Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject. "Senior Indebtedness" means Senior Indebtedness as defined in the Indenture. "Successor Guarantee Trustee" means a successor Guarantee Trustee possessing the qualifications to act as Guarantee Trustee under Section 4.01. "Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at the date as of which this instrument was executed; provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means, to the extent required by any such amendment, the Trust Indenture Act of 1939, as so amended. ARTICLE II TRUST INDENTURE ACT Section 2.01. Trust Indenture Act; Application. (a) This Guarantee Agreement is subject to the provisions of the Trust Indenture Act that are required to be part of this Guarantee Agreement and shall, to the extent applicable, be governed by such provisions. (b) If and to the extent that any provision of this Guarantee Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties shall control. 3 Section 2.02. List of Holders. (a) The Guarantor shall furnish or cause to be furnished to the Guarantee Trustee (i) semiannually, on or before January 15 and July 15 of each year, a list, in such form as the Guarantee Trustee may reasonably require, of the names and addresses of the Holders ("List of Holders") as of a date not more than 15 days prior to the delivery thereof, and (ii) at such other times as the Guarantee Trustee may request in writing, within 30 days after the receipt by the Guarantor of any such request, a List of Holders as of a date not more than 15 days prior to the time such list is furnished, in each case to the extent such information is in the possession or control of the Guarantor and is not identical to a previously supplied List of Holders or has not otherwise been received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. (b) The Guarantee Trustee shall comply with its obligations under Sections 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act. Section 2.03. Reports by the Guarantee Trustee. Within 60 days after May 31 of each year, the Guarantee Trustee shall provide to the Holders such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply with the requirements of Section 313(d) of the Trust Indenture Act. Section 2.04. Periodic Reports to Guarantee Trustee. The Guarantor shall provide to the Guarantee Trustee, the Securities and Exchange Commission and the Holders such documents, reports and information, if any, as required by Section 314 of the Trust Indenture Act and the compliance certificate required by Section 314 of the Trust Indenture Act in the form and manner and at the times required by Section 314 of the Trust Indenture Act. Section 2.05. Evidence of Compliance with Conditions Precedent. The Guarantor shall provide to the Guarantee Trustee such evidence of compliance with such conditions precedent, if any, provided for in this Guarantee Agreement that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Each Officers' Certificate and Opinion of Counsel delivered with respect to compliance with a condition or covenant provided for in this Guarantee Agreement shall include: (a) a statement that each officer signing the Officers' Certificate or Opinion of Counsel has read the covenant or condition and the definition relating thereto; (b) a brief statement of the nature and scope of the examination or investigation undertaken by each officer in rendering the Officers' Certificate or Opinion of Counsel and upon which the statements contained therein are based; (c) a statement that each such officer has made such examination or investigation as, in such officer's opinion, is necessary to enable such officer to express an informed opinion as to whether or not such covenant or condition has been complied with; and 4 (d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. Section 2.06. Events of Default; Waiver. The Holders of a Majority in liquidation amount of the Preferred Securities may, by vote, on behalf of the Holders, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Guarantee Agreement, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent therefrom. Section 2.07. Event of Default; Notice. (a) The Guarantee Trustee shall, within 90 days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders, notices of all Events of Default known to the Guarantee Trustee, unless such defaults have been cured before the giving of such notice, provided, that, except in the case of a default in the payment of a Guarantee Payment, the Guarantee Trustee shall be protected in withholding such notice if and so long as the Board of Directors, the executive committee or a trust committee of directors and/or Responsible Officers of the Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. (b) The Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless the Guarantee Trustee shall have received written notice, or a Responsible Officer charged with the administration of the Trust Agreement shall have obtained written notice, of such Event of Default. ARTICLE III POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE Section 3.01. Powers and Duties of the Guarantee Trustee. (a) This Guarantee Agreement shall be held by the Guarantee Trustee for the benefit of the Holders, and the Guarantee Trustee shall not transfer this Guarantee Agreement to any Person except a Holder exercising his or her rights pursuant to Section 5.04(iv) or to a Successor Guarantee Trustee on acceptance by such Successor Guarantee Trustee of its appointment to act as Successor Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall automatically vest in any Successor Guarantee Trustee upon acceptance by such Successor Guarantee Trustee of its appointment hereunder and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed and delivered pursuant to the appointment of such Successor Guarantee Trustee. (b) If an Event of Default has occurred and is continuing, the Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the Holders. 5 (c) The Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Guarantee Agreement, and no implied covenants shall be read into this Guarantee Agreement against the Guarantee Trustee. In case an Event of Default has occurred and is continuing (and has not been cured or waived pursuant to Section 2.06), the Guarantee Trustee shall exercise such of the rights and powers vested in it by this Guarantee Agreement, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use in the conduct of his or her own affairs. (d) No provision of this Guarantee Agreement shall be construed to relieve the Guarantee Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) prior to the occurrence of any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: (A) the duties and obligations of the Guarantee Trustee shall be determined solely by the express provisions of this Guarantee Agreement, and the Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Guarantee Agreement; and (B) in the absence of bad faith on the part of the Guarantee Trustee, the Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Guarantee Trustee and conforming to the requirements of this Guarantee Agreement; but in the case of any such certificates or opinions that by any provision hereof or of the Trust Indenture Act are specifically required to be furnished to the Guarantee Trustee, the Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Guarantee Agreement; (ii) the Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Guarantee Trustee, unless it shall be proved that the Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; (iii) the Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a Majority in liquidation amount of the Preferred Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) no provision of this Guarantee Agreement shall require the Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the 6 Guarantee Trustee shall have reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Guarantee Agreement or reasonable indemnity against such risk or liability is not reasonably assured to it. Section 3.02. Certain Rights of Guarantee Trustee (a) Subject to the provisions of Section 3.01: (i) The Guarantee Trustee may rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed, sent or presented by the proper party or parties. (ii) Any direction or act of the Guarantor contemplated by this Guarantee Agreement shall be sufficiently evidenced by an Officers' Certificate unless otherwise prescribed herein. (iii) Whenever, in the administration of this Guarantee Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved or established before taking, suffering or omitting to take any action hereunder, the Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers' Certificate which, upon receipt of such request from the Guarantee Trustee, shall be promptly delivered by the Guarantor. (iv) The Guarantee Trustee may consult with legal counsel, and the written advice or Opinion of Counsel with respect to legal matters shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in accordance with such advice or opinion. Such legal counsel may be legal counsel to the Guarantor or any of its Affiliates and may be one of its employees. The Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Guarantee Agreement from any court of competent jurisdiction. (v) The Guarantee Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Guarantee Agreement at the request or direction of any Holder, unless such Holder shall have provided to the Guarantee Trustee such reasonable indemnity as would satisfy a reasonable person in the position of the Guarantee Trustee, against the costs, expenses (including attorneys' fees and expenses) and liabilities that might be incurred by it in complying with such request or direction; provided that, nothing contained in this Section 3.02(a)(v) shall be taken to relieve the Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Guarantee Agreement. (vi) The Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence 7 of indebtedness or other paper or document, but the Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. (vii) The Guarantee Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its agents or attorneys, and the Guarantee Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder. (viii) Whenever in the administration of this Guarantee Agreement the Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Guarantee Trustee (A) may request instructions from the Holders, (B) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (C) shall be protected in acting in accordance with such instructions. (b) No provision of this Guarantee Agreement shall be deemed to impose any duty or obligation on the Guarantee Trustee to perform any act or acts or exercise any right, power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Guarantee Trustee shall be construed to be a duty to act in accordance with such power and authority. Section 3.03. Indemnity. The Guarantor agrees to indemnify the Guarantee Trustee for, and to hold it harmless against, any loss, liability or expense incurred without negligence or willful misconduct on the part of the Guarantee Trustee, arising out of or in connection with the acceptance or administration of this Guarantee Agreement, including the 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 hereunder. The Guarantee Trustee will not claim or exact any lien or charge on any Guarantee Payments as a result of any amount due to it under this Guarantee Agreement. ARTICLE IV GUARANTEE TRUSTEE Section 4.01. Guarantee Trustee; Eligibility. (a) There shall at all times be a Guarantee Trustee which shall: (i) not be an Affiliate of the Guarantor; and (ii) be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least fifty million U.S. dollars ($50,000,000), and shall be a corporation meeting the requirements of Section 310(a) of the Trust Indenture Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority, then, for the 8 purposes of this Section and to the extent permitted by the Trust Indenture Act, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. (b) If at any time the Guarantee Trustee shall cease to be eligible to so act under Section 4.01(a), the Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.02(c). (c) If the Guarantee Trustee has or shall acquire any "conflicting interest" within the meaning of Section 310(b) of the Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. In determining whether the Guarantee Trustee has a "conflicting interest" within the meaning of Section 310(b)(1) of the Trust Indenture Act, the provisions contained in the proviso to Section 310(b)(1) of the Trust Indenture Act and the Guarantee Trustee's Statement of Eligibility on Form T-1 shall be deemed incorporated herein. Section 4.02. Appointment, Removal and Resignation of the Guarantee Trustee. (a) Subject to Section 4.02(b), the Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor. (b) The Guarantee Trustee shall not be removed until new, eligible guarantee trustee has been appointed (a "Successor Guarantee Trustee") and has accepted such appointment and assumed the applicable obligations hereunder by written instrument executed by such Successor Guarantee Trustee and delivered to the Guarantor. (c) The Guarantee Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing executed by the Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Guarantee Trustee has been appointed and has accepted such appointment by instrument in writing executed by such Successor Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee Trustee. (d) If no Successor Guarantee Trustee shall have been appointed and accepted appointment as provided in this Section 4.02 within 60 days after delivery to the Guarantor of an instrument of resignation, the resigning Guarantee Trustee may petition, at the expense of the Guarantor, any court of competent jurisdiction for appointment of a Successor Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee. ARTICLE V GUARANTEE Section 5.01. Guarantee. The Guarantor irrevocably and unconditionally agrees to pay in full to the Holders of the Outstanding Preferred Securities the Guarantee Payments (without duplication of amounts theretofore paid by or on behalf of the Issuer pursuant to the Trust 9 Agreement or by the Guarantor pursuant to the Indenture), as and when due, regardless of any defense, right of set-off or counterclaim which the Issuer may have or assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. Section 5.02. Waiver of Notice and Demand. The Guarantor hereby waives notice of acceptance of the Guarantee Agreement and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Guarantee Trustee, the Issuer or any other Person before proceeding against the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. Section 5.03. Obligations Not Affected. The obligations, covenants, agreements and duties of the Guarantor under this Guarantee Agreement shall in no way be affected or impaired by reason of the happening from time to time of any of the following: (a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied agreement, covenant, term or condition relating to the Preferred Securities to be performed or observed by the Issuer; (b) the extension of time for the payment by the Issuer of all or any portion of the Distributions (other than an extension of time for payment of Distributions that results from an Extension Period on the Debentures as so provided in the Indenture), Redemption Price, Liquidation Distribution or any other sums payable under the terms of the Preferred Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Preferred Securities; (c) any failure, omission, delay or lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Preferred Securities, or any action on the part of the Issuer granting indulgence or extension of any kind; (d) the voluntary or involuntary liquidation, termination, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar proceedings affecting, the Issuer or any of the assets of the Issuer; (e) any invalidity of, or detect or deficiency in, the Preferred Securities; (f) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or (g) to the extent permitted by law, any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a guarantor, it being 10 the intent of this Section 5.03 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. There shall be no obligation of the Holders to give notice to, or obtain the consent of, the Guarantor with respect to the happening of any of the foregoing. Section 5.04. Rights of Holders The Guarantor expressly acknowledges that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in 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 this Guarantee Agreement or exercise or direct the exercise of any trust or power conferred upon the Guarantee Trustee under this Guarantee Agreement; and (iv) if the Guarantee Trustee has failed to enforce this Guarantee Agreement as above provided, any Holder may institute a legal proceeding directly against the Guarantor to enforce its rights under this Guarantee Agreement, without first instituting a legal proceeding against the Guarantee Trustee, the Issuer or any other Person. Section 5.05. Guarantee of Payment. This Guarantee Agreement creates a guarantee of payment and not of collection. This Guarantee Agreement will not be discharged except by payment of the Guarantee Payments in full (without duplication of amounts theretofore paid by the Issuer) or upon distribution of Debentures to Holders as provided in the Trust Agreement. Section 5.06. Subrogation. The Guarantor shall be subrogated to all (if any) rights of the Holders against the Issuer in respect of any amounts paid to the Holders by the Guarantor under this Guarantee Agreement and shall have the right to waive payment by the Issuer pursuant to Section 5.01; provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any rights which it may acquire by way of subrogation or any indemnity, reimbursement or other agreement, in all cases as a result of payment under this Guarantee Agreement, if, at the time of any such payment, any amounts are due and unpaid under this Guarantee Agreement. If any amount shall be paid to the Guarantor in violation of the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. Section 5.07. Independent Obligations. The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer with respect to the Preferred Securities and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Guarantee Agreement notwithstanding the occurrence of any event referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof. 11 ARTICLE VI COVENANTS AND SUBORDINATION Section 6.01. Subordination. This Guarantee Agreement will constitute an unsecured obligation of the Guarantor and will rank subordinate and junior in right of payment to all general liabilities of the Guarantor. Section 6.02. Pari Passu Guarantees. This Guarantee Agreement shall rank pari passu with any similar Guarantee Agreements issued by the Guarantor on behalf of the holders of Cumulative Quarterly Income Preferred Securities issued by PSE&G Capital Trust I, PSE&G Capital Trust II and PSE&G Capital Trust III and on behalf of the holders of the 9-3/8% Cumulative Monthly Income Preferred Securities, Series A and the 8% Cumulative Monthly Income Preferred Securities, Series B issued by Public Service Electric and Gas Capital, L.P. ARTICLE VII TERMINATION Section 7.01. Termination. This Guarantee Agreement shall terminate and be of no further force and effect upon (i) full payment by the Issuer or the Guarantor, as the case may be, of the Redemption Price for all Preferred Securities, (ii) the distribution of the Debentures to the Holders in accordance with Article VIII of the Trust Agreement upon liquidation of the Issuer or (iii) full payment by the Issuer or the Guarantor, as the case may be, of the amounts payable in accordance with the Trust Agreement upon liquidation of the Issuer. Notwithstanding the foregoing, this Guarantee Agreement will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid with respect to Preferred Securities or this Guarantee Agreement. ARTICLE VIII MISCELLANEOUS Section 8.01. Successors and Assigns. All guarantees and agreements contained in this Guarantee Agreement shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Preferred Securities then outstanding. The Guarantor may not consolidate with or merge with or into, or sell, convey, transfer or lease its properties and assets as an entirety or substantially as an entirety (either in one transaction or a series of transactions) to, any Person unless permitted under Article Five of the Indenture. In connection with a consolidation, merger or sale involving the Guarantor that is permitted under Article Five of the Indenture the Person formed by or surviving such consolidation or merger or to which such sale, conveyance, transfer or lease shall have been made, if other than the Guarantor, shall expressly assume all of the obligations of the Guarantor hereunder and under the Trust Agreement. Section 8.02. Amendments. Except with respect to any changes which do not adversely affect the rights of the Holders in any material respect (in which case no consent of the Holders will be required), this Guarantee Agreement may only be amended with the prior approval of the 12 Holders of a Majority in liquidation amount of the Preferred Securities (excluding any Preferred Securities held by the Guarantor or an affiliate thereof). The provisions of Article VI of the Trust Agreement concerning meetings of the Holders shall apply to the giving of such approval. Section 8.03. Notices. Any notice, request or other communication required or permitted to be given hereunder shall be in writing and delivered, telecopied or mailed by first class mail, postage prepaid, as follows: (a) if given to the Guarantor, to the address set forth below or such other address as the Guarantor may give notice of to the Holders: Public Service Electric and Gas Company 80 Park Plaza P.O. Box 570 Newark, NJ 07101 Facsimile No: 973-242-1651 Attention: Treasurer (b) if given to the Issuer, in care of the Guarantee Trustee, at the Issuer's (and the Guarantee Trustee's) address set forth below or such other address as the Guarantee Trustee on behalf of the Issuer may give notice to the Holders: PSE&G Capital Trust IV 80 Park Plaza Newark, NJ 07101 Facsimile No: 973-242-1651 Attention: Treasurer with a copy to: First Union National Bank 21 South Street Morristown, NJ 07960 Facsimile No: 973-682-4531 Attention: Corporate Trust Department (c) if given to any Holder, at the address set forth in the Securities Register. All notices hereunder shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of such refusal or inability to deliver. 13 Section 8.04. Benefit. This Guarantee Agreement is solely for the benefit of the Holders and is not separately transferable from the Preferred Securities. Section 8.05. Interpretation. In this Guarantee Agreement, unless the context otherwise requires: (a) all references to "the Guarantee Agreement" or "this Guarantee Agreement" are to this Guarantee Agreement as modified, supplemented or amended from time to time; (b) all references in this Guarantee Agreement to Articles and Sections are to Articles and Sections of this Guarantee Agreement unless otherwise specified; (c) a term defined in the Trust Indenture Act has the same meaning when used in this Guarantee Agreement unless otherwise defined in this Guarantee Agreement or unless the context otherwise requires; (d) a reference to the singular includes the plural and vice versa; and (e) the masculine, feminine or neuter genders used herein shall include the masculine, feminine and neuter genders. Section 8.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW JERSEY WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 14 THIS GUARANTEE AGREEMENT is executed as of the day and year first above written. PUBLIC SERVICE ELECTRIC AND GAS COMPANY, as Guarantor By: ---------------------------------------- Name: Title: FIRST UNION NATIONAL BANK, as Guarantee Trustee By: ---------------------------------------- Name: Title: 15 EX-23.1 8 e13009ex231.txt INDEPENDENT AUDITORS' CONSENT Exhibit 23-1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Amendment No. 1 to Registration Statement No. 333-76020 of Public Service Electric and Gas Company (the "Company") on Form S-3 of our report dated February 16, 2001, appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2000 and to the reference to us under the heading "Experts" in both of the Prospectuses which are part of Registration Statement No. 333-76020. DELOITTE & TOUCHE LLP Parsippany, NJ February 12, 2002 -----END PRIVACY-ENHANCED MESSAGE-----