Pursuant to Rule 424(b)(5)
Registration No. 33-55821
And Registration No. 33-55821-01
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED NOVEMBER 9, 1994
6,000,000 PREFERRED SECURITIES
PUBLIC SERVICE ELECTRIC AND GAS CAPITAL
9 3/8% CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES (MIPS*), SERIES A
(LIQUIDATION PREFERENCE $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT THE ISSUER HAS FUNDS AS SET FORTH HEREIN BY
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
-------------------
The 9 3/8% Cumulative Monthly Income Preferred Securities, Series A (the
"Series A Preferred Securities"), representing the limited partner interests
offered hereby, are being issued by Public Service Electric and Gas Capital,
L.P., a limited partnership formed under the laws of the State of New Jersey
(the "Partnership"). The Partnership exists for the sole purpose of issuing
partner interests and lending the proceeds thereof to Public Service Electric
and Gas Company ("PSE&G"), the sole general partner of the Partnership (the
"General Partner"). The limited partner interests represented by the Series A
Preferred Securities will have a preference with respect to cash distributions
and amounts payable on liquidation over the General Partner's interest in the
Partnership.
(Continued on following page)
-------------------
SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR CERTAIN INFORMATION RELEVANT
TO AN INVESTMENT IN THE SERIES A PREFERRED SECURITIES, INCLUDING THE PERIOD
DURING WHICH AND CIRCUMSTANCES UNDER WHICH PAYMENT OF DIVIDENDS ON THE SERIES A
PREFERRED SECURITIES MAY BE DEFERRED, AND THE RELATED FEDERAL INCOME TAX
CONSEQUENCES.
-------------------
The Series A Preferred Securities have been approved for listing on the New
York Stock Exchange.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO THE
OFFERING PRICE COMMISSION(1) PARTNERSHIP(2)(3)
-------------- ------------- ----------------
<S> <C> <C> <C>
Per Series A Preferred Security........ $25 (2) $25
Total.................................. $150,000,000 (2) $150,000,000
</TABLE>
- ------------
(1) The Partnership and PSE&G have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act
of 1933, as amended. See "Underwriting" herein.
(2) As the proceeds of the sale of the Series A Preferred Securities will be
loaned to PSE&G, under the Underwriting Agreement PSE&G has agreed to pay to
the Underwriters $0.7875 per Series A Preferred Security (or $4,725,000 in
the aggregate). See "Underwriting".
(3) Expenses of the offering, excluding underwriting commissions which are
payable by PSE&G, are estimated to be $325,000.
----------------------
The Series A Preferred Securities offered hereby are offered severally by
the Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Series A Preferred Securities will be made only in
book-entry form through the facilities of The Depository Trust Company on or
about November 17, 1994.
- ------------
* An application has been filed by Goldman, Sachs & Co. with the United States
Patent and Trademark Office for the registration of the MIPS servicemark.
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
DEAN WITTER REYNOLDS INC.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES
INCORPORATED
SMITH BARNEY INC.
-------------------
The date of this Prospectus Supplement is November 9, 1994.
<PAGE>
(Continued from previous page)
Holders of the Series A Preferred Securities will be entitled to receive
cumulative preferential cash distributions ("Dividends") at an annual rate of 9
3/8% of the stated liquidation preference of $25 per Series A Preferred
Security, accruing from the date of original issuance and payable monthly in
arrears on the last day of each calendar month of each year, commencing November
30, 1994. The payment of Dividends and the payments in liquidation or redemption
with respect to the Series A Preferred Securities, in each case out of funds
legally available therefor held by the Partnership, are guaranteed by PSE&G to
the extent described herein and in the accompanying Prospectus (the
"Guarantee"). See "Description of the Guarantee" in the accompanying Prospectus.
If PSE&G fails to make payments on its 9 3/8% Deferrable Interest Subordinated
Debentures, Series A (the "Series A Subordinated Debentures") purchased by the
Partnership with the proceeds of the Series A Preferred Securities, the
Partnership will not have sufficient funds to make the related payments,
including Dividends, on the Series A Preferred Securities. The Guarantee does
not cover such payments when the Partnership does not have sufficient funds. In
such event, the remedy of a holder of Series A Preferred Securities is to
enforce the rights of the Partnership under the Series A Subordinated
Debentures. See "Certain Terms of the Series A Subordinated Debentures" herein
and "Description of the Subordinated Debentures" in the accompanying Prospectus.
The obligations of PSE&G under the Guarantee are subordinate and junior in
right of payment to all general liabilities of PSE&G and its obligations under
the Series A Subordinated Debentures are subordinate and junior in right of
payment to all present and future Senior Indebtedness of PSE&G. At September 30,
1994, the Senior Indebtedness of PSE&G aggregated approximately $5.412 billion.
The Series A Preferred Securities are subject to redemption at the option of
the General Partner, in whole or in part, from time to time, on or after
November 17, 1999, at $25 per Series A Preferred Security plus accumulated and
unpaid Dividends to the date fixed for redemption (the "Redemption Price"), and
will be redeemed from the proceeds of any redemption or payment at maturity of
the Series A Subordinated Debentures. See "Certain Terms of the Series A
Preferred Securities--Optional Redemption" and "--Mandatory Redemption" herein.
In addition, the Series A Preferred Securities will be subject to redemption at
the option of the General Partner upon the occurrence of certain special events
described under "Certain Terms of the Series A Preferred Securities--Optional
Redemption" and "-- Special Event Redemption or Distribution" herein, provided
that upon the occurrence of certain special events, the General Partner may
dissolve the Partnership and cause the Series A Subordinated Debentures to be
distributed to the holders of the Series A Preferred Securities in liquidation
of their interests in the Partnership. If the Series A Subordinated Debentures
are so distributed, PSE&G will use its best efforts to list them on the New York
Stock Exchange.
In the event of the liquidation of the Partnership, holders of Series A
Preferred Securities will be entitled to receive for each Series A Preferred
Security a liquidation preference of $25 plus accumulated and unpaid Dividends
to the date of payment, unless, in connection with such liquidation, the Series
A Subordinated Debentures are distributed to the holders of the Series A
Preferred Securities. See "Description of the Preferred Securities--Liquidation
Distribution" in the accompanying Prospectus.
-------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES A
PREFERRED SECURITIES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE,
IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
The following information supplements and should be read in conjunction with
the information contained in the accompanying Prospectus. Each of the
capitalized terms used in this Prospectus Supplement has the meaning set forth
in this Prospectus Supplement or in the accompanying Prospectus.
CERTAIN INVESTMENT CONSIDERATIONS
Prospective purchasers of the Series A Preferred Securities should carefully
review the information contained elsewhere in this Prospectus Supplement and in
the accompanying Prospectus and should particularly consider the following
matters:
SUBORDINATE OBLIGATIONS UNDER THE GUARANTEE AND THE SERIES A SUBORDINATED
DEBENTURES
PSE&G's obligations under the Guarantee are subordinate and junior in right
of payment to all general liabilities of PSE&G and its obligations under the 9
3/8% Deferrable Interest Subordinated Debentures, Series A (the "Series A
Subordinated Debentures") are subordinate and junior in right of payment to all
Senior Indebtedness (as defined in the accompanying Prospectus) of PSE&G. At
September 30, 1994, the Senior Indebtedness of PSE&G aggregated approximately
$5.412 billion. There are no terms in the Series A Preferred Securities, the
Series A Subordinated Debentures or the Guarantee that limit PSE&G's ability to
incur additional indebtedness, including indebtedness that ranks senior to the
Series A Subordinated Debentures and the Guarantee. The Guarantee guarantees
payment to the holders of the Series A Preferred Securities of accumulated and
unpaid monthly Dividends, amounts payable on redemption, and amounts payable on
liquidation of the Partnership, in each case, however, only to the extent that
the Partnership has funds on hand legally available therefor and payment thereof
does not otherwise violate applicable law. If PSE&G were to default on its
obligation to pay interest or amounts payable on redemption or maturity of the
Series A Subordinated Debentures, the Partnership would lack legally available
funds for the payment of Dividends or amounts payable on redemption of the
Series A Preferred Securities, and in such event, holders of the Series A
Preferred Securities would not be able to rely upon the Guarantee for payment of
such amounts. Instead, holders of the Series A Preferred Securities would be
required to seek enforcement of the Partnership's rights against PSE&G pursuant
to the terms of the Indenture (as defined below). See "Description of the
Guarantee--Status of the Guarantee" and "Description of the Subordinated
Debentures--Subordination" in the accompanying Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
So long as an Event of Default (as defined in the Indenture) has not
occurred and is continuing, PSE&G has the right under the Indenture at any time
and from time to time to extend interest payment periods on the Subordinated
Debentures (as defined below), including the Series A Subordinated Debentures,
for up to 60 consecutive months, and, as a consequence, monthly Dividends on the
Series A Preferred Securities can be deferred by the Partnership during any such
extended interest payment period. Dividends in arrears after the monthly payment
date therefor will accumulate additional distributions thereon at the rate per
annum of 9 3/8% thereof. The term "Dividends" as used herein includes, as
applicable, monthly distributions, distributions on monthly distributions in
arrears and Additional Amounts (as defined below). In the event PSE&G exercises
its right to extend the interest payment periods on the Subordinated Debentures,
PSE&G may not declare or pay dividends on or redeem, purchase, acquire, or make
a liquidation payment with respect to, any shares of its capital stock during
such extension period. PSE&G currently believes
S-3
<PAGE>
that the extension of an interest payment period is unlikely. See "Description
of the Preferred Securities--Dividends" and "Description of the Subordinated
Debentures--Option to Extend Interest Payment Period" in the accompanying
Prospectus.
Should an extended interest payment period occur, the Partnership will
continue to accrue income for United States federal income tax purposes which
will be allocated, but not distributed, to holders of the Series A Preferred
Securities. As a result, the owner of Series A Preferred Securities will include
such interest in gross income for United States federal income tax purposes in
advance of the receipt of cash, and will not receive the cash related to such
income if the owner disposes of the Series A Preferred Securities prior to the
record date for the payment of Dividends. See "United States Taxation--Potential
Extension of Interest Payment Period" herein.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence and continuation of certain special events arising from
a change in law or a pronouncement or decision interpreting or applying any
applicable law, the General Partner may dissolve the Partnership and cause the
Series A Subordinated Debentures to be distributed to the holders of the Series
A Preferred Securities in liquidation of such holders' interests in the
Partnership. See "Certain Terms of the Series A Preferred Securities--Special
Event Redemption or Distribution" herein.
THE PARTNERSHIP
The Partnership is a limited partnership formed under the laws of the State
of New Jersey. All of its general partner interests are owned by PSE&G. As a
limited partnership, all of the business and affairs of the Partnership will be
managed by the General Partner. The Partnership has been created solely for the
purpose of issuing partner interests, including its Cumulative Monthly Income
Preferred Securities (the "Preferred Securities"), and lending the proceeds
thereof to PSE&G. Such loans will be evidenced by the Deferrable Interest
Subordinated Debentures (the "Subordinated Debentures") issued by PSE&G under an
Indenture dated as of November 1, 1994 (the "Indenture") between PSE&G and First
Fidelity Bank, National Association, as trustee (the "Trustee"), including the
Series A Subordinated Debentures to be issued concurrently with the issuance of
the Series A Preferred Securities. The Subordinated Debentures will be the only
assets of the Partnership and the only revenues of the Partnership will be the
interest on the Subordinated Debentures.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
PSE&G is an operating public utility company engaged in the generation,
transmission, distribution and sale of electric energy service and in the
production, transmission, distribution and sale of gas service in New Jersey.
PSE&G supplies electric and gas service in areas of New Jersey in which
approximately 5,500,000 persons reside, approximately 70% of the State's
population. PSE&G is the principal subsidiary of Public Service Enterprise Group
Incorporated ("Enterprise"), which owns all of PSE&G's common stock.
PSE&G's service area is a corridor of approximately 2,600 square miles
running diagonally across the State of New Jersey from Bergen County in the
northeast to an area below the City of Camden in the southwest. This heavily
populated, commercialized and industrialized territory
S-4
<PAGE>
encompasses most of New Jersey's largest municipalities, including its six
largest cities, in addition to approximately 300 suburban and rural communities.
As of December 31, 1993, PSE&G had approximately 1,868,000 electric
customers and 1,498,000 gas customers. For the year ended December 31, 1993,
PSE&G's operating revenues were approximately $5.287 billion and PSE&G's
earnings available to Enterprise were approximately $577 million.
COVERAGE RATIOS
PSE&G's Ratio of Earnings to Fixed Charges for each of the periods indicated
is as follows:
YEARS ENDED DECEMBER 31, 12 MONTHS ENDED
- ---------------------------------------- SEPTEMBER 30,
1989 1990 1991 1992 1993 1994
- ---- ---- ---- ---- ---- ---------------
3.21 3.10 3.20 2.70 3.30 3.43
The Ratio of Earnings to Fixed Charges represents, on a pre-tax basis, the
number of times earnings cover fixed charges. Earnings consist of net income, to
which has been added fixed charges and taxes based on income of PSE&G and its
subsidiaries. Fixed charges consist of interest charges and an interest factor
in rentals.
PSE&G's Ratio of Earnings to Fixed Charges plus Preferred Stock Dividend
Requirements for each of the periods indicated is as follows:
YEARS ENDED DECEMBER 31, 12 MONTHS ENDED
- ---------------------------------------- SEPTEMBER 30,
1989 1990 1991 1992 1993 1994
- ---- ---- ---- ---- ---- ---------------
2.88 2.79 2.86 2.43 2.89 2.98
The Ratio of Earnings to Fixed Charges plus Preferred Stock Dividend
Requirements represents, on a pre-tax basis, the number of times earnings cover
fixed charges plus preferred stock dividend requirements. Earnings consist of
net income, to which has been added fixed charges and taxes based on income of
PSE&G and its subsidiaries. Fixed Charges consist of interest charges and an
interest factor in rentals. Preferred Stock Dividend Requirements represent the
pre-tax earnings necessary to pay such dividends, computed at the effective tax
rates for the applicable periods.
USE OF PROCEEDS
The proceeds to be received by the Partnership from the sale of the Series A
Preferred Securities offered hereby will be loaned to PSE&G and will be added to
the general funds of PSE&G and used for general corporate purposes, including
the refunding and redemption of certain of its higher cost redeemable preferred
stock, the payment of construction expenditures and the reimbursement of its
treasury of funds expended therefor and/or the payment of its short-term
obligations incurred for such purposes. PSE&G's short-term obligations are
expected to aggregate approximately $325 million at the time the net proceeds of
the Series A Preferred Securities are received.
PSE&G is calling for redemption on December 16, 1994 all of the outstanding
750,000 shares of its 7.80% cummulative Preferred Stock (Par Value $100 per
share).
S-5
<PAGE>
CERTAIN TERMS OF THE SERIES A PREFERRED SECURITIES
DIVIDENDS
The Series A Preferred Securities will be entitled to Dividends out of funds
legally available therefor held by the Partnership at the annual rate of 9 3/8%
of the stated liquidation preference of $25, payable monthly in arrears on the
last day of each calendar month. The General Partner may make distributions on
the general partner interests of the Partnership only after payment in full of
all Dividends accrued on the Series A Preferred Securities and any other
outstanding Preferred Securities of the Partnership. The first Dividend payment
date for the Series A Preferred Securities will be November 30, 1994, and such
Dividends will be cumulative from the date of original issuance.
The Series A Preferred Securities will rank pari passu with all other series
of Preferred Securities which may be issued by the Partnership. No other series
of Preferred Securities has been issued by the Partnership.
So long as an Event of Default has not occurred and is continuing, PSE&G has
the right under the Indenture at any time and from time to time to extend the
interest payment period on the Subordinated Debentures, including the Series A
Subordinated Debentures, to a period not exceeding 60 consecutive months,
provided that such extended interest payment period shall not extend beyond the
stated maturity date or redemption date of any Subordinated Debentures. As a
consequence, monthly Dividends on the Series A Preferred Securities would be
deferred (but would continue to accumulate with Dividends thereon) by the
Partnership during any such extended interest payment period. Dividends in
arrears after the monthly payment date therefor will accumulate additional
distributions thereon at the rate per annum of 9 3/8% thereof. In the event that
PSE&G exercises its right to extend the interest payment period on the
Subordinated Debentures, PSE&G may not declare or pay dividends on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any shares of
its capital stock during such extension period. PSE&G currently believes that
the extension of an interest payment period is unlikely. Prior to the
termination of any such extension period, PSE&G may further extend the interest
payment period, provided that such extension period together with all such
previous and further extensions thereof may not exceed 60 consecutive months.
Upon the termination of any extension period and the payment of all amounts then
due on the Subordinated Debentures, PSE&G may elect to extend the interest
payment period again, subject to the above requirements. See "United States
Taxation--Potential Extension of Interest Payment Period" herein and
"Description of the Preferred Securities--Dividends" and "Description of the
Subordinated Debentures--Option to Extend Interest Payment Period" in the
accompanying Prospectus. Payments received by the Partnership with respect to
the Series A Subordinated Debentures and other series of PSE&G's Subordinated
Debentures will not be segregated by the Partnership for the benefit of the
holders of the Series A Preferred Securities or holders of any other particular
series of Preferred Securities.
OPTIONAL REDEMPTION
The Series A Preferred Securities are subject to redemption, at the option
of the General Partner, in whole or in part, from time to time, on or after
November 17, 1999, at $25 per Series A Preferred Security, plus accumulated and
unpaid Dividends, if any, to the date fixed for redemption (the "Redemption
Price").
In addition, if at any time after the issuance of the Series A Preferred
Securities, the Partnership is or would be required to pay Additional Amounts as
described below or PSE&G is or would be required to pay Additional Interest on
the Series A Subordinated Debentures, as described under "Description of the
Subordinated Debentures--Additional Interest" in the accompanying Prospectus,
then the Series A Preferred Securities will be subject to redemption at the
Redemption Price, at the option of the General Partner, in whole, or in part if
such requirement relates only to certain Series A Preferred Securities.
S-6
<PAGE>
MANDATORY REDEMPTION
If at any time the Series A Subordinated Debentures are redeemed by PSE&G
upon the occurrence of certain events which also cause the Series A Preferred
Securities to become redeemable or PSE&G pays the Series A Subordinated
Debentures at maturity as described under "Certain Terms of the Series A
Subordinated Debentures" herein, the Series A Preferred Securities will be
subject to mandatory redemption at the Redemption Price.
The Series A Preferred Securities will not be entitled to any sinking fund.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If a Tax Event or an Investment Company Act Event (each, as defined below,
and, each, a "Special Event") shall occur and be continuing, the General Partner
may elect, at its option, to (i) redeem the Series A Preferred Securities in
whole (but not in part), at the Redemption Price within 90 days following the
occurrence of such Special Event, or (ii) dissolve the Partnership and cause the
Series A Subordinated Debentures to be distributed to the holders of the Series
A Preferred Securities in liquidation of the Partnership within 90 days
following the occurrence of such Special Event, provided that the General
Partner shall have received an opinion of counsel (which may be regular tax
counsel to the General Partner or an affiliate but not an employee thereof) to
the effect that the holders of the Series A Preferred Securities will not
recognize any gain or loss for federal income tax purposes as a result of such
dissolution and distribution. See "United States Taxation--Receipt of Series A
Subordinated Debentures Upon Liquidation of the Partnership" herein. If the
General Partner does not elect either option (i) or (ii) above, the Series A
Preferred Securities will remain outstanding.
"Tax Event" means that the Partnership shall have received an opinion of
counsel (which may be regular counsel to PSE&G or an affiliate but not an
employee thereof) experienced in such matters to the effect that, as a result of
any amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting taxation, or as a
result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such interpretation or pronouncement is announced on or after the
date of original issuance of the Series A Preferred Securities, there is more
than an insubstantial risk that (i) the Partnership is subject to United States
federal income tax with respect to interest received on the Subordinated
Debentures, (ii) interest payable by PSE&G on the Subordinated Debentures will
not be deductible for United States federal income tax purposes or the
Partnership will otherwise not be taxed as a partnership or (iii) the
Partnership is subject to more than a de minimis amount of other taxes, duties,
assessments or other governmental charges.
"Investment Company Act Event" means the occurrence of a change in law or
regulation or a change in official interpretation of law or regulation by any
legislative body, court, governmental agency or regulatory authority (a "Change
in 1940 Act Law") to the effect that the Partnership is or will be considered an
"investment company" which is required to be registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Series A
Preferred Securities; provided, that no Investment Company Act Event shall be
deemed to have occurred if the Partnership has received an opinion of counsel
(which may be regular counsel to PSE&G or any affiliate but not an employee
thereof) experienced in such matters, to the effect that the Partnership and/or
PSE&G has taken reasonable measures, in its discretion, to avoid such Change in
1940 Act Law so that notwithstanding such Change in 1940 Act Law, the
Partnership is not required to be registered as an "investment company" within
the meaning of the 1940 Act.
S-7
<PAGE>
ADDITIONAL AMOUNTS
If, as a result of (i) the Series A Subordinated Debentures not being
treated as indebtedness for United States federal income tax purposes or (ii)
the Partnership not being treated as a partnership for United States federal
income tax purposes, the Partnership is required to withhold or deduct from
payments on the Series A Preferred Securities for or on account of any present
or future taxes imposed by the United States which would not otherwise be
required to be withheld or deducted, the Partnership will pay such additional
amounts as may be necessary in order that the net amounts received by the
holders of the Series A Preferred Securities after such withholding or deduction
will equal the amounts which would have been received in respect of such Series
A Preferred Securities in the absence of such withholding or deduction
("Additional Amounts"), except that no such Additional Amounts will be payable
to a holder of Series A Preferred Securities (or a third party on such holder's
behalf) with respect to Series A Preferred Securities if:
(a) such holder is liable for such taxes by reason of such holder having
a connection with the United States, other than being a holder of Series A
Preferred Securities; or
(b) the Partnership has notified such holder of the obligation to
withhold or deduct taxes and requested but not received from such holder a
valid declaration of non-residence, a valid taxpayer identification number
or other claim for exemption in such form or content as may be required by
the United States Internal Revenue Service ("IRS") and such withholding or
deduction would not have been required had such declaration, taxpayer
identification number or claim been received.
LIQUIDATION VALUE
The amount per share payable on the Series A Preferred Securities in the
event of any liquidation of the Partnership is $25 plus accumulated and unpaid
Dividends, unless, in connection with such liquidation, the Series A
Subordinated Debentures are distributed to the holders of the Series A Preferred
Securities.
CERTAIN TERMS OF THE SERIES A SUBORDINATED DEBENTURES
In exchange for, and to evidence the loan of, the proceeds of the sale of
the Series A Preferred Securities and the General Partner's related investment
in the Partnership, PSE&G will issue the Series A Subordinated Debentures to the
Partnership in the principal amount of $154,639,176 and with interest payment
provisions which correspond to the distribution provisions of the Series A
Preferred Securities. The Series A Debentures are redeemable prior to maturity
at the option of PSE&G (i) at any time if PSE&G is required to pay Additional
Interest on the Series A Debentures, in whole or in part, (ii) at any time on or
after November 17, 1999, in whole or in part, and (iii) if a Tax Event occurs
and is continuing, in whole (but not in part), in any case at 100% of the
principal amount thereof plus accrued interest to the redemption date. The
Series A Debentures are subject to mandatory redemption prior to maturity at
100% of the principal amount thereof plus accrued interest to the redemption
date in whole or in part upon a redemption of the Series A Preferred Securities,
but if in part, in an aggregate principal amount equal to the aggregate stated
liquidation preference of the Series A Preferred Securities redeemed. In
addition, the Series A Subordinated Debentures will be subject to mandatory
redemption upon the dissolution and winding up of the Partnership, unless,
following the occurrence of a Special Event, the General Partner elects to
distribute the Series A Subordinated Debentures to the holders of the Series A
Preferred Securities. In the event the Series A Subordinated Debentures were
issued to the holders of the Series A Preferred Securities, such Series A
Subordinated Debentures would be in denominations of $25.00 and integral
multiples thereof. The Series A Subordinated Debentures will mature on November
17, 2043.
The Series A Subordinated Debentures will rank junior and be subordinate in
right of payment to all Senior Indebtedness of PSE&G. See "Description of the
Subordinated Debentures--Subordination" in the accompanying Prospectus.
S-8
<PAGE>
UNITED STATES TAXATION
GENERAL
This section is a summary of certain United States federal income tax
considerations that may be relevant to prospective purchasers of Series A
Preferred Securities and represents the opinion of Ballard Spahr Andrews &
Ingersoll, special tax counsel to PSE&G and the Partnership, 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 and proposed regulations thereunder and current administrative
rulings and court decisions, all of which are subject to change. Subsequent
changes may cause tax consequences to vary substantially from the consequences
described below.
No attempt has been made in the following discussion to comment on all
United States federal income tax matters affecting purchasers of Series A
Preferred Securities. Moreover, the discussion focuses on holders of Series A
Preferred Securities who are individual citizens or residents of the United
States who are owners of Series A Preferred Securities for United States federal
tax purposes and has only limited application to corporations, estates, trusts
or non-resident aliens. Accordingly, each prospective purchaser of Series A
Preferred Securities should consult, and should depend on, his or her own tax
adviser in analyzing the federal, state, local and foreign tax consequences of
the purchase, ownership or disposition of Series A Preferred Securities.
In April 1994, the IRS issued certain notices generally addressing the
characteristics which distinguish debt from equity for various purposes under
the United States federal income tax laws. In these notices, the IRS indicated
that transactions involving securities that, like the Series A Preferred
Securities, have both debt and equity characteristics would be reviewed with
scrutiny to determine how they would be treated for tax purposes. Based on the
advice of Ballard Spahr Andrews & Ingersoll, PSE&G believes that interest on the
Series A Subordinated Debentures will be deductible under the tests referred to
in these notices. If, however, the IRS should subsequently issue a further
official pronouncement, or should there be a judicial decision, as a result of
which there is more than an insubstantial risk that interest on the Series A
Subordinated Debentures would not be deductible, the General Partner would have
the option to redeem the Series A Preferred Securities or to dissolve and cause
Series A Subordinated Debentures to be distributed to the holders of the Series
A Preferred Securities, as described herein.
INCOME FROM SERIES A PREFERRED SECURITIES
In the opinion of Ballard Spahr Andrews & Ingersoll, the Partnership will be
treated as a partnership for United States federal income tax purposes.
Accordingly, each owner of Series A Preferred Securities will be required to
include in gross income such owner's distributive share of the net income of the
Partnership. Such income should not exceed Dividends received on such Series A
Preferred Securities, except in limited circumstances as described below under
"Potential Extension of Interest Payment Period." No portion of such income will
be eligible for the dividends received deduction.
DISPOSITION OF SERIES A PREFERRED SECURITIES
Gain or loss will be recognized on a sale, including a redemption for cash,
of Series A Preferred Securities in an amount equal to the difference between
the amount realized and the tax basis of the owner of the Series A Preferred
Securities sold. Gain or loss recognized by an owner of a Series A Preferred
Security on the sale or exchange of a Series A Preferred Security held for more
than one year will generally be taxable as long-term capital gain or loss.
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RECEIPT OF SERIES A SUBORDINATED DEBENTURES UPON LIQUIDATION OF THE PARTNERSHIP
Under certain circumstances described in "Certain Terms of the Series A
Preferred Securities--Special Event Redemption or Distribution" herein, the
General Partner may dissolve and wind up the Partnership and cause the Series A
Subordinated Debentures to be distributed to the holders of Series A Preferred
Securities in liquidation of such holders' interests in the Partnership,
provided that the General Partner shall have received an opinion of counsel
(which may be regular tax counsel to the General Partner or an affiliate but not
an employee thereof) to the effect that the holders of the Series A Preferred
Securities will not recognize any gain or loss for federal income tax purposes
as a result of such dissolution and distribution. Under current United States
federal income tax law, such a distribution would be treated as a non-taxable
exchange to each holder of Series A Preferred Securities. Such a tax-free
transaction would result in the holder of Series A Preferred Securities
receiving an aggregate tax basis in the Series A Subordinated Debentures equal
to such holder's aggregate tax basis in the holder's Series A Preferred
Securities. A holder's holding period for such Series A Subordinated Debentures
would include the period for which the Series A Preferred Securities were held
by such holder.
PARTNERSHIP INFORMATION RETURNS AND AUDIT PROCEDURES
The General Partner will furnish each owner of a Series A Preferred Security
with a schedule K-1 each year setting forth such owner's allocable share of
income for the prior calendar year. The General Partner is required to furnish
such schedules as soon as practicable following the end of the year, but in any
event prior to March 31.
Any person who holds Series A Preferred Securities as a nominee for another
person is required to furnish to the Partnership (a) the name, address and
taxpayer identification number of the beneficial owner and the nominee; (b)
information as to whether the beneficial owner is (i) a person that is not a
United States person, (ii) a foreign government, an international organization
or any wholly owned agency or instrumentality of either of the foregoing, or
(iii) a tax-exempt entity; (c) the amount and description of Series A Preferred
Securities held, acquired or transferred for the beneficial owner; and (d)
certain information including the dates of acquisitions and transfers, means of
acquisitions and transfers, and acquisition cost for purchases, as well as the
amount of net proceeds from sales. Brokers and financial institutions are
required to furnish additional information, including whether they are United
States persons, and certain information on Series A Preferred Securities they
acquire, hold or transfer for their own accounts. A penalty of $50 per failure
(up to a maximum of $100,000 per calendar year) is imposed by the Code for
failure to report such information to the Partnership. The nominee is required
to supply the beneficial owners of the Series A Preferred Securities with the
information furnished to the Partnership.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD
In the event that the interest payment period on the Series A Preferred
Securities is extended (as provided under "Certain Terms of the Series A
Preferred Securities--Dividends" herein), the Partnership will continue to
accrue income, generally equal to the amount of the interest payment due at the
end of the extended interest payment period, over the length of the extended
interest payment period.
Accrued income will be allocated, but not distributed, to holders of record
on the Business Day preceding the last day of each calendar month. As a result,
owners of Series A Preferred Securities during an extended interest payment
period will be required to include interest in gross income in advance of the
receipt of cash, and any such owners who dispose of Series A Preferred
Securities prior to the record date for the payment of Dividends following such
extended interest payment period will include interest in gross income but will
not receive any cash related thereto. The tax
S-10
<PAGE>
basis of a Series A Preferred Security will be increased by the amount of any
interest that is included in income without a receipt of cash, and will be
decreased again when and if such cash is subsequently received from the
Partnership. The subsequent receipt of such cash will not be included in gross
income.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien Holder" is any
holder or beneficial owner who or which is (i) a nonresident alien individual or
(ii) a foreign corporation, partnership or estate or trust, in either case not
subject to United States federal income tax on a net income basis in respect of
a Series A Preferred Security.
Under present United States federal income tax law, subject to the
discussion below with respect to backup withholding, and assuming satisfaction
by the Partnership of its withholding tax obligations, if any:
(i) payments by the Partnership or any of its paying agents to any
United States Alien Holder will not be subject to United States federal
withholding tax provided that (a) the beneficial owner of the Series A
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
beneficial owner of the Series A Preferred Security is not a controlled
foreign corporation that is related to PSE&G through stock ownership, and
(c) either (A) the beneficial owner of the Series A Preferred Security
certifies to the Partnership or its agent, under penalties of perjury, that
it is a United States Alien Holder and provides its name and address or (B)
the holder of the Series A Preferred Security 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 Partnership or its agent
under penalties of perjury that such statement has been received from the
beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payor with a copy thereof; and
(ii) a United States Alien Holder of a Series A Preferred Security will
generally not be subject to United States federal income or withholding tax
on any gain realized on the sale or exchange of a Series A Preferred
Security unless such person is present in the United States for 183 days or
more in the taxable year of sale and such person has a "tax home" in the
United States or certain other requirements are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments to
noncorporate United States holders of the proceeds of the sale of Series A
Preferred Securities within the United States and "backup withholding" at a rate
of 31% will apply to such payments if the seller fails to provide a correct
taxpayer identification number.
Payments of the proceeds from the sale by a United States Alien Holder of
Series A 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 payments. Payments of
the proceeds from the sale of Series A Preferred Securities to or through the
United States office of a broker is subject to information reporting and backup
withholding unless the holder or beneficial owner certifies as to its non-United
States status or otherwise establishes an exemption from information reporting
and backup withholding.
S-11
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement among the
Partnership, PSE&G and the underwriters named below (the "Underwriters"), for
whom Goldman, Sachs & Co., Bear, Stearns & Co. Inc., Dean Witter Reynolds Inc.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co.
Incorporated, PaineWebber Incorporated, Prudential Securities Incorporated and
Smith Barney Inc. are acting as Representatives, the Partnership has agreed to
sell to each of the Underwriters and each of the Underwriters has severally
agreed to purchase from the Partnership the respective number of Series A
Preferred Securities set forth opposite its name below:
NUMBER OF SERIES A
PREFERRED
UNDERWRITER SECURITIES
- --------------------------------------------------------- ------------------
Goldman, Sachs & Co...................................... 570,000
Bear, Stearns & Co. Inc.................................. 570,000
Dean Witter Reynolds Inc................................. 570,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated....... 570,000
Morgan Stanley & Co. Incorporated........................ 570,000
PaineWebber Incorporated................................. 570,000
Prudential Securities Incorporated....................... 570,000
Smith Barney Inc......................................... 570,000
Advest, Inc.............................................. 40,000
CS First Boston Corporation.............................. 80,000
J.C. Bradford & Co....................................... 40,000
The Chapman Company...................................... 40,000
Cowen & Company.......................................... 40,000
Dain Bosworth Incorporated............................... 40,000
A.G. Edwards & Sons, Inc................................. 80,000
Fahnestock & Co. Inc..................................... 40,000
Gibraltar Securities Company............................. 40,000
Gruntal & Co., Incorporated.............................. 40,000
J.J.B. Hilliard, W.L. Lyons, Inc......................... 40,000
Interstate/Johnson Lane Corporation...................... 40,000
Janney Montgomery Scott Inc.............................. 80,000
Kemper Securities, Inc................................... 80,000
Legg Mason Wood Walker Incorporated...................... 40,000
McGinn, Smith & Co., Inc................................. 40,000
Morgan Keegan & Company, Inc............................. 40,000
The Ohio Company......................................... 40,000
Olde Discount Corporation................................ 40,000
Oppenheimer & Co., Inc................................... 80,000
Piper Jaffray Inc........................................ 40,000
Pryor, McClendon, Counts & Co., Inc...................... 40,000
Raymond James & Associates, Inc.......................... 40,000
SBCI Swiss Bank Corporation Investment banking Inc....... 80,000
Salomon Brothers Inc..................................... 80,000
Muriel Siebert & Co., Inc................................ 40,000
Sturdivant & Co., Inc.................................... 40,000
U.S. Clearing Corp....................................... 40,000
Wheat, First Securities, Inc............................. 40,000
------------------
Total................................................ 6,000,000
------------------
------------------
S-12
<PAGE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all such Series A Preferred
Securities offered hereby, if any are taken.
The Underwriters propose to offer the Series A Preferred Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and in part to certain securities
dealers at such price less a concession of $0.50 per Series A Preferred
Security. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $0.25 per Series A Preferred Security to certain brokers and
dealers. After the Series A Preferred Securities are released for sale to the
public, the offering price and other selling terms may from time to time be
varied by the Representatives.
In view of the fact that the proceeds from the sale of the Series A
Preferred Securities will be loaned to PSE&G, under the Underwriting Agreement
PSE&G has agreed to pay to the Underwriters $0.7875 per Series A Preferred
Security for the accounts of the several Underwriters.
Prior to this offering, there has been no public market for the Series A
Preferred Securities. In order to meet one of the requirements for listing the
Series A Preferred Securities on the New York Stock Exchange, the Underwriters
have undertaken to sell the Series A Preferred Securities to a minimum of 400
beneficial owners.
The Underwriters do not intend to confirm sales to any discretionary account
unless the customer's prior written consent is obtained.
PSE&G and the Partnership have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
PSE&G and the Partnership have agreed, during the period beginning on the
date of the Underwriting Agreement and continuing to and including the earlier
of (i) the date, after the closing date, on which the distribution of the Series
A Preferred Securities ceases, as determined by Goldman, Sachs & Co., or (ii) 30
days after the closing date, not to offer, sell, contract to sell, or otherwise
dispose of any Series A Preferred Securities, any limited partner interests of
the Partnership, or any preferred stock or any other securities of the
Partnership or PSE&G which are substantially similar to the Series A Preferred
Securities, including the related Guarantee, or any securities convertible into
or exchangeable for Series A Preferred Securities, limited partner interests,
preferred stock or other substantially similar securities of either the
Partnership or PSE&G, without the prior written consent of Goldman, Sachs & Co.
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<PAGE>
PUBLIC SERVICE ELECTRIC AND GAS CAPITAL
CUMULATIVE MONTHLY INCOME PREFERRED SECURITIES (MIPS*)
GUARANTEED TO THE EXTENT THE ISSUER HAS FUNDS AS SET FORTH HEREIN BY
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
-------------------
Public Service Electric and Gas Capital, L.P. (the "Partnership"), a New
Jersey special purpose limited partnership in which Public Service Electric and
Gas Company ("PSE&G") is the sole general partner (the "General Partner"), may
offer from time to time, in one or more series, its cumulative monthly income
preferred securities representing limited partner interests (the "Preferred
Securities"). See "Description of the Preferred Securities." The payment of
periodic cash distributions ("Dividends") with respect to the Preferred
Securities of each series and payments on liquidation or redemption with respect
to such Preferred Securities, in each case out of funds on hand legally
available therefor held by the Partnership, are guaranteed by PSE&G to the
extent described herein (the "Guarantee"). The obligations of PSE&G under the
Guarantee will be subordinate and junior in right of payment to all general
liabilities of PSE&G. See "Description of the Guarantee." Concurrently with the
issuance of each series of Preferred Securities, the Partnership will loan the
proceeds thereof to PSE&G and to evidence such loan, PSE&G will issue and
deliver to the Partnership a series of PSE&G's deferrable interest subordinated
debentures (the "Subordinated Debentures") with terms corresponding to that
series of Preferred Securities. The Subordinated Debentures will be unsecured
and subordinate and junior in right of payment to Senior Indebtedness (as
defined herein) of PSE&G. See "Description of the Subordinated Debentures." The
Subordinated Debentures will be the sole asset of the Partnership and the
interest on the Subordinated Debentures will be the only revenue of the
Partnership. Upon the occurrence of certain events as may be described in the
accompanying Prospectus Supplement (the "Prospectus Supplement"), the General
Partner may dissolve the Partnership and cause the Subordinated Debentures to be
distributed to the holders of the Preferred Securities in liquidation of their
interest in the Partnership.
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
$210,000,000. Certain specific terms of the particular series of Preferred
Securities in respect of which this Prospectus is being delivered will be set
forth in an accompanying Prospectus Supplement, including where applicable and
to the extent not set forth herein, the specific title, the series, the
aggregate amount, the Dividend rate (or the method for determining such rate),
the stated liquidation preference, redemption provisions, other rights, the
initial public offering price, and any other special terms, as well as any
planned listing of such Preferred Securities on a securities exchange.
The Preferred Securities may be sold in a public offering to or through
underwriters or dealers designated from time to time. See "Plan of
Distribution." The names of any such underwriters or dealers involved in the
sale of the Preferred Securities of the particular series in respect of which
this Prospectus is being delivered, 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 Prospectus Supplement. The net proceeds to
the Partnership will also be set forth in the Prospectus Supplement.
The Prospectus Supplement will also contain information concerning United
States federal income tax considerations applicable to the series of Preferred
Securities offered.
- ------------
* An application has been filed by Goldman, Sachs & Co. with the United
States Patent and Trademark Office for the registration of the MIPS servicemark.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------------
THE DATE OF THIS PROSPECTUS IS NOVEMBER 9, 1994.
<PAGE>
STATEMENT OF AVAILABLE INFORMATION
PSE&G is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission ("SEC"). Such reports and other information can be inspected and
copied at the public reference facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. and at its regional offices at 500 West Madison
Street, Chicago, Illinois and 7 World Trade Center, New York, New York. Copies
of such reports and other information may also be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549-1004 at prescribed rates. Such reports and other information can also be
inspected at the New York Stock Exchange, Inc. where certain of PSE&G's
securities are listed.
No separate financial statements of the Partnership have been included
herein. PSE&G and the Partnership do not consider that such financial statements
would be material to holders of Preferred Securities offered hereby because the
Partnership is a newly formed special purpose entity, has no operating history
or independent operations and is not engaged in, and does not propose to engage
in, any activity other than as set forth below. See "The Partnership."
-------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by PSE&G with the SEC pursuant to the Exchange
Act are incorporated herein by reference:
1. PSE&G's Annual Report on Form 10-K for the year ended December 31, 1993;
2. PSE&G's Quarterly Reports on Form 10-Q for the periods ended March 31,
1994, June 30, 1994 and September 30, 1994; and
3. PSE&G's Current Reports on Form 8-K dated January 21, 1994, June 15, 1994
and October 6, 1994.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to the
termination of the offering shall be deemed to be incorporated by reference in
this Prospectus and the accompanying Prospectus Supplement and shall be a part
hereof and thereof from the date of filing of such document. Any statement
contained herein or therein or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein and therein shall
be deemed to be modified or superseded for purposes of this Prospectus and the
accompanying Prospectus Supplement to the extent that a statement contained
herein or therein or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein and therein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or the accompanying Prospectus Supplement.
PSE&G undertakes to provide without charge to each person, including any
beneficial owner, to whom this Prospectus and the accompanying Prospectus
Supplement are delivered, upon written or oral request of such person, a copy of
any or all documents described above under "Incorporation of Certain Documents
by Reference," other than exhibits to such documents not specifically
incorporated by reference therein. Such requests should be directed to the
Director-- Investor Relations, Public Service Electric and Gas Company, 80 Park
Plaza, T6B, P. O. Box 570, Newark, New Jersey 07101, telephone (201) 430-6503.
2
<PAGE>
THE PARTNERSHIP
The Partnership is a limited partnership formed under the laws of the State
of New Jersey. All of its general partner interests are owned by PSE&G (the
"General Partner"). As a limited partnership, all of the business and affairs of
the Partnership will be managed by the General Partner pursuant to the Amended
and Restated Limited Partnership Agreement of the Partnership (the "Limited
Partnership Agreement"). Under the Limited Partnership Agreement, the general
partner of the Partnership must (i) at all times maintain a "fair market net
worth" of at least 10% of the total capital contributions (less redemptions) to
the Partnership, (ii) contribute capital equal to 3% of the aggregate capital
contributed to the Partnership, and (iii) use its reasonable efforts to cause
the Partnership to remain a limited partnership and otherwise continue to be
treated as a partnership for United States federal income tax purposes.
The Partnership has been created solely for the purpose of issuing partner
interests, including the Preferred Securities, and lending the proceeds thereof
to PSE&G. Such loans will be evidenced by the Subordinated Debentures issued by
PSE&G under an Indenture dated as of November 1, 1994 (the "Indenture") between
PSE&G and First Fidelity Bank, National Association, as trustee (the "Trustee").
The Subordinated Debentures will be the only assets of the Partnership and the
only revenues of the Partnership will be interest on the Subordinated
Debentures. The General Partner will pay all of the Partnership's operating
expenses and will have general liability for all of the Partnership's
obligations.
Assuming a holder of Preferred Securities acts in conformity with the
Limited Partnership Agreement, such holder will not be liable for the debts,
obligations and liabilities of the Partnership, whether arising in contract,
tort or otherwise, solely by reason of being a limited partner of the
Partnership, subject to the obligation of a limited partner to repay any funds
wrongfully distributed to it.
The place of business of the Partnership is the principal executive offices
of the General Partner at 80 Park Plaza, Newark, New Jersey 07101 and its
telephone number is 201-430-7000.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
PSE&G is an operating public utility company engaged in the generation,
transmission, distribution and sale of electric energy service and in the
production, transmission, distribution and sale of gas service in New Jersey.
PSE&G supplies electric and gas service in areas of New Jersey in which
approximately 5,500,000 persons reside, approximately 70% of the State's
population. PSE&G is the principal subsidiary of Public Service Enterprise Group
Incorporated, which owns all of PSE&G's common stock.
PSE&G's service area is a corridor of approximately 2,600 square miles
running diagonally across the State of New Jersey from Bergen County in the
northeast to an area below the City of Camden in the southwest. This heavily
populated, commercialized and industrialized territory encompasses most of New
Jersey's largest municipalities, including its six largest cities, in addition
to approximately 300 suburban and rural communities.
PSE&G's executive offices are located at 80 Park Plaza, Newark, New Jersey
07101-0570, telephone (201) 430-7000.
3
<PAGE>
USE OF PROCEEDS
Unless otherwise specified in the accompanying Prospectus Supplement, the
proceeds to be received by the Partnership from the sale of the Preferred
Securities offered hereby will be loaned to PSE&G and will be added to the
general funds of PSE&G and used for general corporate purposes, including the
refunding and redemption of certain of its higher cost redeemable preferred
stock, the payment of construction expenditures and the reimbursement of its
treasury of funds expended therefor and/or the payment of its short-term
obligations incurred for such purposes.
DESCRIPTION OF THE PREFERRED SECURITIES
The following is a summary of certain terms and provisions of the Preferred
Securities and the Limited Partnership Agreement. The summary is subject to, and
qualified in its entirety by reference to, the Limited Partnership Agreement,
the Preferred Securities and the New Jersey Uniform Limited Partnership Law
(1976). The Limited Partnership Agreement and the form of the Preferred
Securities are filed as exhibits to the Registration Statement of which this
Prospectus forms a part.
GENERAL
Under the Limited Partnership Agreement, the Partnership is authorized to
issue two classes of partner interests, Preferred Securities representing
limited partner interests, including the Preferred Securities offered hereby,
and general partner interests. All of the general partner interests of the
Partnership are owned by PSE&G. The Limited Partnership Agreement authorizes the
General Partner to establish various series of Preferred Securities in an
unlimited amount having such designations, rights, privileges, restrictions and
other terms and provisions as the General Partner may determine. Dividends on
all series of Preferred Securities must be paid in full before the General
Partner may participate in the profits or assets of the Partnership. All of the
Preferred Securities will rank pari passu in participation in the assets and
income of the Partnership.
DIVIDENDS
Dividends on each series of Preferred Securities will be cumulative, will
accrue from the date of original issuance and will be payable monthly in arrears
on the last day of each calendar month of each year, except as otherwise
described below. The rate of Dividends (or method of calculation thereof)
payable on a series of Preferred Securities offered hereby will be specified in
the Prospectus Supplement related thereto. Unless otherwise specified in the
applicable Prospectus Supplement, the amount of Dividends payable for any period
will be computed on the basis of twelve 30-day months and a 360-day year and,
for any period shorter than a full monthly distribution period, will be computed
on the basis of the actual number of days elapsed in such period.
So long as an Event of Default under the Indenture has not occurred and is
continuing, PSE&G has the right under the Indenture at any time and from time to
time, to extend the interest payment period on the Subordinated Debentures to a
period not exceeding 60 consecutive months, provided that such extended interest
payment period shall not extend beyond the stated maturity date or redemption
date of any series of Subordinated Debentures (an "Extension Period"). As a
consequence, monthly Dividends on the Preferred Securities would be deferred by
the Partnership during any Extension Period. The term "Dividends" as used herein
includes, as applicable, monthly distributions, distributions on monthly
distributions in arrears and Additional Amounts (as defined in the applicable
Prospectus Supplement). In the event that PSE&G exercises this right, PSE&G may
not declare or pay dividends on or redeem, purchase, acquire, or make a
liquidation payment with
4
<PAGE>
respect to, any of its capital stock during an Extension Period. Prior to the
termination of any such Extension Period, PSE&G may further extend the interest
payment period, provided that such Extension Period together with all such
previous and further extensions thereof may not exceed 60 consecutive months.
Upon the termination of any Extension Period and the payment of all amounts then
due, PSE&G may elect to extend the interest payment period again, subject to the
above requirements. See "Description of the Subordinated Debentures--Option to
Extend Interest Payment Period." Any tax consequences resulting from the
extension of the interest payment period to a holder of Preferred Securities
will be described in the applicable Prospectus Supplement.
Dividends on the Preferred Securities must be paid by the Partnership in any
calendar year or portion thereof to the extent the Partnership has funds on hand
legally available therefor. The Partnership's revenues will be limited to
interest payments on the Subordinated Debentures issued by PSE&G to the
Partnership. See "Description of the Subordinated Debentures."
Dividends on the Preferred Securities will be payable to the holders thereof
as they appear on the books and records of the Partnership on the relevant
record dates, which, so long as the Preferred Securities remain in
book-entry-only form, will be one Business Day (as defined below) prior to the
relevant payment dates. Subject to any applicable laws and regulations and the
provisions of the Limited Partnership Agreement, each such payment will be made
as described under "--Book-Entry-Only Issuance--The Depository Trust Company"
below. In the event that the Preferred Securities do not remain in
book-entry-only form, the record dates will be the fifteenth day of each month.
In the event that any date on which a Dividend is payable on the Preferred
Securities is not a Business Day, then payment of the Dividend 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 shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date. A "Business Day" shall mean any day
other than a Saturday, Sunday or other day on which banking institutions in The
City of New York or the State of New Jersey are authorized or required by law or
executive order to close.
CERTAIN RESTRICTIONS ON THE PARTNERSHIP
If Dividends have not been paid in full on any series of Preferred
Securities, the Partnership shall not:
(i) pay any Dividends on any other series of Preferred Securities,
unless Dividends are paid on all Preferred Securities then outstanding on a
pro rata basis in proportion to the full Dividends to which each series of
Preferred Securities would be entitled if paid in full;
(ii) pay any distribution on the general partner interests; or
(iii) redeem, purchase or otherwise acquire any Preferred Securities or
the general partner interests;
until, in each case, such time as all accumulated and unpaid Dividends on all
series of Preferred Securities shall have been paid in full for all prior
distribution periods. As of the date of this Prospectus, there are no Preferred
Securities outstanding.
REDEMPTION PROVISIONS
The redemption provisions with respect to each series of the Preferred
Securities offered hereby will be set forth in the Prospectus Supplement related
thereto.
5
<PAGE>
The Partnership may not redeem any Preferred Securities unless all
accumulated and unpaid Dividends have been paid on all Preferred Securities for
all monthly distribution periods terminating on or prior to the date of
redemption. If a partial redemption would result in a delisting of such series
of Preferred Securities from any national securities exchange on which such
series of Preferred Securities is then listed, the Partnership may only redeem
such series of Preferred Securities in whole.
Notice of any redemption of the Preferred Securities will be given not less
than 30 days nor more than 60 days prior to the redemption date to the holders
thereof. So long as The Depository Trust Company ("DTC") or its nominee is the
sole holder of the Preferred Securities of any series, any failure on the part
of DTC or a participant in the book-entry system to notify a beneficial owner of
such Preferred Securities of such redemption shall not affect the validity of
the redemption. See "--Book-Entry-Only Issuance--The Depository Trust Company"
below. If notice of redemption shall have been given and payment shall have been
made by the Partnership to DTC, then, upon the date of such payment, all rights
in respect of the Preferred Securities so called for redemption will cease. In
the event that any date fixed for redemption of Preferred Securities 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 falls 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 day).
Subject to applicable law and except as provided under "Description of the
Subordinated Debentures--Certain Covenants of PSE&G," PSE&G or its affiliates
may at any time and from time to time purchase outstanding Preferred Securities
by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION
In the event of any voluntary or involuntary dissolution and winding up of
the Partnership, other than in connection with the distribution of Subordinated
Debentures to holders of the Preferred Securities upon the occurrence of certain
events as may be described in the accompanying Prospectus Supplement, the
holders of the Preferred Securities at the time outstanding will be entitled to
receive out of the assets of the Partnership after satisfaction of liabilities
to creditors as required by New Jersey law and before any distribution of assets
is made to holders of its general partner interests, the aggregate of the stated
liquidation preference and all accumulated and unpaid Dividends to the date of
payment (the "Liquidation Distribution"). All assets of the Partnership
remaining after payment of the Liquidation Distribution will be distributed to
the General Partner.
If, upon a liquidation of the Partnership, the Liquidation Distribution can
be paid only in part because the Partnership has insufficient assets available
to pay in full the aggregate Liquidation Distribution on all Preferred
Securities, then the amounts payable on each series of Preferred Securities
shall be paid on a pro rata basis in proportion to the full Liquidation
Distribution to which each series of Preferred Securities would be entitled.
Pursuant to the Limited Partnership Agreement, the Partnership shall be
dissolved and its affairs shall be wound up upon the occurrence of any of the
following events: (i) the expiration of the term of the Partnership, which is 99
years, (ii) the withdrawal, removal or bankruptcy of the General Partner or the
occurrence of any other event that under applicable law causes PSE&G to cease to
be the General Partner, except for a transfer to a permitted successor or
assignee of the General Partner as set forth in the Limited Partnership
Agreement, (iii) the entry of a decree of judicial dissolution, (iv) the
election of the General Partner upon the occurrence of certain special events
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as may be set forth in the Prospectus Supplement, or (v) the written consent of
the General Partner and all of the holders of the Preferred Securities. Upon any
dissolution and winding up other than under (iv) above, PSE&G is required to
redeem the Subordinated Debentures to fund the Liquidation Distribution.
MERGER, CONSOLIDATION, ETC. OF THE PARTNERSHIP
The Partnership may not consolidate, amalgamate, merge with or into, 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 with the approval of the General Partner and the holders of 66 2/3% in
aggregate stated liquidation preference of the outstanding Preferred Securities
or as otherwise described below. The General Partner may, without the consent of
the holders of the Preferred Securities, cause the Partnership to consolidate,
amalgamate, merge with or into, or be replaced by, or convey, transfer or lease
its properties and assets as an entirety or substantially as an entirety to, a
corporation, a limited liability company or a limited partnership, a trust or
other entity organized as such under the laws of any state of the United States
of America or the District of Columbia, provided that (i) such successor entity
either (x) expressly assumes all of the obligations of the Partnership under the
Preferred Securities or (y) 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, as regards
participation in the profits and assets of the successor entity, at least as
high as the Preferred Securities rank, as regards participation in the profits
and assets of the Partnership, (ii) PSE&G confirms its obligations under the
Guarantee with regard to the Successor Securities, if any, (iii) such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease
does not cause any series of Preferred Securities or Successor Securities to be
delisted by any national securities exchange on which such series of Preferred
Securities is then listed, (iv) such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease does not cause the Preferred
Securities or Successor Securities to be downgraded by any "nationally
recognized statistical rating organization," as that term is defined by the SEC
for purposes of Rule 436(g)(2) under the Securities Act of 1933, as amended (the
"Securities Act"), (v) such consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease does not adversely affect the powers, preferences
and other special rights of holders of Preferred Securities or Successor
Securities in any material respect, (vi) such successor entity has a purpose
substantially identical to that of the Partnership, (vii) prior to such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease,
PSE&G has received an opinion of counsel (which may be regular tax or other
counsel to PSE&G or an affiliate, but not an employee thereof) experienced in
such matters to the effect that (w) holders of outstanding Preferred Securities
will not recognize any gain or loss for United States federal income tax
purposes as a result of the consolidation, amalgamation, merger, replacement,
conveyance, transfer or lease, (x) such successor entity will be treated as a
partnership for United States federal income tax purposes, (y) following such
consolidation, amalgamation, merger, replacement, conveyance, transfer or lease,
PSE&G and such successor entity will be in compliance with the Investment
Company Act of 1940, as amended (the "1940 Act") without registering thereunder
as an investment company, and (z) such consolidation, amalgamation, merger,
replacement, conveyance, transfer or lease will not adversely affect the limited
liability of holders of Preferred Securities or Successor Securities.
VOTING RIGHTS
Except as provided below and under "--Merger, Consolidation, etc. of the
Partnership" and "Description of the Guarantee--Amendments", and as otherwise
required by law and the Limited Partnership Agreement, the holders of the
Preferred Securities will have no voting rights.
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If (i) the Partnership fails to pay Dividends in full on the Preferred
Securities for 18 consecutive monthly distribution periods, (ii) an Event of
Default (as defined in the Indenture and described below) occurs and is
continuing, or (iii) PSE&G is in default on any of its payment or other
obligations under the Guarantee, then the holders of the Preferred Securities,
acting as a single class, will be entitled by a vote of the majority of the
aggregate stated liquidation preference of all outstanding Preferred Securities
having a right to vote to appoint and authorize a special representative
("Special Representative") to enforce the Partnership's rights against PSE&G
under the Subordinated Debentures and the Indenture and the obligations
undertaken by PSE&G under the Guarantee, including, after failure to pay
Dividends for 60 consecutive monthly distribution periods on the Preferred
Securities, the payment of Dividends on the Preferred Securities. The Special
Representative shall not be admitted as a partner of the Partnership or
otherwise be deemed a partner of the Partnership and shall have no liability for
the debts, obligations or liabilities of the Partnership.
For purposes of determining whether the Partnership has failed to pay
Dividends in full for 18 consecutive monthly distribution periods, Dividends
shall be deemed to remain in arrears, notwithstanding any payments in respect
thereof, until full cumulative Dividends on all Preferred Securities have been
or contemporaneously are paid with respect to all monthly distribution periods
terminating on or prior to the date of payment of such full cumulative
Dividends. Subject to the requirements of applicable law, not later than 30 days
after the right to appoint a Special Representative arises, the General Partner
will convene a general meeting. If the General Partner fails to convene a
meeting within such 30-day period, the holders of 10% of the aggregate stated
liquidation preference of the Preferred Securities will be entitled to convene
such meeting. The provisions of the Limited Partnership Agreement relating to
the convening and conduct of the general meetings of security holders will apply
with respect to any such meeting. Any Special Representative so appointed shall
vacate office immediately if the Partnership (or PSE&G pursuant to the
Guarantee) shall have paid in full all accumulated and unpaid Dividends on the
Preferred Securities or the Event of Default under the Indenture or the default
under the Guarantee, as the case may be, shall have been cured. Notwithstanding
the appointment of any such Special Representative, PSE&G retains all rights
under the Indenture, including the right to extend the interest payment period
for up to 60 consecutive months as provided under "Description of the
Subordinated Debentures--Option to Extend Interest Payment Period."
If any proposed amendment to the Limited Partnership Agreement provides for,
or the General Partner otherwise proposes to effect, any action which would
materially adversely affect the powers, preferences or special rights attached
to any series of Preferred Securities, whether by way of amendment to the
Limited Partnership Agreement or otherwise, then the holders of such series of
Preferred Securities will be entitled to vote on such amendment or action of the
General Partner (but not on any other amendment or action) and, in the case of
an amendment or action which would equally adversely affect the rights or
preferences of any other Preferred Securities, such Preferred Securities shall
vote together as a class on such amendment or action of the General Partner (but
not on any other amendment or action), and such amendment or action shall not be
effective except with the approval of the holders of not less than 66 2/3% of
the aggregate stated liquidation preference of such series of Preferred
Securities. In addition to the circumstances described under "--Liquidation
Distribution" above, the Partnership may be dissolved and wound up with the
consent of the holders of all Preferred Securities then outstanding.
The powers, preferences or special rights attached to any Preferred
Securities will be deemed not to be adversely affected by the creation or issue
of, and no vote will be required for the creation or issue of, any additional
series of Preferred Securities or additional general partner interests. Holders
of Preferred Securities have no preemptive rights.
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So long as any Subordinated Debentures are held by the Partnership, the
General Partner, unless so directed by the Special Representative, shall not (i)
direct the time, method and place of conducting any proceeding for any remedy
available to the holders of the Subordinated Debentures or the Trustee under the
Indenture, or executing any trust or power conferred on the Trustee, (ii) waive
compliance or waive any default in compliance by PSE&G with any covenant or
other term in the Indenture, (iii) exercise any right to rescind or annul a
declaration that the principal of all the Subordinated Debentures shall be due
and payable or (iv) consent to any amendment, modification or termination of the
Indenture, where consent by the holder of the Subordinated Debentures shall be
required, without, in each case, obtaining the prior approval of the holders of
at least 66 2/3% in aggregate stated liquidation preference of all series of
Preferred Securities, acting as a single class; provided, however, that where a
consent under the Indenture would require the consent of each holder of the
Subordinated Debentures affected thereby, no such consent shall be given by the
General Partner without the prior consent of each holder of all series of
Preferred Securities. The General Partner shall not revoke any action previously
authorized or approved by a vote of any series of Preferred Securities. The
General Partner shall notify all holders of the Preferred Securities of any
notice of default received from the Trustee with respect to the Subordinated
Debentures.
Any required approval of holders of Preferred Securities may be given at a
separate meeting of such holders convened for such purposes, at a meeting of all
partners of the Partnership or pursuant to written consent. The Partnership will
cause a notice of any meeting at which holders of any series 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 mailed to each holder of record of
such series of Preferred Securities. Each such notice will include a statement
setting forth (i) the date of such meeting or the date by which such action is
to be taken, (ii) a description of any resolution proposed for adoption at such
meeting on which such holders are entitled to vote or of such matter upon which
written consent is sought, and (iii) instructions for the delivery of proxies or
consents.
No vote or consent of the holders of the Preferred Securities will be
required for the Partnership to redeem and cancel Preferred Securities in
accordance with the Limited Partnership Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned by PSE&G or any entity owned more than 50% by PSE&G,
either directly or indirectly, shall not be entitled to so vote or consent and
shall, for the purposes of such vote or consent, be treated as if they were not
outstanding.
The holders of the Preferred Securities will have no rights to remove or
replace the General Partner. PSE&G may, without the consent of any holder of
Preferred Securities, transfer its general partner interests in the Partnership
to any direct or indirect wholly owned subsidiary of PSE&G.
BOOK-ENTRY-ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
DTC will act as securities depository for the Preferred Securities offered
hereby. Each series of Preferred Securities offered hereby will be issued only
as fully registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully registered global Preferred Security certificates
will be issued, representing in the aggregate the total number of Preferred
Securities of each series, and will be deposited with DTC.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial
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Code, and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers and pledges, in
deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations ("Direct Participants"). DTC is owned by a number of its Direct
Participants and by the New York Stock Exchange, Inc., the American Stock
Exchange, Inc., and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly ("Indirect
Participants"). The rules applicable to DTC and its Participants are on file
with the SEC.
Purchases of Preferred Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements, of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased the Preferred
Securities. Transfers of ownership interests in the Preferred Securities are to
be accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Preferred Securities, except in the event that use
of the book-entry system for the Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities. DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of a series
of Preferred Securities are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such series to be
redeemed.
Although voting with respect to the Preferred Securities is limited, in
those cases where a vote is required, neither DTC nor Cede & Co. will consent or
vote with respect to Preferred Securities. Under its usual procedure, DTC would
mail an Omnibus Proxy to the Partnership as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts the Preferred Securities are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Payments on the Preferred Securities will be made to DTC. DTC's practice is
to credit Direct Participants' accounts on the relevant payment date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payments on such payment date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customer practices and will be the responsibility of such
Participant and not of DTC, the Partnership or PSE&G, subject to any statutory
or regulatory requirements as may be in
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effect from time to time. Payment of distributions to DTC is the responsibility
of the Partnership, disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that PSE&G and the Partnership believe to be
reliable, but neither PSE&G nor the Partnership takes responsibility for the
accuracy thereof.
DTC may discontinue providing its services as securities depository with
respect to any series of the Preferred Securities at any time by giving
reasonable notice to the Partnership. Under such circumstances, in the event
that a successor securities depository is not obtained, certificates
representing such Preferred Securities are required to be printed and delivered.
Additionally, the General Partner may decide to discontinue use of the system of
book-entry transfers through DTC (or a successor depository), including for the
purpose of effectuating a partial redemption of a series of Preferred Securities
in which only the Preferred Securities of certain holders will be redeemed.
In the event that the book-entry-only system is discontinued, the General
Partner will appoint a registrar, transfer agent and paying agent for the
Preferred Securities. Registration of transfers of Preferred Securities will be
effected without charge by or on behalf of the Partnership, but upon payment of
any tax or other governmental charges which may be imposed in relation to it.
The Partnership will not be required to register or cause to be registered the
transfer of Preferred Securities after such Preferred Securities have been
called for redemption.
MISCELLANEOUS
The General Partner is authorized and directed to use its best efforts to
manage the affairs of the Partnership in such a way that the Partnership would
not be deemed to be an "investment company" required to be registered under the
1940 Act or taxed as a corporation for United States federal income tax purposes
and so that the Subordinated Debentures will be treated as indebtedness of PSE&G
for federal income tax purposes. In this connection, the General Partner is
authorized to take any action that is not inconsistent with applicable law, the
Certificate of Limited Partnership of the Partnership or the Limited Partnership
Agreement, that does not materially adversely affect the interests of holders of
Preferred Securities and that the General Partner determines in its discretion
to be necessary or desirable for such purposes.
The Partnership may not borrow money or issue debt or mortgage or pledge any
of its assets.
DESCRIPTION OF THE GUARANTEE
The following is a summary of certain provisions of the Guarantee which will
be executed and delivered by PSE&G concurrently with the issuance of each series
of Preferred Securities offered hereby for the benefit of the holders from time
to time of that series of the Preferred Securities. The summary is subject to,
and qualified by reference to, the Payment and Guarantee Agreement, which is
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part. Reference in the summary to Preferred Securities means the series of the
Preferred Securities to which a Guarantee relates.
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GENERAL
PSE&G will irrevocably and unconditionally agree, to the extent set forth
herein, to pay in full, to the holders of the Preferred Securities, the
Guarantee Payments (as defined below) (except to the extent paid by the
Partnership), as and when due, regardless of any defense, right of set-off or
counterclaim which PSE&G may have or assert against the Partnership. The
following payments, to the extent not paid by the Partnership (the "Guarantee
Payments"), will be subject to the Guarantee (without duplication): (i) any
accumulated and unpaid Dividends on the Preferred Securities to the extent that
the Partnership has funds on hand legally available therefor, (ii) the
redemption price with respect to any Preferred Securities called for redemption
to the extent that the Partnership has funds on hand legally available therefor,
(iii) upon liquidation of the Partnership (unless the Subordinated Debentures
are distributed to holders of the Preferred Securities), the lesser of (a) the
Liquidation Distribution and (b) the amount of assets of the Partnership legally
available for distribution to holders of Preferred Securities, and (iv) any
Additional Amounts payable with respect to a particular series of Preferred
Securities. PSE&G's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by PSE&G to the holders of Preferred
Securities or by causing the Partnership to pay such amounts to such holders.
While the assets of the General Partner will not be available for making
distributions on the Preferred Securities, they will be available for payment of
the expenses of the Partnership. Accordingly, the Guarantee, together with the
related covenants contained in the Limited Partnership Agreement and PSE&G's
obligations under the Indenture and the Subordinated Debentures, provide for
PSE&G's full and unconditional guarantee of the Preferred Securities as set
forth above.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of PSE&G and will rank
subordinate and junior in right of payment to all general liabilities of PSE&G.
The Limited Partnership Agreement provides that each holder of Preferred
Securities by acceptance thereof agrees to the subordination provisions and
other terms of the Guarantee.
The Guarantee related to a series of Preferred Securities will rank pari
passu with all other Guarantees issued by PSE&G in connection with other series
of Preferred Securities.
The Guarantee will constitute a guarantee of payment and not of collection.
The Guarantee will be held for the benefit of the holders of the Preferred
Securities. In the event of the appointment of a Special Representative, the
Special Representative may enforce the Guarantee. The holders of not less than
10% in aggregate stated liquidation preference of the Preferred Securities have
the right to direct the time, method and place of conducting any proceeding to
enforce the Guarantee, including the giving of directions to the General Partner
or the Special Representative, as the case may be. If the General Partner or the
Special Representative fails to enforce the Guarantee, any holder of Preferred
Securities may institute a legal proceeding directly against PSE&G to enforce
its rights under the Guarantee without first instituting a legal proceeding
against the Partnership or any other person or entity. The Guarantee will not be
discharged except by payment of the Guarantee Payments in full to the extent not
paid by the Partnership.
CERTAIN COVENANTS OF PSE&G
Under the Guarantee, PSE&G will covenant that, so long as any Preferred
Securities remain outstanding, 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 (i) during an Extension Period, (ii) if PSE&G shall
be in default with respect to its payment or other obligations under the
Guarantee or (iii) if there shall have occurred and is continuing any event
that, with giving of notice or the lapse of time or both, would constitute an
Event of Default under the Indenture.
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AMENDMENTS
Except with respect to any changes which do not materially adversely affect
the rights of holders of Preferred Securities (in which case no vote will be
required), the Guarantee may be changed only with the prior approval of the
holders of not less than 66 2/3% of the aggregate stated liquidation preference
of the outstanding Preferred Securities. The manner of obtaining any such
approval of holders of the Preferred Securities will be as set forth under
"Description of the Preferred Securities--Voting Rights."
MERGER OF PSE&G
So long as any Preferred Securities remain outstanding, PSE&G will maintain
its corporate existence; provided that PSE&G may 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 if 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 the obligations of PSE&G under the Guarantee.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate and be of no further force and effect upon full
payment of the redemption price of the Preferred Securities or upon full payment
of the amounts payable upon liquidation of the Partnership. The Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any holder of Preferred Securities must restore payment of any sums paid
under the Preferred Securities or the Guarantee.
DESCRIPTION OF THE SUBORDINATED DEBENTURES
The following is a summary of certain terms and provisions of the
Subordinated Debentures and the Indenture. The summary is subject to, and is
qualified by reference to, the Subordinated Debentures and the Indenture, the
forms of which are filed as exhibits to the Registration Statement of which this
Prospectus forms a part.
GENERAL
Concurrently with the issuance of each series of the Preferred Securities,
the Partnership will loan the proceeds thereof and the General Partner's
concurrent investment in the Partnership to PSE&G. The loan will be evidenced by
a separate series of Subordinated Debentures issued by PSE&G to the Partnership.
The Subordinated Debentures will be unsecured subordinated obligations of PSE&G
issued under the Indenture. Each series of Subordinated Debentures will be in
the principal amount equal to the aggregate stated liquidation preference of the
related series of Preferred Securities plus the General Partner's concurrent
investment in the Partnership, will bear interest at a rate equal to the
Dividend rate or manner of calculation thereof on such series of Preferred
Securities payable on the Dividend dates and will rank pari passu with all other
series of Subordinated Debentures.
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 an Event of Default under the Indenture has not occurred and is
continuing, to extend the interest payment period for all Subordinated
Debentures for up to 60 consecutive months; provided that no Extension Period
shall extend beyond the stated maturity date or date of redemption of any series
of Subordinated Debentures. At the end of the Extension Period, PSE&G is
obligated to pay all
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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 of its capital stock. Prior to the termination of
any Extension Period, PSE&G may further extend the interest payment period,
provided that such Extension Period, together with all such previous and further
extensions thereof, may not exceed 60 consecutive months. Upon the termination
of any Extension Period and the payment of all amounts then due, PSE&G may
select a new Extension Period subject to the above requirements. PSE&G is
required to give the trustee and the Partnership, or the holders of the
Subordinated Debentures if the Subordinated Debentures have been distributed to
the holders of the Preferred Securities, notice of its selection of such
extended interest payment period one Business Day prior to the date the
Partnership or PSE&G is required to give notice to any national securities
exchange on which any series of the Preferred Securities or Subordinated
Debentures are listed or other applicable self-regulatory organization or to
holders of the Preferred Securities of the record date or the date such Dividend
or payment of interest on the Subordinated Debentures is payable, but in any
event not less than two Business Days prior to such record date. PSE&G shall
cause the Partnership to give such notice of PSE&G's selection of such extended
interest payment period to the holders of the Preferred Securities.
If during any Extension Period, PSE&G fails to pay dividends upon any shares
of PSE&G's preferred stock for four consecutive quarterly periods, pursuant to
PSE&G's Restated Certificate of Incorporation, as amended, the holders of
PSE&G's preferred stock, voting separately as a single class, are entitled to
elect a majority of PSE&G's Board of Directors. Such voting rights of the
holders of preferred stock to elect directors shall continue until all
accumulated and unpaid dividends thereon have been paid.
ADDITIONAL INTEREST
In connection with the issuance of any series of Preferred Securities, the
Partnership may agree to pay the holders of such series certain additional
amounts ("Additional Amounts") relating to certain tax events or tax treatment
of the Subordinated Debentures or the Partnership. Such Additional Amounts will
be described in the Prospectus Supplement for such series. If at any time the
Partnership shall be required to pay any Additional Amounts in respect of the
Preferred Securities pursuant to the terms thereof, then PSE&G will pay as
interest on the Subordinated Debentures ("Additional Interest") an amount equal
to such Additional Amounts. In addition, if the Partnership would be required to
pay any taxes, duties, assessments or other governmental charges of whatever
nature (other than withholding taxes) imposed by the United States, or any other
taxing authority, PSE&G also will pay as Additional Interest such amounts as
shall be required so that the net amounts received and retained by the
Partnership after paying any such taxes, duties, assessments or governmental
charges will be not less than the amounts the Partnership would have received
had no such taxes, duties, assessments or governmental charges been imposed.
REDEMPTION
If the Partnership redeems any series of the Preferred Securities, in whole
or in part, in accordance with the terms thereof, PSE&G shall redeem
Subordinated Debentures of the corresponding series, in a principal amount equal
to the aggregate stated liquidation preference of the Preferred Securities so
redeemed, at a redemption price equal to 100% of the aggregate principal amount
of such Subordinated Debentures to be redeemed, plus any accrued but unpaid
interest, including Additional Interest, if any. In addition, unless otherwise
provided in the applicable Prospectus Supplement, PSE&G will have the right to
redeem the Subordinated Debentures of any series, in whole or in part, at any
time on or after the first date on which the corresponding series of Preferred
Securities becomes redeemable, and upon such other events as may be specified in
the
14
<PAGE>
applicable Prospectus Supplement, at a redemption price equal to 100% of the
aggregate principal amount of such Subordinated Debentures to be redeemed, plus
any accrued but unpaid interest, including Additional Interest, if any, to the
date fixed for redemption, upon not less than 30 nor more than 60 days' notice.
The Subordinated Debentures shall be subject to mandatory redemption upon
the dissolution and winding up of the Partnership, unless in connection with
such dissolution and winding up, the Subordinated Debentures are distributed to
the holders of the Preferred Securities.
SUBORDINATION
The Indenture provides that all payments by PSE&G in respect of the
Subordinated Debentures shall be subordinated to the prior payment in full of
all amounts payable on Senior Indebtedness. The term "Senior Indebtedness" means
(i) 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; (ii) all capital
lease obligations of PSE&G; (iii) 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);
(iv) certain obligations of PSE&G for the reimbursement of any obligor on 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; (v)
all obligations of the type referred to in clauses (i) through (iv) of other
persons and all dividends of other persons (other than Preferred Securities) for
the payment of which, in either case, PSE&G is responsible or liable as obligor,
guarantor or otherwise; and (vi) all obligations of the type referred to in
clauses (i) through (v) 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 Subordinated Debentures and for indebtedness between or among PSE&G and its
affiliates.
Upon any payment or distribution of assets or securities of PSE&G, 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 Subordinated Debentures or the Trustee on behalf
of the holders shall be entitled to receive from PSE&G any payment of principal
of, premium, if any, or interest on the Subordinated 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 Subordinated Debentures, whether pursuant to
the terms of the Subordinated Debentures or upon acceleration or otherwise,
shall be made if, at the time of such payment, there exists (i) a default in the
payment of all or any portion of any Senior Indebtedness or (ii) any other
default pursuant to which the maturity of Senior Indebtedness has been
accelerated and, in either case, requisite notice has been given to the Trustee
and such default shall not have been cured or waived by or on behalf of the
holders of such Senior Indebtedness.
If the Trustee or the holders of the Subordinated Debentures shall have
received any payment on account of the principal of, premium, if any, or
interest on the Subordinated 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 over or delivered to the holders of the Senior
Indebtedness remaining unpaid to the extent necessary to pay such Senior
Indebtedness in full.
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<PAGE>
Nothing in the Indenture shall limit the right of the Trustee, the Special
Representative or the holders of the Subordinated Debentures to take any action
to accelerate the maturity of the Subordinated Debentures or to pursue any
rights or remedies against PSE&G; provided that all Senior Indebtedness shall be
paid before holders of the Subordinated Debentures are entitled to receive any
payment from PSE&G of principal of or interest on the Subordinated Debentures.
Upon the payment in full of all Senior Indebtedness, the holders of the
Subordinated 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 Subordinated Debentures shall be paid in
full.
The Indenture does not limit the aggregate amount of Senior Indebtedness
which PSE&G may issue.
BOOK-ENTRY SYSTEM IN THE EVENT OF DISTRIBUTION OF SUBORDINATED DEBENTURES
In the event that the Subordinated Debentures are to be distributed to the
holders of the Preferred Securities, it is anticipated that such distribution
would occur in book-entry form and that DTC, or any successor depositary for the
Preferred Securities, would act as depositary for the Subordinated Debentures
and that the depositary arrangements for the Subordinated Debentures would be
substantially identical to those in effect for the Preferred Securities. For a
description of DTC and the terms of the depositary arrangements relating to
payments, transfers, voting rights, redemption and other notices and other
matters, see "Description of the Preferred Securities-- Book-Entry-Only
Issuance--The Depository Trust Company".
Except under certain limited circumstances as described under "Description
of the Preferred Securities--Book-Entry-Only Issuance--The Depository Trust
Company" for delivery of certificates evidencing beneficial ownership in the
Preferred Securities, the Subordinated Debentures would not be issuable as, or
exchangeable for, Subordinated Debentures in definitive certificated form. In
the event that Subordinated Debentures were to be issued in certificated form,
principal and interest on such Subordinated Debentures would be payable at, and
transfers or exchanges of such Subordinated Debentures would be effected at, the
office or agency of PSE&G designated for such purposes. In addition, if the
Subordinated Debentures are issued in certificated form, the record dates for
payment of interest will be the fifteenth day of each month.
CERTAIN COVENANTS OF PSE&G
PSE&G will covenant that may it not declare or pay any dividend on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock (i) during an Extension Period, (ii) if there shall have
occurred and is continuing any event that, with the giving of notice or the
lapse of time or both, would constitute an Event of Default under the Indenture
or (iii) if PSE&G shall be in default with respect to its payment or other
obligations under the Guarantee. PSE&G will covenant under the Indenture that,
in the event that it transfers its general partner interests in the Partnership
to a direct or indirect wholly owned subsidiary, PSE&G will (i) maintain direct
or indirect 100% ownership of the General Partner and cause the General Partner
to maintain 100% ownership of the general partner interests of the Partnership,
(ii) cause the General Partner to at all times maintain a "fair market net
worth" of at least 10% of the total capital contributions (less redemptions) to
the Partnership and to contribute capital equal to at least 3% of the aggregate
capital contributed to the Partnership, (iii) cause the General Partner to
timely perform all of its duties as general partner of the Partnership
(including the duty to pay Dividends on the Preferred Securities to the extent
the Partnership has funds legally available therefor), and (iv) to use its
reasonable efforts to cause the Partnership to remain a limited partnership and
otherwise continue to be treated as a partnership for United States federal
income tax purposes.
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<PAGE>
The Partnership may not waive compliance or waive any default in compliance
by PSE&G with any covenant or other term in the Indenture without the approval
of the Special Representative or without the direction of the holders of 66 2/3%
of the aggregate stated liquidation preference of the Preferred Securities,
provided, however, that a default in the payment of principal of or interest on
the Subordinated Debentures may be waived only with the consent of all of the
holders of the Preferred Securities. In the event that the Subordinated
Debentures are distributed to the holders of the Preferred Securities, any
waiver of compliance or any default in compliance by PSE&G with any covenant or
other term in the Indenture will require the approval of 66 2/3% of the
aggregate principal amount of the Subordinated Debentures, provided, however,
that a default in the payment of principal of or interest on the Subordinated
Debenture may be waived only with the consent of all of the holders of the
Subordinated Debentures.
MODIFICATION OF THE INDENTURE
From time to time, PSE&G and the Trustee, without notice to or the consent
of any holders of the Subordinated Debentures or the Special Representative may
amend or supplement the Indenture or the Subordinated Debentures for any of the
following purposes: (i) to cure any ambiguity, defect or inconsistency; (ii) to
comply with the provisions of the Indenture regarding consolidation, merger or
the sale, conveyance, transfer or lease of the properties as an entirety or
substantially as an entirety of PSE&G; (iii) to provide for uncertificated
Subordinated Debentures in addition to or in place of certificated Subordinated
Debentures; (iv) to make any other change that does not in the reasonable
judgment of PSE&G adversely affect the rights of any holder of the Subordinated
Debentures; (v) to comply with any requirement of the SEC in connection with the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended; or (vi) to set forth the terms and conditions, which shall not be
inconsistent with the Indenture, of each series of Subordinated Debentures
(other than the first series of Subordinated Debentures) and the form of
Subordinated Debentures of such series.
The Indenture contains provisions permitting PSE&G and the Trustee to modify
the Indenture or any supplemental indenture or the rights of the holders of the
Subordinated Debentures issued under the Indenture or to waive future compliance
by PSE&G with the provisions of the Indenture, with the consent of (i) in the
event the Partnership is the sole holder of the Debentures, the Special
Representative, or, if no Special Representative has been appointed, the
Partnership at the direction of the holders of not less than 66 2/3% of the
aggregate stated liquidation preference of the Preferred Securities, or (ii) in
the event that the Subordinated Debentures have been distributed to the holders
of the Preferred Securities, the holders of 66 2/3% of the aggregate principal
amount of the Subordinated Debentures provided that no such modification,
without the consent of (i) each holder of the Preferred Securities, or (ii) each
holder of the Subordinated Debentures in the event the Subordinated Debentures
have been distributed to the holders of the Preferred Securities, may, (a)
reduce the principal of the Subordinated Debentures, (b) reduce the percentage
of principal amount of outstanding Subordinated Debentures of any series, the
consent of holders of which is required for amendment of the Indenture or for
waiver of compliance with certain provisions of the Indenture or for waiver of
certain defaults, (c) change the stated maturity of the principal of, or
premium, if any, or interest on or the rate of interest of, or Additional
Interest with respect to, the Subordinated Debentures, (d) change the obligation
of PSE&G to pay Additional Interest on any Subordinated Debenture, (e) change
redemption provisions applicable to the Subordinated Debentures adversely to the
holders thereof, (f) impair the right to institute suit for the enforcement of
any payment with respect to the Subordinated Debentures, (g) change the currency
in which payments with respect to the Subordinated Debentures are to be made or,
(h) change the subordination provisions applicable to the Subordinated
Debentures adversely to the holders thereof.
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<PAGE>
EVENTS OF DEFAULT
The following are "Events of Default" under the Indenture: (i) default for
10 days in payment of any interest (including Additional Interest) on any
Subordinated Debentures (other than the payment of interest during an Extension
Period); (ii) default in payment of principal of (or premium, if any, on) any
Subordinated Debentures; (iii) default for 60 days after notice in the
performance of any other covenant in the Indenture or (iv) certain events of
bankruptcy, insolvency or reorganization of PSE&G. In case an Event of Default
under the Indenture shall occur and be continuing, other than an Event of
Default relating to bankruptcy, insolvency or reorganization of PSE&G, in which
case the principal of and any interest on all of the Subordinated Debentures
shall become immediately due and payable, the Trustee, the Special
Representative or the holders of not less than 25% in aggregate principal amount
of the Subordinated Debentures may declare the principal of and any interest on
all the Subordinated Debentures to be due and payable. Under certain
circumstances, any declaration of acceleration with respect to Subordinated
Debentures may be rescinded only by (i) in the event the Partnership is the sole
holder of the Debentures, the Special Representative, or, if no Special
Representative has been appointed, the Partnership at the direction of the
holders of 66 2/3% in aggregate stated liquidation preference of Preferred
Securities, or (ii) in the event that the Subordinated Debentures have been
distributed by the Partnership to the holders of the Preferred Securities, by
the vote of holders of 66 2/3% in aggregate principal amount of the Subordinated
Debentures.
PSE&G is required to furnish to the Trustee annually a statement as to the
performance by PSE&G of its obligations under the Indenture and as to any
default in such performance.
ENFORCEMENT OF CERTAIN RIGHTS OF HOLDERS OF PREFERRED SECURITIES
The holders of the Preferred Securities will have the rights referred to
under "Description of Preferred Securities--Voting Rights", including the right
to appoint a Special Representative authorized to exercise the rights of the
Partnership, as the holder of the Subordinated Debentures, to declare the
principal of and any interest on the Subordinated Debentures due and payable
following an Event of Default under the Indenture and to enforce the obligations
of PSE&G under the Subordinated Debentures and the Indenture directly against
PSE&G, without first proceeding against the Partnership or any other person or
entity.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
The Indenture provides that 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 (i)
the successor person shall be organized and existing under the laws of the
United States or any state thereof or the District of Columbia, and shall
expressly assume by a supplemental indenture all of the obligations of PSE&G
under the Subordinated Debentures and the Indenture and (ii) immediately after
giving effect to such transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would become an Event of Default, shall
have occurred and be continuing.
DEFEASANCE AND DISCHARGE
Under the terms of the Indenture, PSE&G will be discharged from any and all
obligations in respect of the Subordinated Debentures of any series if PSE&G
deposits with the Trustee, in trust, (i) cash and/or (ii) 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, and interest
on, the Subordinated Debentures of such series on the dates such payments are
due in accordance with the terms of such Subordinated Debentures.
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<PAGE>
INFORMATION CONCERNING THE TRUSTEE
Subject to the provisions of the Indenture relating to its duties, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request, order or direction of any of the holders of
the Subordinated Debentures, unless such holders shall have offered to the
Trustee reasonable indemnity. Subject to such provision for indemnification, the
Special Representative if one has been appointed or, if no Special
Representative has been appointed, the Partnership, at the direction of the
holders of 66 2/3% of the aggregate stated liquidation preference of the
Preferred Securities or the holders of 66 2/3% in principal amount of the
Subordinated Debentures if the Subordinated Debentures have been distributed to
the holders of the Preferred Securities will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee thereunder, or exercising any trust or power conferred on the Trustee.
The Indenture contains limitations on the right of the 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 Trustee may be deemed to have a conflicting interest
and may be required to resign as Trustee if at the time of default under the
Indenture (i) it is a creditor of PSE&G or (ii) if there is a default under the
Indenture referred to below.
First Fidelity Bank, National Association, is the Trustee under PSE&G's
Indenture dated August 1, 1924, with respect to PSE&G's First and Refunding
Mortgage Bonds. PSE&G also maintains other normal banking relationships with
First Fidelity Bank, National Association.
First Fidelity Bank, National Association, is a subsidiary of First Fidelity
Bancorporation. E. James Ferland, Chairman of the Board and Chief Executive
Officer of PSE&G, is a director of First Fidelity Bancorporation and of First
Fidelity Bank, National Association.
PLAN OF DISTRIBUTION
The Partnership may offer or sell Preferred Securities offered hereby to one
or more underwriters for public offering and sale by them. The Partnership may
sell Preferred Securities as soon as practicable after effectiveness of the
Registration Statement. Any such underwriter involved in the offer and sale of
the Preferred Securities will be named in an applicable Prospectus Supplement.
Underwriters may offer and sell the Preferred Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. In connection with the sale of Preferred Securities,
underwriters may be deemed to have received compensation from PSE&G and/or the
Partnership in the form of underwriting discounts or commissions and may also
receive commissions. Underwriters may sell Preferred Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters.
Any underwriting compensation paid by PSE&G and/or the Partnership 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 applicable 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.
Underwriters and dealers may be entitled, under agreement with PSE&G and the
Partnership, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act, and to
reimbursement by PSE&G for certain expenses.
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<PAGE>
In connection with the offering of any series of Preferred Securities, the
Partnership may grant to the Underwriters an option to purchase additional
Preferred Securities of such series to cover over-allotments, if any, at the
initial public offering price (with an additional underwriting commission), as
may be set forth in the accompanying Prospectus Supplement. If the Partnership
grants any over-allotment option, the terms of such over-allotment option will
be set forth in the Prospectus Supplement for such series of Preferred
Securities.
Underwriters and dealers may engage in transactions with, or perform
services for, PSE&G and/or the Partnership and/or any of their affiliates in the
ordinary course of business.
Each series of Preferred Securities will be a new issue of securities and
will have no established trading market. Any underwriters to whom Preferred
Securities are sold by the Partnership for public offering and sale may make a
market in such Preferred Securities, but such underwriters will not be obligated
to do so and may discontinue any market making at any time without notice. The
Preferred Securities may or may not be listed on a national securities exchange.
No assurance can be given as to the liquidity of or the existence of trading
markets for any Preferred Securities.
LEGAL MATTERS
Certain legal matters will be passed upon for PSE&G and the Partnership by
R. Edwin Selover, Esquire, Senior Vice President and General Counsel of PSE&G or
James T. Foran, Esquire, General Corporate Counsel of PSE&G and by Ballard Spahr
Andrews & Ingersoll, Philadelphia, Pennsylvania, special tax counsel to PSE&G,
and for the underwriters by Brown & Wood, New York, New York, who may rely on
the opinion of Mr. Selover or Mr. Foran as to matters of New Jersey law. R.
Edwin Selover, Esquire or James T. Foran, Esquire and Brown & Wood may rely on
the opinion of Ballard Spahr Andrews & Ingersoll as to matters of Pennsylvania
law.
EXPERTS
The consolidated financial statements and schedules of PSE&G incorporated by
reference in this Prospectus have been audited by Deloitte & Touche, independent
auditors, for the periods indicated in their report thereon which is included in
the Annual Report on Form 10-K for the year ended December 31, 1993. The
consolidated financial statements and schedules audited by Deloitte & Touche
have been incorporated herein by reference in reliance on their report given on
their authority as experts in accounting and auditing.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS OR AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR THEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH INFORMATION.
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TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUPPLEMENT
Certain Investment Considerations........ S-3
The Partnership.......................... S-4
Public Service Electric and
Gas Company............................ S-4
Coverage Ratios.......................... S-5
Use of Proceeds.......................... S-5
Certain Terms of the Series A
Preferred Securities................... S-6
Certain Terms of the Series A
Subordinated Debentures................ S-8
United States Taxation................... S-9
Underwriting............................. S-12
PROSPECTUS
Statement of Available Information....... 2
Incorporation of Certain Documents
by Reference........................... 2
The Partnership.......................... 3
Public Service Electric and
Gas Company............................ 3
Use of Proceeds.......................... 4
Description of the Preferred
Securities............................... 4
Description of the Guarantee............. 11
Description of the Subordinated
Debentures............................... 13
Plan of Distribution..................... 19
Legal Matters............................ 20
Experts.................................. 20
6,000,000
PREFERRED SECURITIES
PUBLIC SERVICE
ELECTRIC AND GAS
CAPITAL
9 3/8% CUMULATIVE
MONTHLY INCOME PREFERRED
SECURITIES, SERIES A
GUARANTEED TO THE EXTENT THE
ISSUER HAS FUNDS AS SET FORTH
HEREIN BY
PUBLIC SERVICE
ELECTRIC AND GAS
COMPANY
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("PSE&G" LOGO)
-------------------
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
DEAN WITTER REYNOLDS INC.
MERRILL LYNCH & CO.
MORGAN STANLEY & CO. INCORPORATED
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SMITH BARNEY INC.
REPRESENTATIVES OF THE UNDERWRITERS
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