<PAGE>
As filed with the Securities and Exchange Commission on November , 1994
Registration Nos. 33-55821 & 33-55821-01
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
AMENDMENT NO. 2 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
__________________
Public Service Electric and Gas Public Service Electric and Gas
Company Capital, L.P.
(Exact name of registrant (Exact name of registrant as specified
as specified in charter) in Limited Partnership Agreement)
New Jersey New Jersey
(State or other jurisdiction of incorporation or organization)
22-1212800 22-3325834
(I.R.S. Employer Identification No.)
80 Park Plaza 80 Park Plaza
P. O. Box 570 P. O. Box 570
Newark, New Jersey 07101 Newark, New Jersey 07101
(201) 430-7000 (201) 430-7000
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
Robert C. Murray c/o Robert C. Murray
Senior Vice President-Finance Senior Vice President-Finance
and Chief Financial Officer and Chief Financial Officer
80 Park Plaza, T4B 80 Park Plaza, T4B
P. O. Box 570 P. O. Box 570
Newark, New Jersey 07101 Newark, New Jersey 07101
(201) 430-5630 (201) 430-5630
(Name, address, including zip code, and telephone number, including area code,
of agents for service)
with copies to:
James T. Foran, Esquire Howard G. Godwin, Jr., Esquire
General Corporate Counsel Brown & Wood
80 Park Plaza, T5B One World Trade Center
P.O. Box 570 New York, NY 10048
Newark, New Jersey 07101
<PAGE>
Approximate date of commencement of proposed sale to the public: After
the Registration Statement becomes effective, as determined by market
conditions and other factors.
____________________
If the only securities being registered on this Form are being offered
pursuant to dividendor interest reinvestment plans, please check the following
box.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box.
- ---
x
- ---
____________________
<PAGE>
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
SUBJECT TO COMPLETION, DATED ______ , 1994
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED , 1994
____________________ Preferred Securities
PUBLIC SERVICE ELECTRIC AND GAS CAPITAL
_____% Cumulative Monthly Income Preferred Securities (MIPS*), Series A
(liquidation preference $25 per Preferred Security) guaranteed to the
the extent the issuer has funds as set forth herein by
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
_________________________
The % 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.
Holders of the Series A Preferred Securities will be entitled to receive
cumulative preferential cash distributions ("Dividends") at an annual rate of
% 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 _______, 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 __% 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 June 30,
1994, the Senior Indebtedness of PSE&G aggregated approximately $5.624 billion.
<PAGE>
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
_______________, 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.
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.
Application has been made to list the Series A Preferred Securities 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.
Initial Public Underwriting Proceeds to the
Offering Price Commission (1) Partnership
-------------- ------------- ---------------
Per Series A
Preferred
Security... $ (2) $
Total.......$ (2) $
_______________________
(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.
<PAGE>
(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 $ per Series A Preferred Security (or $ in
the aggregate); provided that such compensation will be $ per Series
A Preferred Security sold to certain institutions. Therefore, to the extent
that Series A Preferred Securities are sold to such institutions, the actual
amount of Underwriters' compensation will be less than the amount specified
above. 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 , 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 , 1994.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES
APREFERRED 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.
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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 _____% 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
June 30, 1994, the Senior Indebtedness of PSE&G aggregated approximately $5.624
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
notoccurred 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
<PAGE>
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 _____% 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 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 , 1994 (the "Indenture") between
<PAGE>
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 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:
12 Months Ended
Years Ended December 31, June 30, 1994
1989 1990 1991 1992 1993
- ---------------------------------------------- ---------------
3.21 3.10 3.20 2.70 3.30 3.49
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.
<PAGE>
PSE&G's Ratio of Earnings to Fixed Charges plus Preferred Stock
Dividend Requirements for each of the periods indicated is as follows:
12 Months Ended
Years Ended December 31, June 30, 1994
1989 1990 1991 1992 1993
- ----------------------------------------------- ---------------
2.88 2.79 2.86 2.43 2.89 3.03
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.
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
____% 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 ,
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
otherseries 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 ___% thereof. In
the event that PSE&G exercises its right to extend the interest payment period
<PAGE>
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 , 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.
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.
<PAGE>
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
<PAGE>
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.
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.
<PAGE>
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 $________ 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 __________, 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 __________, 2043.
The Series A Subordinated Debentures will rank junior and be
subordinatein right of payment to all Senior Indebtedness of PSE&G. See
"Description of the Subordinated Debentures Subordination" in the accompanying
Prospectus.
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.
<PAGE>
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.
<PAGE>
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,
providedthat 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.
<PAGE>
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
paymentperiod 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 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
<PAGE>
(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 of31% 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
brokerwill 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.
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
<PAGE>
the Partnership the respective number of Series A Preferred Securities set
forth opposite its name below:
Number of Series A
Underwriter Preferred Securities
-----------
Goldman, Sachs & Co. . . . . . . . . .
Bear, Stearns & Co. Inc. . . . . . . .
Dean Witter Reynolds Inc.. . . . . . .
Morgan Stanley & Co. Incorporated. . .
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................
PaineWebber Incorporated . . . . . . .
Prudential Securities Incorporated . .
Smith Barney Inc.. . . . . . . . . . .
_________________
Total
=================
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
inpart directly to the public at the initial public offering price set forth on
the cover page of this Prospectus Supplement, and in part to certain securities
dealers at such price less a concession of $______ per Series A Preferred
Security. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $_____ 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&Ghas agreed to pay to the Underwriters $______ per Series A Preferred
Security ($_____ per Series A Preferred Security sold to certain institutions)
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
theSeries 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 ct of 1933, as amended.
<PAGE>
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.
<PAGE>
SUBJECT TO COMPLETION, DATED , 1994
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 , 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.
<PAGE>
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.
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 ______, 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.
<PAGE>
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.
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
<PAGE>
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 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."
<PAGE>
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.
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.
<PAGE>
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
<PAGE>
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
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.
<PAGE>
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.
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
<PAGE>
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.
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 any default under 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.
<PAGE>
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 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
<PAGE>
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 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.
<PAGE>
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.
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
<PAGE>
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 the Partnership may have or assert. 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.
<PAGE>
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.
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.
<PAGE>
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 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 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.
<PAGE>
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 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
<PAGE>
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.
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.
<PAGE>
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
<PAGE>
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.
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,
<PAGE>
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.
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
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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.
<PAGE>
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.
_______________
TABLE OF CONTENTS
- Page-
----
Prospectus Supplement
Certain Investment
Considerations . . . . .
The Partnership. . . . .
Public Service Electric and
Gas Company. . . . . .
Coverage Ratios .. . . .
Certain Terms of the Series A
Preferred Securities .
Certain Terms of the Series A
Subordinated Debentures. .
United States Taxation .
Underwriting . . . . . .
Prospectus
Statement of Available
Information. . . . . . .
Incorporation of Certain Documents
by Reference . . . . .
The Partnership. . . . .
Public Service Electric and
Gas Company. . . . . .
Use of Proceeds. . . . .
Description of the Preferred
Securities . . . . . . .
Description of the Guarantee
Description of the Subordinated
Debentures
Plan of Distribution
Legal Matters
Experts
Preferred Securities
Public Service
Electric and
Gas Capital
% 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
________________
PROSPECTUS SUPPLEMENT
____________________
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
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.*
Filing fees - Securities and Exchange
Commission . . . . . . . . . . . . . . . . $ 42,000
Printing . . . . . . . . . . . . . . . . . . . 16,000
New York Stock Exchange listing fee. . . . . . 51,650
Legal fees and Blue Sky fees and expenses. . .125,000
Accounting fees. . . . . . . . . . . . . . . . 30,000
Transfer Agent and Registrar . . . . . . . . . 10,000
Indenture Trustee fees and expenses. . . . . . 15,000
Rating agencies fees and expenses. . . . . . .120,000
Miscellaneous. . . . . . . . . . . . . . . . . 35,415
-------
Total . . . . . . . . . . . . . . . . . $445,065
========
* Estimated
Item 15. Indemnification of Directors and Officers.
Under Section 14A:3-5 of the New Jersey Business Corporation Act, PSE&G
(1) has power to indemnify each director and officer of PSE&G
(as well as its employees and agents) against expenses and liabilities in
connection with any proceeding involving him by reason of his being or
having been such director or officer, other than a proceeding by or in the
right of PSE&G, if (a) such director of officer acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best
interest of PSE&G, and (b) with respect to any criminal proceeding, such
director or officer had no reasonable cause to believe his conduct was
unlawful;
(2) has power to indemnify each director and officer of PSE&G
against expenses in connection with any proceeding by or in the right of
PSE&G to procure a judgment in its favor which involves such director or
officer by reason of his being or having been such director or officer, if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interest of PSE&G; however, in such proceeding no
indemnification may be provided in respect to any claim, issue or matter
as to which such director or officer shall have been adjudged to be liable
to PSE&G, unless and only to the extent that the court determines that the
director or officer is fairly and reasonably entitled to indemnity for
such expenses as the court shall deem proper;
(3) must indemnify each director and officer against expenses to
the extent that he has been successful on the merits or otherwise in any
proceeding referred to in (1) and (2) above or in defense of any claim,
issue or matter therein; and
<PAGE>
(4) has power to purchase and maintain insurance on behalf of a
director or officer against any expenses incurred in any proceeding and
any liabilities asserted against him by reason of his being or having been
a director or officer, whether or not PSE&G would have the power to
indemnify him against such expenses and liabilities under the statute.
As used in the statute, "expenses" means reasonable costs, disbursements
and counsel fees, "liabilities" means amounts paid or incurred in satisfaction
of settlements, judgments, fines and penalties, and "proceedings" means any
pending, threatened or completed civil, criminal, administrative or arbitrative
action, suit or proceeding, and any appeal therein and any inquiry or
investigation which could lead to such action, suit or proceeding.
Indemnification may be awarded by a court under (1) or (2) as well as under
(3) above, notwithstanding a prior determination by PSE&G that the director or
officer has not met the applicable standard of conduct.
Indemnification under the statute does not exclude any other rights to
which a director or officer may be entitled under a certificate of
incorporation, by-law, or otherwise.
Subdivision 1 of Article VI of PSE&G's Restated Certificate of
Incorporation, as amended, provides as follows:
1. Indemnification of Directors, Officers and
Employees:
The corporation shall indemnify to the full extent from time to
time permitted by law any person made, or threatened to be made, a party to any
pending, threatened or completed civil, criminal, administrative or arbitrative
action, suit or proceeding and any appeal therein (and any inquiry or
investigation which could lead to such action, suit or proceeding) by reason of
the fact that he is or was a director, officer or employee of the corporation
or serves or served any other enterprise as a director, officer or employee at
the request of the corporation. Such right of indemnification shall inure to
the benefit of the legal representative of any such person.
Subdivision 5 of Article VI of PSE&G's Restated Certificate of
Incorporation, as amended, provides as follows:
5. Limitation of Liability:
To the full extent from time to time permitted by law, directors
and officers of the corporation shall not be personally liable to the
corporation or its shareholders for damages for breach of any duty owed to the
corporation or its shareholders. No amendment or repeal of this provision
shall adversely affect any right or protection of a director or officer of the
corporation existing at the time of such amendment or repeal.
<PAGE>
The directors and officers of PSE&G are insured under policies of
insurance, within the limits and subject to the limitations of the policies,
against claims made against them for acts in the discharge of their duties, and
PSE&G is insured to the extent that it is required or permitted by law to
indemnify the directors and officers for such loss. The premiums for such
insurance are paid by PSE&G.
Pursuant to the Limited Partnership Agreement, to the fullest extent
permitted by applicable law, the Partnership shall indemnify and hold harmless
the General Partner or any Special Representative, any affiliate of the General
Partner or any Special Representative or any officers, directors, shareholders,
partners, employees, representatives or agents of the General Partner or any
Special Representative, or any employee or agent of the Partnership or its
affiliates (each, an "Indemnified Person") from and against any loss, damage or
claim incurred by such Indemnified Person by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Partnership and in a manner reasonably believed to be within the scope of
authority conferred on such Indemnified Person by the Limited Partnership
Agreement, except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim incurred by such
Indemnified Person by reason of gross negligence, willful misconduct or fraud
with respect to such acts or omissions; provided, however, that any such
indemnity shall be provided out of and to the extent of the Partnership's
assets only, and no General Partner or limited partner (collectively,
"Partners"), any affiliate of a Partner or any officers, directors,
shareholders, partners, employees, representatives or agents of a Partner or
its respective affiliates, or any employee or agent of the Partnership or its
affiliates or any Special Representative shall have any personal liability on
account thereof. To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by an Indemnified Person in defending any
claim, demand, action, suit or proceeding shall, from time to time, be advanced
by the Partnership prior to the final disposition of such claim, demand,
action, suit or proceeding pursuant to an undertaking by or on behalf of the
Indemnified Person to repay such amount if it shall be determined that the
Indemnified Person is not entitled to be indemnified.
<PAGE>
Item 16. Exhibits
Exhibit
Numbers
1 * Form of Underwriting Agreement.
3-1 *Certificate of Limited Partnership for the Partnership.
3-2 *Form of Action of the General Partner.
3-3 *Limited Partnership Agreement of Public Service Electric and Gas Capital,
L.P.
3-4 *Form of Amended and Restated Limited Partnership Agreement of Public
Service Electric and Gas Capital, L.P.
4-1 *Form of Preferred Security Certificate (included in Exhibit 3-4).
4-2 *Form of Deferrable Interest Subordinated Debenture (included in Exhibit
4-3).
4-3 *Form of Deferrable Interest Subordinated Debenture Indenture.
4-4 *Form of Deferrable Interest Subordinated Debenture Supplemental Indenture.
4-5 *Form of Payment and Guarantee Agreement.
5 *Opinion of James T. Foran, Esquire relating to the legality of the
Preferred Securities, Subordinated Debentures and Guarantees, including
consent.
8 *Opinion of Ballard Spahr Andrews & Ingersoll as to tax matters and certain
matters of Pennsylvania law.
12-1 *Computations of PSE&G's Ratio of Earnings to Fixed Charges (incorporated
by reference to Exhibit 12-1 of PSE&G's 1993 Report on Form 10-K and
PSE&G's Quarterly Report on Form 10-Q for the period ended June 30, 1994).
12-2 *Computations of PSE&G Ratio of Earnings to Combined Fixed Charges plus
Preferred Stock Dividend Requirements (incorporated by reference to
Exhibit 12-2 of PSE&G's 1993 Report on Form 10-K and PSE&G's Quarterly
Report on Form 10-Q for the period ended June 30, 1994).
23-1 *Consent of Independent Accountants.
23-2 *Consent of James T. Foran, Esquire (included in Exhibit 5).
23-3 *Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 8).
24 *Power of Attorney.
<PAGE>
25 *Statement of Eligibility under the Trust Indenture Act of 1939 of First
Fidelity Bank, National Association, designated to act as Trustee.
27 *Financial Data Schedule
- ----------------------------
*Previously filed
Item 17. Undertakings
A. To Update Annually
The Registrants hereby undertake (1) to file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement: (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the registration statement; and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement; provided, however, that paragraphs (1)(i) and (1)(ii)
do not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by PSE&G
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement; (2) that for
the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof; and (3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. Incorporation by Reference
The Registrants hereby undertake that, for purposes of determining any
liability under the Securities Act of 1933, each filing of PSE&G's annual
report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934 that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
C. Indemnification
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrants, the Registrants have been advised that in the
opinion of the SEC such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrants of expenses incurred or paid by a director, officer
or controlling person of the Registrants in the successful defense of any
<PAGE>
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrants will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
D. Equity Offerings of Nonreporting Registrants
The Partnership hereby undertakes to provide to the underwriter at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Public Service Electric and Gas Capital, L.P., certifies that it
hasreasonable grounds to believe it meets all of the requirements for filing on
Form S-3 and has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Newark,
State of New Jersey, on this 8th day of November, 1994.
Public Service Electric and Gas Capital, L.P.
By: Public Service Electric and Gas Company,
its general partner
By /s/ Robert C. Murray
----------------------------------------
Robert C. Murray, Senior Vice President
- Finance and Chief Financial Officer
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant, Public Service Electric and Gas Company, certifies that it has
reasonable grounds to believe it meets all of the requirements for filing on
Form S-3 and has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Newark,
State of New Jersey, on the 8th day of November, 1994.
Public Service Electric and Gas Company
By /s/ Robert C. Murray
-----------------------------------
Robert C. Murray, Senior Vice President
- Finance and Chief Financial Officer
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated.
Signature Title Date
*
---------------- Chairman of the Board and November 8, 1994
E. James Ferland Chief Executive Officer
and Director
(Principal Executive Officer)
*
----------------- President and Chief Operating November 8, 1994
Lawrence R. Codey Officer and Director
*
---------------- Senior Vice President-Finance November 8, 1994
Robert C. Murray and Chief Financial Officer
(Principal Financial Officer)
*
---------------- Vice President and Controller November 8, 1994
Patricia A. Rado (Principal Accounting Officer)
*
-------------------- Director November 8, 1994
Raymond V. Gilmartin
*
------------------ Director November 8, 1994
Shirley A. Jackson
*
------------ Director November 8, 1994
Irwin Lerner
*
--------------- Director November 8, 1994
James C. Pitney
*By /s/Robert C. Murray
-------------------
Robert C. Murray
Attorney-in-Fact
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus supplement shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
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