As filed with the Securities and Exchange Commission on June 11, 1996
Registration No. 333-2763
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
Amendment No. 2
to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
___________________
PSE&G Capital Trust I Public Service Electric and Gas
PSE&G Capital Trust II Company
PSE&G Capital Trust III (Exact name of registrant as specified
(Exact name of registrants as in charter)
specified in Trust Agreements)
Delaware
New Jersey
(State or other jurisdiction of incorporation or organization)
22-6691381 22-1212800
22-6691382
22-6691384
(I.R.S. Employer Identification No.)
80 Park Plaza
P.O. Box 570
Newark, New Jersey 07101
(201) 430-7000
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
Robert C. Murray
Senior Vice President
and Chief Financial Officer
80 Park Plaza, T4B
P.O. Box 570
Newark, New Jersey 07101
(201) 430-5630
(Name, address, including zip code, and telephone number, including area
code, of agent for service for each registrant)
with copies to:
James T. Foran, Esquire Howard G. Godwin, Jr., Esquire
General Corporate Counsel Brown & Wood
80 Park Plaza, T5B One World Trade Center
P.O. Box 570 New York, New York 10048
Newark, New Jersey 07101
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 dividend or interest reinvestment plans, please check the
following box.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, other than securities offered only in connection with dividend
or interest reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering.
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box.
___________________
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The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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SUBJECT TO COMPLETION, DATED JUNE 11, 1996
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE __, 1996
__________ Preferred Securities
PSE&G Capital Trust I
_____% Cumulative Quarterly Income Preferred Securities (QUIPS(SM)),* Series A
(LIQUIDATION AMOUNT $25 PER PREFERRED SECURITY)
GUARANTEED TO THE EXTENT PSE&G CAPITAL TRUST I
HAS AVAILABLE FUNDS AS SET FORTH HEREIN BY
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
_________________________________
The _____% Cumulative Quarterly Income Preferred Securities, Series A
(the "Series A Preferred Securities") offered hereby represent undivided
beneficial interests in the assets of PSE&G Capital Trust I, a statutory
business trust created under the laws of the State of Delaware (the "Series
A Issuer"). Public Service Electric and Gas Company ("PSE&G") is the owner
of the beneficial interests
(continued on next page)
See "Risk Factors" commencing on page S-3 for certain information
relevant to an investment in the Series A Preferred Securities, including
the period during which and circumstances under which payments of
Distributions on the Series A Preferred Securities may be deferred and the
related Federal income tax consequences.
Application will be made to list the Series A Preferred Securities on
the New York Stock Exchange. If approved for listing, trading of the
Series A Preferred Securities is expected to commence within a 30-day
period after the initial delivery thereof.
_________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
_________________________________
Proceeds to
Initial Public Underwriting the Series
Offering Price Commission(1) A Issuer(2)(3)
--------------- --------------- --------------
Per Series A Preferred $25.00 (2) $25.00
Security . . . . . . . . .
Total . . . . . . . . . . . $_________ (2) $_________
_______________________
(1) PSE&G and the Series A Issuer have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Underwriting."
(2) In view of the fact that the proceeds of the sale of the Series A
Preferred Securities will be used to purchase the Series A Debentures,
under the Underwriting Agreement, PSE&G will pay to the Underwriters
$__________ per Series A Preferred Security (or $__________ in the
aggregate). See "Underwriting."
(3) Expenses of the offering, which are payable by PSE&G, are estimated to
be $550,000.
_________________________________
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 in book-entry-only form through the facilities of DTC in New York, New York
on or about June____, 1996 against payment therefor in immediately available
funds.
_______________________
*QUIPS is a service mark of Goldman, Sachs & Co.
Goldman, Sachs & Co.
Dean Witter Reynolds Inc.
Lehman Brothers
Merrill Lynch & Co.
Morgan Stanley & Co.
Incorporated
PaineWebber Incorporated
Prudential Securities Incorporated
Smith Barney Inc.
---------------
The date of this Prospectus Supplement is June __, 1996.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
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(continued from previous page)
represented by the common securities of the Series A Issuer (the "Common
Securities"). First Union National Bank is the Property Trustee of the
Series A Issuer (the "Property Trustee"). The Series A Issuer exists for
the sole purpose of issuing beneficial interests in the assets of the
Series A Issuer and investing the proceeds thereof in _____% Deferrable
Interest Subordinated Debentures, Series A to be issued by PSE&G (the
"Series A Debentures"). The Series A Preferred Securities have a
preference over the Common Securities under certain circumstances with
respect to cash distributions and amounts payable on redemption or
liquidation. See "Description of the Preferred Securities - Subordination
of Common Securities" in the accompanying Prospectus.
Holders of the Series A Preferred Securities are entitled to receive
cumulative cash distributions ("Distributions") at an annual rate of _____%
of the liquidation amount of $25 per Series A Preferred Security,
accumulating from the date of original issuance and payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year,
commencing June 30, 1996. So long as no Debenture Event of Default has
occurred and is continuing, PSE&G has the right to defer payments of
interest on the Series A Debentures by extending the interest payment
period in respect thereof for up to 20 consecutive quarters (each, an
"Extension Period"), but not beyond the maturity or any redemption date of
the Series A Debentures. See "Certain Terms of the Series A Preferred
Securities--Distributions" herein and "Description of the Debentures--Option
to Extend Interest Payment Period" in the accompanying Prospectus. If and
for so long as interest payments are deferred, Distributions on the
Series A Preferred Securities will also be deferred. During an Extension
Period, Distributions will continue to accumulate and owners of Series A
Preferred Securities will be required to accrue interest income for Federal
income tax purposes. See "United States Taxation--Potential Extension of
Interest Payment Period and Original Issue Discount."
PSE&G has, through the Series A Guarantee, the Trust Agreement, the
Indenture and the Series A Debentures, taken together, fully, irrevocably
and unconditionally guaranteed all of the Series A Issuer's obligations
under the Series A Preferred Securities. Under the Series A Guarantee,
PSE&G agrees to make payments of Distributions and payments on redemption
or liquidation with respect to the Series A Preferred Securities, but only
to the extent that the Series A Issuer holds funds available therefor and
has not made such payments. See "Description of the Guarantee" in the
accompanying Prospectus. If PSE&G fails to make a payment on the Series A
Debentures, the Series A Issuer will not have sufficient funds to make the
related payment, including Distributions, on the Series A Preferred
Securities. The Series A Guarantee does not cover any such payment when
the Series A Issuer does not have sufficient funds available therefor. In
such event, the Property Trustee or holders of the Series A Preferred
Securities may enforce the rights of the Series A Issuer under the Series A
Debentures. See "Description of the Guarantee -Guarantee Events of
Default" in the accompanying Prospectus.
The obligations of PSE&G under the Series A Guarantee are subordinate
and junior in right of payment to all general liabilities of PSE&G, and the
obligations of PSE&G under the Series A Debentures are subordinate and
junior in right of payment to all present and future Senior Indebtedness of
PSE&G (as defined in the companying Prospectus). At March 31, 1996, the Senior
Indebtedness of PSE&G aggregated approximately $5.315 billion.
The Series A Preferred Securities are subject to mandatory redemption
upon payment of the Series A Debentures at maturity on June __, 2045, or
upon earlier redemption. See "Certain Terms of the Series A Preferred
Securities--Redemption." PSE&G has the option at any time on or after June
___, 2001 to redeem, in whole or in part, the Series A Debentures. In
addition, the Series A Debentures are subject to redemption, in whole but
not in part, at the option of PSE&G upon the occurrence of certain special
events described under "Certain Terms of the Series A Preferred
Securities--Special Event Redemption."
PSE&G has the right, at any time, subject to certain conditions, to
terminate the Series A Issuer and cause the Series A Debentures to be
distributed to the holders of the Series A Preferred Securities and the
Common Securities. See "Certain Terms of the Series A Preferred
Securities--Distribution of Series A Debentures." If the Series A
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 termination and liquidation of the Series A
Issuer, holders of Series A Preferred Securities will be entitled to
receive a liquidation amount of $25 per Series A Preferred Security plus
accumulated and unpaid Distributions to the date of payment, unless, in
connection therewith, the Series A Debentures are distributed to the
holders of the Series A Preferred Securities and the Common Securities.
See "Description of the Preferred Securities--Liquidation Distribution Upon
Termination" in the accompanying Prospectus.
The Series A Preferred Securities are represented by global securities
registered in the name of The Depository Trust Company ("DTC") or its
nominee. Beneficial interests in the Series A Preferred Securities will be
shown on, and transfers thereof will be effected only through, records
maintained by participants in DTC. Except as described in the accompanying
Prospectus, Series A Preferred Securities in certificated form will not be
issued in exchange for the global securities. See "Description of the
Preferred Securities -- Book-Entry-Only Issuance -- The Depository Trust
Company" in the accompanying Prospectus.
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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 and not defined herein has
the meaning set forth in the accompanying Prospectus.
RISK FACTORS
Prospective purchasers of 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:
Ranking of Subordinated Obligations under the Series A Guarantee and the Series
A Debentures
The obligations of Public Service Electric and Gas Company ("PSE&G") under
the Guarantee issued by PSE&G (the "Series A Guarantee") for the benefit of the
holders of the _____% Cumulative Quarterly Income Preferred Securities, Series A
(the "Series A Preferred Securities") issued by PSE&G Capital Trust I (the
"Series A Issuer") are unsecured and rank subordinate and junior in right of
payment to all general liabilities of PSE&G. The obligations of PSE&G under its
_____% Deferrable Interest Subordinated Debentures, Series A (the "Series A
Debentures") issued pursuant to the Indenture dated as of June 1, 1996 (as
amended and supplemented from time to time, the "Indenture") between PSE&G and
First Union National Bank, as trustee (the "Debenture Trustee"), are unsecured
and rank subordinate and junior in right of payment to all Senior Indebtedness
of PSE&G. At March 31, 1996, the Senior Indebtedness of PSE&G aggregated
approximately $5.315 billion. No terms of the Series A Preferred Securities,
the Series A Debentures or the Series A Guarantee limit PSE&G's ability to incur
additional indebtedness, including indebtedness that ranks senior to the
Series A Debentures and the Series A Guarantee. See "Description of the
Guarantee--Status of the Guarantee" and "Description of the
Debentures--Subordination" in the accompanying Prospectus.
The ability of the Series A Issuer to pay cash distributions
("Distributions") on the Series A Preferred Securities and the redemption price
or liquidation amount of the Series A Preferred Securities is solely dependent
upon PSE&G making the related payments on the Series A Debentures when due.
Option to Extend Interest Payment Period; Tax Consequences
So long as no event of default with respect to the Series A Debentures (a
"Debenture Event of Default") under the Indenture has occurred and is
continuing, PSE&G has the right at any time and from time to time to defer
payments of interest on the Series A Debentures by extending the interest
payment period on the Series A Debentures for up to 20 consecutive quarters
(each, an "Extension Period"), but not beyond the maturity or any redemption
date of the Series A Debentures. As a consequence, Distributions on the
Series A Preferred Securities would be deferred by the Series A Issuer during
any Extension Period (but the amount of Distributions to which holders of the
Series A Preferred Securities would be entitled would continue to accumulate at
the rate of _____% per annum, compounded quarterly). During any Extension
Period, PSE&G may not declare or pay any dividend on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any shares of PSE&G's
capital stock. Prior to the termination of any Extension Period, PSE&G may
shorten or further extend the interest payment period on the Series A
Debentures, provided that such Extension Period, together with all such previous
and further extensions thereof, may not exceed 20 consecutive quarters or extend
beyond the maturity or any redemption date of the Series A Debentures. Upon the
termination of any Extension Period and the payment of all amounts then due,
PSE&G may elect to begin a new Extension Period, subject to the above
requirements. See "Certain Terms of the Series A Preferred
S-3
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Securities--Distributions" herein and "Description of the Debentures--Option to
Extend Interest Payment Period" in the accompanying Prospectus.
Should an Extension Period occur, an owner of Series A Preferred Securities
(which represent undivided beneficial interests in the Series A Debentures) will
continue to accrue interest income for Federal income tax purposes in respect of
its pro rata share of the Series A Debentures held by the Series A Issuer. As a
result, an owner of Series A Preferred Securities will include such interest in
gross income for Federal income tax purposes in advance of the receipt of cash
and will not receive the cash related to such income from the Series A Issuer if
such owner disposes of the Series A Preferred Securities prior to the record
date for the payment of Distributions following such Extension Period. See
"United States Taxation--Potential Extension of Interest Payment Period and
Original Issue Discount."
PSE&G has no current intention of exercising its right to defer payments of
interest by extending the interest payment period on the Series A Debentures.
However, should PSE&G exercise such right in the future, the market price of the
Series A Preferred Securities is likely to be affected. An owner who disposes
of Series A Preferred Securities during an Extension Period might not receive
the same return on investment as an owner who continues to hold Series A
Preferred Securities. In addition, as a result of the mere existence of PSE&G's
right to defer interest payments on the Series A Debentures, the market price of
the Series A Preferred Securities may be more volatile than other securities on
which original issue discount accrues that are not subject to such deferrals.
Trading Characteristics of the Series A Preferred Securities; Tax Consequences
The Series A Preferred Securities may trade at a price that does not fully
reflect the value of accrued but unpaid interest with respect to the Series A
Debentures. An owner of Series A Preferred Securities who disposes of Series A
Preferred Securities prior to the record date for the payment of Distributions
will nevertheless be required to include accrued but unpaid interest on the
Series A Debentures through the date of disposition in income as ordinary income
and to add such amount to its adjusted tax basis of the Series A Preferred
Securities so disposed. Such owner will recognize a capital loss to the extent
the selling price (which may not fully reflect the value of accrued but unpaid
interest) is less than its adjusted tax basis (which will include accrued but
unpaid interest). Subject to certain limited exceptions, capital losses cannot
be applied to offset ordinary income for Federal income tax purposes. See
"United States Taxation."
Special Event Redemption and Proposed Federal Income Tax Law Changes
Upon the occurrence and continuation of a Tax Event or an Investment
Company Event (each as defined in "Certain Terms of the Series A Preferred
Securities--Special Event Redemption"), PSE&G has the right to redeem the Series
A Debentures, in whole but not in part, and therefore cause a mandatory
redemption of the Series A Preferred Securities and common securities of the
Series A Issuer (the "Common Securities" and, together with the Series A
Preferred Securities, the "Trust Securities"), at a redemption price equal to
the liquidation amount plus accumulated and unpaid Distributions, within 90 days
following the occurrence of such Tax Event or Investment Company Event.
On December 7, 1995, President Clinton proposed certain tax law changes
that would, among other things, generally deny interest deductions to corporate
issuers if the debt instrument has a term exceeding 20 years and is not
reflected as indebtedness on such issuer's consolidated balance sheet. Because
the term of the Series A Debentures exceeds 20 years, this proposal, were it to
become effective, would prevent PSE&G from deducting interest on the Series A
Debentures. However, on March 29, 1996, the Chairmen of the Senate Finance
Committee and the House Ways and Means Committee issued
S-4
<PAGE>
a joint statement to the effect that it was their intention that the effective
date of the President's legislative proposals, if adopted, will be no earlier
than the date of appropriate Congressional action. In the opinion of special
tax counsel to PSE&G and the Series A Issuer, under current law, interest on the
Series A Debentures is deductible. There can be no assurance, however, that
such proposals, subsequent proposals or final legislation will not affect the
ability of PSE&G to deduct interest on the Series A Debentures which, in turn,
could give rise to a Tax Event and, accordingly, PSE&G's optional right to
redeem the Series A Debentures, as described under "Certain Terms of the Series
A Preferred Securities--Special Event Redemption."
Distribution of Series A Debentures; Possible Adverse Effect on Market Price
At any time, PSE&G may, in its sole discretion, terminate the Series A
Issuer and cause the Series A Debentures to be distributed to the holders of the
Trust Securities, provided that PSE&G shall have delivered to the Issuer
Trustees (as defined herein) an opinion of nationally recognized tax counsel
(which may be regular tax counsel to PSE&G or an affiliate but not an employee
thereof and which must be acceptable to First Union National Bank, as the
Property Trustee for the Series A Issuer (the "Property Trustee")) that any such
distribution will not be a taxable event to the owners of the Trust Securities.
Although PSE&G has agreed to use its best efforts to list the Series A
Debentures so distributed on the New York Stock Exchange, there can be no
assurance that the Series A Debentures will be approved for listing on the New
York Stock Exchange or that a trading market will exist for the Series A
Debentures.
There can be no assurance as to the market prices for the Series A
Debentures that may be distributed in exchange for the Series A Preferred
Securities if a termination of the Series A Issuer were to occur. Accordingly,
the Series A Debentures that a holder of Series A Preferred Securities may
receive upon such a distribution, or the Series A Preferred Securities held
pending such a distribution, may trade at a discount to the price that the
investor paid to purchase such Series A Preferred Securities. Because holders
of Series A Preferred Securities may receive Series A Debentures at PSE&G's sole
discretion, prospective purchasers of Series A Preferred Securities are also
making an investment decision with regard to the Series A Debentures and should
carefully review all the information regarding the Series A Debentures contained
herein. See "Certain Terms of the Series A Preferred Securities --Distribution
of Series A Debentures" herein and "Description of the Debentures" in the
accompanying Prospectus.
Rights under the Series A Guarantee
The Series A Guarantee has been qualified as an indenture under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"). First Union
National Bank is the indenture trustee under the Series A Guarantee (the
"Guarantee Trustee") for the purposes of compliance with the Trust Indenture Act
and holds the Series A Guarantee for the benefit of the holders of the Series A
Preferred Securities. Under the Series A Guarantee, PSE&G agrees to make the
following payments to the holders of the Series A Preferred Securities, to the
extent not paid by the Series A Issuer: (i) any accumulated and unpaid
Distributions on the Series A Preferred Securities to the extent that the Series
A Issuer has funds available therefor, (ii) the redemption price of any Series A
Preferred Securities called for redemption to the extent that the Series A
Issuer has funds available therefor, and (iii) upon a voluntary or involuntary
termination and liquidation of the Series A Issuer (unless the Series A
Debentures are distributed to holders of the Series A Preferred Securities),
the lesser of (a) the liquidation amount of $25 per Series A Preferred Security
plus accumulated and unpaid Distributions to the date of payment, and (b) the
amount of assets of the Series A Issuer available for distribution to holders
of Series A Preferred Securities upon such termination and liquidation of the
Series A Issuer. See "Description of the Guarantee--General" in the
accompanying Prospectus. The holders of at least a
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majority in aggregate liquidation amount of the Series A Preferred Securities
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Guarantee Trustee in respect of the Series A
Guarantee and to direct the exercise of any trust power conferred upon the
Guarantee Trustee under the Series A Guarantee. Any holder of the Series A
Preferred Securities may institute a legal proceeding directly against PSE&G
to enforce its rights under the Series A Guarantee without first instituting a
legal proceeding against the Series A Issuer, the Guarantee Trustee or any other
person or entity. If PSE&G defaults on its obligation to pay amounts payable on
the Series A Debentures, the Series A Issuer will not have sufficient funds for
the payment of Distributions, amounts payable on redemption of the Series A
Preferred Securities or amounts payable upon liquidation of the Series A Issuer
and, accordingly, holders of the Series A Preferred Securities will not be able
to rely upon the Series A Guarantee for payment of such amounts. Instead, the
Property Trustee or holders of the Series A Preferred Securities may enforce
the rights of the Series A Issuer under the Series A Debentures against PSE&G
pursuant to the terms of the Series A Debentures. The Amended and Restated
Trust Agreement of the Series A Issuer (the "Trust Agreement") provides that
each holder of Series A Preferred Securities, by acceptance thereof, agrees to
the provisions of the Trust Agreement, the Series A Guarantee and the Indenture.
Limited Voting Rights
Holders of Series A Preferred Securities have limited voting rights under
the Trust Agreement. Holders of Series A Preferred Securities will not be
entitled to vote to appoint, remove or replace the Issuer Trustees, which voting
rights are vested exclusively in PSE&G as the holder of the Common Securities,
except that upon the occurrence of an event of default under the Trust
Agreement, the holders of at least a majority in aggregate liquidation amount of
the Series A Preferred Securities may replace the Property Trustee and the
Delaware Trustee (as defined herein). See "Description of the Preferred
Securities--Voting Rights; Amendment of Trust Agreement" and "--Removal of
Issuer Trustees" in the accompanying Prospectus.
PSE&G CAPITAL TRUST I
PSE&G Capital Trust I is a statutory business trust created under the laws
of the State of Delaware pursuant to the Trust Agreement. The exclusive
business of the Series A Issuer is to issue and sell the Trust Securities
representing undivided beneficial interests in the assets of the Series A Issuer
and to use the proceeds therefrom to purchase the Series A Debentures, to
maintain the status of the Series A Issuer as a grantor trust for Federal income
tax purposes and to engage in only those activities that are necessary,
convenient or incidental to the foregoing. Accordingly, the Series A Debentures
will be the sole assets of the Series A Issuer and payments on the Series A
Debentures will be the sole revenues of the Series A Issuer. Pursuant to the
Trust Agreement, PSE&G will be obligated to pay all expenses and liabilities of
the Series A Issuer except the Series A Issuer's obligations under the Series A
Preferred Securities. The Series A Issuer has a term of 54 years, but may be
terminated earlier as provided in the Trust Agreement. See "Description of the
Preferred Securities--Liquidation Distribution Upon Termination" in the
accompanying Prospectus.
The business and affairs of the Series A Issuer are conducted by three
trustees: (i) First Union National Bank, as Property Trustee; (ii) an affiliate
of the Property Trustee with its principal place of business in the State of
Delaware, as "Delaware Trustee"; and (iii) one individual who is an employee and
officer of or affiliated with PSE&G, as "Administrative Trustee." The Property
Trustee, the Delaware Trustee and the Administrative Trustee are collectively
referred to herein as the "Issuer
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Trustees." The Trust Agreement is qualified as an indenture under the Trust
Indenture Act and the Property Trustee is the indenture trustee thereunder for
the purposes of compliance with the Trust Indenture Act.
Concurrently with the issuance of the Series A Preferred Securities, PSE&G
will acquire Common Securities of the Series A Issuer with a liquidation amount
equal to 3% of the aggregate liquidation amount of all of the Trust Securities
of the Series A Issuer. The Common Securities rank pari passu, and payments
will be made thereon pro rata, with the Series A Preferred Securities, except
that upon the occurrence and continuance of a Debenture Event of Default, the
rights of PSE&G, as holder of the Common Securities, to payment of Distributions
and payments upon redemption and liquidation will be subordinated to the rights
of the holders of the Series A Preferred Securities.
The principal place of business of the Series A Issuer is 80 Park Plaza,
P.O. Box 570, Newark, New Jersey 07101 and its telephone number is (201) 430-
7000.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
General
PSE&G is an operating public utility company engaged principally in the
generation, transmission, distribution and sale of electric energy service and
in the 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, approximately 70% of the State's population, reside. 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 the six largest cities, in addition
to approximately 300 suburban and rural communities.
Ratio of Earnings to Fixed Charges
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, March 31, 1996
------------------------------------------------ --------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
3.20 2.70 3.30 3.35 3.25 3.16
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.
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Ratio of Earnings to Fixed Charges Plus Preferred Securities Dividend
Requirements
PSE&G's ratio of earnings to fixed charges plus preferred securities
dividend requirements for each of the periods indicated is as follows:
12 Months Ended
Years Ended December 31, March 31, 1996
------------------------------------------------- ---------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
2.86 2.43 2.89 2.92 2.77 2.70
The ratio of earnings to fixed charges plus preferred securities dividend
requirements represents, on a pre-tax basis, the number of times earnings cover
fixed charges plus preferred securities dividend requirements. Earnings consist
of net income, to which has been added fixed charges and taxes based on income
of PSE&G and its subsidiaries. Fixed charges consist of interest charges and an
interest factor in rentals. Preferred securities dividend requirements
represent the pre-tax earnings necessary to pay dividends on outstanding
preferred securities, computed at the effective tax rates for the applicable
periods.
USE OF PROCEEDS
The net proceeds from the sale of the Series A Preferred Securities and the
Common Securities will be used by the Series A Issuer to purchase the Series A
Debentures from PSE&G. The net proceeds from the sale of the Series A
Debentures will be used by PSE&G to redeem all 500,000 outstanding shares of
each of its 7.52% and 7.40% Cumulative Preferred Stock ($100 par value) at $101
per share, called for redemption on June 28, 1996, to purchase shares tendered,
up to the amount sought, of its 4.08%, 4.18%, 4.30%, 5.05%, 5.28%, 6.80% and
6.92% Cumulative Preferred Stock ($100 par value) and for general corporate
purposes, including reimbursement of its treasury for funds expended therefor.
CAPITALIZATION
The following table sets forth the consolidated capitalization of PSE&G and
its subsidiaries as of March 31, 1996 and as adjusted to give effect to the
consummation of the offering of the
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Series A Preferred Securities and the use of proceeds therefrom. The following
data should be read in conjunction with the consolidated financial statements
and notes thereto of PSE&G and its subsidiaries incorporated herein by
reference.
As of March 31, 1996
--------------------
As
Actual Adjusted
------ --------
(in millions)
Common Equity
Common Stock . . . . . . . . . . . . $2,563,003 $
Contributed Capital from Enterprise . . 594,395
Retained Earnings . . . . . . . . . . . 1,418,653
----------
Total Common Equity . . . . . . . . 4,576,051
Preferred Stock without mandatory redemption 324,994
Preferred Stock with mandatory redemption . . 150,000
Monthly Income Preferred Securities of Subsidiary 210,000
Company-Obligated Mandatorily Redeemable Quarterly
Income Preferred Securities of Subsidiary Trust
holding solely PSE&G Debentures(1) . . . . --
Long-Term Debt . . . . . . . . . . . . 4,523,614
----------
Total Capitalization . . . . . . . . . . $9,784,659
____________________
(1) The sole asset of the Series A Issuer is the ___% Series A Debentures in an
aggregate principal amount of $__________ with a stated maturity date of
June __, 2045.
CERTAIN TERMS OF THE SERIES A PREFERRED SECURITIES
The following summary of certain terms and provisions of the Series A
Preferred Securities supplements the description of the terms and provisions
of the Preferred Securities set forth in the accompanying Prospectus under the
heading "Description of the Preferred Securities," to which description
reference is hereby made.
Distributions
The Series A Preferred Securities represent undivided beneficial interests
in the assets of the Series A Issuer, the sole assets of which will be the
Series A Debentures. Distributions on the Series A Preferred Securities are
cumulative and will accumulate from the date of original issuance at the annual
rate of ____% of the liquidation amount of $25 per Series A Preferred Security.
Distributions will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing June 30, 1996.
Distributions in arrears after the quarterly payment date therefor will
accumulate additional Distributions (to the extent permitted by law) compounded
quarterly at the annual rate of _____% thereof. The term "Distributions," as
used herein, shall include any such additional Distributions. The amount of
Distributions payable for any period will be computed on the basis of a 360-day
year of twelve 30-day months.
So long as no Debenture Event of Default has occurred and is continuing,
PSE&G has the right at any time and from time to time to defer the payment of
interest by extending the interest
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payment period on the Series A Debentures for up to 20 consecutive quarters,
provided that any such Extension Period shall not extend beyond the maturity or
any redemption date of the Series A Debentures. As a consequence, quarterly
Distributions on the Series A Preferred Securities would be deferred by the
Series A Issuer during any Extension Period, but the amount of Distributions to
which holders of the Series A Preferred Securities would be entitled would
continue to accumulate at the rate set forth above, compounded quarterly.
During any Extension Period, PSE&G may not declare or pay any dividend on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any
shares of PSE&G's capital stock. Prior to the termination of any Extension
Period, PSE&G may shorten or further extend the interest payment period on the
Series A Debentures, provided that such Extension Period, together with all such
previous and further extensions thereof, may not exceed 20 consecutive quarters
or extend beyond the maturity or any redemption date of the Series A Debentures.
Upon the termination of any Extension Period and the payment of all amounts then
due, PSE&G may elect to begin a new Extension Period, subject to the above
requirements. See "United States Taxation--Potential Extension of Interest
Payment Period and Original Issue Discount" herein and "Description of the
Debentures--Option to Extend Interest Payment Period" in the accompanying
Prospectus. PSE&G has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the Series A
Debentures.
The Series A Preferred Securities are issued in the form of one or more
global securities and The Depository Trust Company ("DTC") or any successor
depositary will act as depositary for the Series A Preferred Securities. See
"Description of the Preferred Securities -- Book-Entry-Only Issuance -- The
Depository Trust Company" in the accompanying Prospectus. Payments on the
Series A Preferred Securities represented by a global security will be made in
immediately available funds to DTC, as the depositary for the Series A Preferred
Securities. In the event that the Series A Preferred Securities are issued in
certificated form, the payment of Distributions and payments on redemption or
liquidation will be payable, the transfer of the Series A Preferred Securities
will be registerable and Series A Preferred Securities will be exchangeable at
the corporate office of the Property Trustee in Newark, New Jersey, or at the
offices of any other paying agent or transfer agent appointed by the
Administrative Trustee; provided, however, that the payment of Distributions may
be made at the option of the Property Trustee by check mailed to the address of
the persons entitled thereto or by wire transfer. In addition, if the Series A
Preferred Securities are issued in certificated form, the record dates for the
payment of Distributions will be the 15th day of the last month of each quarter,
whether or not a Business Day.
Redemption
Upon the payment of the Series A Debentures at maturity or upon
redemption as provided in the Indenture, the proceeds from such payment will
be applied by the Property Trustee to redeem a Like Amount of the Trust
Securities, upon not less than 30 nor more than 60 days' notice, at a redemption
price equal to the aggregate liquidation amount plus accumulated and unpaid
Distributions to the date of redemption (the "Redemption Price"). See "Certain
Terms of the Series A Debentures--Redemption."
"Like Amount" means (i) with respect to a redemption of the Trust
Securities, Trust Securities having an aggregate liquidation amount equal to the
principal amount of Series A Debentures to be paid in accordance with the
Indenture and (ii) with respect to a distribution of Series A Debentures to
holders of Trust Securities in connection with a termination and liquidation of
the Series A Issuer, Series A Debentures having a principal amount equal to the
aggregate liquidation amount of the Trust Securities in exchange for which such
Series A Debentures are distributed.
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Special Event Redemption
If a Tax Event or an Investment Company Event (each, a "Special Event") has
occurred and is continuing, PSE&G has the right to redeem the Series A
Debentures, in whole but not in part, and therefore cause a mandatory redemption
of the Trust Securities, in whole but not in part, at the Redemption Price
within 90 days following the occurrence of such Special Event.
"Tax Event" means that PSE&G shall have received an opinion of counsel
(which may be counsel to PSE&G or an affiliate but not an employee thereof and
which must be acceptable to the Property Trustee) experienced in such matters to
the effect that, as a result of any amendment to, or change (including any
announced prospective change) in, the laws (or any regulations thereunder) of
the United States or any political subdivision or taxing authority thereof or
therein affecting taxation, or as a result of any official administrative
pronouncement or judicial decision interpreting or applying such laws or
regulations, which amendment or change is effective or such pronouncement or
decision 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
Series A Issuer is, or will be, subject to Federal income tax with respect to
interest on the Series A Debentures, (ii) interest payable by PSE&G on the
Series A Debentures is not, or will not be, deductible by PSE&G for Federal
income tax purposes or (iii) the Series A Issuer is, or will be, subject to more
than a de minimis amount of other taxes, duties, assessments or other
governmental charges.
"Investment Company Event" means the occurrence of a change in law or
regulation or a change in interpretation or application of law or regulation by
any legislative body, court, governmental agency or regulatory authority (a
"Change in 1940 Act Law") to the effect that the Series A Issuer is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act of 1940, as amended, which Change in 1940 Act Law becomes
effective on or after the date of original issuance of the Series A Preferred
Securities.
Distribution of Series A Debentures
At any time, PSE&G may, in its sole discretion, terminate the Series A
Issuer and cause a Like Amount of Series A Debentures to be distributed to the
holders of the Trust Securities in liquidation of the Series A Issuer upon 30
days' prior notice to the holders of the Trust Securities, provided that PSE&G
shall have delivered to the Issuer Trustees an opinion of nationally recognized
tax counsel (which may be regular tax counsel to PSE&G or an affiliate but not
an employee thereof and which must be acceptable to the Property Trustee) that
any such distribution will not be a taxable event to the owners of the Trust
Securities for Federal income tax purposes. In addition, the Series A
Debentures may be distributed to holders of Trust Securities in certain other
circumstances as described under "Certain Terms of the Preferred
Securities--Liquidation Distribution Upon Termination" in the accompanying
Prospectus.
Liquidation Amount
The amount payable on the Series A Preferred Securities in the event of the
termination and liquidation of the Series A Issuer is $25 per Series A Preferred
Security plus accumulated and unpaid Distributions to the date of payment,
unless, in connection therewith, the Series A Debentures are distributed to the
holders of the Trust Securities.
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CERTAIN TERMS OF THE SERIES A DEBENTURES
The following summary of certain terms and provisions of the Series A
Debentures supplements the description of the terms and provisions of the
Debentures set forth in the accompanying Prospectus under the heading
"Description of the Debentures," to which description reference is hereby made.
The Series A Debentures are unsecured and rank subordinate and junior in
right of payment to all Senior Indebtedness of PSE&G.
Interest Rate; Maturity
Concurrently with the issuance of the Series A Preferred Securities, the
Series A Issuer is investing the proceeds thereof, together with the
consideration paid by PSE&G for the Common Securities, in the Series A
Debentures. The Series A Debentures will be issued as a series of Debentures
under the Indenture. The Series A Debentures will mature on June ___, 2045.
The Series A Debentures will bear interest at the annual rate of _____% of the
principal amount thereof, payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year, commencing June 30, 1996. Interest
which is accrued and unpaid after the quarterly payment date therefor will bear
additional interest on the amount thereof (to the extent permitted by law) at
the annual rate of _____% thereof, compounded quarterly. The term "interest,"
as used herein, shall include quarterly interest payments and interest on
quarterly interest payments in arrears, as applicable. The interest payment
provisions for the Series A Debentures correspond to the Distribution provisions
of the Series A Preferred Securities.
Redemption
The Series A Debentures are redeemable prior to maturity at the option of
PSE&G at a redemption price equal to 100% of the principal amount thereof plus
accrued and unpaid interest to the redemption date (i) at any time on or after
June ___, 2001, in whole or in part, or (ii) if a Special Event has occurred and
is continuing, in whole but not in part.
Distribution of Series A Debentures
If Series A Debentures are distributed to the holders of the Trust
Securities upon the termination and liquidation of the Series A Issuer, the
Series A Debentures will be issued in denominations of $25 and integral
multiples thereof. It is anticipated that the Series A Debentures would be
distributed in the form of one or more global securities and DTC, or any
successor depositary for the Series A Preferred Securities, would act as
depositary for the Series A Debentures. The depositary arrangements for the
Series A Debentures would be substantially similar to those in effect for the
Series A Preferred Securities. Neither PSE&G, the Debenture Trustee, any paying
agent nor any other agent of PSE&G or the Debenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a global security
for such Series A Debentures or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests. For a description of
DTC and the terms of the depositary arrangements relating to payments,
transfers, voting rights, redemption and other notices and other matters, see
"Description of the Preferred Securities--Book-Entry-Only Issuance--The
Depository Trust Company" in the accompanying Prospectus.
Payments on the Series A Debentures represented by a global security will
be made in immediately available funds to DTC, as the depositary for the Series
A Debentures. In the event that the Series A Debentures are issued in
certificated form, principal and interest will be payable, the transfer
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of the Series A Debentures will be registrable and the Series A Debentures will
be exchangeable for Series A Debentures of other authorized denominations of a
like aggregate principal amount, at the corporate office of the Debenture
Trustee in Newark, New Jersey, or at the offices of any other paying agent or
transfer agent appointed by PSE&G; provided, however, that payment of interest
may be made at the option of PSE&G by check mailed to the address of the persons
entitled thereto or by wire transfer. In addition, if the Series A Debentures
are issued in certificated form, the record dates for payment of interest will
be the 15th day of the last month of each quarter, whether or not a Business
Day.
If the Series A Debentures are distributed to the holders of the Trust
Securities upon the termination and liquidation of the Series A Issuer, PSE&G
will use its best efforts to list the Series A Debentures on the New York Stock
Exchange.
UNITED STATES TAXATION
General
This section is a summary of certain Federal income tax considerations that
may be relevant to prospective purchasers of Series A Preferred Securities and
is the opinion of Ballard Spahr Andrews & Ingersoll, special tax counsel to
PSE&G and the Series A Issuer, insofar as it relates to matters of law and legal
conclusions. This section is based upon current provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), existing regulations thereunder
and current administrative rulings and court decisions, all of which are subject
to change. Subsequent changes may cause tax consequences to vary substantially
from the consequences described below. Unless otherwise stated, this summary
deals only with Series A Preferred Securities held as capital assets and does
not deal with special classes of holders, such as dealers in securities or
currencies, life insurance companies, persons holding Series A Preferred
Securities as a hedge against or which are hedged against currency risks or as a
part of a straddle, or persons whose functional currency is not the United
States dollar.
POTENTIAL INVESTORS ARE ADVISED TO CONSULT THEIR TAX ADVISORS AS TO THE
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE PURCHASE OF SERIES A
PREFERRED SECURITIES PURSUANT TO THE OFFERING MADE HEREBY AND OF THE OWNERSHIP
AND DISPOSITION OF SERIES A PREFERRED SECURITIES IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR OTHER LAWS.
In the opinion of Ballard Spahr Andrews & Ingersoll, the Series A
Debentures will be treated as indebtedness for Federal income tax purposes.
However, holders of Series A Preferred Securities should note that the Internal
Revenue Service (the "IRS") may attempt to treat the Series A Debentures as
equity rather than indebtedness for tax purposes, as described below. If the
IRS were successful in such attempt, the Series A Debentures would be subject to
redemption at the option of PSE&G as described under "Certain Terms of the
Series A Debentures--Redemption" and "Certain Terms of the Series A Preferred
Securities--Special Event Redemption."
On December 7, 1995, President Clinton proposed certain tax law changes
that would, among other things, generally deny interest deductions to corporate
issuers if the debt instrument has a term exceeding 20 years and is not
reflected as indebtedness on such issuer's consolidated balance sheet. Because
the term of the Series A Debentures exceeds 20 years, this proposal, were it to
become effective, would prevent PSE&G from deducting interest on the Series A
Debentures. However, on March 29, 1996, the Chairmen of the Senate Finance
Committee and the House Ways
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and Means Committee issued a joint statement to the effect that it was their
intention that the effective date of the President's legislative proposals, if
adopted, will be no earlier than the date of appropriate Congressional action.
In the opinion of Ballard Spahr Andrews & Ingersoll, under current law, interest
on the Series A Debentures is deductible. There can be no assurance, however,
that such proposals, subsequent proposals or final legislation will not affect
the ability of PSE&G to deduct interest on the Series A Debentures which, in
turn, could give rise to a Tax Event and, accordingly, PSE&G's optional right to
redeem the Series A Debentures, as described under "Certain Terms of the Series
A Preferred Securities--Special Event Redemption."
Income from Series A Preferred Securities
In connection with the issuance of the Series A Debentures, in the opinion
of Ballard Spahr Andrews & Ingersoll, under current law and assuming full
compliance with the terms of the Trust Agreement, the Series A Issuer will be
classified as a grantor trust and not as an association taxable as a corporation
or partnership for Federal income tax purposes.
As a consequence, each owner of Series A Preferred Securities will be
considered the owner of a pro rata portion of the Series A Debentures held by
the Series A Issuer. As a further consequence, each owner of Series A Preferred
Securities will be required to include in gross income his or her pro rata share
of the income accrued on the Series A Debentures held by the Series A Issuer.
Such income should not exceed Distributions received by the owners of Series A
Preferred Securities on the Series A Preferred Securities except in limited
circumstances described under "--Potential Extension of Interest Payment Period
and Original Issue Discount." No portion of such income will be eligible for
the dividends-received deduction.
Potential Extension of Interest Payment Period and Original Issue Discount
Under the Indenture, under certain circumstances, PSE&G has the right at
any time and from time to time to extend the interest payment period on the
Series A Debentures for up to 20 consecutive quarters but not beyond the
maturity or any redemption date of the Series A Debentures. PSE&G's right to
defer payments of interest by extending the interest payment period will cause
the Series A Debentures to be treated as issued with "original issue discount"
for Federal income tax purposes. Accordingly, an owner of Series A Preferred
Securities will accrue interest income (i.e., original issue discount) under a
constant yield basis over the term of the Series A Debentures (including any
Extension Period), regardless of the receipt of cash with respect to the period
to which such income is attributable.
As a result, owners of Series A Preferred Securities during an Extension
Period will include interest in gross income in advance of the receipt of cash,
and any owners of Series A Preferred Securities who dispose of Series A
Preferred Securities prior to the record date for the payment of Distributions
following such Extension Period will include interest in gross income, but will
not receive any cash related thereto. The tax basis of a Series A Preferred
Security will be increased by the amount of any original issue discount that is
included in income without a receipt of cash and will be decreased when and if
such cash is subsequently received by the owner of the Series A Preferred
Security.
Disposition of the Series A Preferred Securities
Gain or loss will be recognized on a sale, including a redemption for cash,
of Series A Preferred Securities (which represent undivided beneficial interests
in the Series A Debentures) in an amount equal to the difference between the
amount realized and the tax basis of an owner of Series A Preferred
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Securities in his or her pro rata share of the Series A Debentures. Gain or
loss recognized by an owner of Series A Preferred Securities on the sale or
exchange of Series A Preferred Securities held for more than one year generally
will be taxable as long-term capital gain or loss.
United States Alien Holders
For purposes of this discussion, a "United States Alien Holder" is any
holder or beneficial owner who or which is (i) a nonresident alien individual or
(ii) a foreign corporation, partnership, estate or trust, in either case not
subject to Federal income tax on a net income basis in respect of a Series A
Preferred Security.
Under present Federal income tax law, subject to the discussion below with
respect to backup withholding:
(i) payments by the Series A Issuer or any of its paying agents to any
United States Alien Holder will not be subject to Federal withholding tax,
provided that (a) the owner of the 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 owner of the Series A Preferred Securities is
not a controlled foreign corporation that is related to PSE&G through stock
ownership, and (c) either (1) the owner of the Series A Preferred Securities
certifies to the Series A Issuer or its agent, under penalties of perjury, that
it is a United States Alien Holder and provides its name and address or (2) the
holder of the Series A Preferred Securities is a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution"), and such holder certifies to the Series A Issuer or its agent,
under penalties of perjury, that such statement has been received from the owner
by it or by a financial institution between it and the owner and furnishes the
payor with a copy thereof; and
(ii) a United States Alien Holder of a Series A Preferred Security will not
be subject to 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 the Series A
Preferred Securities within the United States and "backup withholding" at a rate
of 31% will apply to such payments if the seller fails to provide a correct
taxpayer identification number. Information reporting requirements and backup
withholding will also apply to original issue discount allocable to noncorporate
United States holders of the Series A Preferred Securities if the seller fails
to provide a correct taxpayer identification number.
Payments of the proceeds from the sale by a United States Alien Holder of
Series A Preferred Securities made to or through a foreign office of a broker
will not be subject to information reporting or backup withholding, except that,
if the broker is a United States person, a controlled foreign corporation for
United States tax purposes or a foreign person 50% or more of whose gross income
is effectively connected with a United States trade or business for a specified
three-year period, information reporting may apply to such payment. Payments of
the proceeds from a 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.
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Receipt of Series A Debentures Upon Liquidation of the Series A Issuer
PSE&G may cause the Series A Issuer to be terminated and cause the Series A
Debentures to be distributed to the holders of Series A Preferred Securities in
liquidation of such holders' interests in the Series A Issuer, provided that
PSE&G has delivered to the Issuer Trustees an opinion of nationally recognized
tax counsel (which may be regular tax counsel to PSE&G or an affiliate but not
an employee thereof and which must be acceptable to the Property Trustee) that
any such distribution will not be a taxable event to the owners of the Series A
Preferred Securities for Federal income tax purposes. Under current Federal
income tax law and interpretation and assuming the Series A Issuer is treated as
a grantor trust, such a distribution should not be treated as a taxable event to
owners of the Series A Preferred Securities. Such a tax-free transaction would
result in the owner of Series A Preferred Securities receiving an aggregate tax
basis in the Series A Debentures equal to such owner's aggregate tax basis in
such owner's Series A Preferred Securities. An owner's holding period for such
Series A Debentures would include the period during which such owner had a
beneficial interest in the Series A Preferred Securities.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Series A Issuer has agreed to sell to each of the Underwriters named below, for
whom Goldman, Sachs & Co., Dean Witter Reynolds Inc., Lehman Brothers 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 "Representatives"), and
each of the Underwriters has severally agreed to purchase from the Series A
Issuer, the respective number of Series A Preferred Securities set forth
opposite its name below:
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Number of Series A
Underwriter Preferred Securities
----------- --------------------
Goldman, Sachs & Co. . . . . . .
Dean Witter Reynolds Inc. . . .
Lehman Brothers Inc. . . . . . .
Merrill Lynch, Pierce, Fenner & Smith
Incorporated . . . . . .
Morgan Stanley & Co. 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 of the Series A Preferred
Securities offered hereby if any are taken.
The Underwriters propose to offer the Series A Preferred Securities in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus Supplement, and in part to certain securities
dealers at such price less a concession of $__________ 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 used to purchase the Series A Debentures, under the
Underwriting Agreement, PSE&G has agreed to pay to the Underwriters an
underwriting commission of $______ per Series A Preferred Security.
Prior to this offering, there has been no public market for the Series A
Preferred Securities. Application will be made to list the Series A Preferred
Securities on the New York Stock Exchange. If approved for listing, trading on
the Series A Preferred Securities is expected to commence within a 30-day period
after the initial delivery thereof. In order to meet one of the requirements
for listing the Series A Preferred Securities on the New York Stock Exchange,
the Underwriters have undertaken to sell the Series A Preferred Securities to a
minimum of 400 beneficial owners. The Representatives have advised PSE&G that
they intend to make a market in the Series A Preferred Securities prior to
commencement of trading on the New York Stock Exchange, but are not obligated to
do so and may discontinue market making at any time without notice. No assurance
can be given as to the liquidity of the trading market for the Series A
Preferred Securities.
PSE&G and the Series A Issuer have agreed, during the period beginning from
the date of the Underwriting Agreement and continuing to and including the
earlier of (i) the date on which the distribution of the Series A Preferred
Securities ceases, as determined by the Representatives, or
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(ii) 30 days after the closing date, not to offer, sell, contract to sell or
otherwise dispose of any Preferred Securities or any preferred stock or any
other securities of PSE&G which are substantially similar to the Series A
Preferred Securities, including any guarantee of such securities, or any
securities convertible into or exchangeable for or represent the right to
receive any of the foregoing securities, without the prior written consent of
the Representatives.
PSE&G and the Series A Issuer have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act.
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PROSPECTUS
SUBJECT TO COMPLETION, DATED JUNE 11, 1996
PSE&G Capital Trust I
PSE&G Capital Trust II
PSE&G Capital Trust III
Cumulative Quarterly Income Preferred Securities guaranteed to the
extent the Issuer thereof has available funds as set forth herein by
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
_________________
PSE&G Capital Trust I, PSE&G Capital Trust II and PSE&G Capital Trust III,
each a statutory business trust created under the laws of the State of Delaware
(each, an "Issuer," and collectively, the "Issuers") may severally offer, from
time to time, their respective cumulative quarterly income preferred securities
(the "Preferred Securities") representing undivided beneficial interests in the
assets of such Issuer. Public Service Electric and Gas Company, a New Jersey
corporation ("PSE&G"), will be the owner of beneficial interests represented by
the common securities (the "Common Securities") of each Issuer. First Union
National Bank is the Property Trustee of each Issuer. Concurrently with the
issuance by each Issuer of its Preferred Securities, such Issuer will invest the
proceeds thereof, together with the consideration paid by PSE&G for the Common
Securities of such Issuer, in a corresponding series of PSE&G's deferrable
interest subordinated debentures (the "Debentures"). The Debentures will be
subordinate and junior in right of payment to all Senior Indebtedness (as
defined herein) of PSE&G. The Debentures will be the sole assets of each Issuer
and payments in respect of the Debentures will be the only revenues of each
Issuer.
Pursuant to a guarantee agreement to be entered into by PSE&G with respect
to each series of Preferred Securities (each, a "Guarantee"), PSE&G will agree
to make payments of cash distributions ("Distributions") with respect to the
Preferred Securities of each Issuer and payments on liquidation or redemption
with respect to such Preferred Securities but only to the extent that such
Issuer holds funds available therefor and has not made such payments. The
obligations of PSE&G under each Guarantee will be subordinate and junior in
right of payment to all general liabilities of PSE&G. As described herein, each
Guarantee, together with PSE&G's obligations under the Debentures, the Indenture
relating to such Debentures and the Amended and Restated Trust Agreement for
each Issuer, will provide for PSE&G's full, irrevocable and unconditional
guarantee of the Preferred Securities.
The Preferred Securities may be offered in amounts, at prices and on terms
to be determined at the time of offering; provided, however, that the aggregate
initial public offering price of all Preferred Securities issued pursuant to the
Registration Statement of which this Prospectus forms a part shall not exceed
$350,000,000. Certain specific terms of an Issuer's Preferred Securities will
be set forth in an accompanying Prospectus Supplement, including where
applicable and to the extent not set forth herein, the identity of such Issuer,
the specific title, the aggregate number, the Distribution rate (or the method
for determining such rate), the liquidation amount, redemption provisions, the
right, if any, of PSE&G to terminate such Issuer and cause the corresponding
series of Debentures to be distributed to the holders of such Issuer's Preferred
Securities and Common Securities, the period during which interest on the
corresponding series of Debentures may be deferred, the initial public offering
price, and any other special terms, as well as any planned listing on a
securities exchange, of such Preferred Securities.
The Preferred Securities may be sold in a public offering to or through
underwriters or dealers designated from time to time. See "Plan of
Distribution." The names of any such underwriters or dealers involved in the
sale of the Preferred Securities of a particular Issuer, the number of Preferred
Securities to be purchased by any such underwriters or dealers and any
applicable commissions or discounts will be set forth in the accompanying
Prospectus Supplement. The net proceeds to each Issuer will also be set forth
in the accompanying Prospectus Supplement.
The accompanying Prospectus Supplement will contain information concerning
material Federal income tax considerations applicable to the Preferred
Securities offered thereby.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
____________________
The date of this Prospectus is June , 1996.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
STATEMENT OF AVAILABLE INFORMATION
Public Service Electric and Gas Company, a New Jersey corporation
("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. (the "New York Stock Exchange")
where certain of PSE&G's securities are listed.
No separate financial statements of PSE&G Capital Trust I, PSE&G Capital
Trust II or PSE&G Capital Trust III, each a statutory business trust created
under the laws of the State of Delaware (each, an "Issuer," and collectively,
the "Issuers"), have been included herein. PSE&G and the Issuers do not
consider that such financial statements would be material to holders of any
Issuer's cumulative quarterly income preferred securities (the "Preferred
Securities") because each Issuer is a newly formed special purpose entity, has
no operating history or independent operations and is not engaged in and does
not propose to engage in any activity other than holding as trust assets the
corresponding series of deferrable interest subordinated debentures (the
"Debentures") of PSE&G and issuing Preferred Securities and common securities
(the "Common Securities," and together with the Preferred Securities, the "Trust
Securities") representing undivided beneficial interests in such Debentures.
See "The Issuers," "Description of the Preferred Securities" and "Description of
the Debentures."
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,
1995;
2. PSE&G's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996; and
3. PSE&G's Current Reports on Form 8-K dated January 19, 1996, March 14,
1996 and May 24, 1996.
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 of the related Preferred Securities shall be deemed
to be incorporated by reference in this Prospectus and the accompanying
Prospectus Supplement and shall be a part hereof and thereof from the date of
filing of such document. Any statement contained herein or therein or in a
document all or a portion of which is incorporated or deemed to be incorporated
by reference herein and therein shall be deemed to be modified or superseded for
purposes of this Prospectus and the accompanying Prospectus Supplement to the
extent that a statement contained herein or therein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference herein
and therein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus or the accompanying Prospectus
Supplement.
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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 ISSUERS
Each of PSE&G Capital Trust I, PSE&G Capital Trust II and PSE&G Capital
Trust III is a statutory business trust created under Delaware law pursuant to
(i) a trust agreement executed by PSE&G, as sponsor for each Issuer, and the
Issuer Trustees (as defined below) and (ii) the filing of a certificate of trust
with the Delaware Secretary of State. Each trust agreement will be amended and
restated in its entirety (each, as so amended and restated, a "Trust Agreement")
substantially in the form filed as an exhibit to the Registration Statement of
which this Prospectus forms a part. Each Trust Agreement will be qualified as
an indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act").
Each Issuer exists for the exclusive purposes of issuing and selling its
Trust Securities and using the proceeds from the sale of its Trust Securities to
acquire a corresponding series of Debentures, maintaining the status of the
Issuer as a grantor trust for Federal income tax purposes and engaging in those
activities necessary, convenient or incidental to the foregoing. All of the
Common Securities of each Issuer will be owned by PSE&G. The Common Securities
of an Issuer will rank pari passu, and payments will be made thereon pro rata,
with the Preferred Securities of that Issuer, except that upon the occurrence
and continuance of an event of default with respect to the corresponding series
of Debentures (a "Debenture Event of Default") under the Indenture dated as of
June 1, 1996 (as amended and supplemented from time to time, the "Indenture")
between PSE&G and First Union National Bank, as trustee (the "Debenture
Trustee"), the rights of the holders of such Common Securities to payment of
cash distributions ("Distributions") and payments upon redemption and
liquidation will be subordinated to the rights of the holders of such Preferred
Securities. The Indenture will be qualified as an indenture under the Trust
Indenture Act.
Each Issuer's business and affairs are conducted by three trustees, each
appointed by PSE&G as holder of the Common Securities: (i) First Union National
Bank (the "Property Trustee"); (ii) an affiliate of the Property Trustee that
has its principal place of business in the State of Delaware (the "Delaware
Trustee"); and (iii) one individual trustee who is an employee or officer of or
affiliated with PSE&G (the "Administrative Trustee," and collectively with the
Property Trustee and the Delaware Trustee, the "Issuer Trustees"). The holder
of the Common Securities, or the holders of at least a majority in aggregate
liquidation amount of an Issuer's Preferred Securities if an event of default
under the Trust Agreement (a "Trust Agreement Event of Default") has occurred
and is continuing, will be entitled to remove and replace the Property Trustee
and the Delaware Trustee. In no event will the holders of the Preferred
Securities have the right to vote to appoint, remove or replace the
Administrative Trustee, which voting rights are vested exclusively in the holder
of the Common Securities. The duties and obligations of each of the Issuer
Trustees are governed by the applicable Trust Agreement.
Pursuant to the Trust Agreement of each Issuer, PSE&G will pay all fees and
expenses related to that Issuer and the offering of its Preferred Securities and
will pay, directly or indirectly, all
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ongoing costs, expenses and liabilities of that Issuer except such Issuer's
obligations under its Preferred Securities.
The principal place of business of each Issuer is 80 Park Plaza, Newark,
New Jersey 07101, and its telephone number is (201) 430-7000.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
PSE&G is an operating public utility company engaged principally in the
generation, transmission, distribution and sale of electric energy service and
in the 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, approximately 70% of the State's population, reside. 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, and its telephone number is (201) 430-7000.
USE OF PROCEEDS
Unless otherwise specified in the accompanying Prospectus Supplement, the
proceeds to be received by the Issuers from the sale of the Preferred Securities
offered hereby will be used by the Issuers to purchase Debentures from PSE&G.
The proceeds from the sale of the Debentures will be used by PSE&G to refund
certain outstanding preferred stock of PSE&G identified in the accompanying
Prospectus Supplement and for general corporate purposes, including
reimbursement of its treasury for funds expended therefor.
DESCRIPTION OF THE PREFERRED SECURITIES
Pursuant to the terms of each Trust Agreement, the Issuers will issue the
Preferred Securities and the Common Securities. The Preferred Securities of an
Issuer will represent undivided beneficial interests in the assets of such
Issuer and the holders thereof will be entitled to a preference in certain
circumstances with respect to the payment of Distributions and amounts payable
on redemption or liquidation over the Common Securities of such Issuer, as well
as other benefits as described in the applicable Trust Agreement. Each of the
Issuers is a legally separate entity and the assets of one are not available to
satisfy the obligations of any other.
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General
The Preferred Securities of each Issuer will rank pari passu, and payments
will be made thereon pro rata, with the Common Securities of that Issuer except
as described under "-- Subordination of Common Securities." The proceeds from
the sale of the Preferred Securities and the Common Securities will be used by
the related Issuer to purchase a corresponding series of Debentures from PSE&G.
The Debentures will be held in trust by the Property Trustee for the benefit of
the holders of the related Trust Securities. Each Guarantee Agreement executed
by PSE&G for the benefit of the holders of each Issuer's Preferred Securities
(each, a "Guarantee") will be subordinate and junior in right of payment to all
general liabilities of PSE&G. Pursuant to each Guarantee, PSE&G will agree to
make payments of Distributions and payments on redemption or liquidation with
respect to such Preferred Securities, but only to the extent the related Issuer
holds funds available therefor and has not made such payments. See
"Description of the Guarantee."
It is anticipated that the assets of each Issuer available for distribution
to the holders of its Preferred Securities will be limited to payments from
PSE&G under the corresponding series of Debentures in which such Issuer will
invest the proceeds from the issuance and sale of its Trust Securities. See
"Description of the Debentures." If PSE&G fails to make a payment on a series of
Debentures, the related Issuer will not have sufficient funds to make related
payments, including Distributions, on the corresponding series of Preferred
Securities.
Distributions
Distributions on the Preferred Securities of each Issuer will be payable at
a rate specified in the accompanying Prospectus Supplement for such Preferred
Securities. The amount of Distributions payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months.
Distributions on the Preferred Securities will be cumulative and will
accumulate from the date of original issuance and will be payable quarterly in
arrears on the dates specified in the accompanying Prospectus Supplement except
as otherwise described below. In the event that any date on which Distributions
are otherwise payable on the Preferred Securities is not a Business Day (as
defined below), payment of such Distributions will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect to any such delay), except that if such Business Day is in the next
succeeding calendar year, payment of such Distributions shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date (each date on which Distributions are payable in
accordance with the foregoing is referred to herein as a "Distribution Date").
A "Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in The City of New York or the State of New Jersey
are required by law or executive order to remain closed.
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the securities register of the related Issuer on the
relevant record date, which, as long as the Preferred Securities remain in
book-entry-only form, will be one Business Day prior to the relevant
Distribution Date. Subject to any applicable laws and regulations and the
provisions of the applicable Trust Agreement, each such payment will be made as
described under "--Book-Entry-Only Issuance--The Depository Trust Company." In
the event that any Preferred Securities are not in book-entry-only form, the
relevant record date for such Preferred Securities will be the 15th day of the
last month of each quarter, whether or not a Business Day.
So long as no Debenture Event of Default has occurred and is continuing
with respect to a series of Debentures, PSE&G will have the right at any time
and from time to time to defer payments
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of interest by extending the interest payment period on such series of
Debentures for up to the maximum period specified in the accompanying Prospectus
Supplement for such series of Debentures (each, an "Extension Period"), provided
that any such Extension Period shall not extend beyond the maturity or any
redemption date of the Debentures of such series. As a consequence, quarterly
Distributions on the corresponding Preferred Securities would be deferred by the
Issuer thereof during such Extension Period, but the amount of Distributions to
which holders of the Preferred Securities would be entitled will continue to
accumulate at the annual rate applicable to quarterly Distributions thereon,
compounded quarterly. During any Extension Period, PSE&G may not declare or pay
any dividend on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any shares of PSE&G's capital stock. Prior to the termination
of any Extension Period, PSE&G may shorten or further extend the interest
payment period on a series of Debentures, provided that such Extension Period,
together with all such previous and further extensions thereof, may not exceed
the maximum Extension Period or extend beyond the maturity or any redemption
date of such Debentures. Upon the termination of any Extension Period and the
payment of all amounts then due, PSE&G may elect to begin a new Extension
Period, subject to the above requirements. See "Description of the
Debentures--Option to Extend Interest Payment Period."
Redemption
Upon the repayment of any series of Debentures at maturity or upon
redemption, the proceeds from such repayment will be applied by the Property
Trustee to redeem a like amount of the corresponding Trust Securities of the
Issuer thereof at a redemption price (the "Redemption Price") equal to the
liquidation amount of such Trust Securities plus all accumulated and unpaid
Distributions to the redemption date (the "Redemption Date"). The redemption
terms of a particular series of Debentures and the corresponding Trust
Securities will be set forth in the accompanying Prospectus Supplement.
If less than all the Trust Securities of the Issuer thereof are to be
redeemed on a Redemption Date, then the aggregate amount of such Trust
Securities to be redeemed shall be selected by the Property Trustee among such
Issuer's Preferred Securities and Common Securities pro rata based on the
respective aggregate liquidation amounts of such Preferred Securities and Common
Securities, subject to the provisions of "--Subordination of Common Securities."
Redemption Procedures
Notice of any redemption of Trust Securities will be given by the Property
Trustee to the holders of such Trust Securities to be redeemed not less than 30
nor more than 60 days prior to the Redemption Date. If a notice of redemption
is given with respect to any Trust Securities, then, to the extent funds are
available therefor, the Issuer thereof will irrevocably deposit with the paying
agent for such Trust Securities funds sufficient to pay the applicable
Redemption Price for the Trust Securities being redeemed on the Redemption Date
and will give such paying agent irrevocable instructions and authority to pay
the Redemption Price to the holders of such Trust Securities upon surrender
thereof. Notwithstanding the foregoing, Distributions payable on or prior to
the Redemption Date for any Trust Securities called for redemption shall be
payable to the holders of such Trust Securities on the relevant record dates for
the related Distribution Dates.
If notice of redemption shall have been given and funds irrevocably
deposited as required, then upon the date of such deposit, all rights of the
holders of such Trust Securities so called for redemption will cease, except the
right of the holders of such Trust Securities to receive the Redemption Price,
but without interest thereon, and such Trust Securities will cease to be
outstanding. In the event that any Redemption Date for Trust Securities is not
a Business Day, then the Redemption Price will be payable
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on the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that if such Business Day is
in the next succeeding calendar year, the Redemption Price will be payable on
the immediately preceding Business Day, in each case with the same force and
effect as if made on such date. In the event that payment of the Redemption
Price in respect of any Trust Securities called for redemption is improperly
withheld or refused and not paid either by the Issuer thereof or by PSE&G
pursuant to the Guarantee as described under "Description of the Guarantee,"
Distributions on such Trust Securities will continue to accumulate at the then
applicable rate from the original Redemption Date to the date of payment, in
which case the actual payment date will be considered the Redemption Date for
purposes of calculating the Redemption Price.
Subject to applicable law, PSE&G or its subsidiaries may at any time and
from time to time purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Subordination of Common Securities
Payment of Distributions on, and the Redemption Price of, each Issuer's
Trust Securities, as applicable, shall be made pro rata based on the respective
aggregate liquidation amounts of such Trust Securities; provided, however, that
if a Debenture Event of Default has occurred and is continuing with respect to
the corresponding series of Debentures, no payment of any Distribution on, or
Redemption Price of, any of such Issuer's Common Securities, and no other
payment on account of the liquidation of such Common Securities, shall be made
unless payment in full in cash of all accumulated and unpaid Distributions on
all of such Issuer's outstanding Preferred Securities for all Distribution
periods terminating on or prior thereto, or in the case of a redemption, the
full amount of such Redemption Price on all of such Issuer's outstanding
Preferred Securities shall have been made or provided for, and all funds
available to the Property Trustee shall first be applied to the payment in full
in cash of all Distributions on, or Redemption Price of, all of such Issuer's
outstanding Preferred Securities then due and payable.
If a Debenture Event of Default has occurred and is continuing with respect
to a series of Debentures, the holder of the related Issuer's Common Securities
will be deemed to have waived any right to act with respect to such Debenture
Event of Default until the effect of such Debenture Event of Default has been
cured, waived or otherwise eliminated. Until any such Debenture Event of
Default has been so cured, waived or otherwise eliminated, the Property Trustee
shall act solely on behalf of the holders of the corresponding Preferred
Securities and not on behalf of PSE&G, as holder of such Common Securities, and
only the holders of such Preferred Securities will have the right to direct the
Property Trustee to act on their behalf.
Liquidation Distribution Upon Termination
Pursuant to its Trust Agreement, each Issuer shall be terminated on the
earliest to occur of: (i) the expiration of the term of such Issuer; (ii) the
bankruptcy, dissolution or liquidation of PSE&G or an acceleration of the
maturity of the corresponding series of Debentures held by such Issuer; (iii) if
provided for in the accompanying Prospectus Supplement, upon the election of
PSE&G to terminate such Issuer and cause the distribution of the corresponding
series of Debentures to the holders of such Issuer's Trust Securities; (iv) the
redemption of all of such Issuer's Trust Securities; and (v) an order for the
termination of such Issuer shall have been entered by a court of competent
jurisdiction. The election of PSE&G pursuant to clause (iii) above shall be
made by PSE&G giving written notice to the Issuer Trustees not less than 30 days
prior to the date of distribution of the corresponding series of Debentures
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and shall be accompanied by an opinion of counsel that such event will not be a
taxable event to the holders of the Trust Securities for Federal income tax
purposes.
If a termination event occurs as described in clause (i), (ii) or (v) above
with respect to any Issuer, such Issuer shall be liquidated by the Issuer
Trustees as expeditiously as the Issuer Trustees determine to be possible by
distributing, after satisfaction of liabilities to creditors of such Issuer as
provided by applicable law, to the holders of its Trust Securities a like amount
of the corresponding series of Debentures, unless such distribution is
determined by the Property Trustee not to be practical, in which event such
holders will be entitled to receive out of the assets of such Issuer available
for distribution to holders, after satisfaction of liabilities to creditors of
such Issuer as provided by applicable law, an amount equal to, in the case of
holders of Preferred Securities, the aggregate liquidation amount per Preferred
Security specified in the accompanying Prospectus Supplement plus accumulated
and unpaid Distributions thereon to the date of payment (such amount, the
"Liquidation Distribution"). If the Liquidation Distribution with respect to an
Issuer's Preferred Securities can be paid only in part because such Issuer has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable by such Issuer on such Preferred
Securities shall be paid on a pro rata basis. The holders of such Issuer's
Common Securities will be entitled to receive the Liquidation Distribution upon
any such liquidation pro rata with the holders of its Preferred Securities,
except that if a Debenture Event of Default has occurred and is continuing the
Preferred Securities shall have a priority over the Common Securities with
respect to payment of such Liquidation Distribution.
Trust Agreement Event of Default; Notice
A Debenture Event of Default shall constitute a Trust Agreement Event of
Default with respect to the Preferred Securities issued by the related Issuer
under its Trust Agreement.
Within 90 days after the occurrence of any Trust Agreement Event of Default
actually known to the Property Trustee, the Property Trustee shall transmit
notice of such Trust Agreement Event of Default to the holders of the
corresponding Trust Securities, the Administrative Trustee and PSE&G, unless
such Trust Agreement Event of Default shall have been cured or waived. PSE&G
and the Administrative Trustee are required to file annually with the Property
Trustee a certificate as to whether or not they are in compliance with all the
conditions and covenants applicable to them under each Trust Agreement.
Under each Trust Agreement, if the Property Trustee has failed to enforce
its rights under the Trust Agreement or the Indenture to the fullest extent
permitted by law and subject to the terms of the Trust Agreement and the
Indenture, any holder of the corresponding Preferred Securities may institute a
legal proceeding directly to enforce the Property Trustee's rights under the
Trust Agreement or the Indenture with respect to Debentures having a principal
amount equal to the aggregate liquidation amount of the Preferred Securities of
such holder without first instituting a legal proceeding against the Property
Trustee or any other person. To the extent that any action under the Indenture
is entitled to be taken by the holders of at least a specified percentage of the
principal amount of a series of Debentures, holders of the corresponding
Preferred Securities may take such action if such action is not taken by the
Property Trustee. Notwithstanding the foregoing, if a Trust Agreement Event of
Default attributable to PSE&G's failure to pay principal of or premium, if any,
or interest on the Debentures of any series has occurred and is continuing, then
each holder of Preferred Securities of the corresponding series may institute a
legal proceeding directly against PSE&G for enforcement of any such payment to
such holder, all as provided in the Indenture.
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If a Debenture Event of Default has occurred and is continuing with respect
to a series of Debentures, the corresponding Preferred Securities shall have a
preference over the related Issuer's Common Securities with respect to the
payment of Distributions and amounts payable on redemption and liquidation as
described above. See "--Liquidation Distribution Upon Termination" and
"--Subordination of Common Securities."
Removal of Issuer Trustees
Unless a Trust Agreement Event of Default has occurred and is continuing,
any Issuer Trustee may be removed and replaced at any time by the holder of the
Common Securities. If a Trust Agreement Event of Default has occurred and is
continuing, the Property Trustee and the Delaware Trustee may be removed and
replaced at such time only by the holders of at least a majority in aggregate
liquidation amount of the outstanding Preferred Securities. In no event will
the holders of the Preferred Securities have the right to vote to appoint,
remove or replace the Administrative Trustee, which voting rights are vested
exclusively in the holder of the Common Securities. No resignation or removal
of an Issuer Trustee and no appointment of a successor trustee shall be
effective until the acceptance of appointment by the successor trustee in
accordance with the provisions of the applicable Trust Agreement.
Co-Trustees and Separate Property Trustee
Unless a Trust Agreement Event of Default has occurred and is continuing,
at any time and from time to time, for the purpose of meeting the legal
requirements of the Trust Indenture Act or of any jurisdiction in which any part
of the Trust Property (as defined in each Trust Agreement) may at such time be
located, the holder of the Common Securities and the Administrative Trustee
shall have the power (i) to appoint one or more persons approved by the Property
Trustee either to act as co-trustee, jointly with the Property Trustee, of all
or any part of such Trust Property, or to act as separate trustee of any such
Trust Property, in either case with such powers as may be provided in the
instrument of appointment, and (ii) to vest in such person or persons in such
capacity any property, title, right or power deemed necessary or desirable,
subject to the provisions of the applicable Trust Agreement. If a Trust
Agreement Event of Default has occurred and is continuing, only the Property
Trustee shall have power to make such appointment.
Merger or Consolidation of Issuer Trustees
Any corporation or other entity into which any Issuer Trustee may be merged
or converted or with which it may be consolidated, or any corporation or other
entity resulting from any merger, conversion or consolidation to which any
Issuer Trustee shall be a party, or any corporation or other entity succeeding
to all or substantially all the corporate trust business of any Issuer Trustee,
shall be the successor of such Issuer Trustee under the applicable Trust
Agreement, provided such corporation or other entity shall be otherwise
qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Issuers
An Issuer may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any corporation or other entity,
except as described below. An Issuer may, at the request of PSE&G, with the
consent of the Administrative Trustee and without the consent of the holders of
its Preferred Securities, merge with or into, consolidate, amalgamate, or be
replaced by a trust organized as such under the laws of any State, provided that
(i) such successor entity either (a) expressly assumes all of the obligations of
such Issuer with respect to such Preferred Securities or (b) substitutes for
such Preferred Securities
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other securities substantially similar to such Preferred Securities (the
"Successor Securities") so long as the Successor Securities rank the same as
such Preferred Securities rank with respect to the payment of Distributions and
payments upon redemption and liquidation, (ii) PSE&G expressly appoints a
trustee of such successor entity possessing the same powers and duties as the
Property Trustee with respect to the corresponding series of Debentures,
(iii) the Successor Securities are listed, or any Successor Securities will be
listed upon notification of issuance, on any national securities exchange or
other organization on which such Preferred Securities are then listed, (iv) such
merger, consolidation, amalgamation or replacement does not cause such Preferred
Securities (including any Successor Securities) to be downgraded by any
nationally recognized statistical rating organization, (v) such merger,
consolidation, amalgamation or replacement does not adversely affect the rights,
preferences and privileges of the holders of such Preferred Securities
(including any Successor Securities) in any material respect, (vi) such
successor entity has a purpose substantially similar to that of such Issuer,
(vii) prior to such merger, consolidation, amalgamation or replacement, PSE&G
has received an opinion of counsel to such Issuer to the effect that (a) such
merger, consolidation, amalgamation or replacement does not adversely affect the
rights, preferences and privileges of the holders of such Preferred Securities
(including any Successor Securities) in any material respect, and (b) following
such merger, consolidation, amalgamation or replacement, neither such Issuer nor
such successor entity will be required to register as an investment company
under the Investment Company Act of 1940, as amended (the "Investment Company
Act"), and (viii) PSE&G or any permitted successor assignee owns all of the
common securities of such successor entity and guarantees the obligations of
such successor entity under the Successor Securities at least to the extent
provided by the related Guarantee and Trust Agreement. Notwithstanding the
foregoing, an Issuer shall not, except with the consent of all holders of its
Preferred Securities, consolidate, amalgamate, merge with or into, or be
replaced by, any other entity, or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it if such consolidation,
amalgamation, merger or replacement would cause such Issuer or the successor
entity not to be classified as a grantor trust for Federal income tax purposes.
Voting Rights; Amendment of Trust Agreement
Except as provided below and under "--Mergers, Consolidations,
Amalgamations or Replacements of the Issuers" and "Description of the
Guarantee--Amendments and Assignment" and as otherwise required by law and the
applicable Trust Agreement, the holders of the Preferred Securities will have
no voting rights.
A Trust Agreement may be amended from time to time by PSE&G and the Issuer
Trustees, without the consent of the holders of the corresponding Preferred
Securities, (i) to cure any ambiguity, defect or inconsistency or (ii) to make
any other change that does not adversely affect in any material respect the
interests of any holder of such Preferred Securities. A Trust Agreement may be
amended by PSE&G and the Issuer Trustees in any other respect, with the consent
of the holders of at least a majority in aggregate liquidation amount of such
Preferred Securities, except to (i) change the amount, timing or currency or
otherwise adversely affect the method of payment of any Distribution or
Liquidation Distribution, (ii) restrict the right of a holder of any such
Preferred Security to institute suit for enforcement of any Distribution,
Redemption Price or Liquidation Distribution, (iii) change the purpose of the
related Issuer, (iv) authorize the issuance of any additional beneficial
interests in the related Issuer, (v) change the redemption provisions, (vi)
change the conditions precedent for PSE&G to elect to terminate the related
Issuer and distribute the corresponding series of Debentures to the holders of
such Preferred Securities or (vii) affect the limited liability of any holder of
such Preferred Securities, which amendment requires the consent of each holder
of the related Preferred Securities affected thereby. Notwithstanding the
foregoing, no amendment may be made without receipt by the related Issuer of an
opinion of counsel to the effect that such amendment will not affect such
Issuer's
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status as a grantor trust for Federal income tax purposes or its exemption from
regulation as an investment company under the Investment Company Act.
The Issuer Trustees shall not (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee or
executing any trust or power conferred on the Debenture Trustee with respect to
the corresponding series of Debentures, (ii) waive any past default pursuant to
Section 6.04 of the Indenture, (iii) exercise any right to rescind or annul an
acceleration of the principal of the corresponding series of Debentures or (iv)
consent to any amendment or modification of the Indenture, where such consent
shall be required, without, in each case, obtaining the consent of the holders
of at least a majority in aggregate liquidation amount of all outstanding
Preferred Securities of the corresponding series; provided, however, that where
a consent under the Indenture would require the consent of each holder of
Debentures affected thereby, no such consent shall be given by the Property
Trustee without the prior consent of each holder of the corresponding Preferred
Securities. The Issuer Trustees shall not revoke any action previously
authorized or approved by a vote of the holders of such Preferred Securities
except by subsequent vote of the holders thereof. The Property Trustee shall
notify all holders of Preferred Securities of any notice received from the
Debenture Trustee as a result of the Issuer thereof being the holder of the
corresponding Debentures. In addition to obtaining the consent of the holders
of the Preferred Securities of the corresponding series, prior to taking any of
the foregoing actions, the Issuer Trustees shall obtain an opinion of counsel to
the effect that the related Issuer will not be classified as an association
taxable as a corporation or a partnership for Federal income tax purposes on
account of such action and will continue to be classified as a grantor trust for
Federal income tax purposes.
Any required consent of holders of Preferred Securities may be given at a
meeting of holders of such Preferred Securities convened for such purpose or
pursuant to written consent. The Property Trustee will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be given to each holder of record of such Preferred Securities in the manner set
forth in the applicable Trust Agreement.
Notwithstanding that holders of Preferred Securities are entitled to vote
or consent under certain circumstances, any Preferred Securities that are owned
by PSE&G, the Issuer Trustees or any affiliate of PSE&G or any Issuer Trustee
shall, for purposes of such vote or consent, be treated as if they were not
outstanding.
Book-Entry-Only Issuance--The Depository Trust Company
The Depository Trust Company ("DTC") will act as securities depositary for
all of the Preferred Securities. The Preferred Securities will be issued only
as fully-registered securities registered in the name of Cede & Co. (DTC's
nominee) as the holder thereof. One or more fully-registered global securities
will be issued for the Preferred Securities of each Issuer, representing in the
aggregate the total number of such Issuer's Preferred Securities, and will be
deposited with DTC.
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
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physical movement of securities certificates. Direct participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations ("Direct Participants"). DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, the
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain custodial relationships with Direct Participants, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the SEC.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the transactions,
as well as periodic statements of their holdings, from the Direct or Indirect
Participants through which the Beneficial Owners purchased Preferred Securities.
Transfers of ownership interests in the Preferred Securities are to be
accomplished by entries made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing
their ownership interests in Preferred Securities, except in the event that use
of the book-entry system for the Preferred Securities of such Issuer is
discontinued.
DTC has no knowledge of the actual Beneficial Owners of the Preferred
Securities; DTC's records reflect only the identity of the Direct Participants
to whose accounts such Preferred Securities are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for keeping
account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants and by Direct and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in
effect from time to time.
Redemption notices shall be sent to Cede & Co. as the registered holder of
the Preferred Securities. If less than all of an Issuer's Preferred Securities
are being redeemed, DTC's practice is to determine by lot the amount of the
interest of each Direct Participant to be redeemed.
Although voting with respect to the Preferred Securities is limited to the
holders of record of the Preferred Securities, in those instances in which a
vote is required, neither DTC nor Cede & Co. will itself consent or vote with
respect to the Preferred Securities. Under its usual procedures, DTC would mail
an omnibus proxy (the "Omnibus Proxy") to the Property Trustee as soon as
possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those Direct Participants to whose accounts such
Preferred Securities are credited on the record date (identified in a listing
attached to the Omnibus Proxy).
Distributions on the Preferred Securities will be made in immediately
available funds by the Property Trustee on behalf of the related Issuer to DTC.
DTC's practice is to credit Direct Participants' accounts on the relevant
payment date in accordance with their respective holdings shown on DTC's records
unless DTC has reason to believe that it will not receive payments on such
payment date. Payments by Participants to Beneficial Owners will be governed
by standing instructions and customary practices and will be the responsibility
of such Participant and not of DTC, the Property Trustee, the Issuer of the
relevant Preferred Securities 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
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responsibility of the Property Trustee on behalf of the related Issuer,
disbursement of such payments to Direct Participants is the responsibility of
DTC and disbursements of such payments to the Beneficial Owners is the
responsibility of the Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to any series of Preferred Securities at any time by giving reasonable
notice to the Property Trustee and PSE&G. In the event that a successor
securities depositary is not obtained, definitive Preferred Security
certificates representing such Preferred Securities are required to be printed
and delivered. PSE&G, at its option, may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor depositary) as a
result of such discontinuance or as a result of DTC's ineligibility to so act,
in which case definitive certificates for such Preferred Securities will be
issued. After a Trust Agreement Event of Default, the related Issuer will issue
definitive certificates for such Issuer's Preferred Securities. Upon
distribution of definitive Preferred Securities certificates, owners of such
Preferred Securities will become the registered holders of such Preferred
Securities.
The information set forth above concerning DTC and DTC's book-entry system
has been obtained from sources that the Issuers and PSE&G believe to be
accurate, but the Issuers and PSE&G assume no responsibility for the accuracy
thereof. Neither the Issuers nor PSE&G has any responsibility for the
performance by DTC or its Participants of their respective obligations as
described herein or under the rules and procedures governing their respective
operations.
In the event that the book-entry-only system is discontinued, the payment
of any Distribution, Redemption Price and Liquidation Distribution in respect of
a series of Preferred Securities will be payable in the manner described in the
accompanying Prospectus Supplement, and the following provisions would apply.
The Property Trustee shall keep the registration books for such Preferred
Securities at its corporate office. Such Preferred Securities may be
transferred or exchanged for one or more Preferred Securities upon surrender
thereof at the corporate office of the Property Trustee by the holders or their
duly authorized attorneys or legal representatives. Upon surrender of any
Preferred Securities to be transferred or exchanged, the Property Trustee shall
record the registration of transfer or exchange in the registration books and
shall deliver new Preferred Securities appropriately registered. The Property
Trustee shall not be required to register the transfer of any Preferred
Securities that have been called for redemption or on or after the liquidation
date. The Issuers and the Property Trustee shall be entitled to treat the
holders of the related Preferred Securities, as their names appear in the
registration books, as the owners of those Preferred Securities for all purposes
under the applicable Trust Agreement.
Information Concerning the Property Trustee
The Property Trustee is the sole Trustee under each Trust Agreement for
purposes of the Trust Indenture Act and shall have and be subject to all of the
duties and responsibilities specified with respect to an indenture trustee under
the Trust Indenture Act. The Property Trustee, other than during the occurrence
and continuance of a Trust Agreement Event of Default, undertakes to perform
only such duties as are specifically set forth in each Trust Agreement and, upon
a Trust Agreement Event of Default, must use the same degree of care and skill
in the exercise thereof as a prudent person would exercise or use in the conduct
of his or her own affairs. Subject to this provision, the Property Trustee is
under no obligation to exercise any of the powers vested in it by any Trust
Agreement at the request of any holder of Preferred Securities unless it is
offered reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred thereby. If no Trust Agreement Event of
Default has occurred and is continuing, and the Property Trustee is required to
decide between
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alternative courses of action, construe ambiguous provisions in a Trust
Agreement or is unsure of the application of any provision of a Trust Agreement,
and the matter is not one on which holders of Preferred Securities are entitled
under such Trust Agreement to vote, then the Property Trustee shall take such
action as is directed by PSE&G and, if not so directed, may take such action as
it deems advisable and in the best interests of the holders of the corresponding
Trust Securities and will have no liability except for its own negligent action,
negligent failure to act or willful misconduct.
Miscellaneous
The Administrative Trustee is authorized and directed to conduct the
affairs of and to operate the Issuers in such a way that (i) no Issuer will be
deemed to be an "investment company" required to be registered under the
Investment Company Act or to be taxed as a corporation or partnership for
Federal income tax purposes, (ii) each Issuer will be classified as a grantor
trust for Federal income tax purposes and (iii) the Debentures held by such
Issuers will be treated as indebtedness of PSE&G for Federal income tax
purposes. In this connection, PSE&G and the Administrative Trustee are
authorized to take any action, not inconsistent with applicable law, the
applicable certificate of trust of the related Issuer or the applicable Trust
Agreement, that PSE&G and the Administrative Trustee determine in their
discretion to be necessary or desirable for such purposes, even if such action
adversely affects the interests of the holders of the corresponding Preferred
Securities.
Holders of the Preferred Securities have no preemptive or similar rights.
No Issuer may borrow money, issue debt, execute mortgages or pledge any of
its assets.
Except as otherwise provided in the Trust Agreements, any action requiring
the consent or vote of the Issuer Trustees shall be approved by the
Administrative Trustee.
Governing Law
The Trust Agreements will be governed by and construed in accordance with
the laws of the State of Delaware.
DESCRIPTION OF THE GUARANTEE
Each Guarantee will be executed and delivered by PSE&G concurrently with
the issuance by each Issuer of its Preferred Securities for the benefit of the
holders from time to time of such Preferred Securities. Each Guarantee will
be qualified as an indenture under the Trust Indenture Act and First Union
National Bank will act as indenture trustee (the "Guarantee Trustee") under
each Guarantee for the purposes of compliance with the Trust Indenture Act.
Reference under this caption to Preferred Securities means the Preferred
Securities to which a Guarantee relates. The Guarantee Trustee will hold each
Guarantee for the benefit of the holders of the related Issuer's Preferred
Securities.
General
PSE&G will irrevocably agree, to the extent set forth in each Guarantee,
to pay in full, to the holders of the related Issuer's Preferred Securities,
the Guarantee Payments (as defined below) (except to the extent previously paid
by or on behalf of such Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim which such Issuer may have or assert. The
following payments, to the extent not paid by an Issuer (the "Guarantee
Payments"), will be subject to the applicable
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Guarantee (without duplication): (i) any accumulated and unpaid Distributions
required to be paid on such Preferred Securities, to the extent that such Issuer
has funds available therefor, (ii) the Redemption Price to the extent that such
Issuer has funds available therefor, and (iii) upon a voluntary or involuntary
termination and liquidation of such Issuer (unless the corresponding series of
Debentures are distributed to holders of such Preferred Securities), the lesser
of (a) the aggregate of the liquidation amount specified in the Prospectus
Supplement per Preferred Security plus all accumulated and unpaid Distributions
on the Preferred Securities to the date of payment, to the extent the Issuer has
funds available therefor and (b) the amount of assets of such Issuer remaining
available for distribution to holders of Preferred Securities upon a termination
and liquidation of such Issuer. 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 the corresponding Preferred Securities or by causing the related
Issuer to pay such amounts to such holders. While the assets of PSE&G will not
be available pursuant to the Guarantee for the payment of any Distribution,
Liquidation Distribution or Redemption Price on any Preferred Securities if the
related Issuer does not have funds available therefor as described above, PSE&G
has agreed under the applicable Trust Agreement to pay all expenses of such
Issuer except such Issuer's obligations under its Preferred Securities.
Accordingly, the applicable Guarantee, together with the backup undertakings
consisting of PSE&G's obligations under the applicable Trust Agreement, the
corresponding series of Debentures and the Indenture, provide for PSE&G's full,
irrevocable and unconditional guarantee of the Preferred Securities.
No single document executed by PSE&G in connection with the issuance of a
series of Preferred Securities will provide for PSE&G's full, irrevocable and
unconditional guarantee of the Preferred Securities. It is only the combined
operation of PSE&G's obligations under the applicable Guarantee, the applicable
Trust Agreement, the corresponding series of Debentures and the Indenture that
has the effect of providing a full, irrevocable and unconditional guarantee of
an Issuer's obligations under its Preferred Securities. See "Relationship
Among the Preferred Securities, the Debentures and the Guarantee."
Status of the Guarantee
Each Guarantee will constitute an unsecured obligation of PSE&G and will
rank subordinate and junior in right of payment to all general liabilities of
PSE&G. The Trust Agreements provide that each holder of Preferred Securities by
acceptance thereof agrees to the subordination provisions and other terms of the
related Guarantee. Each Guarantee will rank pari passu with all other
Guarantees issued by PSE&G. Each Guarantee will constitute a guarantee of
payment and not of collection (i.e., the guaranteed party may institute a legal
proceeding directly against PSE&G to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or
entity). Each Guarantee will not be discharged except by payment of the
Guarantee Payments in full to the extent not previously paid or upon
distribution to the holders of the Preferred Securities of the corresponding
series of Debentures pursuant to the applicable Trust Agreement.
Amendments and Assignment
Except with respect to any changes which do not materially adversely affect
the rights of holders of the corresponding Preferred Securities (in which case
no consent of the holders will be required), no Guarantee may be amended without
the prior approval of the holders of at least a majority in aggregate
liquidation amount of such Preferred Securities (excluding any Preferred
Securities held by PSE&G or an affiliate thereof). The manner of obtaining any
such approval will be as set forth under "Description of the Preferred
Securities--Voting Rights; Amendment of Trust Agreement." All agreements
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contained in each Guarantee shall bind the successors, assigns, receivers,
trustees and representatives of PSE&G and shall inure to the benefit of the
holders of the corresponding Preferred Securities.
Guarantee Events of Default
An event of default under a Guarantee (a "Guarantee Event of Default") will
occur upon the failure of PSE&G to perform any of its payment or other
obligations thereunder, provided that except with respect to a Guarantee Event
of Default resulting from a failure to make any of the Guarantee Payments, PSE&G
shall have received notice of such Guarantee Event of Default from the Guarantee
Trustee and shall not have cured such Guarantee Event of Default within 60 days
after receipt of such notice. The holders of at least a majority in aggregate
liquidation amount of the corresponding Preferred Securities (excluding any
Preferred Securities held by PSE&G or an affiliate thereof) will have the right
to direct the time, method and place of conducting any proceeding for any remedy
available to the Guarantee Trustee in respect of such Guarantee or to direct the
exercise of any trust or power conferred upon the Guarantee Trustee under such
Guarantee.
Any holder of the corresponding Preferred Securities may institute a
legal proceeding directly against PSE&G to enforce such holder's rights under
such Guarantee without first instituting a legal proceeding against the related
Issuer, the Guarantee Trustee or any other person or entity.
PSE&G, as guarantor, will be required to file annually with the Guarantee
Trustee a certificate as to whether or not PSE&G is in compliance with all the
conditions and covenants applicable to it under each Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, other than during the occurrence and continuance of
a Guarantee Event of Default, undertakes to perform only such duties as are
specifically set forth in each Guarantee and, upon a Guarantee Event of Default,
must exercise such of the rights and powers vested in it by the Guarantee and to
use the same degree of care and skill in the exercise thereof as a prudent
person would exercise or use in the conduct of his or her own affairs. Subject
to this provision, the Guarantee Trustee is under no obligation to exercise any
of the powers vested in it by any Guarantee at the request of any holder of
Preferred Securities unless it is offered reasonable indemnity against the
costs, expenses and liabilities that might be incurred thereby.
Termination of the Guarantee
Each Guarantee will terminate and be of no further force and effect upon
full payment of the Redemption Price or Liquidation Distribution for the
corresponding Preferred Securities or upon distribution of the corresponding
series of Debentures to the holders of the corresponding Preferred Securities.
Each Guarantee will continue to be effective or will be reinstated, as the case
may be, if at any time any holder of the corresponding Preferred Securities must
restore payment of any sums paid under such Preferred Securities or such
Guarantee.
Governing Law
Each Guarantee will be governed by and construed in accordance with the
laws of the State of New Jersey.
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DESCRIPTION OF THE DEBENTURES
General
The Debentures will be issued in one or more series under the Indenture.
Each series of Debentures will rank pari passu with all other series of
Debentures and the $154,639,176 aggregate principal amount of PSE&G's 9-3/8%
Deferrable Interest Subordinated Debentures, Series A and the $61,855,670
aggregate principal amount of PSE&G's 8% Deferrable Interest Subordinated
Debentures, Series B (together, the "MIPs Debentures"). Each series of
Debentures will be unsecured and will rank subordinate and junior in right of
payment, to the extent and in the manner set forth in the Indenture, to all
Senior Indebtedness (as defined below) of PSE&G. See "--Subordination." The
Indenture does not limit the incurrence or issuance of Senior Indebtedness by
PSE&G.
The accompanying Prospectus Supplement will describe the following terms of
any series of Debentures: (i) the title of such series of Debentures; (ii) the
aggregate principal amount of such series of Debentures; (iii) the date or dates
on which the principal of such series of Debentures shall be payable or the
method of determination thereof; (iv) the rate or rates, if any, at which such
series of Debentures shall bear interest, the interest payment dates on which
any such interest shall be payable or the method by which any of the foregoing
shall be determined; (v) any terms regarding redemption; (vi) the maximum
Extension Period for such series of Debentures; and (vii) any other terms of
such series of Debentures not inconsistent with the provisions of the Indenture.
Certain Federal income tax consequences and special considerations relating
to the applicable series of Debentures will be described in the accompanying
Prospectus Supplement.
Option to Extend Interest Payment Period
Under the Indenture, PSE&G shall have the right at any time and from time
to time, so long as no Debenture Event of Default has occurred and is continuing
with respect to such series of Debentures, to defer payments of interest by
extending the interest payment period for such series of Debentures for up to
the maximum Extension Period provided for such series of Debentures, provided
that no Extension Period shall extend beyond the maturity or any redemption date
of such series of Debentures. At the end of the Extension Period, PSE&G shall
be obligated to pay all interest then accrued and unpaid (together with interest
thereon to the extent permitted by applicable law). During any Extension
Period, PSE&G may not declare or pay any dividend on, or redeem, purchase,
acquire, or make a liquidation payment with respect to, any shares of PSE&G's
capital stock. Prior to the termination of any Extension Period, PSE&G may
shorten or further extend the interest payment period, provided that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed the maximum Extension Period for such series of
Debentures or extend beyond the maturity or any redemption date of such series
of Debentures. Upon the termination of any Extension Period and the payment of
all amounts then due, PSE&G may elect to begin a new Extension Period, subject
to the above requirements. PSE&G shall be required to give notice to the
Debenture Trustee and cause the Debenture Trustee to give notice to the holders
of the applicable series of Debentures of its election to begin an Extension
Period, or any shortening or extension thereof, at least one Business Day prior
to the date the notice of the record or payment date of the related Distribution
on the corresponding series of Preferred Securities or payment of interest on
such Debentures is required to be given to any national securities exchange on
which such Debentures or such Preferred Securities are then listed or other
applicable self-regulatory organization but in any event not less than two
Business Days prior to such record date.
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If during any Extension Period PSE&G fails to pay dividends on 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, will be 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.
Subordination
All payments by PSE&G in respect of the Debentures shall be subordinated to
the prior payment in full of all amounts payable on Senior Indebtedness. The
term "Senior Indebtedness" means (i) the principal of and premium, if any, in
respect of (a) indebtedness of PSE&G for money borrowed and (b) indebtedness
evidenced by securities, debentures, bonds or other similar instruments issued
by PSE&G; (ii) all capital lease obligations of PSE&G; (iii) all obligations of
PSE&G issued or assumed as the deferred purchase price of property, all
conditional sale obligations of PSE&G and all obligations of PSE&G under any
title retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) certain obligations of PSE&G for the
reimbursement of any obligation, any letter of credit, banker's acceptance,
security purchase facility or similar credit transaction entered into in the
ordinary course of business of PSE&G; (v) all obligations of the type referred
to in clauses (i) through (iv) of other persons and all dividends of other
persons (other than the Preferred Securities or similar securities) for the
payment of which, in either case, PSE&G is responsible or liable as obligor,
guarantor or otherwise (other than each Guarantee and obligations ranking pari
passu with such Guarantee); and (vi) certain obligations of the type referred to
in clauses (i) through (v) of other persons secured by any lien on any property
or asset of PSE&G (whether or not such obligation is assumed by PSE&G), except
for any such indebtedness that is by its terms subordinated to or pari passu
with the Debentures and for indebtedness between or among PSE&G and its
affiliates.
Upon any payment or distribution of 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 Debentures or the Debenture Trustee on behalf of
such holders shall be entitled to receive from PSE&G any payment of principal
of, premium, if any, or interest on, the Debentures or distributions of any
assets or securities.
No direct or indirect payment by or on behalf of PSE&G of principal of,
premium, if any, or interest on, the Debentures, whether pursuant to the terms
of the Debentures or upon acceleration or otherwise, shall be made if, at the
time of such payment, there exists (i) a default in the payment of all or any
portion of any Senior Indebtedness or (ii) any other default pursuant to which
the maturity of Senior Indebtedness has been accelerated and, in either case,
requisite notice has been given to the Debenture Trustee and such default shall
not have been cured or waived by or on behalf of the holders of such Senior
Indebtedness.
If the Debenture Trustee or any holder of the Debentures shall have
received any payment on account of the principal of, premium, if any, or
interest on, the Debentures when such payment is prohibited and before all
amounts payable on Senior Indebtedness are paid in full, then such payment shall
be received and held in trust for the holders of Senior Indebtedness and shall
be paid to the holders of the Senior Indebtedness remaining unpaid to the extent
necessary to pay such Senior Indebtedness in full.
18
<PAGE>
Nothing in the Indenture shall limit the right of the Debenture Trustee or
the holders of the Debentures to take any action to accelerate the maturity of
the Debentures or to pursue any rights or remedies against PSE&G, provided that
all Senior Indebtedness shall be paid before holders of the Debentures are
entitled to receive any payment from PSE&G of principal of, premium, if any, or
interest on, the Debentures.
Upon the payment in full of all Senior Indebtedness, the holders of the
Debentures shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments or distributions of assets of PSE&G made on
such Senior Indebtedness until the Debentures shall be paid in full.
Certain Covenants of PSE&G
PSE&G will covenant that it may not declare or pay any dividend on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any
shares of PSE&G's capital stock (i) during an Extension Period, (ii) if there
has occurred and is continuing any event that is, or, with the giving of notice
or the lapse of time or both would constitute, a Debenture Event of Default or
(iii) if PSE&G is in default with respect to its payment or other obligations
under any Guarantee. See "--Debenture Events of Default" and "Description of
the Guarantee--Guarantee Events of Default."
Any waiver of any Debenture Event of Default will require the approval of
at least a majority of the aggregate principal amount of the corresponding
series of Debentures or, if such Debentures are held by an Issuer, the approval
of at least a majority in aggregate liquidation amount of the Preferred
Securities of such Issuer; provided, however, that a Debenture Event of Default
resulting from the failure to pay the principal of, premium, if any, or interest
on, such Debentures may not be waived.
Modification of the Indenture
From time to time, PSE&G and the Debenture Trustee, without notice to or
the consent of any holders of Debentures, may amend or supplement the Indenture
for any of the following purposes: (i) to cure any ambiguity, defect or
inconsistency; (ii) to comply with the provisions of the Indenture regarding
consolidation, merger or sale, conveyance, transfer or lease of the properties
as an entirety or substantially as an entirety of PSE&G; (iii) to provide for
uncertificated Debentures in addition to or in place of certificated Debentures;
(iv) to make any other change that does not in the reasonable judgment of PSE&G
adversely affect the rights of any holder of the Debentures; (v) to comply with
any requirement of the SEC in connection with the qualification of the Indenture
under the Trust Indenture Act; or (vi) to set forth the terms and conditions,
which shall not be inconsistent with the Indenture, of any series of Debentures
and the form of Debentures of such series.
In addition, PSE&G and the Debenture Trustee may modify the Indenture or
any supplemental indenture or waive future compliance by PSE&G with the
provisions of the Indenture, with the consent of the holders of at least a
majority of the aggregate principal amount of the Debentures of each series
affected thereby, provided that no such modification, without the consent of
each holder of such Debentures, may (i) reduce the principal amount of such
Debentures, (ii) reduce the principal amount of outstanding Debentures of any
series the holders of which must consent to an amendment of the Indenture or a
waiver, (iii) change the stated maturity of the principal of, or interest on, or
the rate of interest on, such Debentures, (iv) change the redemption provisions
applicable to such Debentures adversely to the holders thereof, (v) impair the
right to institute suit for the enforcement of any payment with respect to such
Debentures, (vi) change the currency in which payments with respect to such
Debentures are to be made, or (vii) change the subordination provisions
applicable to such Debentures adversely to the holders thereof, provided that if
such
19
<PAGE>
Debentures are held by an Issuer, no modification shall be made that adversely
affects the holders of the Preferred Securities of such Issuer, and no waiver of
any Debenture Event of Default with respect to such Debentures or compliance
with any covenant under the Indenture shall be effective, without the prior
consent of the holders of at least a majority of the aggregate liquidation
amount of the Preferred Securities of such Issuer or the holder of each such
Preferred Security, as applicable.
Debenture Events of Default
The following are "Debenture Events of Default" with respect to the
Debentures of any series: (i) default for 30 days in payment of any interest on
any Debenture of that series (other than the payment of interest during an
Extension Period); (ii) default in payment of principal of or premium, if any,
on any Debenture of that series when the same becomes due and payable; (iii)
default for 60 days after receipt by PSE&G of a "Notice of Default" in the
performance of or failure to comply with any other covenant or agreement for
such series of Debentures or in the Indenture or any supplemental indenture
under which such series of Debentures may have been issued or (iv) certain
events of bankruptcy, insolvency or reorganization of PSE&G. In case a
Debenture Event of Default has occurred and is continuing, other than one
relating to bankruptcy, insolvency or reorganization of PSE&G, in which case the
principal of, premium, if any, and any interest on, all of the Debentures of the
applicable series shall become immediately due and payable, the Debenture
Trustee or the holders of at least 25% in aggregate principal amount of the
Debentures of that series may declare the principal, together with interest
accrued thereon, of all the Debentures of that series to be due and payable;
provided, however, that if a Debenture Event of Default has occurred and is
continuing with respect to such Debentures and the Debenture Trustee or the
holders of at least 25% in aggregate principal amount of such series of
Debentures fail to declare the principal of such series of Debentures to be
immediately due and payable, then, if such Debentures are held by an Issuer, the
holders of at least 25% in aggregate liquidation amount of the corresponding
Preferred Securities shall have such right by written notice to PSE&G and the
Debenture Trustee. The holders of at least a majority in aggregate principal
amount of such series of Debentures, by notice to the Debenture Trustee, may
rescind an acceleration, provided that if the principal of such Debentures has
been declared due and payable by the holders of the corresponding Preferred
Securities, no rescission of such acceleration will be effective unless
consented to by the holders of at least a majority in aggregate liquidation
amount of the corresponding Preferred Securities.
PSE&G will be required to furnish to the Debenture Trustee annually a
statement as to the compliance by PSE&G with all conditions and covenants under
the Indenture and the Debentures and as to any Debenture Event of Default.
Consolidation, Merger, Sale or Conveyance
PSE&G may not consolidate with or merge with or into any other person or
sell, convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to any person, unless (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 Debentures and the
Indenture; (ii) immediately after giving effect to such transaction, no
Debenture Event of Default, and no event which after notice or lapse of time or
both would become a Debenture Event of Default, has occurred and is continuing;
and (iii) certain other conditions prescribed in the Indenture are met.
20
<PAGE>
Defeasance and Discharge
Under the terms of the Indenture, PSE&G will be discharged from any and all
obligations in respect of the Debentures of any series if PSE&G deposits with
the Debenture Trustee, in trust, (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, premium, if any, and
interest on, the Debentures of such series on the dates such payments are due in
accordance with the terms of such Debentures.
Information Concerning the Debenture Trustee
Subject to the provisions of the Indenture relating to its duties, the
Debenture Trustee will be under no obligation to exercise any of its rights or
powers under the Indenture at the request, order or direction of the holders of
any series of Debentures or the holders of the corresponding Preferred
Securities, unless such holders shall have offered to the Debenture Trustee
reasonable security and indemnity. Subject to such provision for
indemnification, the holders of at least a majority in aggregate principal
amount of any series of Debentures affected or the holders of at least a
majority in aggregate liquidation amount of the corresponding Preferred
Securities (with each such series voting as a class), as applicable, will have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Debenture Trustee with respect to such series of
Debentures or exercising any trust or power conferred on the Debenture Trustee.
The Indenture will contain limitations on the right of the Debenture
Trustee, as a creditor of PSE&G, to obtain payment of claims in certain cases,
or to realize on certain property received in respect of any such claim as
security or otherwise. In addition, the Debenture Trustee may be deemed to have
a conflicting interest and may be required to resign as Debenture Trustee if at
the time of a Debenture Event of Default (i) it is a creditor of PSE&G or (ii)
there is a default under either of the indentures referred to below.
First Union National Bank is the Trustee under PSE&G's Indenture dated
August 1, 1924, with respect to PSE&G's First and Refunding Mortgage Bonds and
PSE&G's Indenture dated as of November 1, 1994, as supplemented, with respect to
the MIPs Debentures. PSE&G also maintains other normal banking relationships
with First Union National Bank.
Governing Law
The Indenture will be governed by and construed in accordance with the laws
of the State of New Jersey.
RELATIONSHIP AMONG THE PREFERRED SECURITIES,
THE DEBENTURES AND THE GUARANTEE
Payments of Distributions and redemption and liquidation payments due on a
series of Preferred Securities (to the extent the Issuer thereof has funds
available for such payments) will be guaranteed by PSE&G as and to the extent
set forth under "Description of the Guarantee." No single document executed by
PSE&G in connection with the issuance of a series of Preferred Securities will
provide for PSE&G's full, irrevocable and unconditional guarantee of the
Preferred Securities. It is only the combined operation of PSE&G's obligations
under the applicable Guarantee, the applicable Trust Agreement, the
corresponding series of Debentures and the Indenture that has
21
<PAGE>
the effect of providing a full, irrevocable and unconditional guarantee of an
Issuer's obligations under its Preferred Securities.
A holder of any corresponding Preferred Security may institute a legal
proceeding directly against PSE&G to enforce its rights under such Guarantee
without first instituting a legal proceeding against the Guarantee Trustee, the
related Issuer or any other person or entity.
As long as PSE&G makes payments of interest and other payments when due on
a series of Debentures, such payments will be sufficient to cover the payment of
Distributions and redemption and liquidation payments due on the corresponding
Preferred Securities, primarily because (i) the aggregate principal amount of
such series of Debentures will be equal to the sum of the aggregate liquidation
amount of the corresponding Preferred Securities and Common Securities, (ii) the
interest rate and interest and other payment dates on such series of Debentures
will match the Distribution rate and Distribution and other payment dates for
the corresponding Preferred Securities, (iii) the applicable Trust Agreement
provides that PSE&G shall pay for all and any costs, expenses and liabilities of
the Issuer of such Preferred Securities except such Issuer's obligations under
such Preferred Securities, and (iv) the applicable Trust Agreements provide that
no Issuer will engage in any activity that is not consistent with the limited
purposes of such Issuer. If and to the extent that PSE&G does not make payments
on any series of Debentures, such Issuer will not have funds available to make
payments of Distributions or other amounts due on the corresponding Preferred
Securities.
A principal difference between the rights of a holder of a Preferred
Security (which represents an undivided beneficial interest in the assets of the
Issuer thereof) and a holder of a Debenture is that a holder of a Debenture will
accrue, and (subject to the permissible extension of the interest payment
period) is entitled to receive, interest on the principal amount of Debentures
held, while a holder of Preferred Securities is entitled to receive
Distributions only if and to the extent such Issuer has funds available for the
payment of such Distributions.
Upon any voluntary or involuntary termination or liquidation of any Issuer
not involving a distribution of any series of Debentures, the holders of the
corresponding Preferred Securities will be entitled to receive, out of assets
held by such Issuer, the Liquidation Distribution in cash. See "Description of
the Preferred Securities--Liquidation Distribution Upon Termination." Upon any
voluntary liquidation or bankruptcy of PSE&G, each Issuer, as holder of the
Debentures, would be a creditor of PSE&G, subordinated in right of payment to
all Senior Indebtedness, but entitled to receive payment in full of principal,
premium, if any, and interest, before any stockholders of PSE&G receive payments
or distributions. Since PSE&G will be the guarantor under each Guarantee and
has agreed to pay for all costs, expenses and liabilities of each Issuer (other
than an Issuer's obligations to the holders of its Preferred Securities), the
positions of a holder of such Preferred Securities and a holder of such
Debentures relative to other creditors and to stockholders of PSE&G in the event
of liquidation or bankruptcy of PSE&G would be substantially the same.
A default or event of default under any Senior Indebtedness would not
constitute a Debenture Event of Default. However, in the event of payment
defaults under, or acceleration of, Senior Indebtedness, the subordination
provisions of the Debentures provide that no payments may be made in respect of
the Debentures until such Senior Indebtedness has been paid in full or any
payment default thereunder has been cured or waived. Failure to make required
payments on any series of Debentures would constitute a Debenture Event of
Default.
22
<PAGE>
PROPOSED TAX LAW CHANGES
On December 7, 1995, President Clinton proposed certain tax law changes
that would, among other things, generally deny interest deductions to corporate
issuers if the debt instrument has a term exceeding 20 years and is not
reflected as indebtedness on such issuer's consolidated balance sheet. However,
on March 29, 1996, the Chairmen of the Senate Finance Committee and the House
Ways and Means Committee issued a joint statement to the effect that it was
their intention that the effective date of the President's legislative
proposals, if adopted, will be not earlier than the date of appropriate
Congressional action. The term of each series of Debentures may vary and may
exceed 20 years. PSE&G cannot predict what effect, if any, the proposals
discussed above will have on any series of Debentures; however, if such
proposals are adopted, PSE&G would not be able to deduct interest paid on such
Debentures which could, depending on the specific terms of such Debentures and
the corresponding series of Preferred Securities, give rise to the right of
PSE&G to redeem such Debentures and thereby cause a mandatory redemption of the
corresponding series of Preferred Securities. Federal income tax information and
consequences and redemption provisions, if any, relating to each series of
Debentures and corresponding series of Preferred Securities will be discussed as
applicable in the accompanying Prospectus Supplement.
PLAN OF DISTRIBUTION
The Issuers may offer or sell Preferred Securities offered hereby to one or
more underwriters for public offering and sale by them. The Issuers may sell
Preferred Securities as soon as practicable after effectiveness of the
Registration Statement. Any such underwriter involved in the offer and sale of
the Preferred Securities will be named in an accompanying Prospectus Supplement.
Underwriters may offer and sell the Preferred Securities at a fixed price
or prices, which may be changed, or from time to time at market prices
prevailing at the time of sale, at prices relating to such prevailing market
prices or at negotiated prices. In connection with the sale of Preferred
Securities, underwriters may be deemed to have received compensation from PSE&G
in the form of underwriting discounts or commissions and may also receive
commissions. Underwriters may sell Preferred Securities to or through dealers,
and such dealers may receive compensation in the form of discounts, concessions
or commissions from such underwriters.
Any underwriting compensation paid by PSE&G on behalf of the Issuers to
underwriters in connection with the offering of Preferred Securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in an accompanying Prospectus Supplement.
Underwriters and dealers participating in the distribution of the Preferred
Securities may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the Preferred
Securities may be deemed to be underwriting discounts and commissions, under the
Securities Act of 1933, as amended (the "Securities Act"). Underwriters and
dealers may be entitled, under agreement with PSE&G and the Issuers, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by PSE&G
for certain expenses.
Underwriters and dealers may engage in transactions with, or perform
services for, PSE&G and/or any of its 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 Issuers for public offering and sale may make a
market in such Preferred Securities but such underwriters will not be obligated
to do so and may discontinue any market making at any time without notice. The
Preferred Securities may or may not be listed on a national securities exchange.
No assurance can be given as to the liquidity of or the existence of trading
markets for any Preferred Securities.
LEGAL MATTERS
Certain legal matters will be passed upon for PSE&G 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 the
Issuers, and by Richards, Layton & Finger, special Delaware counsel to PSE&G and
the Issuers, 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 and on the opinion of Richards, Layton & Finger as to matters
of Delaware law.
23
<PAGE>
EXPERTS
The consolidated financial statements and related financial statement
schedules of PSE&G incorporated by reference in this Prospectus have been
audited by Deloitte & Touche LLP, independent auditors, for the periods
indicated in their report thereon which is included in the Annual Report on Form
10-K for the year ended December 31, 1995. The consolidated financial
statements and related financial statement schedules audited by Deloitte &
Touche LLP have been incorporated herein by reference in reliance on their
report given on their authority as experts in accounting and auditing.
24
<PAGE>
============================== ===================================
__________ Preferred Securities
No person has been
authorized to give any PSE&G Capital Trust I
information or to make any
representations other than _____% Cumulative Quarterly
those contained in this Income Preferred
Prospectus Supplement or the Securities, Series A
Prospectus and, if given or
made, such information or GUARANTEED TO THE EXTENT
REPRESENTATIONS MUST NOT BE PSE&G CAPITAL TRUST I HAS AVAILABLE
RELIED UPON AS HAVING BEEN FUNDS AS SET FORTH HEREIN BY
AUTHORIZED. THIS PROSPECTUS
Supplement and the Prospectus
do not constitute an offer to PUBLIC SERVICE ELECTRIC
sell or the solicitation of AND GAS COMPANY
any offer to buy any
securities other than the
securities described in this
Prospectus Supplement and the
Prospectus or an offer to sell
or the solicitation of an
offer to buy such securities
in any circumstances in which
such offer or solicitation is
unlawful. Neither the
delivery of this Prospectus
Supplement or the Prospectus
nor any sale made hereunder or
thereunder shall, under any
circumstances, create any
implication that there has
been no change in the affairs
of PSE&G since the date hereof
or that the information
contained herein or therein
is correct as of any time
subsequent to the date of
such information.
________________
TABLE OF CONTENTS
Page [LOGO] PSE&G
----
______________________________
Prospectus Supplement
PROSPECTUS SUPPLEMENT
Risk Factors . . . . . . S-3
PSE&G Capital Trust I . . S-6 ______________________________
Public Service Electric and
Gas Company . . . . . . . S-7
Use of Proceeds . . . . . S-8
Capitalization . . . . . S-8
Certain Terms of the Series
A Preferred
Securities . . . . . . . S-9
Certain Terms of the Series A
Debentures . . . . . . . S-12
United States Taxation . S-13
Underwriting . . . . . . S-16
Goldman, Sachs & Co.
Prospectus Dean Witter Reynolds Inc.
Lehman Brothers
Merrill Lynch & Co.
Statement of Available Morgan Stanley & Co.
Information . . . . . . . 2 Incorporated
Incorporation of Certain PaineWebber Incorporated
Documents by Prudential Securities Incorporated
Reference . . . . . . . 2 Smith Barney Inc.
The Issuers . . . . . . . 3
Public Service Electric and Representatives of the Underwriters
Gas Company . . . . . . . 4
Use of Proceeds . . . . . 4
Description of the Preferred
Securities . . . . . . . 4
Description of the Guarantee 14
Description of the Debentures 17
Relationship among the
Preferred Securities,
the Debentures and the
Guarantee . . . . . . . . 21
Proposed Tax Law Changes. 23
Plan of Distribution . . 23
Legal Matters . . . . . . 23
Experts . . . . . . . . . 24
============================== =============================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 16. Exhibits
Exhibit
Numbers
- -------
1 Form of Underwriting Agreement.*
3-1 Certificate of Trust for PSE&G Capital Trust I.*
3-2 Certificate of Trust for PSE&G Capital Trust II.*
3-3 Certificate of Trust for PSE&G Capital Trust III.*
3-4 Trust Agreement for PSE&G Capital Trust I.*
3-5 Trust Agreement for PSE&G Capital Trust II.*
3-6 Trust Agreement for PSE&G Capital Trust III.*
3-7 Form of Amended and Restated Trust Agreement for PSE&G Capital Trust
I.*
3-8 Form of Amended and Restated Trust Agreement for PSE&G Capital Trust
II.*
3-9 Form of Amended and Restated Trust Agreement for PSE&G Capital Trust
III.*
4-1(a) Form of Preferred Security Certificate for PSE&G Capital Trust I,
PSE&G Capital Trust II and PSE&G Capital Trust III (included in
Exhibit 3-7). *
4-1(b) Form of Preferred Security Certificate for PSE&G Capital Trust II,
(included in Exhibit 3-8). *
4-1(c) Form of Preferred Security Certificate for PSE&G Capital Trust III,
(included in Exhibit 3-9). *
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 Guarantee Agreement for PSE&G Capital Trust I.
4-6 Form of Guarantee Agreement for PSE&G Capital Trust II.
4-7 Form of Guarantee Agreement for PSE&G Capital Trust III.
5-1 Opinion of James T. Foran, Esquire relating to the legality of the
Debentures and the Guarantees, including consent.*
5-2 Opinion of Richards, Layton & Finger, special Delaware counsel,
relating to the legality of the Preferred Securities of PSE&G Capital
Trust I, including consent.*
5-3 Opinion of Richards, Layton & Finger, special Delaware counsel,
relating to the legality of the Preferred Securities of PSE&G Capital
Trust II, including consent.*
5-4 Opinion of Richards, Layton & Finger, special Delaware counsel,
relating to the legality of the Preferred Securities of PSE&G Capital
Trust III, including consent.*
8 Opinion of Ballard Spahr Andrews & Ingersoll, special tax counsel, as
to tax matters, including consent.*
12-1 Computations of Ratios of Earnings to Fixed Charges (incorporated by
reference to PSE&G's Annual Report on Form 10-K for the year ended
December 31, 1995, File No. 1-9120).*
12-2 Computations of Ratios of Earnings to Combined Fixed Charges plus
Preferred Securities Dividend Requirements (incorporated by reference
to PSE&G's Annual Report on Form 10-K for the year ended December 31,
1995, File No. 1-9120).*
23-1 Consent of Independent Auditors.*
23-2 Consent of James T. Foran, Esquire (included in Exhibit 5-1).*
23-3 Consent of Richards, Layton & Finger (included in Exhibits 5-2, 5-3
and 5-4).*
23-4 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 8).*
24 Power of Attorney. *
25-1 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Indenture Trustee under the Deferrable
Interest Subordinated Debenture Indenture and Deferrable Interest
Subordinated Debenture Supplemental Indenture.*
<PAGE>
25-2 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Property Trustee under the Amended and
Restated Trust Agreement for PSE&G Capital Trust I.*
25-3 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Property Trustee under the Amended and
Restated Trust Agreement for PSE&G Capital Trust II.*
25-4 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Property Trustee under the Amended and
Restated Trust Agreement for PSE&G Capital Trust III.*
25-5 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Guarantee Trustee under the Guarantee
Agreement for PSE&G Capital Trust I.*
25-6 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Guarantee Trustee under the Guarantee
Agreement for PSE&G Capital Trust II.*
25-7 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Guarantee Trustee under the Guarantee
Agreement for PSE&G Capital Trust III.*
____________________
* Previously filed as an Exhibit (with the same exhibit number) to
Registration Statement No. 333-2763.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants, PSE&G Capital Trust I, PSE&G Capital Trust II and PSE&G Capital
Trust III each certifies that it has reasonable grounds to believe it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 2 to the 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 10th day of June, 1996.
PSE&G Capital Trust I
By: Public Service Electric and Gas Company,
as Sponsor
By: /s/ Robert C. Murray
----------------------------------------
Robert C. Murray, as Attorney-in-Fact for
E. James Ferland
Chairman of the Board
and Chief Executive Officer
PSE&G Capital Trust II
By: Public Service Electric and Gas Company,
as Sponsor
By: /s/ Robert C. Murray
----------------------------------------
Robert C. Murray, as Attorney-in-Fact for
E. James Ferland
Chairman of the Board
and Chief Executive Officer
PSE&G Capital Trust III
By: Public Service Electric and Gas Company,
as Sponsor
By: /s/ Robert C. Murray
----------------------------------------
Robert C. Murray, as Attorney-in-Fact for
E. James Ferland
Chairman of the Board
and Chief Executive 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 Amendment No. 2 to the 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 10th day of June, 1996.
Public Service Electric and Gas Company
By: /s/ Robert C. Murray
------------------------------------------
Robert C. Murray, as Attorney-in-Fact for
E. James Ferland
Chairman of the Board and
Chief Executive Officer
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement has been signed by the following
persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Robert C. Murray Chairman of the June 10, 1996
------------------- Board and Chief
Robert C. Murray, as Executive Officer
Attorney-in-Fact for and Director
E. James Ferland (Principal
Executive Officer)
/s/ Robert C. Murray Senior Vice June 10, 1996
------------------- President and
Robert C. Murray Chief Financial
Officer (Principal
Financial Officer)
/s/ Patricia A. Rado Vice President and June 10, 1996
------------------- Controller (Principal
Patricia A. Rado Accounting Officer)
This Amendment No. 2 to the Registration Statement has also been
signed by Robert C. Murray, Attorney-in-Fact, on behalf of the following
Directors on June 10, 1996.
Lawrence R. Codey James C. Pitney
Raymond V. Gilmartin Forrest J. Remick
Irwin Lerner
By: /s/ Robert C. Murray
--------------------------------
Robert C. Murray
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Numbers DESCRIPTION
- ------- -----------
1 Form of Underwriting Agreement.*
3-1 Certificate of Trust for PSE&G Capital Trust I.*
3-2 Certificate of Trust for PSE&G Capital Trust II.*
3-3 Certificate of Trust for PSE&G Capital Trust III.*
3-4 Trust Agreement for PSE&G Capital Trust I.*
3-5 Trust Agreement for PSE&G Capital Trust II.*
3-6 Trust Agreement for PSE&G Capital Trust III.*
3-7 Form of Amended and Restated Trust Agreement for PSE&G Capital Trust
I. *
3-8 Form of Amended and Restated Trust Agreement for PSE&G Capital Trust
II. *
3-9 Form of Amended and Restated Trust Agreement for PSE&G Capital Trust
III. *
4-1(a) Form of Preferred Security Certificate for PSE&G Capital Trust I
(included in Exhibit 3-7). *
4-1(b) Form of Preferred Security Certificate for PSE&G Capital Trust II
(included in Exhibit 3-8). *
4-1(c) Form of Preferred Security Certificate for PSE&G Capital Trust III
(included in Exhibit 3-9). *
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 Guarantee Agreement for PSE&G Capital Trust I.
4-6 Form of Guarantee Agreement for PSE&G Capital Trust II.
4-7 Form of Guarantee Agreement for PSE&G Capital Trust III.
5-1 Opinion of James T. Foran, Esquire relating to the legality of the
Debentures and the Guarantees, including consent.*
5-2 Opinion of Richards, Layton & Finger, special Delaware counsel,
relating to the legality of the Preferred Securities of PSE&G Capital
Trust I, including consent.*
5-3 Opinion of Richards, Layton & Finger, special Delaware counsel,
relating to the legality of the Preferred Securities of PSE&G Capital
Trust II, including consent.*
5-4 Opinion of Richards, Layton & Finger, special Delaware counsel,
relating to the legality of the Preferred Securities of PSE&G Capital
Trust III, including consent.*
8 Opinion of Ballard Spahr Andrews & Ingersoll, special tax counsel, as
to tax matters, including consent.*
12-1 Computations of Ratios of Earnings to Fixed Charges (incorporated by
reference to Exhibit 12-1 to PSE&G's Annual Report on Form 10-K for
the year ended December 31, 1995 and Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, File No. 1-9120).
12-2 Computations of Ratios of Earnings to Combined Fixed Charges plus
Preferred Securities Dividend Requirements (incorporated by reference
to Exhibit 12-2 to PSE&G's Annual Report on Form 10-K for the year
ended December 31, 1995, and Quarterly Report on Form 10-Q for the
quarter ended March 31, 1996, File No. 1-9120).
23-1 Consent of Independent Auditors.*
23-2 Consent of James T. Foran, Esquire (included in Exhibit 5-1).*
23-3 Consent of Richards, Layton & Finger (included in Exhibits 5-2, 5-3
and 5-4).*
23-4 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 8).*
24 Power of Attorney. *
25-1 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Indenture Trustee under the Deferrable
Interest Subordinated Debenture Indenture and Deferrable Interest
Subordinated Debenture Supplemental Indenture.*
<PAGE>
25-2 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Property Trustee under the Amended and
Restated Trust Agreement for PSE&G Capital Trust I.*
25-3 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Property Trustee under the Amended and
Restated Trust Agreement for PSE&G Capital Trust II.*
25-4 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Property Trustee under the Amended and
Restated Trust Agreement for PSE&G Capital Trust III.*
25-5 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Guarantee Trustee under the Guarantee
Agreement for PSE&G Capital Trust I.*
25-6 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Guarantee Trustee under the Guarantee
Agreement for PSE&G Capital Trust II.*
25-7 Statement of Eligibility under the Trust Indenture Act of 1939 of
First Union National Bank, as Guarantee Trustee under the Guarantee
Agreement for PSE&G Capital Trust III.*
____________________
* Previously filed as an Exhibit (with the same exhibit number) to
Registration Statement No. 333-2763.
Exhibit 4-5
============================================================================
Guarantee Agreement
between
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(as Guarantor)
and
FIRST UNION NATIONAL BANK
(as Guarantee Trustee)
Dated as of
June __, 1996
============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application. . . . . . . . . . . . 4
SECTION 2.02. List of Holders. . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.03. Reports by the Guarantee Trustee. . . . . . . . . . . . 4
SECTION 2.04. Periodic Reports to Guarantee Trustee. . . . . . . . . . 4
SECTION 2.05. Evidence of Compliance with Conditions Precedent. . . . 5
SECTION 2.06. Events of Default; Waiver. . . . . . . . . . . . . . . . 5
SECTION 2.07. Event of Default; Notice. . . . . . . . . . . . . . . . 5
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE
GUARANTEE TRUSTEE
SECTION 3.01. Powers and Duties of the Guarantee Trustee. . . . . . . 6
SECTION 3.02. Certain Rights of Guarantee Trustee. . . . . . . . . . . 8
SECTION 3.03. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01. Guarantee Trustee; Eligibility. . . . . . . . . . . . . 10
SECTION 4.02. Appointment, Removal and Resignation of the Guarantee
Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V
GUARANTEE
SECTION 5.01. Guarantee. . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.02. Waiver of Notice and Demand. . . . . . . . . . . . . . . 11
SECTION 5.03. Obligations Not Affected. . . . . . . . . . . . . . . . 11
SECTION 5.04. Rights of Holders. . . . . . . . . . . . . . . . . . . . 12
(i)
<PAGE>
Page
----
SECTION 5.05. Guarantee of Payment. . . . . . . . . . . . . . . . . . 13
SECTION 5.06. Subrogation. . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.07. Independent Obligations. . . . . . . . . . . . . . . . . 13
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.01. Subordination. . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.02. Pari Passu Guarantees. . . . . . . . . . . . . . . . . . 13
ARTICLE VII
TERMINATION
SECTION 7.01. Termination. . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Successors and Assigns. . . . . . . . . . . . . . . . . 14
SECTION 8.02. Amendments. . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 8.03. Notices. . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 8.04. Benefit. . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 8.05. Interpretation. . . . . . . . . . . . . . . . . . . . . 15
SECTION 8.06. Governing Law. . . . . . . . . . . . . . . . . . . . . . 16
(ii)
<PAGE>
CROSS-REFERENCE TABLE*
Section of Section of
Trust Indenture Act Guarantee
of 1939, as amended Agreement
- ------------------- ---------------
310(a) . . . . . . . . . . . . . . . . . . 4.01(a)
310(b) . . . . . . . . . . . . . . . . . . 4.01(c), 2.08
310(c) . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . 2.02(b)
311(b) . . . . . . . . . . . . . . . . . . 2.02(b)
311(c) . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . 2.02(a)
312(b) . . . . . . . . . . . . . . . . . . 2.02(b)
313 . . . . . . . . . . . . . . . . . . 2.03
314(a) . . . . . . . . . . . . . . . . . . 2.04
314(b) . . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . . 2.05
314(d) . . . . . . . . . . . . . . . . . . Inapplicable
314(e) . . . . . . . . . . . . . . . . . .
1.01, 2.05, 3.02
314(f) . . . . . . . . . . . . . . . . . 2.01, 3.02
315(a) . . . . . . . . . . . . . . . . . . 3.01(d)
315(b) . . . . . . . . . . . . . . . . . . 2.07
315(c) . . . . . . . . . . . . . . . . . . 3.01
315(d) . . . . . . . . . . . . . . . . . . 3.01(d)
316(a) . . . . . . . . . . . . . . . . . .
1.01, 2.06, 5.04
316(b) . . . . . . . . . . . . . . . . . . 5.03
316(c) . . . . . . . . . . . . . . . . . . 8.02
317(a) . . . . . . . . . . . . . . . . . . Inapplicable
317(b) . . . . . . . . . . . . . . . . . . Inapplicable
318(a) . . . . . . . . . . . . . . . . . . 2.01(b)
318(b) . . . . . . . . . . . . . . . . . . 2.01
318(c) . . . . . . . . . . . . . . . . . . 2.01(a)
________________________
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms
or provisions.
(iii)
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of June __, 1996, is executed and
delivered by Public Service Electric and Gas Company, a New Jersey
corporation (the "Guarantor"), to First Union National Bank, a national
banking association duly organized and existing under the laws of the
United States of America, as trustee (the "Guarantee Trustee"), for the
benefit of the Holders (as defined herein) from time to time of the
Preferred Securities (as defined herein) of PSE&G Capital Trust I, a
Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement for PSE&G
Capital Trust I (the "Trust Agreement"), dated as of June __, 1996 among
the Trustees named therein, the Guarantor, as Depositor, and the Holders
from time to time of undivided beneficial interests in the assets of the
Issuer, the Issuer is issuing $________ aggregate liquidation amount of its
___% Cumulative Quarterly Income Preferred Securities, Series A
(liquidation amount of $25 per preferred security) (the "Preferred
Securities") representing undivided beneficial interests in the assets of
the Issuer and having the terms set forth in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the sale by the Issuer of
its Common Securities will be used to purchase the Debentures (as defined
in the Trust Agreement) of the Guarantor which will be deposited with First
Union National Bank, as Property Trustee under the Trust Agreement, as
Trust Property (as defined in the Trust Agreement); and
WHEREAS, as incentive for the Holders to purchase Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree,
to the extent set forth herein, to pay to the Holders of the Preferred
Securities the Guarantee Payments (as defined herein) and to make certain
other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Guarantee
Agreement for the benefit of the Holders from time to time of the Preferred
Securities.
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. As used in this Guarantee Agreement, each
of the terms set forth below shall, unless the context otherwise requires,
have the following meaning. Each capitalized or otherwise defined term
used but not otherwise defined herein shall have the
<PAGE>
meaning assigned to such terms in the Trust Agreement as in effect on the
date hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Common Securities" means the common securities representing undivided
beneficial interests in the assets of the Issuer and having the rights
provided therefor in the Trust Agreement.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, that
except with respect to a default resulting from a failure to pay any
Guarantee Payment, the Guarantor shall have received notice of default and
shall not have cured such default within 60 days after receipt of such
notice.
"Guarantee Payments" means the following payments or Distributions (as
defined in the Trust Agreement) , without duplication, with respect to the
Preferred Securities, to the extent not paid or made by or on behalf of the
Issuer pursuant to the Trust Agreement or by the Guarantor pursuant to the
Indenture: (i) any accumulated and unpaid Distributions required to be paid
on the Preferred Securities, to the extent the Issuer shall have funds
available therefor, (ii) the redemption price, including all accumulated
and unpaid Distributions to the date of redemption (the "Redemption
Price"), with respect to the Preferred Securities called for redemption by
the Issuer, to the extent the Issuer shall have funds available therefor,
and (iii) upon a voluntary or involuntary termination, and liquidation of the
Issuer, unless Debentures are distributed to the Holders, the lesser of (a)
the aggregate of the liquidation amount of $25 per Preferred Security plus
accumulated and unpaid Distributions on the Preferred Securities to the date
of payment, to the extent the Issuer shall have funds available therefor and
(b) the amount of assets of the Issuer remaining available for distribution to
Holders upon a termination and liquidation of the Issuer (in either case, the
"Liquidation Distribution").
"Guarantee Trustee" means First Union National Bank, until a Successor
Guarantee Trustee (as defined below) has been appointed and has accepted
such appointment pursuant to the terms of this Guarantee Agreement and
thereafter means each such Successor Guarantee Trustee.
"Holder" means a Person in whose name a Preferred Security is
registered in the Securities Register; provided, however, that in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder,
2
<PAGE>
"Holder" shall not include the Guarantor, the Guarantee Trustee or any
Affiliate of the Guarantor or the Guarantee Trustee.
"Indenture" means the Indenture dated as of June 1, 1996, between
Public Service Electric and Gas Company and First Union National Bank, as
trustee thereunder.
"List of Holders" has the meaning specified in Section 2.02(a).
"Majority in liquidation amount of the Preferred Securities" means,
except as provided by the Trust Indenture Act, a vote by the Holders, of
more than 50% of the aggregate liquidation amount of all then outstanding
Preferred Securities issued by the Issuer.
"Officers' Certificate" means a certificate signed by the Chairman,
the President, any Vice President, the Treasurer, any Assistant Treasurer,
the Secretary or any Assistant Secretary of the Guarantor.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization, government or any agency or political
subdivision thereof or any other entity.
"Responsible Officer" means, with respect to the Guarantee Trustee,
any Vice President, any Assistant Vice President, any Trust Officer or
Assistant Trust Officer or any other officer of the Corporate Trust
Department of the Guarantee Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge
of and familiarity with the particular subject.
"Senior Indebtedness" means Senior Indebtedness as defined in the
Indenture.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section
4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided,
--------
however, that in the event the Trust Indenture Act of 1939 is amended after
- -------
such date, "Trust Indenture Act" means, to the extent required by any such
amendment, the Trust Indenture Act of 1939, as so amended.
3
<PAGE>
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the
Trust Indenture Act that are required to be part of this Guarantee
Agreement and shall, to the extent applicable, be governed by such
provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
SECTION 2.02. List of Holders.
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, on or before January 15 and July
15 of each year, a list, in such form as the Guarantee Trustee may
reasonably require, of the names and addresses of the Holders ("List
of Holders") as of a date not more than 15 days prior to the delivery
thereof, and (b) at such other times as the Guarantee Trustee may
request in writing, within 30 days after the receipt by the Guarantor
of any such request, a List of Holders as of a date not more than 15
days prior to the time such list is furnished, in each case to the
extent such information is in the possession or control of the
Guarantor and is not identical to a previously supplied List of
Holders or has not otherwise been received by the Guarantee Trustee in
its capacity as such. The Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations
under Sections 311(a), Section 311(b) and Section 312(b) of the Trust
Indenture Act.
SECTION 2.03. Reports by the Guarantee Trustee. Within 60 days after
May 31 of each year, the Guarantee Trustee shall provide to the Holders
such reports as are required by Section 313 of the Trust Indenture Act, if
any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Guarantee Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to Guarantee Trustee. The Guarantor
shall provide to the Guarantee Trustee, the Securities and Exchange
Commission and the Holders such documents, reports and information, if any,
as required by Section 314 of the Trust Indenture
4
<PAGE>
Act and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form and manner and at the times required by Section
314 of the Trust Indenture Act.
SECTION 2.05. Evidence of Compliance with Conditions Precedent. The
Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Each Officers' Certificate and Opinion
of Counsel delivered with respect to compliance with a condition or
covenant provided for in this Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers'
Certificate or Opinion of Counsel has read the covenant or condition
and the definition relating thereto;
(b) a brief statement of the nature and scope of the examination
or investigation undertaken by each officer in rendering the Officers'
Certificate or Opinion of Counsel and upon which the statements
contained therein are based;
(c) a statement that each such officer has made such examination
or investigation as, in such officer's opinion, is necessary to enable
such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such
officer, such condition or covenant has been complied with.
SECTION 2.06. Events of Default; Waiver. The Holders of a Majority
in liquidation amount of the Preferred Securities may, by vote, on behalf
of the Holders, waive any past Event of Default and its consequences. Upon
such waiver, any such Event of Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Guarantee Agreement, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right
consequent therefrom.
SECTION 2.07. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class
postage prepaid, to the Holders, notices of all Events of Default
known to the Guarantee Trustee, unless such defaults have been cured
before the giving of such notice, provided, that, except in the case
of a default in the payment of a Guarantee Payment, the Guarantee
Trustee shall be protected in withholding such notice if and so long
as the Board of Directors, the executive committee or a trust
committee of directors and/or Responsible Officers of the Guarantee
Trustee
5
<PAGE>
in good faith determines that the withholding of such notice is in the
interests of the Holders.
(b) The Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless the Guarantee Trustee shall have
received written notice, or a Responsible Officer charged with the
administration of the Trust Agreement shall have obtained written
notice, of such Event of Default.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE
GUARANTEE TRUSTEE
SECTION 3.01. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Guarantee
Trustee for the benefit of the Holders, and the Guarantee Trustee
shall not transfer this Guarantee Agreement to any Person except a
Holder exercising his or her rights pursuant to Section 5.04(iv) or to
a Successor Guarantee Trustee on acceptance by such Successor
Guarantee Trustee of its appointment to act as Successor Guarantee
Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee upon acceptance
by such Successor Guarantee Trustee of its appointment hereunder and
such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to
the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the
benefit of the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are
specifically set forth in this Guarantee Agreement, and no implied
covenants shall be read into this Guarantee Agreement against the
Guarantee Trustee. In case an Event of Default has occurred and is
continuing (and has not been cured or waived pursuant to Section
2.06), the Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Guarantee Agreement, and use the same
degree of care and skill in its exercise thereof, as a prudent person
would exercise or use in the conduct of his or her own affairs.
6
<PAGE>
(d) No provision of this Guarantee Agreement shall be construed
to relieve the Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and
after the curing or waiving of all such Events of Default that
may have occurred:
(A) the duties and obligations of the Guarantee
Trustee shall be determined solely by the express provisions
of this Guarantee Agreement, and the Guarantee Trustee shall
not be liable except for the performance of such duties and
obligations as are specifically set forth in this Guarantee
Agreement; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively
rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon any certificates or
opinions furnished to the Guarantee Trustee and conforming
to the requirements of this Guarantee Agreement; but in the
case of any such certificates or opinions that by any
provision hereof or of the Trust Indenture Act are
specifically required to be furnished to the Guarantee
Trustee, the Guarantee Trustee shall be under a duty to
examine the same to determine whether or not they conform to
the requirements of this Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of
the Guarantee Trustee, unless it shall be proved that the
Guarantee Trustee was negligent in ascertaining the pertinent
facts upon which such judgment was made;
(iii) the Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of a
Majority in liquidation amount of the Preferred Securities
relating to the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee, or
exercising any trust or power conferred upon the Guarantee
Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require
the Guarantee Trustee to expend or risk its own funds or
otherwise incur personal financial liability in the performance
of any of its duties or in the exercise of any of its rights or
powers, if the Guarantee Trustee shall have reasonable grounds
for believing that the repayment of such funds or liability is
not reasonably assured
7
<PAGE>
to it under the terms of this Guarantee Agreement or reasonable
indemnity against such risk or liability is not reasonably
assured to it.
SECTION 3.02. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.01:
(i) The Guarantee Trustee may rely and shall be fully
protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by
this Guarantee Agreement shall be sufficiently evidenced by an
Officers' Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a
matter be proved or established before taking, suffering or
omitting to take any action hereunder, the Guarantee Trustee
(unless other evidence is herein specifically prescribed) may, in
the absence of bad faith on its part, request and rely upon an
Officers' Certificate which, upon receipt of such request from
the Guarantee Trustee, shall be promptly delivered by the
Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel,
and the written advice or Opinion of Counsel with respect to
legal matters shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted to
be taken by it hereunder in good faith and in accordance with
such advice or opinion. Such legal counsel may be legal counsel
to the Guarantor or any of its Affiliates and may be one of its
employees. The Guarantee Trustee shall have the right at any
time to seek instructions concerning the administration of this
Guarantee Agreement from any court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Guarantee Agreement at the request or direction of any Holder,
unless such Holder shall have provided to the Guarantee Trustee
such reasonable indemnity as would satisfy a reasonable person in
the position of the Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses) and liabilities
that might be incurred by it in
8
<PAGE>
complying with such request or direction; provided that, nothing
contained in this Section 3.02(a)(v) shall be taken to relieve
the Guarantee Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and powers
vested in it by this Guarantee Agreement.
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the
Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see
fit.
(vii) The Guarantee Trustee may execute any of the trusts
or powers hereunder or perform any duties hereunder either
directly or by or through its agents or attorneys, and the
Guarantee Trustee shall not be responsible for any misconduct or
negligence on the part of any such agent or attorney appointed
with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or
right or taking any other action hereunder, the Guarantee Trustee
(A) may request instructions from the Holders, (B) may refrain
from enforcing such remedy or right or taking such other action
until such instructions are received, and (C) shall be protected
in acting in accordance with such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to
impose any duty or obligation on the Guarantee Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred
or imposed on it in any jurisdiction in which it shall be illegal, or
in which the Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to
exercise any such right, power, duty or obligation. No permissive
power or authority available to the Guarantee Trustee shall be
construed to be a duty to act in accordance with such power and
authority.
SECTION 3.03. Indemnity. The Guarantor agrees to indemnify the
Guarantee Trustee for, and to hold it harmless against, any loss, liability
or expense incurred without negligence or willful misconduct on the part of
the Guarantee Trustee, arising out of or in connection with the acceptance
or administration of this Guarantee Agreement, including the costs and
expenses of defending itself against any claim or liability in connection
with the exercise or performance of any of its powers or duties hereunder.
The Guarantee Trustee will
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not claim or exact any lien or charge on any Guarantee Payments as a result
of any amount due to it under this Guarantee Agreement.
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01. Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and
surplus of at least fifty million U.S. dollars ($50,000,000), and
shall be a corporation meeting the requirements of Section 310(a)
of the Trust Indenture Act. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority, then, for
the purposes of this Section and to the extent permitted by the
Trust Indenture Act, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Guarantee Trustee shall cease to be
eligible to so act under Section 4.01(a), the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in
Section 4.02(c).
(c) If the Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust
Indenture Act. In determining whether the Guarantee Trustee has a
"conflicting interest" within the meaning of Section 310(b)(1) of the
Trust Indenture Act, the provisions contained in the proviso to
Section 310(b)(1) of the Trust Indenture Act and the Guarantee
Trustee's Statement of Eligibility on Form T-1 shall be deemed
incorporated herein.
SECTION 4.02. Appointment, Removal and Resignation of the Guarantee
Trustee.
(a) Subject to Section 4.02(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
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(b) The Guarantee Trustee shall not be removed until a new,
eligible guarantee trustee has been appointed (a "Successor Guarantee
Trustee") and has accepted such appointment and assumed the applicable
obligations hereunder by written instrument executed by such Successor
Guarantee Trustee and delivered to the Guarantor.
(c) The Guarantee Trustee may resign from office (without need
for prior or subsequent accounting) by an instrument in writing
executed by the Guarantee Trustee and delivered to the Guarantor,
which resignation shall not take effect until a Successor Guarantee
Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Guarantee Trustee and
delivered to the Guarantor and the resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.02 within 60
days after delivery to the Guarantor of an instrument of resignation,
the resigning Guarantee Trustee may petition, at the expense of the
Guarantor, any court of competent jurisdiction for appointment of a
Successor Guarantee Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper, appoint a
Successor Guarantee Trustee.
ARTICLE V
GUARANTEE
SECTION 5.01. Guarantee. The Guarantor irrevocably and
unconditionally agrees to pay in full to the Holders of the Outstanding
Preferred Securities the Guarantee Payments (without duplication of amounts
theretofore paid by or on behalf of the Issuer pursuant to the Trust
Agreement or by the Guarantor pursuant to the Indenture), as and when due,
regardless of any defense, right of set-off or counterclaim which the
Issuer may have or assert. The Guarantor's obligation to make a Guarantee
Payment may be satisfied by direct payment of the required amounts by the
Guarantor to the Holders or by causing the Issuer to pay such amounts to
the Holders.
SECTION 5.02. Waiver of Notice and Demand. The Guarantor hereby
waives notice of acceptance of the Guarantee Agreement and of any liability
to which it applies or may apply, presentment, demand for payment, any
right to require a proceeding first against the Guarantee Trustee, the
Issuer or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and
all other notices and demands.
11
<PAGE>
SECTION 5.03. Obligations Not Affected. The obligations, covenants,
agreements and duties of the Guarantor under this Guarantee Agreement shall
in no way be affected or impaired by reason of the happening from time to
time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of
the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Preferred
Securities to be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all
or any portion of the Distributions (other than an extension of time
for payment of Distributions that results from an Extension Period on
the Debentures as so provided in the Indenture), Redemption Price,
Liquidation Distribution or any other sums payable under the terms of
the Preferred Securities or the extension of time for the performance
of any other obligation under, arising out of, or in connection with,
the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Holders pursuant to the
terms of the Preferred Securities, or any action on the part of the
Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, termination, sale
of any collateral, receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, composition
or readjustment of debt of, or other similar proceedings affecting,
the Issuer or any of the assets of the Issuer;
(e) any invalidity of, or detect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) to the extent permitted by law, any other circumstance
whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a guarantor, it being the intent of this
Section 5.03 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or
obtain the consent of, the Guarantor with respect to the happening of any
of the foregoing.
SECTION 5.04. Rights of Holders. The Guarantor expressly
acknowledges that: (i) this Guarantee Agreement will be deposited with the
Guarantee Trustee to be held for the benefit of the Holders; (ii) the
Guarantee Trustee has the right to enforce this Guarantee Agreement on
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<PAGE>
behalf of the Holders; (iii) the Holders of a Majority in liquidation
amount of the Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or exercise or
direct the exercise of any trust or power conferred upon the Guarantee
Trustee under this Guarantee Agreement; and (iv) any Holder may institute a
legal proceeding directly against the Guarantor to enforce its rights under
this Guarantee Agreement, without first instituting a legal proceeding against
the Guarantee Trustee, the Issuer or any other Person.
SECTION 5.05. Guarantee of Payment. This Guarantee Agreement creates
a guarantee of payment and not of collection. This Guarantee Agreement will
not be discharged except by payment of the Guarantee Payments in full
(without duplication of amounts theretofore paid by or on behalf of the Issuer
pursuant to the Trust Agreement or by the Guarantor pursuant to the Indenture)
or upon distribution of Debentures to Holders as provided in the Trust
Agreement.
SECTION 5.06. Subrogation. The Guarantor shall be subrogated to all
(if any) rights of the Holders against the Issuer in respect of any amounts
paid to the Holders by the Guarantor under this Guarantee Agreement and
shall have the right to waive payment by the Issuer pursuant to Section
5.01; provided, however, that the Guarantor shall not (except to the extent
required by mandatory provisions of law) be entitled to enforce or exercise
any rights which it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under
this Guarantee Agreement, if, at the time of any such payment, any amounts
are due and unpaid under this Guarantee Agreement. If any amount shall be
paid to the Guarantor in violation of the preceding sentence, the Guarantor
agrees to hold such amount in trust for the Holders and to pay over such
amount to the Holders.
SECTION 5.07. Independent Obligations. The Guarantor acknowledges
that its obligations hereunder are independent of the obligations of the
Issuer with respect to the Preferred Securities and that the Guarantor
shall be liable as principal and as debtor hereunder to make Guarantee
Payments pursuant to the terms of this Guarantee Agreement notwithstanding
the occurrence of any event referred to in subsections (a) through (g),
inclusive, of Section 5.03 hereof.
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.01. Subordination. This Guarantee Agreement shall
constitute an unsecured obligation of the Guarantor and shall rank
subordinate and junior in right of payment to all general liabilities of
the Guarantor.
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<PAGE>
SECTION 6.02. Pari Passu Guarantees. This Guarantee Agreement shall
rank pari passu with any similar Guarantee Agreements issued by the
Guarantor on behalf of the holders of Cumulative Quarterly Income Preferred
Securities issued by PSE&G Capital Trust II and PSE&G Capital Trust III and
on behalf of the holders of the 9-3/8% Cumulative Monthly Income Preferred
Securities, Series A and the 8% Cumulative Monthly Income Preferred
Securities, Series B issued by Public Service Electric and Gas Capital,
L.P.
ARTICLE VII
TERMINATION
SECTION 7.01. Termination. This Guarantee Agreement shall terminate
and be of no further force and effect upon (i) full payment by the Issuer
or the Guarantor, as the case may be, of the Redemption Price for all
Preferred Securities, (ii) the distribution of the Debentures to the
Holders in accordance with Article VIII of the Trust Agreement upon
liquidation of the Issuer or (iii) full payment by the Issuer or the
Guarantor, as the case may be, of the amounts payable in accordance with
the Trust Agreement upon liquidation of the Issuer. Notwithstanding the
foregoing, this Guarantee Agreement will continue to be effective or will
be reinstated, as the case may be, if at any time any Holder must restore
payment of any sums paid with respect to Preferred Securities or this
Guarantee Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Successors and Assigns. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and shall inure to
the benefit of the Holders of the Preferred Securities then outstanding.
The Guarantor may not consolidate with or merge with or into, or sell,
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety (either in one transaction or a series of
transactions) to, any Person unless permitted under Article Five of the
Indenture. In connection with a consolidation, merger or sale involving
the Guarantor that is permitted under Article Five of the Indenture the
Person formed by or surviving such consolidation or merger or to which such
sale, conveyance, transfer or lease shall have been made, if other than the
Guarantor, shall expressly assume all of the obligations of the Guarantor
hereunder and under the Trust Agreement.
SECTION 8.02. Amendments. Except with respect to any changes which
do not adversely affect the rights of the Holders in any material respect
(in which case no consent of the Holders will be required), this Guarantee
Agreement may only be amended with the prior
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<PAGE>
approval of the Holders of a Majority in liquidation amount of the
Preferred Securities (excluding any Preferred Securities held by the
Guarantor or an affiliate thereof). The provisions of Article VI of the
Trust Agreement concerning meetings of the Holders shall apply to the
giving of such approval.
SECTION 8.03. Notices. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing and
delivered, telecopied or mailed by first class mail, postage prepaid, as
follows:
(a) if given to the Guarantor, to the address set forth below or
such other address as the Guarantor may give notice of to the Holders:
Public Service Electric and Gas Company
80 Park Plaza
P.O. Box 570
Newark, NJ 07101
Facsimile No:
Attention: Treasurer
(b) if given to the Issuer, in care of the Guarantee Trustee, at
the Issuer's (and the Guarantee Trustee's) address set forth below or
such other address as the Guarantee Trustee on behalf of the Issuer
may give notice to the Holders:
PSE&G Capital Trust I
80 Park Plaza
Newark, NJ 07101
Facsimile No:
Attention: Treasurer
with a copy to:
First Union National Bank
765 Broad Street
Newark, NJ 07101
Facsimile No:
Attention: Corporate Trust Department
(c) if given to any Holder, at the address set forth in the
Securities Register.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if
15
<PAGE>
a notice or other document is refused delivery or cannot be delivered
because of a changed address of which no notice was given, such notice or
other document shall be deemed to have been delivered on the date of such
refusal or inability to deliver.
SECTION 8.04. Benefit. This Guarantee Agreement is solely for the
benefit of the Holders and is not separately transferable from the
Preferred Securities.
SECTION 8.05. Interpretation. In this Guarantee Agreement, unless
the context otherwise requires:
(a) all references to "the Guarantee Agreement" or "this
Guarantee Agreement" are to this Guarantee Agreement as modified,
supplemented or amended from time to time;
(b) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement
unless otherwise specified;
(c) a term defined in the Trust Indenture Act has the same
meaning when used in this Guarantee Agreement unless otherwise defined
in this Guarantee Agreement or unless the context otherwise requires;
(d) a reference to the singular includes the plural and vice
versa; and
(e) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 8.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW JERSEY AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF NEW JERSEY WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
16
<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY, as
Guarantor
By:
------------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Guarantee Trustee
By:
------------------------------------------
Name:
Title:
17
Exhibit 4-6
================================================================================
Guarantee Agreement
between
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(as Guarantor)
and
FIRST UNION NATIONAL BANK
(as Guarantee Trustee)
Dated as of
__________ __, _____
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application. . . . . . . . . . . . . . 4
SECTION 2.02. List of Holders. . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.03. Reports by the Guarantee Trustee. . . . . . . . . . . . . . 4
SECTION 2.04. Periodic Reports to Guarantee Trustee. . . . . . . . . . . . 4
SECTION 2.05. Evidence of Compliance with Conditions Precedent. . . . . . 5
SECTION 2.06. Events of Default; Waiver. . . . . . . . . . . . . . . . . . 5
SECTION 2.07. Event of Default; Notice. . . . . . . . . . . . . . . . . . 5
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE
GUARANTEE TRUSTEE
SECTION 3.01. Powers and Duties of the Guarantee Trustee. . . . . . . . . 6
SECTION 3.02. Certain Rights of Guarantee Trustee. . . . . . . . . . . . . 8
SECTION 3.03. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01. Guarantee Trustee; Eligibility. . . . . . . . . . . . . . . 10
SECTION 4.02. Appointment, Removal and Resignation of the Guarantee Trustee.
10
ARTICLE V
GUARANTEE
SECTION 5.01. Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.02. Waiver of Notice and Demand. . . . . . . . . . . . . . . . . 11
SECTION 5.03. Obligations Not Affected. . . . . . . . . . . . . . . . . . 11
SECTION 5.04. Rights of Holders. . . . . . . . . . . . . . . . . . . . . . 12
(i)
<PAGE>
Page
----
SECTION 5.05. Guarantee of Payment. . . . . . . . . . . . . . . . . . . . 13
SECTION 5.06. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.07. Independent Obligations. . . . . . . . . . . . . . . . . . . 13
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.01. Subordination. . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.02. Pari Passu Guarantees. . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII
TERMINATION
SECTION 7.01. Termination. . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Successors and Assigns. . . . . . . . . . . . . . . . . . . 14
SECTION 8.02. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 8.03. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 8.04. Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 8.05. Interpretation. . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 8.06. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 16
(ii)
<PAGE>
CROSS-REFERENCE TABLE*
Section of Section of
Trust Indenture Act Guarantee
of 1939, as amended Agreement
- ------------------- ---------------
310(a) . . . . . . . . . . . . . . . . . . . . . . . 4.01(a)
310(b) . . . . . . . . . . . . . . . . . . . . . . . 4.01(c), 2.08
310(c) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . 2.02(b)
311(b) . . . . . . . . . . . . . . . . . . . . . . . 2.02(b)
311(c) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . 2.02(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . 2.02(b)
313 . . . . . . . . . . . . . . . . . . . . . . . 2.03
314(a) . . . . . . . . . . . . . . . . . . . . . . . 2.04
314(b) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . 2.05
314(d) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(e) . . . . . . . . . . . . . . . . . . . . . . .
1.01, 2.05, 3.02
314(f) . . . . . . . . . . . . . . . . . . . . . . 2.01, 3.02
315(a) . . . . . . . . . . . . . . . . . . . . . . . 3.01(d)
315(b) . . . . . . . . . . . . . . . . . . . . . . . 2.07
315(c) . . . . . . . . . . . . . . . . . . . . . . . 3.01
315(d) . . . . . . . . . . . . . . . . . . . . . . . 3.01(d)
316(a) . . . . . . . . . . . . . . . . . . . . . . .
1.01, 2.06, 5.04
316(b) . . . . . . . . . . . . . . . . . . . . . . . 5.03
316(c) . . . . . . . . . . . . . . . . . . . . . . . 8.02
317(a) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
317(b) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
318(a) . . . . . . . . . . . . . . . . . . . . . . . 2.01(b)
318(b) . . . . . . . . . . . . . . . . . . . . . . . 2.01
318(c) . . . . . . . . . . . . . . . . . . . . . . . 2.01(a)
________________________
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
(iii)
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of _______ __, ____, is executed and
delivered by Public Service Electric and Gas Company, a New Jersey corporation
(the "Guarantor"), to First Union National Bank, a national banking association
duly organized and existing under the laws of the United States of America, as
trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Preferred Securities (as defined herein) of
PSE&G Capital Trust II, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement for PSE&G
Capital Trust II (the "Trust Agreement"), dated as of _______ __, ____ among the
Trustees named therein, the Guarantor, as Depositor, and the Holders from time
to time of undivided beneficial interests in the assets of the Issuer, the
Issuer is issuing $________ aggregate liquidation amount of its ___% Cumulative
Quarterly Income Preferred Securities, Series B (liquidation amount of $_____
per preferred security) (the "Preferred Securities") representing undivided
beneficial interests in the assets of the Issuer and having the terms set forth
in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the sale by the Issuer of its
Common Securities will be used to purchase the Debentures (as defined in the
Trust Agreement) of the Guarantor which will be deposited with First Union
National Bank, as Property Trustee under the Trust Agreement, as Trust Property
(as defined in the Trust Agreement); and
WHEREAS, as incentive for the Holders to purchase Preferred Securities, the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth herein, to pay to the Holders of the Preferred Securities the Guarantee
Payments (as defined herein) and to make certain other payments on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders from time to time of the Preferred Securities.
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. As used in this Guarantee Agreement, each of
the terms set forth below shall, unless the context otherwise requires, has the
following meaning.
<PAGE>
Each capitalized or otherwise defined terms used but not otherwise defined
herein shall have the meaning assigned to such terms in the Trust Agreement as
in effect on the date hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Common Securities" means the common securities representing undivided
beneficial interests in the assets of the Issuer and having the rights
provided therefor in the Trust Agreement.
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Guarantee Agreement; provided, that except with
respect to a default resulting from a failure to pay any Guarantee Payment, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.
"Guarantee Payments" means the following payments or Distributions (as
defined in the Trust Agreement) , without duplication, with respect to the
Preferred Securities, to the extent not paid or made by or on behalf of the
Issuer pursuant to the Trust Agreement or by the Guarantor pursuant to the
Indenture: (i) any accumulated and unpaid Distributions required to be paid
on the Preferred Securities, to the extent the Issuer shall have funds
available therefor, (ii) the redemption price, including all accumulated and
unpaid Distributions to the date of redemption (the "Redemption Price"),
with respect to the Preferred Securities called for redemption by the Issuer,
to the extent the Issuer shall have funds available therefor, and (iii) upon
a voluntary or involuntary termination, and liquidation of the Issuer, unless
Debentures are distributed to the Holders, the lesser of (a) the aggregate of
the liquidation amount of $_____ per Preferred Security plus accumulated and
unpaid Distributions on the Preferred Securities to the date of payment, to the
extent the Issuer shall have funds available therefor and (b) the amount
of assets of the Issuer remaining available for distribution to Holders
upon a termination and in liquidation of the Issuer (in either case, the
"Liquidation Distribution").
"Guarantee Trustee" means First Union National Bank, until a Successor
Guarantee Trustee (as defined below) has been appointed and has accepted such
appointment pursuant to the terms of this Guarantee Agreement and thereafter
means each such Successor Guarantee Trustee.
"Holder" means a Person in whose name a Preferred Security is registered in
the Securities Register; provided, however, that in determining whether the
holders of the requisite percentage of Preferred Securities have given any
request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor, the Guarantee Trustee or any Affiliate of the Guarantor or the
Guarantee Trustee.
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"Indenture" means the Indenture dated as of June 1, 1996, between Public
Service Electric and Gas Company and First Union National Bank, as trustee
thereunder.
"List of Holders" has the meaning specified in Section 2.02(a).
"Majority in liquidation amount of the Preferred Securities" means, except
as provided by the Trust Indenture Act, a vote by the Holders, of more than 50%
of the aggregate liquidation amount of all then outstanding Preferred Securities
issued by the Issuer.
"Officers' Certificate" means a certificate signed by the Chairman, the
President, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Guarantor.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Responsible Officer" means, with respect to the Guarantee Trustee, any
Vice President, any Assistant Vice President, any Trust Officer or Assistant
Trust Officer or any other officer of the Corporate Trust Department of the
Guarantee Trustee customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
"Senior Indebtedness" means Senior Indebtedness as defined in the
Indenture.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; provided, however, that in
-------- -------
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939, as so amended.
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ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the
Trust Indenture Act that are required to be part of this Guarantee
Agreement and shall, to the extent applicable, be governed by such
provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
SECTION 2.02. List of Holders.
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, on or before January 15 and July 15 of
each year, a list, in such form as the Guarantee Trustee may reasonably
require, of the names and addresses of the Holders ("List of Holders") as
of a date not more than 15 days prior to the delivery thereof, and (b) at
such other times as the Guarantee Trustee may request in writing, within 30
days after the receipt by the Guarantor of any such request, a List of
Holders as of a date not more than 15 days prior to the time such list is
furnished, in each case to the extent such information is in the possession
or control of the Guarantor and is not identical to a previously supplied
List of Holders or has not otherwise been received by the Guarantee Trustee
in its capacity as such. The Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Sections 311(a), Section 311(b) and Section 312(b) of the Trust Indenture
Act.
SECTION 2.03. Reports by the Guarantee Trustee. Within 60 days after May
31 of each year, the Guarantee Trustee shall provide to the Holders such reports
as are required by Section 313 of the Trust Indenture Act, if any, in the form
and in the manner provided by Section 313 of the Trust Indenture Act. The
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
SECTION 2.04. Periodic Reports to Guarantee Trustee. The Guarantor shall
provide to the Guarantee Trustee, the Securities and Exchange Commission and the
Holders such documents, reports and information, if any, as required by Section
314 of the Trust Indenture Act and the compliance certificate required by
Section 314 of the Trust Indenture Act in the form and manner and at the times
required by Section 314 of the Trust Indenture Act.
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SECTION 2.05. Evidence of Compliance with Conditions Precedent. The
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with such conditions precedent, if any, provided for in this Guarantee Agreement
that relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Each Officers' Certificate and Opinion of Counsel delivered with
respect to compliance with a condition or covenant provided for in this
Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
or Opinion of Counsel has read the covenant or condition and the definition
relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate or Opinion of Counsel and upon which the statements contained
therein are based;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
SECTION 2.06. Events of Default; Waiver. The Holders of a Majority in
liquidation amount of the Preferred Securities may, by vote, on behalf of the
Holders, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Guarantee Agreement, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent therefrom.
SECTION 2.07. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to
the Holders, notices of all Events of Default known to the Guarantee
Trustee, unless such defaults have been cured before the giving of such
notice, provided, that, except in the case of a default in the payment of a
Guarantee Payment, the Guarantee Trustee shall be protected in withholding
such notice if and so long as the Board of Directors, the executive
committee or a trust committee of directors and/or Responsible Officers of
the Guarantee Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders.
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(b) The Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless the Guarantee Trustee shall have received
written notice, or a Responsible Officer charged with the administration of
the Trust Agreement shall have obtained written notice, of such Event of
Default.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE
GUARANTEE TRUSTEE
SECTION 3.01. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Guarantee Trustee
for the benefit of the Holders, and the Guarantee Trustee shall not
transfer this Guarantee Agreement to any Person except a Holder exercising
his or her rights pursuant to Section 5.04(iv) or to a Successor Guarantee
Trustee on acceptance by such Successor Guarantee Trustee of its
appointment to act as Successor Guarantee Trustee. The right, title and
interest of the Guarantee Trustee shall automatically vest in any Successor
Guarantee Trustee upon acceptance by such Successor Guarantee Trustee of
its appointment hereunder and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of
the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically
set forth in this Guarantee Agreement, and no implied covenants shall be
read into this Guarantee Agreement against the Guarantee Trustee. In case
an Event of Default has occurred and is continuing (and has not been cured
or waived pursuant to Section 2.06), the Guarantee Trustee shall exercise
such of the rights and powers vested in it by this Guarantee Agreement, and
use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action,
its own negligent failure to act or its own willful misconduct, except
that:
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(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee Trustee
shall be determined solely by the express provisions of this
Guarantee Agreement, and the Guarantee Trustee shall not be
liable except for the performance of such duties and obligations
as are specifically set forth in this Guarantee Agreement; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Guarantee Trustee and conforming to the
requirements of this Guarantee Agreement; but in the case of any
such certificates or opinions that by any provision hereof or of
the Trust Indenture Act are specifically required to be furnished
to the Guarantee Trustee, the Guarantee Trustee shall be under a
duty to examine the same to determine whether or not they conform
to the requirements of this Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment
was made;
(iii) the Guarantee Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a Majority in
liquidation amount of the Preferred Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Guarantee Trustee, or exercising any trust or power conferred
upon the Guarantee Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers, if the Guarantee
Trustee shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it under the
terms of this Guarantee Agreement or reasonable indemnity against such
risk or liability is not reasonably assured to it.
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SECTION 3.02. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.01:
(i) The Guarantee Trustee may rely and shall be fully protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting to take
any action hereunder, the Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officers' Certificate which, upon
receipt of such request from the Guarantee Trustee, shall be promptly
delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel, and
the written advice or Opinion of Counsel with respect to legal matters
shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted to be taken by it hereunder in
good faith and in accordance with such advice or opinion. Such legal
counsel may be legal counsel to the Guarantor or any of its Affiliates
and may be one of its employees. The Guarantee Trustee shall have the
right at any time to seek instructions concerning the administration
of this Guarantee Agreement from any court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder, unless such
Holder shall have provided to the Guarantee Trustee such reasonable
indemnity as would satisfy a reasonable person in the position of the
Guarantee Trustee, against the costs, expenses (including attorneys'
fees and expenses) and liabilities that might be incurred by it in
complying with such request or direction; provided that, nothing
contained in this Section 3.02(a)(v) shall be taken to relieve the
Guarantee Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this
Guarantee Agreement.
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(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, and the Guarantee Trustee shall
not be responsible for any misconduct or negligence on the part of any
such agent or attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Guarantee Trustee (A) may request
instructions from the Holders, (B) may refrain from enforcing such
remedy or right or taking such other action until such instructions
are received, and (C) shall be protected in acting in accordance with
such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to
impose any duty or obligation on the Guarantee Trustee to perform any act
or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which
the Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any
such right, power, duty or obligation. No permissive power or authority
available to the Guarantee Trustee shall be construed to be a duty to act
in accordance with such power and authority.
SECTION 3.03. Indemnity. The Guarantor agrees to indemnify the Guarantee
Trustee for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or willful misconduct on the part of the Guarantee
Trustee, arising out of or in connection with the acceptance or administration
of this Guarantee Agreement, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The Guarantee Trustee
will not claim or exact any lien or charge on any Guarantee Payments as a result
of any amount due to it under this Guarantee Agreement.
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ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01. Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of
at least fifty million U.S. dollars ($50,000,000), and shall be a
corporation meeting the requirements of Section 310(a) of the Trust
Indenture Act. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the
supervising or examining authority, then, for the purposes of this
Section and to the extent permitted by the Trust Indenture Act, the
combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent
report of condition so published.
(b) If at any time the Guarantee Trustee shall cease to be eligible
to so act under Section 4.01(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 4.02(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act,
the Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act. In determining
whether the Guarantee Trustee has a "conflicting interest" within the
meaning of Section 310(b)(1) of the Trust Indenture Act, the provisions
contained in the proviso to Section 310(b)(1) of the Trust Indenture Act
and the Guarantee Trustee's Statement of Eligibility on Form T-1 shall be
deemed incorporated herein.
SECTION 4.02. Appointment, Removal and Resignation of the Guarantee
Trustee.
(a) Subject to Section 4.02(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until new, eligible
guarantee trustee has been appointed (a "Successor Guarantee Trustee") and
has accepted such appointment and assumed the applicable obligations
hereunder by written instrument executed by such Successor Guarantee
Trustee and delivered to the Guarantor.
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(c) The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall
not take effect until a Successor Guarantee Trustee has been appointed and
has accepted such appointment by instrument in writing executed by such
Successor Guarantee Trustee and delivered to the Guarantor and the
resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.02 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court
of competent jurisdiction for appointment of a Successor Guarantee Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may
deem proper, appoint a Successor Guarantee Trustee.
ARTICLE V
GUARANTEE
SECTION 5.01. Guarantee. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders of the Outstanding Preferred Securities the
Guarantee Payments (without duplication of amounts theretofore paid by or on
behalf of the Issuer pursuant to the Trust Agreement or by the Guarantor
pursuant to the Indenture), as and when due, regardless of any defense, right of
set-off or counterclaim which the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer to pay
such amounts to the Holders.
SECTION 5.02. Waiver of Notice and Demand. The Guarantor hereby waives
notice of acceptance of the Guarantee Agreement and of any liability to which it
applies or may apply, presentment, demand for payment, any right to require a
proceeding first against the Guarantee Trustee, the Issuer or any other Person
before proceeding against the Guarantor, protest, notice of nonpayment, notice
of dishonor, notice of redemption and all other notices and demands.
SECTION 5.03. Obligations Not Affected. The obligations, covenants,
agreements and duties of the Guarantor under this Guarantee Agreement shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant,
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term or condition relating to the Preferred Securities to be performed or
observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions (other than an extension of time for payment
of Distributions that results from an Extension Period on the Debentures as
so provided in the Indenture), Redemption Price, Liquidation Distribution
or any other sums payable under the terms of the Preferred Securities or
the extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, termination, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Issuer
or any of the assets of the Issuer;
(e) any invalidity of, or detect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) to the extent permitted by law, any other circumstance whatsoever
that might otherwise constitute a legal or equitable discharge or defense
of a guarantor, it being the intent of this Section 5.03 that the
obligations of the Guarantor hereunder shall be absolute and unconditional
under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
the consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.04. Rights of Holders. The Guarantor expressly acknowledges
that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee
to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the
right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the
Holders of a Majority in liquidation amount of the Preferred Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of this Guarantee Agreement
or exercise or direct the exercise of any trust or power conferred upon the
Guarantee Trustee under this Guarantee Agreement; and (iv) any Holder may
institute a legal proceeding directly against the
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Guarantor to enforce its rights under this Guarantee Agreement, without first
instituting a legal proceeding against the Guarantee Trustee, the Issuer or any
other Person.
SECTION 5.05. Guarantee of Payment. This Guarantee Agreement creates a
guarantee of payment and not of collection. This Guarantee Agreement will not be
discharged except by payment of the Guarantee Payments in full (without
duplication of amounts theretofore paid by or on behalf of the Issuer pursuant
to the Trust Agreement or by the Guarantor pursuant to the Indenture) or upon
distribution of Debentures to Holders as provided in the Trust Agreement.
SECTION 5.06. Subrogation. The Guarantor shall be subrogated to all (if
any) rights of the Holders against the Issuer in respect of any amounts paid to
the Holders by the Guarantor under this Guarantee Agreement and shall have the
right to waive payment by the Issuer pursuant to Section 5.01; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights which
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if, at the time of any such payment, any amounts are due and unpaid under this
Guarantee Agreement. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.
SECTION 5.07. Independent Obligations. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Issuer with
respect to the Preferred Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof.
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.01. Subordination. This Guarantee Agreement shall constitute
an unsecured obligation of the Guarantor and shall rank subordinate and junior
in right of payment to all general liabilities of the Guarantor.
SECTION 6.02. Pari Passu Guarantees. This Guarantee Agreement shall rank
pari passu with any similar Guarantee Agreements issued by the Guarantor on
behalf of the holders of Cumulative Quarterly Income Preferred Securities issued
by PSE&G Capital Trust I and PSE&G Capital Trust III and on behalf of the
holders of the 9-3/8% Cumulative Monthly Income Preferred Securities, Series A
and the 8% Cumulative Monthly Income Preferred Securities, Series B issued by
Public Service Electric and Gas Capital, L.P.
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ARTICLE VII
TERMINATION
SECTION 7.01. Termination. This Guarantee Agreement shall terminate and
be of no further force and effect upon (i) full payment by the Issuer or the
Guarantor, as the case may be, of the Redemption Price for all Preferred
Securities, (ii) the distribution of the Debentures to the Holders in accordance
with Article VIII of the Trust Agreement upon liquidation of the Issuer or (iii)
full payment by the Issuer or the Guarantor, as the case may be, of the amounts
payable in accordance with the Trust Agreement upon liquidation of the Issuer.
Notwithstanding the foregoing, this Guarantee Agreement will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
must restore payment of any sums paid with respect to Preferred Securities or
this Guarantee Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Successors and Assigns. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders of the Preferred Securities then outstanding. The
Guarantor may not consolidate with or merge with or into, or sell, convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety (either in one transaction or a series of transactions) to, any
Person unless permitted under Article Five of the Indenture. In connection with
a consolidation, merger or sale involving the Guarantor that is permitted under
Article Five of the Indenture the Person formed by or surviving such
consolidation or merger or to which such sale, conveyance, transfer or lease
shall have been made, if other than the Guarantor, shall expressly assume all of
the obligations of the Guarantor hereunder and under the Trust Agreement.
SECTION 8.02. Amendments. Except with respect to any changes which do not
adversely affect the rights of the Holders in any material respect (in which
case no consent of the Holders will be required), this Guarantee Agreement may
only be amended with the prior approval of the Holders of a Majority in
liquidation amount of the Preferred Securities (excluding any Preferred
Securities held by the Guarantor or an affiliate thereof). The provisions of
Article VI of the Trust Agreement concerning meetings of the Holders shall apply
to the giving of such approval.
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SECTION 8.03. Notices. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing and delivered,
telecopied or mailed by first class mail, postage prepaid, as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address as the Guarantor may give notice of to the Holders:
Public Service Electric and Gas Company
80 Park Plaza
P.O. Box 570
Newark, NJ 07101
Facsimile No:
Attention: Treasurer
(b) if given to the Issuer, in care of the Guarantee Trustee, at the
Issuer's (and the Guarantee Trustee's) address set forth below or such
other address as the Guarantee Trustee on behalf of the Issuer may give
notice to the Holders:
PSE&G Capital Trust II
80 Park Plaza
Newark, NJ 07101
Facsimile No:
Attention: Treasurer
with a copy to:
First Union National Bank
765 Broad Street
Newark, NJ 07101
Facsimile No:
Attention: Corporate Trust Department
(c) if given to any Holder, at the address set forth in the Securities
Register.
All notices hereunder shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 8.04. Benefit. This Guarantee Agreement is solely for the benefit
of the Holders and is not separately transferable from the Preferred Securities.
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SECTION 8.05. Interpretation. In this Guarantee Agreement, unless the
context otherwise requires:
(a) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or
amended from time to time;
(b) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
(c) a term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;
(d) a reference to the singular includes the plural and vice versa;
and
(e) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 8.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
JERSEY AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW JERSEY
WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
16
<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY,
as Guarantor
By:
-------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Guarantee Trustee
By:
-------------------------------------
Name:
Title:
Exhibit 4-7
===============================================================================
Guarantee Agreement
between
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
(as Guarantor)
and
FIRST UNION NATIONAL BANK
(as Guarantee Trustee)
Dated as of
__________ __, _____
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application. . . . . . . . . . . . . . 4
SECTION 2.02. List of Holders. . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.03. Reports by the Guarantee Trustee. . . . . . . . . . . . . . 4
SECTION 2.04. Periodic Reports to Guarantee Trustee. . . . . . . . . . . . 4
SECTION 2.05. Evidence of Compliance with Conditions Precedent. . . . . . 5
SECTION 2.06. Events of Default; Waiver. . . . . . . . . . . . . . . . . . 5
SECTION 2.07. Event of Default; Notice. . . . . . . . . . . . . . . . . . 5
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE
GUARANTEE TRUSTEE
SECTION 3.01. Powers and Duties of the Guarantee Trustee. . . . . . . . . 6
SECTION 3.02. Certain Rights of Guarantee Trustee. . . . . . . . . . . . . 8
SECTION 3.03. Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01. Guarantee Trustee; Eligibility. . . . . . . . . . . . . . . 10
SECTION 4.02. Appointment, Removal and Resignation of the Guarantee Trustee.
10
ARTICLE V
GUARANTEE
SECTION 5.01. Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.02. Waiver of Notice and Demand. . . . . . . . . . . . . . . . . 11
SECTION 5.03. Obligations Not Affected. . . . . . . . . . . . . . . . . . 11
SECTION 5.04. Rights of Holders. . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.05. Guarantee of Payment. . . . . . . . . . . . . . . . . . . . 13
SECTION 5.06. Subrogation. . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.07. Independent Obligations. . . . . . . . . . . . . . . . . . . 13
(i)
<PAGE>
Page
----
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.01. Subordination. . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 6.02. Pari Passu Guarantees. . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII
TERMINATION
SECTION 7.01. Termination. . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Successors and Assigns. . . . . . . . . . . . . . . . . . . 14
SECTION 8.02. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 8.03. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 8.04. Benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 8.05. Interpretation. . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 8.06. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . 16
(ii)
<PAGE>
CROSS-REFERENCE TABLE*
Section of Section of
Trust Indenture Act Guarantee
of 1939, as amended Agreement
- ------------------- ---------------
310(a) . . . . . . . . . . . . . . . . . . . . . . . 4.01(a)
310(b) . . . . . . . . . . . . . . . . . . . . . . . 4.01(c), 2.08
310(c) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
311(a) . . . . . . . . . . . . . . . . . . . . . . . 2.02(b)
311(b) . . . . . . . . . . . . . . . . . . . . . . . 2.02(b)
311(c) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
312(a) . . . . . . . . . . . . . . . . . . . . . . . 2.02(a)
312(b) . . . . . . . . . . . . . . . . . . . . . . . 2.02(b)
313 . . . . . . . . . . . . . . . . . . . . . . . 2.03
314(a) . . . . . . . . . . . . . . . . . . . . . . . 2.04
314(b) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(c) . . . . . . . . . . . . . . . . . . . . . . . 2.05
314(d) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
314(e) . . . . . . . . . . . . . . . . . . . . . . .
1.01, 2.05, 3.02
314(f) . . . . . . . . . . . . . . . . . . . . . . 2.01, 3.02
315(a) . . . . . . . . . . . . . . . . . . . . . . . 3.01(d)
315(b) . . . . . . . . . . . . . . . . . . . . . . . 2.07
315(c) . . . . . . . . . . . . . . . . . . . . . . . 3.01
315(d) . . . . . . . . . . . . . . . . . . . . . . . 3.01(d)
316(a) . . . . . . . . . . . . . . . . . . . . . . .
1.01, 2.06, 5.04
316(b) . . . . . . . . . . . . . . . . . . . . . . . 5.03
316(c) . . . . . . . . . . . . . . . . . . . . . . . 8.02
317(a) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
317(b) . . . . . . . . . . . . . . . . . . . . . . . Inapplicable
318(a) . . . . . . . . . . . . . . . . . . . . . . . 2.01(b)
318(b) . . . . . . . . . . . . . . . . . . . . . . . 2.01
318(c) . . . . . . . . . . . . . . . . . . . . . . . 2.01(a)
________________________
* This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
(iii)
<PAGE>
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of _______ __, ____, is executed and
delivered by Public Service Electric and Gas Company, a New Jersey corporation
(the "Guarantor"), to First Union National Bank, a national banking association
duly organized and existing under the laws of the United States of America, as
trustee (the "Guarantee Trustee"), for the benefit of the Holders (as defined
herein) from time to time of the Preferred Securities (as defined herein) of
PSE&G Capital Trust III, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement for PSE&G
Capital Trust III (the "Trust Agreement"), dated as of _______ __, ____ among
the Trustees named therein, the Guarantor, as Depositor, and the Holders from
time to time of undivided beneficial interests in the assets of the Issuer, the
Issuer is issuing $________ aggregate liquidation amount of its ___% Cumulative
Quarterly Income Preferred Securities, Series C (liquidation amount of $_____
per preferred security) (the "Preferred Securities") representing undivided
beneficial interests in the assets of the Issuer and having the terms set forth
in the Trust Agreement;
WHEREAS, the Preferred Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the sale by the Issuer of its
Common Securities will be used to purchase the Debentures (as defined in the
Trust Agreement) of the Guarantor which will be deposited with First Union
National Bank, as Property Trustee under the Trust Agreement, as Trust Property
(as defined in the Trust Agreement); and
WHEREAS, as incentive for the Holders to purchase Preferred Securities, the
Guarantor desires irrevocably and unconditionally to agree, to the extent set
forth herein, to pay to the Holders of the Preferred Securities the Guarantee
Payments (as defined herein) and to make certain other payments on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders from time to time of the Preferred Securities.
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. As used in this Guarantee Agreement, each of
the terms set forth below shall, unless the context otherwise requires, has the
following meaning.
<PAGE>
Each capitalized or otherwise defined terms used but not otherwise defined
herein shall have the meaning assigned to such terms in the Trust Agreement as
in effect on the date hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Common Securities" means the common securities representing undivided
beneficial interests in the assets of the Issuer and having the rights
provided therefor in the Trust Agreement.
"Event of Default" means a default by the Guarantor on any of its payment
or other obligations under this Guarantee Agreement; provided, that except with
respect to a default resulting from a failure to pay any Guarantee Payment, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.
"Guarantee Payments" means the following payments or Distributions (as
defined in the Trust Agreement) , without duplication, with respect to the
Preferred Securities, to the extent not paid or made by or on behalf of the
Issuer pursuant to the Trust Agreement or by the Guarantor pursuant to the
Indenture: (i) any accumulated and unpaid Distributions required to be paid
on the Preferred Securities, to the extent the Issuer shall have funds
available therefor, (ii) the redemption price, including all accumulated and
unpaid Distributions to the date of redemption (the "Redemption Price"), with
respect to the Preferred Securities called for redemption by the Issuer, to
the extent the Issuer shall have funds available therefor, and (iii) upon a
voluntary or involuntary termination, and liquidation of the Issuer, unless
Debentures are distributed to the Holders, the lesser of (a) the aggregate of
the liquidation amount of $_____ per Preferred Security plus accumulated and
unpaid Distributions on the Preferred Securities to the date of payment, to
the extent the Issuer shall have funds available therefor and (b) the amount of
assets of the Issuer remaining available for distribution to Holders upon a
termination and liquidation of the Issuer (in either case, the "Liquidation
Distribution").
"Guarantee Trustee" means First Union National Bank, until a Successor
Guarantee Trustee (as defined below) has been appointed and has accepted such
appointment pursuant to the terms of this Guarantee Agreement and thereafter
means each such Successor Guarantee Trustee.
"Holder" means a Person in whose name a Preferred Security is registered in
the Securities Register; provided, however, that in determining whether the
holders of the requisite percentage of Preferred Securities have given any
request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor, the Guarantee Trustee or any Affiliate of the Guarantor or the
Guarantee Trustee.
2
<PAGE>
"Indenture" means the Indenture dated as of June 1, 1996, between Public
Service Electric and Gas Company and First Union National Bank, as trustee
thereunder.
"List of Holders" has the meaning specified in Section 2.02(a).
"Majority in liquidation amount of the Preferred Securities" means, except
as provided by the Trust Indenture Act, a vote by the Holders, of more than 50%
of the aggregate liquidation amount of all then outstanding Preferred Securities
issued by the Issuer.
"Officers' Certificate" means a certificate signed by the Chairman, the
President, any Vice President, the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of the Guarantor.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.
"Responsible Officer" means, with respect to the Guarantee Trustee, any
Vice President, any Assistant Vice President, any Trust Officer or Assistant
Trust Officer or any other officer of the Corporate Trust Department of the
Guarantee Trustee customarily performing functions similar to those performed by
any of the above designated officers and also means, with respect to a
particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
"Senior Indebtedness" means Senior Indebtedness as defined in the
Indenture.
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force at
the date as of which this instrument was executed; provided, however, that in
-------- -------
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939, as so amended.
3
<PAGE>
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01. Trust Indenture Act; Application.
(a) This Guarantee Agreement is subject to the provisions of the
Trust Indenture Act that are required to be part of this Guarantee
Agreement and shall, to the extent applicable, be governed by such
provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by
Sections 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control.
SECTION 2.02. List of Holders.
(a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, on or before January 15 and July 15 of
each year, a list, in such form as the Guarantee Trustee may reasonably
require, of the names and addresses of the Holders ("List of Holders") as
of a date not more than 15 days prior to the delivery thereof, and (b) at
such other times as the Guarantee Trustee may request in writing, within 30
days after the receipt by the Guarantor of any such request, a List of
Holders as of a date not more than 15 days prior to the time such list is
furnished, in each case to the extent such information is in the possession
or control of the Guarantor and is not identical to a previously supplied
List of Holders or has not otherwise been received by the Guarantee Trustee
in its capacity as such. The Guarantee Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Sections 311(a), Section 311(b) and Section 312(b) of the Trust Indenture
Act.
SECTION 2.03. Reports by the Guarantee Trustee. Within 60 days after May
31 of each year, the Guarantee Trustee shall provide to the Holders such reports
as are required by Section 313 of the Trust Indenture Act, if any, in the form
and in the manner provided by Section 313 of the Trust Indenture Act. The
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.
SECTION 2.04. Periodic Reports to Guarantee Trustee. The Guarantor shall
provide to the Guarantee Trustee, the Securities and Exchange Commission and the
Holders such documents, reports and information, if any, as required by Section
314 of the Trust Indenture Act and the compliance certificate required by
Section 314 of the Trust Indenture Act in the form and manner and at the times
required by Section 314 of the Trust Indenture Act.
4
<PAGE>
SECTION 2.05. Evidence of Compliance with Conditions Precedent. The
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with such conditions precedent, if any, provided for in this Guarantee Agreement
that relate to any of the matters set forth in Section 314(c) of the Trust
Indenture Act. Each Officers' Certificate and Opinion of Counsel delivered with
respect to compliance with a condition or covenant provided for in this
Guarantee Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
or Opinion of Counsel has read the covenant or condition and the definition
relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate or Opinion of Counsel and upon which the statements contained
therein are based;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
SECTION 2.06. Events of Default; Waiver. The Holders of a Majority in
liquidation amount of the Preferred Securities may, by vote, on behalf of the
Holders, waive any past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured, for every purpose of this
Guarantee Agreement, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent therefrom.
SECTION 2.07. Event of Default; Notice.
(a) The Guarantee Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to
the Holders, notices of all Events of Default known to the Guarantee
Trustee, unless such defaults have been cured before the giving of such
notice, provided, that, except in the case of a default in the payment of a
Guarantee Payment, the Guarantee Trustee shall be protected in withholding
such notice if and so long as the Board of Directors, the executive
committee or a trust committee of directors and/or Responsible Officers of
the Guarantee Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders.
5
<PAGE>
(b) The Guarantee Trustee shall not be deemed to have knowledge of
any Event of Default unless the Guarantee Trustee shall have received
written notice, or a Responsible Officer charged with the administration of
the Trust Agreement shall have obtained written notice, of such Event of
Default.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF THE
GUARANTEE TRUSTEE
SECTION 3.01. Powers and Duties of the Guarantee Trustee.
(a) This Guarantee Agreement shall be held by the Guarantee Trustee
for the benefit of the Holders, and the Guarantee Trustee shall not
transfer this Guarantee Agreement to any Person except a Holder exercising
his or her rights pursuant to Section 5.04(iv) or to a Successor Guarantee
Trustee on acceptance by such Successor Guarantee Trustee of its
appointment to act as Successor Guarantee Trustee. The right, title and
interest of the Guarantee Trustee shall automatically vest in any Successor
Guarantee Trustee upon acceptance by such Successor Guarantee Trustee of
its appointment hereunder and such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and
delivered pursuant to the appointment of such Successor Guarantee Trustee.
(b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of
the Holders.
(c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have
occurred, shall undertake to perform only such duties as are specifically
set forth in this Guarantee Agreement, and no implied covenants shall be
read into this Guarantee Agreement against the Guarantee Trustee. In case
an Event of Default has occurred and is continuing (and has not been cured
or waived pursuant to Section 2.06), the Guarantee Trustee shall exercise
such of the rights and powers vested in it by this Guarantee Agreement, and
use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use in the conduct of his or her own affairs.
(d) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action,
its own negligent failure to act or its own willful misconduct, except
that:
6
<PAGE>
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Guarantee Trustee
shall be determined solely by the express provisions of this
Guarantee Agreement, and the Guarantee Trustee shall not be
liable except for the performance of such duties and obligations
as are specifically set forth in this Guarantee Agreement; and
(B) in the absence of bad faith on the part of the
Guarantee Trustee, the Guarantee Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Guarantee Trustee and conforming to the
requirements of this Guarantee Agreement; but in the case of any
such certificates or opinions that by any provision hereof or of
the Trust Indenture Act are specifically required to be furnished
to the Guarantee Trustee, the Guarantee Trustee shall be under a
duty to examine the same to determine whether or not they conform
to the requirements of this Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment
was made;
(iii) the Guarantee Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a Majority in
liquidation amount of the Preferred Securities relating to the time,
method and place of conducting any proceeding for any remedy available
to the Guarantee Trustee, or exercising any trust or power conferred
upon the Guarantee Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers, if the Guarantee
Trustee shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it under the
terms of this Guarantee Agreement or reasonable indemnity against such
risk or liability is not reasonably assured to it.
7
<PAGE>
SECTION 3.02. Certain Rights of Guarantee Trustee.
(a) Subject to the provisions of Section 3.01:
(i) The Guarantee Trustee may rely and shall be fully protected
in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties.
(ii) Any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.
(iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter
be proved or established before taking, suffering or omitting to take
any action hereunder, the Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officers' Certificate which, upon
receipt of such request from the Guarantee Trustee, shall be promptly
delivered by the Guarantor.
(iv) The Guarantee Trustee may consult with legal counsel, and
the written advice or Opinion of Counsel with respect to legal matters
shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted to be taken by it hereunder in
good faith and in accordance with such advice or opinion. Such legal
counsel may be legal counsel to the Guarantor or any of its Affiliates
and may be one of its employees. The Guarantee Trustee shall have the
right at any time to seek instructions concerning the administration
of this Guarantee Agreement from any court of competent jurisdiction.
(v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee
Agreement at the request or direction of any Holder, unless such
Holder shall have provided to the Guarantee Trustee such reasonable
indemnity as would satisfy a reasonable person in the position of the
Guarantee Trustee, against the costs, expenses (including attorneys'
fees and expenses) and liabilities that might be incurred by it in
complying with such request or direction; provided that, nothing
contained in this Section 3.02(a)(v) shall be taken to relieve the
Guarantee Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this
Guarantee Agreement.
8
<PAGE>
(vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Guarantee Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(vii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by
or through its agents or attorneys, and the Guarantee Trustee shall
not be responsible for any misconduct or negligence on the part of any
such agent or attorney appointed with due care by it hereunder.
(viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive
instructions with respect to enforcing any remedy or right or taking
any other action hereunder, the Guarantee Trustee (A) may request
instructions from the Holders, (B) may refrain from enforcing such
remedy or right or taking such other action until such instructions
are received, and (C) shall be protected in acting in accordance with
such instructions.
(b) No provision of this Guarantee Agreement shall be deemed to
impose any duty or obligation on the Guarantee Trustee to perform any act
or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which
the Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any
such right, power, duty or obligation. No permissive power or authority
available to the Guarantee Trustee shall be construed to be a duty to act
in accordance with such power and authority.
SECTION 3.03. Indemnity. The Guarantor agrees to indemnify the Guarantee
Trustee for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or willful misconduct on the part of the Guarantee
Trustee, arising out of or in connection with the acceptance or administration
of this Guarantee Agreement, including the costs and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The Guarantee Trustee
will not claim or exact any lien or charge on any Guarantee Payments as a result
of any amount due to it under this Guarantee Agreement.
9
<PAGE>
ARTICLE IV
GUARANTEE TRUSTEE
SECTION 4.01. Guarantee Trustee; Eligibility.
(a) There shall at all times be a Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a Person that is eligible pursuant to the Trust
Indenture Act to act as such and has a combined capital and surplus of
at least fifty million U.S. dollars ($50,000,000), and shall be a
corporation meeting the requirements of Section 310(a) of the Trust
Indenture Act. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the
supervising or examining authority, then, for the purposes of this
Section and to the extent permitted by the Trust Indenture Act, the
combined capital and surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its most recent
report of condition so published.
(b) If at any time the Guarantee Trustee shall cease to be eligible
to so act under Section 4.01(a), the Guarantee Trustee shall immediately
resign in the manner and with the effect set out in Section 4.02(c).
(c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act,
the Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act. In determining
whether the Guarantee Trustee has a "conflicting interest" within the
meaning of Section 310(b)(1) of the Trust Indenture Act, the provisions
contained in the proviso to Section 310(b)(1) of the Trust Indenture Act
and the Guarantee Trustee's Statement of Eligibility on Form T-1 shall be
deemed incorporated herein.
SECTION 4.02. Appointment, Removal and Resignation of the Guarantee
Trustee.
(a) Subject to Section 4.02(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed until new, eligible
guarantee trustee has been appointed (a "Successor Guarantee Trustee") and
has accepted such appointment and assumed the applicable obligations
hereunder by written instrument executed by such Successor Guarantee
Trustee and delivered to the Guarantor.
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(c) The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall
not take effect until a Successor Guarantee Trustee has been appointed and
has accepted such appointment by instrument in writing executed by such
Successor Guarantee Trustee and delivered to the Guarantor and the
resigning Guarantee Trustee.
(d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.02 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court
of competent jurisdiction for appointment of a Successor Guarantee Trustee.
Such court may thereupon, after prescribing such notice, if any, as it may
deem proper, appoint a Successor Guarantee Trustee.
ARTICLE V
GUARANTEE
SECTION 5.01. Guarantee. The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders of the Outstanding Preferred Securities the
Guarantee Payments (without duplication of amounts theretofore paid by or on
behalf of the Issuer pursuant to the Trust Agreement or by the Guarantor
pursuant to the Indenture), as and when due, regardless of any defense, right of
set-off or counterclaim which the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer to pay
such amounts to the Holders.
SECTION 5.02. Waiver of Notice and Demand. The Guarantor hereby waives
notice of acceptance of the Guarantee Agreement and of any liability to which it
applies or may apply, presentment, demand for payment, any right to require a
proceeding first against the Guarantee Trustee, the Issuer or any other Person
before proceeding against the Guarantor, protest, notice of nonpayment, notice
of dishonor, notice of redemption and all other notices and demands.
SECTION 5.03. Obligations Not Affected. The obligations, covenants,
agreements and duties of the Guarantor under this Guarantee Agreement shall in
no way be affected or impaired by reason of the happening from time to time of
any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied
agreement, covenant,
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term or condition relating to the Preferred Securities to be performed or
observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions (other than an extension of time for payment
of Distributions that results from an Extension Period on the Debentures as
so provided in the Indenture), Redemption Price, Liquidation Distribution
or any other sums payable under the terms of the Preferred Securities or
the extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Preferred Securities;
(c) any failure, omission, delay or lack of diligence on the part of
the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Issuer granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, termination, sale of
any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Issuer
or any of the assets of the Issuer;
(e) any invalidity of, or detect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby
or hereby incurred; or
(g) to the extent permitted by law, any other circumstance whatsoever
that might otherwise constitute a legal or equitable discharge or defense
of a guarantor, it being the intent of this Section 5.03 that the
obligations of the Guarantor hereunder shall be absolute and unconditional
under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
the consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.04. Rights of Holders. The Guarantor expressly acknowledges
that: (i) this Guarantee Agreement will be deposited with the Guarantee Trustee
to be held for the benefit of the Holders; (ii) the Guarantee Trustee has the
right to enforce this Guarantee Agreement on behalf of the Holders; (iii) the
Holders of a Majority in liquidation amount of the Preferred Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee in respect of this Guarantee Agreement
or exercise or direct the exercise of any trust or power conferred upon the
Guarantee Trustee under this Guarantee Agreement; and (iv) any Holder may
institute a legal proceeding directly against the
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Guarantor to enforce its rights under this Guarantee Agreement, without first
instituting a legal proceeding against the Guarantee Trustee, the Issuer or any
other Person.
SECTION 5.05. Guarantee of Payment. This Guarantee Agreement creates a
guarantee of payment and not of collection. This Guarantee Agreement will not be
discharged except by payment of the Guarantee Payments in full (without
duplication of amounts theretofore paid by or on behalf of the Issuer pursuant
to the Trust Agreement or by the Guarantor pursuant to the Indenture) or upon
distribution of Debentures to Holders as provided in the Trust Agreement.
SECTION 5.06. Subrogation. The Guarantor shall be subrogated to all (if
any) rights of the Holders against the Issuer in respect of any amounts paid to
the Holders by the Guarantor under this Guarantee Agreement and shall have the
right to waive payment by the Issuer pursuant to Section 5.01; provided,
however, that the Guarantor shall not (except to the extent required by
mandatory provisions of law) be entitled to enforce or exercise any rights which
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if, at the time of any such payment, any amounts are due and unpaid under this
Guarantee Agreement. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.
SECTION 5.07. Independent Obligations. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Issuer with
respect to the Preferred Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof.
ARTICLE VI
COVENANTS AND SUBORDINATION
SECTION 6.01. Subordination. This Guarantee Agreement shall constitute an
unsecured obligation of the Guarantor and shall rank subordinate and junior in
right of payment to all general liabilities of the Guarantor.
SECTION 6.02. Pari Passu Guarantees. This Guarantee Agreement shall rank
pari passu with any similar Guarantee Agreements issued by the Guarantor on
behalf of the holders of Cumulative Quarterly Income Preferred Securities issued
by PSE&G Capital Trust I and PSE&G Capital Trust II and on behalf of the holders
of the 9-3/8% Cumulative Monthly Income Preferred Securities, Series A and the
8% Cumulative Monthly Income Preferred Securities, Series B issued by Public
Service Electric and Gas Capital, L.P.
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ARTICLE VII
TERMINATION
SECTION 7.01. Termination. This Guarantee Agreement shall terminate and
be of no further force and effect upon (i) full payment by the Issuer or the
Guarantor, as the case may be, of the Redemption Price for all Preferred
Securities, (ii) the distribution of the Debentures to the Holders in accordance
with Article VIII of the Trust Agreement upon liquidation of the Issuer or (iii)
full payment by the Issuer or the Guarantor, as the case may be, of the amounts
payable in accordance with the Trust Agreement upon liquidation of the Issuer.
Notwithstanding the foregoing, this Guarantee Agreement will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
must restore payment of any sums paid with respect to Preferred Securities or
this Guarantee Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Successors and Assigns. All guarantees and agreements
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders of the Preferred Securities then outstanding. The
Guarantor may not consolidate with or merge with or into, or sell, convey,
transfer or lease its properties and assets as an entirety or substantially as
an entirety (either in one transaction or a series of transactions) to, any
Person unless permitted under Article Five of the Indenture. In connection with
a consolidation, merger or sale involving the Guarantor that is permitted under
Article Five of the Indenture the Person formed by or surviving such
consolidation or merger or to which such sale, conveyance, transfer or lease
shall have been made, if other than the Guarantor, shall expressly assume all of
the obligations of the Guarantor hereunder and under the Trust Agreement.
SECTION 8.02. Amendments. Except with respect to any changes which do not
adversely affect the rights of the Holders in any material respect (in which
case no consent of the Holders will be required), this Guarantee Agreement may
only be amended with the prior approval of the Holders of a Majority in
liquidation amount of the Preferred Securities (excluding any Preferred
Securities held by the Guarantor or an affiliate thereof). The provisions of
Article VI of the Trust Agreement concerning meetings of the Holders shall apply
to the giving of such approval.
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SECTION 8.03. Notices. Any notice, request or other communication
required or permitted to be given hereunder shall be in writing and delivered,
telecopied or mailed by first class mail, postage prepaid, as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address as the Guarantor may give notice of to the Holders:
Public Service Electric and Gas Company
80 Park Plaza
P.O. Box 570
Newark, NJ 07101
Facsimile No:
Attention: Treasurer
(b) if given to the Issuer, in care of the Guarantee Trustee, at the
Issuer's (and the Guarantee Trustee's) address set forth below or such
other address as the Guarantee Trustee on behalf of the Issuer may give
notice to the Holders:
PSE&G Capital Trust III
80 Park Plaza
Newark, NJ 07101
Facsimile No:
Attention: Treasurer
with a copy to:
First Union National Bank
765 Broad Street
Newark, NJ 07101
Facsimile No:
Attention: Corporate Trust Department
(c) if given to any Holder, at the address set forth in the Securities
Register.
All notices hereunder shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 8.04. Benefit. This Guarantee Agreement is solely for the benefit
of the Holders and is not separately transferable from the Preferred Securities.
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SECTION 8.05. Interpretation. In this Guarantee Agreement, unless the
context otherwise requires:
(a) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or
amended from time to time;
(b) all references in this Guarantee Agreement to Articles and
Sections are to Articles and Sections of this Guarantee Agreement unless
otherwise specified;
(c) a term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this
Guarantee Agreement or unless the context otherwise requires;
(d) a reference to the singular includes the plural and vice versa;
and
(e) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 8.06. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
JERSEY AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW JERSEY
WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
PUBLIC SERVICE ELECTRIC AND GAS COMPANY, as
Guarantor
By:
-----------------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK,
as Guarantee Trustee
By:
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Name:
Title:
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