EXHIBIT 4.2



                            PSEG Energy Holdings Inc.


                            10% Senior Notes due 2009


                                -----------------

                  Exchange and Registration Rights Agreement

                                                      October 8, 1999

Goldman, Sachs & Co.
Banc of America Securities LLC
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith
           Incorporated
c/o Goldman, Sachs & Co.
    85 Broad Street,
    New York, New York 10004

Ladies and Gentlemen:

      PSEG Energy  Holdings  Inc.,  a New Jersey  corporation  (the  "Company"),
proposes to issue and sell to the Purchasers (as defined  herein) upon the terms
set forth in the Purchase Agreement (as defined herein) its 10% Senior Notes due
2009. As an inducement  to the  Purchasers to enter into the Purchase  Agreement
and in  satisfaction  of a  condition  to  the  obligations  of  the  Purchasers
thereunder,  the Company  agrees with the  Purchasers for the benefit of holders
(as defined herein) from time to time of the Registrable  Securities (as defined
herein) as follows:

      1. Certain  Definitions.  For purposes of this  Exchange and  Registration
Rights  Agreement,  the  following  terms  shall have the  following  respective
meanings:

      "Base Interest" shall mean the interest that would otherwise accrue on the
   Securities  under the terms thereof and the Indenture,  without giving effect
   to the provisions of this Agreement.

      The term  "broker-dealer"  shall mean any broker or dealer registered with
   the Commission under the Exchange Act.

      "Closing  Date"  shall  mean  the  date  on  which  the  Securities  are
   initially issued.

<PAGE>

      "Commission"   shall  mean  the  United  States  Securities  and  Exchange
   Commission,  or any  other  federal  agency  at the  time  administering  the
   Exchange Act or the Securities Act, whichever is the relevant statute for the
   particular purpose.

      "Effective Time," in the case of (i) an Exchange Registration,  shall mean
   the  time  and  date  as  of  which  the  Commission  declares  the  Exchange
   Registration  Statement  effective or as of which the  Exchange  Registration
   Statement  otherwise becomes effective and (ii) a Shelf  Registration,  shall
   mean  the  time  and  date as of which  the  Commission  declares  the  Shelf
   Registration  Statement  effective  or as of  which  the  Shelf  Registration
   Statement otherwise becomes effective.

      "Electing Holder" shall mean any holder of Registrable Securities that has
   returned a completed  and signed Notice and  Questionnaire  to the Company in
   accordance with Section 3(d)(ii) or 3(d)(iii) hereof.

      "Exchange  Act" shall mean the  Securities  Exchange  Act of 1934,  or any
   successor thereto, as the same shall be amended from time to time.

      "Exchange  Offer" shall have the meaning  assigned thereto in Section 2(a)
   hereof.

      "Exchange Registration" shall have the meaning assigned thereto in Section
   3(c) hereof.

      "Exchange Registration  Statement" shall have the meaning assigned thereto
   in Section 2(a) hereof.

      "Exchange  Securities"  shall have the meaning assigned thereto in Section
   2(a) hereof.

      The term "holder"  shall mean each of the Purchasers and other persons who
   acquire Registrable Securities from time to time (including any successors or
   assigns),  in each  case  for so long as such  person  owns  any  Registrable
   Securities.

      "Indenture"  shall mean the  Indenture,  dated as of o, 1999,  between the
   Company  and First Union  National  Bank,  as  Trustee,  as the same shall be
   amended from time to time.

      "Notice and  Questionnaire"  means a Notice of Registration  Statement and
   Selling Securityholder  Questionnaire  substantially in the form of Exhibit A
   hereto.

      The term  "person"  shall mean a  corporation,  association,  partnership,
   organization,  business,  individual,  government  or  political  subdivision
   thereof or governmental agency.

      "Purchase  Agreement"  shall  mean  the  Purchase  Agreement,  dated as of
   [date], between the Purchasers and the Company relating to the Securities.


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<PAGE>

      "Purchasers"  shall  mean  the  Purchasers  named in  Schedule  I to the
   Purchase Agreement.

      "Registrable  Securities"  shall mean the Securities;  provided,  however,
   that a Security  shall  cease to be a  Registrable  Security  when (i) in the
   circumstances  contemplated  by Section  2(a)  hereof,  the Security has been
   exchanged for an Exchange  Security in an Exchange Offer as  contemplated  in
   Section 2(a) hereof  (provided that any Exchange  Security that,  pursuant to
   the last two sentences of Section  2(a), is included in a prospectus  for use
   in  connection  with  resales  by  broker-dealers  shall  be  deemed  to be a
   Registrable Security with respect to Sections 5, 6 and 9 until resale of such
   Registrable  Security has been effected within the 180-day period referred to
   in Section  2(a));  (ii) in the  circumstances  contemplated  by Section 2(b)
   hereof, a Shelf  Registration  Statement  registering such Security under the
   Securities  Act has been declared or becomes  effective and such Security has
   been sold or otherwise transferred by the holder thereof pursuant to and in a
   manner  contemplated by such effective Shelf  Registration  Statement;  (iii)
   such Security is sold pursuant to Rule 144 under  circumstances  in which any
   legend borne by such Security  relating to  restrictions  on  transferability
   thereof, under the Securities Act or otherwise,  is removed by the Company or
   pursuant to the Indenture; (iv) such Security is eligible to be sold pursuant
   to  paragraph  (k) of Rule  144;  or (v)  such  Security  shall  cease  to be
   outstanding.

      "Registration  Default" shall have the meaning assigned thereto in Section
   2(c) hereof.

      "Registration Expenses" shall have the meaning assigned thereto in Section
   4 hereof.

      "Resale  Period" shall have the meaning  assigned  thereto in Section 2(a)
   hereof.

      "Restricted  Holder"  shall mean (i) a holder that is an  affiliate of the
   Company  within the meaning of Rule 405, (ii) a holder who acquires  Exchange
   Securities  outside the ordinary  course of such holder's  business,  (iii) a
   holder who has arrangements or understandings  with any person to participate
   in the Exchange Offer for the purpose of distributing Exchange Securities and
   (iv) a holder  that is a  broker-dealer,  but only with  respect to  Exchange
   Securities  received by such  broker-dealer  pursuant to an Exchange Offer in
   exchange for Registrable  Securities  acquired by the broker-dealer  directly
   from the Company.

      "Rule 144," "Rule 405" and "Rule 415" shall mean, in each case,  such rule
   promulgated  under the  Securities Act (or any successor  provision),  as the
   same shall be amended from time to time.

      "Securities"  shall mean,  collectively,  the 10% Senior Notes due 2009 of
   the Company to be issued and sold to the Purchasers, and securities issued in
   exchange therefor or in lieu thereof pursuant to the Indenture.


                                       3
<PAGE>

      "Securities  Act" shall mean the  Securities Act of 1933, or any successor
   thereto, as the same shall be amended from time to time.

      "Shelf  Registration"  shall have the meaning  assigned thereto in Section
   2(b) hereof.

      "Shelf Registration  Statement" shall have the meaning assigned thereto in
   Section 2(b) hereof.

      "Special Interest" shall have the meaning assigned thereto in Section 2(c)
   hereof.

      "Subsidiary" shall mean a "significant subsidiary" as such term is defined
   in Rule 1-02 of Regulation S-X.

      "Trust  Indenture Act" shall mean the Trust  Indenture Act of 1939, or any
   successor  thereto,   and  the  rules,   regulations  and  forms  promulgated
   thereunder, all as the same shall be amended from time to time.

      Unless the context otherwise requires, any reference herein to a "Section"
or "clause" refers to a Section or clause,  as the case may be, of this Exchange
and  Registration  Rights  Agreement,  and  the  words  "herein,"  "hereof"  and
"hereunder"  and  other  words of  similar  import  refer to this  Exchange  and
Registration  Rights  Agreement as a whole and not to any particular  Section or
other subdivision.

      2. Registration Under the Securities Act.

      (a) Except as set forth in Section 2(b) below,  the Company agrees to file
under the  Securities  Act, as soon as  practicable,  but no later than 240 days
after  the  Closing  Date,  a  registration  statement  relating  to an offer to
exchange (such registration  statement,  the "Exchange Registration  Statement",
and such offer,  the "Exchange  Offer") any and all of the Securities for a like
aggregate principal amount of debt securities issued by the Company,  which debt
securities are  substantially  identical to the Securities  (and are entitled to
the  benefits  of a trust  indenture  which is  substantially  identical  to the
Indenture  or is the  Indenture  and  which has been  qualified  under the Trust
Indenture Act),  except that they have been registered  pursuant to an effective
registration  statement  under the Securities Act and do not contain  provisions
for the additional  interest  contemplated  in Section 2(c) below (such new debt
securities hereinafter called "Exchange Securities").  The Company agrees to use
its  reasonable  best  efforts to cause the Exchange  Registration  Statement to
become  effective under the Securities Act as soon as practicable,  but no later
than 270 days after the Closing  Date.  The  Exchange  Offer will be  registered
under  the  Securities  Act on the  appropriate  form and will  comply  with all
applicable  tender  offer rules and  regulations  under the  Exchange  Act.  The
Company  further  agrees to use its best  efforts to commence  and  complete the
Exchange  Offer  promptly,  but no later than 45 days  after  such  registration
statement  has become  effective,  hold the Exchange  Offer open for at least 30
days and exchange Exchange  Securities for all Registrable  Securities that have
been properly  tendered and not  withdrawn on or prior to the  expiration of the
Exchange Offer. The


                                       4
<PAGE>

Exchange  Offer  will  be  deemed  to have  been  "completed"  only if the  debt
securities  received by holders  other than  Restricted  Holders in the Exchange
Offer for Registrable  Securities  are, upon receipt,  transferable by each such
holder  without  restriction  under the  Securities Act and the Exchange Act and
without  material  restrictions  under  the  blue  sky or  securities  laws of a
substantial majority of the States of the United States of America. The Exchange
Offer  shall be deemed to have been  completed  upon the earlier to occur of (i)
the  Company  having  exchanged  the  Exchange  Securities  for all  outstanding
Registrable  Securities  pursuant  to the  Exchange  Offer and (ii) the  Company
having exchanged,  pursuant to the Exchange Offer,  Exchange  Securities for all
Registrable Securities that have been properly tendered and not withdrawn before
the expiration of the Exchange Offer,  which shall be on a date that is at least
30 days following the commencement of the Exchange Offer. The Company agrees (x)
to include in the Exchange  Registration  Statement a prospectus  for use in any
resales by any holder of Exchange  Securities that is a broker-dealer and (y) to
keep such Exchange  Registration  Statement  effective for a period (the "Resale
Period")  beginning  when Exchange  Securities  are first issued in the Exchange
Offer and ending upon the earlier of the  expiration  of the 180th day after the
Exchange Offer has been completed or such time as such  broker-dealers no longer
own any  Registrable  Securities.  With  respect to such  Exchange  Registration
Statement,  such holders shall have the benefit of the rights of indemnification
and contribution set forth in Sections 6(a), (c), (d) and (e) hereof.

      (b) If (i) on or  prior  to the  time  the  Exchange  Offer  is  completed
existing  Commission  interpretations  are changed such that the debt securities
received by holders  other than  Restricted  Holders in the  Exchange  Offer for
Registrable  Securities are not or would not be, upon receipt,  transferable  by
each such holder without restriction under the Securities Act, (ii) the Exchange
Offer has not been completed within 315 days following the Closing Date or (iii)
the Exchange Offer is not available to any holder of the Securities, the Company
shall,  in lieu of (or, in the case of clause (iii),  in addition to) conducting
the Exchange Offer  contemplated  by Section 2(a), file under the Securities Act
as soon as  practicable,  but no later  than the later of 30 days after the time
such obligation to file arises, a "shelf"  registration  statement providing for
the  registration  of,  and the sale on a  continuous  or  delayed  basis by the
holders  of,  all of the  Registrable  Securities,  pursuant  to Rule 415 or any
similar  rule that may be adopted by the  Commission  (such  filing,  the "Shelf
Registration"  and  such  registration   statement,   the  "Shelf   Registration
Statement").  The Company agrees to use its reasonable best efforts (x) to cause
the Shelf  Registration  Statement  to become or be declared  effective no later
than 30 days after such Shelf  Registration  Statement is filed and to keep such
Shelf Registration  Statement  continuously effective for a period ending on the
earlier of the second  anniversary  of the Effective  Time or such time as there
are no longer any Registrable Securities outstanding, provided, however, that no
holder  shall be entitled to be named as a selling  securityholder  in the Shelf
Registration  Statement  or to use the  prospectus  forming a part  thereof  for
resales of Registrable  Securities unless such holder is an Electing Holder, and
(y) after the Effective Time of the Shelf Registration Statement,  promptly upon
the request of any holder of Registrable Securities that is not then an Electing
Holder, to take any action reasonably necessary to enable such holder to use the
prospectus forming a part thereof for resales of Registrable Securities,


                                       5
<PAGE>

including, without limitation, any action necessary to identify such holder as a
selling securityholder in the Shelf Registration Statement,  provided,  however,
that nothing in this Clause (y) shall relieve any such holder of the  obligation
to return a  completed  and signed  Notice and  Questionnaire  to the Company in
accordance  with  Section  3(d)(iii)  hereof.  The  Company  further  agrees  to
supplement or make amendments to the Shelf Registration  Statement,  as and when
required  by  the  rules,   regulations  or   instructions   applicable  to  the
registration form used by the Company for such Shelf  Registration  Statement or
by  the   Securities  Act  or  rules  and   regulations   thereunder  for  shelf
registration,  and the Company agrees to furnish to each Electing  Holder copies
of any  such  supplement  or  amendment  prior  to its  being  used or  promptly
following its filing with the Commission.

      (c) In the  event  that  (i)  the  Company  has  not  filed  the  Exchange
Registration  Statement or Shelf Registration Statement on or before the date on
which such  registration  statement is required to be filed  pursuant to Section
2(a) or 2(b),  respectively,  or (ii) such  Exchange  Registration  Statement or
Shelf Registration Statement has not become effective or been declared effective
by the Commission on or before the date on which such registration  statement is
required to become or be declared  effective  pursuant to Section  2(a) or 2(b),
respectively,  or (iii) the Exchange Offer has not been completed within 45 days
after the initial effective date of the Exchange Registration Statement relating
to the  Exchange  Offer (if the Exchange  Offer is then  required to be made) or
(iv)  any  Exchange  Registration  Statement  or  Shelf  Registration  Statement
required by Section  2(a) or 2(b)  hereof is filed and  declared  effective  but
shall  thereafter  either be withdrawn by the Company or shall become subject to
an effective  stop order issued  pursuant to Section 8(d) of the  Securities Act
suspending  the  effectiveness  of  such   registration   statement  (except  as
specifically  permitted  herein)  without  being  succeeded  immediately  by  an
additional  registration statement filed and declared effective (each such event
referred to in clauses (i)  through  (iv),  a  "Registration  Default"  and each
period during which a  Registration  Default has occurred and is  continuing,  a
"Registration   Default   Period"),   then,  as  liquidated   damages  for  such
Registration  Default,  subject  to the  provisions  of  Section  9(b),  special
interest ("Special Interest"), in addition to the Base Interest, shall accrue at
a per  annum  rate of 0.25% for the  first 90 days of the  Registration  Default
Period,  at a per annum rate of 0.50% for the second 90 days of the Registration
Default  Period,  at a per  annum  rate of  0.75%  for the  third 90 days of the
Registration  Default Period and at a per annum rate of 1.0%  thereafter for the
remaining portion of the Registration Default Period.

      (d) The Company shall take all actions  necessary or advisable to be taken
by it to ensure that the  transactions  contemplated  herein are  effected as so
contemplated.

      (e) Any reference herein to a registration  statement as of any time shall
be deemed to include any document  incorporated,  or deemed to be  incorporated,
therein  by  reference  as  of  such  time  and  any  reference  herein  to  any
post-effective  amendment  to a  registration  statement as of any time shall be
deemed to  include  any  document  incorporated,  or deemed to be  incorporated,
therein by reference as of such time.


                                       6
<PAGE>

      3. Registration Procedures.

      If the Company files a registration  statement pursuant to Section 2(a) or
Section 2(b), the following provisions shall apply:

      (a) At or before the Effective  Time of the Exchange  Registration  or the
Shelf Registration,  as the case may be, the Company shall qualify the Indenture
under the Trust Indenture Act of 1939.

      (b) In the event that such qualification  would require the appointment of
a new  trustee  under the  Indenture,  the Company  shall  appoint a new trustee
thereunder pursuant to the applicable provisions of the Indenture.

      (c) In  connection  with the  Company's  obligations  with  respect to the
registration  of  Exchange  Securities  as  contemplated  by  Section  2(a) (the
"Exchange  Registration"),   if  applicable,  the  Company  shall,  as  soon  as
practicable (or as otherwise specified):

            (i) prepare and file with the Commission, as soon as practicable but
      no later than 240 days after the Closing  Date,  an Exchange  Registration
      Statement on any form which may be utilized by the Company and which shall
      permit  the  Exchange   Offer  and  resales  of  Exchange   Securities  by
      broker-dealers  during the Resale Period to be effected as contemplated by
      Section 2(a), and use its  reasonable  best efforts to cause such Exchange
      Registration   Statement  to  become  effective  as  soon  as  practicable
      thereafter, but no later than 270 days after the Closing Date;

            (ii) as soon as  practicable  prepare  and file with the  Commission
      such  amendments and supplements to such Exchange  Registration  Statement
      and the  prospectus  included  therein as may be  necessary  to effect and
      maintain the effectiveness of such Exchange Registration Statement for the
      periods and  purposes  contemplated  in Section  2(a) hereof and as may be
      required by the applicable rules and regulations of the Commission and the
      instructions   applicable  to  the  form  of  such  Exchange  Registration
      Statement,  and  promptly  provide  each  broker-dealer  holding  Exchange
      Securities with such number of copies of the prospectus  included  therein
      (as then amended or supplemented),  in conformity in all material respects
      with the  requirements  of the Securities Act and the Trust  Indenture Act
      and the  rules  and  regulations  of the  Commission  thereunder,  as such
      broker-dealer reasonably may request prior to the expiration of the Resale
      Period, for use in connection with resales of Exchange Securities;

            (iii)  promptly  notify each  broker-dealer  that has  requested  or
      received copies of the prospectus included in such registration statement,
      and confirm such advice in writing,  (A) when such  Exchange  Registration
      Statement or the prospectus  included therein or any prospectus  amendment
      or  supplement  or  post-effective  amendment  has been filed,  and,  with
      respect to such  Exchange  Registration  Statement  or any  post-effective
      amendment,  when the same has become effective, (B) of any comments by the
      Commission and by the blue sky


                                       7
<PAGE>

      or securities  commissioner or regulator of any state with respect thereto
      or any request by the  Commission  for  amendments or  supplements to such
      Exchange   Registration   Statement  or  prospectus   or  for   additional
      information,  (C) of the  issuance  by the  Commission  of any stop  order
      suspending the  effectiveness of such Exchange  Registration  Statement or
      the initiation or threatening of any proceedings for that purpose,  (D) if
      at any time the representations and warranties of the Company contemplated
      by Section 5 cease to be true and correct in all material respects, (E) of
      the  receipt  by the  Company  of any  notification  with  respect  to the
      suspension of the qualification of the Exchange Securities for sale in any
      jurisdiction  or the  initiation or threatening of any proceeding for such
      purpose,  or (F) at any time during the Resale Period when a prospectus is
      required to be delivered  under the  Securities  Act,  that such  Exchange
      Registration Statement, prospectus,  prospectus amendment or supplement or
      post-effective  amendment does not conform in all material respects to the
      applicable  requirements of the Securities Act and the Trust Indenture Act
      and the rules and regulations of the Commission  thereunder or contains an
      untrue  statement of a material  fact or omits to state any material  fact
      required to be stated therein or necessary to make the statements  therein
      not misleading in light of the circumstances then existing;

            (iv) in the event that the Company  would be  required,  pursuant to
      Section 3(c)(iii)(F) above, to notify any broker-dealers  holding Exchange
      Securities,  without  delay  prepare  and  furnish  to each such  holder a
      reasonable  number of copies of a  prospectus  supplemented  or amended so
      that,  as thereafter  delivered to purchasers of such Exchange  Securities
      during the Resale Period,  such  prospectus  shall conform in all material
      respects to the  applicable  requirements  of the  Securities  Act and the
      Trust  Indenture  Act and the  rules  and  regulations  of the  Commission
      thereunder and shall not contain an untrue statement of a material fact or
      omit to state a material fact  required to be stated  therein or necessary
      to  make  the   statements   therein  not   misleading  in  light  of  the
      circumstances then existing;

            (v) use its best  efforts  to  obtain  the  withdrawal  of any order
      suspending the  effectiveness of such Exchange  Registration  Statement or
      any post-effective amendment thereto at the earliest practicable date;

            (vi) use its reasonable  best efforts to (A) register or qualify the
      Exchange  Securities  under the  securities  laws or blue sky laws of such
      jurisdictions  as are  contemplated  by  Section  2(a) no  later  than the
      commencement  of the  Exchange  Offer,  (B)  keep  such  registrations  or
      qualifications  in effect  and  comply  with such laws so as to permit the
      continuance of offers,  sales and dealings  therein in such  jurisdictions
      until the  expiration  of the Resale Period and (C) take any and all other
      actions  as may be  reasonably  necessary  or  advisable  to  enable  each
      broker-dealer  holding  Exchange  Securities to consummate the disposition
      thereof in such jurisdictions;  provided,  however, that the Company shall
      not be  required  for  any  such  purpose  to  (1)  qualify  as a  foreign
      corporation in any jurisdiction wherein it would not otherwise be required
      to qualify but for the


                                       8
<PAGE>

      requirements of this Section  3(c)(vi),  (2) consent to general service of
      process  in  any  such  jurisdiction  or  (3)  make  any  changes  to  its
      certificate of  incorporation  or by-laws or any agreement  between it and
      its stockholders;

            (vii) use its  reasonable  best  efforts  to obtain  the  consent or
      approval of each governmental agency or authority,  whether federal, state
      or local, which may be required to effect the Exchange  Registration,  the
      Exchange  Offer  and the  offering  and  sale of  Exchange  Securities  by
      broker-dealers during the Resale Period;

            (viii)provide a CUSIP number for all Exchange Securities, not later
      than the applicable Effective Time;

            (ix)  comply  with  all  applicable  rules  and  regulations  of the
      Commission, and make generally available to its securityholders as soon as
      practicable  but no later than eighteen months after the effective date of
      such Exchange Registration  Statement, an earning statement of the Company
      and its  subsidiaries  complying  with Section 11(a) of the Securities Act
      (including, at the option of the Company, Rule 158 thereunder).

      (d) In connection with the Company's obligations with respect to the Shelf
Registration,  if applicable,  the Company shall,  as soon as practicable (or as
otherwise specified):

            (i) prepare and file with the Commission, as soon as practicable but
      in any case within the time  periods  specified  in Section  2(b), a Shelf
      Registration  Statement  on any form which may be  utilized by the Company
      and which shall register all of the  Registrable  Securities for resale by
      the  holders  thereof  in  accordance  with  such  method  or  methods  of
      disposition  as may be  specified  by such of the holders as, from time to
      time, may be Electing Holders and use its best efforts to cause such Shelf
      Registration  Statement to become  effective as soon as practicable but in
      any case within the time periods specified in Section 2(b);

            (ii) not less than 30 calendar days prior to the  Effective  Time of
      the Shelf Registration Statement, mail the Notice and Questionnaire to the
      holders of Registrable Securities; no holder shall be entitled to be named
      as a selling  securityholder in the Shelf Registration Statement as of the
      Effective  Time,  and no holder  shall be entitled  to use the  prospectus
      forming a part thereof for resales of Registrable  Securities at any time,
      unless  such  holder  has  returned  a  completed  and  signed  Notice and
      Questionnaire  to the  Company  by the  deadline  for  response  set forth
      therein;  provided,  however, holders of Registrable Securities shall have
      at  least  28  calendar  days  from  the  date on  which  the  Notice  and
      Questionnaire  is first mailed to such  holders to return a completed  and
      signed Notice and Questionnaire to the Company;


                                       9
<PAGE>

            (iii) after the Effective Time of the Shelf Registration  Statement,
      upon the request of any holder of Registrable  Securities that is not then
      an  Electing  Holder,  promptly  send a Notice and  Questionnaire  to such
      holder; provided that the Company shall not be required to take any action
      to name such holder as a selling  securityholder in the Shelf Registration
      Statement  or to enable such holder to use the  prospectus  forming a part
      thereof  for  resales of  Registrable  Securities  until  such  holder has
      returned a completed and signed Notice and Questionnaire to the Company;

            (iv) as soon as  practicable  prepare  and file with the  Commission
      such amendments and supplements to such Shelf  Registration  Statement and
      the prospectus included therein as may be necessary to effect and maintain
      the  effectiveness  of such Shelf  Registration  Statement  for the period
      specified in Section 2(b) hereof and as may be required by the  applicable
      rules and regulations of the Commission and the instructions applicable to
      the form of such Shelf Registration Statement, and furnish to the Electing
      Holders copies of any such supplement or amendment  simultaneously with or
      prior to its being used or filed with the Commission;

            (v) comply with the provisions of the Securities Act with respect to
      the disposition of all of the Registrable Securities covered by such Shelf
      Registration   Statement  in  accordance  with  the  intended  methods  of
      disposition   by  the  Electing   Holders   provided  for  in  such  Shelf
      Registration Statement;

            (vi) provide (A) the Electing Holders,  (B) the underwriters  (which
      term,  for purposes of this Exchange and  Registration  Rights  Agreement,
      shall include a person deemed to be an  underwriter  within the meaning of
      Section 2(a)(11) of the Securities Act), if any, thereof, (C) any sales or
      placement  agent therefor,  (D) counsel for any such  underwriter or agent
      and (E) not  more  than  one  counsel  for all the  Electing  Holders  the
      opportunity to participate in the  preparation of such Shelf  Registration
      Statement,  each prospectus  included therein or filed with the Commission
      and each amendment or supplement thereto;

            (vii) for a  reasonable  period  prior to the  filing of such  Shelf
      Registration  Statement,  and throughout  the period  specified in Section
      2(b), make available at reasonable times at the Company's  principal place
      of business or such other  reasonable  place for inspection by the persons
      referred to in Section 3(d)(vi) who shall certify to the Company that they
      have a current  intention to sell the Registrable  Securities  pursuant to
      the Shelf  Registration such financial and other information and books and
      records of the Company,  and cause the  officers,  employees,  counsel and
      independent certified public accountants of the Company to respond to such
      inquiries,  as shall  be  reasonably  necessary,  in the  judgment  of the
      respective  counsel  referred to in such Section,  to conduct a reasonable
      investigation  within the  meaning of  Section 11 of the  Securities  Act;
      provided,  however,  that each such party shall be required to maintain in
      confidence  and not to disclose  to any other  person any  information  or
      records reasonably designated by the Company as being confidential,  until
      such time as


                                       10
<PAGE>

      (A) such information  becomes a matter of public record (whether by virtue
      of its inclusion in such registration statement or otherwise), or (B) such
      person  shall be required so to disclose  such  information  pursuant to a
      subpoena or order of any court or other governmental agency or body having
      jurisdiction  over the matter (subject to the  requirements of such order,
      and only after such  person  shall have  given the  Company  prompt  prior
      written notice of such  requirement),  or (C) such information is required
      to be set forth in such Shelf  Registration  Statement  or the  prospectus
      included therein or in an amendment to such Shelf  Registration  Statement
      or an amendment or supplement to such  prospectus in order that such Shelf
      Registration Statement,  prospectus,  amendment or supplement, as the case
      may be,  complies with applicable  requirements of the federal  securities
      laws and the rules and  regulations of the Commission and does not contain
      an untrue statement of a material fact or omit to state therein a material
      fact  required to be stated  therein or necessary  to make the  statements
      therein not misleading in light of the circumstances then existing;

            (viii)promptly  notify each of the  Electing  Holders,  any sales or
      placement agent therefor and any underwriter  thereof (which  notification
      may be made through any managing  underwriter that is a representative  of
      such underwriter for such purpose) and confirm such advice in writing, (A)
      when such Shelf Registration  Statement or the prospectus included therein
      or any prospectus amendment or supplement or post-effective  amendment has
      been filed, and, with respect to such Shelf Registration  Statement or any
      post-effective  amendment,  when the same has become effective, (B) of any
      comments by the Commission and by the blue sky or securities  commissioner
      or  regulator  of any state with  respect  thereto  or any  request by the
      Commission  for  amendments  or  supplements  to such  Shelf  Registration
      Statement or prospectus or for additional information, (C) of the issuance
      by the Commission of any stop order  suspending the  effectiveness of such
      Shelf  Registration  Statement or the  initiation  or  threatening  of any
      proceedings for that purpose,  (D) if at any time the  representations and
      warranties of the Company  contemplated by Section 3(d)(xvii) or Section 5
      cease to be true and correct in all material respects,  (E) of the receipt
      by the Company of any  notification  with respect to the suspension of the
      qualification  of the Registrable  Securities for sale in any jurisdiction
      or the initiation or  threatening  of any proceeding for such purpose,  or
      (F) if at any time when a prospectus is required to be delivered under the
      Securities  Act,  that  such  Shelf  Registration  Statement,  prospectus,
      prospectus  amendment or supplement or  post-effective  amendment does not
      conform in all material  respects to the  applicable  requirements  of the
      Securities Act and the Trust  Indenture Act and the rules and  regulations
      of the Commission thereunder or contains an untrue statement of a material
      fact or omits to state any material fact required to be stated  therein or
      necessary to make the  statements  therein not  misleading in light of the
      circumstances then existing;

            (ix) use its reasonable best efforts to obtain the withdrawal of any
      order suspending the effectiveness of such  registration  statement or any
      post-effective amendment thereto at the earliest practicable date;


                                       11
<PAGE>

            (x) if requested by any managing  underwriter or  underwriters,  any
      placement or sales agent or any Electing Holder, promptly incorporate in a
      prospectus  supplement or post-effective  amendment such information as is
      required by the applicable  rules and regulations of the Commission and as
      such managing  underwriter  or  underwriters,  such agent or such Electing
      Holder  specifies  should be included therein relating to the terms of the
      sale of such Registrable Securities, including information with respect to
      the principal amount of Registrable Securities being sold by such Electing
      Holder or agent or to any  underwriters,  the name and description of such
      Electing  Holder,  agent  or  underwriter,  the  offering  price  of  such
      Registrable Securities and any discount,  commission or other compensation
      payable in respect thereof, the purchase price being paid therefor by such
      underwriters  and with  respect to any other terms of the  offering of the
      Registrable  Securities to be sold by such Electing  Holder or agent or to
      such  underwriters;  and  make all  required  filings  of such  prospectus
      supplement or post-effective  amendment promptly after notification of the
      matters to be incorporated in such prospectus supplement or post-effective
      amendment;

            (xi) furnish to each Electing Holder, each placement or sales agent,
      if any,  therefor,  each  underwriter,  if any, thereof and the respective
      counsel  referred to in Section 3(d)(vi) an executed copy (or, in the case
      of an  Electing  Holder,  a  conformed  copy) of such  Shelf  Registration
      Statement,  each  such  amendment  and  supplement  thereto  (in each case
      including  all  exhibits  thereto  (in the case of an  Electing  Holder of
      Registrable  Securities,  upon  request)  and  documents  incorporated  by
      reference  therein)  and such number of copies of such Shelf  Registration
      Statement  (excluding  exhibits  thereto  and  documents  incorporated  by
      reference  therein  unless  specifically  so  requested  by such  Electing
      Holder,  agent or  underwriter,  as the case may be) and of the prospectus
      included in such Shelf Registration  Statement (including each preliminary
      prospectus  and any summary  prospectus),  in  conformity  in all material
      respects with the  applicable  requirements  of the Securities Act and the
      Trust  Indenture  Act and the  rules  and  regulations  of the  Commission
      thereunder,  and such other documents,  as such Electing Holder, agent, if
      any,  and  underwriter,  if  any,  may  reasonably  request  in  order  to
      facilitate  the offering and  disposition  of the  Registrable  Securities
      owned  by  such  Electing  Holder,  offered  or  sold  by  such  agent  or
      underwritten by such underwriter and to permit such Electing Holder, agent
      and  underwriter to satisfy the prospectus  delivery  requirements  of the
      Securities  Act;  and  the  Company  hereby  consents  to the  use of such
      prospectus  (including such  preliminary  and summary  prospectus) and any
      amendment or supplement  thereto by each such  Electing  Holder and by any
      such  agent  and  underwriter,  in each  case in the  form  most  recently
      provided to such person by the Company,  in  connection  with the offering
      and  sale  of  the  Registrable   Securities  covered  by  the  prospectus
      (including such  preliminary and summary  prospectus) or any supplement or
      amendment thereto;

            (xii) use reasonable best efforts to (A) register or qualify the
      Registrable Securities to be included in such Shelf Registration Statement
      under such


                                       12
<PAGE>

      securities  laws or blue sky laws of such  jurisdictions  as any  Electing
      Holder  and  each  placement  or  sales  agent,   if  any,   therefor  and
      underwriter,  if any,  thereof  shall  reasonably  request,  (B) keep such
      registrations or  qualifications in effect and comply with such laws so as
      to permit the  continuance of offers,  sales and dealings  therein in such
      jurisdictions  during the period the Shelf  Registration  is  required  to
      remain  effective  under  Section  2(b)  above  and  for so long as may be
      necessary to enable any such  Electing  Holder,  agent or  underwriter  to
      complete  its   distribution   of   Securities   pursuant  to  such  Shelf
      Registration  Statement  and (C) take any and all other  actions as may be
      reasonably  necessary or advisable  to enable each such  Electing  Holder,
      agent, if any, and  underwriter,  if any, to consummate the disposition in
      such jurisdictions of such Registrable Securities; provided, however, that
      the Company shall not be required for any such purpose to (1) qualify as a
      foreign corporation in any jurisdiction  wherein it would not otherwise be
      required to qualify but for the  requirements  of this Section  3(d)(xii),
      (2) consent to general service of process in any such  jurisdiction or (3)
      make any changes to its  certificate  of  incorporation  or by-laws or any
      agreement between it and its stockholders;

            (xiii)use  its  reasonable  best  efforts to obtain  the  consent or
      approval of each governmental agency or authority,  whether federal, state
      or local,  which may be required to effect the Shelf  Registration  or the
      offering or sale in connection  therewith or to enable the selling  holder
      or  holders  to  offer,   or  to  consummate  the  disposition  of,  their
      Registrable Securities;

            (xiv) unless any Registrable  Securities shall be in book-entry only
      form,  cooperate with the Electing Holders and the managing  underwriters,
      if any, to facilitate the timely  preparation and delivery of certificates
      representing Registrable Securities to be sold, which certificates,  if so
      required by any securities exchange upon which any Registrable  Securities
      are listed, shall be penned,  lithographed or engraved, or produced by any
      combination  of  such  methods,  on  steel  engraved  borders,  and  which
      certificates shall not bear any restrictive  legends;  and, in the case of
      an underwritten offering, enable such Registrable Securities to be in such
      denominations  and  registered in such names as the managing  underwriters
      may  request  at  least  two  business  days  prior  to  any  sale  of the
      Registrable Securities;

            (xv)  provide a CUSIP  number for all  Registrable  Securities,  not
      later than the applicable Effective Time;

            (xvi)  enter into one or more  underwriting  agreements,  engagement
      letters,  agency  agreements,  "best efforts"  underwriting  agreements or
      similar  agreements,   as  appropriate,   including  customary  provisions
      relating to indemnification and contribution,  and take such other actions
      in connection  therewith as any Electing Holders  aggregating at least 20%
      in aggregate  principal  amount of the Registrable  Securities at the time
      outstanding   shall  request  in  order  to  expedite  or  facilitate  the
      disposition of such Registrable Securities;


                                       13
<PAGE>

            (xvii)whether or not an agreement of the type referred to in Section
      3(d)(xvi)  hereof is entered  into and  whether or not any  portion of the
      offering  contemplated  by  the  Shelf  Registration  is  an  underwritten
      offering  or is made  through  a  placement  or sales  agent or any  other
      entity,  (A) make such  representations  and  warranties  to the  Electing
      Holders  and the  placement  or  sales  agent,  if any,  therefor  and the
      underwriters,  if  any,  thereof  in  form,  substance  and  scope  as are
      customarily  made in  connection  with  an  offering  of  debt  securities
      pursuant to any appropriate agreement or to a registration statement filed
      on the form applicable to the Shelf Registration; (B) obtain an opinion of
      counsel to the Company in customary form and covering such matters, of the
      type customarily covered by such an opinion, as the managing underwriters,
      if any, or as any Electing Holders of at least 20% in aggregate  principal
      amount  of  the  Registrable   Securities  at  the  time  outstanding  may
      reasonably request,  addressed to such Electing Holder or Electing Holders
      and the placement or sales agent, if any,  therefor and the  underwriters,
      if any,  thereof and dated the effective  date of such Shelf  Registration
      Statement  (and if  such  Shelf  Registration  Statement  contemplates  an
      underwritten  offering  of a part  or all of the  Registrable  Securities,
      dated the date of the closing under the  underwriting  agreement  relating
      thereto)  (it being  agreed that the matters to be covered by such opinion
      shall include the due  incorporation  and good standing of the Company and
      its Subsidiaries; the qualification of the Company and its Subsidiaries to
      transact  business  as  foreign   corporations;   the  due  authorization,
      execution  and delivery of the relevant  agreement of the type referred to
      in  Section   3(d)(xvi)   hereof;   the  due   authorization,   execution,
      authentication and issuance,  and the validity and enforceability,  of the
      Securities;  the absence of  material  legal or  governmental  proceedings
      involving  the  Company;  the absence of a breach by the Company or any of
      its Subsidiaries of, or a default under,  material agreements binding upon
      the Company or any Subsidiary of the Company;  the absence of governmental
      approvals   required  to  be  obtained  in   connection   with  the  Shelf
      Registration,  the offering and sale of the Registrable  Securities,  this
      Exchange and  Registration  Rights  Agreement or any agreement of the type
      referred to in Section 3(d)(xvi)  hereof,  except such approvals as may be
      required under state securities or blue sky laws; the material  compliance
      as to  form  of  such  Shelf  Registration  Statement  and  any  documents
      incorporated   by  reference   therein  and  of  the  Indenture  with  the
      requirements  of the  Securities  Act and the Trust  Indenture Act and the
      rules and regulations of the Commission thereunder,  respectively; and, as
      of the date of the opinion and of the Shelf Registration Statement or most
      recent  post-effective  amendment thereto, as the case may be, the absence
      from  such  Shelf  Registration  Statement  and  the  prospectus  included
      therein,  as  then  amended  or  supplemented,   and  from  the  documents
      incorporated  by reference  therein (in each case other than the financial
      statements and other financial information contained therein) of an untrue
      statement of a material  fact or the omission to state  therein a material
      fact necessary to make the statements  therein not misleading (in the case
      of such documents,  in the light of the circumstances existing at the time
      that such  documents  were filed with the  Commission  under the  Exchange
      Act)); (C) obtain a "cold comfort" letter or


                                       14
<PAGE>

      letters from the independent  certified public  accountants of the Company
      addressed to the selling Electing  Holders,  the placement or sales agent,
      if any,  therefor  or the  underwriters,  if any,  thereof,  dated (i) the
      effective date of such Shelf Registration Statement and (ii) the effective
      date of any prospectus supplement to the prospectus included in such Shelf
      Registration   Statement  or   post-effective   amendment  to  such  Shelf
      Registration  Statement  which  includes  unaudited  or audited  financial
      statements  as of a date or for a period  subsequent to that of the latest
      such  statements   included  in  such  prospectus   (and,  if  such  Shelf
      Registration  Statement  contemplates an underwritten offering pursuant to
      any  prospectus  supplement  to the  prospectus  included  in  such  Shelf
      Registration   Statement  or   post-effective   amendment  to  such  Shelf
      Registration  Statement  which  includes  unaudited  or audited  financial
      statements  as of a date or for a period  subsequent to that of the latest
      such statements included in such prospectus, dated the date of the closing
      under the underwriting agreement relating thereto), such letter or letters
      to be in customary form and covering such matters of the type  customarily
      covered  by  letters  of  such  type;   (D)  deliver  such  documents  and
      certificates,  including  officers'  certificates,  as may  be  reasonably
      requested by any Electing  Holders of at least 20% in aggregate  principal
      amount  of the  Registrable  Securities  at the  time  outstanding  or the
      placement or sales agent, if any, therefor and the managing  underwriters,
      if any,  thereof to  evidence  the  accuracy  of the  representations  and
      warranties made pursuant to clause (A) above or those contained in Section
      5(a) hereof and the compliance  with or  satisfaction of any agreements or
      conditions  contained in the  underwriting  agreement  or other  agreement
      entered into by the Company;  and (E) undertake such obligations  relating
      to expense reimbursement, indemnification and contribution as are provided
      in Section 6 hereof;

            (xviii) notify in writing each holder of  Registrable  Securities of
      any  proposal  by the  Company  to amend or waive  any  provision  of this
      Exchange and Registration Rights Agreement pursuant to Section 9(h) hereof
      and of any amendment or waiver effected  pursuant  thereto,  each of which
      notices  shall  contain the text of the  amendment  or waiver  proposed or
      effected, as the case may be;

            (xix) in the  event  that any  broker-dealer  registered  under  the
      Exchange Act shall underwrite any Registrable Securities or participate as
      a member of an  underwriting  syndicate or selling group or "assist in the
      distribution"  (within  the  meaning of the  Conduct  Rules (the  "Conduct
      Rules) of the National Association of Securities Dealers, Inc. ("NASD") or
      any successor thereto, as amended from time to time) thereof, whether as a
      holder of such Registrable Securities or as an underwriter, a placement or
      sales agent or a broker or dealer in respect thereof, or otherwise, assist
      such  broker-dealer  in complying  with the  requirements  of such Conduct
      Rules, including by (A) if such Conduct Rules shall so require, engaging a
      "qualified independent  underwriter" (as defined in such Conduct Rules) to
      participate  in  the  preparation  of  the  Shelf  Registration  Statement
      relating to such  Registrable  Securities,  to exercise usual standards of
      due  diligence  in respect  thereto  and, if any  portion of the  offering
      contemplated  by


                                       15
<PAGE>

      such Shelf Registration  Statement is an underwritten  offering or is made
      through  a  placement  or sales  agent,  to  recommend  the  yield of such
      Registrable  Securities,  (B) indemnifying any such qualified  independent
      underwriter to the extent of the indemnification of underwriters  provided
      in  Section  6  hereof  (or  to  such  other  customary  extent  as may be
      reasonably  requested  by  such  underwriter),   and  (C)  providing  such
      information  to such  broker-dealer  as may be  required in order for such
      broker-dealer to comply with the requirements of the Conduct Rules; and

            (xx)  comply  with  all  applicable  rules  and  regulations  of the
      Commission, and make generally available to its securityholders as soon as
      practicable  but in any event not later  than  eighteen  months  after the
      effective date of such Shelf Registration  Statement, an earning statement
      of the Company and its  subsidiaries  complying  with Section 11(a) of the
      Securities  Act  (including,  at the  option  of  the  Company,  Rule  158
      thereunder).

      (e) In the event that the Company  would be required,  pursuant to Section
3(d)(viii)(F)  above,  to notify the Electing  Holders,  the  placement or sales
agent, if any,  therefor and the managing  underwriters,  if any,  thereof,  the
Company shall without delay prepare and furnish to each of the Electing Holders,
to each placement or sales agent, if any, and to each such underwriter,  if any,
a reasonable  number of copies of a prospectus  supplemented or amended so that,
as thereafter delivered to purchasers of Registrable Securities, such prospectus
shall conform in all material  respects to the  applicable  requirements  of the
Securities Act and the Trust  Indenture Act and the rules and regulations of the
Commission  thereunder  and shall not contain an untrue  statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances then
existing.  Each Electing  Holder agrees that upon receipt of any notice from the
Company  pursuant to Section  3(d)(viii)(F)  hereof,  such Electing Holder shall
forthwith discontinue the disposition of Registrable  Securities pursuant to the
Shelf  Registration  Statement  applicable to such Registrable  Securities until
such Electing  Holder shall have received copies of such amended or supplemented
prospectus,  and if so directed  by the  Company,  such  Electing  Holder  shall
deliver  to the  Company  (at the  Company's  expense)  all  copies,  other than
permanent  file  copies,  then  in  such  Electing  Holder's  possession  of the
prospectus  covering such Registrable  Securities at the time of receipt of such
notice.

      (f) In the event of a Shelf  Registration,  in addition to the information
required to be provided by each Electing Holder in its Notice Questionnaire, the
Company  may  require  such  Electing  Holder to  furnish  to the  Company  such
additional information regarding such Electing Holder and such Electing Holder's
intended method of distribution of Registrable  Securities as may be required in
order to comply with the  Securities  Act. Each such  Electing  Holder agrees to
notify the Company as promptly as  practicable  of any  inaccuracy  or change in
information  previously  furnished by such Electing  Holder to the Company or of
the  occurrence of any event in either case as a result of which any  prospectus
relating  to such  Shelf  Registration  contains  or  would  contain  an  untrue
statement of a material fact  regarding  such  Electing  Holder or such


                                       16
<PAGE>

Electing Holder's intended method of disposition of such Registrable  Securities
or omits to state any  material  fact  regarding  such  Electing  Holder or such
Electing Holder's intended method of disposition of such Registrable  Securities
required to be stated  therein or necessary to make the  statements  therein not
misleading in light of the circumstances then existing,  and promptly to furnish
to the Company  any  additional  information  required to correct and update any
previously  furnished  information or required so that such prospectus shall not
contain,  with  respect  to such  Electing  Holder  or the  disposition  of such
Registrable Securities,  an untrue statement of a material fact or omit to state
a  material  fact  required  to be  stated  therein  or  necessary  to make  the
statements therein not misleading in light of the circumstances then existing.

      (g) Until the  expiration of two years after the Closing Date, the Company
will not, and will not permit any of its  "affiliates"  (as defined in Rule 144)
to, resell any of the Securities that have been reacquired by any of them except
pursuant to an effective registration statement under the Securities Act.

      4. Registration Expenses.

      The  Company  agrees to bear and to pay or cause to be paid  promptly  all
expenses  incident  to the  Company's  performance  of or  compliance  with this
Exchange and Registration Rights Agreement, including (a) all Commission and any
NASD  registration,  filing  and review  fees and  expenses  including  fees and
disbursements  of counsel for the  placement or sales agent or  underwriters  in
connection with such registration,  filing and review, (b) all fees and expenses
in connection  with the  qualification  of the  Securities for offering and sale
under the State  securities  and blue sky laws referred to in Section  3(d)(xii)
hereof and  determination of their  eligibility for investment under the laws of
such  jurisdictions  as any managing  underwriters  or the Electing  Holders may
designate,  including  any fees and  disbursements  of counsel for the  Electing
Holders or underwriters in connection with such qualification and determination,
(c) all expenses relating to the preparation, printing, production, distribution
and reproduction of each registration  statement required to be filed hereunder,
each prospectus  included therein or prepared for distribution  pursuant hereto,
each  amendment or  supplement to the  foregoing,  the expenses of preparing the
Securities   for  delivery  and  the  expenses  of  printing  or  producing  any
underwriting agreements,  agreements among underwriters,  selling agreements and
blue sky or legal  investment  memoranda  and all other  documents in connection
with the  offering,  sale or delivery of Securities to be disposed of (including
certificates representing the Securities), (d) messenger, telephone and delivery
expenses  relating  to the  offering,  sale or delivery  of  Securities  and the
preparation of documents  referred in clause (c) above, (e) fees and expenses of
the Trustee  under the  Indenture,  any agent of the Trustee and any counsel for
the Trustee and of any  collateral  agent or  custodian,  (f) internal  expenses
(including  all salaries and expenses of the  Company's  officers and  employees
performing legal or accounting duties), (g) fees,  disbursements and expenses of
counsel and independent  certified public  accountants of the Company (including
the expenses of any opinions or "cold comfort"  letters  required by or incident
to such performance and compliance), (h) fees, disbursements and expenses of any
"qualified  independent  underwriter"  engaged  pursuant  to  Section  3(d)(xix)
hereof,  (i)


                                       17
<PAGE>

fees,  disbursements  and  expenses  of one  counsel  for the  Electing  Holders
retained in connection  with a Shelf  Registration,  as selected by the Electing
Holders of at least a majority in aggregate  principal amount of the Registrable
Securities  held  by  Electing   Holders  (which  counsel  shall  be  reasonably
satisfactory to the Company), (j) any fees charged by securities rating services
for rating the Securities, and (k) fees, expenses and disbursements of any other
persons,  including special experts,  retained by the Company in connection with
such registration  (collectively,  the "Registration  Expenses").  To the extent
that any  Registration  Expenses are incurred,  assumed or paid by any holder of
Registrable  Securities or any placement or sales agent  therefor or underwriter
thereof,  the  Company  shall  reimburse  such person for the full amount of the
Registration  Expenses so incurred,  assumed or paid promptly after receipt of a
request therefor.  Notwithstanding the foregoing, the holders of the Registrable
Securities  being  registered  shall pay all  agency  fees and  commissions  and
underwriting  discounts  and  commissions  attributable  to  the  sale  of  such
Registrable  Securities and the fees and  disbursements  of any counsel or other
advisors or experts retained by such holders (severally or jointly),  other than
the counsel and experts specifically referred to above.

      5. Representations and Warranties.

      The Company  represents  and warrants to, and agrees with,  each Purchaser
and each of the holders from time to time of Registrable Securities that:

      (a) Each registration  statement covering Registrable  Securities and each
prospectus  (including any preliminary or summary prospectus)  contained therein
or  furnished  pursuant to Section  3(d) or Section  3(c) hereof and any further
amendments or supplements to any such registration statement or prospectus, when
it becomes  effective or is filed with the Commission,  as the case may be, and,
in the case of an underwritten offering of Registrable  Securities,  at the time
of the closing under the underwriting  agreement relating thereto,  will conform
in all material respects to the requirements of the Securities Act and the Trust
Indenture Act and the rules and  regulations  of the  Commission  thereunder and
will not  contain  an untrue  statement  of a  material  fact or omit to state a
material fact required to be stated  therein or necessary to make the statements
therein not misleading; and at all times subsequent to the Effective Time when a
prospectus  would be required to be delivered  under the  Securities  Act, other
than from (i) such time as a notice has been  given to  holders  of  Registrable
Securities  pursuant to Section  3(d)(viii)(F)  or Section  3(c)(iii)(F)  hereof
until  (ii)  such time as the  Company  furnishes  an  amended  or  supplemented
prospectus  pursuant  to Section  3(e) or  Section  3(c)(iv)  hereof,  each such
registration  statement,  and each prospectus (including any summary prospectus)
contained therein or furnished  pursuant to Section 3(d) or Section 3(c) hereof,
as then amended or  supplemented,  will conform in all material  respects to the
requirements of the Securities Act and the Trust Indenture Act and the rules and
regulations  of the  Commission  thereunder  and  will  not  contain  an  untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated therein or necessary to make the statements therein not misleading in the
light  of  the  circumstances  then  existing;   provided,  however,  that  this
representation  and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity


                                       18
<PAGE>

with information  furnished in writing to the Company by a holder of Registrable
Securities expressly for use therein.

      (b) Any documents  incorporated by reference in any prospectus referred to
in Section  5(a)  hereof,  when they become or became  effective  or are or were
filed with the Commission,  as the case may be, will conform or conformed in all
material respects to the requirements of the Securities Act or the Exchange Act,
as  applicable,  and none of such  documents will contain or contained an untrue
statement  of a material  fact or will omit or omitted to state a material  fact
required to be stated  therein or necessary to make the  statements  therein not
misleading;  provided,  however, that this representation and warranty shall not
apply to any  statements  or omissions  made in reliance  upon and in conformity
with information  furnished in writing to the Company by a holder of Registrable
Securities expressly for use therein.

      (c) The  compliance  by the  Company  with all of the  provisions  of this
Exchange  and  Registration   Rights  Agreement  and  the  consummation  of  the
transactions herein contemplated will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage,  deed  of  trust,  loan  agreement  or  other  material  agreement  or
instrument  to which the Company or any  Subsidiary of the Company is a party or
by which the Company or any  Subsidiary  of the Company is bound or to which any
of the  property  or assets of the Company or any  Subsidiary  of the Company is
subject,  nor will such action result in any violation of the  provisions of the
certificate of incorporation,  as amended,  or the by-laws of the Company or any
statute or any order, rule or regulation of any court or governmental  agency or
body having  jurisdiction  over the Company or any  subsidiary of the Company or
any  of  their  properties;  and no  consent,  approval,  authorization,  order,
registration or qualification  of or with any such court or governmental  agency
or body is required  for the  consummation  by the  Company of the  transactions
contemplated  by this Exchange and  Registration  Rights  Agreement,  except the
registration  under the Securities Act of the Securities,  qualification  of the
Indenture  under  the  Trust   Indenture  Act  and  such  consents,   approvals,
authorizations,  registrations or  qualifications as may be required under State
securities or blue sky laws in connection with the offering and  distribution of
the Securities.

      (d)  This  Exchange  and  Registration  Rights  Agreement  has  been  duly
authorized, executed and delivered by the Company.

      6. Indemnification.

      (a)  Indemnification  by the Company.  The Company will indemnify and hold
harmless each of the holders of Registrable  Securities  included in an Exchange
Registration  Statement,  each of the Electing Holders of Registrable Securities
included in a Shelf Registration Statement and each person who participates as a
placement  or sales agent or as an  underwriter  in any offering or sale of such
Registrable Securities against any losses, claims, damages or liabilities, joint
or several, to which such holder,  agent or underwriter may become subject under
the  Securities  Act or otherwise,  insofar as such losses,  claims,  damages or
liabilities  (or actions in respect  thereof)  arise out of


                                       19
<PAGE>

or are based upon an untrue  statement or alleged untrue statement of a material
fact  contained in any  Exchange  Registration  Statement or Shelf  Registration
Statement,  as the case may be,  under which such  Registrable  Securities  were
registered  under the  Securities  Act,  or any  preliminary,  final or  summary
prospectus  contained  therein or  furnished  by the Company to any such holder,
Electing Holder,  agent or underwriter,  or any amendment or supplement thereto,
or arise out of or are based  upon the  omission  or alleged  omission  to state
therein a material fact  required to be stated  therein or necessary to make the
statements therein not misleading, and will reimburse such holder, such Electing
Holder,  such  agent  and such  underwriter  for any  legal  or  other  expenses
reasonably  incurred by them in connection with  investigating  or defending any
such action or claim as such expenses are incurred;  provided, however, that the
Company  shall not be liable to any such  person in any such case to the  extent
that any such loss, claim, damage or liability arises out of or is based upon an
untrue  statement or alleged  untrue  statement or omission or alleged  omission
made  in  such  registration  statement,   or  preliminary,   final  or  summary
prospectus,  or  amendment  or  supplement  thereto,  in  reliance  upon  and in
conformity  with  written  information  furnished  to the Company by such person
expressly for use therein.

      (b)  Indemnification  by the Holders and any Agents and Underwriters.  The
Company may require,  as a condition to including any Registrable  Securities in
any registration statement filed pursuant to Section 2(b) hereof and to entering
into any  underwriting  agreement with respect  thereto,  that the Company shall
have received an  undertaking  reasonably  satisfactory  to it from the Electing
Holder of such  Registrable  Securities and from each  underwriter  named in any
such  underwriting  agreement,  severally and not jointly,  to (i) indemnify and
hold  harmless the Company,  and all other  holders of  Registrable  Securities,
against any losses,  claims, damages or liabilities to which the Company or such
other holders of Registrable Securities may become subject, under the Securities
Act or otherwise,  insofar as such losses,  claims,  damages or liabilities  (or
actions in respect  thereof) arise out of or are based upon an untrue  statement
or alleged untrue  statement of a material fact  contained in such  registration
statement, or any preliminary,  final or summary prospectus contained therein or
furnished by the Company to any such Electing Holder,  agent or underwriter,  or
any  amendment  or  supplement  thereto,  or arise out of or are based  upon the
omission or alleged  omission to state  therein a material  fact  required to be
stated therein or necessary to make the statements  therein not  misleading,  in
each case to the extent,  but only to the extent,  that such untrue statement or
alleged  untrue  statement or omission or alleged  omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Electing Holder or underwriter expressly for use therein, and (ii) reimburse the
Company for any legal or other  expenses  reasonably  incurred by the Company in
connection  with  investigating  or  defending  any such action or claim as such
expenses are incurred;  provided, however, that no such Electing Holder shall be
required to  undertake  liability  to any person under this Section 6(b) for any
amounts in excess of the dollar  amount of the  proceeds  to be received by such
Electing Holder from the sale of such Electing Holder's  Registrable  Securities
pursuant to such registration.


                                       20
<PAGE>

      (c) Notices of Claims, Etc. Promptly after receipt by an indemnified party
under  subsection (a) or (b) above of written notice of the  commencement of any
action,  such  indemnified  party shall,  if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying  party in writing of
the commencement of such action;  but the omission so to notify the indemnifying
party  shall  not  relieve  it  from  any  liability  which  it may  have to any
indemnified  party  otherwise  than under the  indemnification  provisions of or
contemplated  by Section 6(a) or 6(b)  hereof.  In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying  party
of the  commencement  thereof,  such  indemnifying  party  shall be  entitled to
participate  therein  and, to the extent that it shall  wish,  jointly  with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party (who shall not, except
with the  consent of the  indemnified  party,  be  counsel  to the  indemnifying
party),  and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof,  such indemnifying party shall
not be liable to such indemnified  party for any legal expenses of other counsel
or any other expenses,  in each case  subsequently  incurred by such indemnified
party, in connection  with the defense  thereof other than  reasonable  costs of
investigation.  In no event shall an  indemnifying  party be liable for fees and
expenses of more than one counsel (in addition to local  counsel)  separate from
their own counsel for all indemnified  parties in connection with any one action
or separate but similar or related actions in the same jurisdiction  arising out
of the same general  allegations or circumstances.  No indemnifying party shall,
without the written consent of the indemnified  party,  effect the settlement or
compromise  of, or consent to the entry of any  judgment  with  respect  to, any
pending or  threatened  action or claim in respect of which  indemnification  or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or  potential  party to such  action or claim)  unless  such  settlement,
compromise or judgment (i) includes an unconditional  release of the indemnified
party from all  liability  arising out of such action or claim and (ii) does not
include a statement as to or an admission of fault,  culpability or a failure to
act by or on behalf of any indemnified party.

      (d)  Contribution.  If  for  any  reason  the  indemnification  provisions
contemplated  by Section 6(a) or Section 6(b) are unavailable to or insufficient
to hold harmless an indemnified party in respect of any losses,  claims, damages
or liabilities (or actions in respect  thereof)  referred to therein,  then each
indemnifying  party  shall  contribute  to the  amount  paid or  payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect  thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses,  claims, damages
or liabilities  (or actions in respect  thereof),  as well as any other relevant
equitable  considerations.  The relative  fault of such  indemnifying  party and
indemnified  party shall be  determined  by reference  to,  among other  things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged  omission to state a material  fact relates to  information  supplied by
such indemnifying  party or by such indemnified party, and the parties' relative
intent,  knowledge,  access to information and opportunity to correct or prevent
such  statement or omission.  The parties hereto agree


                                       21
<PAGE>

that it would  not be just  and  equitable  if  contributions  pursuant  to this
Section 6(d) were determined by pro rata allocation  (even if the holders or any
agents  or  underwriters  or all of them were  treated  as one  entity  for such
purpose) or by any other method of allocation which does not take account of the
equitable  considerations  referred to in this Section 6(d).  The amount paid or
payable by an indemnified party as a result of the losses,  claims,  damages, or
liabilities (or actions in respect thereof) referred to above shall be deemed to
include  any  legal  or  other  fees or  expenses  reasonably  incurred  by such
indemnified party in connection with  investigating or defending any such action
or claim.  Notwithstanding  the provisions of this Section 6(d), no holder shall
be required to contribute any amount in excess of the amount by which the dollar
amount of the proceeds  received by such holder from the sale of any Registrable
Securities  (after  deducting  any fees,  discounts and  commissions  applicable
thereto)  exceeds the amount of any damages which such holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged  omission,  and no  underwriter  shall be required to contribute  any
amount in excess of the amount by which the total price at which the Registrable
Securities  underwritten by it and distributed to the public were offered to the
public  exceeds the amount of any damages which such  underwriter  has otherwise
been  required to pay by reason of such untrue or alleged  untrue  statement  or
omission or alleged omission.  No person guilty of fraudulent  misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution   from  any  person   who  was  not   guilty  of  such   fraudulent
misrepresentation.  The  holders'  and  any  underwriters'  obligations  in this
Section  6(d) to  contribute  shall be several in  proportion  to the  principal
amount of Registrable Securities registered or underwritten, as the case may be,
by them and not joint.

      (e) The  obligations  of the  Company  under  this  Section  6 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and  conditions,  to each  officer,  director and partner of
each holder,  agent and  underwriter  and each person,  if any, who controls any
holder,  agent or underwriter  within the meaning of the Securities Act; and the
obligations of the holders and any agents or  underwriters  contemplated by this
Section 6 shall be in addition to any  liability  which the  respective  holder,
agent or underwriter  may otherwise  have and shall extend,  upon the same terms
and  conditions,  to each  officer and  director of the Company  (including  any
person who, with his consent, is named in any registration statement as about to
become a director of the Company)  and to each person,  if any, who controls the
Company within the meaning of the Securities Act.

      7. Underwritten Offerings.

      (a)  Selection  of  Underwriters.  If any of  the  Registrable  Securities
covered by the Shelf  Registration  are to be sold  pursuant to an  underwritten
offering,  the managing  underwriter or underwriters thereof shall be designated
by Electing Holders holding at least a majority in aggregate principal amount of
the Registrable  Securities to be included in such offering,  provided that such
designated managing underwriter or underwriters is or are reasonably  acceptable
to the Company.


                                       22
<PAGE>

      (b) Participation by Holders. Each holder of Registrable Securities hereby
agrees with each other such holder  that no such holder may  participate  in any
underwritten  offering  hereunder  unless  such  holder  (i) agrees to sell such
holder's  Registrable  Securities  on the  basis  provided  in any  underwriting
arrangements  approved  by  the  persons  entitled  hereunder  to  approve  such
arrangements  and (ii)  completes  and  executes all  questionnaires,  powers of
attorney,  indemnities,  underwriting  agreements and other documents reasonably
required under the terms of such underwriting arrangements.

      8. Rule 144.

      The Company covenants to the holders of Registrable Securities that to the
extent it shall be required to do so under the Exchange  Act, the Company  shall
timely file the reports required to be filed by it under the Exchange Act or the
Securities Act (including the reports under Section 13 and 15(d) of the Exchange
Act  referred to in  subparagraph  (c)(1) of Rule 144 adopted by the  Commission
under  the  Securities  Act)  and  the  rules  and  regulations  adopted  by the
Commission  thereunder,  and shall  take such  further  action as any  holder of
Registrable  Securities may reasonably request,  all to the extent required from
time to time to  enable  such  holder  to sell  Registrable  Securities  without
registration  under the Securities  Act within the  limitations of the exemption
provided by Rule 144 under the Securities  Act, as such Rule may be amended from
time to time, or any similar or successor rule or regulation  hereafter  adopted
by the Commission.  Upon the request of any holder of Registrable  Securities in
connection  with that  holder's  sale  pursuant to Rule 144,  the Company  shall
deliver to such holder a written  statement as to whether it has  complied  with
such requirements.

      9. Miscellaneous.

      (a)  No  Inconsistent  Agreements.   The  Company  represents,   warrants,
covenants and agrees that it has not granted, and shall not grant,  registration
rights with respect to  Registrable  Securities  or any other  securities  which
would be inconsistent with the terms contained in this Exchange and Registration
Rights Agreement.

      (b) Specific Performance.  The parties hereto acknowledge that there would
be no  adequate  remedy  at law if  the  Company  fails  to  perform  any of its
obligations  hereunder and that the Purchasers and the holders from time to time
of the Registrable Securities may be irreparably harmed by any such failure, and
accordingly agree that the Purchasers and such holders, in addition to any other
remedy to which they may be entitled  at law or in equity,  shall be entitled to
compel  specific  performance  of the  obligations  of the  Company  under  this
Exchange and  Registration  Rights  Agreement in  accordance  with the terms and
conditions of this Exchange and Registration  Rights Agreement,  in any court of
the United States or any State thereof having jurisdiction.

      (c) Notices. All notices,  requests,  claims,  demands,  waivers and other
communications  hereunder  shall be in writing  and shall be deemed to have been
duly given when  delivered by hand, if delivered  personally  or by courier,  or
three days after being  deposited in the mail  (registered  or  certified  mail,
postage prepaid,  return receipt


                                       23
<PAGE>

requested) as follows:  If to the Company,  to it at 80 Park Plaza,  Newark,  NJ
07102,  and if to a  holder,  to the  address  of such  holder  set forth in the
security  register or other records of the Company,  or to such other address as
the  Company or any such  holder may have  furnished  to the other in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.

      (d) Parties in Interest. All the terms and provisions of this Exchange and
Registration  Rights Agreement shall be binding upon, shall inure to the benefit
of and shall be  enforceable  by the parties hereto and the holders from time to
time of the Registrable  Securities and the respective successors and assigns of
the parties  hereto and such  holders.  In the event that any  transferee of any
holder of Registrable  Securities shall acquire Registrable  Securities,  in any
manner, whether by gift, bequest, purchase,  operation of law or otherwise, such
transferee shall, without any further writing or action of any kind, be deemed a
beneficiary  hereof for all purposes and such  Registrable  Securities  shall be
held  subject  to all of the  terms of this  Exchange  and  Registration  Rights
Agreement, and by taking and holding such Registrable Securities such transferee
shall be entitled to receive the benefits of, and be conclusively deemed to have
agreed  to be  bound  by all of the  applicable  terms  and  provisions  of this
Exchange and Registration Rights Agreement. If the Company shall so request, any
such successor,  assign or transferee shall agree in writing to acquire and hold
the Registrable Securities subject to all of the applicable terms hereof.

      (e) Survival.  The respective  indemnities,  agreements,  representations,
warranties and each other provision set forth in this Exchange and  Registration
Rights  Agreement or made pursuant  hereto shall remain in full force and effect
regardless of any investigation (or statement as to the results thereof) made by
or on behalf of any holder of Registrable Securities,  any director,  officer or
partner of such holder,  any agent or  underwriter  or any director,  officer or
partner thereof,  or any controlling  person of any of the foregoing,  and shall
survive delivery of and payment for the Registrable  Securities  pursuant to the
Purchase  Agreement and the transfer and registration of Registrable  Securities
by such holder and the consummation of an Exchange Offer.

      (f) Governing Law. This Exchange and  Registration  Rights Agreement shall
be governed by and  construed  in  accordance  with the laws of the State of New
York.

      (g)  Headings.  The  descriptive  headings  of the  several  Sections  and
paragraphs of this Exchange and  Registration  Rights Agreement are inserted for
convenience  only, do not  constitute a part of this  Exchange and  Registration
Rights  Agreement and shall not affect in any way the meaning or  interpretation
of this Exchange and Registration Rights Agreement.

      (h) Entire Agreement;  Amendments.  This Exchange and Registration  Rights
Agreement and the other writings referred to herein (including the Indenture and
the form of  Securities) or delivered  pursuant  hereto which form a part hereof
contain  the entire  understanding  of the parties  with  respect to its subject
matter.  This Exchange and Registration  Rights  Agreement  supersedes all prior
agreements  and  understandings


                                       24
<PAGE>

between the  parties  with  respect to its subject  matter.  This  Exchange  and
Registration  Rights  Agreement may be amended and the observance of any term of
this Exchange and Registration  Rights Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively) only by a
written  instrument  duly  executed by the Company and the holders of at least a
majority in aggregate principal amount of the Registrable Securities at the time
outstanding. Each holder of any Registrable Securities at the time or thereafter
outstanding  shall be bound by any amendment or waiver effected pursuant to this
Section  9(h),  whether or not any notice,  writing or marking  indicating  such
amendment or waiver  appears on such  Registrable  Securities or is delivered to
such holder.

      (i)  Inspection.  For so long as this  Exchange  and  Registration  Rights
Agreement shall be in effect,  this Exchange and  Registration  Rights Agreement
and a complete list of the names and addresses of all the holders of Registrable
Securities  shall be made  available for  inspection and copying on any business
day by any holder of  Registrable  Securities  for proper  purposes  only (which
shall  include any purpose  related to the rights of the holders of  Registrable
Securities  under the  Securities,  the  Indenture  and this  Agreement)  at the
offices of the  Company at the address  thereof set forth in Section  9(c) above
and at the office of the Trustee under the Indenture.

      (j)  Counterparts.  This  agreement  may be  executed  by the  parties  in
counterparts,  each of which  shall be  deemed to be an  original,  but all such
respective counterparts shall together constitute one and the same instrument.



                                       25
<PAGE>


      If the foregoing is in accordance with your understanding, please sign and
return to us  counterparts  hereof,  and upon the  acceptance  hereof by you, on
behalf of each of the Purchasers,  this letter and such acceptance  hereof shall
constitute a binding  agreement  between each of the Purchasers and the Company.
It is  understood  that your  acceptance of this letter on behalf of each of the
Purchasers is pursuant to the  authority set forth in a form of Agreement  among
Purchasers,  the form of which shall be submitted to the Company for examination
upon  request,  but  without  warranty on your part as to the  authority  of the
signers thereof.

                                          Very truly yours,

                                          PSEG Energy Holdings Inc.

                                          By:    /s/ Bruce E. Walenczyk
                                             ----------------------------------
                                               Name: Bruce E. Walenczyk
                                               Title:  Vice President-Finance


Accepted as of the date hereof:

Goldman, Sachs & Co.
Banc of America Securities LLC
Lehman Brothers Inc.
Merrill Lynch, Pierce, Fenner & Smith
   Incorporated

By:  Goldman, Sachs & Co.



     /s/ Goldman, Sachs & Co.
   ------------------------------
        (Goldman, Sachs & Co.)










                                       26
<PAGE>




                                                                       Exhibit A
                            PSEG Energy Holdings Inc.

                         INSTRUCTION TO DTC PARTICIPANTS

                                (Date of Mailing)

                     URGENT - IMMEDIATE ATTENTION REQUESTED

                        DEADLINE FOR RESPONSE: [DATE] *


The Depository  Trust Company  ("DTC") has  identified you as a DTC  Participant
through  which  beneficial  interests  in the PSEG  Energy  Holdings  Inc.  (the
"Company") 10% Senior Notes due 2009 (the "Securities") are held.

The Company is in the process of registering the Securities under the Securities
Act of 1933 for resale by the beneficial owners thereof.  In order to have their
Securities  included  in the  registration  statement,  beneficial  owners  must
complete and return the enclosed  Notice of  Registration  Statement and Selling
Securityholder Questionnaire.

It is important that beneficial  owners of the Securities  receive a copy of the
enclosed  materials as soon as possible as their  rights to have the  Securities
included in the  registration  statement  depend upon their returning the Notice
and  Questionnaire  by [Deadline  For  Response].  Please  forward a copy of the
enclosed  documents  to  each  beneficial  owner  that  holds  interests  in the
Securities  through you. If you require more copies of the enclosed materials or
have any  questions  pertaining  to this  matter,  please  contact  PSEG  Energy
Holdings Inc. in writing at 80 Park Plaza,  Newark,  NJ 07102 or by telephone at
(973) 456-3581.









-------------------------
*Not less than 28 calendar days from date of mailing.



                                      A-1
<PAGE>




                            PSEG Energy Holdings Inc.

                        Notice of Registration Statement
                                       and
                      Selling Securityholder Questionnaire

                                     (Date)



Reference is hereby made to the Exchange and Registration  Rights Agreement (the
"Exchange and Registration  Rights Agreement") between PSEG Energy Holdings Inc.
(the "Company") and the Purchasers  named therein.  Pursuant to the Exchange and
Registration  Rights  Agreement,  the Company  has filed with the United  States
Securities and Exchange  Commission (the "Commission") a registration  statement
on Form S-3 (the "Shelf Registration Statement") for the registration and resale
under Rule 415 of the Securities Act of 1933, as amended (the "Securities Act"),
of the  Company's  10% Senior Notes due 2009 (the  "Securities").  A copy of the
Exchange and Registration  Rights Agreement is attached hereto.  All capitalized
terms not otherwise  defined herein shall have the meanings  ascribed thereto in
the Exchange and Registration Rights Agreement.

Each beneficial  owner of Registrable  Securities (as defined below) is entitled
to have the  Registrable  Securities  beneficially  owned by it  included in the
Shelf Registration  Statement.  In order to have Registrable Securities included
in the Shelf Registration  Statement,  this Notice of Registration Statement and
Selling  Securityholder  Questionnaire  ("Notice  and  Questionnaire")  must  be
completed, executed and delivered to the Company at the address set forth herein
for  receipt  ON  OR  BEFORE  [Deadline  for  Response].  Beneficial  owners  of
Registrable  Securities who do not complete,  execute and return this Notice and
Questionnaire by such date (i) will not be named as selling  securityholders  in
the Shelf  Registration  Statement and (ii) may not use the Prospectus forming a
part thereof for resales of Registrable Securities.

Certain legal consequences arise from being named as a selling securityholder in
the Shelf Registration  Statement and related Prospectus.  Accordingly,  holders
and beneficial owners of Registrable Securities are advised to consult their own
securities law counsel  regarding the  consequences  of being named or not being
named as a  selling  securityholder  in the  Shelf  Registration  Statement  and
related Prospectus.

The term "Registrable  Securities" is defined in the Exchange and Registration
Rights Agreement.




                                      A-2
<PAGE>




                                    ELECTION



The undersigned holder (the "Selling  Securityholder") of Registrable Securities
hereby elects to include in the Shelf  Registration  Statement  the  Registrable
Securities  beneficially  owned  by  it  and  listed  below  in  Item  (3).  The
undersigned,  by signing and returning this Notice and Questionnaire,  agrees to
be bound with respect to such Registrable Securities by the terms and conditions
of this  Notice and  Questionnaire  and the  Exchange  and  Registration  Rights
Agreement,  including,  without  limitation,  Section  6  of  the  Exchange  and
Registration Rights Agreement, as if the undersigned Selling Securityholder were
an original party thereto.

Upon any sale of  Registrable  Securities  pursuant  to the  Shelf  Registration
Statement, the Selling Securityholder will be required to deliver to the Company
and Trustee the Notice of Transfer set forth in Appendix A to the Prospectus and
as Exhibit B to the Exchange and Registration Rights Agreement.

The Selling  Securityholder  hereby  provides the following  information  to the
Company and  represents  and  warrants  that such  information  is accurate  and
complete:




                                      A-3
<PAGE>




                                  QUESTIONNAIRE



(1)(a)   Full Legal Name of Selling Securityholder:

         ----------------------------------------------------------------------

   (b)   Full Legal Name of Registered  Holder (if not the same as in (a) above)
         of Registrable Securities Listed in Item (3) below:

         ----------------------------------------------------------------------

   (c)   Full Legal Name of DTC  Participant  (if applicable and if not the same
         as (b) above) Through Which  Registrable  Securities Listed in Item (3)
         below are Held:

         ----------------------------------------------------------------------

(2)      Address for Notices to Selling Securityholder:

                                 ___________________________
                                 ___________________________
                                 ___________________________
         Telephone:              ___________________________
         Fax:                    ___________________________
         Contact Person:         ___________________________

(3)      Beneficial Ownership of Securities:

         Except as set forth below in this Item (3),  the  undersigned  does not
         beneficially own any Securities.

   (a)   Principal amount of Registrable Securities beneficially owned:________
         CUSIP No(s). of such Registrable Securities:__________________________

   (b)   Principal  amount  of  Securities  other  than  Registrable  Securities
         beneficially owned:

         ----------------------------------------------------------------------
         CUSIP No(s). of such other Securities:________________________________

   (c)   Principal amount of Registrable Securities which the undersigned wishes
         to be included in the Shelf  Registration  Statement: ________________
         CUSIP No(s).  of such  Registrable  Securities to be included in the
         Shelf  Registration Statement:________________________________________

(4)      Beneficial Ownership of Other Securities of the Company:

         Except as set forth  below in this Item (4),  the  undersigned  Selling
         Securityholder  is not the beneficial or registered  owner of any other
         securities of the Company,  other than the  Securities  listed above in
         Item (3).

         State any exceptions here:


                                      A-4
<PAGE>


(5)      Relationships with the Company:

         Except as set forth below,  neither the Selling  Securityholder nor any
         of its affiliates,  officers, directors or principal equity holders (5%
         or more) has held any position or office or has had any other  material
         relationship  with the  Company  (or its  predecessors  or  affiliates)
         during the past three years.

         State any exceptions here:




(6)      Plan of Distribution:

         Except as set  forth  below,  the  undersigned  Selling  Securityholder
         intends to distribute the Registrable  Securities  listed above in Item
         (3) only as follows (if at all):  Such  Registrable  Securities  may be
         sold  from  time  to  time   directly   by  the   undersigned   Selling
         Securityholder or, alternatively, through underwriters,  broker-dealers
         or  agents.  Such  Registrable  Securities  may be  sold in one or more
         transactions at fixed prices,  at prevailing  market prices at the time
         of sale,  at  varying  prices  determined  at the  time of sale,  or at
         negotiated  prices.  Such sales may be effected in transactions  (which
         may  involve  crosses  or  block  transactions)  (i)  on  any  national
         securities  exchange  or  quotation  service  on which  the  Registered
         Securities  may be listed  or  quoted at the time of sale,  (ii) in the
         over-the-counter  market, (iii) in transactions  otherwise than on such
         exchanges  or  services  or in the  over-the-counter  market,  or  (iv)
         through  the  writing  of  options.  In  connection  with  sales of the
         Registrable  Securities or otherwise,  the Selling  Securityholder  may
         enter into hedging transactions with broker-dealers,  which may in turn
         engage in short sales of the  Registrable  Securities  in the course of
         hedging the positions they assume. The Selling  Securityholder may also
         sell Registrable Securities short and deliver Registrable Securities to
         close  out  such  short  positions,   or  loan  or  pledge  Registrable
         Securities to broker-dealers that in turn may sell such securities.

         State any exceptions here:



By signing below, the Selling  Securityholder  acknowledges  that it understands
its obligation to comply, and agrees that it will comply, with the provisions of
the  Exchange  Act  and  the  rules  and  regulations  thereunder,  particularly
Regulation M.

In the event that the Selling Securityholder transfers all or any portion of the
Registrable  Securities  listed in Item (3) above  after the date on which  such
information  is provided to the Company,  the Selling  Securityholder  agrees to
notify  the  transferee(s)  at the  time


                                      A-5
<PAGE>


of  the  transfer  of  its  rights  and   obligations   under  this  Notice  and
Questionnaire and the Exchange and Registration Rights Agreement.

By signing below, the Selling  Securityholder  consents to the disclosure of the
information  contained  herein in its answers to Items (1) through (6) above and
the  inclusion  of such  information  in the Shelf  Registration  Statement  and
related Prospectus. The Selling Securityholder understands that such information
will be relied upon by the Company in  connection  with the  preparation  of the
Shelf Registration Statement and related Prospectus.

In accordance with the Selling Securityholder's obligation under Section 3(d) of
the Exchange and  Registration  Rights  Agreement to provide such information as
may be required by law for inclusion in the Shelf  Registration  Statement,  the
Selling Securityholder agrees to promptly notify the Company of any inaccuracies
or changes in the information  provided herein which may occur subsequent to the
date  hereof at any time  while  the Shelf  Registration  Statement  remains  in
effect.  All notices  hereunder  and pursuant to the  Exchange and  Registration
Rights Agreement shall be made in writing,  by hand-delivery,  first-class mail,
or air courier guaranteeing overnight delivery as follows:

      To the Company:

                                      PSEG Energy Holdings Inc.
                                      80 Park Plaza, T-22
                                      P.O. Box 1171
                                      Newark, New Jersey 07101
                                      Attention: Treasurer

Once this Notice and Questionnaire is executed by the Selling Securityholder and
received by the  Company,  the terms of this Notice and  Questionnaire,  and the
representations  and  warranties  contained  herein,  shall be binding on, shall
inure to the benefit of and shall be enforceable  by the respective  successors,
heirs,  personal  representatives,  and  assigns of the  Company and the Selling
Securityholder (with respect to the Registrable Securities beneficially owned by
such Selling  Securityholder  and listed in Item (3) above. This Agreement shall
be governed in all respects by the laws of the State of New York.




                                      A-6
<PAGE>




IN WITNESS WHEREOF,  the  undersigned,  by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.

Dated:__________________





            __________________________________________________________________
            Selling Securityholder
            (Print/type full legal name of beneficial owner of Registrable
            Securities)




            By:_______________________________________________________________
            Name:
            Title:





PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE COMPANY AT:

                                      PSEG Energy Holdings Inc.
                                      80 Park Plaza, T-22
                                      P.O. Box 1171
                                      Newark, New Jersey 07101
                                      Attention: Treasurer




                                      A-7
<PAGE>



                                                                       Exhibit B

            NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT

First Union National Bank
PSEG Energy Holdings Inc.
c/o First Union National Bank
21 South Street, 3rd Floor
Morristown, New Jersey 07960

Attention:  Trust Officer

      Re:   PSEG Energy Holdings Inc. (the "Company")
            10% Senior Notes due 2009

Dear Sirs:

Please be advised that  _____________________  has  transferred  $____________
aggregate  principal  amount  of the  above-referenced  Notes  pursuant  to an
effective  Registration  Statement  on Form S-3 (File No.  333-____ ) filed by
the Company.

We hereby  certify that the  prospectus  delivery  requirements,  if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial  owner of the Notes is named as a "Selling  Holder" in the Prospectus
dated [date] or in supplements  thereto, and that the aggregate principal amount
of the Notes  transferred are the Notes listed in such Prospectus  opposite such
owner's name.

Dated:                                    Very truly yours,

                                          ______________________
                                          (Name)

                                    By:   ______________________
                                          (Authorized Signature)











                                      B-1