Exhibit 4.2

                            PSEG ENERGY HOLDINGS INC.


                          9 1/8% SENIOR NOTES DUE 2004


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

                   EXCHANGE AND REGISTRATION RIGHTS AGREEMENT

                                                               FEBRUARY 10, 2000

Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285

Ladies and Gentlemen:

      PSEG Energy  Holdings  Inc.,  a New Jersey  corporation  (the  "Company"),
proposes to issue and sell to the Purchaser  (as defined  herein) upon the terms
set forth in the Purchase  Agreement (as defined herein) its 9 1/8% Senior Notes
due 2004. As an inducement to the Purchaser to enter into the Purchase Agreement
and  in  satisfaction  of a  condition  to  the  obligations  of  the  Purchaser
thereunder, the Company agrees with the Purchaser 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.

            "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.


<PAGE>

            "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 the  Purchaser  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 October 8, 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
      February 3, 2000,  between the Purchaser  and the Company  relating to the
      Securities.

            "Purchaser" shall mean Lehman Brothers Inc.

            "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


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<PAGE>

      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 9 1/8% Senior Notes due
      2004 of the Company to be issued and sold to the Purchaser, and securities
      issued in exchange therefor or in lieu thereof pursuant to the Indenture.

            "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.


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<PAGE>

            "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 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


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<PAGE>

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,
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


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<PAGE>

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.

      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.


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<PAGE>

      (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 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


                                       7
<PAGE>

      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 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;


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<PAGE>

            (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;

            (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


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<PAGE>

      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 (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;


                                       10
<PAGE>

            (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;

            (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


                                       11
<PAGE>

      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 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


                                       12
<PAGE>

      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;

            (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


                                       13
<PAGE>

      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 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


                                       14
<PAGE>

      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 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).


                                       15
<PAGE>

      (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 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.


                                       16
<PAGE>

      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) 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.


                                       17
<PAGE>

      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 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


                                       18
<PAGE>

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 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.


                                       19
<PAGE>

      (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.

      (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


                                       20
<PAGE>

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 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


                                       21
<PAGE>

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.

      (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


                                       22
<PAGE>

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 Purchaser and the holders from time to time
of the Registrable Securities may be irreparably harmed by any such failure, and
accordingly agree that the Purchaser 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 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.


                                       23
<PAGE>

      (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  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.


                                       24
<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, this
letter and such acceptance  hereof shall constitute a binding  agreement between
the Purchaser and the Company.

                                           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:

Lehman Brothers Inc.

By: /s/ James W. Merli
    -------------------------------
    Name: James W. Merli
    Title: Managing Director


                                       25
<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") 9 1/8% Senior Notes due 2004 (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 Purchaser  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 9 1/8% Senior Notes due 2004 (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")
                  9 1/8% Senior Notes due 2004

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