LIMITED SUPPLEMENTAL BENEFITS PLAN

                            FOR CERTAIN EMPLOYEES OF

                     PUBLIC SERVICE ELECTRIC AND GAS COMPANY











                                                    AS AMENDED DECEMBER 15, 1998


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                       LIMITED SUPPLEMENTAL BENEFITS PLAN
                            FOR CERTAIN EMPLOYEES OF

                     PUBLIC SERVICE ELECTRIC AND GAS COMPANY

                                TABLE OF CONTENTS

                                                                            Page

1.    PURPOSE...............................................................  1

2.    DEFINITIONS OF TERMS USED IN THE PLAN.................................  1

3.    DEATH BENEFIT.......................................................... 5

4.    RETIREMENT BENEFIT..................................................... 6

5.    ADMINISTRATION OF ACCOUNTS............................................ 12

6.    DESIGNATION OF BENEFICIARIES.......................................... 13

7.    LIMITATION OF BENEFITS................................................ 16

8.    PLAN DOES NOT CONSTITUTE AN EMPLOYMENT AGREEMENT...................... 16

9.    AMENDMENT OR TERMINATION OF THE PLAN.................................. 16

10.   WHAT CONSTITUTES NOTICE............................................... 17

11.   ADVANCE DISCLAIMER OF WAIVER.......................................... 17

12.   EFFECT OF INVALIDITY OF ANY PART OF THE PLAN.......................... 17

13.   PLAN BINDING ON ANY SUCCESSOR......................................... 17

14.   FUNCTION OF THE COMMITTEE............................................. 18

15.   COMPANY SHALL PAY LEGAL FEES.......................................... 18

16.   LAW GOVERNING THE PLAN................................................ 18

17.   MISCELLANEOUS......................................................... 18


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                       LIMITED SUPPLEMENTAL BENEFITS PLAN
                            FOR CERTAIN EMPLOYEES OF
                     PUBLIC SERVICE ELECTRIC AND GAS COMPANY

1.  PURPOSE. The purpose of this Plan is to assist the Company in attracting and
    retaining a stable pool of key managerial talent and to encourage long-term
    key employee commitment to the Company by providing selected employees of
    the Company with certain limited supplemental death and retirement benefits
    as defined herein. The Plan is intended to provide such benefits to a select
    group of management or highly compensated employees within the meaning of
    ERISA.

2.  DEFINITIONS OF TERMS USED IN THE PLAN. As used in the Plan, the following
    words and phrases shall have the meanings indicated:

    (a) "ACCOUNT" -- Any account established pursuant to Paragraph 3(b) or 4(f)
        of the Plan.

    (b) "ANNUITY" -- A fully-funded contract with an independent insurance
        company purchased by the Company pursuant to Paragraph 4(f) of the Plan.
     
    (c) "ASSETS" -- All amounts that have been credited to an Employee's Account
        in accordance with Paragraph 3(b), 4(f), or 5(b) of the Plan.

    (d) "BENEFICIARY" -- The individual(s) and/or entity(ies) designated in
        writing by a Participant in the form attached to the Plan as Schedule A.

    (e) "CASH BALANCE PLAN" -- The Cash Balance Pension Plan of Public Service
        Electric and Gas Company.

    (f) "CHANGE IN CONTROL" -- For the purposes of the Plan, a Change in Control
        of the Company shall mean the occurrence of any of the following events:


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        (i)  any "person" (within the meaning of Section 13(d) of the Securities
             Exchange Act of 1934, as amended from time to time (the "Act")) is
             or becomes the beneficial owner within the meaning of Rule 13d-3
             under the Act (a "Beneficial Owner"), directly or indirectly, of
             securities of Public Service Enterprise Group Incorporated
             ("Parent") (not including in the securities beneficially owned by
             such person any securities acquired directly from Parent or its
             affiliates) representing 25% or more of the combined voting power
             of Parent's then outstanding securities, excluding any person who
             becomes such a Beneficial Owner in connection with a transaction
             described in clause (A) of paragraph (iii) below; or

        (ii) the following individuals cease for any reason to constitute a
             majority of the number of directors then serving: individuals who,
             on December 15, 1998, constitute the board of directors of Parent
             ("Board") and any new director (other than a director whose initial
             assumption of office is in connection with an actual or threatened
             election contest, including but not limited to a consent
             solicitation, relating to the election of directors of Parent)
             whose appointment or election by the Board or nomination for
             election by Parent's stockholders was approved or recommended by a
             vote of at least two-thirds (2/3) of the directors then still in
             office who either were directors on December 15, 1998 or whose
             appointment, election or nomination for election was previously so
             approved or recommended; or

       (iii) there is consummated a merger or consolidation of Parent or any
             direct or indirect wholly owned subsidiary of Parent with any other
             corporation, other than (A) a merger or consolidation which would
             result in the voting securities of Parent outstanding immediately
             prior to such merger or consolidation continuing to represent
             (either by remaining outstanding or by being converted into voting
             securities of the surviving entity or any parent thereof), in
             combination with the ownership of any trustee or other fiduciary
             holding securities under an employee benefit plan of Parent or any
             subsidiary of Parent, at least 75% of the combined voting power of
             the securities of Parent or such surviving entity or any parent
             thereof outstanding immediately after such merger or consolidation,
             or (B) a merger or consolidation effected to implement a
             recapitalization of Parent (or similar transaction) in which no
             person is or becomes the Beneficial Owner, directly or indirectly,
             of securities of Parent representing 25% or more of the combined
             voting power of Parent's then outstanding securities; or


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        (iv) the stockholders of Parent approve a plan of complete liquidation
             or dissolution of Parent or there is consummated an agreement for
             the sale or disposition by Parent of all or substantially all of
             Parent's assets, other than a sale or disposition by Parent of all
             or substantially all of Parent's assets to an entity, at least 75%
             of the combined voting power of the voting securities of which are
             owned by stockholders of Parent in substantially the same
             proportions as their ownership of Parent immediately prior to such
             sale.

            Notwithstanding the foregoing subparagraphs (i), (ii), (iii) and
            (iv), a "Change in Control" shall not be deemed to have occurred by
            virtue of the consummation of any transaction or series of
            integrated transactions immediately following which the record
            holders of the common stock of Parent immediately prior to such
            transaction or series of transactions continue to have substantially
            the same proportionate ownership in an entity which owns all or
            substantially all of the assets of Parent immediately following such
            transaction or series of transactions.

    (g) "CODE" -- The Internal Revenue Code of 1986, as amended.

    (h) "COMMITTEE" -- The Employee Benefits Committee of the Company as
        selected by its Board of Directors.

    (i) "COMPANY" -- Public Service Electric and Gas Company.

    (j) "COMPENSATION" --

        (i)  For the purposes of calculating the Death Benefit pursuant to
             Paragraph 3 of the Plan, as to any Participant, Compensation shall
             be equal to the annual rate of salary of the Participant in effect
             at the date of death; and

        (ii) For the purposes of calculating the Retirement Benefit pursuant to
             Paragraph 4 of the Plan, as to any Participant, Compensation shall
             be equal to the average of the total remuneration paid to such
             Participant for services rendered to the Company, excluding the
             Company's cost for any


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             public or private employee benefit plan (including, without
             limitation, the Long-Term Incentive Compensation Plan of
             Enterprise) but including all elective contributions that are made
             by the Company on behalf of a Participant which are not includable
             in income under Code Sections 125 or 401(k), for the five years
             ending at the earlier of such Participant's date of Retirement or
             attainment of normal retirement age under the Pension Plan;
             provided, however, that for the purposes of Paragraph 4 of the
             Plan, Compensation with respect to any Participant shall not exceed
             the amount which is 130% of the average annual base salary of the
             Participant for the applicable five-year period.

    (k) "ENTERPRISE" -- Public Service Enterprise Group Incorporated.

    (l) "ERISA" -- The Employee Retirement Income Security Act of 1974, as
        amended.

    (m) "PARTICIPANT" -- Each employee of the Company nominated by the Chief
        Executive Officer and designated by the Employee Benefits Policy
        Committee of Enterprise. The Chief Executive Officer of the Company
        shall nominate such select and key employees of the Company upon such
        terms as he shall deem appropriate due to the employee's
        responsibilities and opportunity to contribute substantially to the
        financial and operating objectives of the Company.

    (n) "PENSION PLAN" -- The Pension Plan of Public Service Electric and Gas
        Company.

    (o) "PLAN" -- The Limited Supplemental Benefits Plan for Certain Employees
        of Public Service Electric and Gas Company.


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    (p) "RETIREMENT" -- For the purposes of the Plan, Retirement of a
        Participant shall be deemed to have occurred upon either (i) termination
        of the Participant's service with the Company with the right to an
        immediately payable periodic retirement benefit under the Pension Plan
        or the Cash Balance Plan or (ii) upon a Change in Control of the
        Company. Retirement shall not include termination of service with the
        right to a deferred pension under the Pension Plan or a deferred
        retirement benefit or early commencement of payment of a participant's
        Cash Balance Account under the Cash Balance Plan.

    (q) "RETIREMENT PLAN" -- Any pension plan within the meaning of ERISA,
        excluding (i) the Pension Plan, the Cash Balance Plan and all defined
        contribution plans maintained by the Company, except insofar as any such
        defined contribution plan may provide supplementary benefits to the
        Pension Plan or the Cash Balance Plan, (ii) this Plan and (iii) all
        deferred compensation plans, tax credit employee stock ownership plans
        and thrift plans, and all other profit-sharing plans which are not the
        principal retirement benefit of a plan sponsor, maintained by sponsors
        other than the Company.

    (r) "VOTING STOCK" -- Outstanding stock of a corporation entitled to vote in
        the election of the directors of that corporation.

3.    DEATH BENEFIT.

    (a) AMOUNT OF BENEFIT -- If a Participant dies while in the active
        employment of the Company, the Company shall provide a death benefit to
        such Participant's Beneficiary in an amount equal to 150% of the
        Participant's Compensation, adjusted to the nearest $1,000, or to the
        next highest $1,000 if such Compensation


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        is  a multiple of $500 but not of $1,000.
     
    (b) ESTABLISHMENT OF ACCOUNT -- Upon the death of a Participant during
        employment with the Company, the Company shall establish an Account for
        the benefit of such Participant's Beneficiary. Such Account shall
        initially be credited with an amount equal to the benefit provided under
        Paragraph 3(a) and shall be held and administered as provided in
        Paragraph 5 of the Plan.

4.    RETIREMENT BENEFIT.

    (a) GENERAL -- At Retirement, the Company shall provide each Participant
        with a retirement benefit calculated as provided in this Paragraph 4.
         

    (b) DETERMINATION OF BENEFIT --

        (i)  Pension Plan Participants:

        (A)  The Participant's Compensation shall be multiplied by an amount
             equal to one one-hundredth of the sum of (X) the number of the
             Participant's years of credited service under the Pension Plan at
             Retirement, (Y) the number of any additional years of service
             credit to which the Participant may be entitled from the Company
             under the Mid-Career Supplemental Retirement Income Plan of Public
             Service Electric and Gas Company and its Affiliates or any written
             arrangement with the Company, and (Z) 30; but, in no event, shall
             the multiple be greater than 0.75.

        (B)  The amount determined under subparagraph (A) of this Paragraph
             4(b)(i) shall be reduced by the sum of (X) the amount the
             Participant would be entitled to at Retirement as an annual pension
             benefit under the Pension Plan and any supplemental retirement plan
             (other than this Plan)


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             maintained by the Company calculated as a single life annuity
             without reduction for any pre-retirement survivor's option coverage
             or any reduction for early retirement, (Y) 100% of the amount of
             the unreduced annual Social Security benefit to which the
             Participant would be entitled at age 65 (or such other age which
             may be established by the Social Security Administration from time
             to time as the earliest age at which a Participant may receive an
             unreduced benefit thereunder), assuming that the Participant has no
             earnings from the date of Retirement to age 65 (or such other
             applicable age), or, if greater, any disability benefit under
             Social Security to which the Participant may be entitled, and (Z)
             the aggregate of the annual benefits to which the Participant is
             entitled under all Retirement Plans as of the date the Participant
             is employed by the Company, such Social Security Benefits and
             benefits under all Retirement Plans to be calculated as single life
             annuities without any reductions, under rules, procedures and
             equivalents determined by the Committee. To determine the amounts
             referred to under (y) and (z) above, the Participant shall file a
             declaration of all such amounts with the Employee Benefits
             Department of the Company in such form as the Committee may require
             from time to time. No benefit shall be paid under the Plan until
             such a declaration, in satisfactory form, shall be filed with the
             Employee Benefits Department. If a Participant is granted a
             disability Social Security benefit, he shall notify the Employee
             Benefits Department thereof within 30 days thereof, and the
             Participant's retirement benefit under this Plan shall be adjusted


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             accordingly. The Company shall be entitled to rely on such
             statements in making payment, and if any such statement is
             incorrect or is not furnished, the Company shall be entitled to
             reimbursement from the Participant, the Beneficiary or their legal
             representatives for any overpayment and may reduce or suspend
             future payments to recover any such overpayment. In the event it is
             established to the satisfaction of the Committee, in its sole
             discretion, that any such statement was intentionally false or
             omitted, the Participant or Beneficiary shall be entitled to no
             further payments under the Plan, and the Company shall be entitled
             to recover any payments made hereunder.

        (ii) Cash Balance Plan Participants:

             (A) The Participant's Compensation shall be multiplied by an amount
                 equal to one one-hundredth of the sum of (X) the number of the
                 Participant's years of service under the Pension Plan with
                 which such Participant would have been credited at Retirement
                 had the Participant participated in the Pension Plan from
                 his/her date of hire, (Y) the number of any additional years of
                 service credit to which the Participant may be entitled from
                 the Company under the Mid-Career Supplemental Retirement Income
                 Plan of Public Service Electric and Gas Company and its
                 Affiliates or any written arrangement with the Company, and (Z)
                 30; but, in no event, shall the multiple be greater than 0.75.

             (B) The amount determined under subparagraph (A) of this Paragraph
                 4(b)(ii) shall be reduced by the sum of (X) the amount the
                 Participant would be


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             entitled to at Retirement as an annual pension benefit under the
             Cash Balance Plan and any supplemental retirement plan (other than
             this Plan) maintained by the Company calculated as a single life
             annuity without reduction for any pre-retirement survivor's option
             coverage or any reduction for early retirement, (Y) 100% of the
             amount of the unreduced annual Social Security benefit to which the
             Participant would be entitled at age 65 (or such other age which
             may be established by the Social Security Administration from time
             to time as the earliest age at which a Participant may receive an
             unreduced benefit thereunder), assuming that the Participant has no
             earnings from the date of Retirement to age 65 (or such other
             applicable age), or, if greater, any disability benefit under
             Social Security to which the Participant may be entitled, and (Z)
             the aggregate of the annual benefits to which the Participant is
             entitled under all Retirement Plans as of the date the Participant
             is employed by the Company, such Social Security Benefits and
             benefits under all Retirement Plans to be calculated as single life
             annuities without any reductions, under rules, procedures and
             equivalents determined by the Committee. To determine the amounts
             referred to under (y) and (z) above, the Participant shall file a
             declaration of all such amounts with the Employee Benefits
             Department of the Company in such form as the Committee may require
             from time to time. No benefit shall be paid under the Plan until
             such a declaration, in satisfactory form, shall be filed with the
             Employee Benefits Department. If a Participant is granted a
             disability Social Security benefit, he shall


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             notify the Employee Benefits Department thereof within 30 days
             thereof, and the Participant's retirement benefit under this Plan
             shall be adjusted accordingly. The Company shall be entitled to
             rely on such statements in making payment, and if any such
             statement is incorrect or is not furnished, the Company shall be
             entitled to reimbursement from the Participant, the Beneficiary or
             their legal representatives for any overpayment and may reduce or
             suspend future payments to recover any such overpayment. In the
             event it is established to the satisfaction of the Committee, in
             its sole discretion, that any such statement was intentionally
             false or omitted, the Participant or Beneficiary shall be entitled
             to no further payments under the Plan, and the Company shall be
             entitled to recover any payments made hereunder.

    (c) FORMS OF BENEFIT -- The annual amount determined under paragraph (b) of
        this Paragraph 4 shall be paid in one of the following forms:

        (i)  a single life annuity in monthly installments equal to one twelfth
             of such annual amount;

        (ii) a joint and survivor annuity in monthly installments based upon
             such annual amount and calculated in accordance with any
             post-retirement survivorship option available under the Pension
             Plan or the Cash Balance Plan, as the case may be;

        (iii)a 10-year certain level payment annuity in monthly installments
             which is the actuarial equivalent to the single life annuity under
             (i), as determined by the actuary for the Pension Plan or the Cash
             Balance Plan, as the case


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             may be, according to mortality assumptions used for the Pension
             Plan or the Cash Balance Plan, as the case may be, on the basis of
             a current interest rate assumption determined from time to time by
             the Committee;

                  or

        (iv) a 10-year certain increasing payment annuity paid in accordance
             with Paragraph 5(c) of the Plan based upon the lump-sum amount
             which is the actuarial equivalent to the single life annuity under
             (i), as determined by the actuary for the Pension Plan or the Cash
             Balance Plan, as the case may be, according to mortality
             assumptions used for the Pension Plan or the Cash Balance Plan, as
             the case may be, on the basis of a current market rate interest
             assumption determined from time to time by the Committee;

                  or

        (v)  a lump sum payment of the present value of any of the foregoing
             based upon the same assumptions used for lump sum payments under
             the Pension Plan or the Cash Balance Plan, as the case may be.

      The Committee in its sole discretion shall determine the form of benefit
      payment for each Participant; provided, however, that, notwithstanding any
      other provision of this Plan, the Participant shall determine the form of
      benefit from and after the occurrence of a Change in Control.

    (d) CHANGE IN CONTROL --

        (i)  If there shall occur a Change in Control, then each Participant who
             has not already retired under the Pension Plan or the Cash Balance
             Plan, as the case may be, shall be entitled to a retirement benefit
             under this Plan


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             calculated as if such Participant had retired under the Pension
             Plan or the Cash Balance Plan, as the case may be, as of the date
             of such Change in Control.

        (ii) The retirement benefit to be paid pursuant to Paragraph 4(d)(i)
             shall be paid to the Participant in a 10-year certain level payment
             annuity paid in accordance with Paragraph 5(c) of the Plan based
             upon the lump-sum amount which is the actuarial equivalent to the
             single-life annuity under Paragraph 4(c)(i) of the Plan as
             determined by the actuary for the Pension Plan or the Cash Balance
             Plan, as the case may be, according to mortality assumptions used
             for the Pension Plan or the Cash Balance Plan, as the case may be,
             on the basis of a current market rate interest assumption
             determined from time to time by the Committee.

       (iii) Notwithstanding anything contained in the Plan to the contrary, if
             a Change in Control shall occur, the Company shall purchase from an
             independent insurance company fully paid annuities which shall
             provide for the payment to all Participants and Beneficiaries of
             all accrued benefits under the Plan.

    (e) ESTABLISHMENT OF ACCOUNT -- If payment is made under either Paragraph
        4(c)(iii) or 4(c)(iv) of the Plan, upon Retirement, the Company shall
        establish an Account for the benefit of the Participant and any
        Beneficiary. Such Account shall initially be credited with an amount
        equal to the amount of the lump-sum payment determined under Paragraph
        4(c)(iii) or 4(c)(iv), as applicable, and shall be administered as
        provided in Paragraph 5 of the Plan.

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    (f) DISABILITY RETIREMENT -- If a Participant retires for disability under
        the Pension Plan or the Cash Balance Plan, as the case may be, payment
        of the Participant's retirement benefit and any joint and survivor
        benefit under Paragraph 4(c)(ii) of the Plan shall be subject to the
        same conditions as the disability pension under the Pension Plan or the
        Cash Balance Plan, as the case may be.

5.  ADMINISTRATION OF ACCOUNTS.

    (a) GENERAL -- Accounts shall be established under the Plan only pursuant to
        Paragraphs 3(b) and 4(e) hereof. All Accounts shall be administered in
        accordance with the provisions of this Paragraph 5.

    (b) INTEREST ON ASSETS IN THE ACCOUNT -- The Assets credited to a
        Participant's Account shall accrue interest at a market rate of interest
        as may be determined from time to time by the Committee.

    (c) TIMING OF THE DISTRIBUTION(S) -- A Participant or Beneficiary shall
        receive the distribution of the Participant's Account in the form of
        monthly distributions over a ten-year period commencing in the month
        following the month of the Participant's death in the case of a death
        benefit, or over a ten-year period commencing in the month of the
        Participant's Retirement in the case of a retirement benefit. The amount
        of each installment shall be determined by dividing the then unpaid
        balance in the Participant's Account, including accrued and unpaid
        interest, by the number of installments remaining to be paid.

    (d) REQUEST FOR CHANGE IN DISTRIBUTION -- A Participant, Beneficiary or
        legal representative may request a change in the timing, frequency or
        amount of payments made from a Participant's Account by filing a written
        request therefor


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        with the Committee. The Committee may, in its sole discretion, grant
        such request only if the Committee determines that an emergency beyond
        the control of the Participant, Beneficiary or legal representative
        exists and which would cause such Participant, Beneficiary or legal
        representative severe financial hardship if the payment of such benefits
        were not approved. Any such distribution for hardship shall be limited
        to the amount needed to meet such emergency. The Committee shall inform
        the Participant, Beneficiary or legal representative of its decision
        within sixty (60) days of receipt of the written request.

6.  DESIGNATION OF BENEFICIARIES

    (a) GENERAL -- To designate an individual(s) and/or entity(ies) to receive
        the benefits of the Plan with respect to a Participant, such Participant
        must file a written designation in the form of Schedule A to the Plan
        with the Committee. Subject to the restrictions of this Paragraph 6, a
        Participant may change such designation by filing a subsequent written
        designation.

    (b) DEATH BENEFIT -- By designation on Section 1 of a Schedule A filed with
        the Committee, a Participant may name an individual(s) and/or
        entity(ies) to receive a death benefit under Paragraph 3 of the Plan
        with respect to such Participant. A Participant may change such
        designation by filing a subsequent notification in the form of Schedule
        A.

    (c) RETIREMENT BENEFITS --

        (i)  SINGLE LIFE ANNUITY. If a Participant's retirement benefit under
             the Plan is paid as a single life annuity under Paragraph 4(c)(i)
             of the Plan, there shall be no Beneficiary with respect to such
             benefit and all retirement benefits shall cease


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             upon the Participant's death.

        (ii) JOINT AND SURVIVOR ANNUITY. If a Participant's retirement benefit
             under Paragraph 4(c)(ii) of the Plan and the Participant's pension
             under the Pension Plan or the Cash Balance Plan, as the case may
             be, are both paid as joint and survivor annuities, any survivor
             annuity under the Plan shall be paid to the same beneficiary
             entitled to any post-retirement survivorship benefit under the
             Pension Plan or the Cash Balance Plan, as the case may be. If the
             Participant's pension under the Pension Plan or the Cash Balance
             Plan, as the case may be, is paid as a single life annuity, any
             survivor annuity paid under Paragraph 4(c)(ii) of the Plan shall be
             paid to the Beneficiary designated in Section 2 of Schedule A to
             the Plan. If a Beneficiary designated by the Participant under
             Paragraph 4(c)(ii) of the Plan predeceases the Participant within
             five years from the date of Participant's Retirement, the
             Participant's retirement benefit hereunder will automatically
             revert and return to a single life annuity commencing the first day
             of the month following the month in which the designated
             Beneficiary died. If, however, the Beneficiary predeceases the
             Participant more than five years after Participant's Retirement,
             the Participant's reduced retirement benefit shall continue during
             his life and no survivor benefit shall be paid. The election of
             such Beneficiary must be made prior to Retirement and may not be
             changed thereafter.

       (iii) 10-YEAR CERTAIN ANNUITIES. If a Participant's Retirement benefit
             is paid as a 10-year certain level payment annuity under Paragraph
             4(c)(iii) or Paragraph 4(d)(ii) of the Plan, or a 10-year certain
             increasing payment annuity under Paragraph 4(c)(iv), the
             Beneficiary or Beneficiaries with respect to such benefit shall be
             as


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<PAGE>


             specified in Section 1 of the most recent Schedule A filed with the
             Committee.

    (d) DESIGNATION BY LAST REMAINING BENEFICIARY -- After a Participant's
        death, if there is only one remaining Beneficiary with respect to a
        death benefit under Paragraph 3 of the Plan or a 10-year certain annuity
        under Paragraph 4(c)(iii), 4(c)(iv) or 4(d)(ii) of the Plan, such
        Beneficiary shall be entitled to designate in writing to the Committee
        an individual to be paid any remainder of such benefit under the Plan at
        such Beneficiary's death. If no such further designation is made, such
        remainder shall be paid to such Beneficiary's estate. In the event of
        such Beneficiary's death, and regardless of whether any such further
        designation has been made, the Committee in its sole discretion may
        require any such remainder to be paid as a lump sum.

7.  LIMITATION OF BENEFITS.

    (a) The Plan shall be unfunded with respect to all benefits to be paid
        hereunder. In addition, except as provided in Paragraphs 4(d)(iii) and
        16(b), the Company shall not be required to segregate any amounts
        credited to any Account, which shall be established merely as an
        accounting convenience; title to and beneficial ownership of any Assets
        credited to any Account shall at all times remain in the Company, and no
        Participant, Beneficiary or legal representative shall have any interest
        whatsoever in any specific assets of the Company.

    (b) The payment of any death or survivorship benefit under this Plan shall
        be contingent upon such evidence of death as may be required by the
        Committee.

    (c) If the Company should terminate the Plan pursuant to Paragraph 9 hereof,
        the Company's obligation to pay any benefits under the Plan shall
        likewise terminate;


                                       16
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        provided, however, that, except as otherwise provided in said Paragraph
        9, the Company may not terminate the Plan with respect to any
        Participant subsequent to that Participant's Retirement or death.

8.  PLAN DOES NOT CONSTITUTE AN EMPLOYMENT AGREEMENT. The Plan shall not
    constitute a contract for the continued employment of any Participant by the
    Company. The Company reserves the right to modify a Participant's
    Compensation at any time and from time to time as it considers appropriate
    and to terminate any Participant's employment for any reason at any time
    notwithstanding the Plan.

9.  AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors of the Company
    may, in its sole discretion, amend, modify or terminate the Plan at any
    time, provided, however, that no such amendment, modification or termination
    shall deprive any Participant or Beneficiary of a previously acquired right
    unless such Participant or Beneficiary or his legal representative shall
    consent to such change. No right to a death benefit under the Plan shall
    accrue until a Participant's death and no right to a retirement benefit
    shall accrue until a Participant's Retirement.

10. WHAT CONSTITUTES NOTICE. Any notice to a Participant, a Beneficiary or any
    legal representative hereunder shall be given in writing, by personal
    delivery, overnight express service or by United States mail, postage
    prepaid, addressed to such person's last known address. Any notice to the
    Company or the Committee hereunder (including the filing of Schedule A)
    shall be given by delivering it in person or by overnight express service,
    or depositing it in the United States mail, postage prepaid, to the
    Secretary of the Employee Benefits Committee, Public Service Electric and
    Gas Company, 80 Park Plaza, T10B, P.O. Box 570, Newark, New Jersey, 07101.


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<PAGE>


11. ADVANCE DISCLAIMER OF WAIVER. Failure by the Company or the Committee to
    insist upon strict compliance with any of the terms, covenants or conditions
    hereof shall not be deemed a waiver of any such term, covenant or condition,
    nor shall any waiver or relinquishment of any right or power hereunder at
    any one or more times be deemed a waiver or relinquishment of any such right
    or power at any other time or times.

12. EFFECT OF INVALIDITY OF ANY PART OF THE PLAN. The invalidity or
    unenforceability of any provision hereof shall in no way affect the validity
    or enforceability of any other provision of the Plan.

13. PLAN BINDING ON ANY SUCCESSOR. Except as otherwise provided herein, the Plan
    shall inure to the benefit of and be binding upon the Company, its
    successors and assigns, including but not limited to any corporation which
    may acquire all or substantially all of the Company's assets and business or
    with or into which the Company may be consolidated or merged.

14. FUNCTION OF THE COMMITTEE. The Plan shall be administered by the Committee
    and the Committee shall be the final arbiter of any question that may arise
    under the Plan.

15. COMPANY SHALL PAY LEGAL FEES.


    (a) In the event of a Change in Control, the Company shall pay the legal
        fees and expenses of any Participant, Beneficiary or legal
        representative thereof incurred in any action to enforce such person's
        right to receive a benefit under the Plan.

    (b) In the event of a Change in Control, the Company shall establish a trust
        for the benefit of Participants and persons claiming though them which
        shall be funded in


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        an initial amount of $1,000,000 from which the Committee shall,
        according to reasonable rules that the Committee shall establish, pay
        the legal fees and expenses incurred by any Participant, Beneficiary or
        legal representative thereof in enforcing his rights under the Plan. The
        Company shall contribute such additional sums to such trust as shall be
        necessary to pay such legal fees and expenses.

16. LAW GOVERNING THE PLAN. Except to the extent federal law applies, the Plan
    shall be governed by the laws of the State of New Jersey without giving
    effect to principles of conflicts of law.

17. MISCELLANEOUS.

    (a) The masculine pronoun shall mean the feminine wherever appropriate.

    (b) The headings are for convenience only. In the event of a conflict
        between the headings of a paragraph and its contents, the contents shall
        control.

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