LIMITED SUPPLEMENTAL BENEFITS PLAN

                            FOR CERTAIN EMPLOYEES OF

                    PUBLIC SERVICE ELECTRIC AND GAS COMPANY






















                                                    As Amended January 1, 1997


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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
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2.    DEFINITIONS OF TERMS USED IN THE PLAN................................  1
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3.    DEATH BENEFIT......................................................... 5
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4.    RETIREMENT BENEFIT.................................................... 6
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5.    ADMINISTRATION OF ACCOUNTS........................................... 12
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6.    DESIGNATION OF BENEFICIARIES......................................... 13
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7.    LIMITATION OF BENEFITS............................................... 16
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8.    PLAN DOES NOT CONSTITUTE AN EMPLOYMENT AGREEMENT..................... 16
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9.    AMENDMENT OR TERMINATION OF THE PLAN................................. 16
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10.   WHAT CONSTITUTES NOTICE.............................................. 17
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11.   ADVANCE DISCLAIMER OF WAIVER......................................... 17
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12.   EFFECT OF INVALIDITY OF ANY PART OF THE PLAN......................... 17
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13.   PLAN BINDING ON ANY SUCCESSOR........................................ 17
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14.   FUNCTION OF THE COMMITTEE............................................ 18
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15.   COMPANY SHALL PAY LEGAL FEES......................................... 18
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16.   LAW GOVERNING THE PLAN............................................... 18
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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.
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      (f)   "Change in  Control" -- For the  purposes  of the Plan,  a Change in
            Control of the  Company  shall be deemed to have  occurred  upon the
            happening of any one of the following events:

            (i)   A filing with the U.S. Securities and Exchange Commission
                  disclosing that any individual,  group or other entity (except
                  for any  employee  benefit  plan  sponsored  by the Company or
                  Enterprise  or  any  trust  related  to  such a  plan)  is the
                  beneficial  owner,  directly or indirectly,  of 10% or more of
                  the Voting Stock of Enterprise;
            (ii)  The purchase by any  individual,  group or other entity (other
                  than by Enterprise or an affiliate of Enterprise)  pursuant to
                  a tender or exchange  offer that  results in such  individual,
                  group or  entity  being  the  beneficial  owner,  directly  or
                  indirectly, of 10% or more of the Voting Stock of Enterprise;
            (iii) Approval by the stockholders of Enterprise or the Company,  as
                  the case may be, of any merger or  consolidation of Enterprise
                  or the Company in which the common  stockholders of Enterprise
                  or of the  Company,  as  the  case  may  be,  do not  continue
                  substantially the same  proportionate  ownership of the common
                  stock of the surviving entity;
            (iv)  Approval  by  stockholders  of the  sale  or  transfer  of the
                  Company to an unrelated entity;
            (v)   The  sale  or  transfer,   or  taking  by  eminent  domain  or
                  otherwise,  of all or  substantially  all of the assets of the
                  Company; or

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            (vi)  A change  in the  majority  of the Board of  Directors  of the
                  Company or of Enterprise within any twelve (12) month period.

      Except that a Change in Control  shall not be deemed to have occurred with
      respect  to the  events  noted in items  (iii),  (iv) or (v) hereof if the
      transaction, or in the case of the event noted in item (vi) hereof, if the
      election  or  nomination  for  election  by the  stockholders  of each new
      director,  shall  have been  approved  by a vote of three-  fourths of the
      directors  of the Company  with  respect to Company  directors  and of the
      directors of Enterprise,  with respect to Enterprise directors, then still
      in office who were in office  prior to the  event,  or in the case of item
      (vi) hereof, at the beginning of the twelve (12) month period.

       (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 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
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                    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.
      (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.

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      (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  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.

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               (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) 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  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.

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      (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 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,

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                    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 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 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
<PAGE>             
               (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. 

      (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  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.

          (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.
<PAGE>
 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  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.
<PAGE>
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 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.
<PAGE>
               (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 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 10
          hereof,  the Company's  obligation to pay any benefits  under the Plan
          shall likewise terminate; provided, however, that, except as otherwise
          provided in said  Paragraph 10, 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.
<PAGE>
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.

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.
<PAGE>

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 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.