Document:

DEFERRED COMPENSATION PLAN FOR CERTAIN EMPLOYEES

                 OF PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

                               AND ITS AFFILIATES

                               AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000

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               DEFERRED COMPENSATION PLAN FOR CERTAIN EMPLOYEES OF
         PUBLIC SERVICE ENTERPRISE GROUP INCORPORATEDAND ITS AFFILIATES
                AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000

     1. PURPOSE. The purpose of this Plan is to provide a method to certain
select and key employees of the Company and its Affiliates to defer compensation
as provided herein. This Plan was formerly known as the Deferred Compensation
Plan for Certain Employees of Public Service Electric and Gas Company.

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

     (a)  "Account" -- The Deferred Compensation Account described in Paragraph
          4 of this Plan.

     (b)  "Affiliate" -- any organization which is a member of a controlled
          group of corporations (as defined in Code section 414(b), as modified
          by Code section 415(h)) which includes the Company; or any trades or
          businesses (whether or not incorporated) which are under common
          control (as defined in Code section 414(c), as modified by Code
          section 415(h)) with the Company; or a member of an affiliated service
          group (as defined in Code section 414(m)) which includes the Company
          or any other entity required to be aggregated with the Company
          pursuant to regulations under Code section 414(o). The term affiliate
          shall also include such entities which shall be specifically
          designated by the Committee.

     (c)  "Assets" -- All Compensation and interest that have been credited to
          an Participant's Account in accordance with Paragraph 4 of this Plan.

     (d)  "Beneficiary" -- The individual(s) and/or entity(ies) designated and
          defined by Schedule B of the Plan.

     (e)  "Change in Control" -- The occurrence of any of the following events:

          (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 the Company (not
               including in the securities

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               beneficially owned by such person any securities acquired
               directly from the Company or its affiliates) representing 25% or
               more of the combined voting power of the Company'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
               the Company ("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 the Company) whose appointment or election by the Board or
               nomination for election by the Company'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 the Company or
               any direct or indirect wholly owned subsidiary of the Company
               with any other corporation, other than (1) a merger or
               consolidation which would result in the voting securities of the
               Company 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 the Company or any subsidiary
               of the Company, at least 75% of the combined voting power of the
               securities of the Company or such surviving entity or any parent
               thereof outstanding immediately after such merger or
               consolidation, or (2) a merger or consolidation effected to
               implement a recapitalization of the Company (or similar
               transaction) in which no person is or becomes the Beneficial
               Owner, directly or indirectly, of securities of the Company
               representing 25% or more of the combined voting power of the
               Company's then outstanding securities; or

          (iv) the stockholders of the Company approve a plan of complete
               liquidation or dissolution of the Company or there is consummated
               an agreement for the sale or disposition by the Company of all or
               substantially all of the Company's assets, other than a sale or

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               disposition by the Company of all or substantially all of the
               Company's assets to an entity, at least 75% of the combined
               voting power of the voting securities of which are owned by
               stockholders of the Company in substantially the same proportions
               as their ownership of the Company immediately prior to such sale.

          (v)  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 the Company 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 the Company
               immediately following such transaction or series of transactions.

     (e)  "Committee" -- The Employee Benefits Policy Committee of the Company.

     (f)  "Company" -- Public Service Enterprise Group Incorporated.

     (g)  "Compensation" -- The total remuneration paid to a Participant for
          services rendered to the Company or a Participating Affiliate,
          excluding the Company's or Participating Affiliate's cost for any
          public or private employee benefit plan, including this Plan, but
          including all elective contributions that are made by the Company or
          Participating Affiliate under Internal Revenue Code Sections 125 or
          401(k). Compensation deferrable under this Plan shall specifically
          include any and all amounts transferred from the deferred compensation
          accounts of the Company's Management Incentive Compensation Plan, the
          Management Incentive Compensation Plan of Public Service Electric and
          Gas Company and any prior deferred compensation plan of an Affiliate.

     (h)  "Deferred Compensation" -- The amount of Compensation deferred
          pursuant to Paragraph 3 of this Plan.

     (i)  "Disability" -- Disability so as to be incapable of performing further
          work for the Company or Participating Affiliate that results in
          termination of employment.

     (j)  "Employer" -- The Company and any Participating Affiliate.

     (k)  "Investment Fund" -- The fund or funds selected by the Committee from
          time to time and included in Schedule C of the Plan which shall serve
          as a means of measuring the increase or decrease of each Participant's
          Account. The Committee may, in its discretion, add or discontinue any
          Investment

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          Fund available under the Plan. The Committee shall provide each
          affected Participant with the opportunity, without limiting or
          otherwise impairing any other right of such Participant regarding
          changes in investment directions, to redirect the allocation of his or
          her Account invested in any discontinued Investment Fund among the
          other Investment Funds available under the Plan, including any
          replacement investment vehicle.

     (l)  "Participant" -- Each employee of the Company or any Participating
          Affiliate as may be designated by the Chief Executive Officer of the
          Company.

     (m)  "Participating Affiliate" -- Any Affiliate of the Company which (a)
          adopts this Plan with the approval of the Company; (b) authorizes the
          Board of Directors and the Committee to act for it in all matters
          arising under or with respect to this Plan; and (c) complies with such
          other terms and conditions relating to this Plan as may be imposed by
          the Company.

     (n)  "Pension Plan" -- The Pension Plan of Public Service Enterprise Group
          Incorporated (formerly known as the Pension Plan of Public Service
          Electric and Gas Company) or the Public Service Enterprise Group
          Incorporated Cash Balance Pension Plan (formerly known as the Public
          Service Electric and Gas Company Cash Balance Pension Plan).

     (o)  "Plan" -- The Deferred Compensation Plan for Certain Employees of
          Public Service Enterprise Group Incorporated and its Affiliates,
          formerly known as the Deferred Compensation Plan for Certain Employees
          of Public Service Electric and Gas Company.

     3. ELECTION AS TO THE AMOUNT OF COMPENSATION THAT IS TO BE DEFERRED. A
Participant may elect to defer any portion of his Compensation otherwise payable
for services rendered for his/her Employer after the date of adoption of this
Plan.

     Any such election must be made by filing with the Committee an "Election in
Connection with Deferral of Compensation", the form of which shall be designated
by the Committee and is hereinafter referred to as "Schedule A". A Participant
may change (using Schedule A for such purposes), not later than December 31 of
any year, the amount of Compensation to be deferred by him/her with respect to
the next succeeding calendar year or years. In the calendar year that a
Participant first becomes eligible to participate in this Plan, such Participant
may elect to defer Compensation for part of that calendar year but only if such
election is made within thirty (30) days after the Participant first becomes
eligible to participate in this Plan. Compensation may be

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deferred prospectively only, and the amount of Compensation to be deferred may
be changed only with respect to future calendar years.

     4. HOW THE ACCOUNT IS TO BE MAINTAINED.

     (a) ESTABLISHMENT OF ACCOUNT -- The Company shall establish an Account for
each Participant who elects to participate in the Plan. Each Participant's
Account shall be credited at the end of each month with an amount equal to the
Deferred Compensation which would have otherwise been payable to him/her that
month.

     (b) EARNINGS CREDITS ON ASSETS IN THE ACCOUNT -- Each Participant, except
Participants not actively employed by an Employer on January 1, 2000, may direct
investment of his or her Account among the Investment Funds (in the manner
established by the Committee) in multiples of one percent; provided, however,
that the Committee shall not be obligated to effectuate any such investment
direction. In the case of (i) Participants not actively employed by an Employer
on January 1, 2000 and (ii) a Participant who fails to provide a designation of
Investment Funds, such Participants shall be deemed to have designated 100
percent of his or her Account to be invested in the Investment Fund that
determines income accrual with reference to the prime commercial lending rate of
the Chase Manhattan Bank.

     Except with respect to an investment election related to (A) an election
made within 30 days of January 1, 2000 and (B) any Investment Fund which is
discontinued during a Plan Year, each of which shall be effective immediately, a
Participant's investment election may be changed annually and will be effective
from January 1 of the Plan Year next following receipt of the Employee's
investment election form.

     Each Participant's Account shall be credited with a rate of return on the
last day of March, June, September and December equal to the rate of return
experienced by the Investment Fund selected by the Participant for the same
period. The fair market value of each Investment Fund shall be determined by the
Committee and shall represent the fair market value of all securities and other
property held by the Investment Fund.

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     (c) TITLE TO AND BENEFICIAL OWNERSHIP OF ASSETS -- The Plan shall be
unfunded. The Company shall not be required to segregate any amounts credited to
any Participant's Account, which shall be established merely as an accounting
convenience. Title to and beneficial ownership of any Assets, whether Deferred
Compensation or earnings credited to a Participant's Account pursuant to
Paragraphs 4(a) and (b) hereof, shall at all times remain in the Company, and no
Participant nor Beneficiary shall have any interest whatsoever in any specific
assets of the Company. All Assets shall at all times remain solely the property
of the Company subject to the claims of its general creditors and available for
the Company's use for whatever purpose desired.

     5. DISTRIBUTION FROM THE ACCOUNT

     (a) ELECTION AS TO THE COMMENCEMENT OF THE DISTRIBUTION -- By election on
Schedule A filed with the Committee, an Participant may elect to have
distribution from his/her account commence either (i) within thirty (30) days
after the date he ceases to be employed by an Employer or, in the alternative,
(ii) in the month of January of any calendar year following termination of
employment elected by the Participant, but in any event no later than the later
of (A) the January of the year following the year of the Participant's 70th
birthday or (B) the January following termination of employment or (iii)
pursuant to the terms of any written employment agreement applicable to the
Participant. A Participant may change such election by filing a subsequent
Schedule A, but any such change shall apply only to future deferrals. The actual
date that distribution shall commence shall be a date within the elected period
to be determined by the Committee in its sole discretion.

     (b) ELECTION AS TO THE TIMING OF THE DISTRIBUTION(S) -- By election on
Schedule A filed with the Committee, a Participant may elect to receive the
distribution of his/her Account in the form of (i) one lump-sum payment, (ii)
annual distributions over a five-year period or (3) annual distributions over a
10-year period. A Participant may change such election by filing a subsequent
Schedule A, but any such change shall apply only to future deferrals. In the
event a lump-sum payment is made under this Plan, the Assets credited to a
Participant's Account, including earnings at the rate provided in Paragraph 4(b)
of this Plan to the date of distribution, shall be paid to the Participant on
the date

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determined under Paragraph 5(a) of this Plan. In the case of a distribution over
a period of years, the Company shall pay to the Participant on the date
determined under Paragraph 5(a) of this Plan and on the yearly anniversaries of
such date, annual installments of the unpaid balance of the Assets in the
Participant's Account, including earnings on the unpaid balance at the rate
provided in Paragraph 4(b) of this Plan to the date of distribution. The amount
of each installment shall be determined by multiplying the then unpaid balance,
plus accrued earnings, in the Participant's Account by a fraction, the numerator
of which is one and the denominator of which is the number of annual
installments remaining to be paid.

     (c) DISTRIBUTION IN CASE OF CERTAIN DISABILITY -- In the event of an
Participant's Disability prior to a calendar year elected by the Participant
under Paragraph 5(a)(ii) of this Plan for distribution to commence, distribution
of the Participant's Account shall commence in the month following the month in
which the Participant terminates employment for disability, in accordance with
the Participant's election under Paragraph 5(b) of this Plan as to the form of
distribution. The actual date that distribution shall commence shall be a date
within such month determined by the Committee in its sole discretion.

     (d) DISTRIBUTION IN CASE OF DEATH -- In the event of an Participant's
death, the balance of the Participant's Account shall be distributed to the
Participant's Beneficiary(ies) over a period of not more than five (5) years, in
accordance with his/her election on Schedules A and B (filed with the Committee)
for distribution in case of death. Any change in the period over which such
payments are made shall only apply to future deferrals. Such distribution shall
be made in a manner consistent with Paragraph 5(b) of this Plan and shall
commence in the month of January of the year after the year of the Participant's
death, on a date within said month to be determined by the Committee in its sole
discretion. Additional annual payments for distributions made over a period of
more than one year shall be made on the yearly anniversaries of such date. In
the event of an Participant's death after distribution of his Account has
commenced, any election under this Paragraph 5(d) shall not extend the time of
payment of his Account beyond the time when distribution would have been
completed if he had lived. A Participant may change Beneficiary designations by
filing a subsequent Schedule B with the Committee.

     (e) REQUEST FOR CHANGE IN DISTRIBUTION -- An Participant, Beneficiary or a
legal representative may request a change in the timing, frequency or amount of
payments made from an Participant's Account by filing a written request
therefore with the Committee. The Committee may, in its sole discretion, grant
such request only if the Committee determines that

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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. A Participant who makes a hardship
withdrawal may not reenter this Plan for 12 months after the date of withdrawal.
Any distribution under this Paragraph 5(e) shall commence within 30 days after
the Committee grants such request for hardship withdrawal.

     (f) EMPLOYMENT NOT TERMINATED IF TRANSFERRED TO AN AFFILIATE -- For the
purposes of this Paragraph 5, an Participant shall not be deemed to have
terminated his/her employment if he/she is transferred to the employ of a
corporation is an Affiliate of the Company.

     (g) COMPANY MAY DISTRIBUTE IN LUMP-SUM IF DISTRIBUTABLE AMOUNT LESS THAN
$5,000 -- The Company reserves the right to make a lump-sum distribution,
notwithstanding any other provision of this Plan, if the total Assets in an
Participant's Account are $5,000 or less at any time after the Participant
ceases to be employed by the Company.

     6. ASSIGNMENT. No benefit under the Plan shall in any manner or to any
extent be assigned, alienated, or transferred by any Participant or Beneficiary
under the Plan or subject to attachment, garnishment or other legal process.

     7. PLAN DOES NOT CONSTITUTE AN EMPLOYMENT AGREEMENT. This Plan shall not
constitute a contract f or 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
his employment for any reason at any time notwithstanding this Plan.

     8. AMENDMENT OR TERMINATION OF THE PLAN BY THE COMPANY. The Company may, in
its sole discretion and by action of its Board of Directors or Employee Benefit
Policy Committee, amend, modify or terminate this Plan at any time, provided,
however, that no such amendment, modification or termination shall adversely
affect the right of a

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Participant in respect of Deferred Compensation previously earned by him/her
which has not been paid, unless such Participant or his/her legal representative
shall consent to such change; provided, further, that notwithstanding any other
provision of this Plan, upon the occurrence of a Change in Control, the earnings
credit calculated pursuant to Paragraph 4 may not be reduced below the prime
commercial lending rate described in Schedule C.

     9. WHAT CONSTITUTES NOTICE. Any notice to an Participant, Beneficiary or
legal representative hereunder shall be given either by delivering it or by
depositing it in the United States mail, postage prepaid, addressed to his last
known address. Any notice to the Company or the Committee hereunder (including
the filing of Schedules A and B) shall be given either by delivering it, or
depositing it in the United States mail, postage prepaid, to the Secretary of
the Employee Benefits Policy Committee, Public Service Enterprise Group
Incorporated, 80 Park Plaza, P. 0. Box 1170, Newark, New Jersey 07101.

     10. ADVANCE DISCLAIMER OF ANY WAIVER ON THE PART OF THE COMPANY. Failure by
the Company 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.

     11. EFFECT ON 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.

     12. PLAN BINDING ON ANY SUCCESSOR OWNER. Except as otherwise provided
herein, this 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.

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                                       11

     13. LAWS GOVERNING THIS PLAN. Except to the extent federal law applies,
this Plan shall be governed by the laws of the State of New Jersey.

     14. MISCELLANEOUS. The masculine pronoun shall mean the feminine wherever
appropriate.

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                                                                      SCHEDULE A

               DEFERRED COMPENSATION PLAN FOR CERTAIN EMPLOYEES OF
         PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED AND ITS AFFILIATES

              ELECTIONS IN CONNECTION WITH DEFERRAL OF COMPENSATION

SECTION 1. ELECTION AS TO COMPENSATION TO BE DEFERRED.

      Note: THIS SECTION IS TO BE USED TO MAKE OR TO CHANGE AN ELECTION UNDER
            PARAGRAPH 3 OF THE PLAN. ANY CHANGE IN ELECTION MUST BE MADE NO
            LATER THAN DECEMBER 31 OF THE YEAR PRECEDING THE YEAR IN WHICH YOU
            WISH THE CHANGE TO APPLY.

      I hereby elect to defer, in accordance with the provisions of the Plan:

      __________ (a) a month of my Compensation; or

      __________ (b) All of my Compensation in excess of $_________ per year.

SECTION 2. ELECTION AS TO COMMENCEMENT OF DISTRIBUTION FROM ACCOUNT

      Note: THIS SECTION IS TO BE USED (A) WHEN FIRST BECOMING A PARTICIPANT
            COVERED BY THE PLAN AND (B) PRIOR TO DECEMBER 31ST OF ANY GIVEN YEAR
            IF THERE IS TO BE ANY CHANGE IN THE ORIGINAL ELECTION. ANY SUCH
            CHANGE WILL ONLY APPLY TO FUTURE DEFERRALS.

      I hereby elect, in accordance with the provisions of the Plan, to have
distribution from my Account commence:

      __________ (a) Within thirty (30) days after I cease to be employed by an
                     Employer.

      __________ (b) In the month of January, __________, unless I am employed
                     by an Employer at such time, in which case within 30 days
                     after I cease to be employed by an Employer.

      __________ (c) Pursuant to the my employment contract dated ____________ .

                                               Participant's Initials __________

                                                                  Date__________

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                                       13

                                                                    SCHEDULE A-2

SECTION 3. ELECTION AS TO THE TIMING OF THE DISTRIBUTION

      Note: THIS SECTION IS TO BE USED (A) WHEN FIRST BECOMING A PARTICIPANT AND
            (B) PRIOR TO DECEMBER 31ST OF ANY GIVEN YEAR IF THERE IS TO BE ANY
            CHANGE IN THE ORIGINAL ELECTION. ANY SUCH CHANGE WILL ONLY APPLY TO
            FUTURE DEFERRALS.

      I hereby elect, in accordance with the provisions of the Plan, to have the
distribution of my Account paid:

      __________ (a) In one lump sum.

      __________ (b) In annual installments over a period of five (5) years.

      __________ (c) In annual installments over a period of ten (10) years.

      __________ (d) Pursuant to the terms of my employment agreement
                     dated _______

SECTION 4. ELECTION AS TO METHOD OF DISTRIBUTION IN CASE OF DEATH

      Note: THIS SECTION TO BE USED TO SELECT THE METHOD OF DISTRIBUTION IN THE
            CASE OF DEATH. PERIOD SELECTED MAY NOT BE MORE THAN FIVE (5) YEARS.

      In case of my death, I hereby elect, in accordance with the provisions of
the Plan, to have the distribution of my Account paid over a period of _____
year(s) to my Beneficiary(ies) designated on Schedule B.

______________________, 19___

____________________________________        ____________________________________
Witness                                              Participant Signature

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                                                                      SCHEDULE B

               DEFERRED COMPENSATION PLAN FOR CERTAIN EMPLOYEES OF
           PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED AND AFFILIATES
                                  (THE "PLAN")

                         DESIGNATION OF BENEFICIARY(IES)

      In the event of my death, I hereby designate the following individuals,
fiduciaries or other entities, either in their own right or in their
representative capacity, in the proportions and in the priority of interest
designated, to be the beneficiaries of any benefits owing to me, under the Plan.

      PRIMARY BENEFICIARIES - The following beneficiary(ies) shall receive all
benefits payable under the Plan in the event of my death in the proportions
designated hereunder. If any one or more of the primary beneficiaries designated
hereunder shall predecease me, such beneficiary's share(s) shall be divided
equally among the remaining primary beneficiaries.

                                         PROPORTIONATE
 NAME AND PRESENT ADDRESS             INTEREST OF PRIMARY          RELATIONSHIP
OF PRIMARY BENEFICIARY(IES)            BENEFICIARY(IES)           TO PARTICIPANT
---------------------------            ----------------           --------------

______________________________

______________________________             _________%               _________

______________________________

______________________________             _________%               _________

______________________________

______________________________             _________%               _________

______________________________

______________________________             _________%               _________

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                                       15

                                                                      SCHEDULE B

      SECONDARY BENEFICIARIES - The following beneficiary(ies) shall receive all
benefits payable under the Plan in the event of my death in the proportions
designated hereunder only if all of my Primary Beneficiaries have predeceased
me. If all Primary Beneficiaries have predeceased me and if any one or more of
the Secondary Beneficiaries designated hereunder shall predecease me, such
Secondary Beneficiary's share(s) shall be divided equally among the Secondary
Beneficiaries.

                                         PROPORTIONATE
 NAME AND PRESENT ADDRESS             INTEREST OF PRIMARY          RELATIONSHIP
OF PRIMARY BENEFICIARY(IES)            BENEFICIARY(IES)           TO PARTICIPANT
---------------------------            ----------------           --------------

______________________________

______________________________             _________%               _________

______________________________

______________________________             _________%               _________

______________________________

______________________________             _________%               _________

______________________________

______________________________             _________%               _________

      ESTATE -- In the event I have declined to designate a Beneficiary
hereunder or if all of the Beneficiaries that I have designated predecease me,
then all benefits payable under the Plan shall be payable to my Estate.

Date:__________

____________________________________        ____________________________________
Witness                                              Participant's Signature

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                                       16

                                                                      SCHEDULE C

                        INVESTMENT FUND ELECTION OPTIONS

     The following options shall be available for selection pursuant to Section
4(b) of the Plan.

     1)   An annual rate equal to the rate charged by The Chase Manhattan Bank,
          N.A. on the first business day of each calendar quarter for prime
          commercial loans of 90 day maturity (based on actual number of days,
          360 days to the year), plus 1/2 of 1%.

     2)   An annual rate equal to the rate of return of the Conservative
          Pre-Mixed Portfolio of the PSEG Thrift Plan.

     3)   An annual rate equal to the rate of return of the Moderate Pre-Mixed
          Portfolio of the PSEG Thrift Plan.

     4)   An annual rate equal to the rate of return of the Aggressive Pre-Mixed
          Portfolio of the PSEG Thrift Plan.

     5)   An annual rate equal to the return of the Large Cap Equity Fund of the
          PSEG Thrift Plan.

     Such earnings credit shall be computed on the average daily balance in the
Participant's Account during each calendar quarter, excluding any Assets that
have been distributed from the Participant's Account during such quarter, and
shall be credited to the Participant's Account and compounded as provided for in
the Plan.LIMITED SUPPLEMENTAL BENEFITS PLAN

                            FOR CERTAIN EMPLOYEES OF

         PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED AND ITS AFFILIATES

                              AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 2000

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                       LIMITED SUPPLEMENTAL BENEFITS PLAN
                            FOR CERTAIN EMPLOYEES OF
                  PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
                               AND ITS AFFILIATES

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
1.  PURPOSE.................................................................   1

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

3.  DEATH BENEFIT...........................................................   7

4.  RETIREMENT BENEFIT......................................................   8

5.  ADMINISTRATION OF ACCOUNTS..............................................  15

6.  DESIGNATION OF BENEFICIARIES............................................  16

7.  LIMITATION OF BENEFITS..................................................  19

8.  PLAN DOES NOT CONSTITUTE AN EMPLOYMENT AGREEMENT........................  19

9.  AMENDMENT OR TERMINATION OF THE PLAN....................................  20

10. WHAT CONSTITUTES NOTICE.................................................  20

11. ADVANCE DISCLAIMER OF WAIVER............................................  20

12. EFFECT OF INVALIDITY OF ANY PART OF THE PLAN............................  20

13. PLAN BINDING ON ANY SUCCESSOR...........................................  21

14. FUNCTION OF THE COMMITTEE...............................................  21

15. COMPANY SHALL PAY LEGAL FEES............................................  21

16. LAW GOVERNING THE PLAN..................................................  21

17. MISCELLANEOUS...........................................................  22

APPENDIX A..................................................................  23

                                       i

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                       LIMITED SUPPLEMENTAL BENEFITS PLAN
                            FOR CERTAIN EMPLOYEES OF
         PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED AND ITS AFFILIATES

1.   PURPOSE. Public Service Electric and Gas Company previously established and
     currently maintains the Limited Supplemental Benefits Plan for Certain
     Employees of Public Service Electric and Gas Company. Effective as of
     December 13, 1999, Public Service Electric and Gas Company transfers
     sponsorship of the plan to Public Service Enterprise Group Incorporated and
     renames the plan the Limited Supplemental Benefits Plan for Certain
     Employees of Public Service Enterprise Group Incorporated and Its
     Affiliates (the "Plan"). Furthermore, effective as of January 1, 2000, the
     Plan is amended as set forth in this document. 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 and its Participating Affiliates by providing selected employees
     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)  "AFFILIATE" -- Any organization which is a member of a controlled
          group of corporations (as defined in Code Section 414(b), as modified
          by Code Section 415(h)) which includes the Company, or any trades or
          businesses (whether or not

                                       1

<PAGE>

     incorporated) which are under common control (as defined in Code Section
     414(c), as modified by Code Section 415(h)) with the Company, or a member
     of an affiliated service group (as defined in Code Section 414(m)) which
     includes the Company or any other entity required to be aggregated with the
     Company as required by regulations promulgated pursuant to Code Section
     414(o).

     (c)  "ANNUITY" -- A fully-funded contract with an independent insurance
          company purchased by the Company pursuant to Paragraph 4(f) of the
          Plan.

     (d)  "ASSETS" -- All amounts that have been credited to a Participant's
          Account in accordance with Paragraph 3(b), 4(e), or 5(b) of the Plan.

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

     (f)  "BOARD OF DIRECTORS" OR "BOARD" -- The Board of Directors of Public
          Service Enterprise Group Incorporated.

     (g)  "CASH BALANCE PLAN" -- The Cash Balance Pension Plan of Public Service
          Enterprise Group Incorporated (formerly known as the "Cash Balance
          Pension Plan of Public Service Electric and Gas Company"), as amended
          and restated from time to time.

     (h)  "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:

          (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 the Company (not
               including in the

                                       2

<PAGE>

               securities beneficially owned by such person any securities
               acquired directly from the Company or its affiliates)
               representing 25% or more of the combined voting power of the
               Company'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 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 the Company) whose
               appointment or election by the Board or nomination for election
               by the Company'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 the Company or
               any direct or indirect wholly owned subsidiary of the Company
               with any other corporation, other than (A) a merger or
               consolidation which would result in the voting securities of the
               Company 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 the Company or any subsidiary
               of the Company, at least 75% of the combined voting power of the
               securities of the Company 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 the Company (or similar
               transaction) in which no person is or becomes the Beneficial
               Owner, directly or indirectly, of securities of the Company
               representing 25% or more of the combined voting power of the
               Company's then outstanding securities; or

          (iv) the stockholders of the Company approve a plan of complete
               liquidation or dissolution of the Company or there is consummated
               an agreement for the sale or

                                       3

<PAGE>

               disposition by the Company of all or substantially all of the
               Company's assets, other than a sale or disposition by the Company
               of all or substantially all of the Company's assets to an entity,
               at least 75% of the combined voting power of the voting
               securities of which are owned by stockholders of the Company in
               substantially the same proportions as their ownership of the
               Company 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 the Company 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 the Company immediately following such
          transaction or series of transactions.

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

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

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

     (l)  "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 his/her Employer,
               excluding the cost to the Employer for any public or private
               employee benefit plan (including, without limitation, the
               Long-Term Incentive Compensation Plan of the Company) but
               including all elective contributions that are made by the
               Employer on behalf of a Participant which are not includible 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

                                       4

<PAGE>

               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.

     (m)  "EMPLOYER" -- The Company and its Participating Affiliates.

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

     (o)  "PARTICIPANT" -- Each employee of an Employer nominated by the Chief
          Executive Officer and designated by the Employee Benefits Policy
          Committee of the Company. The Chief Executive Officer of the Company
          shall nominate such select and key employees 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 Employer. Any individual who was an "Employee," as
          that term was defined in the "Limited Supplemental Death Benefits and
          Retirement Plan for Certain Employees of Public Service Electric and
          Gas Company," such plan having been amended and restated July 1, 1987
          and terminated effective March 31, 1993, who participated in such plan
          and who retired prior to March 31, 1993 under the terms of such plan
          shall be deemed a "Participant" hereunder, subject only to the
          provisions of Appendix A and entitled to receive only those benefits
          as set forth in Appendix A.

     (p)  "PARTICIPATING AFFILIATE" -- Any Affiliate of the Company which (a) is
          the sponsor or a Participating Affiliate of the Pension Plan or Cash
          Balance Plan; (b) adopts this Plan with the approval of the Board of
          Directors; (c) authorizes the Board of Directors and the Committee to
          act for it in all matters arising under or

                                       5

<PAGE>

          with respect to this Plan; and (d) complies with such other terms and
          conditions relating to this Plan as may be imposed by the Board of
          Directors.

     (q)  "PENSION PLAN" -- The Pension Plan of Public Service Enterprise Group
          Incorporated (formerly known as the "Pension Plan of Public Service
          Electric and Gas Company"), as amended and restated from time to time.

     (r)  "PLAN" -- The Limited Supplemental Benefits Plan for Certain Employees
          of Public Service Enterprise Group Incorporated and its Affiliates
          (formerly known as the "Limited Supplemental Benefits Plan for Certain
          Employees of Public Service Electric and Gas Company").

     (s)  "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.

     (t)  "RETIREMENT CHOICE PROGRAM" -- The Public Service Enterprise Group
          Incorporated Retirement Choice Program (formerly known as the "Public
          Service Electric and Gas Company Retirement Choice Program"), as
          amended and restated from time to time.

     (u)  "RETIREMENT PLAN" -- Any pension plan within the meaning of ERISA,
          excluding (i) the Pension Plan, the Cash Balance Plan and all defined
          contribution plans

                                       6

<PAGE>

          maintained by the Company or its Affiliates, 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.

     (v)  "THRIFT PLAN" - The Public Service Enterprise Group Incorporated
          Thrift and Tax-Deferred Savings Plan (formerly known as the "Public
          Service Electric and Gas Company Thrift and Tax-Deferred Savings
          Plan"), as amended and restated from time to time.

     (w)  "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 an Employer, the Employer 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 an Employer, 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.

                                       7

<PAGE>

4.   RETIREMENT BENEFIT.

     (a)  GENERAL -- At Retirement, each Participant shall be provided 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 under the Mid-Career Supplemental Retirement
                    Income Plan of Public Service Enterprise Group Incorporated
                    and its Affiliates or any written arrangement with his/her
                    Employer, 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)
                    maintained by an Employer 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

                                       8

<PAGE>

                    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 an Employer,
                    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
                    Performance and Rewards Department of PSEG Services Corp. 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
                    Performance and Rewards Department. If a Participant is
                    granted a disability Social Security benefit, he shall
                    notify the Performance and Rewards 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

                                       9

<PAGE>

                    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 Enterprise Group Incorporated and its Affiliates or
                    any written arrangement with his/her Employer, and (Z) 30;
                    but, in no event, shall the multiple be greater than 0.75.

                                       10

<PAGE>

               (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,
                    including that portion of a Participant's account under the
                    Thrift Plan attributable to age and service credits
                    transferred from the Cash Balance Plan as a result of
                    Participant elections made pursuant to the Cash Balance Plan
                    and the Retirement Choice Program, and any supplemental
                    retirement plan (other than this Plan) maintained by an
                    Employer 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 an Employer,
                    such Social Security benefits and benefits under all
                    Retirement

                                       11

<PAGE>

                    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 Performance
                    and Rewards Department 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 Performance and Rewards Department.
                    If a Participant is granted a disability Social Security
                    benefit, he shall notify the Performance and Rewards
                    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.

                                       12

<PAGE>

     (c)  FORMS OF BENEFIT -- The annual amount determined under Paragraph 4(b)
          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

                                       13

<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; 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 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.

                                       14

<PAGE>

         (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.

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.

                                       15

<PAGE>

     (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.

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

                                       16

<PAGE>

          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

                                       17
<PAGE>

               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 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

                                       18
<PAGE>

          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; 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
     any Employer. The Employer 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.

                                       19

<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 Enterprise
     Group Incorporated, 80 Park Plaza, T10B, P.O. Box 1171, 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.

                                       20

<PAGE>

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 through
          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.

                                       21

<PAGE>

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.

                                       22

<PAGE>

                                   APPENDIX A

Those Participants who retired prior to March 31, 1993 under the terms of the
"Limited Supplemental Death Benefits and Retirement Plan for Certain Employees
of Public Service Electric and Gas Company," such plan having been amended and
restated effective July 1, 1987 and terminated effective March 31, 1993, are
subject to the provisions of this Appendix A and shall receive the benefits as
set forth below:

1.   DEFINITIONS. As used in this Appendix A, the following words and phrases
     shall have the meanings indicated. Any terms used herein that are not
     defined in this Appendix A, shall have the meanings assigned such terms in
     the Plan document.

     (a)  "ACCOUNT" -- Any account established pursuant to Paragraph 3(d) of
          this Appendix A.

     (b)  "ASSETS" -- All amounts that have been credited to a Participant's
          Account in accordance with Paragraph 3(d) of this Appendix A and
          Paragraph 5(b) of the Plan.

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

     (d)  "COMPENSATION" --

          (i)  For purposes of calculating the post-retirement death benefit
               pursuant to Paragraph 2 of this Appendix A, "Compensation" is the
               annual rate of salary from the Company of each Participant in
               effect at any time; and

                                       23

<PAGE>

          (ii) For purposes of calculating the Retirement Benefit pursuant to
               Paragraph 3 of this Appendix A, "Compensation" is the annual rate
               of salary from the Company of each Participant in effect at the
               earlier of such Participant's Retirement or attainment of normal
               retirement age under the Pension Plan; provided however, that
               "Compensation" for the purpose of such Paragraph 3(b) shall not
               be reduced below the annual rate of salary in effect on December
               31, 1986 for each Participant employed by the Company on such
               date.

     (e)  "RETIREMENT" -- The termination of service with the Company prior to
          March 31, 1993 with the right to an immediate benefit under the
          Pension Plan. Retirement shall not include termination of service with
          the right to a deferred pension except as provided in Paragraph 3(f)
          hereof.

2.   POST-RETIREMENT DEATH BENEFIT. At Retirement, the Company shall provide
     each Participant with a certificate of coverage under a post-retirement
     group life insurance policy. Such certificate shall provide a
     post-retirement death benefit to be paid by the insurance company in the
     amount of the applicable following percentage of the Participant's
     Compensation adjusted to the nearest $1,000, or the next highest $1,000 if
     such Compensation is a multiple of $500 but not of $1,000: operating
     committee - 75%; management salary grades numbers 12 through 16 - 50%; and
     management salary grades numbers 10 and 11 - 25%. The insurance company to
     provide such post-retirement group life insurance coverage shall be
     selected from time to time by the Committee.

3.   RETIREMENT BENEFIT.

     (a)  GENERAL. At Retirement, the Company shall provide each Participant
          with a retirement benefit calculated as provided in this Paragraph 3.

     (b)  DETERMINATION OF BENEFIT.

          (i)  The Participant's Compensation shall be multiplied by an amount
               equal to one one hundredth of the sum of (A) the number of the
               Participant's years

                                       24

<PAGE>

               of credited service under the Pension Plan at Retirement, (B) the
               number of any additional years of service credit to which the
               Participant may be entitled from the Company under any written
               arrangement, and (c) 30; but in no event more than 0.75.

          (ii) The amount determined under subparagraph (i) of this Paragraph
               3(b) shall be reduced by the sum of (a) the amount the
               Participant would be entitled to at Retirement as an annual
               pension benefit under the Pension Plan calculated as a single
               life annuity without any reduction for any pre-retirement
               survivorship option coverage or any reduction for early
               retirement, (B) 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 Social
               Security 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 age), or, if greater, any
               disability benefit under Social Security to which the Participant
               may be entitled, and (C) 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 reduction,
               under rules, procedures and equivalents determined by the
               Committee. To determine the amount referred to under (B) and (C)
               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 this Appendix A 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, and the Participant's
               retirement benefit under this Appendix A 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 by 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 this Appendix A, 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 3 shall be paid in one of the following forms:

                                       25

<PAGE>

          (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;

         (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 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 on
               the basis of a current interest rate assumption determined from
               time to time by the Committee.

          The Committee in its sole discretion shall determine the form of
          benefit payment for each Participant.

     (d)  ESTABLISHMENT OF ACCOUNT. If payment is made under Paragraph 3(c)(iv)
          of this Appendix A, 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 3(c)(iv) and shall
          be administered as provided in Paragraph 5 of the Plan.

                                       26

<PAGE>

     (e)  DISABILITY RETIREMENT. If a Participant retires for disability under
          the Pension Plan, payment of the Participant's retirement benefit and
          any joint and survivor benefit under Paragraph 3(c)(ii) of this
          Appendix A shall be subject to the same conditions as the disability
          pension under the Pension Plan.

     (f)  VESTED BENEFIT. If a Participant, who is entitled to a deferred
          pension under the Pension Plan, terminates employment with the Company
          pursuant to the Company's Limited Incentive Separation Program on or
          after July 1, 1987, the Company shall provide such Participant with a
          retirement benefit calculated as provided in this Paragraph 3 upon
          commencement of the payment of benefits to the Participant under the
          Pension Plan.

4.   ADMINISTRATION OF ACCOUNTS. Accounts shall be established under this
     Appendix A only pursuant to Paragraph 3(b) herein. All such Accounts shall
     be administered in accordance with the provisions of Paragraph 5(b) - (d)
     of the Plan document.

5.   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 5, a Participant may change such designation by filing a
          subsequent written designation.

     (b)  POST-RETIREMENT DEATH BENEFIT. The post-retirement death benefit under
          Paragraph 3 of this Appendix A shall be paid in accordance with
          Section 1 of the most recent Schedule A to the Plan filed with the
          Committee, or in accordance

                                       27

<PAGE>

          with such other procedure for payment of post-retirement death
          benefits as may be established by the Committee or the insurance
          company providing post-retirement group life insurance pursuant to
          this Appendix A.

     (c)  RETIREMENT BENEFITS.

          (i)  SINGLE LIFE ANNUITY. If a Participant's retirement benefit is
               paid as a single life annuity under Paragraph 3(c)(i) of this
               Appendix A, 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 3(c)(ii) of this Appendix A and the Participant's
               pension under the Pension Plan are both paid as joint and
               survivor annuities, any survivor annuity under this Appendix A
               shall be paid to the same beneficiary entitled to any post
               retirement survivorship benefit under the Pension Plan. If the
               Participant's pension under the Pension Plan is paid as a single
               life annuity, any survivor annuity paid under Paragraph 3(c)(ii)
               of this Appendix A shall be paid to the Beneficiary designated in
               Section 2 of Schedule A to the Plan. If the Beneficiary
               predeceases the Participant after 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 3(c)(iii) of this

                                       28

<PAGE>

               Appendix A, or a 10-year certain increasing payment annuity under
               Paragraph 3(c)(iv) of this Appendix A, the Beneficiary or
               Beneficiaries with respect to such benefit shall be as specified
               in Section 1 of the most recent Schedule A to the Plan 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
          10-year certain annuity under Paragraph 3(c)(iii) or 3(c)(iv) of this
          Appendix A, 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.

6.   APPLICABILITY OF CERTAIN PLAN PROVISIONS. The provisions of Paragraphs 7,
     8, 9, 10, 11, 12,13, 14, 16, and 17 of the Plan shall apply with full force
     and effect with respect to any Participant subject to this Appendix A as if
     each such Paragraph was set forth in its entirety herein.

                                       29

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