Document:

Exhibit 4.3 

[FACE OF NOTE]

IF THE
REGISTERED OWNER OF THIS NOTE (AS INDICATED BELOW) IS THE DEPOSITORY TRUST
COMPANY OR A NOMINEE OF THE DEPOSITORY TRUST COMPANY, THIS NOTE IS A GLOBAL
SECURITY AND THE FOLLOWING LEGENDS APPLY: 

UNLESS THIS
NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (THE “DEPOSITARY”) (55 WATER STREET, NEW YORK, NEW YORK) TO THE ISSUER
HEREOF OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY AND ANY PAYMENT IS
MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN. 

THIS NOTE MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. 

IF APPLICABLE,
THE “TOTAL AMOUNT OF OID,” “YIELD TO MATURITY” AND “INITIAL ACCRUAL PERIOD”
(COMPUTED UNDER THE APPROXIMATE METHOD) BELOW WILL BE COMPLETED SOLELY FOR THE
PURPOSES OF APPLYING THE FEDERAL INCOME TAX ORIGINAL ISSUE DISCOUNT RULES. 

	
 

	
 

	
 

	
REGISTERED
No. FLR-___

	
CUSIP No.:

	
PRINCIPAL
 AMOUNT:

 $

COLGATE-PALMOLIVE COMPANY 

MEDIUM-TERM NOTE, SERIES F 

(Floating Rate)

	
 

	
 

	
 

	
 

	
 

	
INTEREST RATE BASIS

 OR BASES:

	
 

	
ORIGINAL ISSUE DATE:

	
 

	
STATED MATURITY DATE:

	
 

	
 

	
 

	
 

	
 

	
 

	
IF LIBOR:

	
 

	
IF CMT RATE:

	
 

	
IF FEDERAL FUNDS RATE:

	
o Reuters Page LIBOR01

	
o

	
 Reuters Page FRBCMT

	
 

	
o

	
Federal Funds (Effective)
 Rate

	
o Reuters Page LIBOR02

	
o

	
 Reuters Page FEDCMT

	
 

	
o

	
Federal Funds Open Rate

	
 

	
 

	
     o Weekly Average

	
 

	
o

	
Federal Funds Target Rate

	
  Designated
 LIBOR

	
 

	
     o Monthly Average

	
 

	
 

	
 

	
  Currency:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
INDEX MATURITY:

	
 

	
INITIAL INTEREST RATE:   %

	
 

	
INTEREST PAYMENT DATE(S):

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
INITIAL INTEREST RESET
 DATE:

	
 

	
INTEREST RATE RESET
 PERIOD:

	
 

	
 

	
SPREAD (PLUS OR

	
SPREAD MULTIPLIER:

	
MINUS):

	
 

	
 

	
INTEREST DETERMINATION

	
REGULAR RECORD DATES:

	
DATES:

	
 

	
 

	
 

	
 

	
 

	
 

	
MINIMUM INTEREST RATE:   %

	
 

	
MAXIMUM INTEREST RATE:   %

	
 

	
INTEREST RESET DATE(S):

	
 

	
 

	
 

	
 

	
 

	
INITIAL REDEMPTION

	
 

	
INITIAL REDEMPTION

	
 

	
*ANNUAL REDEMPTION

	
DATE:

	
 

	
PERCENTAGE:   %

	
 

	
PERCENTAGE REDUCTION:   %

	
 

	
 

	
 

	
 

	
 

	
HOLDER’S OPTIONAL

	
 

	
CALCULATION AGENT:

	
 

	
o CHECK IF DISCOUNT NOTE

	
REPAYMENT DATE(S):

	
 

	
 

	
 

	
Issue Price:   %

	
 

	
 

	
 

	
 

	
 

	
SPECIFIED CURRENCY:

	
 

	
EXCHANGE RATE AGENT:

	
 

	
 

	
 

	
 

	
INTEREST CATEGORY:

	
DAY COUNT CONVENTION:

	
o Regular Floating Rate Note

	
o 30/360 for the period

	
o Floating Rate/Fixed Rate Note

	
       from            to               .

	
       Fixed
 Rate Commencement Date:

	
o Actual/360 for the period

	
       Fixed
 Interest Rate:   %

	
       from            to               .

	
o Inverse Floating Rate Note

	
o Actual/Actual for the period

	
       Fixed
 Interest Rate:   %

	
       from            to               .

	
 

	
Applicable Interest Rate
 Basis:

	
 

	
AUTHORIZED DENOMINATION: 

	
o $1,000 and integral multiples 

	
         thereof 

	
o Other:

	
 

	
ADDENDUM ATTACHED 

	
o Yes

	
o No

	
 

	
OTHER/ADDITIONAL
 PROVISIONS: 

	
 

	
 

	

	
*

	
If an Initial Redemption
 Date is specified above, (i) the Redemption Price will initially be the
 Initial Redemption Percentage specified above and shall decline at each
 anniversary of the Initial Redemption Date shown above by the Annual
 Redemption Percentage Reduction specified above until the Redemption Price is
 100% of such principal amount, and (ii) this Note may be redeemed either in
 whole or from time to time in part except if the following box is marked,
 this Note may be redeemed in whole only o. If no Initial Redemption Date is
 specified above, this Note may not be redeemed prior to Maturity. 

2

          COLGATE-PALMOLIVE
COMPANY, a Delaware corporation (the “Company”, which term includes any
successor corporation under the Indenture hereinafter referred to), for value
received, hereby promises to pay, to              
                                  
  , or registered assigns, the Principal
Amount of                     
                             , on the Stated Maturity Date specified above (or any Redemption Date
or Repayment Date, each as defined on the reverse hereof, or any earlier date
of acceleration of maturity) (each such date being hereinafter referred to as
the “Maturity Date” with respect to the principal repayable on such date) and
to pay interest thereon (and on any overdue principal, premium and/or interest
to the extent legally enforceable) at a rate per annum equal to the Initial
Interest Rate specified above until the Initial Interest Reset Date specified
above and thereafter at a rate determined in accordance with the provisions
specified above and on the reverse hereof or in an Addendum hereto with respect
to one or more Interest Rate Bases specified above until the principal hereof
is paid or duly made available for payment. 

          The
Company will pay interest in arrears on each Interest Payment Date specified above
(each, an “Interest Payment Date”), commencing with the first Interest Payment
Date next succeeding the Original Issue Date specified above, and on the
Maturity Date; provided, however, that if the Original Issue Date
occurs between a Record Date (as defined below) and the next succeeding
Interest Payment Date, interest payments will commence on the second Interest
Payment Date next succeeding the Original Issue Date to the registered holder
of this Note (the “Holder”) on the Record Date with respect to such second
Interest Payment Date. 

          Interest
on this Note will accrue from, and including, the most recent Interest Payment
Date to which interest has been paid or duly provided for or from, and
including, the Original Issue Date if no interest has been paid or duly
provided for, to, but excluding, the next Interest Payment Date or the Maturity
Date, as the case may be (each, an “Interest Period”). The interest so payable,
and punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the person in whose name this Note (or
one or more Predecessor Securities) is registered at the close of business on
the fifteenth calendar day (whether or not a Business Day, as defined below)
immediately preceding such Interest Payment Date (the “Record Date”); provided,
however, that interest payable on the Maturity Date will be payable to
the person to whom the principal hereof and premium, if any, hereon shall be
payable. Any such interest not so punctually paid or duly provided for on any
Interest Payment Date (“Defaulted Interest”) shall forthwith cease to be
payable to the Holder at the close of business on any Record Date and may
either be paid to the Person in whose name this Note (or one or more Predecessor
Securities) is registered at the close of business on a special record date
(the “Special Record Date”) for the payment of such Defaulted Interest to be
fixed by the Trustee, notice whereof shall be given to the Holder of this Note
by the Trustee not less than 10 calendar days prior to such Special Record Date
or may be paid at any time in any other lawful manner, all as more fully
provided for in the Indenture. 

          Payment
of principal, premium, if any, and interest in respect of this Note due on the
Maturity Date will be made in immediately available funds upon presentation and
surrender of this Note (and, with respect to any applicable repayment of this
Note, upon delivery of a duly completed election form as contemplated on the
reverse hereof) at the office of the Trustee maintained for that purpose in the
Borough of Manhattan, The City of New York, New York, in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts. Payment of interest due on any Interest
Payment Date 

3

 other than the Maturity Date will be made at
the aforementioned office of the Trustee or, at the option of the Company, by
check mailed to the address of the person entitled thereto as such address
shall appear in the Security Register maintained by the Trustee; provided,
however, that a Holder of U.S.$10,000,000 or more in aggregate principal amount
of Notes (whether having identical or different terms and provisions) shall, at
the option of the Company, be entitled to receive interest payments on such
Interest Payment Date by wire transfer of immediately available funds if
appropriate wire transfer instructions have been received in writing by the
Trustee not less than 15 calendar days prior to such Interest Payment Date. Any
such wire transfer instructions received by the Trustee shall remain in effect
until revoked by such Holder. 

          If
any Interest Payment Date other than the Maturity Date would otherwise be a day
that is not a Business Day, such Interest Payment Date shall be postponed to
the next succeeding Business Day, except that if EURIBOR or LIBOR is an
applicable Interest Rate Basis and such Business Day falls in the next
succeeding calendar month, such Interest Payment Date shall be the immediately
preceding Business Day. If the Maturity Date falls on a day that is not a
Business Day, the required payment of principal, premium, if any, and/or
interest shall be made on the next succeeding Business Day with the same force
and effect as if made on such Maturity Date, and no interest shall accrue with
respect to such payment for the period from and after the Maturity Date to the
date of such payment on the next succeeding Business Day. 

          As
used herein, “Business Day” means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which commercial banks are
authorized or required by law, regulation or executive order to close in The
City of New York; provided, however, that with respect to non-United States
dollar-denominated notes, the day is also not a day on which commercial banks
are authorized or required by law, regulation or executive order to close in
the Principal Financial Center (as defined below) of the country issuing the
specified currency or, if the specified currency is euro, the day is also a
Target Settlement Day (as defined below); provided, further, that, with respect
to floating rate notes as to which LIBOR is an applicable Interest Rate Basis,
the day is also a London Banking Day (as defined below) and that, with respect
to floating rate notes as to which EURIBOR is an applicable Interest Rate
Basis, the day is also a Target Settlement Day. 

          “London
Banking Day” means a day on which commercial banks are open for business,
including dealings in the Designated LIBOR Currency, in London. 

          “Principal
Financial Center” means (1) the capital city of the country issuing the
specified currency, or (2) the capital city of the country to which the
Designated LIBOR Currency relates, except, in each case, that with respect to
United States dollars, Australian dollars, Canadian dollars, Euros, New Zealand
dollars, South African rand and Swiss francs, the “Principal Financial Center”
will be The City of New York, Sydney, Toronto, London (solely in the case of
the Designated LIBOR Currency), Wellington, Johannesburg and Zurich,
respectively. 

          Unless
otherwise set forth above or specified on the face hereof or in an Addendum
hereto, “U.S. Government Securities Business Day” means any day other than a
Saturday, Sunday or a day on which The Securities Industry and Financial
Markets Association recommends that the fixed income departments of its members
be closed for the entire day for purposes of trading in U.S. government
securities. 

4

          “Target
Settlement Day” means a day on which the Trans-European Automated Real-Time
Gross Settlement Express Transfer (TARGET) System or any successor is open. 

          Reference
is hereby made to the further provisions of this Note set forth on the reverse
hereof and, if so specified on the face hereof, in an Addendum hereto, which
further provisions shall have the same force and effect as if set forth on the
face hereof. 

          Notwithstanding
the foregoing, if an Addendum is attached hereto or “Other/Additional
Provisions” apply to this Note as specified above, this Note shall be subject
to the terms set forth in such Addendum or such “Other/Additional Provisions”. 

          Unless
the Certificate of Authentication hereon has been executed by the Trustee by
manual signature of one of its authorized officers, this Note shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose. 

5

          IN
WITNESS WHEREOF, Colgate-Palmolive Company has caused this Note to be duly
executed by one of its duly authorized officers. 

	
 

	
 

	
 

	
 

	
 

	
COLGATE-PALMOLIVE
 COMPANY

	
 

	
 

	
 

	
 

	
By

	
 

	
 

	
 

	

	
 

	
Title:

	
 

	
 

	
 

	
 

	
Dated:

	
 

	
 

TRUSTEE’S
CERTIFICATE OF AUTHENTICATION: 

This is one of
the Debt Securities of 

the series designated therein referred 

to in the within-mentioned Indenture. 

THE BANK OF
NEW YORK MELLON,
as Trustee 

	
 

	
 

	
By

	
 

	
 

	

	
 

	
                  Authorized
 Signatory

6

[REVERSE OF NOTE]

COLGATE-PALMOLIVE
COMPANY

MEDIUM-TERM NOTE, SERIES F

(Floating Rate)

          This
Note is one of a duly authorized series of debt securities (the “Debt
Securities”) of the Company issued and to be issued under an Indenture, dated
as of November 15, 1992, as amended, modified or supplemented from time to time
(the “Indenture”), between the Company and The Bank of New York Mellon
(formerly known as The Bank of New York), as trustee (the “Trustee”, which term
includes any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Debt Securities, and of the
terms upon which the Debt Securities are, and are to be, authenticated and
delivered. This Note is one of the Debt Securities of the series designated as
“Medium-Term Notes, Series F, Due One Year or More From Date of Issue” (the
“Notes”). All terms used but not defined in this Note or in an Addendum hereto
shall have the meanings assigned to such terms in the Indenture or on the face
hereof, as the case may be.

          This
Note is issuable only in registered form without coupons in minimum
denominations of U.S.$1,000 and integral multiples thereof or other Authorized
Denomination specified on the face hereof.

          Except
as otherwise provided in the Indenture and as set forth below, the Notes will
be issued in global form only, registered in the name of the Depositary or its
nominee and ownership of the Notes shall be maintained in book-entry form by
the Depositary for the accounts of participating organizations of the
Depositary. If this Note is a global note, this Note is exchangeable for
certificated Notes only if (i) the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for this global Note and a
successor depositary is not appointed by the Company within 60 days after the
Depositary notifies the Company, (ii) the Company in its sole discretion
determines that this global Note shall be exchangeable for certificated Notes
of this series in registered form or (iii) an Event of Default with respect to
the Notes represented hereby has occurred and is continuing.

          Unless
otherwise specified on the face hereof in accordance with the provisions of the
following two paragraphs, this Note will not be subject to any sinking fund and
will not be redeemable or repayable prior to the Stated Maturity Date.

          This
Note will be subject to redemption at the option of the Company on any date on
or after the Initial Redemption Date, if any, specified on the face hereof, in
whole or from time to time in part in increments of U.S.$1,000 unless otherwise
specified above (provided that any remaining principal amount hereof shall be
at least U.S.$1,000 unless otherwise specified above), at the Redemption Price
(as defined below), together with unpaid interest accrued hereon to the date
fixed for redemption (the “Redemption Date”), on written notice given to the
Holder hereof (in accordance with the provisions of the Indenture) not more
than 60 nor less than 30 calendar days prior to the Redemption Date. In the
event of redemption of this Note in part only, a new Note of like tenor for the
unredeemed portion hereof and otherwise having the same terms and provisions as
this Note shall be issued by the Company in the name of the Holder hereof upon
the presentation and surrender hereof.

7

          Unless
otherwise specified above, the “Redemption Price” shall be the Initial
Redemption Percentage specified on the face hereof (as adjusted by the Annual
Redemption Percentage Reduction, if any, specified on the face hereof)
multiplied by the principal amount of this Note to be redeemed. 

          This
Note may be subject to repayment by the Company at the option of the Holder
hereof on the Optional Repayment Date(s), if any, specified on the face hereof,
in whole or in part in increments of U.S.$1,000 (provided that any remaining
principal amount hereof shall be at least U.S.$1,000), at a repayment price
equal to 100% of the principal amount to be repaid, together with unpaid
interest accrued thereon to the date fixed for repayment (the “Repayment
Date”). For this Note to be repaid in whole or in part at the option of the
Holder hereof, the Trustee must receive at its corporate trust office not more
than 60 nor less than 30 calendar days prior to the Repayment Date, this Note
with the form thereon entitled “Option to Elect Repayment” below duly
completed. Exercise of such repayment option by the Holder hereof shall be
irrevocable. In the event of repayment of this Note in part only, a new Note of
like tenor for the unrepaid portion hereof and otherwise having the same terms
and provisions as this Note shall be issued by the Company in the name of the
Holder hereof upon the presentation and surrender hereof.

          If
the Discount Note box is checked above, the amount payable to the Holder of
this Note in the event of redemption, repayment or acceleration of maturity of
this Note will be equal to the sum of (i) the Issue Price specified on the face
hereof (increased by any accruals of the Discount, as defined below, and
reduced by any amounts of principal previously paid) and, in the event of any
redemption of this Note (if applicable), multiplied by the Initial Redemption
Percentage (as adjusted by the Annual Redemption Percentage Reduction, if
applicable) and (ii) any unpaid interest accrued hereon to the Redemption Date,
Repayment Date or date of acceleration of maturity, as the case may be. The
difference between the Issue Price specified above and 100% of the principal
amount of this Note is referred to herein as the “Discount.”

          For
purposes of determining the amount of Discount that has accrued as of any
Redemption Date, Repayment Date or date of acceleration of maturity of this
Note, such Discount will be accrued so as to cause an assumed yield on the Note
to be constant. The assumed constant yield will be calculated using a 30-day
month, 360-day year convention, a compounding period that, except for the
Initial Period (as defined below), corresponds to the shortest period between
Interest Payment Dates (with ratable accruals within a compounding period), a
coupon rate equal to the initial interest rate applicable to this Note and an
assumption that the maturity of this Note will not be accelerated. If the
period from the Original Issue Date to the initial Interest Payment Date (the
“Initial Period”) is shorter than the compounding period for this Note, a
proportionate amount of the yield for an entire compounding period will be
accrued. If the Initial Period is longer than the compounding period, then such
period will be divided into a regular compounding period and a short period,
with the short period being treated as provided in the preceding sentence.

          The
interest rate borne by this Note will be determined as follows:

	
 

	
 

	
 

	
          (i)          Unless
 the Interest Category of this Note is specified on the face hereof as a
 “Floating Rate/Fixed Rate Note” or an “Inverse Floating Rate Note” or the
 face hereof specifies that either “Other/Additional Provisions” or an
 Addendum hereto applies, in each case, relating to a different interest rate
 formula, this Note shall be designated as a 

8

	
 

	
 

	
 

	
“Regular
 Floating Rate Note” and, except as set forth below or specified on the face
 hereof or in an Addendum hereto, shall bear interest at the rate determined
 by reference to the applicable Interest Rate Basis or Bases (a) plus or minus
 the Spread, if any, and/or (b) multiplied by the Spread Multiplier, if any,
 in each case as specified on the face hereof. Commencing on the Initial
 Interest Reset Date, the rate at which interest on this Note shall be payable
 shall be reset as of each Interest Reset Date specified on the face hereof; provided,
 however, that the interest rate in effect for the period, if any, from
 the Original Issue Date to, but excluding, the Initial Interest Reset Date
 shall be the Initial Interest Rate.

	
 

	
 

	
 

	
          (ii)          If
 the Interest Category of this Note is specified on the face hereof as a
 “Floating Rate/Fixed Rate Note”, then, except as set forth below or specified
 on the face hereof or in an Addendum hereto, this Note shall bear interest at
 the rate determined by reference to the applicable Interest Rate Basis or
 Bases (a) plus or minus the Spread, if any, and/or (b) multiplied by the
 Spread Multiplier, if any, in each case as specified on the face hereof.
 Commencing on the Initial Interest Reset Date, the rate at which interest on
 this Note shall be payable shall be reset as of each Interest Reset Date; provided,
 however, that (y) the interest rate in effect for the period from the
 Original Issue Date to, but excluding, the Initial Interest Reset Date shall
 be the Initial Interest Rate and (z) the interest rate in effect for the
 period commencing on, and including, the Fixed Rate Commencement Date
 specified on the face hereof to the Maturity Date shall be the Fixed Interest
 Rate specified on the face hereof or, if no such Fixed Interest Rate is
 specified, the interest rate in effect hereon on the day immediately
 preceding the Fixed Rate Commencement Date.

	
 

	
 

	
 

	
          (iii)          If
 the Interest Category of this Note is specified on the face hereof as an
 “Inverse Floating Rate Note”, then, except as set forth below or specified on
 the face hereof or in an Addendum hereto, this Note shall bear interest at
 the Fixed Interest Rate minus the rate determined by reference to the
 applicable Interest Rate Basis or Bases (a) plus or minus the Spread, if any,
 and/or (b) multiplied by the Spread Multiplier, if any, in each case as
 specified on the face hereof; provided, however, that the
 interest rate hereon shall not be less than zero percent. Commencing on the
 Initial Interest Reset Date, the rate at which interest on this Note shall be
 payable shall be reset as of each Interest Reset Date; provided, however,
 that the interest rate in effect for the period from the Original Issue Date
 to, but excluding, the Initial Interest Reset Date shall be the Initial
 Interest Rate.

          Except
as set forth above or specified on the face hereof or in an Addendum hereto,
the interest rate in effect on each day shall be (i) if such day is an Interest
Reset Date, the interest rate determined as of the Interest Determination Date
(as defined below) immediately preceding such Interest Reset Date or (ii) if
such day is not an Interest Reset Date, the interest rate determined as of the
Interest Determination Date immediately preceding the most recent Interest
Reset Date; provided, however, that the interest rate in effect
for the period, if any, from the Original Issue Date to, but excluding, the
Initial Interest Reset Date shall be the Initial Interest Rate. If any Interest
Reset Date would otherwise be a day that is not a Business Day, such Interest
Reset Date shall be postponed to the next succeeding Business Day, except that
if EURIBOR or LIBOR is an applicable Interest Rate Basis and such Business Day
falls in the next succeeding calendar month, such Interest Reset Date shall be
the immediately preceding 

9

Business Day.
In addition, if the Treasury Rate is an applicable Interest Rate Basis and the
Interest Determination Date would otherwise fall on an Interest Reset Date,
then such Interest Reset Date will be postponed to the next succeeding Business
Day.

               The
interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be determined by the Calculation Agent as of
the applicable Interest Determination Date and will be calculated by the
Calculation Agent on or prior to the Calculation Date (as defined below). The
determination of any interest rate by the Calculation Agent will be final and
binding absent manifest error. The “Interest Determination Date” with respect
to the CD Rate and the Commercial Paper Rate shall be the second Business Day
immediately preceding the applicable Interest Reset Date; the “Interest
Determination Date” with respect to the CMT Rate shall be the second U.S.
Government Securities Business Day immediately preceding the applicable
Interest Reset Date; the “Interest Determination Date” with respect to the
Prime Rate shall be the Business Day immediately preceding the applicable
Interest Reset Date; the “Interest Determination Date” with respect to the
Eleventh District Cost of Funds Rate shall be the last Business Day of the
month immediately preceding the applicable Interest Reset Date on which the
Federal Home Loan Bank of San Francisco (the “FHLB of San Francisco”) publishes
the Index (as defined below); the “Interest Determination Date” with respect to
the Federal Funds Rate shall be the applicable Interest Reset Date; the
“Interest Determination Date” with respect to LIBOR shall be the second London
Banking Day immediately preceding the applicable Interest Reset Date, unless
the Designated LIBOR Currency is the British pounds sterling, in which case the
Interest Determination Date will be the applicable Interest Reset Date; and the
Interest Determination Date with respect to EURIBOR shall be the second Target
Settlement Day immediately preceding the applicable Interest Reset Date. The
“Interest Determination Date” with respect to the Treasury Rate shall be the
day in the week in which the applicable Interest Reset Date falls on which day
Treasury Bills (as defined below) are normally auctioned (i.e., Treasury Bills
are normally sold at an auction held on Monday of each week, unless such Monday
is a legal holiday, in which case the auction is normally held on the
immediately succeeding Tuesday, except that such auction may be held on the
preceding Friday) or, if no auction is held for a particular week, the first
Business Day of that week; provided, however, that if an auction
is held on the Friday of the week preceding the applicable Interest Reset Date,
the “Interest Determination Date” shall be such preceding Friday; provided,
further that if the Interest Determination Date would otherwise fall on
an Interest Reset Date, then such Interest Reset Date will be postponed to the
next succeeding Business Day. If the interest rate of this Note is determined
with reference to two or more Interest Rate Bases specified on the face hereof,
the “Interest Determination Date” pertaining to this Note shall be the most
recent Business Day which is at least two Business Days prior to the applicable
Interest Reset Date on which each Interest Rate Basis is determinable. Each
Interest Rate Basis shall be determined as of such date, and the applicable
interest rate shall take effect on the related Interest Reset Date.

          Unless
otherwise specified on the face hereof or in an Addendum hereto, the rate with
respect to each Interest Rate Basis will be determined in accordance with the
applicable provisions below.

          CD
Rate. If an Interest Rate Basis for this Note is specified on the face
hereof as the CD Rate, the CD Rate shall be determined as of the applicable
Interest Determination Date (a “CD Rate Interest Determination Date”) as the
rate on such date for negotiable United States dollar certificates of deposit
having the Index Maturity specified on the face hereof published in 

10

H.15(519) (as
defined below) under the caption “CDs (secondary market)”, or, if not published
by 3:00 P.M., New York City time, on the related Calculation Date, the rate on
such CD Rate Interest Determination Date for negotiable United States dollar
certificates of deposit of the Index Maturity specified on the face hereof
published in H.15 Daily Update (as defined below), or such other recognized
electronic source used for the purpose of displaying such rate, under the
caption “CDs (secondary market).” If such rate is not yet published in
H.15(519), H.15 Daily Update or another recognized electronic source by 3:00
P.M., New York City time, on the related Calculation Date, then the CD Rate on
such CD Rate Interest Determination Date will be calculated by the Calculation
Agent specified on the face hereof and will be the arithmetic mean of the
secondary market offered rates as of 10:00 A.M., New York City time, on such CD
Rate Interest Determination Date, of three leading non-bank dealers in
negotiable United States dollar certificates of deposit in The City of New York
selected by the Calculation Agent for negotiable United States dollar
certificates of deposit of major United States money market banks for
negotiable United States dollar certificates of deposit with a remaining
maturity closest to the Index Maturity specified on the face hereof in an
amount that is representative for a single transaction in that market at that
time; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the CD Rate
determined as of such CD Rate Interest Determination Date will be the CD Rate
in effect on such CD Rate Interest Determination Date.

          “H.15(519)”
means the weekly statistical release designated as H.15(519), or any successor
publication, published by the Board of Governors of the Federal Reserve System
and available on their website via http://www.federalreserve.gov/releases/h15/
or any successor site.

          “H.15
Daily Update” means the daily update of H.15(519), published by the Board of
Governors of the Federal Reserve System and available on their website at
http://www.federalreserve.gov/releases/h15/update/h15upd.htm or any successor
site.

          CMT
Rate. If an Interest Rate Basis for this Note is specified on the face
hereof as the CMT Rate, the CMT Rate shall be determined as of the applicable
Interest Determination Date (a “CMT Rate Interest Determination Date”) in
accordance with the following provisions:

          (i)
if Reuters Page FRBCMT (as defined below) is specified above, the percentage
equal to the yield for United States Treasury securities at “constant maturity”
having the Index Maturity specified on the face hereof published in H.15(519)
under the caption “Treasury constant maturities”, as the yield is displayed on
Reuters, (“Reuters”) (or any successor service) on page FRBCMT, or any other
page as may that specified page on that service (“Reuters Page FRBCMT”), for
such CMT Rate Interest Determination Date. If such rate does not appear on
Reuters Page FRBCMT, the CMT Rate on such CMT Rate Interest Determination Date
will be the percentage equal to the yield for United States Treasury securities
at “constant maturity” having the Index Maturity specified on the face hereof
and for such CMT Rate Interest Determination Date published in H.15(519) under
the caption “Treasury constant maturities”. If such rate does not appear in
H.15(519), the CMT Rate on such CMT Rate Interest Determination Date will be
the rate on such CMT Rate Interest Determination Date for the period of the
Index Maturity specified on the face hereof as may then be published by either
the Federal Reserve System Board of Governors or the United States Department
of the Treasury that the Calculation Agent determines to be comparable to the
rate which would otherwise have been published in H.15(519). If the Federal
Reverse System Board of Governors or the United States Department of the
Treasury does not publish a yield on United States Treasury securities at
“constant 

11

maturity”
having the Index Maturity specified on the face hereof for such CMT Rate
Interest Determination Date, the CMT Rate on such CMT Rate Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity based on the arithmetic mean of the secondary market bid
prices at approximately 3:30 P.M., New York City time, on such CMT Rate
Interest Determination Date of three leading primary United States government
securities dealers in The City of New York (each, a “Reference Dealer”)
selected by the Calculation Agent from five Reference Dealers and eliminating
the highest quotation (or, in the event of equality, one of the highest) and
the lowest quotation (or, in the event of equality, one of the lowest) for
United States Treasury securities with an original maturity equal to the Index Maturity
specified on the face hereof, a remaining term to maturity no more than one
year shorter than the Index Maturity specified on the face hereof and in a
principal amount that is representative for a single transaction in such
securities in such market at such time. If fewer than five but more than two
such prices are provided as requested, the CMT Rate on such CMT Rate Interest
Determination Date will be calculated by the Calculation Agent and will be
based on the arithmetic mean of the bid prices obtained and neither the highest
nor the lowest of such quotations will be eliminated. If fewer than three
prices are provided as requested, the CMT Rate on such CMT Rate Interest
Determination Date will be calculated by the Calculation Agent and will be a yield
to maturity based on the arithmetic mean of the secondary market bid prices as
of approximately 3:30 P.M., New York City time, on such CMT Rate Interest
Determination Date of three Reference Dealers selected by the Calculation Agent
from five Reference Dealers selected by the Calculation Agent and eliminating
the highest quotation (or, in the event of equality, one of the highest) and
the lowest quotation (or, in the event of equality, one of the lowest) for
United States Treasury securities with an original maturity longer than the
Index Maturity specified on the face hereof, a remaining term to maturity
closest to the Index Maturity specified on the face hereof, and in a principal
amount that is representative for a single transaction in such securities in
such market at such time. If fewer than five but more than two such prices are
provided as requested, the CMT Rate on such CMT Rate Interest Determination
Date will be calculated by the Calculation Agent and will be based on the
arithmetic mean of the bid prices obtained and neither the highest nor the
lowest of the quotations will be eliminated; provided, however, that if fewer
than three such prices are provided as requested, the CMT Rate determined as of
such CMT Rate Interest Determination Date will be the CMT Rate in effect on
such CMT Rate Interest Determination Date. If two such United States Treasury
securities with an original maturity longer than the Index Maturity specified
on the face hereof have remaining terms to maturity equally close to the Index
Maturity specified on the face hereof, the quotes for the Treasury security
with the shorter original term to maturity will be used.

          (ii)
if Reuters Page FEDCMT (as defined below) is specified above, the percentage
equal to the one-week or one-month, as specified above, average yield for
United States Treasury securities at “constant maturity” having the Index
Maturity specified on the face hereof published in H.15(519) under the caption
“Treasury constant maturities”, as such yield is displayed on Reuters (or any
successor service) on page FEDCMT, or any other page as may replace that
specified page on that service (“Reuters Page FEDCMT”), for the week or month,
as applicable, ended immediately preceding the week or month, as applicable, in
which such CMT Rate Interest Determination Date falls. If such rate does not
appear on the Reuters Page FEDCMT, the CMT Rate on such CMT Rate Interest Rate
Determination Date will be the percentage equal to the one-week or one-month,
as specified above, average yield for United States Treasury securities at
“constant maturity” having the Index Maturity specified on the face hereof and
for the week or month, as applicable, preceding such CMT Rate Interest
Determination Date 

12

published in
H.15(519) opposite the caption “Treasury constant maturities”. If such rate
does not appear in H.15(519), the CMT Rate on such CMT Rate Interest
Determination Date will be the one-week or one-month, as specified above,
average yield for United States Treasury securities at “constant maturity”
having the Index Maturity specified on the face hereof as otherwise announced
by the Federal Reserve Bank of New York for the week or month, as applicable,
ended immediately preceding the week or month, as applicable, in which such CMT
Rate Interest Determination Date falls. If the one-week or one-month, as
specified above, average yield on United States Treasury securities at
“constant maturity” having the Index Maturity specified on the face hereof for
the applicable week or month is not published, the CMT Rate on such CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity based on the arithmetic mean of the secondary
market bid prices at approximately 3:30 P.M., New York City time, on such
CMT Rate Interest Determination Date of three Reference Dealers selected by the
Calculation Agent from five such Reference Dealers selected by the Calculation
Agent and eliminating the highest quotation (or, in the event of equality, one of
the highest) and the lowest quotation (or, in the event of equality, one of the
lowest) for United States Treasury securities with an original maturity equal
to the Index Maturity specified on the face hereof, a remaining term to
maturity of no more than 1 year shorter than the Index Maturity specified on
the face hereof and in a principal amount that is representative for a single
transaction in such securities in such market at such time. If fewer than five
but more than two such prices are provided as requested, the CMT Rate on such
CMT Rate Interest Determination Date will be calculated by the Calculation
Agent and will be based on the arithmetic mean of the bid prices obtained and
neither the highest nor the lowest of such quotations will be eliminated. If
fewer than three prices are provided as requested, the CMT Rate on such CMT
Rate Interest Determination Date will be calculated by the Calculation Agent
and will be a yield to maturity based on the arithmetic mean of the secondary
market bid prices as of approximately 3:30 P.M., New York City time, on
such CMT Rate Interest Determination Date of three Reference Dealers selected
by the Calculation Agent from five Reference Dealers selected by the
Calculation Agent and eliminating the highest quotation (or, in the event of
equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest) for United States Treasury securities with an
original maturity longer than the Index Maturity specified on the face hereof,
a remaining term to maturity closest to the Index Maturity specified on the
face hereof and in a principal amount that is representative for a single
transaction in such securities in such market at such time. If fewer than five
but more than two such prices are provided as requested, the CMT Rate on such
CMT Rate Interest Determination Date will be calculated by the Calculation
Agent and will be based on the arithmetic mean of the bid prices obtained and
neither the highest or the lowest of such quotations will be eliminated;
provided, however, that if fewer than three such prices are provided as
requested, the CMT Rate determined as of such CMT Rate Interest Determination
Date will be the CMT Rate in effect on such CMT Rate Interest Determination
Date. If two such United States Treasury securities with an original maturity
longer than the Index Maturity specified on the face hereof have remaining
terms to maturity equally close to the Index Maturity specified on the face
hereof, the quotes for the United States Treasury security with the shorter
original remaining term to maturity will be used.

          Commercial
Paper Rate. If an Interest Rate Basis for this Note is specified on the
face hereof as the Commercial Paper Rate, the Commercial Paper Rate shall be determined
as of the applicable Interest Determination Date (a “Commercial Paper Rate
Interest Determination Date”) as the Money Market Yield (as defined below) on
such date of the rate for commercial paper 

13

having the
Index Maturity specified on the face hereof published in H.15(519) under the
caption “Commercial Paper-Nonfinancial” or, if not so published by 3:00 P.M.,
New York City time, on the related Calculation Date, the Money Market Yield of
the rate on such Commercial Paper Rate Interest Determination Date for
commercial paper having the Index Maturity specified on the face hereof
published in H.15 Daily Update, or other recognized electronic source used for
the purpose of displaying such rate, under the caption “Commercial
Paper-Nonfinancial.” If such rate is not so published in H.15(519), H.15 Daily
Update or another recognized electronic source by 3:00 P.M., New York City
time, on such Calculation Date, then the Commercial Paper Rate on such
Commercial Paper Rate Interest Determination Date will be calculated by the
Calculation Agent and shall be the Money Market Yield of the arithmetic mean of
the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
United States dollar commercial paper in The City of New York selected by the
Calculation Agent for commercial paper having the Index Maturity specified on
the face hereof placed for industrial issuers whose bond rating is “Aa”, or the
equivalent, from a nationally recognized statistical rating organization; provided,
however, that if the dealers so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Commercial Paper Rate determined
as of such Commercial Paper Rate Interest Determination Date will be the
Commercial Paper Rate in effect on such Commercial Paper Rate Interest
Determination Date.

          “Money
Market Yield” means a yield (expressed as a percentage) calculated in
accordance with the following formula:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
D X 360

	
 

	
 

	
 

	
Money Market
 Yield =

	

	

	
 

	
X 100

	
 

	
 

	
 

	
360 – (D X M)

	
 

	
 

          where
“D” refers to the applicable per annum rate for commercial paper quoted on a
bank discount basis and expressed as a decimal, and “M” refers to the actual
number of days in the applicable Interest Reset Period.

          Eleventh
District Cost of Funds Rate. If an Interest Rate Basis for this Note is
specified on the face hereof as the Eleventh District Cost of Funds Rate, the
Eleventh District Cost of Funds Rate shall be determined as of the applicable
Interest Determination Date (an “Eleventh District Cost of Funds Rate Interest
Determination Date”) as the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls, as set
forth under the caption “11TH Dist COFI” on the display on Reuters (or any
successor service) on page COFI/ARMS or any other page as may replace that
specified page on such service (“Reuters Page COFI/ARMS”) as of 11:00 A.M., San
Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Reuters Page COFI/ARMS on
such Eleventh District Cost of Funds Rate Interest Determination Date, then the
Eleventh District Cost of Funds Rate on such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the “Index”) by the FHLB of San
Francisco as such cost of funds for the calendar month immediately preceding
such Eleventh District Cost of Funds Rate Interest Determination Date. If the
FHLB of San Francisco fails to announce the Index on or prior to such Eleventh
District Cost of Funds Rate Interest Determination Date for the calendar month
immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date, the Eleventh District 

14

Cost of Funds
Rate determined as of such Eleventh District Cost of Funds Rate Interest
Determination Date will be the Eleventh District Cost of Funds Rate in effect
on such Eleventh District Cost of Funds Rate Interest Determination Date.

          EURIBOR.
If an Interest Rate Basis for this Note is specified on the face hereof as
EURIBOR, EURIBOR shall be determined as of the applicable Interest
Determination Date (a “EURIBOR Interest Determination Date”) as (i) the rate
for deposits in euros as sponsored, calculated and published jointly by the
European Banking Federation and ACI - The Financial Market Association, or any
company established by the joint sponsors for purposes of compiling and
publishing those rates, having the Index Maturity specified on the face hereof,
commencing on the applicable Interest Reset Date, as that rate appears on
Reuters (or any successor service) on page EURIBOR01, or any other page as may
replace that specified page on that service (“Reuters Page EURIBOR01”) as of
11:00 A.M., Brussels time, on such EURIBOR Interest Determination Date, or (ii)
if the rate referred to in clause (i) does not appear on Reuters Page
EURIBOR01, or is not so published by 11:00 A.M., Brussels time, on such EURIBOR
Interest Determination Date, the rate calculated by the Calculation Agent as
the arithmetic mean of at least two quotations obtained by the Calculation
Agent after requesting the principal Euro-zone (as defined below) offices of
four major reference banks in the Euro-zone interbank market to provide the
Calculation Agent with its offered quotation for deposits in euros for the
period of the Index Maturity specified on the face hereof, commencing on the
applicable Interest Reset Date, to prime banks in the Euro-zone interbank
market at approximately 11:00 A.M., Brussels time, on such EURIBOR Interest
Determination Date and in a principal amount not less than the equivalent of
U.S. $1 million in euros that is representative for a single transaction in
euro in that market at that time, or (iii) if fewer than two quotations
referred to in clause (ii) are so provided, the rate on such EURIBOR Interest
Determination Date calculated by the Calculation Agent as the arithmetic mean
of the rates quoted at approximately 11:00 A.M., Brussels time, on such EURIBOR
Interest Determination Date by four major banks in the Euro-zone for loans in
euro to leading European banks, having the Index Maturity specified on the face
hereof, commencing on the applicable Interest Reset Date and in a principal
amount not less than the equivalent of U.S. $1 million in euros that is
representative for a single transaction in euros in that market at that time,
or (iv) if the banks so selected by the Calculation Agent are not quoting as
mentioned in clause (iii), EURIBOR in effect on such EURIBOR Interest
Determination Date.

          “Euro-zone”
means the region comprised of member states of the European Union that adopt
the single currency in accordance with the treaty establishing the European
Community, as amended by the treaty on the European Union.

          Federal
Funds Rate. If an Interest Rate Basis for this Note is specified on the
face hereof as the Federal Funds Rate, the Federal Funds Rate shall be
determined as of the applicable Interest Determination Date (a “Federal Funds
Rate Interest Determination Date”) in accordance with the following provisions:

	
 

	
 

	
 

	
 

	
     (1) if
 “Federal Funds (Effective) Rate” is specified on the face hereof, the Federal
 Funds Rate determined as of the applicable Federal Funds Rate Interest
 Determination Date shall be:

	
 

	
 

	
 

	
     (a)
 the rate on such date for United States dollar federal funds as published in
 H.15(519) under the heading “Federal funds (effective),” and that is
 displayed on Reuters, or any successor service, on page FEDFUNDS1 or any
 other page as may 

15

	
 

	
 

	
 

	
replace that
 specified page on that service (“Reuters Page FEDFUNDS1”) under the heading
 “EFFECT”, or

	
 

	
 

	
 

	
     (b)
 if such rate does not appear on Reuters Page FEDFUNDS1 or is not so published
 by 3:00 P.M., New York City time, on the related Calculation Date, the rate
 with respect to such Federal Funds Rate Interest Determination Date for
 United States dollar federal funds as published in H.15 Daily Update, or such
 other recognized electronic source used for the purpose of displaying the
 applicable rate, opposite the caption “Federal funds (effective)”, or

	
 

	
 

	
 

	
     (c)
 if such rate does not appear on Reuters Page FEDFUNDS1 or is not so published
 in H.15(519), H.15 Daily Update or another recognized electronic source by
 3:00 P.M., New York City time, on the related Calculation Date, the rate on
 such Federal Funds Rate Interest Determination Date calculated by the
 Calculation Agent as the arithmetic mean of the rates for the last
 transaction in overnight United States dollar federal funds arranged by three
 leading brokers of United States dollar federal funds transactions in The
 City of New York selected by the Calculation Agent before 9:00 A.M., New York
 City time on the Business Day following such Federal Funds Rate Interest
 Determination Date, provided, however, that if the brokers so
 selected by the Calculation Agent are not quoting as mentioned in this
 sentence, the Federal Funds Rate determined as of such Federal Funds Rate
 Interest Determination Date will be the Federal Funds Rate in effect on such
 Federal Funds Rate Interest Determination Date.

	
 

	
 

	
 

	
 

	
     (2)
 if “Federal Funds Open Rate” is specified on the face hereof, the Federal
 Funds Rate determined as of the applicable Federal Funds Rate Interest
 Determination Date shall be:

	
 

	
 

	
 

	
     (a)
 the rate on such date under the heading “Federal Funds” for the Index
 Maturity specified on the face hereof and opposite the caption “Open” as such
 rate is displayed on Reuters, or any successor service, on page 5 or any
 other page as may replace that specified page on that service (“Reuters Page
 5”), or

	
 

	
 

	
 

	
     (b)
 if such rate does not appear on Reuters Page 5 or is not so published by 3:00
 P.M., New York City time, on the related Calculation Date, the rate with
 respect to such Federal Funds Rate Interest Determination Date displayed on
 the FFPREBON Index Page on Bloomberg L.P. (“Bloomberg”), which is the Fed
 Funds Opening Rate as reported by Prebon Yamane (or its successor) on
 Bloomberg, or

	
 

	
 

	
 

	
     (c)
 if such rate does not appear on the FFREBON Index page on Bloomberg or
 another recognized electronic source or is not so published by 3:00 P.M., New
 York City time, on the related Calculation Date, the rate on such Federal
 Funds Rate Interest Determination Date calculated by the Calculation Agent as
 the arithmetic mean of the rates for the last transaction in overnight United
 States dollar federal funds arranged by three leading brokers of United
 States dollar federal funds transactions in The City of New York selected by
 the Calculation Agent before 9:00 A.M., New York City time on such Federal
 Funds Rate Interest Determination Date, provided, however, that
 if the brokers so selected by the Calculation Agent are not quoting as
 mentioned in this sentence, the Federal Funds Rate determined as of such
 Federal Funds Rate Interest 

16

	
 

	
 

	
 

	
Determination
 Date will be the Federal Funds Rate in effect on such Federal Funds Rate
 Interest Determination Date.

	
 

	
 

	
 

	
 

	
     (3)
 if “Federal Funds Target Rate” is specified on the face hereof, the Federal
 Funds Rate determined as of the applicable Federal Funds Rate Interest
 Determination Date shall be:

	
 

	
 

	
 

	
     (a)
 the rate on such date displayed on the FDTR Index Page on Bloomberg, or

	
 

	
 

	
 

	
     (b)
 if such rate does not appear on the FDTR Index Page on Bloomberg or is not so
 published by 3:00 P.M., New York City time, on the related Calculation Date,
 the rate with respect to such Federal Funds Rate Interest Determination Date
 appearing on Reuters on page USFFTARGET= or any other page as may replace
 that specified page on that service (“Reuters Page USFFTARGET=”), or

	
 

	
 

	
 

	
     (c)
 if such rate does not appear on Reuters Page USFFTARGET= or is not so
 published by 3:00 P.M., New York City time, on the related Calculation Date,
 the rate on such Federal Funds Rate Interest Determination Date calculated by
 the Calculation Agent as the arithmetic mean of the rates for the last
 transaction in overnight United States dollar federal funds arranged by three
 leading brokers of United States dollar federal funds transactions in The
 City of New York selected by the Calculation Agent before 9:00 A.M., New York
 City time, on such Federal Funds Rate Interest Determination Date, provided,
 however, that if the brokers so selected by the Calculation Agent are
 not quoting as mentioned in this sentence, the Federal Funds Rate determined
 as of such Federal Funds Rate Interest Determination Date will be the Federal
 Funds Rate in effect on such Federal Funds Rate Interest Determination Date.

          LIBOR.
If an Interest Rate Basis for this Note is specified on the face hereof as
LIBOR, LIBOR shall be determined by the Calculation Agent as of the applicable
Interest Determination Date (a “LIBOR Interest Determination Date”) in
accordance with the following provisions: 

          (i)
LIBOR will be the rate for deposits in the Designated LIBOR Currency having the
Index Maturity specified on the face hereof, commencing on the applicable
Interest Reset Date, that appears on the Designated LIBOR Page (as defined
below) as of 11:00 A.M., London time, on such LIBOR Interest Determination
Date; or if no such rate so appears, LIBOR on such LIBOR Interest Determination
Date will be determined in accordance with the provisions described in clause
(ii) below.

          (ii)
With respect to a LIBOR Interest Determination Date on which no rate appears on
the Designated LIBOR Page as specified in clause (i) above, or is not so
published by 11:00 A.M., London time, the Calculation Agent shall request the
principal London offices of each of four major reference banks in the London
interbank market, as selected by the Calculation Agent, to provide the
Calculation Agent with its offered quotation for deposits in the Designated LIBOR
Currency for the period of the Index Maturity specified on the face hereof,
commencing on the applicable Interest Reset Date immediately following such
Interest Determination Date, to prime banks in the London interbank market at
approximately 11:00 A.M., London time, on such LIBOR Interest Determination
Date and in a principal amount that is representative for a single transaction
in the Designated LIBOR Currency in such market at such time. If at least two
such quotations are so provided, then LIBOR on such LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If fewer
than two such quotations are so provided, then 

17

LIBOR on such
LIBOR Interest Determination Date as calculated by the Calculation Agent will
be the arithmetic mean of the rates quoted at approximately 11:00 A.M., London
time, in the applicable Principal Financial Center, on such LIBOR Interest
Determination Date by three major banks in such Principal Financial Center
selected by the Calculation Agent for loans in the Designated LIBOR Currency to
leading European banks, having the Index Maturity specified on the face hereof,
commencing on the applicable Interest Reset Date immediately following such
Interest Determination Date, and in a principal amount that is representative
for a single transaction in the Designated LIBOR Currency in such market at
such time; provided, however, that if the banks so selected by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
determined as of such LIBOR Interest Determination Date shall be LIBOR in
effect on such LIBOR Interest Determination Date.

          “Designated
LIBOR Currency” means the currency specified on the face hereof as to which
LIBOR shall be calculated or, if no such currency is specified on the face
hereof, United States dollars.

          “Designated
LIBOR Page” means (a) if “Reuters Page LIBOR01” is specified on
the face hereof, the display on Reuters (or any successor service) on page
LIBOR01 or any page as may replace that specified page on that service, for the
purpose of displaying the London interbank rates of major banks for the
Designated LIBOR Currency, or (b) if “Reuters Page LIBOR02” is
specified on the face hereof, the display on Reuters (or any successor service)
on page LIBOR02, or any page as may replace that specified page on that
service, for the purpose of displaying the London interbank rates of major
banks for the Designated LIBOR Currency.

          Prime
Rate. If an Interest Rate Basis for this Note is specified on the face
hereof as the Prime Rate, the Prime Rate shall be determined as of the
applicable Interest Determination Date (a “Prime Rate Interest Determination
Date”) as the rate on such date as such rate is published in H.15(519) opposite
the caption “Bank prime loan” or, if not published by 3:00 P.M., New York City
time, on the related Calculation Date, the rate on such Prime Rate Interest
Determination Date published in H.15 Daily Update, or other recognized
electronic source used for the purpose of displaying such rate, opposite the
caption “Bank prime loan”, or if such rate is not so published in H.15(519),
H.15 Daily Update or another recognized electronic source by 3:00 P.M., New
York City time, on the related Calculation Date, the Prime Rate determined as
of such Prime Rate Interest Determination Date shall be calculated by the
Calculation Agent as the arithmetic mean of the rates of interest publicly
announced by each bank that appears on the Reuters Page USPRIME1 (as defined
below) as such bank’s prime rate or base lending rate as of 11:00 A.M., New
York City time, on such Prime Rate Interest Determination Date. If fewer than
four such rates so appear on the Reuters Page USPRIME1 by 3:00 P.M., New York
City time, on the related Calculation Date, then the Prime Rate determined as
of such Prime Rate Interest Determination Date shall be calculated by the
Calculation Agent as the arithmetic mean of the prime rates or base lending
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date by three major banks in The City of New York selected by the
Calculation Agent; provided, however, that if the banks so
selected by the Calculation Agent are not quoting as mentioned in this
sentence, the Prime Rate determined as of such Prime Rate Interest
Determination Date will be the Prime Rate in effect on such Prime Rate Interest
Determination Date.

18

          “Reuters
Page USPRIME1” means the display on Reuters (or any successor service) on the
page USPRIME1 (or any other page as may replace that specified page on that
service) for the purpose of displaying prime rates or base lending rates of
major United States banks.

          Treasury
Rate. If an Interest Rate Basis for this Note is specified on the face
hereof as the Treasury Rate, the Treasury Rate shall be determined as of the
applicable Interest Determination Date (a “Treasury Rate Interest Determination
Date”) as the rate from the auction held on such Treasury Rate Interest
Determination Date (the “Auction”) of direct obligations of the United
States (“Treasury Bills”) having the Index Maturity specified on the
face hereof under the caption “INVEST RATE” on the display on Reuters
(or any successor service) on page USAUCTION 10, or any other page as may replace
that specified page on that service (“Reuters Page USAUCTION 10”) or
page USAUCTION 11, or any other page as may replace that specified page on that
service (“Reuters Page
USAUCTION 11”) or, if not so published by 3:00 P.M., New York City time,
on the related Calculation Date, the Bond Equivalent Yield (as defined below)
of the auction rate of such Treasury Bills as announced by the United States
Department of the Treasury. In the event that such auction rate is not so
announced by the United States Department of Treasury on such Calculation Date,
or if no such Auction is held, then the Treasury Rate determined as of such
Treasury Rate Interest Determination Date shall be the Bond Equivalent Yield
of the rate on such Treasury Rate Interest Determination Date of Treasury Bills
having the Index Maturity specified on the face hereof published in H.15(519)
under the caption “U.S. government securities/Treasury bills(secondary market)”
or, if not yet published by 3:00 P.M., New York City time, on the related
Calculation Date, the rate on such Treasury Rate Interest Determination Date
of such Treasury Bills published in H.15 Daily Update, or such other recognized
electronic source used for the purpose of displaying such rate, under the
caption “U.S. government securities/Treasury bills(secondary market).” If
such rate is not yet published in H.15(519), H.15 Daily Update or another recognized
electronic source by 3:00 P.M., New York City time, on the related Calculation
Date, then the Treasury Rate determined as of such Treasury Rate Interest
Determination Date shall be calculated by the Calculation Agent as the Bond
Equivalent Yield of the arithmetic mean of the secondary market bid rates, as
of approximately 3:30 P.M., New York City time, on such Treasury Rate Interest
Determination Date, of three leading primary United States government
securities dealers selected by the Calculation Agent, for the issue of Treasury
Bills with a remaining maturity closest to the Index Maturity specified on the
face hereof; provided, however, that if the dealers so selected
by the Calculation Agent are not quoting as mentioned in this sentence, the
Treasury Rate determined as of such Treasury Rate Interest Determination Date
shall be the Treasury Rate in effect on such Treasury Rate Interest
Determination Date.

          “Bond
Equivalent Yield” means a yield (expressed as a percentage) calculated in
accordance with the following formula:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
D X N

	
 

	
 

	
 

	
Bond
 Equivalent Yield  =

	

	

	
 

	
X 100

	
 

	
 

	
 

	
360 – (D X M)

	
 

	
 

          where
“D” refers to the applicable per annum rate for Treasury Bills quoted on a bank
discount basis and expressed as a decimal, N refers to 365 or 366, as the case
may be, and “M” refers to the actual number of days in the applicable Interest
Reset Period.

19

          Any
provision contained herein, including the determination of an Interest Rate
Basis, the specification of an Interest Rate Basis, calculation of the interest
rate applicable to this Note, its Interest Payment Dates or any other matter
relating thereto may be modified as specified in an Addendum relating hereto if
so specified above. 

          Notwithstanding
the foregoing, the interest rate hereon shall not be greater than the Maximum
Interest Rate, if any, or less than the Minimum Interest Rate, if any,
specified above. In addition to any maximum Interest Rate applicable hereto
pursuant to the above provisions, the interest rate on this Note will in no
event be higher than the maximum rate permitted by New York law, as the same
may be modified by the United States law of general application. 

          The
Calculation Agent shall calculate the interest rate hereof in accordance with
the foregoing on or before each Calculation Date. At the request of the Holder
hereof, the Calculation Agent will provide to the Holder hereof the interest
rate hereon then in effect and, if determined, the interest rate which will
become effective as of the next Interest Reset Date. 

          The
“Calculation Date”, if applicable, pertaining to any Interest Determination
Date shall be the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day or (ii) the Business Day immediately preceding the applicable
Interest Payment Date or the Maturity Date, as the case may be. At the request
of the Holder hereof, the Calculation Agent will provide to the Holder hereof
the interest rate hereon then in effect and, if determined, the interest rate
that will become effective as a result of a determination made for the next
succeeding Interest Reset Date.

          Accrued
interest hereon shall be an amount calculated by multiplying the principal amount
hereof by an accrued interest factor. Such accrued interest factor shall be
computed by adding the interest factor calculated for each day in the
applicable Interest Period. Unless otherwise specified as the Day Count
Convention on the face hereof, the interest factor for each such date shall be
computed by dividing the interest rate applicable to such day by 360 if the CD
Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
EURIBOR, the Federal Funds Rate, LIBOR or the Prime Rate is an applicable
Interest Rate Basis or by the actual number of days in the year if the CMT Rate
or the Treasury Rate is an applicable Interest Rate Basis. Unless otherwise
specified as the Day Count Convention on the face hereof, the interest factor
for this Note, if the interest rate is calculated with reference to two or more
Interest Rate Bases, shall be calculated in each period in the same manner as
if only the applicable Interest Rate Basis specified on the face hereof
applied.

          All
percentages resulting from any calculation on this Note shall be rounded to the
nearest one hundred-thousandth of a percentage point, with five one-millionths
of a percentage point rounded upwards (e.g., 9.876545% (or .09876545) would be
rounded to 9.87655% (or .0987655)), and all amounts used in or resulting from
such calculation on this Note shall be rounded, in the case of United States
dollars, to the nearest cent or, in the case of a foreign currency, to the
nearest unit (with one-half cent or unit being rounded upwards).

          If
an Event of Default shall occur and be continuing, the principal of the Notes
may be accelerated in the manner and with the effect provided in the Indenture.

20

          The
Indenture permits, with certain exceptions as therein provided, the amendment
thereof and the modification of the rights and obligations of the Company and
the rights of the Holders of any series of Debt Securities to be adversely
affected thereby at any time by the Company and the Trustee with the consent of
the Holders of a majority in aggregate principal amount of each series of Debt
Securities at the time outstanding, adversely affected thereby. The Indenture
also contains provisions permitting the Holders of specified percentages in
aggregate principal amount of the outstanding Debt Securities of each series,
on behalf of the Holders of Debt Securities of such series, to waive compliance
by the Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such consent or waiver
by the Holder of this Note shall be conclusive and binding upon such Holder and
upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof, whether
or not notation of such consent or waiver is made upon this Note.

          No
reference herein to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay principal, premium, if any, and interest in
respect of this Note at the times, places and rate or formula, and in the coin
or currency, herein prescribed.

          As
provided in the Indenture and subject to certain limitations therein set forth,
the transfer of this Note may be registered on the Security Register of the
Company upon surrender of this Note for registration of transfer at the office
or agency of the Company in the Borough of Manhattan, The City of New York,
duly endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or by his attorney duly authorized in writing, and thereupon one
or more new Notes of Authorized Denominations and for the same aggregate
principal amount with the same terms and provisions, will be issued by the
Company to the designated transferee or transferees.

          The
Notes are issuable only in registered form without coupons and, if payable in
U.S. dollars, only in denominations of U.S.$1,000 and any integral multiple of
U.S.$1,000. As provided in the Indenture and subject to certain limitations
therein set forth, Notes of this series are exchangeable for a like aggregate
principal amount of Notes of this series of a different denomination, as
requested by the Holder surrendering the same.

          No
service charge shall be made for any such registration of transfer or exchange,
but the Company may require payment of a sum sufficient to cover any tax or
other governmental charge payable in connection therewith.

          Prior
to due presentment of this Note for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the Holder as the
owner hereof for all purposes, whether or not this Note be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary, except as required by law.

          THE
INDENTURE AND THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.

          Capitalized
terms used herein without definition which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

21

ABBREVIATIONS

          The
following abbreviations, when used in the inscription on the face of this Note,
shall be construed as though they were written out in full according to
applicable laws or regulations:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
TEN COM

	
-

	
as tenants
 in common

	
 

	
UNIF GIFT
 MIN ACT - ______ Custodian _____

	
TEN ENT

	
-

	
as tenants
 by the entireties

	
 

	
 

	
(Cust)

	
(Minor)

	
JT TEN

	
-

	
as joint
 tenants with right of

	
 

	
 

	
under
 Uniform Gifts to Minors

	
 

	
 

	
survivorship
 and not as tenants

	
 

	
 

	
Act_____________________

	
 

	
 

	
in common

	
 

	
 

	
(State)

	
 

	
Additional abbreviations may also be used though not in the above
 list.

	
 

	

22

ASSIGNMENT

FOR VALUE
RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

	
 

	
 

	
PLEASE
 INSERT SOCIAL SECURITY OR

	
 

	
OTHER

	
 

	
IDENTIFYING
 NUMBER OF ASSIGNEE

	
 

	

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
_____________________________________________________________________________________________________

	
(Please
 print or typewrite name and address including postal zip code of assignee)

	
 

	
_____________________________________________________________________________________________________

	
this Note
 and all rights thereunder hereby irrevocably constituting and appointing

	
 

	
_____________________________________________________________________________________________Attorney
 

	
to transfer
 this Note on the books of the Company, with full power of substitution in the
 premises.

	
 

	
 

	
 

	
 

	
Dated:___________________________

	
 

	
___________________________________________________

	
 

	
 

	
 

	
 

	
 

	
___________________________________________________

	
 

	
 

	
 

	
Notice: The
 signature(s) on this Assignment must correspond with the name(s) as written
 upon the face of this Note in every particular, without alteration or
 enlargement or any change whatsoever.

23

[OPTION TO ELECT REPAYMENT]

	 	 

	          The
          undersigned hereby irrevocably request(s) and instruct(s) the Company
          to repay this Note (or portion hereof specified below) pursuant to
          its terms at a price equal to 100% of the principal amount to be repaid,
          together with unpaid interest accrued hereon to the Repayment Date,
      to the undersigned, at
	 
	 

	 	 
	 	 

	 (Please print
            or typewrite name and address of the undersigned)

	 	 

          For
this Note to be repaid, the Trustee must receive at its corporate trust office
in the Borough of Manhattan, The City of New York, currently located at 101
Barclay Street, New York, New York 10286 not more than 60 nor less than 30 calendar days prior to the Repayment Date,
this Note with this “Option to Elect Repayment” form duly completed.

          If
less than the entire principal amount of this Note is to be repaid, specify the
portion hereof (which shall be increments of U.S.$1,000, (provided that any
remaining principal amount shall be at least U.S.$1,000 unless otherwise
specified in the Note) which the Holder elects to have repaid and specify the
denomination or denominations (which shall be U.S.$1,000 or an integral
multiple thereof) of the Notes to be issued to the Holder for the portion of
this Note not being repaid (in the absence of any such specification, one such
Note will be issued for the portion not being repaid).

	
 

	
 

	
 

	
 

	
Principal
 Amount

	
 

	
 

	
to be
 Repaid: $______________

	
 

	
 

	
_____________________________________________

	
 

	
 

	
 

	
Notice: The
 signature(s) on this Option to Elect Repayment must correspond with the
 name(s) as written upon the face of this Note in every particular, without
 alteration or enlargement or any change whatsoever.

	
Date: ______________________

	
 

	
 

24EXHIBIT 10.1

PUBLIC
SERVICE ENTERPRISE GROUP INCORPORATED

MANAGEMENT
INCENTIVE COMPENSATION PLAN

Effective
January 1, 2009

TABLE
OF CONTENTS

	
 

	
 

	
 

	
 

	
I.

	
PURPOSE

	
1

	
 

	
 

	
 

	
 

	
 

	
II.

	
DEFINITIONS

	
1

	
 

	
 

	
 

	
 

	
 

	
III.

	
ADMINISTRATION

	
5

	
 

	
 

	
 

	
 

	
 

	
IV.

	
ELIGIBILITY

	
5

	
 

	
 

	
 

	
 

	
 

	
V.

	
TARGET INCENTIVE AWARDS

	
6

	
 

	
 

	
 

	
 

	
 

	
VI.

	
PERFORMANCE GOALS

	
7

	
 

	
 

	
 

	
 

	
 

	
VII.

	
DETERMINATION OF FINAL INCENTIVE AWARDS

	
8

	
 

	
 

	
 

	
 

	
 

	
VIII.

	
DISTRIBUTION

	
10

	
 

	
 

	
 

	
 

	
 

	
IX.

	
TERMINATION OF EMPLOYMENT

	
10

	
 

	
 

	
 

	
 

	
 

	
X.

	
LIMITATIONS

	
11

	
 

	
 

	
 

	
 

	
 

	
XI.

	
LIMITATION OF ACTIONS

	
12

	
 

	
 

	
 

	
 

	
 

	
XII.

	
CLAIMS PROCEDURES

	
13

	
 

	
 

	
 

	
 

	
 

	
XIII.

	
PLAN AMENDMENT, SUSPENSION OR TERMINATION

	
13

	
 

	
 

	
 

	
 

	
 

	
XIV.

	
OTHER COMPENSATION PLANS

	
13

	
 

	
 

	
 

	
 

	
 

	
XV.

	
MISCELLANEOUS

	
14

	
 

i

PUBLIC
SERVICE ENTERPRISE GROUP INCORPORATED

MANAGEMENT
INCENTIVE COMPENSATION PLAN

I. PURPOSE

          The
purposes of this Plan are to foster attainment of the financial and operating
objectives of the Company and its Participating Affiliates, which are important
to customers and stockholders by providing incentive to certain key officers
and executive-level employees who contribute to attainment of these objectives.
This Plan is designed to provide for awards to selected salaried employees in
executive or other important positions, who, individually or as members of a
group, contribute in a substantial degree to the success of the Company and its
Participating Affiliates, and who are in a position to have a direct and
significant impact on the growth and success of the Company and its
Participating Affiliates, thus affording to them a means of participating in that
success and an incentive to contribute further to that success. This Plan also
serves to supplement the Company’s and Participating Affiliates’ salary and
benefit programs so as to provide overall compensation for such executive-level
employee that is competitive with corporations with which the Company and its
Participating Affiliates must compete for executive talent and to assist the
Company and its Participating Affiliates in attracting and retaining executives
who are important to their continued success.

II. DEFINITIONS

          The
following words and phrases shall have the meanings set forth below:

	
 

	
 

	
 

	
          (a)
 “Affiliate”
 shall mean any organization which is a member of a controlled group of
 corporations (as defined in Code section 414(b), as modified by Code section 

1

	
 

	
 

	
 

	
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).

	
 

	
 

	
 

	
          (b)
 “Award” shall mean the amount determined by the Committee pursuant to Section
 VII hereof.

	
 

	
 

	
 

	
          (c)
 “Award Fund” shall mean the aggregate amount made available in any Plan Year
 pursuant to Section V hereof from which awards determined under Section VII
 hereof may be made.

	
 

	
 

	
 

	
          (d)
 “Cash Balance Plan” shall mean the Cash Balance Pension Plan of Public
 Service Enterprise Group Incorporated.

	
 

	
 

	
 

	
          (e)
 “CEO” shall mean the Chief Executive Officer of the Company. If the Board of
 Directors has not designated a Chief Executive Officer, “CEO” shall mean the
 President of the Company.

	
 

	
 

	
 

	
          (f)
 “Code”
 shall mean the Internal Revenue Code of 1986, as amended, or as it may be
 amended from time to time.

	
 

	
 

	
 

	
          (g)
 “Committee” shall mean the Organization and Compensation Committee of the
 Board of Directors of the Company, the membership on which shall be limited
 to directors of the Company who are not Employees.

2

	
 

	
 

	
 

	
          (h)
 “Company” shall mean Public Service Enterprise Group Incorporated, a New
 Jersey corporation, or any successor thereto.

	
 

	
 

	
 

	
          (i)
 “Disability” for the purposes of this Plan, a Participant shall be deemed to
 have terminated employment on account of “Disability “if such Participant
 qualifies for a disability pension under the Pension Plan or the Cash Balance
 Plan.

	
 

	
 

	
 

	
          (j)
 “Employee”
 shall mean any person not included in a unit of employees covered by a
 collective bargaining agreement who is an employee (such term having its
 customary meaning) of the Company or a Participating Affiliate, whether
 full-time or part-time, and whether or not an officer or director, and who is
 receiving remuneration for personal services rendered to the Company or
 Participating Affiliate other than (i) solely as a director of the Company or
 a Participating Affiliate, (ii) as a temporary employee, (iii) as a
 consultant or (iv) as an independent contractor (regardless of whether a
 determination is made by the Internal Revenue Service or other governmental
 agency or court after the individual is engaged to perform such services that
 the individual is an employee of the Company or Participating Affiliate for
 the purposes of the Code or otherwise).

	
 

	
 

	
 

	
          (k)
 “Lay Off” shall mean an involuntary termination of employment, other than for
 cause.

	
 

	
 

	
 

	
          (l)
 “Participant” shall mean an Employee who has been designated by the Committee
 to participate in the Plan pursuant to Sections IV and V hereof.

	
 

	
 

	
 

	
          (m)
 “Participating
 Affiliate” shall mean any Affiliate of the Company that adopts this Plan with
 the approval of the Board of Directors of the Company. As a 

3

	
 

	
 

	
 

	
condition to participating in this Plan, such
 Affiliate shall authorize the Board of Directors of the Company and the
 Committee to act for it in all matters arising under or with respect to this
 Plan and shall comply with such other terms and conditions as may be imposed
 by the Board of Directors of the Company.

	
 

	
 

	
 

	
          (n)
 “Pension Plan” shall mean the Pension Plan of Public Service Enterprise Group
 Incorporated.

	
 

	
 

	
 

	
          (o)
 “Plan” shall mean this Public Service Enterprise Group Incorporated
 Management Incentive Compensation Plan, as it may be amended from time to
 time.

	
 

	
 

	
 

	
          (p)
 “Plan Year” shall mean the calendar year.

	
 

	
 

	
 

	
          (q)
 “Retirement” – the voluntary termination of employment under circumstances
 entitling the Participant to an immediately payable periodic retirement
 benefit under the Pension Plan or the Cash Balance Plan. Retirement shall not
 include termination of service with a right to a deferred pension under the
 Pension Plan or a deferred retirement benefit or early commencement of a
 Participant’s cash balance account under the Cash Balance Plan; 

	
 

	
 

	
 

	
          (r)
 “Subsidiary” shall mean any corporation, limited liability company or other
 entity, domestic or foreign (other than the Company), 50% or more of the
 total voting power of which is held by the Company and/or a Subsidiary or
 Subsidiaries.

	
 

	
 

	
 

	
          (s)
 “Target Incentive Awards” shall mean the amounts determined by the Committee
 pursuant to Section V hereof.

4

III. ADMINISTRATION

          (a)
The Committee shall administer the Plan. Subject to the provisions of the Plan,
the Committee shall have full and final authority to select Participants, to
designate Target Incentive Awards for each Participant and to determine the
performance objectives and the amount of all Awards under this Plan. The
Committee shall also have, subject to the provisions of the Plan, full and
final authority to interpret the Plan, to establish and revise such
administrative regulations as it deems necessary for the proper administration
of the Plan and to make any other determinations that it believes necessary or
advisable for the administration of the Plan. The Committee may delegate such
responsibilities, other than final approval of Awards or appeals of alleged
adverse determinations under the Plan, to the CEO or to any other officer of
the Company or any Participating Affiliate.

          (b)
All decisions and determinations by the Committee shall be final and binding
upon all parties, including stockholders, Participants, legal representatives
and other Employees.

          (c)
The Committee may rely conclusively on the determinations made by the Company’s
independent public accountants.

IV. ELIGIBILITY

          (a)
Those Employees who are key officers or executive-level Employees of the
Company, a Subsidiary or an Affiliate who, in the opinion of the Committee, are
in a position to have a direct and significant impact on achieving the
Company’s long-term objectives are eligible to participate in the Plan. 

5

          (b)
The Committee may select such Employees of the Company or Participating
Affiliate (individually or by position) for participation in the Plan upon such
terms as it deems appropriate, due to the Employee’s responsibilities and
his/her opportunity to contribute substantially to the attainment of financial
and operating objectives of the Company or Participating Affiliate. A
determination of participation for a Plan Year shall be made no later than the
beginning of that Plan Year; provided, however, that newly hired Employees may
be added and an Employee whose duties and responsibilities change significantly
during a Plan Year may be added or deleted as a Participant by the Committee. The Committee may prorate the
Incentive Award of any Participant if appropriate to reflect any such change in
duties and responsibilities during a Plan Year.

          (c)
Any Employee who has been selected as a Participant in the Public Service Enterprise Group
Incorporated Key Executive Incentive Compensation Plan for any Plan Year may
not participate in this Plan for the same Plan Year. 

          (d)
Participation in the Plan in one Plan Year shall not guarantee or require
participation in another Plan Year.

          (e)
The Committee shall have sole discretion as to whether to suspend operation of
the Plan for any period of time.

V. TARGET
INCENTIVE AWARDS

          (a) For each Plan Year, the Committee shall determine:

	
 

	
 

	
 

	
 

	
 (i)

	
Whether or not the Plan shall be in operation for
 such Plan Year.

6

	
 

	
 

	
 

	
 

	
 (ii)

	
The names or positions of those Employees who will
 participate in the Plan for such Plan Year.

	
 

	
 

	
 

	
 

	
 (iii)

	
The Target Incentive Award for each Participant,
 expressed as a percentage of the Participant’s rate of base salary in effect
 as of the last day of the Plan Year to which such Target Incentive Award
 relates. 

	
 

	
 

	
 

	
          (b)

	
 

	
At any time after the
 commencement of a Plan Year, but prior to the close thereof, the Committee
 may, in its discretion, eliminate or add Participants or increase or decrease
 the Target Incentive Award of any Participant based upon such criteria as it
 shall deem appropriate.

VI. PERFORMANCE
GOALS

          For
each Plan Year, within 90 days of the beginning of the Plan Year (or, for
Participants joining the Plan during a Plan year, within 90 days of
participation), the CEO shall approve performance goals for each Participant
which shall be performance measures or objectives, whether quantitative or
qualitative, which must be achieved in order to earn an Award under this Plan.
The CEO shall approve the specific targets for any such selected performance
goals. These targets may be set at a specific level or may be expressed as
relative to the comparable measure at comparison companies or to a defined
index. Such performance goals shall include a corporate goal or goals related
to the performance of the Company and may include (i) an employer goal or goals
related to the performance of a Subsidiary or organizational business unit and
(ii) an individual goal or goals related to the individual performance of the
Participant in his/her position.

7

          The
CEO shall determine the substance and weighting of each goal of a subsidiary
president. The CEO may determine the substance and weighting of each of the
goals of other Participants or may delegate the determination of the substance
and weighting of these goals to the Subsidiary presidents with their respective
business units and direct reports. 

          Notwithstanding
the foregoing, however, for any Plan Year, the Committee or the CEO may, as
deemed to be appropriate, elect to adjust the applicable weightings of the
corporate goal(s), the employer goal(s) and the individual goal(s) as part of
the criteria for determining Awards for any Participant or group of
Participants in this Plan.

VII. DETERMINATION
OF FINAL INCENTIVE AWARDS

          A
Participant’s Final Incentive Award will be determined as follows:

	
 

	
 

	
 

	
 

	
(a)

	
Within 60 days of the end of each Plan Year, the CEO
 shall certify, subject to confirmation by the Committee, the achievement of
 the corporate goal(s), the several employer goals and the several individual
 goals for the Plan Year. 

	
 

	
 

	
 

	
 

	
(b)

	
The result of such certifications shall be the
 Corporate Factor, the Employer Factor and the Individual Performance Factor,
 respectively. 

	
 

	
 

	
 

	
 

	
(c)

	
The respective portions (employer and individual) of
 each Participant’s Target Incentive Amount shall then be multiplied by the
 Employer Factor and the Individual Performance Factor, as appropriate, added
 together. The result of those calculations shall be then multiplied by the
 Corporate Factor to determine the Participant’s Incentive Award. For example,
 assume (i) a Target Incentive Amount of 50.0%, (ii) a Corporate Factor of
 0.95, (iii) an employer goal 

8

	
 

	
 

	
 

	
 

	
 

	
weighting of 70%, (iv) an Employer Factor of 1.20,
 (v) an individual Goal weighting of 30% and (vi) an Individual Performance
 Factor of 0.80:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
          1.
 Employer Portion =

	
1.20

	
x

	
.70

	
x

	
50.0%

	
=

	
42.00%

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
          2.
 Individual Portion =

	
0.80

	
x

	
.30

	
x

	
50.0%

	
=

	
12.00% 

          INCENTIVE AWARD  =  42.00%  +
  12.00%  =  54.00%  x  0.95  =  51.30%  x  Salary

	
 

	
 

	
 

	
 

	
(e)

	
Notwithstanding anything contained in this Plan to
 the contrary, unless the CEO shall specifically so determine and the
 Committee affirm, a Participant’s Final Incentive Award shall not exceed 1.5
 times such Participant’s Target Incentive Amount for the Plan Year to which
 it relates.

	
 

	
 

	
 

	
 

	
(f)

	
Unless otherwise determined by the Committee or the
 CEO, the Employer Factor to be applied in determining a Participant’s Final
 Incentive Award shall be that of the Subsidiary/ Business Unit of which the
 Participant was a member on the last day of (or, for terminated Participants
 eligible for Awards, on the last day of employment in) the Plan Year to which
 the Award relates.

	
 

	
 

	
 

	
 

	
(g)

	
Unless otherwise determined by the CEO, to the
 extent that the Target Incentive Amount applicable to any Participant is
 changed during a Plan Year (e.g., downgrade of incumbent position, change in
 position, promotion to new position), such Participant’s Final Incentive
 Award shall be prorated on the basis of the Participant’s service in his/her
 respective positions. 

	
 

	
 

	
 

	
 

	
(h)

	
Also notwithstanding anything contained in this Plan
 to the contrary, the Committee or CEO may adjust a Participant’s Final
 Incentive Award based upon any criteria it/he/she may determine to be
 reasonable.

9

VIII. DISTRIBUTION

	
 

	
 

	
 

	
 

	
(a)

	
All distributions of a Participant’s Final Incentive
 Award shall be made as of a distribution date which shall be no later than
 the 15th day of the third month following the close of the Plan
 Year to which such award relates.

	
 

	
 

	
 

	
 

	
(b)

	
All distributions shall be in one lump sum in money
 by check.

IX. TERMINATION
OF EMPLOYMENT

	
 

	
 

	
 

	
 

	
(a)

	
If the employment of a Participant is terminated on
 account of the Participant’s death, Disability, Lay-Off or Retirement, and if
 the Committee determines that Awards under this Plan may be earned for the
 Plan Year of termination, such Participant’s Award shall be prorated for that
 part of the Plan Year in which the Participant was participating prior to
 such termination and the Company shall pay such prorated Award as soon as
 practicable after determination of the Final Incentive Award in accordance
 with Section VII, unless otherwise determined by the Committee; provided,
 however, that any Participant who has received a benefit under the Key
 Employee Severance Plan of Public Service Enterprise Group Incorporated shall
 not be entitled to a prorated payment provided for under this subsection.

	
 

	
 

	
 

	
 

	
(b)

	
If, prior to the payment of any Award under this
 Plan, the employment of a Participant is terminated for any reason other than
 death, Disability, Lay-Off or Retirement, the Participant shall forfeit the
 right to payment of such Award, unless otherwise determined by the Committee.

10

	
 

	
 

	
 

	
 

	
(c)

	
If a Participant becomes a Participant during a Plan
 Year, any Award under this Plan to the Participant may be appropriately
 prorated from the time the Participant entered the Plan to the end of the
 Plan Year, as determined by the CEO.

	
 

	
 

	
 

	
 

	
(d)

	
In the case of a Participant’s death, any payment
 under this Plan shall be made to the Participant’s estate. Such payment shall
 be made as a lump sum as soon as practicable after determination of the Final
 Incentive Award in accordance with Section VII.

X. LIMITATIONS

          Neither
the action of the Company in establishing the Plan, nor any action taken by it
or by the Committee under the provisions hereof, nor any provision of the Plan,
shall be construed as giving to any Employee the right to be retained in the
employ of the Company, its Subsidiaries or its Affiliates.

          The
Company may offset against any payments to be made to a Participant or his/her
beneficiary under this Plan any amounts owing to the Company, its Subsidiaries
or its Affiliates from the Participant for any reason.

          The
invalidity or unenforceability of any provision of this Plan shall in no way
affect the validity or enforceability of any other provision hereof.

XI. LIMITATION
OF ACTIONS

          Every
asserted right of action by or on behalf of the Company or by or on behalf of
the stockholder against any past, present or future member of the Committee or
director, officer or Employee of the Company or any Subsidiary or Affiliate
thereof, arising out of or in connection 

11

with this Plan, shall, irrespective of the place where
such right of action may arise or be asserted and irrespective of the place of
residence of any such member director, officer or Employee, cease and be barred
upon the expiration of three years (i) from the date of the alleged act or
omission in respect of which such right of action arises or (ii) from the date
upon which the Company’s Annual Report to Stockholders setting forth the
aggregate amount of the awards to all or any part of which such action may
relate is made generally available to stockholders, whichever date is earlier;
and every asserted right of action by or on behalf of any Employee, past,
present or future, or any beneficiary, spouse, child or legal representative
thereof, against the Company or any Subsidiary or Affiliate thereof, arising
out of or in connection with this Plan, shall, irrespective of the place where
such right of action may arise or be asserted, cease and be barred by the
expiration of three years from the date of the alleged act or omission in
respect of which such right of action arises.

XII. CLAIMS
PROCEDURE

          In
the case of any Participant (whether active, retired or terminated) or
beneficiary whose claim for an award under this Plan has been denied, the
Company shall provide adequate notice in writing of such adverse determination
setting forth the specific reasons for such denial in a manner calculated to be
understood by the recipient thereof. Such Participant or beneficiary shall be
afforded a reasonable opportunity for a full and fair review of the decision
denying the claim by the Committee.

12

XIII. PLAN
AMENDMENT, SUSPENSION OR TERMINATION

          The
Board of Directors may discontinue the Plan at any time and may, from time to
time, amend or revise the terms of the Plan as permitted by applicable
statutes; provided, however, that no such discontinuance, amendment or revision
shall materially adversely affect any right or obligation with respect to any
award theretofore made. The Plan will continue in operation until discontinued
as herein provided.

XIV. OTHER
COMPENSATION PLANS

          The
adoption of this Plan shall not affect any other incentive compensation plan,
stock option plan or any other compensation plan in effect for the Company or
any Affiliate, nor shall the Plan preclude the Company or any Affiliate from
establishing any other form of incentive compensation plan, stock option plan
or any other compensation plan.

XV. MISCELLANEOUS

          (a)
The costs and expenses of administering the Plan shall be borne by the Company
and its Affiliates and shall not be charged against any Award or to any
Participant receiving an Award.

          (b)
To the extent not preempted by Federal law, this Plan and actions taken in
connection herewith shall be governed and construed in accordance with the laws
of the State of New Jersey without reference to its Conflict of Laws principles.

          (c)
The captions and section numbers appearing in this Plan are inserted only as a
matter of convenience. They do not define, limit or describe the scope or
intent of the provisions of the Plan. In this Plan, words in the singular
number include the plural and in the plural 

13

include the singular; and words of the masculine
gender include the feminine and the neuter, and when the sense so indicates,
words of the neuter gender may refer to any gender. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.

          (d)
Every direction, revocation or notice authorized or required by the Plan shall
be deemed delivered to the Company (a) on the date it is personally delivered
its principal executive offices to the attention of the Compensation Manager of
PSEG Services Corporation or (b) three business days after it is sent by
registered or certified mail, postage prepaid, addressed to the Company (attn:
Compensation Manager of PSEG Services Corporation) at such offices; and shall
be deemed delivered to a Participant (a) on the date it is personally delivered
to him or her, or (b) three business days after it is sent by registered or
certified mail, postage prepaid, addressed to him or her at the last address
shown for him or her on the records of the Company.

          (e)
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.

          (f)
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.

14

          (g)
The Company shall have the right to deduct from any Award payment any sum
required to be withheld by federal, state, or local tax law. There is no
obligation hereunder that any Participant or other person be advised in advance
of the existence of the tax or the amount so required to be withheld.

          (h) This
Plan was originally adopted effective as of January 1, 2009.

15

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