Document:

Exhibit 4.8

                  PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

                                       and

                              THE BANK OF NEW YORK,
        as Collateral Agent, Custodial Agent and Securities Intermediary

                                       and

                      WACHOVIA BANK, NATIONAL ASSOCIATION,
                           as Purchase Contract Agent

                                PLEDGE AGREEMENT

                         Dated as of September 10, 2002
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                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
ARTICLE 1 DEFINITIONS
   SECTION 1.01.  Definitions..................................................2

ARTICLE 2 PLEDGE
   SECTION 2.01.  Pledge.......................................................6
   SECTION 2.02.  Control; Financing Statement.................................7
   SECTION 2.03.  Termination..................................................7

ARTICLE 3 DISTRIBUTIONS ON PLEDGED COLLATERAL
   SECTION 3.01.  Income Distributions.........................................7
   SECTION 3.02.  Principal Payments Following Termination Event...............7
   SECTION 3.03.  Principal Payments Prior to or on Purchase Contract
                  Settlement Date..............................................7
   SECTION 3.04.  Payments to Purchase Contract Agent..........................8
   SECTION 3.05.  Assets Not Properly Released.................................8

ARTICLE 4 CONTROL
   SECTION 4.01.  Establishment of Collateral Account..........................9
   SECTION 4.02.  Treatment as Financial Assets................................9
   SECTION 4.03.  Sole Control by Collateral Agent.............................9
   SECTION 4.04.  Securities Intermediary's Location...........................9
   SECTION 4.05.  No Other Claims..............................................9
   SECTION 4.06.  Investment and Release......................................10
   SECTION 4.07.  Statements and Confirmations................................10
   SECTION 4.08.  Tax Allocations.............................................10
   SECTION 4.09.  No Other Agreements.........................................10
   SECTION 4.10.  Powers Coupled with an Interest.............................10

ARTICLE 5 INITIAL DEPOSIT; ESTABLISHMENT OF TREASURY UNITS AND
   REESTABLISHMENT OF CORPORATE UNITS
   SECTION 5.01.  Initial Deposit of Preferred Securities.....................10
   SECTION 5.02.  Establishment of Treasury Units.............................11
   SECTION 5.03.  Reestablishment of Corporate Units..........................13
   SECTION 5.04.  Termination Event...........................................15
   SECTION 5.05.  Cash Settlement.............................................16
   SECTION 5.06.  Early Settlement............................................17
   SECTION 5.07.  Application of Proceeds in Settlement of Purchase
                  Contracts...................................................18
   SECTION 5.08.  Tax Event Redemption........................................20

ARTICLE 6 VOTING RIGHTS - PLEDGED PREFERRED SECURITIES AND PLEDGED NOTES
   SECTION 6.01.  Voting Rights...............................................20

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ARTICLE 7 RIGHTS AND REMEDIES
   SECTION 7.01.  Rights and Remedies of the Collateral Agent.................21
   SECTION 7.02.  Substitution of Notes or Treasury Portfolio.................22
   SECTION 7.03.  Tax Event Redemption........................................22
   SECTION 7.04.  Initial Remarketing.........................................23
   SECTION 7.05.  Substitutions...............................................24

ARTICLE 8 REPRESENTATIONS AND WARRANTIES; COVENANTS
   SECTION 8.01.  Representations and Warranties..............................24
   SECTION 8.02.  Covenants...................................................24

ARTICLE 9 THE COLLATERAL AGENT, THE CUSTODIAL AGENT AND THE SECURITIES
   INTERMEDIARY
   SECTION 9.01.  Appointment, Powers and Immunities..........................25
   SECTION 9.02.  Instructions of the Company.................................26
   SECTION 9.03.  Reliance....................................................26
   SECTION 9.04.  Rights in Other Capacities..................................26
   SECTION 9.05.  Non-Reliance................................................27
   SECTION 9.06.  Compensation and Indemnity..................................27
   SECTION 9.07.  Failure to Act..............................................27
   SECTION 9.08.  Resignation.................................................28
   SECTION 9.09.  Right to Appoint Agent or Advisor...........................29
   SECTION 9.10.  Survival....................................................30
   SECTION 9.11.  Exculpation.................................................30

ARTICLE 10 AMENDMENT
   SECTION 10.01. Amendment without Consent of Holders........................30
   SECTION 10.02. Amendment with Consent of Holders...........................30
   SECTION 10.03. Execution of Amendments.....................................31
   SECTION 10.04. Effect of Amendments........................................31
   SECTION 10.05. Reference of Amendments.....................................31

ARTICLE 11 MISCELLANEOUS
   SECTION 11.01. No Waiver...................................................32
   SECTION 11.02. Governing Law...............................................32
   SECTION 11.03. Notices.....................................................32
   SECTION 11.04. Successors and Assigns......................................32
   SECTION 11.05. Counterparts................................................33
   SECTION 11.06. Severability................................................33
   SECTION 11.07. Expenses, Etc...............................................33
   SECTION 11.08. Security Interest Absolute..................................33
   SECTION 11.09. Notice of Tax Event, Tax Event Redemption and
                  Termination Event...........................................34

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Exhibit A - Instruction from Purchase Contract Agent to Collateral Agent
                (Establishment of Treasury Units)
Exhibit B - Instruction from Collateral Agent to Securities Intermediary
                (Establishment of Treasury Units)
Exhibit C - Instruction from Purchase Contract Agent to Collateral Agent
                (Reestablishment of Corporate Units)
Exhibit D - Instruction from Collateral Agent to Securities Intermediary
                (Reestablishment of Corporate Units)
Exhibit E - Notice of Cash Settlement from Securities Intermediary to Purchase
                Contract Agent (Cash Settlement Amounts)
Exhibit F - Instruction to Custodial Agent Regarding Remarketing
Exhibit G - Instruction to Custodial Agent Regarding Withdrawal From Remarketing

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<PAGE>

                                PLEDGE AGREEMENT

      PLEDGE AGREEMENT, dated as of September 10, 2002, among Public Service
Enterprise Group Incorporated, a New Jersey corporation (the "Company"), The
Bank of New York, a New York banking corporation, not individually but solely as
collateral agent (in such capacity, together with its successors in such
capacity, the "Collateral Agent"), as custodial agent (in such capacity,
together with its successors in such capacity, the "Custodial Agent") and as
"securities intermediary" as defined in Section 8-102(a)(14) of the UCC (as
defined herein) (in such capacity, together with its successors in such
capacity, the "Securities Intermediary"), and Wachovia Bank, National
Association, a banking association organized under the laws of the United
States, not individually but solely as purchase contract agent and as
attorney-in-fact of the Holders (as defined in the Purchase Contract Agreement)
from time to time of the Securities (as defined in the Purchase Contract
Agreement) (in such capacity, together with its successors in such capacity, the
"Purchase Contract Agent") under the Purchase Contract Agreement (as defined
herein).

                                    RECITALS

      The Company and the Purchase Contract Agent are parties to the Purchase
Contract Agreement dated as of the date hereof (as modified and supplemented and
in effect from time to time, the "Purchase Contract Agreement"), pursuant to
which 9,200,000 Corporate Units (as defined herein) will be issued.

      Each Corporate Unit (as defined herein), at issuance, consists of a unit
comprised of (a) a stock purchase contract (a "Purchase Contract") under which
the Holder will purchase from the Company on the Purchase Contract Settlement
Date (as defined herein), for an amount equal to $50 (the "Stated Amount"), a
number of shares of Public Service Enterprise Group Incorporated common stock,
no par value ("Common Stock"), equal to the Settlement Rate (as defined herein),
and (b) either beneficial ownership of a preferred trust security (a "Preferred
Security") issued by PSEG Funding Trust I, a Delaware statutory trust (the
"Trust"), having a liquidation amount equal to the Stated Amount, a Note (as
defined below) or an Applicable Ownership Interest in the Treasury Portfolio (as
defined below).

      Pursuant to the terms of the Purchase Contract Agreement and the Purchase
Contracts, the Holders of the Securities have irrevocably authorized the
Purchase Contract Agent, as attorney-in-fact of such Holders, among other
things, to execute and deliver this Agreement on behalf of such Holders and to
grant the pledge provided herein of the Collateral (as defined herein) to secure
the Obligations (as defined herein).

      Accordingly, the Company, the Collateral Agent, the Custodial Agent, the
Securities Intermediary and the Purchase Contract Agent, on its own behalf and
as attorney-in-fact of the Holders from time to time of the Securities, agree as
follows:
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                                    ARTICLE 1
                                   DEFINITIONS

      SECTION 1.01. Definitions. For all purposes of this Agreement, except as
otherwise expressly provided or unless the context otherwise requires:

      (a) the terms defined in this Article have the meanings assigned to them
in this Article and include the plural as well as the singular;

      (b) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section, Exhibit or other subdivision;

      (c) the following terms which are defined in the UCC shall have the
meanings set forth therein: "certificated security," "control," "financial
asset," "entitlement order," "investment property," "securities account" and
"security entitlement";

      (d) the following terms have the meanings assigned to them in the Purchase
Contract Agreement: "Act," "Bankruptcy Code," "Board Resolution," "Business
Day," "Cash Merger," "Cash Settlement," "Certificate," "Early Settlement,"
"Early Settlement Amount," "Early Settlement Date," "Failed Initial
Remarketing," "Failed Secondary Remarketing," "Holder," "Initial Remarketing,"
"Initial Remarketing Date," "Initial Reset Date," "Notes," "Officers'
Certificate," "Opinion of Counsel," "Outstanding Securities," "Purchase
Contract," "Purchase Contract Settlement Date," "Purchase Price," "Remarketing
Agent," "Remarketing Agreement," "Remarketing Fee," "Secondary Remarketing,"
"Security," "Separate Preferred Securities or Notes," "Separate Preferred
Securities or Notes Purchase Price," "Settlement Rate," "Successful Initial
Remarketing," "Termination Event," and "Underwriting Agreement";

      (e) the following terms have the meanings assigned to them in the Amended
and Restated Trust Agreement of PSEG Funding Trust I, of even date herewith (the
"Declaration"): "Applicable Ownership Interest," "Applicable Principal Amount,"
"Event of Default," "Indenture," "Indenture Trustee," "Liquidation
Distribution," "Primary Treasury Dealer," "Property Trustee," "Quotation Agent,"
"Redemption Amount," "Redemption Price," "Remarketing," "Tax Event," "Tax Event
Redemption," "Tax Event Redemption Date," "Treasury Portfolio," and Treasury
Portfolio Purchase Price; and

      (f) the following terms have the meanings given to them in this Section
1.01(f):

      "Agreement" means this Pledge Agreement, as the same may be amended,
modified or supplemented from time to time.

      "Cash" means any coin or currency of the United States as at the time
shall be legal tender for payment of public and private debts.

                                       2
<PAGE>

      "Collateral" means the collective reference to:

            (i) all investment property and other financial assets from time to
      time credited to the Collateral Account, including, without limitation,
      (A) the Preferred Securities and security entitlements relating thereto
      which are a component of the Corporate Units from time to time, (B) the
      Applicable Ownership Interests (as specified in Clause (A) of the
      definition of such term) of the Holders with respect to the Treasury
      Portfolio which are a component of the Corporate Units from time to time,
      (C) the Notes and security entitlements relating thereto which are a
      component of the Corporate Units from time to time, (D) any Treasury
      Securities and security entitlements relating thereto delivered from time
      to time upon establishment of Treasury Units in accordance with Section
      5.02 hereof and (E) payments made by Holders pursuant to Section 5.05
      hereof;

            (ii) all Proceeds of any of the foregoing (whether such Proceeds
      arise before or after the commencement of any proceeding under any
      applicable bankruptcy, insolvency or other similar law, by or against the
      pledgor or with respect to the pledgor) (Notwithstanding the foregoing,
      for the avoidance of doubt, the cash payments at a rate of 6.25% per year
      (or in the event of deferred and unpaid Distributions on the Pledged
      Preferred Securities or Pledged Notes, 10.25% per year) of the Stated
      Amount per Corporate Unit to Holders of Corporate Units, whether current
      or deferred, shall not be considered as Proceeds of the Pledged Securities
      and therefore are not part of the Collateral); and

            (iii) all powers and rights now owned or hereafter acquired under or
      with respect to the Collateral Account.

      "Collateral Account" means the securities account of The Bank of New York,
as Collateral Agent, maintained by the Securities Intermediary and designated
"The Bank of New York, as Collateral Agent of Public Service Enterprise Group
Incorporated, as pledgee of Wachovia Bank, National Association, as the Purchase
Contract Agent on behalf of and as attorney-in-fact for the Holders."

      "Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor shall have become such, and thereafter
"Company" shall mean such successor.

      "Corporate Unit" means the collective rights and obligations of a Holder
of a Corporate Units Certificate in respect of a Preferred Security, a Note or
an appropriate Applicable Ownership Interest of the Treasury Portfolio, as the
case may be, subject in each case to the Pledge thereof, and the related
Purchase Contract; provided that the appropriate Applicable Ownership Interest
(as specified in clause (B) of the definition of such term) of the Treasury
Portfolio shall not be subject to the Pledge.

      "Corporate Units Certificate" means a certificate evidencing the rights
and obligations of a Holder in respect of the number of Corporate Units
specified on such certificate.

      "Obligations" means, with respect to each Holder, the collective reference
to all obligations and liabilities of such Holder under such Holder's Purchase
Contract, the Purchase

                                       3
<PAGE>

Contract Agreement, and this Agreement or any other document made, delivered or
given in connection herewith or therewith, in each case whether on account of
principal, interest (including, without limitation, interest accruing before and
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to such Holder, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding), fees, indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Company, the Purchase
Contract Agent, the Collateral Agent or the Securities Intermediary that are
required to be paid by the Holder pursuant to the terms of any of the foregoing
agreements).

      "Permitted Investments" means any one of the following which shall mature
not later than the next succeeding Business Day:

            (1) any evidence of indebtedness with an original maturity of 365
      days or less issued, or directly and fully guaranteed or insured, by the
      United States of America or any agency or instrumentality thereof
      (provided that the full faith and credit of the United States of America
      is pledged in support of the timely payment thereof or such indebtedness
      constitutes a general obligation of it);

            (2) deposits, certificates of deposit or acceptances with an
      original maturity of 365 days or less of any institution which is a member
      of the Federal Reserve System having combined capital and surplus and
      undivided profits of not less than $200.0 million at the time of deposit
      (and which may include the Collateral Agent);

            (3) investments with an original maturity of 365 days or less of any
      Person that is fully and unconditionally guaranteed by a bank referred to
      in clause (2);

            (4) repurchase agreements and reverse repurchase agreements relating
      to marketable direct obligations issued or unconditionally guaranteed by
      the United States Government or issued by any agency thereof and backed as
      to timely payment by the full faith and credit of the United States
      Government;

            (5) investments in commercial paper, other than commercial paper
      issued by the Company or its affiliates, of any corporation incorporated
      under the laws of the United States or any State thereof, which commercial
      paper has a rating at the time of purchase at least equal to "A-1" by
      Standard & Poor's Ratings Services ("S&P") or at least equal to "P-1" by
      Moody's Investors Service, Inc. ("Moody's");

            (6) investments in money market funds (including, but not limited
      to, money market funds managed by the Collateral Agent or an affiliate of
      the Collateral Agent) registered under the Investment Company Act of 1940,
      as amended, rated in the highest applicable rating category by S&P or
      Moody's; and

            (7) a cash escrow product offered by the Collateral Agent, which may
      consist of trust funds, trust accounts or interest-bearing demand or time
      deposits, including certificates of deposit, which are held by any
      commercial bank having a short term deposit rating at the time of purchase
      of at least "A-2" or the equivalent thereof by S&P or at least "P-2" or
      the equivalent thereof by Moody's.

                                       4
<PAGE>

      "Person" means any legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint-stock company, limited
liability company, trust, unincorporated organization or government or any
agency or political subdivision thereof.

      "Pledge" means the lien and security interest created by this Agreement.

      "Pledged Applicable Ownership Interests" means the Applicable Ownership
Interests (as specified in clause (A) of the definition thereof) of the Holders
with respect to the Treasury Portfolio from time to time credited to the
Collateral Account and not then released from the Pledge.

      "Pledged Notes" means Notes and security entitlements with respect thereto
from time to time credited to the Collateral Account and not then released from
the Pledge.

      "Pledged Preferred Securities" means the Preferred Securities and security
entitlements with respect thereto from time to time credited to the Collateral
Account and not then released from the Pledge.

      "Preferred Securities" has the meaning specified in the paragraph
preceding the recitals of this Agreement.

      "Pledged Securities" means the Pledged Preferred Securities, the Pledged
Applicable Ownership Interests, the Pledged Notes or the Pledged Treasury
Securities, collectively.

      "Pledged Treasury Securities" means Treasury Securities and security
entitlements with respect thereto from time to time credited to the Collateral
Account and not then released from the Pledge.

      "Proceeds" has the meaning ascribed thereto in the UCC and includes,
without limitation, all interest, dividends, cash, instruments, securities,
financial assets (as defined in ss.8-102(a)(9) of the UCC) and other property
received, receivable or otherwise distributed upon the sale, exchange,
collection or disposition of any financial assets from time to time held in the
Collateral Account.

      "Purchase Contract Agent" has the meaning specified in the paragraph
preceding the recitals of this Agreement. "Separate Notes" means Notes which are
not components of Corporate Units.

      "Separate Preferred Securities" means Preferred Securities which are not
components of Corporate Units.

      "Stated Amount" has the meaning specified in the recitals of this
Agreement.

      "TRADES" means the Treasury/Reserve Automated Debt Entry System maintained
by the Federal Reserve Bank of New York pursuant to the TRADES Regulations.

                                       5
<PAGE>

      "TRADES Regulations" means the regulations of the United States Department
of the Treasury, published at 31 C.F.R. Part 357, as amended from time to time.
Unless otherwise defined herein, all terms defined in the TRADES Regulations are
used herein as therein defined.

      "Transfer" means in the case of certificated securities in registered
form, delivery as provided in ss.8-301(a) of the UCC, endorsed to the transferee
or in blank by an effective endorsement; in the case of Treasury Securities,
registration of the transferee as the owner of such Treasury Securities on
TRADES; and in the case of security entitlements, including, without limitation,
security entitlements with respect to Treasury Securities, a securities
intermediary indicating by book entry that such security entitlement has been
credited to the transferee's securities account.

      "Treasury Securities" means zero-coupon U.S. treasury securities (CUSIP
No. 912820FX0 or 912820BQ9) which mature on November 15, 2005.

      "Treasury Unit" means, following the substitution of Treasury Securities
for Preferred Securities or Notes as collateral to secure a Holder's obligations
under the Purchase Contract, the collective rights and obligations of a Holder
of a Treasury Units Certificate in respect of such Treasury Securities, subject
to the Pledge thereof, and the related Purchase Contract.

      "Treasury Units Certificate" means a certificate evidencing the rights and
obligations of a Holder in respect of the number of Treasury Units specified on
such certificate.

      "UCC" means the Uniform Commercial Code as in effect in the State of New
York from time to time.

      "Value" means, with respect to any item of Collateral on any date, as to
(1) Cash, the face amount thereof and (2) Treasury Securities or Notes, the
aggregate principal amount thereof at maturity and (3) Applicable Ownership
Interests, the appropriate percentage (as specified in clause (A) of the
definition thereof) of the aggregate principal amount at maturity of the
Treasury Portfolio and (4) the Preferred Securities, the liquidation amount
thereof.

                                    ARTICLE 2
                                     PLEDGE

      SECTION 2.01. Pledge. Each Holder, acting through the Purchase Contract
Agent as such Holder's attorney-in-fact, hereby pledges and grants to the
Collateral Agent, as agent of and for the benefit of the Company, a continuing
first priority security interest in and to, and a lien upon and right of set-off
against, all of such Holder's right, title and interest in and to the Collateral
to secure the prompt and complete payment and performance when due (whether at
stated maturity, by acceleration or otherwise) of the Obligations. The
Collateral Agent shall have all of the rights, remedies and recourses with
respect to the Collateral afforded a secured party by the UCC, in addition to,
and not in limitation of, the other rights, remedies and recourses afforded to
the Collateral Agent by this Agreement.

                                       6
<PAGE>

      SECTION 2.02. Control; Financing Statement.

      (a) The Collateral Agent shall have control of the Collateral Account
pursuant to the provisions of Article 4 of this Agreement.

      (b) Subsequent to the date of initial issuance of the Securities, the
Purchase Contract Agent shall deliver to the Collateral Agent a copy of the
financing statement prepared by the Company and filed in the Office of the
Secretary of State of the State of New York and any other jurisdictions which
the Company deems necessary, authorized by the Purchase Contract Agent to be
filed, as attorney-in-fact for the Holders, as Debtors, and describing the
Collateral, such filing to be undertaken by the Company.

      SECTION 2.03. Termination. As to each Holder, this Agreement and the
Pledge created hereby shall terminate upon the satisfaction of such Holder's
Obligations. Upon written notice by the Company of such termination, the
Collateral Agent shall Transfer such Holder's portion of the Collateral to the
Purchase Contract Agent for distribution to such Holder in accordance with such
Holder's interest, free and clear of any lien, pledge or security interest
created hereby.

                                    ARTICLE 3
                       DISTRIBUTIONS ON PLEDGED COLLATERAL

      SECTION 3.01. Income Distributions. All income distributions received by
the Collateral Agent on account of the Pledged Preferred Securities, the Pledged
Applicable Ownership Interests of the Treasury Portfolio, the Pledged Notes or
Permitted Investments from time to time held in the Collateral Account shall be
distributed to the Purchase Contract Agent (at an account specified by the
Purchase Contract Agent) for the benefit of the applicable Holders as provided
in the Purchase Contracts or Purchase Contract Agreement. Notwithstanding
anything contained herein to the contrary, for the avoidance of doubt, the cash
payments at a rate of 6.25% per year (or in the event of deferred and unpaid
Distributions on the Pledged Preferred Securities or Pledged Notes, 10.25% per
year) of the Stated Amount per Corporate Unit to Holders of Corporate Units,
whether current or deferred, shall not be subject to the Pledge and therefore
are not part of the Collateral.

      SECTION 3.02. Principal Payments Following Termination Event. All payments
received by the Collateral Agent following a Termination Event of (1) the
aggregate liquidation amount of Pledged Preferred Securities or securities
entitlements thereto, (2) the Applicable Ownership Interests (as specified in
clause (A) of the definition thereof) of the aggregate principal amount of the
Treasury Portfolio, (3) the aggregate principal amount of the Pledged Notes or
securities entitlements thereto, or (4) the principal amount of the Pledged
Treasury Securities, shall be distributed to the Purchase Contract Agent for the
benefit of the applicable Holders for distribution to such Holders in accordance
with their respective interests.

      SECTION 3.03. Principal Payments Prior to or on Purchase Contract
Settlement Date.

      (a) Subject to the provisions of Sections 5.06, 5.08 and 7.04, and except
as provided in Section 3.03(b) below, if no Termination Event shall have
occurred, all payments received by

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<PAGE>

the Collateral Agent of (1) the aggregate liquidation amount with respect to the
Pledged Preferred Securities or security entitlements with respect thereto, (2)
the Applicable Ownership Interests (as specified in clause (A) of the definition
thereof) of the aggregate principal amount of the Treasury Portfolio, (3) the
aggregate principal amount with respect to the Pledged Notes or security
entitlements with respect thereto or (4) the principal amount of Pledged
Treasury Securities, shall be held and invested by the Collateral Agent in
Permitted Investments until the Purchase Contract Settlement Date and on the
Purchase Contract Settlement Date distributed to the Company as provided in
Section 5.07 hereof. Any balance remaining in the Collateral Account shall be
distributed to the Purchase Contract Agent for the benefit of the applicable
Holders for distribution to such Holders in accordance with their respective
interests. The Company shall instruct the Collateral Agent as to the type of
Permitted Investments in which any payments made under this Section shall be
invested, provided, however, that if the Company fails to deliver such
instructions by 10:30 a.m. (New York City time), the Collateral Agent shall
invest such payments in the Permitted Investments described in clause (7) of the
definition of Permitted Investments.

      (b) All payments received by the Collateral Agent of (1) the aggregate
liquidation amount of Preferred Securities or security entitlements with respect
thereto, (2) the Applicable Ownership Interests (as specified in clause (A) of
the definition thereof) of the aggregate principal amount of the Treasury
Portfolio, (3) the aggregate principal amount with respect to the Notes or
security entitlements with respect thereto or (4) the principal amount of
Treasury Securities or security entitlements with respect thereto, that, in each
case, have been released from the Pledge shall be distributed to the Purchase
Contract Agent for the benefit of the applicable Holders for distribution to
such Holders in accordance with their respective interests.

      SECTION 3.04. Payments to Purchase Contract Agent. The Collateral Agent
shall use all commercially reasonable efforts to deliver payments to the
Purchase Contract Agent hereunder to the account designated by the Purchase
Contract Agent for such purpose not later than 12:00 p.m. (New York City time)
on the Business Day such payment is received by the Collateral Agent; provided,
however, that if any such payment is received by the Collateral Agent on a day
that is not a Business Day or after 11:00 a.m. (New York City time) on a
Business Day, then the Collateral Agent shall use all commercially reasonable
efforts to deliver such payment to the Purchase Contract Agent no later than
10:30 a.m. (New York City time) on the next succeeding Business Day.

      SECTION 3.05. Assets Not Properly Released. If the Purchase Contract Agent
or any Holder shall receive any principal payments on account of financial
assets credited to the Collateral Account and not released therefrom in
accordance with this Agreement, the Purchase Contract Agent or such Holder shall
hold the same as trustee of an express trust for the benefit of the Company and,
upon receipt of an Officers' Certificate of the Company so directing, promptly
deliver the same to the Collateral Agent for credit to the Collateral Account or
to the Company for application to the Obligations of the Holders, and the
Purchase Contract Agent and Holders shall acquire no right, title or interest in
any such payments of principal amounts so received.

                                       8
<PAGE>

                                    ARTICLE 4
                                     CONTROL

      SECTION 4.01. Establishment of Collateral Account. The Securities
Intermediary hereby confirms that:

      (a) the Securities Intermediary has established the Collateral Account;

      (b) the Collateral Account is a securities account;

      (c) subject to the terms of this Agreement, the Securities Intermediary
shall identify in its records the Collateral Agent as the entitlement holder
entitled to exercise the rights that comprise any financial asset credited to
the Collateral Account;

      (d) all property delivered to the Securities Intermediary pursuant to this
Agreement or the Purchase Contract Agreement will be credited promptly to the
Collateral Account; and

      (e) all securities or other property underlying any financial assets
credited to the Collateral Account shall be registered in the name of the
Purchase Contract Agent and endorsed to the Securities Intermediary or in blank,
registered in the name of the Securities Intermediary or credited to another
securities account maintained in the name of the Securities Intermediary.

      SECTION 4.02. Treatment as Financial Assets. Each item of property
(whether investment property, financial asset, security, instrument or cash)
credited to the Collateral Account shall be treated as a financial asset.

      SECTION 4.03. Sole Control by Collateral Agent. Except as provided in
Section 6.01, at all times prior to the termination of the Pledge, the
Collateral Agent shall have sole control of the Collateral Account, and the
Securities Intermediary shall take instructions and directions with respect to
the Collateral Account solely from the Collateral Agent. If at any time the
Securities Intermediary shall receive an entitlement order issued by the
Collateral Agent and relating to the Collateral Account, the Securities
Intermediary shall comply with such entitlement order without further consent by
the Purchase Contract Agent or any Holder or any other Person. Until termination
of the Pledge, the Securities Intermediary will not comply with any entitlement
orders issued by the Purchase Contract Agent or any Holder.

      SECTION 4.04. Securities Intermediary's Location. The Collateral Account,
and the rights and obligations of the Securities Intermediary, the Collateral
Agent, the Purchase Contract Agent and the Holders with respect thereto, shall
be governed by the laws of the State of New York. Regardless of any provision in
any other agreement, for purposes of the UCC, New York shall be deemed to be the
Securities Intermediary's location.

      SECTION 4.05. No Other Claims. Except for the claims and interest of the
Collateral Agent and of the Purchase Contract Agent and the Holders in the
Collateral Account, the Securities Intermediary (without making any
investigation) does not know of any claim to, or interest in, the Collateral
Account or in any financial asset credited thereto. If any Person asserts any
lien, encumbrance or adverse claim (including any writ, garnishment, judgment,
warrant of attachment, execution or similar process) against the Collateral
Account or in any financial asset

                                       9
<PAGE>

carried therein, the Securities Intermediary will promptly notify the Collateral
Agent and the Purchase Contract Agent in writing.

      SECTION 4.06. Investment and Release. All proceeds of financial assets
from time to time deposited in the Collateral Account shall be invested and
reinvested as provided in this Agreement. At all times prior to termination of
the Pledge, no property shall be released from the Collateral Account except in
accordance with this Agreement or upon written instructions of the Collateral
Agent.

      SECTION 4.07. Statements and Confirmations. The Securities Intermediary
will promptly send copies of all statements, confirmations and other
correspondence concerning the Collateral Account and any financial assets
credited thereto simultaneously to each of the Purchase Contract Agent and the
Collateral Agent at their addresses for notices under this Agreement.

      SECTION 4.08. Tax Allocations. The Purchase Contract Agent shall file with
the Internal Revenue Service and deliver to the Holders Forms 1099 (or successor
or comparable forms), to the extent required by law, with respect to payments
received by the Holders. Neither the Securities Intermediary nor the Collateral
Agent shall have any tax reporting duties hereunder.

      SECTION 4.09. No Other Agreements. The Securities Intermediary has not
entered into, and prior to the termination of the Pledge will not enter into,
any agreement with any other Person relating to the Collateral Account or any
financial assets credited thereto, including, without limitation, any agreement
to comply with entitlement orders of any Person other than the Collateral Agent.

      SECTION 4.10. Powers Coupled with an Interest. The rights and powers
granted in this Article 4 to the Collateral Agent have been granted in order to
perfect its security interests in the Collateral Account, are powers coupled
with an interest and will be affected neither by the bankruptcy of the Purchase
Contract Agent or any Holder nor by the lapse of time. The obligations of the
Securities Intermediary under this Article 4 shall continue in effect until the
termination of the Pledge.

                                    ARTICLE 5
                   INITIAL DEPOSIT; ESTABLISHMENT OF TREASURY
                  UNITS AND REESTABLISHMENT OF CORPORATE UNITS

      SECTION 5.01. Initial Deposit of Preferred Securities.

      (a) Concurrently with the execution and delivery of this Agreement, the
Purchase Contract Agent, on behalf of the initial Holders of the Corporate
Units, shall Transfer to the Collateral Agent, for credit to the Collateral
Account, the Preferred Securities or security entitlements relating thereto, and
the Securities Intermediary shall indicate by book-entry that a securities
entitlement to such Preferred Securities has been credited to the Collateral
Account.

      (b) Prior to any Event of Default, the Collateral Agent agrees to hold any
Preferred Securities or Notes or security interests relating thereto,
constituting a portion of the Collateral

                                       10
<PAGE>

registered in the name of the Purchase Contract Agent with appropriate
endorsement in the form delivered to it and shall not re-register such Preferred
Securities or Notes or security interests relating thereto.

      SECTION 5.02. Establishment of Treasury Units.

      (a) So long as the Treasury Portfolio has not replaced the Preferred
Securities as a component of Corporate Units as a result of a Successful Initial
Remarketing or a Tax Event Redemption and no dissolution or liquidation of the
Trust shall have occurred, at any time on or prior to the fifth Business Day
immediately preceding the Purchase Contract Settlement Date, a Holder of
Corporate Units shall have the right to establish or reestablish Treasury Units
by substitution of Treasury Securities or security entitlements with respect
thereto for the Pledged Preferred Securities comprising a part of such Holder's
Corporate Units in integral multiples of 20 Corporate Units by:

            (i) Transferring to the Collateral Agent for credit to the
      Collateral Account Treasury Securities or security entitlements with
      respect thereto having a Value equal to the aggregate liquidation amount
      of the Pledged Preferred Securities to be released, accompanied by a
      notice, substantially in the form of Exhibit C to the Purchase Contract
      Agreement, whereupon the Purchase Contract Agent shall deliver to the
      Collateral Agent a notice, substantially in the form of Exhibit A hereto,
      (A) stating that such Holder has Transferred Treasury Securities or
      security entitlements with respect thereto to the Collateral Agent for
      credit to the Collateral Account, (B) stating the Value of the Treasury
      Securities or security entitlements with respect thereto Transferred by
      such Holder and (C) requesting that the Collateral Agent release from the
      Pledge the Pledged Preferred Securities that are a component of such
      Corporate Units; and

            (ii) delivering the related Corporate Units to the Purchase Contract
      Agent.

      Upon receipt of such notice and confirmation that Treasury Securities or
security entitlements with respect thereto have been credited to the Collateral
Account as described in such notice, the Collateral Agent shall instruct the
Securities Intermediary by a notice, substantially in the form of Exhibit B
hereto, to release such Pledged Preferred Securities from the Pledge by Transfer
to the Purchase Contract Agent for distribution to such Holder, free and clear
of any lien, pledge or security interest created hereby.

      (b) If the Treasury Portfolio has replaced the Preferred Securities or
Notes as a component of Corporate Units as a result of a Successful Initial
Remarketing or a Tax Event Redemption on or at any time prior to the second
Business Day immediately preceding the Purchase Contract Settlement Date, a
Holder of Corporate Units shall have the right to establish or reestablish
Treasury Units by substitution of Treasury Securities or security entitlements
with respect thereto for the Applicable Ownership Interests (as specified in
clause (A) of the definition of such term) of the Treasury Portfolio comprising
a part of such Holder's Corporate Units in integral multiples of Corporate Units
as will enable the U.S. Treasury securities comprising the Applicable Ownership
Interest of the Treasury Portfolio to be released in whole multiples by:

                                       11
<PAGE>

            (i) Transferring to the Collateral Agent for credit to the
      Collateral Account Treasury Securities or security entitlements with
      respect thereto having a Value equal to the Value of the Applicable
      Ownership Interests (as specified in clause (A) of the definition of such
      term) of the Treasury Portfolio to be released, accompanied by a notice,
      substantially in the form of Exhibit C to the Purchase Contract Agreement,
      whereupon the Purchase Contract Agent shall deliver to the Collateral
      Agent a notice, substantially in the form of Exhibit A hereto, (A) stating
      that such Holder has Transferred Treasury Securities or security
      entitlements with respect thereto to the Collateral Agent for credit to
      the Collateral Account, (B) stating the Value of the Treasury Securities
      or security entitlements with respect thereto Transferred by such Holder
      and (C) requesting that the Collateral Agent release from the Pledge the
      Pledged Applicable Ownership Interests of the Treasury Portfolio that are
      a component of such Corporate Units; and

            (ii) delivering the related Corporate Units to the Purchase Contract
      Agent.

      Upon receipt of such notice and confirmation that Treasury Securities or
security entitlements with respect thereto have been credited to the Collateral
Account as described in such notice, the Collateral Agent shall instruct the
Securities Intermediary by a notice, substantially in the form of Exhibit B
hereto, to release such Pledged Applicable Ownership Interests of the Treasury
Portfolio from the Pledge by Transfer to the Purchase Contract Agent for
distribution to such Holder, free and clear of any lien, pledge or security
interest created hereby.

      (c) If the Trust shall have been dissolved and liquidated and the Notes
have become a component of the Corporate Units and neither a Successful Initial
Remarketing nor a Tax Event Redemption Date shall have occurred, at any time on
or prior to the fifth Business Day immediately preceding the Purchase Contract
Settlement Date, a Holder of Corporate Units shall have the right to substitute
Treasury Securities or security entitlements with respect thereto for the
Pledged Notes comprising a part of such Holder's Corporate Units in integral
multiples of 20 Corporate Units by:

            (i) Transferring to the Collateral Agent for credit to the
      Collateral Account Treasury Securities or security entitlements with
      respect thereto having a Value equal to the aggregate principal amount of
      the Pledged Notes to be released, accompanied by a notice, substantially
      in the form of Exhibit C to the Purchase Contract Agreement, whereupon the
      Purchase Contract Agent shall deliver to the Collateral Agent a notice,
      substantially in the form of Exhibit A hereto, (A) stating that such
      Holder has Transferred Treasury Securities or security entitlements with
      respect thereto to the Collateral Agent for credit to the Collateral
      Account, (B) stating the Value of the Treasury Securities or securities
      entitlements with respect thereto Transferred by such Holder and (C)
      requesting that the Collateral Agent release from the Pledge the Pledged
      Notes that are a component of such Corporate Units; and

            (ii) delivering the related Corporate Units to the Purchase Contract
      Agent.

      Upon receipt of such notice and confirmation that Treasury Securities or
security entitlements with respect thereto have been credited to the Collateral
Account as described in

                                       12
<PAGE>

such notice, the Collateral Agent shall instruct the Securities Intermediary by
a notice, substantially in the form of Exhibit B hereto, to release such Pledged
Notes from the Pledge by Transfer to the Purchase Contract Agent for
distribution to such Holder, free and clear of any lien, pledge or security
interest created hereby.

      SECTION 5.03. Reestablishment of Corporate Units.

      (a) So long as the Treasury Portfolio has not replaced the Preferred
Securities as a component of Corporate Units as a result of a Successful Initial
Remarketing or a Tax Event Redemption and no dissolution or liquidation of the
Trust shall have occurred, at any time on or prior to the fifth Business Day
immediately preceding the Purchase Contract Settlement Date, a Holder of
Treasury Units shall have the right to reestablish Corporate Units by
substitution of Preferred Securities or security entitlements with respect
thereto for Pledged Treasury Securities in integral multiples of 20 Treasury
Units by:

            (i) Transferring to the Collateral Agent for credit to the
      Collateral Account Preferred Securities or security entitlements with
      respect thereto having a liquidation amount equal to the Value of the
      Pledged Treasury Securities to be released, accompanied by a notice,
      substantially in the form of Exhibit C to the Purchase Contract Agreement,
      whereupon the Purchase Contract Agent shall deliver to the Collateral
      Agent a notice, substantially in the form of Exhibit C hereto, stating
      that such Holder has Transferred Preferred Securities or security
      entitlements with respect thereto to the Collateral Agent for credit to
      the Collateral Account and requesting that the Collateral Agent release
      from the Pledge the Pledged Treasury Securities related to such Treasury
      Units; and

            (ii) delivering the related Treasury Units to the Purchase Contract
      Agent.

      Upon receipt of such notice and confirmation that Preferred Securities or
security entitlements with respect thereto have been credited to the Collateral
Account as described in such notice, the Collateral Agent shall instruct the
Securities Intermediary by a notice in the form provided in Exhibit D hereto to
release such Pledged Treasury Securities from the Pledge by Transfer to the
Purchase Contract Agent for distribution to such Holder, free and clear of any
lien, pledge or security interest created hereby.

      (b) If the Treasury Portfolio has replaced the Preferred Securities or
Notes as a component of Corporate Units as a result of a Successful Initial
Remarketing or a Tax Event Redemption on or at any time prior to the second
Business Day immediately preceding the Purchase Contract Settlement Date, a
Holder of Treasury Units shall have the right to reestablish Corporate Units by
substitution of Treasury Securities or security entitlements with respect
thereto for the Applicable Ownership Interests (as specified in clause (A) of
the definition of such term) of the Treasury Portfolio comprising a part of such
Holder's Treasury Units in integral multiples of Treasury Units as will enable
the U.S. Treasury securities comprising the Applicable Ownership Interest of the
Treasury Portfolio to be purchased in whole multiples by:

            (i) Transferring to the Collateral Agent for credit to the
      Collateral Account Applicable Ownership Interests (as specified in clause
      (A) of the definition of such term)

                                       13
<PAGE>

      of the Treasury Portfolio having a Value equal to the Treasury Securities
      or security entitlements with respect thereto to be released, accompanied
      by a notice, substantially in the form of Exhibit C to the Purchase
      Contract Agreement, whereupon the Purchase Contract Agent shall deliver to
      the Collateral Agent a notice, substantially in the form of Exhibit C
      hereto, (A) stating that such Holder has Transferred Applicable Ownership
      Interests (as specified in clause (A) of the definition of such term) of
      the Treasury Portfolio to the Collateral Agent for credit to the
      Collateral Account, (B) stating the Value of the Applicable Ownership
      Interests (as specified in clause (A) of the definition of such term) of
      the Treasury Portfolio Transferred by such Holder and (C) requesting that
      the Collateral Agent release from the Pledge the Treasury Securities or
      security entitlements with respect thereto that are a component of such
      Treasury Units; and

            (ii) delivering the related Treasury Units to the Purchase Contract
      Agent.

      Upon receipt of such notice and confirmation that the Applicable Ownership
Interests (as specified in clause (A) of the definition of such term) of the
Treasury Portfolio have been credited to the Collateral Account as described in
such notice, the Collateral Agent shall instruct the Securities Intermediary by
a notice, substantially in the form of Exhibit D hereto, to release the Treasury
Securities or security entitlements with respect thereto from the Pledge by
Transfer to the Purchase Contract Agent for distribution to such Holder, free
and clear of any lien, pledge or security interest created hereby.

      (c) If the Trust shall have been dissolved and liquidated and the Notes
have become a component of the Corporate Units and neither a Successful Initial
Remarketing nor a Tax Event Redemption Date shall have occurred, at any time on
or prior to the fifth Business Day immediately preceding the Purchase Contract
Settlement Date, a Holder of Treasury Units shall have the right to reestablish
Corporate Units by substitution of Notes or security entitlements with respect
thereto for Pledged Treasury Securities in integral multiples of 20 Treasury
Units by:

            (i) Transferring to the Collateral Agent for credit to the
      Collateral Account Notes or security entitlements with respect thereto
      having a principal amount equal to the Value of the Pledged Treasury
      Securities to be released, accompanied by a notice, substantially in the
      form of Exhibit C to the Purchase Contract Agreement, whereupon the
      Purchase Contract Agent shall deliver to the Collateral Agent a notice,
      substantially in the form of Exhibit C hereto, stating that such Holder
      has Transferred the Notes or security entitlements with respect thereto to
      the Collateral Agent for credit to the Collateral Account and requesting
      that the Collateral Agent release from the Pledge the Pledged Treasury
      Securities related to such Treasury Units; and

            (ii) delivering the related Treasury Units to the Purchase Contract
      Agent.

      Upon receipt of such notice and confirmation that Notes or security
entitlements with respect thereto have been credited to the Collateral Account
as described in such notice, the Collateral Agent shall instruct the Securities
Intermediary by a notice in the form provided in Exhibit D to release such
Pledged Treasury Securities from Pledge by Transfer to the Purchase

                                       14
<PAGE>

Contract Agent for distribution to such Holder, free and clear of any lien,
pledge or security interest created hereby.

      SECTION 5.04. Termination Event.

      (a) Upon receipt by the Collateral Agent of written notice from the
Company or the Purchase Contract Agent that a Termination Event has occurred,
the Collateral Agent shall release all Collateral from the Pledge and shall
promptly Transfer:

            (i) any Pledged Preferred Securities or security entitlements with
      respect thereto, the Applicable Ownership Interests (as specified in
      clause (A) of the definition of such term) of the Treasury Portfolio (if
      the Treasury Portfolio has become a component of the Corporate Units as a
      result of a Successful Initial Remarketing or Tax Event Redemption) or the
      Pledged Notes or security entitlements with respect thereto (if the Trust
      has been dissolved and liquidated, and the Notes or security entitlements
      with respect thereto have become a component of the Corporate Units);

            (ii) any Pledged Treasury Securities; and

            (iii) payments by Holders or the Permitted Investments of such
      payments pursuant to Section 5.05 hereof,

to the Purchase Contract Agent for the benefit of the Holders for distribution
to such Holders in accordance with their respective interests, free and clear of
any lien, pledge or security interest or other interest created hereby;
provided, however, if any Holder shall be entitled to receive less than $1,000
with respect to his interest in the Applicable Ownership Interests (as specified
in clause (A) of the definition of such term) of the Treasury Portfolio, the
Purchase Contract Agent shall have the right but not the obligation to dispose
of such interest for cash and deliver to such Holder cash in lieu of delivering
the Applicable Ownership Interests (as specified in clause (A) of the definition
of such term) of the Treasury Portfolio.

      (b) If such Termination Event shall result from the Company becoming a
debtor under the Bankruptcy Code, and if the Collateral Agent shall for any
reason fail promptly to effectuate the release and Transfer of all Pledged
Preferred Securities, the Applicable Ownership Interests (as specified in clause
(A) of the definition of such term) of the Treasury Portfolio, the Pledged
Notes, the Pledged Treasury Securities or payments by Holders or the Permitted
Investments of such payments pursuant to Section 5.05 hereof, as the case may
be, as provided by this Section 5.04, the Purchase Contract Agent shall, subject
to Section 7.01(b)(3):

            (i) use its best efforts to obtain an opinion of a nationally
      recognized law firm reasonably acceptable to the Collateral Agent to the
      effect that, as a result of the Company being the debtor in such a
      bankruptcy case, the Collateral Agent will not be prohibited from
      releasing or Transferring the Collateral as provided in this Section 5.04,
      and shall deliver such opinion to the Collateral Agent within ten days
      after the occurrence of such Termination Event, and if (A) the Purchase
      Contract Agent shall be unable to obtain such opinion within ten days
      after the occurrence of such Termination Event or (B) the Collateral Agent
      shall continue, after delivery of such opinion, to refuse to effectuate
      the release and Transfer of all Pledged Preferred Securities, Applicable

                                       15
<PAGE>

      Ownership Interests (as specified in clause (A) of the definition of such
      term) of the Treasury Portfolio, Pledged Notes, Pledged Treasury
      Securities, the payments by Holders or the Permitted Investments of such
      payments pursuant to Section 5.05 hereof or the Proceeds of any of the
      foregoing, as the case may be, as provided in this Section 5.04, then the
      Purchase Contract Agent shall, within fifteen days after the occurrence of
      such Termination Event commence an action or proceeding in the court
      having jurisdiction of the Company's case under the Bankruptcy Code
      seeking an order requiring the Collateral Agent to effectuate the release
      and transfer of all Pledged Preferred Securities, Applicable Ownership
      Interests (as specified in clause (A) of the definition of such term) of
      the Treasury Portfolio, Pledged Notes, Pledged Treasury Securities, or the
      payments by Holders or the Permitted Investments of such payments pursuant
      to Section 5.05 hereof, or as the case may be, as provided by this Section
      5.04; or

            (ii) commence an action or proceeding like that described in clause
      Section 5.04(b)(i) hereof within ten days after the occurrence of such
      Termination Event.

      SECTION 5.05. Cash Settlement.

      (a) Upon receipt by the Collateral Agent of (1) a notice from the Purchase
Contract Agent promptly after the receipt by the Purchase Contract Agent of a
notice from a Holder of Corporate Units that such Holder has elected, in
accordance with the procedures specified in Section 5.02(b)(i) or (e)(i) of the
Purchase Contract Agreement, respectively, to effect a Cash Settlement and (2)
payment by such Holder by deposit in the Collateral Account prior to 11:00 a.m.
(New York City time) on the Business Day immediately preceding the Purchase
Contract Settlement Date of the Purchase Price in lawful money of the United
States by certified or cashier's check or wire transfer of immediately available
funds payable to or upon the order of the Securities Intermediary, then the
Collateral Agent shall:

            (i) instruct the Securities Intermediary promptly to invest any such
      Cash in Permitted Investments;

            (ii) release from the Pledge the Corporate Unit Holder's or the
      Treasury Unit Holder's related Pledged Preferred Securities, Applicable
      Ownership Interests (as specified in clause (A) of the definition of such
      term) of the Treasury Portfolio, Pledged Notes or Pledged Treasury
      Securities, as applicable, as to which such Holder has elected to effect a
      Cash Settlement pursuant to this Section 5.05(a); and

            (iii) instruct the Securities Intermediary to Transfer all such
      Pledged Preferred Securities, Applicable Ownership Interests (as specified
      in clause (A) of the definition of such term) of the Treasury Portfolio,
      Pledged Notes or Pledged Treasury Securities, as the case may be, to the
      Purchase Contract Agent for the benefit of such Holder, in each case free
      and clear of the Pledge created hereby, for distribution to such Holder.

      The Company shall instruct the Collateral Agent in writing as to the type
of Permitted Investments in which any such Cash shall be invested; provided,
however, that if the Company fails to deliver such written instructions by 10:30
a.m. (New York City time), the Securities

                                       16
<PAGE>

Intermediary shall invest such Cash in the Permitted Investments described in
clause (7) of the definition of Permitted Investments.

      Upon receipt of the proceeds upon the maturity of the Permitted
Investments on the Purchase Contract Settlement Date, the Collateral Agent shall
in respect of each Purchase Contract settled pursuant to Section 5.02(b)(i) or
(e)(i) of the Purchase Contract Agreement (A) instruct the Securities
Intermediary to pay the portion of such proceeds and deliver any certified or
cashier's checks received, in an amount equal to the Purchase Price, to the
Company on the Purchase Contract Settlement Date, and (B) instruct the
Securities Intermediary to release any amounts in excess of the Purchase Price
earned from such Permitted Investments to the Purchase Contract Agent for
distribution to such Holder.

      (b) If a Holder of Corporate Units (unless a Tax Event Redemption Date or
a Successful Initial Remarketing shall have occurred) fails to notify the
Purchase Contract Agent of its intention to make a Cash Settlement as provided
in paragraph 5.02(b)(i) of the Purchase Contract Agreement, such Holder shall be
deemed to have consented to the disposition of such Holder's Pledged Preferred
Securities or Pledged Notes, as the case may be, in accordance with paragraph
5.02(b)(iii) of the Purchase Contract Agreement.

      (c) If a Holder of a Corporate Unit (if a Tax Event Redemption Date or a
Successful Initial Remarketing shall have occurred) or a Holder of a Treasury
Unit (i) fails to notify the Purchase Contract Agent of its intention to make a
Cash Settlement as provided in paragraph 5.02(e)(i) of the Purchase Contract
Agreement or (ii) does notify the Purchase Contract Agent as provided in
paragraph 5.02(e)(ii) of the Purchase Contract Agreement of its intention to pay
the Purchase Price in cash, but fails to make such payment as required by
paragraph 5.02(e)(ii) of the Purchase Contract Agreement, such Holder shall be
deemed to have elected to pay the Purchase Price in accordance with paragraph
5.02(e)(iii) of the Purchase Contract Agreement.

      (d) As soon as practicable after 11:00 a.m. (New York City time) on the
Business Day immediately preceding the Purchase Contract Settlement Date, the
Collateral Agent shall deliver to the Purchase Contract Agent a notice,
substantially in the form of Exhibit E hereto, stating (i) the amount of Cash
that it has received with respect to the Cash Settlement of Corporate Units and
(ii) the amount of Cash that it has received with respect to the Cash Settlement
of Treasury Units.

      SECTION 5.06. Early Settlement. Upon receipt by the Collateral Agent of a
notice from the Purchase Contract Agent that a Holder of Securities has elected
to effect Early Settlement of its obligations under the Purchase Contracts
forming a part of such Securities in accordance with the terms of the Purchase
Contracts and Section 5.07 or Section 5.04(b)(2) (in case of an early settlement
upon a Cash Merger) of the Purchase Contract Agreement (which notice shall set
forth the number of such Purchase Contracts as to which such Holder has elected
to effect Early Settlement), and that the Purchase Contract Agent has received
from such Holder, and paid to the Company as confirmed in writing by the
Company, the related Early Settlement Amounts or Purchase Price (if such Early
Settlement is pursuant to Section 5.04(b)(2) of the Purchase Contract Agreement)
pursuant to the terms of the Purchase Contracts and the Purchase Contract
Agreement and that all conditions to such Early Settlement have been satisfied,
then the

                                       17
<PAGE>

Collateral Agent shall release from the Pledge, (1) Pledged Preferred
Securities, appropriate Applicable Ownership Interests (as specified in clause
(A) of the definitions at such term) of the Treasury Portfolio or Pledged Notes
in the case of a Holder of Corporate Units or (2) Pledged Treasury Securities,
in the case of a Holder of Treasury Units, in each case with a Value equal to
the product of (x) the Stated Amount times (y) the number of Purchase Contracts
as to which such Holder has elected to effect Early Settlement, and shall
instruct the Securities Intermediary to Transfer all such Pledged Preferred
Securities, appropriate Applicable Ownership Interests (as specified in clause
(A) of the definitions at such term) of the Treasury Portfolio, Pledged Notes or
Pledged Treasury Securities, as the case may be, to the Purchase Contract Agent
for the benefit of such Holder, in each case free and clear of the Pledge
created hereby, for distribution to such Holder. A Treasury Unit Holder may
settle early only in integral multiples of 20 Purchase Contracts and a Corporate
Unit Holder, if a Tax Event Redemption Date or a Successful Initial Remarketing
has occurred, may settle early only in such integral multiples of Purchase
Contracts as will enable the U.S. Treasury securities comprising the Applicable
Ownership Interest of the Treasury Portfolio to be released in whole multiples.

      SECTION 5.07. Application of Proceeds in Settlement of Purchase Contracts.

      (a) If a Holder of Corporate Units (unless a Successful Initial
Remarketing or a Tax Event Redemption has occurred) has not elected to make an
effective Cash Settlement by notifying the Purchase Contract Agent in the manner
provided for in Section 5.02(b)(i) of the Purchase Contract Agreement, such
Holder shall be deemed to have elected to pay for the shares of Common Stock to
be issued under such Purchase Contracts from the Proceeds of the Remarketing of
the related Pledged Preferred Securities or Pledged Notes. Upon written notice
of such event from the Purchase Contract Agent, the Collateral Agent shall
instruct the Securities Intermediary to Transfer the related Pledged Preferred
Securities or Pledged Notes to the Remarketing Agent for Remarketing. Upon
receiving such Pledged Preferred Securities or Pledged Notes, the Remarketing
Agent, pursuant to the terms of the Remarketing Agreement, will use reasonable
efforts to Remarket such Pledged Preferred Securities or Pledged Notes. The
Remarketing Agent will deposit the Proceeds of such Secondary Remarketing (less,
to the extent permitted by the Remarketing Agreement, the Remarketing Fee) in
the Collateral Account, and the Collateral Agent shall invest the Proceeds of
the Remarketing in Permitted Investments set forth in clause (7) of the
definition of Permitted Investments, unless prior to 10:30 a.m. (New York City
time), the Company shall otherwise instruct the Collateral Agent as to the type
of Permitted Investments in which any such Proceeds shall be invested. On the
Purchase Contract Settlement Date, the Purchase Contract Agent shall give
written direction to the Collateral Agent specifying the instruction the
Collateral Agent shall give to the Securities Intermediary in order to apply a
portion of the Proceeds from such Remarketing equal to the aggregate liquidation
amount of the Preferred Securities or aggregate principal amount of such Pledged
Notes to satisfy in full such Holder's obligations to pay the Purchase Price to
purchase the shares of Common Stock under the related Purchase Contracts and the
balance of the Proceeds from the Remarketing, if any, that shall be transferred
to the Purchase Contract Agent for the benefit of such Holder for distribution
to such Holder.

      If (i) the Remarketing Agent advises the Collateral Agent in writing that
there has been a Failed Secondary Remarketing or (ii) a Holder of Corporate
Units has given notice of its intention to make a Cash Settlement in the manner
provided for in Section 5.02(b)(i) of the

                                       18
<PAGE>

Purchase Contract Agreement, but failed to deliver the required cash prior to
11:00 a.m. (New York City time) on the Business Day immediately preceding the
Purchase Contract Settlement Date, thus, in each case, resulting in an event of
default under the Purchase Contract Agreement and hereunder, the Collateral
Agent, for the benefit of the Company shall, at the written direction of the
Company, exercise its rights as a secured party with respect to the Pledged
Notes and use commercially reasonable efforts to dispose of the Pledged Notes in
accordance with applicable law and apply the proceeds from such disposition in
full satisfaction of such Holder's obligations to pay the Purchase Price for the
shares of Common Stock.

      (b) If a Holder of Corporate Units (if a Tax Event Redemption or a
Successful Initial Remarketing has occurred) or a Holder of Treasury Units has
not elected to make an effective Cash Settlement by notifying the Purchase
Contract Agent in the manner provided for in Section 5.02(e)(i) of the Purchase
Contract Agreement, or has given such notice but failed to make such payment in
the manner required by Section 5.02(e)(ii) of the Purchase Contract Agreement,
such Holder shall be deemed to have elected to pay for the shares of Common
Stock to be issued under such Purchase Contracts from the Proceeds of the
related Pledged Treasury Securities or such Applicable Ownership Interests (as
specified in clause (A) of the definition of such term) of the Treasury
Portfolio, as the case may be. Promptly, after 11:00 a.m. (New York City time)
on the Business Day immediately prior to the Purchase Contract Settlement Date,
the Collateral Agent shall invest the Cash Proceeds of the maturing Pledged
Treasury Securities or such Applicable Ownership Interests (as specified in
clause (A) of the definition of such term) of the Treasury Portfolio, as the
case may be, in Permitted Investments set forth in clause (7) of the definition
of Permitted Investments, unless prior to 10:30 a.m. (New York City time), the
Company shall otherwise instruct the Collateral Agent as to the type of
Permitted Investments in which any such Cash Proceeds shall be invested. Without
receiving any instruction from any such Holder, the Collateral Agent shall apply
the Proceeds of the related Pledged Treasury Securities or such Applicable
Ownership Interests (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio, as the case may be, to the settlement of such
Purchase Contracts on the Purchase Contract Settlement Date. In the event the
sum of the Proceeds from the related Pledged Treasury Securities or such
Applicable Ownership Interests (as specified in clause (A) of the definition of
such term) of the Treasury Portfolio as the case may be, and the investment
earnings from the investment in Permitted Investments exceeds the aggregate
Purchase Price of the Purchase Contracts being settled thereby, the Collateral
Agent shall instruct the Securities Intermediary to distribute such excess, when
received, to the Purchase Contract Agent for the benefit of such Holder for
distribution to such Holder.

      (c) Under the Remarketing Agreement and subject to the terms of any
supplemental Remarketing Agreement, on or prior to the second Business Day
immediately preceding the Initial Remarketing Date or the Secondary Remarketing
Date, as the case may be, but no earlier than the Payment Date immediately
preceding the Initial Remarketing Date or the Secondary Remarketing Date,
Holders of Separate Preferred Securities or Separate Notes, as the case may be,
may elect to have their Separate Preferred Securities or Separate Notes, as the
case may be, remarketed by delivering their Separate Preferred Securities or
Separate Notes, as the case may be, along with a notice of such election,
substantially in the form of Exhibit F hereto, to the Custodial Agent. The
Custodial Agent shall hold Separate Preferred Securities or Separate Notes, as

                                       19
<PAGE>

the case may be, in an account separate from the Collateral Account in which the
Pledged Securities shall be held. Holders of Separate Preferred Securities or
Separate Notes, as the case may be, electing to have their Separate Preferred
Securities or Separate Notes, as the case may be, remarketed will also have the
right to withdraw that election by written notice to the Custodial Agent,
substantially in the form of Exhibit G hereto, on or prior to the second
Business Day immediately preceding the Initial Remarketing Date or the Secondary
Remarketing Date, as applicable, upon which notice the Custodial Agent shall
return such Separate Notes to such Holder.

      On or prior to 11:00 a.m. on the Business Day immediately preceding the
Initial Remarketing Date or the Secondary Remarketing Date, as applicable, the
Custodial Agent shall notify the Remarketing Agent of the aggregate liquidation
amount of the Separate Preferred Securities or the aggregate principal amount of
the Separate Notes, as the case may be, to be remarketed and will deliver to the
Remarketing Agent for Remarketing all Separate Preferred Securities or Separate
Notes, as the case may be, delivered to the Custodial Agent pursuant to this
Section 5.07(c) and not withdrawn pursuant to the terms hereof prior to such
date. After deducting the Remarketing Fee to the extent permitted under the
terms of the Remarketing Agreement, the Remarketing Agent will remit to the
Custodial Agent the remaining portion of the proceeds of such Remarketing for
the benefit of such Holders. In the event of a Failed Initial Remarketing or a
Failed Secondary Remarketing, the Remarketing Agent will promptly return such
Separate Preferred Securities or Separate Notes, as the case may be, to the
Custodial Agent for redelivery to such Holders.

      SECTION 5.08. Tax Event Redemption. If the Collateral Agent receives
written notice that a Tax Event Redemption Date has occurred while the Preferred
Securities or Notes are still credited to the Collateral Account, the Collateral
Agent shall apply the Redemption Amount to purchase the Treasury Portfolio from
the Quotation Agent and the Collateral Agent shall credit the Applicable
Ownership Interests (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio to the Collateral Account and shall transfer the
Applicable Ownership Interests (as specified in clause (B) of the definition of
such term) of the Treasury Portfolio to the Purchase Contract Agent for the
benefit of the Holders of the Corporate Units. Upon credit to the Collateral
Account of the Applicable Ownership Interests (as specified in clause (A) of the
definition of such term) of the Treasury Portfolio having a Value equal to the
liquidation amount of the Pledged Preferred Securities or the aggregate
principal amount of the Pledged Notes, the Collateral Agent shall cause the
Securities Intermediary to release the Pledged Preferred Securities or the
Pledged Notes, as applicable, from the Collateral Account and to promptly
transfer the Pledged Preferred Securities or Pledged Notes, as the case may be,
to the Company.

                                    ARTICLE 6
         VOTING RIGHTS - PLEDGED PREFERRED SECURITIES AND PLEDGED NOTES

      SECTION 6.01. Voting Rights. The Purchase Contract Agent may exercise, or
refrain from exercising, any and all voting and other consensual rights
pertaining to the Pledged Preferred Securities or the Pledged Notes or any part
thereof for any purpose not inconsistent with the terms of this Agreement and in
accordance with Section 4.02 of the Purchase Contract Agreement; provided, that
the Purchase Contract Agent shall give the Company and the Collateral Agent at
least five Business Days' prior written notice of the manner in which it intends
to exercise, or its reasons for refraining from exercising, any such right. Upon
receipt of any notices and other communications in respect of any Pledged
Preferred Securities or the

                                       20
<PAGE>

Pledged Notes, including notice of any meeting at which holders of the Preferred
Securities or the Notes are entitled to vote or solicitation of consents,
waivers or proxies of holders of the Preferred Securities or Notes, the
Collateral Agent shall use reasonable efforts to send promptly to the Purchase
Contract Agent such notice or communication, and as soon as reasonably
practicable after receipt of a written request therefor from the Purchase
Contract Agent, execute and deliver to the Purchase Contract Agent such proxies
and other instruments in respect of such Pledged Preferred Securities or the
Pledged Notes (in form and substance satisfactory to the Collateral Agent) as
are delivered by the Purchase Contract Agent with respect to the Pledged
Preferred Securities or the Pledged Notes.

                                    ARTICLE 7
                               RIGHTS AND REMEDIES

      SECTION 7.01. Rights and Remedies of the Collateral Agent.

      (a) In addition to the rights and remedies specified in Section 5.07
hereof or otherwise available at law or in equity, after an event of default (as
specified in Section 7.01(b) below) hereunder, the Collateral Agent shall have
all of the rights and remedies with respect to the Collateral of a secured party
under the UCC (whether or not the UCC is in effect in the jurisdiction where the
rights and remedies are asserted) and the TRADES Regulations and such additional
rights and remedies to which a secured party is entitled under the laws in
effect in any jurisdiction where any rights and remedies hereunder may be
asserted. Without limiting the generality of the foregoing, such remedies may
include, to the extent permitted by applicable law, (1) retention of the Pledged
Preferred Securities, Pledged Notes, Pledged Treasury Securities or the
appropriate Applicable Ownership Interests (as specified in clause (A) of the
definition of such term) of the Treasury Portfolio in full satisfaction of the
Holders' obligations under the Purchase Contracts and the Purchase Contract
Agreement or (2) sale of the Pledged Preferred Securities, Pledged Notes,
Pledged Treasury Securities or the appropriate Applicable Ownership Interests
(as specified in clause (A) of the definition of such term) of the Treasury
Portfolio in one or more public or private sales.

      (b) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, in the event the Collateral Agent is unable
to make payments to the Company on account of the appropriate Applicable
Ownership Interests (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio, or on account of principal payments of any Pledged
Treasury Securities as provided in Article 3 hereof, in satisfaction of the
Obligations of the Holder of the Securities of which such Pledged Applicable
Ownership Interests or such Pledged Treasury Securities, as applicable, are a
part under the related Purchase Contracts, the inability to make such payments
shall constitute an event of default hereunder and the Collateral Agent shall
have and may exercise, with reference to such Pledged Treasury Securities or
Pledged Applicable Ownership Interests of the Treasury Portfolio, as applicable,
any and all of the rights and remedies available to a secured party under the
UCC and the TRADES Regulations after default by a debtor, and as otherwise
granted herein or under any other law.

      (c) Without limiting any rights or powers otherwise granted by this
Agreement to the Collateral Agent, the Collateral Agent is hereby irrevocably
authorized to receive and collect all payments of (i) the liquidation amount of
the Pledged Preferred Securities, (ii) the principal

                                       21
<PAGE>

amount of the Pledged Notes, (iii) the principal amount of the Pledged Treasury
Securities and (iv) the principal amount of the Pledged Applicable Ownership
Interests, subject, in each case, to the provisions of Article 3 hereof, and as
otherwise granted herein.

      (d) The Purchase Contract Agent and each Holder of Securities agrees that,
from time to time, upon the written request of the Collateral Agent or the
Purchase Contract Agent, such Holder shall execute and deliver such further
documents and do such other acts and things as the Collateral Agent may
reasonably request in order to maintain the Pledge, and the perfection and
priority thereof, and to confirm the rights of the Collateral Agent hereunder.
The Purchase Contract Agent shall have no liability to any Holder or any other
third party for executing any documents or taking any such acts requested by the
Collateral Agent hereunder, except for liability for its own negligent acts, its
own negligent failure to act or its own willful misconduct.

      SECTION 7.02. Substitution of Notes or Treasury Portfolio. If the Trust
shall have been dissolved and liquidated prior to the Purchase Contract
Settlement Date, the Purchase Contract Agent shall Transfer to the Collateral
Agent Notes having a Value equal to the liquidation amount of the Pledged
Preferred Securities for credit to the Collateral Account. Upon credit to the
Collateral Account of such Notes, the Collateral Agent shall release the Pledged
Preferred Securities from the Collateral Account and shall promptly transfer the
same to the Purchase Contract Agent.

      Notwithstanding the foregoing, in the event of a dissolution and
liquidation of the Trust, if a Liquidation Distribution is to be distributed in
lieu of the Notes as provided for in the Declaration, the Liquidation
Distribution shall be credited to the Collateral Account by the Property
Trustee, on or prior to 12:30 p.m., New York City time, on the date of
distribution of the Liquidation Distribution, by federal funds check or wire
transfer of immediately available funds. The Collateral Agent is hereby
authorized to present the Pledged Preferred Securities for payment as may be
required by their terms. Upon receipt of such funds, the Pledged Preferred
Securities shall be released from the Collateral Account. In the event such
funds are credited to the Collateral Account, the Collateral Agent, at the
written direction of the Company, shall instruct the Securities Intermediary to
(a) apply an amount equal to the Redemption Amount of such Liquidation
Distribution to purchase the Treasury Portfolio from the Quotation Agent for
credit to the Collateral Account and (b) promptly remit the remaining portion of
such Liquidation Distribution, if any, to the Purchase Contract Agent for
payment to the Holders of Corporate Units. To the extent that the Treasury
Portfolio is purchased pursuant to the preceding sentence, the Treasury
Portfolio shall replace the Preferred Securities as Collateral as and to the
extent that the Proceeds from such Liquidation Distribution were Proceeds from a
Tax Event Redemption or Succeeding Initial Remarketing for all purposes under
this Agreement and the Purchase Contract Agreement. To the extent that the
Proceeds from such Liquidation Distribution are not sufficient to purchase the
Treasury Portfolio, the Collateral Agent shall invest such Proceeds in Permitted
Investments set forth in clause (7) of the definition of Permitted Investments.

      SECTION 7.03. Tax Event Redemption. Upon the occurrence of a Tax Event
Redemption Date while Preferred Securities or Notes are still credited to the
Collateral Account, the Redemption Amount, plus any accumulated and unpaid
distributions, or any accrued and unpaid interest, as the case may be, payable
on the Tax Event Redemption Date with respect to the Applicable Principal Amount
shall be credited to the Collateral Account by the Property

                                       22
<PAGE>

Trustee or, in case there has been a dissolution of the Trust and the
distribution of the related Notes, by the Indenture Trustee, on or prior to
12:30 p.m., New York City time on such Tax Event Redemption Date, by federal
funds check or wire transfer of immediately available funds. The Collateral
Agent is hereby authorized to present the Pledged Preferred Securities or the
Pledged Notes for payment as may be required by their respective terms. Upon
receipt of such funds, the Pledged Preferred Securities or Pledged Notes, as the
case may be, shall be released from the Collateral Account. In the event such
funds are credited to the Collateral Account, the Collateral Agent, at the
written direction of the Company, shall instruct the Securities Intermediary to
(a) apply an amount equal to the Redemption Amount of such funds to purchase the
Treasury Portfolio from the Quotation Agent for credit to the Collateral Account
and (b) promptly remit the remaining portion of such funds, if any, to the
Purchase Contract Agent for payment to the Holders of Corporate Units.

      SECTION 7.04. Initial Remarketing. Upon notice from the Company of the
Initial Remarketing Date, the Collateral Agent shall, by 11:00 a.m., New York
City time, on the Business Day immediately preceding the Initial Remarketing
Date, without any instruction from any Holder of Corporate Units, present the
related Pledged Preferred Securities or Pledged Notes, as the case may be, to
the Remarketing Agent for remarketing. Upon receiving such Pledged Preferred
Securities or Pledged Notes and any Separate Preferred Securities or Separate
Notes duly presented for remarketing pursuant to Section 5.02(a)(i) of the
Purchase Contract Agreement, the Remarketing Agent, pursuant to the terms of the
Remarketing Agreement, will use its reasonable efforts to remarket such
Preferred Securities or Notes on the Initial Remarketing Date at a price of
approximately 100.25% (but not less than 100%) of the Treasury Portfolio
Purchase Price, the Separate Preferred Securities or Notes Purchase Price, plus
deferred and unpaid distributions or interest, if any, on the Preferred
Securities or Notes. After deduction as the Remarketing Fee of an amount not
exceeding 25 basis points (.25%) of the sum of the Treasury Portfolio Purchase
Price, the Separate Preferred Securities or Notes Purchase Price and deferred
and unpaid distributions or interest, if any, on the Preferred Securities or
Notes from any amount of such Proceeds in excess of the sum of Treasury
Portfolio Purchase Price, the Separate Preferred Securities or Notes Purchase
Price, and deferred and unpaid distributions or interest, if any, on the
Preferred Securities or Notes, the Remarketing Agent will remit the entire
amount of the Proceeds of such Remarketing of the Pledged Securities or Pledged
Notes to the Collateral Agent on or prior to 12:00 p.m., New York City time, on
the Initial Reset Date by check or wire transfer in immediately available funds
at such place and at such account as may be designated by the Collateral Agent
in exchange for the Pledged Preferred Securities or Pledged Notes. In the event
the Collateral Agent receives such Proceeds, the Collateral Agent will, at the
written direction of the Company, apply an amount equal to the Treasury
Portfolio Purchase Price to purchase from the Quotation Agent the Treasury
Portfolio and promptly remit the remaining portion of such Proceeds to the
Purchase Contract Agent for payment to the Holders of Corporate Units. The
Collateral Agent shall Transfer the Treasury Portfolio to the Collateral Account
to secure the obligation of all Holders of Corporate Units to purchase Common
Stock of the Company under the Purchase Contracts constituting a part of such
Corporate Units, in substitution for the Pledged Preferred Securities or Pledged
Notes, which shall be released from the Collateral Account. With respect to the
Separate Preferred Securities or Notes, any proceeds of the Initial Remarketing
in excess of the Remarketing Fee attributable to the Separate Preferred
Securities or Notes will be remitted to the Custodial Agent for payment to the
holders of Separate Preferred Securities or Notes. In the event of a Failed
Initial

                                       23
<PAGE>

Remarketing, the Preferred Securities or Notes presented to the Remarketing
Agent pursuant to this Section 7.03 for Remarketing shall be redeposited into
the Collateral Account.

      SECTION 7.05. Substitutions. Whenever a Holder has the right to substitute
Treasury Securities, Preferred Securities, Notes or security entitlements for
any of them or the appropriate Applicable Ownership Interests of the Treasury
Portfolio, as the case may be, for financial assets held in the Collateral
Account, such substitution shall not constitute a novation of the security
interest created hereby.

                                    ARTICLE 8
                    REPRESENTATIONS AND WARRANTIES; COVENANTS

      SECTION 8.01. Representations and Warranties. Each Holder from time to
time, acting through the Purchase Contract Agent as attorney-in-fact (it being
understood that the Purchase Contract Agent shall not be liable for any
representation or warranty made by or on behalf of a Holder), hereby represents
and warrants to the Collateral Agent (with respect to such Holder's interest in
the Collateral), which representations and warranties shall be deemed repeated
on each day a Holder Transfers Collateral that:

      (a) such Holder has the power to grant a security interest in and lien on
the Collateral;

      (b) such Holder is the sole beneficial owner of the Collateral and, in the
case of Collateral delivered in physical form, is the sole holder of such
Collateral and is the sole beneficial owner of, or has the right to Transfer,
the Collateral it Transfers to the Collateral Agent for credit to the Collateral
Account, free and clear of any security interest, lien, encumbrance, call,
liability to pay money or other restriction other than the security interest and
lien granted under Article 2 hereof;

      (c) upon the Transfer of the Collateral to the Collateral Agent for credit
to the Collateral Account, the Collateral Agent, for the benefit of the Company,
will have a valid and perfected first priority security interest therein
(assuming that any central clearing operation or any securities intermediary or
other entity not within the control of the Holder involved in the Transfer of
the Collateral, including the Collateral Agent and the Securities Intermediary,
gives the notices and takes the action required of it hereunder and under
applicable law for perfection of that interest and assuming the establishment
and exercise of control pursuant to Article 4 hereof); and

      (d) the execution and performance by the Holder of its obligations under
this Agreement will not result in the creation of any security interest, lien or
other encumbrance on the Collateral other than the security interest and lien
granted under Article 2 hereof or violate any provision of any existing law or
regulation applicable to it or of any mortgage, charge, pledge, indenture,
contract or undertaking to which it is a party or which is binding on it or any
of its assets.

      SECTION 8.02. Covenants. The Holders from time to time, acting through the
Purchase Contract Agent as their attorney-in-fact (it being understood that the
Purchase Contract Agent shall not be liable for any covenant made by or on
behalf of a Holder), hereby covenant to the Collateral Agent that for so long as
the Collateral remains subject to the Pledge:

                                       24
<PAGE>

      (a) neither the Purchase Contract Agent nor such Holders will create or
purport to create or allow to subsist any mortgage, charge, lien, pledge or any
other security interest whatsoever over the Collateral or any part of it other
than pursuant to this Agreement; and

      (b) neither the Purchase Contract Agent nor such Holders will sell or
otherwise dispose (or attempt to dispose) of the Collateral or any part of it
except for the beneficial interest therein, subject to the Pledge hereunder,
transferred in connection with the Transfer of the Securities.

                                    ARTICLE 9
    THE COLLATERAL AGENT, THE CUSTODIAL AGENT AND THE SECURITIES INTERMEDIARY

      It is hereby agreed as follows:

      SECTION 9.01. Appointment, Powers and Immunities. The Collateral Agent,
the Custodial Agent or the Securities Intermediary shall act as agent for the
Company hereunder with such powers as are specifically vested in the Collateral
Agent, the Custodial Agent or the Securities Intermediary, as the case may be,
by the terms of this Agreement, together with such other powers as are
reasonably incidental thereto. The Collateral Agent, Custodial Agent and
Securities Intermediary shall:

      (a) have no duties or responsibilities except those expressly set forth in
this Agreement and no implied covenants or obligations shall be inferred from
this Agreement against the Collateral Agent, Custodial Agent and Securities
Intermediary, nor shall the Collateral Agent, Custodial Agent and Securities
Intermediary be bound by the provisions of any agreement by any party hereto
beyond the specific terms hereof;

      (b) not be responsible for any recitals contained in this Agreement, or in
any certificate or other document referred to or provided for in, or received by
it under, this Agreement, the Securities or the Purchase Contract Agreement, or
for the value, validity, effectiveness, genuineness, enforceability (other than
as against the Collateral Agent, the Custodial Agent or the Securities
Intermediary, as the case may be) or sufficiency of this Agreement, the
Securities or the Purchase Contract Agreement or any other document referred to
or provided for herein or therein or for any failure by the Company or any other
Person (except the Collateral Agent, the Custodial Agent or the Securities
Intermediary, as the case may be) to perform any of its obligations hereunder or
thereunder or for the perfection, priority or, except as expressly required
hereby, maintenance of any security interest created hereunder;

      (c) not be required to initiate or conduct any litigation or collection
proceedings hereunder (except pursuant to written directions furnished under
Section 9.02 hereof, subject to Section 9.06 hereof);

      (d) not be responsible for any action taken or omitted to be taken by it
hereunder or under any other document or instrument referred to or provided for
herein or in connection herewith or therewith, except for its own negligence or
willful misconduct; and

                                       25
<PAGE>

      (e) not be required to advise any party as to selling or retaining, or
taking or refraining from taking any action with respect to, any securities or
other property deposited hereunder.

      Subject to the foregoing, during the term of this Agreement, the
Collateral Agent shall take all reasonable action in connection with the
safekeeping and preservation of the Collateral hereunder.

      No provision of this Agreement shall require the Collateral Agent,
Custodial Agent or Securities Intermediary to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder. In no event shall the Collateral Agent or Securities Intermediary be
liable for any amount in excess of the Value of the Collateral. Notwithstanding
the foregoing, each of the Collateral Agent and the Securities Intermediary in
its individual capacity hereby waives any right of setoff, bankers' lien, liens
or perfection rights as securities intermediary or any counterclaim with respect
to any of the Collateral.

      SECTION 9.02. Instructions of the Company. The Company shall have the
right, by one or more written instruments executed and delivered to the
Collateral Agent, to direct the time, method and place of conducting any
proceeding for the realization of any right or remedy available to the
Collateral Agent, or of exercising any power conferred on the Collateral Agent,
or to direct the taking or refraining from taking of any action authorized by
this Agreement; provided, however, that (i) such direction shall not conflict
with the provisions of any law or of this Agreement and (ii) the Collateral
Agent shall have received indemnity satisfactory to it as provided herein.
Nothing contained in this Section 9.02 shall impair the right of the Collateral
Agent in its discretion to take any action or omit to take any action which it
deems proper and which is not inconsistent with such direction.

      SECTION 9.03. Reliance. Each of the Securities Intermediary, the Custodial
Agent and the Collateral Agent shall be entitled to conclusively rely upon any
certification, order, judgment, opinion, notice or other written communication
(including, without limitation, any thereof by e-mail or similar electronic
means, telecopy, telex or facsimile) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons
(without being required to determine the correctness of any fact stated therein)
and consult with and rely upon advice, opinions and statements of legal counsel
and other experts selected by the Collateral Agent, the Custodial Agent or the
Securities Intermediary, as the case may be. As to any matters not expressly
provided for by this Agreement, the Collateral Agent, the Custodial Agent and
the Securities Intermediary shall in all cases be fully protected in acting, or
in refraining from acting, hereunder in accordance with instructions given by
the Company in accordance with this Agreement.

      SECTION 9.04. Rights in Other Capacities. The Collateral Agent, the
Custodial Agent and the Securities Intermediary and their affiliates may
(without having to account therefor to the Company) accept deposits from, lend
money to, make their investments in and generally engage in any kind of banking,
trust or other business with the Purchase Contract Agent, any other Person
interested herein and any Holder of Securities (and any of their respective
subsidiaries or affiliates) as if it were not acting as the Collateral Agent,
the Custodial Agent or the Securities Intermediary, as the case may be, and the
Collateral Agent, the Custodial

                                       26
<PAGE>

Agent, the Securities Intermediary and their affiliates may accept fees and
other consideration from the Purchase Contract Agent and any Holder of
Securities without having to account for the same to the Company; provided that
each of the Securities Intermediary, the Custodial Agent and the Collateral
Agent covenants and agrees with the Company that it shall not accept, receive or
permit there to be created in favor of itself and shall take no affirmative
action to permit there to be created in favor of any other Person, any security
interest, lien or other encumbrance of any kind in or upon the Collateral other
than the lien created by the Pledge.

      SECTION 9.05. Non-Reliance. None of the Securities Intermediary, the
Custodial Agent or the Collateral Agent shall be required to keep itself
informed as to the performance or observance by the Purchase Contract Agent or
any Holder of Securities of this Agreement, the Purchase Contract Agreement, the
Securities or any other document referred to or provided for herein or therein
or to inspect the properties or books of the Purchase Contract Agent or any
Holder of Securities. None of the Collateral Agent, the Custodial Agent or the
Securities Intermediary shall have any duty or responsibility to provide the
Company with any credit or other information concerning the affairs, financial
condition or business of the Purchase Contract Agent or any Holder of Securities
(or any of their respective affiliates) that may come into the possession of the
Collateral Agent, the Custodial Agent or the Securities Intermediary or any of
their respective affiliates.

      SECTION 9.06. Compensation and Indemnity. The Company agrees to:

      (a) pay the Collateral Agent, the Custodial Agent and the Securities
Intermediary from time to time such compensation as shall be agreed in writing
between the Company and the Collateral Agent, the Custodial Agent or the
Securities Intermediary, as the case may be, for all services rendered by them
hereunder;

      (b) indemnify and hold harmless the Collateral Agent, the Custodial Agent
and the Securities Intermediary and each of their respective directors,
officers, agents and employees (collectively, the "Indemnitees"), harmless from
and against any and all claims, liabilities, losses, damages, fines, penalties
and expenses (including reasonable fees and expenses of counsel) (collectively,
"Losses" and individually, a "Loss") that may be imposed on, incurred by, or
asserted against, the Indemnitees or any of them for following any instructions
or other directions upon which either the Collateral Agent, the Custodial Agent
or the Securities Intermediary is entitled to conclusively rely pursuant to the
terms of this Agreement; and

      (c) in addition to and not in limitation of paragraph (b) immediately
above, indemnify and hold the Indemnitees and each of them harmless from and
against any and all Losses that may be imposed on, incurred by or asserted
against, the Indemnitees or any of them in connection with or arising out of the
Collateral Agent's, the Custodial Agent's or the Securities Intermediary's
acceptance or performance of its powers and duties under this Agreement,
provided the Collateral Agent, the Custodial Agent or the Securities
Intermediary has not acted with negligence or engaged in willful misconduct or
bad faith with respect to the specific Loss against which indemnification is
sought.

      SECTION 9.07. Failure to Act. In the event of any ambiguity in the
provisions of this Agreement or any dispute between or conflicting claims by or
among the parties hereto or any

                                       27
<PAGE>

other Person with respect to any funds or property deposited hereunder, then at
its sole option, each of the Collateral Agent, the Custodial Agent and the
Securities Intermediary shall be entitled, after prompt notice to the Company
and the Purchase Contract Agent, to refuse to comply with any and all claims,
demands or instructions with respect to such property or funds so long as such
dispute or conflict shall continue, and the Collateral Agent, the Custodial
Agent and the Securities Intermediary shall not be or become liable in any way
to any of the parties hereto for its failure or refusal to comply with such
conflicting claims, demands or instructions. The Collateral Agent, the Custodial
Agent and the Securities Intermediary shall be entitled to refuse to act until
either:

      (a) such conflicting or adverse claims or demands shall have been finally
determined by a court of competent jurisdiction or settled by agreement between
the conflicting parties as evidenced in a writing satisfactory to the Collateral
Agent, the Custodial Agent or the Securities Intermediary; or

      (b) the Collateral Agent, the Custodial Agent or the Securities
Intermediary shall have received security or an indemnity satisfactory to it
sufficient to save it harmless from and against any and all loss, liability or
reasonable out-of-pocket expense which it may incur by reason of its acting.

The Collateral Agent, the Custodial Agent and the Securities Intermediary may in
addition elect to commence an interpleader action or seek other judicial relief
or orders as the Collateral Agent, the Custodial Agent or the Securities
Intermediary may deem necessary. Notwithstanding anything contained herein to
the contrary, none of the Collateral Agent, the Custodial Agent or the
Securities Intermediary shall be required to take any action that is in its
opinion contrary to law or to the terms of this Agreement, or which would in its
opinion subject it or any of its officers, employees or directors to liability.

      SECTION 9.08. Resignation.

      (a) Subject to the appointment and acceptance of a successor Collateral
Agent, Custodial Agent or Securities Intermediary as provided below:

            (i) if the Collateral Agent, the Custodial Agent or the Securities
      Intermediary is the same Person as the Purchase Contract Agent and an
      event of default occurs under the Purchase Contract Agreement or this
      Agreement, except an event of default as a result of (x) a Failed
      Secondary Remarketing or (y) the event referred to in clause (ii) of the
      second paragraph of Section 5.07(a) hereof, the Collateral Agent, the
      Custodial Agent or the Securities Intermediary shall resign immediately;

            (ii) the Collateral Agent, the Custodial Agent and the Securities
      Intermediary may resign at any time by giving notice thereof to the
      Company and the Purchase Contract Agent as attorney-in-fact for the
      Holders of Securities;

            (iii) the Collateral Agent, the Custodial Agent and the Securities
      Intermediary may be removed at any time by the Company; and

                                       28
<PAGE>

            (iv) if the Collateral Agent, the Custodial Agent or the Securities
      Intermediary fails to perform any of its material obligations hereunder in
      any material respect for a period of not less than 20 days after receiving
      written notice of such failure by the Purchase Contract Agent and such
      failure shall be continuing, the Collateral Agent, the Custodial Agent and
      the Securities Intermediary may be removed by the Purchase Contract Agent,
      acting at the written direction of the Holders of Securities.

The Purchase Contract Agent shall promptly notify the Company of any removal of
the Collateral Agent, the Custodial Agent or the Securities Intermediary
pursuant to clause (iv) of this Section 9.08(a). Upon any such resignation or
removal, the Company shall have the right to appoint a successor Collateral
Agent, Custodial Agent or Securities Intermediary, as the case may be, which, in
the case of a resignation pursuant to clause (i) of this Section 9.08(a), shall
not be an Affiliate of the Purchase Contract Agent. If no successor Collateral
Agent, Custodial Agent or Securities Intermediary shall have been so appointed
and shall have accepted such appointment within 30 days after the retiring
Collateral Agent's, Custodial Agent's or Securities Intermediary's giving of
notice of resignation or the Company's or the Purchase Contract Agent's giving
notice of such removal, then the retiring Collateral Agent, Custodial Agent or
Securities Intermediary at the expense of the Company may petition any court of
competent jurisdiction for the appointment of a successor Collateral Agent,
Custodial Agent or Securities Intermediary. The Collateral Agent, the Custodial
Agent and the Securities Intermediary shall each be a bank or a national banking
association which has an office (or an agency office) in New York City with a
combined capital and surplus of at least $50,000,000. Upon the acceptance of any
appointment as Collateral Agent, Custodial Agent or Securities Intermediary
hereunder by a successor Collateral Agent, Custodial Agent or Securities
Intermediary, as the case may be, such successor Collateral Agent, Custodial
Agent or Securities Intermediary, as the case may be, shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Collateral Agent, Custodial Agent or Securities Intermediary, as the
case may be, and the retiring Collateral Agent, Custodial Agent or Securities
Intermediary, as the case may be, shall take all appropriate action, subject to
payment of any amounts owed to it hereunder, to transfer any money and property
held by it hereunder (including the Collateral) to such successor. The retiring
Collateral Agent, Custodial Agent or Securities Intermediary shall, upon such
succession, be discharged from its duties and obligations as Collateral Agent,
Custodial Agent or Securities Intermediary hereunder. After any retiring
Collateral Agent's, Custodial Agent's or Securities Intermediary's resignation
hereunder as Collateral Agent, Custodial Agent or Securities Intermediary, the
provisions of this Article 9 shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as the
Collateral Agent, Custodial Agent or Securities Intermediary. Any resignation or
removal of the Collateral Agent, Custodial Agent or Securities Intermediary
hereunder, at a time when such Person is acting as the Collateral Agent,
Custodial Agent or Securities Intermediary, shall be deemed for all purposes of
this Agreement as the simultaneous resignation or removal of the Collateral
Agent, Securities Intermediary or Custodial Agent, as the case may be.

      SECTION 9.09. Right to Appoint Agent or Advisor. The Collateral Agent
shall have the right to appoint agents or advisors in connection with any of its
duties hereunder, and the Collateral Agent shall not be liable for any action
taken or omitted by, or in reliance upon the advice of, such agents or advisors
selected in good faith. The appointment of agents pursuant to

                                       29
<PAGE>

this Section 9.09 shall be subject to prior consent of the Company, which
consent shall not be unreasonably withheld.

      SECTION 9.10. Survival. The provisions of this Article 9 shall survive
termination of this Agreement and the resignation or removal of the Collateral
Agent, the Custodial Agent or the Securities Intermediary.

      SECTION 9.11. Exculpation. Anything contained in this Agreement to the
contrary notwithstanding, in no event shall any of the Collateral Agent, the
Custodial Agent or the Securities Intermediary or their officers, directors,
employees or agents be liable under this Agreement to any third party for
indirect, special, punitive, or consequential loss or damage of any kind
whatsoever, including, but not limited to, lost profits, whether or not the
likelihood of such loss or damage was known to the Collateral Agent, the
Custodial Agent or the Securities Intermediary, or any of them.

                                   ARTICLE 10
                                    AMENDMENT

      SECTION 10.01. Amendment Without Consent of Holders. Without the consent
of any Holders, the Company, when authorized by a Board Resolution, the
Collateral Agent, the Custodial Agent, the Securities Intermediary and the
Purchase Contract Agent, at any time and from time to time, may amend this
Agreement, in form satisfactory to the Company, the Collateral Agent, the
Custodial Agent, the Securities Intermediary and the Purchase Contract Agent,
to:

      (a) evidence the succession of another Person to the Company, and the
assumption by any such successor of the covenants of the Company;

      (b) evidence and provide for the acceptance of appointment hereunder by a
successor Collateral Agent, Custodial Agent, Securities Intermediary or Purchase
Contract Agent;

      (c) add to the covenants of the Company for the benefit of the Holders, or
surrender any right or power herein conferred upon the Company, provided such
covenants or such surrender do not adversely affect the validity, perfection or
priority of the Pledge created hereunder; or

      (d) cure any ambiguity (or formal defect), correct or supplement any
provisions herein which may be inconsistent with any other such provisions
herein, or make any other provisions with respect to such matters or questions
arising under this Agreement, provided such action shall not adversely affect
the interests of the Holders.

      SECTION 10.02. Amendment with Consent of Holders. With the consent of the
Holders of not less than a majority of the Purchase Contracts at the time
outstanding, by Act of such Holders delivered to the Company, the Purchase
Contract Agent, the Custodial Agent, the Securities Intermediary and the
Collateral Agent, as the case may be, the Company, when duly authorized by a
Board Resolution, the Purchase Contract Agent, the Collateral Agent, the
Securities Intermediary and the Collateral Agent may amend this Agreement for
the purpose of modifying in any manner the provisions of this Agreement or the
rights of the Holders in respect

                                       30
<PAGE>

of the Securities; provided, however, that no such supplemental agreement shall,
without the unanimous consent of the Holders of each Outstanding Security
adversely affected thereby in any material respect:

      (a) change the amount or type of Collateral underlying a Security (except
for the rights of holders of Corporate Units to substitute the Treasury
Securities for the Pledged Preferred Securities, the Pledged Notes or the
Pledged Applicable Ownership Interests, as the case may be, or the rights of
Holders of Treasury Units to substitute Preferred Securities, Notes or the
Applicable Ownership Interests (as specified in clause (A) of the definition of
such term) of the Treasury Portfolio, as applicable, for the Pledged Treasury
Securities), impair the right of the Holder of any Security to receive
distributions on the underlying Collateral or otherwise adversely affect the
Holder's rights in or to such Collateral; or

      (b) otherwise effect any action that would require the consent of the
Holder of each Outstanding Security affected thereby pursuant to the Purchase
Contract Agreement if such action were effected by an agreement supplemental
thereto; or

      (c) reduce the percentage of Purchase Contracts the consent of whose
Holders is required for any such amendment;

provided that if any amendment or proposal referred to above would adversely
affect only the Corporate Units or only the Treasury Units, then only the
affected class of Holders as of the record date for the Holders entitled to vote
thereon will be entitled to vote on such amendment or proposal, and such
amendment or proposal shall not be effective except with the consent of Holders
of not less than a majority of such class; provided further that the unanimous
consent of the Holders of each outstanding Purchase Contract of such class
affected thereby shall be required to approve any amendment or proposal
specified in clauses (a) through (c) above.

      It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed amendment, but it shall be
sufficient if such Act shall approve the substance thereof.

      SECTION 10.03. Execution of Amendments. In executing any amendment
permitted by this Article, the Collateral Agent, the Custodial Agent, the
Securities Intermediary and the Purchase Contract Agent shall be entitled to
receive and (subject to Section 7.01 of the Purchase Contract Agreement with
respect to the Purchase Contract Agent) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent, if
any, to the execution and delivery of such amendment have been satisfied.

      SECTION 10.04. Effect of Amendments. Upon the execution of any amendment
under this Section, this Agreement shall be modified in accordance therewith,
and such amendment shall form a part of this Agreement for all purposes; and
every Holder of Certificates theretofore or thereafter authenticated, executed
on behalf of the Holders and delivered under the Purchase Contract Agreement
shall be bound thereby.

      SECTION 10.05. Reference of Amendments. Certificates authenticated,
executed on behalf of the Holders and delivered after the execution of any
amendment pursuant to this

                                       31
<PAGE>

Section may, and shall if required by the Collateral Agent or the Purchase
Contract Agent, bear a notation in form approved by the Purchase Contract Agent
and the Collateral Agent as to any matter provided for in such amendment. If the
Company shall so determine, new Certificates so modified as to conform, in the
opinion of the Collateral Agent, the Purchase Contract Agent and the Company, to
any such amendment may be prepared and executed by the Company and
authenticated, executed on behalf of the Holders and delivered by the Purchase
Contract Agent in accordance with the Purchase Contract Agreement in exchange
for Certificates representing Outstanding Securities.

                                   ARTICLE 11
                                  MISCELLANEOUS

      SECTION 11.01. No Waiver. No failure on the part of the Collateral Agent,
the Securities Intermediary or any of their respective agents to exercise, and
no course of dealing with respect to, and no delay in exercising, any right,
power or remedy hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise by the Collateral Agent, the Securities Intermediary
or any of their respective agents of any right, power or remedy hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. The remedies herein are cumulative and are not exclusive
of any remedies provided by law.

      SECTION 11.02. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Company,
the Collateral Agent, the Custodial Agent, the Securities Intermediary and the
Holders from time to time of the Securities, acting through the Purchase
Contract Agent as their attorney-in-fact, hereby submit to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York state court sitting in New York City for the
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. The Company, the Collateral Agent, the
Custodial Agent, the Securities Intermediary and the Holders from time to time
of the Securities, acting through the Purchase Contract Agent as their
attorney-in-fact, irrevocably waive, to the fullest extent permitted by
applicable law, any objection which they may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.

      SECTION 11.03. Notices. All notices, requests, consents and other
communications provided for herein (including, without limitation, any
modifications of, or waivers or consents under, this Agreement) shall be given
or made in writing (including, without limitation, by telecopy) delivered to the
intended recipient at the "Address for Notices" specified below its name on the
signature pages hereof or, as to any party, at such other address as shall be
designated by such party in a notice to the other parties. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier or personally delivered or, in the
case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.

      SECTION 11.04. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
Company, the Collateral Agent, the Custodial Agent, the Securities Intermediary
and the Purchase Contract Agent, and

                                       32
<PAGE>

the Holders from time to time of the Securities, by their acceptance of the
same, shall be deemed to have agreed to be bound by the provisions hereof and to
have ratified the agreements of, and the grant of the Pledge hereunder by, the
Purchase Contract Agent.

      SECTION 11.05. Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.

      SECTION 11.06. Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by law,
(i) the other provisions hereof shall remain in full force and effect in such
jurisdiction and shall be liberally construed in order to carry out the
intentions of the parties hereto as nearly as may be possible and (ii) the
invalidity or unenforceability of any provision hereof in any jurisdiction shall
not affect the validity or enforceability of such provision in any other
jurisdiction.

      SECTION 11.07. Expenses, Etc. The Company agrees to reimburse the
Collateral Agent, the Custodial Agent and the Securities Intermediary for:

      (a) all reasonable costs and expenses of the Collateral Agent and the
Securities Intermediary (including, without limitation, the reasonable fees and
expenses of counsel to the Collateral Agent and the Securities Intermediary), in
connection with (i) the negotiation, preparation, execution and delivery or
performance of this Agreement and (ii) any modification, supplement or waiver of
any of the terms of this Agreement;

      (b) all reasonable costs and expenses of the Collateral Agent and the
Securities Intermediary (including, without limitation, reasonable fees and
expenses of counsel) in connection with (i) any enforcement or proceedings
resulting or incurred in connection with causing any Holder of Securities to
satisfy its obligations under the Purchase Contracts forming a part of the
Securities and (ii) the enforcement of this Section 11.07(b);

      (c) all transfer, stamp, documentary or other similar taxes, assessments
or charges levied by any governmental or revenue authority in respect of this
Agreement or any other document referred to herein and all costs, expenses,
taxes, assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated
hereby;

      (d) all reasonable fees and expenses of any agent or advisor appointed by
the Collateral Agent and consented to by the Company under Section 9.09 of this
Agreement; and

      (e) any other out-of-pocket costs and expenses reasonably incurred by the
Collateral Agent and the Securities Intermediary in connection with the
performance of their duties hereunder.

      SECTION 11.08. Security Interest Absolute. All rights of the Collateral
Agent and security interests hereunder, and all obligations of the Holders from
time to time hereunder, shall be absolute and unconditional irrespective of:

                                       33
<PAGE>

      (a) any lack of validity or enforceability of any provision of the
Purchase Contracts or the Securities or any other agreement or instrument
relating thereto;

      (b) any change in the time, manner or place of payment of, or any other
term of, or any increase in the amount of, all or any of the obligations of
Holders of the Securities under the related Purchase Contracts, or any other
amendment or waiver of any term of, or any consent to any departure from any
requirement of, the Purchase Contract Agreement or any Purchase Contract or any
other agreement or instrument relating thereto; or

      (c) any other circumstance which might otherwise constitute a defense
available to, or discharge of, a borrower, a guarantor or a pledgor.

      SECTION 11.09. Notice of Tax Event, Tax Event Redemption and Termination
Event. Upon the occurrence of a Tax Event, a Tax Event Redemption or a
Termination Event, the Company shall deliver written notice to the Collateral
Agent, the Securities Intermediary and the Purchase Contract Agent. Upon the
written request of the Collateral Agent or the Securities Intermediary, the
Company shall inform such party whether or not a Tax Event, a Tax Event
Redemption or a Termination Event has occurred.

                       [SIGNATURES ON THE FOLLOWING PAGE]

                                       34
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.

PUBLIC SERVICE ENTERPRISE GROUP            WACHOVIA BANK, NATIONAL ASSOCIATION,
INCORPORATED                               as Purchase Contract Agent and
                                           as attorney-in-fact of the Holders
                                           from time to time of the Securities

By:                                        By:
   ---------------------------------          ----------------------------------
   Name:                                      Name:
   Title:                                     Title:

Address for Notices:                       Address for Notices:

Public Service Enterprise Group            Wachovia Bank, National Association
Incorporated                               21 South Street
80 Park Plaza                              Morristown, New Jersey
P.O. Box 1171                              Attention: Corporate Trust
Newark, New Jersey 07101                              Administration
Attention: Treasurer                       Telecopy: 973-682-4531
Telecopy: 973-596-6309

With a copy to:

Public Service Enterprise Group
Incorporated
80 Park Plaza
P.O. Box 1171
Newark, New Jersey 07101
Attention: Associate General Counsel
Telecopy: 973-642-5033

                                       35
<PAGE>

THE BANK OF NEW YORK,
as Collateral Agent, Custodial Agent
and as Securities Intermediary

By:
   ----------------------------------
   Name:
   Title:

Address for Notices:

101 Barclay Street
Floor 8 West
New York, New York  10286
Attention: Corporate Trust Administration
Telecopy: 212-815-7760

                                       36
<PAGE>

                                                                       EXHIBIT A

                                   INSTRUCTION
                          FROM PURCHASE CONTRACT AGENT
                               TO COLLATERAL AGENT
                        (Establishment of Treasury Units)

The Bank of New York
101 Barclay Street
Floor 8 West
New York, New York  10286
Attention: Corporate Trust Administration
Telecopy: 212-815-7760

      Re:   Corporate Units of Public Service Enterprise Group Incorporated (the
            "Company") and PSEG Funding Trust I

            The securities account of The Bank of New York, as Collateral Agent,
            maintained by the Securities Intermediary and designated "The Bank
            of New York, as Collateral Agent of Public Service Enterprise Group
            Incorporated, as pledgee of Wachovia Bank, National Association, as
            the Purchase Contract Agent on behalf of and as attorney-in-fact for
            the Holders" (the "Collateral Account")

      Please refer to the Pledge Agreement, dated as of September 10, 2002 (the
"Pledge Agreement"), among the Company, you, as Collateral Agent, Custodial
Agent and Securities Intermediary, and the undersigned, as Purchase Contract
Agent and as attorney-in-fact for the holders of Corporate Units from time to
time. Capitalized terms used herein but not defined shall have the meaning set
forth in the Pledge Agreement.

      We hereby notify you in accordance with Section 5.02[(a)][(b)][(c)] of the
Pledge Agreement that the holder of securities named below (the "Holder") has
elected to substitute $__________ Value of Treasury Securities or security
entitlements with respect thereto in exchange for an equal Value of [Pledged
Preferred Securities] [Pledged Notes] [Pledged Applicable Ownership Interests]
relating to _________ Corporate Units and has delivered to the undersigned a
notice stating that the Holder has Transferred such Treasury Securities or
security entitlements thereto to the Securities Intermediary, for credit to the
Collateral Account.

                                      A-1
<PAGE>

      We hereby request that you instruct the Securities Intermediary, upon
confirmation that such Treasury Securities or security entitlements thereto have
been credited to the Collateral Account, to release to the undersigned an equal
Value of [Pledged Preferred Securities] [Pledged Notes] [Pledged Applicable
Ownership Interests] in accordance with Section 5.02 of the Pledge Agreement.

                                      WACHOVIA BANK, NATIONAL ASSOCIATION,
Date:___________________              as Purchase Contract Agent and as
                                      attorney-in-fact of the Holders from
                                      time to time of the Securities

                                      By:_______________________________________
                                         Name:
                                         Title:

                                      A-2
<PAGE>

Please print name and address of Holder electing to substitute Treasury
Securities or security entitlements with respect thereto for the [Pledged
Preferred Securities] [Pledged Notes] [Pledged Applicable Ownership Interests]:

_____________________________________      _____________________________________
               Name                        Social Security or other
                                           Taxpayer Identification Number,
                                           if any

_____________________________________
             Address

_____________________________________

_____________________________________

                                      A-3
<PAGE>

                                                                       EXHIBIT B

                                   INSTRUCTION
                              FROM COLLATERAL AGENT
                           TO SECURITIES INTERMEDIARY
                        (Establishment of Treasury Units)

The Bank of New York
101 Barclay Street
Floor 8 West
New York, New York  10286
Attention: Corporate Trust Administration
Telecopy: 212-815-7760

      Re:   Corporate Units of Public Service Enterprise Group Incorporated (the
            "Company") and PSEG Funding Trust I (the "Trust")

            The securities account of The Bank of New York, as Collateral Agent,
            maintained by the Securities Intermediary and designated "The Bank
            of New York, as Collateral Agent of Public Service Enterprise Group
            Incorporated, as pledgee of Wachovia Bank, National Association, as
            the Purchase Contract Agent on behalf of and as attorney-in-fact for
            the Holders" (the "Collateral Account")

      Please refer to the Pledge Agreement, dated as of September 10, 2002 (the
"Pledge Agreement"), among the Company, you, as Securities Intermediary,
Wachovia Bank, National Association, as Purchase Contract Agent and as
attorney-in-fact for the holders of Corporate Units from time to time, and the
undersigned, as Collateral Agent. Capitalized terms used herein but not defined
shall have the meanings set forth in the Pledge Agreement.

      When you have confirmed that $__________ Value of Treasury Securities or
security entitlements thereto has been credited to the Collateral Account by or
for the benefit of _________, as Holder of Corporate Units (the "Holder"), you
are hereby instructed to release from the Collateral Account an equal Value of
[Pledged Preferred Securities or security entitlements with respect thereto]
[Pledged Notes or security entitlements with respect thereto] [Pledged
Applicable Ownership Interests] relating to _____ Corporate Units of the Holder
by Transfer to the Purchase Contract Agent.

                                           THE BANK OF NEW YORK,
                                           as Collateral Agent
Dated:_______________

                                           By:__________________________________
                                              Name:
                                              Title:

                                      B-1
<PAGE>

Please print name and address of Holder:

_____________________________________      _____________________________________
               Name                        Social Security or other
                                           Taxpayer Identification Number,
                                           if any

_____________________________________
             Address

_____________________________________

_____________________________________

                                      B-2
<PAGE>

                                                                       EXHIBIT C

                                   INSTRUCTION
                          FROM PURCHASE CONTRACT AGENT
                               TO COLLATERAL AGENT
                      (Reestablishment of Corporate Units)

The Bank of New York
101 Barclay Street
Floor 8 West
New York, New York  10286
Attention: Corporate Trust Administration
Telecopy: 212-815-7760

      Re:   ____________ Corporate Units of Public Service Enterprise Group
            Incorporated (the "Company") and PSEG Funding Trust I (the "Trust")

      Please refer to the Pledge Agreement dated as of September 10, 2002 (the
"Pledge Agreement"), among the Company, you, as Collateral Agent, Custodial
Agent and Securities Intermediary, and the undersigned, as Purchase Contract
Agent and as attorney-in-fact for the holders of Corporate Units from time to
time. Capitalized terms used herein but not defined shall have the meaning set
forth in the Pledge Agreement.

      We hereby notify you in accordance with Section 5.03[(a)][(b)][(c)] of the
Pledge Agreement that the holder of securities listed below (the "Holder") has
elected to substitute $ Value of [Preferred Securities or security entitlements
thereto] [Notes or security entitlements thereto] [Applicable Ownership
Interests (as specified in clause (A) of the definition of such term) of the
Treasury Portfolio] in exchange for $__________ Value of Pledged Treasury
Securities and has delivered to the undersigned a notice stating that the holder
has Transferred such [Preferred Securities or security entitlements with respect
thereto] [Notes or security entitlements with respect thereto] [Applicable
Ownership Interests (as specified in clause (A) of the definition of such term)
of the Treasury Portfolio] to the Securities Intermediary, for credit to the
Collateral Account.

      We hereby request that you instruct the Securities Intermediary, upon
confirmation that such [Preferred Securities or security entitlements with
respect thereto] [Notes or security entitlements with respect thereto]
[Applicable Ownership Interests (as specified in clause (A) of the definition of
such term) of the Treasury Portfolio] have been credited to the Collateral
Account, to release to the undersigned $__________ Value of Treasury Securities
or security

                                      C-1
<PAGE>

entitlements thereto related to _____ Corporate Units of such Holder in
accordance with Section 5.03 of the Pledge Agreement.

                                    WACHOVIA BANK, NATIONAL ASSOCIATION,
                                    as Purchase Contract Agent

Dated:_______________               By:__________________________________
                                       Name:
                                       Title:

                                      C-2
<PAGE>

Please print name and address of Holder electing to substitute [Preferred
Securities or security entitlements with respect thereto] [Pledged Notes or
security entitlements with respect thereto] [Applicable Ownership Interests (as
specified in clause (A) of the definition of such term) of the Treasury
Portfolio] for Pledged Treasury Securities:

_____________________________________      _____________________________________
               Name                        Social Security or other
                                           Taxpayer Identification Number,
                                           if any

_____________________________________
             Address

_____________________________________

_____________________________________

                                      C-3
<PAGE>

                                                                       EXHIBIT D

                                   INSTRUCTION
                              FROM COLLATERAL AGENT
                           TO SECURITIES INTERMEDIARY
                      (Reestablishment of Corporate Units)

The Bank of New York
101 Barclay Street
Floor 8 West
New York, New York  10286
Attention: Corporate Trust Administration
Telecopy: 212-815-7760

      Re:   ___________ Treasury Units of Public Service Enterprise Group
            Incorporated (the "Company") and PSEG Funding Trust I (the "Trust")

            The securities account of The Bank of New York, as Collateral Agent,
            maintained by the Securities Intermediary and designated "The Bank
            of New York, as Collateral Agent of Public Service Enterprise Group
            Incorporated, as pledgee of Wachovia Bank, National Association, as
            the Purchase Contract Agent on behalf of and as attorney-in-fact for
            the Holders" (the "Collateral Account")

      Please refer to the Pledge Agreement dated as of September 10, 2002 (the
"Pledge Agreement"), among the Company, you, as Securities Intermediary,
Collateral Agent and Custodial Agent, Wachovia Bank, National Association, as
Purchase Contract Agent and as attorney-in-fact for the holders of Corporate
Units from time to time, and the undersigned, as Collateral Agent. Capitalized
terms used herein but no defined shall have the meaning set forth in the Pledge
Agreement.

      When you have confirmed that $ __________ Value of [Preferred Securities
or security entitlements with respect thereto] [Notes or security entitlements
with respect thereto] [Applicable Ownership Interests (as specified in clause
(A) of the definition of such term) of the Treasury Portfolio] has been credited
to the Collateral Account by or for the benefit of ________________, as Holder
of Corporate Units (the "Holder"), you are hereby instructed to

                                      D-1
<PAGE>

release from the Collateral Account $________________ Value of Treasury
Securities or security entitlements with respect thereto by Transfer to the
Purchase Contract Agent.

                                         THE BANK OF NEW YORK,
                                         as Collateral Agent

Dated:______________                     By:_______________________________
                                            Name:
                                            Title:

_____________________________________      _____________________________________
               Name                        Social Security or other
                                           Taxpayer Identification Number,
                                           if any

_____________________________________
             Address

_____________________________________

_____________________________________

                                      D-2
<PAGE>

                                                                       EXHIBIT E

                    NOTICE OF CASH SETTLEMENT FROM COLLATERAL
                        AGENT TO PURCHASE CONTRACT AGENT
                            (Cash Settlement Amounts)

WACHOVIA BANK, NATIONAL ASSOCIATION
21 South Street
Morristown, New Jersey 07960
Attention: Corporate Trust Administration
Telecopy: 973-682-4531

      Re:   __________ Corporate Units of Public Service Enterprise Group
            Incorporated (the "Company") and PSEG Funding Trust I (the "Trust")

      Please refer to the Pledge Agreement dated as of September 10, 2002 (the
"Pledge Agreement"), by and among you, the Company, the undersigned, The Bank of
New York, as Collateral Agent, Custodial Agent and Securities Intermediary.
Unless otherwise defined herein, terms defined in the Pledge Agreement are used
herein as defined therein.

      In accordance with Section 5.05(d) of the Pledge Agreement, we hereby
notify you that as of 11:00 a.m. (New York City time) on the Business Day
immediately preceding November 16, 2005, we have received (i) $ _______________
in immediately available funds paid in an aggregate amount equal to the Purchase
Price due to the Company on the Purchase Contract Settlement Date with respect
to ________________ Corporate Units and (ii) $ ___________ in immediately
available funds paid in an aggregate amount equal to the Purchase Price due to
the Company on the Purchase Contract Settlement Date with respect to ______
Treasury Units.

                                      THE BANK OF NEW YORK,
                                      as Collateral Agent

Dated:_______________                 By:_____________________________________
                                         Name:
                                         Title:

                                      E-1
<PAGE>

                                                                       EXHIBIT F

              INSTRUCTION TO CUSTODIAL AGENT REGARDING REMARKETING

The Bank of New York
101 Barclay Street
Floor 8 West
New York, New York  10286
Attention: Corporate Trust Administration
Telecopy: 212-815-7760

      Re:   Preferred Securities of PSEG Funding Trust I (the "Trust")

      The undersigned hereby notifies you in accordance with Section 5.07(c) of
the Pledge Agreement, dated as of September 10, 2002 (the "Pledge Agreement"),
among the Company, you, as Collateral Agent, Custodial Agent and Securities
Intermediary, Wachovia Bank, National Association, as Purchase Contract Agent
and as attorney-in-fact for the holders of Corporate Units from time to time,
that the undersigned elects to deliver [$_____________ aggregate liquidation
amount of Separate Preferred Securities] [$______________ aggregate principal
amount of Separate Notes] for delivery to the Remarketing Agent on the Business
Day immediately preceding the [Initial Remarketing Date] [Secondary Remarketing
Date] for remarketing pursuant to Section 5.07(c) of the Pledge Agreement. The
undersigned will, upon request of the Remarketing Agent, execute and deliver any
additional documents deemed by the Remarketing Agent or by the Company to be
necessary or desirable to complete the sale, assignment and transfer of the
[Separate Preferred Securities] [Separate Notes] tendered hereby. Capitalized
terms used herein but no defined shall have the meaning set forth in the Pledge
Agreement.

      The undersigned hereby instructs you, upon receipt of the Proceeds of such
remarketing from the Remarketing Agent to deliver such Proceeds to the
undersigned in accordance with the instructions indicated herein under "A.
Payment Instructions". The undersigned hereby instructs you, in the event of
Failed Remarketing, upon receipt of the [Separate Preferred Securities]
[Separate Notes] tendered herewith from the Remarketing Agent, to be delivered
to the person(s) and the address(es) indicated herein under "B. Delivery
Instructions."

      With this notice, the undersigned hereby (i) represents and warrants that
the undersigned has full power and authority to tender, sell, assign and
transfer the [Separate Preferred Securities] [Separate Notes] tendered hereby
and that the undersigned is the record owner of any [Preferred Securities]
[Notes] tendered herewith in physical form or a participant in The Depositary
Trust Company ("DTC") and the beneficial owner of any [Preferred Securities]
[Notes] tendered herewith by book-entry transfer to your account at DTC and (ii)
agrees to be bound by the terms and conditions of Section 5.07(c) of the Pledge
Agreement.

                                      F-1
<PAGE>

Date:_____________

                                           _____________________________________

                                           By:__________________________________
                                           Name:
                                           Title:
                                           Signature Guarantee:_________________

_____________________________________      _____________________________________
               Name                        Social Security or other
                                           Taxpayer Identification Number,
                                           if any

_____________________________________
             Address

_____________________________________

_____________________________________

                                      F-2
<PAGE>

--------------------------------------------------------------------------------
A. PAYMENT INSTRUCTIONS
--------------------------------------------------------------------------------

Proceeds of the remarketing should be paid by check in the name of the person(s)
set forth below and mailed to the address set forth below.

                                     Name(s)

________________________________________________________________________________
                                 (Please Print)

                                     Address

________________________________________________________________________________
                                 (Please Print)

________________________________________________________________________________

________________________________________________________________________________
                                   (Zip Code)

________________________________________________________________________________
(Tax Identification or Social Security Number)

--------------------------------------------------------------------------------
B. DELIVERY INSTRUCTIONS
--------------------------------------------------------------------------------

In the event of a Failed Remarketing, [Preferred Securities] [Notes] which are
in physical form should be delivered to the person(s) set forth below and mailed
to the address set forth below.

                                     Name(s)

________________________________________________________________________________
                                 (Please Print)

                                     Address

________________________________________________________________________________
                                 (Please Print)

________________________________________________________________________________

________________________________________________________________________________
                                   (Zip Code)

________________________________________________________________________________
(Tax Identification or Social Security Number)

In the event of a Failed Remarketing, [Preferred Securities] [Notes] which are
in book-entry form should be credited to the account at The Depositary Trust
Company set forth below.

                               __________________
                               DTC Account Number

             Name of Account Party:_________________________________

                                      F-3
<PAGE>

                                                                       EXHIBIT G

                    INSTRUCTION TO CUSTODIAL AGENT REGARDING
                           WITHDRAWAL FROM REMARKETING

The Bank of New York
101 Barclay Street
Floor 8 West
New York, New York  10286
Attention: Corporate Trust Administration
Telecopy: 212-815-7760

      Re:   Preferred Securities of PSEG Funding Trust I (the "Trust")

      The undersigned hereby notifies you in accordance with Section 5.07(c) of
the Pledge Agreement, dated as of September 10, 2002 (the "Pledge Agreement"),
among the Company, you, as Collateral Agent, Custodial Agent and Securities
Intermediary, Wachovia Bank, National Association, as Purchase Contract Agent
and as attorney-in-fact for the holders of Corporate Units from time to time,
that the undersigned elects to withdraw the [$_____ aggregate liquidation amount
of Separate Preferred Securities] [$_________ aggregate principal amount of
Separate Notes] delivered to the Custodial Agent on _________, 2005 for
remarketing pursuant to Section 5.07(c) of the Pledge Agreement. The undersigned
hereby instructs you to return such [Preferred Securities] [Notes] to the
undersigned in accordance with the undersigned's instructions. With this notice,
the Undersigned hereby agrees to be bound by the terms and conditions of Section
5.07(c) of the Pledge Agreement. Capitalized terms used herein but not defined
shall have the meaning set forth in the Pledge Agreement.

Date:_____________
                                           _____________________________________

                                           By:__________________________________
                                           Name:
                                           Title:
                                           Signature Guarantee:_________________

_____________________________________      _____________________________________
               Name                        Social Security or other
                                           Taxpayer Identification Number,
                                           if any

_____________________________________
             Address

_____________________________________

_____________________________________

                                      G-1REMARKETING AGREEMENT

      REMARKETING AGREEMENT, dated as of September 10, 2002 (the "Agreement"),
by and among Public Service Enterprise Group Incorporated, a New Jersey
corporation (the "Company"), PSEG Funding Trust I, a Delaware statutory trust
(the "Trust"), Wachovia Bank, National Association (formerly known as First
Union National Bank), a banking association organized under the laws of the
United States, not individually but solely as Purchase Contract Agent (the
"Purchase Contract Agent") and as attorney-in-fact of the holders of Purchase
Contracts (as defined in the Purchase Contract Agreement (as defined herein)),
and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the "Remarketing
Agent").

                                   WITNESSETH:

      WHEREAS, the Company will issue $460,000,000 aggregate Stated Amount of
its Participating Units (the "Participating Units") under the Purchase Contract
Agreement, dated as of September 10, 2002, by and between the Purchase Contract
Agent and the Company (the "Purchase Contract Agreement"); and

      WHEREAS, the Trust will issue concurrently, as part of the Participating
Units, preferred securities (the "Preferred Securities") representing undivided
beneficial interests in the assets of the Trust in an aggregate liquidation
amount equal to the aggregate Stated Amount of the Participating Units under the
Amended and Restated Trust Agreement, dated as of September 10, 2002, by and
among the Company, the Administrative Trustees, the Delaware Trustee and the
Property Trustee (the "Declaration"); and

      WHEREAS, the Participating Units will initially consist of 9,200,000 units
referred to as "Corporate Units," each of which will consist of a Preferred
Security and a Purchase Contract;

      WHEREAS, the sole assets of the Trust, $474,226,850 aggregate principal
amount of Senior Deferrable Notes due 2007 (the "Notes") of the Company, will be
purchased by the Trust from the Company with the proceeds of the sale of the
Preferred Securities and the proceeds of the sale to the Company of the common
securities representing undivided beneficial interests in the assets of the
Trust; and

      WHEREAS, the Preferred Securities (or upon a dissolution of the Trust and
the distribution of the Notes as described in the Declaration, such Notes) will
be pledged pursuant to the Pledge Agreement (the "Pledge Agreement"), dated as
of September 10, 2002, by and among the Company, The Bank of New York, as
collateral agent (the "Collateral Agent"), and the Purchase Contract Agent, to
secure a Corporate Unit holder's obligations under the related Purchase Contract
on the Purchase Contract Settlement Date; and

      WHEREAS, the Preferred Securities or the Notes, as the case may be, of
Corporate Unit holders and of the Preferred Security holders or Note holders
electing to have their Preferred Securities or Notes remarketed will be
remarketed by the Remarketing Agent on the third Business Day immediately
preceding the Initial Reset Date (the "Initial Remarketing Date"); and
<PAGE>

      WHEREAS, in the event of a Failed Initial Remarketing, the Preferred
Securities or the Notes, as the case may be, of the Preferred Security holders
or Note holders electing to have their Preferred Securities or Notes remarketed
and of the Corporate Unit holders who have elected not to settle the Purchase
Contracts related to their Corporate Units by Cash Settlement will be remarketed
by the Remarketing Agent on the third Business Day immediately preceding the
Purchase Contract Settlement Date; and

      WHEREAS, in the event of a Successful Initial Remarketing, the applicable
distribution rate on the Preferred Securities (or the interest rate on the
Notes) will be reset on the Initial Remarketing Date, to the Reset Rate to be
determined by the Reset Agent as the rate that such Preferred Securities (or
such Notes) should bear in order for the aggregate liquidation amount of the
Preferred Securities or the aggregate principal amount of the Notes to have an
approximate aggregate market value of 100.25% of the sum of the Treasury
Portfolio Purchase Price, the Separate Preferred Securities or Notes Purchase
Price plus deferred and unpaid distributions or interest, if any, on the
Preferred Securities or Notes, as the case may be, on the Initial Remarketing
Date, provided that in the determination of such Reset Rate, the Company shall,
if applicable, limit the Reset Rate to the maximum rate permitted by applicable
law; and

      WHEREAS, in the event of a Failed Initial Remarketing, the applicable
distribution rate on the Preferred Securities (or the interest rate on the
Notes) that remain outstanding on and after the Initial Remarketing will be
reset on the third Business Day immediately preceding the Purchase Contract
Settlement Date, to the Reset Rate to be determined by the Reset Agent as the
rate that such Preferred Securities (and the Notes) should bear in order to have
an approximate market value of 100.25% of the aggregate liquidation amount (plus
deferred and unpaid distributions, if any) of the Preferred Securities or the
aggregate principal amount (plus deferred and unpaid interest, if any) of the
Notes on the third Business Day immediately preceding the Purchase Contract
Settlement Date, provided that in the determination of such Reset Rate, the
Company shall, if applicable, limit the Reset Rate to the maximum rate permitted
by applicable law; and

      WHEREAS, the Company has requested Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") to act as the Reset Agent and as the Remarketing
Agent, and as such to perform the services described herein; and

      WHEREAS, Merrill Lynch is willing to act as Reset Agent and Remarketing
Agent and as such to perform such duties on the terms and conditions expressly
set forth herein;

      NOW, THEREFORE, for and in consideration of the covenants herein made, and
subject to the conditions herein set forth, the parties hereto agree as follows:

      Section 1. Definitions. Capitalized terms used and not defined in this
Agreement, in the recitals hereto or in the paragraph preceding such recitals
shall have the meanings assigned to them in the Purchase Contract Agreement or,
if not therein defined, the Pledge Agreement.

      Section 2. Appointment and Obligations of Remarketing Agent. (a) The
Company hereby appoints Merrill Lynch and Merrill Lynch hereby accepts such
appointment, (i) as the Reset Agent to determine in consultation with the
Company (1) the Reset Rate that, in the

                                       2
<PAGE>

opinion of the Reset Agent, will, when applied to the Preferred Securities (or
the Notes), enable the Preferred Securities or Notes, as the case may be, to
have an approximate aggregate market value of 100.25% of the Treasury Portfolio
Purchase Price, the Separate Preferred Securities or Notes Purchase Price and
deferred and unpaid distributions or interest, if any, on the Preferred
Securities or Notes, as the case may be, as of the Initial Remarketing Date, and
(2) in the event of a Failed Initial Remarketing, the Reset Rate that, in the
opinion of the Reset Agent, will, when applied to the Preferred Securities or
the Notes, enable a Preferred Security or a Note to have an approximate market
value equal to the sum of 100.25% of its liquidation amount or principal amount,
as the case may be, plus deferred and unpaid distributions or interest, if any,
thereon as of the third Business Day preceding the Purchase Contract Settlement
Date, provided, in each case, that the Company, by notice to the Reset Agent
prior to the eighth Business Day preceding (x) the Initial Reset Date, in the
case of the Initial Remarketing, or (y) the Purchase Contract Settlement Date,
in the case of the Secondary Remarketing, shall, if applicable, limit the Reset
Rate so that it does not exceed the maximum rate permitted by applicable law and
(ii) as the exclusive Remarketing Agent (subject to the right of Merrill Lynch
to appoint additional remarketing agents hereunder as described below) to, in
the manner provided for herein, in the Declaration with respect to the Preferred
Securities and in the Indenture with respect to the Notes, (1) remarket the
Preferred Securities or Notes of the Preferred Security holders or Note holders
electing to have their Preferred Securities or Notes remarketed and of the
Corporate Unit holders on the Initial Remarketing Date, for settlement on the
Initial Reset Date and (2) in the case of a Failed Initial Remarketing, remarket
the Preferred Securities or Notes of the Preferred Security holders or Note
holders electing to have their Preferred Securities or Notes remarketed or of
the Corporate Unit holders who have failed to notify the Purchase Contract
Agent, on or prior to the fifth Business Day immediately preceding the Purchase
Contract Settlement Date, of their intention to settle the related Purchase
Contracts through Cash Settlement. In connection with the remarketing
contemplated hereby, the Remarketing Agent will enter into a Supplemental
Remarketing Agreement (the "Supplemental Remarketing Agreement") with the
Company, the Trust and the Purchase Contract Agent, which shall either be (i)
substantially in the form attached hereto as Exhibit A (with such changes as the
Company, the Trust and the Remarketing Agent may agree upon, it being understood
that changes may be necessary in the representations, warranties, covenants and
other provisions of the Supplemental Remarketing Agreement due to changes in law
or facts and circumstances or in the event that Merrill Lynch is not the sole
remarketing agent, and with such further changes therein as the Remarketing
Agent may reasonably request), or (ii) in such other form as the Remarketing
Agent may reasonably request, subject to the approval of the Company and the
Trust (such approval not to be unreasonably withheld). Anything herein to the
contrary notwithstanding, Merrill Lynch shall not be obligated to act as
Remarketing Agent or Reset Agent hereunder unless the Supplemental Remarketing
Agreement is in form and substance reasonably satisfactory to Merrill Lynch. The
Company agrees that Merrill Lynch shall have the right, on 15 Business Days'
notice to the Company, to appoint one or more additional remarketing agents so
long as any such additional remarketing agents shall be reasonably acceptable to
the Company. Upon any such appointment, the parties shall enter into an
appropriate amendment to this Agreement to reflect the addition of any such
remarketing agent.

      (b) Pursuant to the Supplemental Remarketing Agreement, the Remarketing
Agent, either as sole remarketing agent or as representative of a group of
remarketing agents appointed as aforesaid, will agree, subject to the terms and
conditions set forth herein and therein, to use its

                                       3
<PAGE>

reasonable efforts to (i) remarket, on the Initial Remarketing Date, the
Preferred Securities or Notes, as the case may be, that the Custodial Agent and
the Purchase Contract Agent shall have notified the Remarketing Agent have been
tendered for, or otherwise are to be included in, the Initial Remarketing, at a
price per Preferred Security or Note such that the aggregate price for the
Preferred Securities or Notes comprising Corporate Units is approximately equal
to the sum of 100.25% of the Treasury Portfolio Purchase Price, the Separate
Preferred Securities or Notes Purchase Price and deferred and unpaid
distributions or interest, if any, on the Preferred Securities or Notes, as the
case may be and (ii) in the event of a Failed Initial Remarketing, remarket, on
the third Business Day immediately preceding the Purchase Contract Settlement
Date, the Preferred Securities or Notes that the Custodial Agent and the
Purchase Contract Agent shall have notified the Remarketing Agent have been
tendered for, or otherwise are to be included in, the Secondary Remarketing, at
a price that is approximately 100.25% of the aggregate liquidation amount of
such Preferred Securities or aggregate principal amount of such Notes and
deferred and unpaid distributions or interest, if any, on the Preferred
Securities or Notes.

      Notwithstanding the preceding sentence, the Remarketing Agent shall not
remarket the Preferred Securities or Notes for a price that is less than the sum
of 100% of the Treasury Portfolio Purchase Price, the Separate Preferred
Securities or Notes Purchase Price, and deferred and unpaid distributions or
interest, if any, on the Preferred Securities or Notes, as the case may be (the
"Minimum Initial Remarketing Price"), in the case of the Initial Remarketing, or
the aggregate liquidation amount of such Preferred Securities or aggregate
principal amount of such Notes and deferred and unpaid distributions or
interest, if any, on the Preferred Securities or Notes, in the case of the
Secondary Remarketing. After deducting the fee specified in Section 3 below, the
proceeds of such Initial Remarketing or Secondary Remarketing, as the case may
be, shall be paid to the Collateral Agent in accordance with Section 5.07 of the
Pledge Agreement and Section 5.02 of the Purchase Contract Agreement (each of
which Sections are incorporated herein by reference). The right of each holder
of Preferred Securities, Notes or Corporate Units to have Preferred Securities
or Notes, as the case may be, tendered for the Initial Remarketing or the
Secondary Remarketing, as the case may be, shall be limited to the extent that
(i) the Remarketing Agent conducts an Initial Remarketing and, in the event of a
Failed Initial Remarketing, a Secondary Remarketing pursuant to the terms of
this Agreement, (ii) Preferred Securities or Notes, as the case may be, tendered
have not been called for redemption, (iii) the Remarketing Agent is able to find
a purchaser or purchasers for tendered Preferred Securities or Notes, as the
case may be, at a price of not less than the Minimum Initial Remarketing Price,
in the case of the Initial Remarketing, and the sum of 100% of the liquidation
amount or principal amount thereof and deferred and unpaid distributions or
interest, if any, on the Preferred Securities or Notes, in the case of the
Secondary Remarketing and (iv) such purchaser or purchasers deliver the purchase
price therefor to the Remarketing Agent as and when required.

      (c) It is understood and agreed that neither the Remarketing Agent nor the
Reset Agent shall have any obligation whatsoever to purchase any Preferred
Securities or Notes, as the case may be, whether in the Initial Remarketing,
Secondary Remarketing or otherwise, and shall in no way be obligated to provide
funds to make payment upon tender of Preferred Securities or Notes, as the case
may be, for remarketing or to otherwise expend or risk their own funds or incur
or be exposed to financial liability in the performance of their respective
duties under this Agreement or the Supplemental Remarketing Agreement, and,
without limitation of the foregoing, the

                                       4
<PAGE>

Remarketing Agent shall not be deemed an underwriter of the remarketed Preferred
Securities or Notes, as the case may be. The Company shall not be obligated in
any case to provide funds to make payment upon tender of Preferred Securities or
Notes, as the case may be, for remarketing.

      Section 3. Fees. In the event of a Successful Initial Remarketing, the
Remarketing Agent shall retain as a remarketing fee (the "Remarketing Fee") an
amount not exceeding 25 basis points (0.25%) of the Minimum Initial Remarketing
Price from any amount received in connection with such Initial Remarketing in
excess of the Minimum Initial Remarketing Price. In the event of a Successful
Secondary Remarketing, the Remarketing Agent shall retain as the Remarketing Fee
an amount not exceeding 25 basis points (0.25%), of the principal amount of the
remarketed Preferred Securities or Notes from any amount received in connection
with such Secondary Remarketing in excess of the sum of the aggregate principal
amount of such remarketed Preferred Securities or Notes plus deferred and unpaid
distributions or interest, as the case may be. In addition, the Reset Agent
shall, in either case, receive from the Company a reasonable and customary fee
(the "Reset Agent Fee"); provided, however, that if the Remarketing Agent shall
also act as the Reset Agent, then the Reset Agent shall not be entitled to
receive any such Reset Agent Fee. Payment of such Reset Agent Fee shall be made
by the Company on the Initial Remarketing Date, in the case of a Successful
Initial Remarketing, or on the third Business Day immediately preceding the
Purchase Contract Settlement Date, in the case of a Successful Secondary
Remarketing, in immediately available funds or, upon the instructions of the
Reset Agent, by certified or official bank check or checks or by wire transfer.

      Section 4. Replacement and Resignation of Remarketing Agent. (a) The
Company may in its absolute discretion replace Merrill Lynch as the Remarketing
Agent and as the Reset Agent hereunder by giving notice prior to 3:00 p.m., New
York City time (i) on the eleventh Business Day immediately prior to the Initial
Reset Date, or (ii) in the event of a Failed Initial Remarketing, prior to 3:00
p.m., New York City time on the eleventh Business Day immediately prior to the
Purchase Contract Settlement Date, provided, in either case, that the Company
must replace Merrill Lynch both as Remarketing Agent and as Reset Agent unless
Merrill Lynch shall otherwise agree. Any such replacement shall become effective
upon the Company's appointment of a successor to perform the services that would
otherwise be performed hereunder by the Remarketing Agent and the Reset Agent.
Upon providing such notice, the Company shall use all reasonable efforts to
appoint such a successor and to enter into a remarketing agreement with such
successor as soon as reasonably practicable. The Company shall notify the
Purchase Contract Agent and the Collateral Agent of the appointment of any such
successor in writing.

      (b) Merrill Lynch may resign at any time and be discharged from its duties
and obligations hereunder as the Remarketing Agent and/or as the Reset Agent by
giving notice prior to 3:00 p.m., New York City time (i) on the eleventh
Business Day immediately prior to May 16, 2005, or (ii) in the event of a Failed
Initial Remarketing, on the eleventh Business Day immediately prior to the
Purchase Contract Settlement Date. Any such resignation shall become effective
upon the Company's appointment of a successor to perform the services that would
otherwise be performed hereunder by the Remarketing Agent and/or the Reset
Agent. Upon receiving notice from the Remarketing Agent and/or the Reset Agent
that it wishes to resign hereunder, the Company shall appoint such a successor
and enter into a remarketing agreement with it as soon as reasonably
practicable.

                                       5
<PAGE>

      Section 5. Dealing in the Securities. Each of the Remarketing Agent and
the Reset Agent, when acting hereunder or, in the case of the Remarketing Agent,
under the Supplemental Remarketing Agreement, or when acting in its individual
or any other capacity, may, to the extent permitted by law, buy, sell, hold or
deal in any of the Preferred Securities or Notes, as the case may be, Treasury
Units, Corporate Units or any other securities of the Company. With respect to
any Preferred Securities or Notes, as the case may be, Treasury Units, Corporate
Units or any other securities of the Company owned by it, each of the
Remarketing Agent and the Reset Agent may exercise any vote or join in any
action with like effect as if it did not act in any capacity hereunder. Each of
the Remarketing Agent and the Reset Agent, in its individual capacity, either as
principal or agent, may also engage in or have an interest in any financial or
other transaction with the Company as freely as if it did not act in any
capacity hereunder. The Company may, to the extent permitted by law, purchase
any Preferred Securities or Notes that are remarketed by any Remarketing Agent.

      Section 6. Registration Statement and Prospectus. (a) In connection with
the Initial Remarketing, if and to the extent required in the view of counsel
(which need not be an opinion) for either the Remarketing Agent, the Company or
the Trust by applicable law, regulations or interpretations in effect at the
time of such Initial Remarketing, each of the Company and the Trust, as
applicable (i) shall use its reasonable efforts to have a registration statement
relating to the Preferred Securities or Notes, as the case may be, effective
under the Securities Act of 1933, as amended (the "1933 Act") prior to the third
Business Day immediately preceding the Initial Reset Date, (ii) if requested by
the Remarketing Agent shall furnish a current preliminary prospectus and, if
applicable, a current preliminary prospectus supplement to be used by the
Remarketing Agent in the Initial Remarketing not later than seven Business Days
prior to the Initial Reset Date (or such earlier date as the Remarketing Agent
may reasonably request) and in such quantities as the Remarketing Agent may
reasonably request, and (iii) shall furnish a current final prospectus and, if
applicable, a final prospectus supplement to be used by the Remarketing Agent in
the Initial Remarketing not later than the third Business Day immediately
preceding the Initial Reset Date in such quantities as the Remarketing Agent may
reasonably request, and shall pay all expenses relating thereto.

      (b) In the event of a Failed Initial Remarketing and in connection with
the Secondary Remarketing, if and to the extent required in the view of counsel
(which need not be an opinion) for either the Remarketing Agent, the Company or
the Trust by applicable law, regulations or interpretations in effect at the
time of such Secondary Remarketing, each of the Company and the Trust, as
applicable (i) shall use its reasonable efforts to have a registration statement
relating to the Preferred Securities or the Notes, as the case may be, effective
under the 1933 Act prior to the third Business Day immediately preceding the
Purchase Contract Settlement Date, (ii) if requested by the Remarketing Agent,
shall furnish a current preliminary prospectus and, if applicable, a current
preliminary prospectus supplement to be used by the Remarketing Agent in the
Secondary Remarketing not later than seven Business Days prior to the Purchase
Contract Settlement Date (or such earlier date as the Remarketing Agent may
reasonably request) and in such quantities as the Remarketing Agent may
reasonably request, and (iii) shall furnish a current final prospectus and, if
applicable, a final prospectus supplement to be used by the Remarketing Agent in
the Secondary Remarketing not later than the third Business Day immediately
preceding the Purchase Contract Settlement Date in such quantities as the
Remarketing Agent may reasonably request, and shall pay all expenses relating
thereto.

                                       6
<PAGE>

      (c) If, in connection with the Initial Remarketing or, in the event of a
Failed Initial Remarketing, the Secondary Remarketing, it shall not be possible,
in the view of counsel (which need not be an opinion) for either the Remarketing
Agent, the Company or the Trust, under applicable law, regulations or
interpretations in effect at the time of such Initial Remarketing or such
Secondary Remarketing to either register the offer and sale by the Company or
the Trust, as the case may be, of the Preferred Securities or the Notes, as the
case may be, under the 1933 Act or deliver a current prospectus meeting the
requirements of Section (10)(a) of the 1933 Act and the rules and regulations
thereunder, as otherwise contemplated by this Section 6, the Company and the
Trust, as the case may be (i) shall use reasonable efforts to take, or cause to
be taken, all action and to do, or cause to be done, all things necessary,
proper and advisable to permit and effectuate the offer and sale of the
Preferred Securities or the Notes, as the case may be, in connection with the
Initial Remarketing or the Secondary Remarketing, as the case may be, without
registration under the 1933 Act pursuant to an exemption therefrom, if
available, including the exemption afforded by Rule l44A under the rules and
regulations promulgated under the 1933 Act by the Securities and Exchange
Commission, (ii) if requested by the Remarketing Agent shall furnish a current
preliminary remarketing memorandum to be used by the Remarketing Agent in the
Initial Remarketing or the Secondary Remarketing, as the case may be, not later
than seven Business Days prior to the Initial Reset Date, in the case of the
Initial Remarketing, or the Purchase Contract Settlement Date, in the case of
the Secondary Remarketing (or in either case such earlier date as the
Remarketing Agent may reasonably request) and in such quantities as the
Remarketing Agent may reasonably request and (iii) shall furnish a current final
remarketing memorandum to be used by the Remarketing Agent in the Initial
Remarketing or the Secondary Remarketing, as the case may be, not later than the
third Business Day immediately preceding the Initial Reset Date, in the case of
the Initial Remarketing, or the Purchase Contract Settlement Date, in the case
of the Secondary Remarketing, in such quantities as the Remarketing Agent may
reasonably request, and shall pay all expenses relating thereto.

      (d) The Company or the Trust, as the case may be, shall also use its
reasonable effort to take all such actions as may (upon advice of counsel to the
Company, the Trust or the Remarketing Agent) be necessary or desirable under
state securities or blue sky laws in connection with the Initial Remarketing and
the Secondary Remarketing.

      Section 7. Conditions to the Remarketing Agent's Obligations. (a) The
obligations of the Remarketing Agent and the Reset Agent under this Agreement
and, in the case of the Remarketing Agent, the Supplemental Remarketing
Agreement shall be subject to the terms and conditions of this Agreement and the
Supplemental Remarketing Agreement, including, without limitation, the following
conditions: (i) the Preferred Securities or the Notes tendered for, or otherwise
to be included in the Initial Remarketing or Secondary Remarketing, as the case
may be, have not been called for redemption, (ii) the Remarketing Agent is able
to find a purchaser or purchasers for tendered Preferred Securities or Notes (1)
in the case of the Initial Remarketing, at a price not less than Minimum Initial
Remarketing Price, and (2) in the case of the Secondary Remarketing, at a price
per Preferred Security not less than 100% of the liquidation amount thereof plus
deferred and unpaid distributions, if any thereon, or at a price per Note not
less than 100% of the principal amount thereof plus deferred and unpaid
interest, if any, thereon, (iii) the Purchase Contract Agent, the Collateral
Agent, the Custodial Agent, the Securities Intermediary, the Company, the Trust,
the Indenture Trustee and the Property Trustee shall have performed

                                       7
<PAGE>

their respective obligations in connection with the Initial Remarketing and, in
the event of a Failed Initial Remarketing, in connection with the Secondary
Remarketing, in each case pursuant to the Purchase Contract Agreement, the
Pledge Agreement, the Indenture, the Declaration, this Agreement and the
Supplemental Remarketing Agreement (including, without limitation, the Quotation
Agent giving the Remarketing Agent notice of the Treasury Portfolio Purchase
Price and the Separate Preferred Securities or Notes Purchase Price no later
than 5:00 p.m., New York City time, on the fourth Business Day prior to the
Initial Reset Date, in the case of the Initial Remarketing, and the Purchase
Contract Agent giving the Remarketing Agent notice of the aggregate liquidation
amount or aggregate principal amount, as the case may be, of Preferred
Securities or Notes to be remarketed, no later than 11:00 a.m., New York City
time, on the fourth Business Day prior to the Purchase Contract Settlement Date,
in the case of the Secondary Remarketing, and, in each case, the Collateral
Agent and the Custodial Agent concurrently delivering the Preferred Securities
or Notes, as the case may be, to be remarketed to the Remarketing Agent), (iv)
no Event of Default shall have occurred and be continuing, (v) the accuracy of
the representations and warranties of the Company included and incorporated by
reference in this Agreement and the Supplemental Remarketing Agreement or in
certificates of any officer of the Company delivered pursuant to the provisions
included or incorporated by reference in this Agreement or the Supplemental
Remarketing Agreement, (vi) the performance by the Company of its covenants and
other obligations included and incorporated by reference in this Agreement and
the Supplemental Remarketing Agreement, and (vii) the satisfaction of the other
conditions set forth and incorporated by reference in this Agreement and the
Supplemental Remarketing Agreement.

      (b) If at any time during the term of this Agreement, any Event of Default
or event that with the passage of time or the giving of notice or both would
become an Event of Default has occurred and is continuing under the Indenture,
then the obligations and duties of the Remarketing Agent and the Reset Agent
under this Agreement and the Supplemental Remarketing Agreement shall be
suspended until such default or event has been cured. The Company will promptly
give the Remarketing Agent notice of all such defaults and events of which the
Company is aware.

      Section 8. Termination of Remarketing Agreement. This Agreement shall
terminate as to any Remarketing Agent or Reset Agent that is replaced on the
effective date of its replacement pursuant to Section 4(a) hereof or pursuant to
Section 4(b) hereof. Notwithstanding any such termination, the obligations set
forth in Section 3 hereof shall survive and remain in full force and effect
until all amounts payable under said Section 3 shall have been paid in full;
provided, however, that if any Reset Agent resigns prior to a successful
remarketing, then the obligations set forth in Section 3 hereof shall not
survive the termination of this Agreement and no fee shall be payable to such
Reset Agent in such capacity. In addition, each former Remarketing Agent and
Reset Agent shall be entitled to the rights and benefits under Section 10 of
this Agreement, notwithstanding the replacement or resignation of such
Remarketing Agent or Reset Agent.

      Section 9. Remarketing Agent's Performance; Duty of Care. The duties and
obligations of the Remarketing Agent and the Reset Agent shall be determined
solely by the express provisions of this Agreement and, in the case of the
Remarketing Agent, the Supplemental Remarketing Agreement. No implied covenants
or obligations of or against the Remarketing Agent or the Reset Agent shall be
read into this Agreement or the Supplemental

                                       8
<PAGE>

Remarketing Agreement. In the absence of bad faith on the part of the
Remarketing Agent or the Reset Agent, as the case may be, the Remarketing Agent
and the Reset Agent each may conclusively rely upon any document furnished to it
which purports to conform to the requirements of this Agreement or the
Supplemental Remarketing Agreement, as the case may be, as to the truth of the
statements expressed therein. Each of the Remarketing Agent and the Reset Agent
shall be protected in acting upon any document or communication reasonably
believed by it to be signed, presented or made by the proper party or parties.
Neither the Remarketing Agent nor the Reset Agent shall have any obligation to
determine whether there is any limitation under applicable law on the Reset Rate
on the Preferred Securities or the Notes, as the case may be, or, if there is
any such limitation, the maximum permissible Reset Rate on the Preferred
Securities or the Notes, as the case may be, and they shall rely solely upon
written notice from the Company (which the Company agrees to provide on or prior
to the eighth Business Day before the Initial Reset Date, in the case of the
Initial Remarketing, and prior to the tenth Business Day before Purchase
Contract Settlement Date, in the case of the Secondary Remarketing) as to
whether or not there is any such limitation and, if so, the maximum permissible
Reset Rate. Neither the Remarketing Agent nor the Reset Agent shall incur any
liability under this Agreement or the Supplemental Remarketing Agreement to any
beneficial owner or holder of Preferred Securities or Notes, or other
securities, either in its individual capacity or as Remarketing Agent or Reset
Agent, as the case may be, for any action or failure to act in connection with
the Remarketing or otherwise in connection with the transactions contemplated by
this Agreement or the Supplemental Remarketing Agreement, except to the extent
that it shall have been determined by a court of competent jurisdiction by final
and nonappealable judgment that such liability has resulted from the willful
misconduct, bad faith or gross negligence of the Remarketing Agent or the Reset
Agent or by their failure to fulfill in any material respect their express
obligations hereunder or, in the case of the Remarketing Agent, under the
Supplemental Remarketing Agreement. The provisions of this Section 9 shall
survive any termination of this Agreement and shall also continue to apply to
every Remarketing Agent and Reset Agent notwithstanding their resignation or
removal.

      Section 10. Indemnification and Contribution. (a) The Company and the
Trust, jointly and severally, agree to indemnify and hold harmless the
Remarketing Agent, the Reset Agent and their respective directors, officers,
employees, agents, affiliates and each person, if any, who controls the
Remarketing Agent or the Reset Agent within the meaning of either Section 15 of
the 1933 Act, or Section 20 of the Securities Exchange Act of 1934, as amended
(the "1934 Act") (the Remarketing Agent, the Reset Agent and each such person or
entity being an "Agent Indemnified Party"), as follows:

            (i) from and against any and all losses, claims, damages,
      liabilities and expenses whatsoever, joint or several, as incurred, to
      which such Agent Indemnified Party may become subject under any applicable
      federal or state law, or otherwise, and related to, arising out of, or
      based on (A) the failure to have an effective Registration Statement (as
      defined in the Supplemental Remarketing Agreement) under the 1933 Act
      relating to the Preferred Securities or the Notes, as the case may be, if
      required, or the failure to satisfy the prospectus delivery requirements
      of the 1933 Act because the Company or the Trust, as the case may be,
      failed to provide the Remarketing Agent with a Prospectus (as defined in
      the Supplemental Remarketing Agreement) for delivery, or (B) any untrue
      statement or alleged untrue statement of a material fact contained in the

                                       9
<PAGE>

      Registration Statement or any amendment thereto (including any information
      deemed to be a part of the Registration Statement at the time it became
      effective pursuant to paragraph (b) of Rule 430A under the 1933 Act, if
      applicable), or the omission or alleged omission therefrom of a material
      fact required to be stated therein or necessary to make the statements
      therein not misleading, or (C) any untrue statement or alleged untrue
      statement of a material fact contained in any preliminary prospectus or
      the Prospectus, or any amendment or supplement thereto, or the omission or
      alleged omission therefrom of a material fact necessary in order to make
      the statements therein, in the light of the circumstances under which they
      were made, not misleading, or (D) any untrue statement or alleged untrue
      statement of a material fact contained in any preliminary remarketing
      memorandum or any final remarketing memorandum, or any amendment or
      supplement thereto, or the omission or alleged omission therefrom of a
      material fact necessary in order to make the statements therein, in the
      light or the circumstances under which they were made, not misleading, or
      (E) any untrue statement or alleged untrue statement of a material fact
      contained in any other information (whether oral or written) or documents
      (including, without limitation, any documents incorporated or deemed to be
      incorporated by reference in any such information or documents) provided
      by the Company or the Trust, as the case may be, for use in connection
      with the remarketing of the Notes or the Preferred Securities, as the case
      may be, or any of the transactions related thereto, or (F) any breach by
      the Company or the Trust, as the case may be, of any of the
      representations, warranties or agreements included or incorporated by
      reference in this Agreement or the Supplemental Remarketing Agreement, or
      (G) any failure by the Company or the Trust, as the case may be, to make
      or consummate the remarketing of the Notes or the Preferred Securities, as
      the case may be, (including, without limitation, any Failed Initial
      Remarketing or Failed Secondary Remarketing) or the withdrawal, recession,
      termination, amendment or extension of the terms of such remarketing, or
      (H) any failure on the part of the Company or the Trust, as the case may
      be, to comply, or any breach by the Company or the Trust, as the case may
      be, of, any of the provisions included or incorporated by reference in
      this Agreement, the Supplemental Remarketing Agreement, the Purchase
      Contract Agreement, the Corporate Units, the Treasury Units, the Pledge
      Agreement, the Indenture, the Declaration, the Preferred Securities or the
      Notes (collectively, the "Operative Documents") or (I) the Remarketing of
      the Preferred Securities or the Notes, as the case may be, or any other
      transaction contemplated by any of the Operative Documents, or the
      engagement of the Remarketing Agent or the Reset Agent pursuant to, or the
      performance by the Remarketing Agent or the Reset Agent of the respective
      services contemplated by, this Agreement or the Supplemental Remarketing
      Agreement, whether or not the Initial Remarketing or the Secondary
      Remarketing or the reset of the rate on the Preferred Securities or Notes
      as contemplated herein actually occur;

            (ii) against any and all loss, liability, claim, damage and expense
      whatsoever, as incurred, to the extent of the aggregate amount paid in
      settlement of any litigation or any investigation or proceeding by any
      governmental agency or body, commenced or threatened, or of any claim
      whatsoever related to, arising out of or based on any matter described in
      (i) above; and

                                       10
<PAGE>

            (iii) against any and all expense whatsoever, as incurred (including
      the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
      incurred in investigating, preparing or defending against any litigation,
      or any investigation or proceeding by any governmental agency or body,
      commenced or threatened, or any claim whatsoever related to, arising out
      or based on any matter described in (i) above, whether or not such Agent
      Indemnified Party is a party and whether or not such claim, action or
      proceeding is initiated or brought by or on behalf of the Company or the
      Trust, as the case may be, to the extent that any such expense is not paid
      under (i) or (ii) above;

provided, however, that the Company and the Trust shall not be liable under
clause (i) (B), (i) (C), (i) (D) or (i) (E) to the extent any such loss, claim,
damage, liability or expense arises out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and conformity with
written information furnished to the Company and the Trust by the Remarketing
Agent or the Reset Agent expressly for use in the Registration Statement (or any
amendment thereto), any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) or any preliminary or final remarketing
memorandum (or any amendment or supplement thereto) or any other documents used
in connection with remarketing of the Preferred Securities or the Notes, as the
case may be; provided, further, that with respect to any untrue statement or
omission of a material fact made in any preliminary prospectus, the indemnity
agreement contained in this Section 10(a) shall not inure to the benefit of the
Remarketing Agent to the extent that any such loss, claim, damage or liability
of the Remarketing Agent occurs under the circumstance where (w) the Company or
the Trust had previously furnished copies of the Prospectus to Merrill Lynch,
(x) the untrue statement or alleged untrue statement of a material fact or
omission or alleged omission of a material fact contained in the preliminary
prospectus was corrected in the Prospectus, and (y) there was not sent or given
to such person, at or prior to the written confirmation of the sale of Preferred
Securities or Notes, as the case may be, to such person, a copy of the
Prospectus and the delivery thereof would have constituted a complete defense to
such person's claim in respect of such untrue statement or omission or alleged
untrue statement or omission; provided, further, that the Company and the Trust
shall not be liable under clause (i)(G) or (i)(I) to the extent that such loss,
claim, damage, liability or expense has, by final judicial determination,
resulted from the willful misconduct, bad faith or gross negligence of the
Remarketing Agent or the Reset Agent or by their failure to fulfill, in any
material respect, their express obligations hereunder or, in the case of the
Remarketing Agent, under the Supplemental Remarketing Agreement.

            Other than as set forth in Section 10(b) below, the Company and the
Trust agree that no Agent Indemnified Party shall have any liability (whether
direct or indirect, in contract or tort or otherwise) to the Company or the
Trust or their respective security holders or creditors relating to or arising
out of the engagement of the Remarketing Agent or the Reset Agent pursuant to,
or the performance by the Remarketing Agent or the Reset Agent of their
respective services contemplated by, this Agreement or the Supplemental
Remarketing Agreement except to the extent that any loss, claim, damage,
liability or expense is found in a final judgment by a court of competent
jurisdiction to have resulted from the willful misconduct, gross negligence or
bad faith of the Remarketing Agent or the Reset Agent, as the case may be.

            The Company and the Trust agree that, without Merrill Lynch's prior
written consent, it will not settle, compromise or consent to the entry of any
judgment with respect to

                                       11
<PAGE>

any litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any action or claim whatsoever in respect of
which indemnification or contribution could be sought under this Section 10(a)
(whether or not Merrill Lynch or any other Agent Indemnified Party is an actual
or potential party to such claim, action or proceeding), unless such settlement,
compromise or consent (i) includes an unconditional release of each Agent
Indemnified Party from all liability arising out of such litigation,
investigation, proceeding, action or claim and (ii) does not include a statement
as to, or an admission of, fault, culpability or a failure to act by or on
behalf of an Agent Indemnified Party.

      (b) The Remarketing Agent and the Reset Agent, severally and not jointly,
agree to indemnify and hold harmless the Company, its directors and its officers
who sign the Registration Statement, the Trust, each of the Trustees who signed
the Registration Statement and each person, if any, who controls the Company or
the Trust within the meaning of either Section 15 of the 1933 Act or Section 20
of the 1934 Act (the "Company and Trust Indemnified Parties") to the same extent
as the foregoing indemnity from the Company or the Trust to the Agent
Indemnified Parties, but only with reference to information relating to such
Remarketing Agent and Reset Agent furnished to the Company and the Trust in
writing by such Remarketing Agent and Reset Agent expressly for use in the
Registration Statement, any preliminary prospectus, the Prospectus or any
amendments or supplements thereto or any other documents used in connection with
the Remarketing of the Preferred Securities or the Notes, as the case may be.

            Each of the Remarketing Agent and the Reset Agent agrees that,
without the Company's and the Trust's prior written consent, it will not settle,
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any action or claim whatsoever in respect of
which indemnification or contribution could be sought under this Section 10(b)
(whether or not the Company or the Trust or any other Company and Trust
Indemnified Party is an actual or potential party to such claim, action or
proceeding), unless such settlement, compromise or consent (i) includes an
unconditional release of each Company and Trust Indemnified Party from all
liability arising out of such litigation, investigation, proceeding, action or
claim and (ii) does not include a statement as to, or an admission of fault,
culpability or a failure to act by or on behalf of a Company and Trust
Indemnified Party.

      (c) If the indemnification provided for in Section 10(a) or 10(b) hereof
is for any reason unavailable to or insufficient to hold harmless any party
seeking indemnification thereunder (an "Indemnified Party") in respect of any
losses, liabilities, claims, damages or expenses referred to therein, then the
Company and the Trust, on the one hand, and the Remarketing Agent and the Reset
Agent on the other hand, shall contribute to the aggregate amount of such
losses, liabilities, claims, damages and expenses incurred by such Indemnified
Party, as incurred, (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Trust on the one hand and the
Remarketing Agent and the Reset Agent on the other hand from the remarketing of
the Preferred Securities or the Notes contemplated hereby or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company and the Trust
on the one hand and of the Remarketing Agent and the Reset Agent on the other
hand in connection with the statements, omissions or

                                       12
<PAGE>

other matters which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Trust on the one hand and the
Remarketing Agent and the Reset Agent on the other hand in connection with the
remarketing of the Preferred Securities and the Notes contemplated hereby shall
be deemed to be in the same respective proportions as the aggregate liquidation
amount of the Preferred Securities or the aggregate principal amount of the
Notes which are or are to be remarketed bears to the aggregate fees actually
received by the Remarketing Agent and the Reset Agent under Section 3 hereof.
The relative fault of the Company and the Trust on the one hand and the
Remarketing Agent and the Reset Agent on the other hand (i) in the case of an
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, shall be determined by reference to, among
other things, whether such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or the Trust on the one hand or by the Remarketing Agent
or the Reset Agent on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission and (ii) in the case of any other action or omission shall
be determined by reference to, among other things, whether such action or
omission was taken or omitted to be taken by the Company or the Trust on the one
hand, or by the Remarketing Agent or the Reset Agent, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
prevent or correct such action or omission. The Company, the Trust, the
Remarketing Agent and the Reset Agent agree that it would not be just and
equitable if contribution pursuant to this Section 10(c) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above in this Section 10(c). The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an Indemnified Party and referred to above in this Section 10(c) shall be
deemed to include any legal or other expenses incurred by such Indemnified Party
in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or any such omission or alleged omission or any other such action or
omission; provided, however, that to the extent permitted by applicable law, in
no event shall the Remarketing Agent or the Reset Agent be required to
contribute any amount which, in the aggregate, exceeds the aggregate fees
received by them under Section 3 of this Agreement. No investigation or failure
to investigate by any Indemnified Party shall impair the foregoing
indemnification and contribution agreement or any rights an Indemnified Party
may have. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

      (d) Promptly after receipt by any Indemnified Party of written notice of
any claim or commencement of an action or proceeding with respect to which
indemnification may be sought hereunder, such party will notify the party from
whom indemnification is sought (the "Indemnifying Party") in writing of such
claim or of the commencement of such action or proceeding, but failure to so
notify the Indemnifying Party will not relieve the Indemnifying Party from any
liability which it may have to such party seeking indemnification under this
indemnification and contribution agreement, and in any event will not relieve
the Indemnifying Party from any other liability that it may have to such party.
The Indemnified Party (or Merrill Lynch in the case of any Agent Indemnified
Party) shall have the right to select counsel in connection with any transaction
for which any Indemnified Party may be entitled to

                                       13
<PAGE>

indemnification or contribution hereunder, provided that in no event shall the
Indemnifying Parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel, for all
Indemnified Parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances.

      (e) Anything herein or in the Supplemental Remarketing Agreement to the
contrary notwithstanding, the provisions of this Section 10, and the rights of
the Company, the Trust, the Remarketing Agent, the Reset Agent and the other
Indemnified Parties hereunder, shall be in addition to, and not in limitation
of, any rights or benefits (including, without limitation, rights to
indemnification or contribution) which the Company, the Trust, the Remarketing
Agent, the Reset Agent or any other Indemnified Party may have under any other
instrument or agreement.

      Section 11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
principles of conflicts of laws that would require the application of the law of
any other jurisdiction.

      Section 12. Term of Agreement. (a) Unless otherwise terminated in
accordance with the provisions hereof and except as otherwise provided herein,
this Agreement shall remain in full force and effect from the date hereof until
the first day thereafter on which no Preferred Securities or Notes are
outstanding, or, if earlier, the Business Day immediately following the Initial
Reset Date, in the case of a Successful Initial Remarketing, or the Business Day
immediately following the Purchase Contract Settlement Date, in the case of a
Successful Secondary Remarketing. Anything herein to the contrary
notwithstanding, the provisions of Section 8 hereof and the provisions of
Sections 3, 9, 10 and 12(b) hereof shall survive any termination of this
Agreement and remain in full force and effect; provided, however, that if any
Reset Agent resigns prior to a successful remarketing, then the obligations set
forth in Section 3 hereof shall not survive the termination of this Agreement
and no fee shall be payable to such Reset Agent in such capacity.

      (b) All representations and warranties included or incorporated by
reference in this Agreement, or the Supplemental Remarketing Agreement, or
contained in certificates of officers of the Company submitted pursuant hereto
or thereto, shall remain operative and in full force and effect, regardless of
any investigation made by or on behalf of the Remarketing Agent, the Reset Agent
or any of their controlling persons, or by or on behalf of the Company or the
Purchase Contract Agent, and shall survive the remarketing of the Preferred
Securities or the Notes.

      Section 13. Successors and Assigns. Except in the case of a succession
pursuant to the terms of the Purchase Contract Agreement, the rights and
obligations of the Company and the Purchase Contract Agent (both in its capacity
as Purchase Contract Agent and as attorney-in-fact) hereunder may not be
assigned or delegated to any other person without the prior written consent of
the Remarketing Agent and the Reset Agent, which consent shall not be
unreasonably withheld and, except with respect to the Purchase Contract Agent,
in connection with the appointment of a successor thereof pursuant to the
Purchase Contract Agreement. The rights and obligations of the Remarketing Agent
and the Reset Agent hereunder may not be assigned or delegated to any other
person without the prior written consent of the Company or the Trust, except
that the Remarketing Agent shall have the right to appoint additional
remarketing agents

                                       14
<PAGE>

as provided herein. This Agreement shall inure to the benefit of and be binding
upon the Company, the Purchase Contract Agent, the Remarketing Agent and the
Reset Agent and their respective successors and assigns and the other
Indemnified Parties (as defined in Section 10 hereof) and the successors,
assigns, heirs and legal representatives of the Indemnified Parties. The terms
"successors" and "assigns" shall not include any purchaser of Preferred
Securities or Preferred Securities merely because of such purchase.

      Section 14. Headings. Section headings have been inserted in this
Agreement and the Supplemental Remarketing Agreement as a matter of convenience
of reference only, and it is agreed that such section headings are not a part of
this Agreement or the Supplemental Remarketing Agreement and will not be used in
the interpretation of any provision of this Agreement or the Supplemental
Remarketing Agreement.

      Section 15. Severability. If any provision of this Agreement or the
Supplemental Remarketing Agreement shall be held or deemed to be or shall, in
fact, be invalid, inoperative or unenforceable as applied in any particular case
in any or all jurisdictions because it conflicts with any provisions of any
constitution, statute, rule or public policy or for any other reason, then, to
the extent permitted by law, such circumstances shall not have the effect of
rendering the provision in question invalid, inoperative or unenforceable in any
other case, circumstances or jurisdiction, or of rendering any other provision
or provisions of this Agreement or the Supplemental Remarketing Agreement, as
the case may be, invalid, inoperative or unenforceable to any extent whatsoever.

      Section 16. Counterparts. This Agreement and the Supplemental Remarketing
Agreement may be executed in counterparts, each of which shall be regarded as an
original and all of which shall constitute one and the same document.

      Section 17. Amendments. This Agreement and the Supplemental Remarketing
Agreement may be amended by any instrument in writing signed by the parties
hereto. The Company, the Trust and the Purchase Contract Agent (except with
respect to the Indenture and the Preferred Securities, to which it is not a
party) agree that they will not enter into, cause or permit any amendment or
modification of the Purchase Contract Agreement, the Indenture, the Declaration,
the Pledge Agreement, the Preferred Securities, the Notes, the Participating
Units or any other instruments or agreements relating to the Preferred
Securities or Notes or the Participating Units which would adversely affect the
rights, duties or obligations of the Remarketing Agent or the Reset Agent
without the prior written consent of the Remarketing Agent or the Reset Agent,
as the case may be.

      Section 18. Notices. Unless otherwise specified, any notices, requests,
consents or other communications given or made hereunder or pursuant hereto
shall be made in writing or transmitted by any standard form of
telecommunication, including telephone or telecopy, and confirmed in writing.
All written notices and confirmations of notices by telecommunication shall be
deemed to have been validly given or made when delivered or mailed, registered
or certified mail, return receipt requested and postage prepaid. All such
notices, requests, consents or other communications shall be addressed as
follows: if to the Company, to Public Service Enterprise Group Incorporated, 80
Park Plaza, P.O. Box 1171, Newark, New Jersey 07101 Attention: Treasurer, with a
copy to Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market

                                       15
<PAGE>

Street, Philadelphia, PA 19103-7599 Attention: Robert C. Gerlach; if to the
Remarketing Agent or Reset Agent, to Merrill Lynch, Pierce, Fenner & Smith
Incorporated, at 4 World Financial Center, New York, New York 10080, Attention:
John Lynch, with a copy to Sidley Austin Brown & Wood LLP, 787 Seventh Avenue,
New York, NY 10019 Attention: Howard G. Godwin, Jr.; and if to the Purchase
Contract Agent, to Wachovia Bank, National Association, 21 South Street,
Morristown, New Jersey 07960, Attention: Corporate Trust Administration, or to
such other address as any of the above shall specify to the other in writing.

      Section 19. Information. The Company and Trust agree to furnish the
Remarketing Agent and the Reset Agent with such information and documents as the
Remarketing Agent or the Reset Agent may reasonably request in connection with
the transactions contemplated by this Remarketing Agreement and the Supplemental
Remarketing Agreement, and make reasonably available to the Remarketing Agent,
the Reset Agent and any accountant, attorney or other advisor retained by the
Remarketing Agent or the Reset Agent such information that parties would
customarily require in connection with a due diligence investigation conducted
in accordance with applicable securities laws and cause the Company's officers,
directors, employees and accountants to participate in all such discussions and
to supply all such information reasonably requested by any such person in
connection with such investigation.

                                       16
<PAGE>

         IN WITNESS WHEREOF, each of the Company, the Trust, the Purchase
Contract Agent and the Remarketing Agent has caused this Agreement to be
executed in its name and on its behalf by one of its duly authorized signatories
as of the date first above written.

                                    PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

                                    By:
                                       -----------------------------------------
                                       Name:
                                       Title:

                                    PSEG FUNDING TRUST I

                                    By:
                                       -----------------------------------------
                                       Name:
                                       Title:

CONFIRMED AND ACCEPTED:
MERRILL LYNCH, PIERCE, FENNER & SMITH
            INCORPORATED

By:
   ---------------------------------
   Name:
   Title:

WACHOVIA BANK,
not individually but solely as
Purchase Contract Agent and
as attorney-in-fact for the
holders of the Purchase Contracts

By:
   ---------------------------------
   Name:
   Title:

                                       17
<PAGE>

                                                                    Exhibit A to
                                                           Remarketing Agreement

                   Form of Supplemental Remarketing Agreement

      Supplemental Remarketing Agreement dated ______________, ____ among Public
Service Enterprise Group Incorporated, a New Jersey corporation (the "Company"),
PSEG Funding Trust I, a Delaware statutory trust (the "Trust"), Merrill Lynch,
Pierce, Fenner & Smith Incorporated (the "Remarketing Agent"), and Wachovia
Bank, a banking association organized under the laws of the United States, as
Purchase Contract Agent and attorney-in-fact for the Holders of the Purchase
Contracts (as such terms are defined in the Purchase Contract Agreement referred
to in Schedule I hereto).

      NOW, THEREFORE, for and in consideration of the covenants herein made, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

      B. 1. Definitions. Capitalized terms used and not defined in this
Agreement shall have the meanings assigned to them in the Remarketing Agreement
dated as of September 10, 2002 (the "Remarketing Agreement") among the Company,
the Trust, the Purchase Contract Agent and Merrill Lynch, Pierce, Fenner & Smith
Incorporated or, if not defined in the Remarketing Agreement, the meanings
assigned to them in the Purchase Contract Agreement (as defined in Schedule I
hereto).

      2. Registration Statement and Prospectus. [IN THE EVENT THAT A
REGISTRATION STATEMENT IS REQUIRED, INSERT THE FOLLOWING: The Company and the
Trust have filed with the Securities and Exchange Commission, and there has
become effective, a registration statement on Form S-3, including a prospectus,
relating to the Securities (as such term is defined on Schedule I hereto). Such
Registration Statement, as amended, and including the information deemed to be a
part thereof pursuant to Rule 430A under the Securities Act of 1933, as amended
(the "1933 Act"), and the documents incorporated or deemed to be incorporated by
reference therein, are hereinafter called, collectively, the "Registration
Statement"; (the related preliminary prospectus dated ____________, including
the documents incorporated or deemed to be incorporated by reference therein,
[and preliminary prospectus supplemented dated __________] are hereinafter
called, [collectively] the "preliminary prospectus";] and the related prospectus
dated _____________, including the documents incorporated or deemed to be
incorporated by reference therein, [and prospectus supplement dated _________]
are hereinafter called, [collectively,] the "Prospectus." The Company and the
Trust, as the case may be, have provided copies of the Registration Statement [,
the preliminary prospectus] and the Prospectus to the Remarketing Agent, and
hereby consents to the use of the [preliminary prospectus] and the Prospectus in
connection with the remarketing of the Securities.] [IN THE EVENT THAT A
REGISTRATION STATEMENT IS NOT POSSIBLE OR NOT REQUIRED, INSERT THE FOLLOWING:
The Company and the Trust have provided to the Remarketing Agent, for use in
connection with remarketing of the Securities (as such term is defined on
Schedule I hereto), a [preliminary remarketing memorandum and] remarketing
memorandum and [describe other materials, if any]. Such remarketing memorandum

                                       18
<PAGE>

(including the documents incorporated or deemed to be incorporated by reference
therein, [and] [describe other materials] are hereinafter called, collectively,
the "Prospectus," [and such preliminary marketing memorandum (including the
documents incorporated or deemed to be incorporated by reference therein) is
hereinafter called a "preliminary prospectus")]. The Company and the Trust each
hereby consent to the use of the Prospectus [and the preliminary prospectus] in
connection with the remarketing of the Securities]. All references in this
Agreement to amendments or supplements to the [Registration Statement] [the
preliminary prospectus] or the Prospectus shall be deemed to mean and include
the filing of any document under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), which is incorporated or deemed to be incorporated by
reference in the [Registration Statement] [the preliminary prospectus] or the
Prospectus, as the case may be.

      3. Provisions Incorporated by Reference.

      (a) Subject to Section 3(b), the provisions of the Underwriting Agreement
(other than Section 2, Section 4, Section 6, Section 7, Section 8, Section 9 and
Section 10 thereof) are incorporated herein by reference, mutatis mutandis, and
the Company and the Trust, as the case may be, hereby make the representations
and warranties, and agrees to comply with the covenants and obligations, set
forth in the provisions of the Underwriting Agreement incorporated by reference
herein, as modified by the provisions of Section 3(b) hereof.

      (b) With respect to the provisions of the Underwriting Agreement
incorporated herein, for the purposes hereof, (i) all references therein to the
"Underwriter" or "Underwriters" shall be deemed to refer to the Remarketing
Agent and all references to the "Representative" or the "Representatives" shall
be deemed to refer to the Remarketing Agent; (ii) all references therein to the
"Securities" or "Initial Securities" shall be deemed to refer to the Securities
as defined herein; (iii) all references therein to the "Closing Time" shall be
deemed to refer to the Remarketing Closing Date specified in Schedule I hereto;
(iv) all references therein to the ["Registration Statement"] [the "preliminary
prospectus"] or the "Prospectus" shall be deemed to refer to the [Registration
Statement] [the preliminary prospectus] and the Prospectus, respectively, as
defined herein; (v) all references therein to this "Agreement," the
"Underwriting Agreement," "hereof," "herein" and all references of similar
import, shall be deemed to mean and refer to this Supplemental Remarketing
Agreement; (vi) all references therein to "the date hereof," "the date of this
Agreement" and all similar references shall be deemed to refer to the date of
this Supplemental Remarketing Agreement; (vii) all references therein to any
"Date of Delivery" shall be disregarded; and (viii) [other changes, including
changes relating to the offer and sale of the Securities in connection with the
Remarketing without registration under the 1933 Act in reliance upon an
exemption therefrom (including the exemption afforded by Rule 144A)].]

      4. Remarketing. Subject to the terms and conditions and in reliance upon
the representations and warranties herein set forth or incorporated by reference
herein and in the Remarketing Agreement, the Remarketing Agent agrees to use its
reasonable efforts to remarket, in the manner set forth in Section 2(b) of the
Remarketing Agreement, the aggregate liquidation amount or aggregate principal
amount, as the case may be, of Securities set forth in Schedule I hereto at a
purchase price not less than 100% of the [Minimum Initial Remarketing Price]
[aggregate liquidation amount of the Preferred Securities or the principal
amount of the Notes

                                       19
<PAGE>

plus deferred and unpaid distributions or interest, if any, on the Securities].
In connection therewith, the registered holder or holders thereof agree, in the
manner specified in Section 5 hereof, to pay to the Remarketing Agent a
Remarketing Fee equal to an amount not exceeding 25 basis points (0.25%) of [the
Minimum Initial Remarketing Price] [such aggregate liquidation amount or
aggregate principal amount of the Securities plus deferred and unpaid
distributions or interest, if any, thereon, as the case may be,] payable by
deduction from any amount received in connection from such [Initial] [Secondary]
Remarketing in excess of the [Minimum Initial Remarketing Price] [aggregate
liquidation amount or aggregate principal amount of the Securities plus deferred
and unpaid distributions or interest, if any, thereon, as the case may be]. The
right of each holder of Securities to have Securities tendered for purchase
shall be limited to the extent set forth in the last sentence of Section 2(b) of
the Remarketing Agreement (which is incorporated by reference herein). As more
fully provided in Section 2 (c) of the Remarketing Agreement (which is
incorporated by reference herein), the Remarketing Agent is not obligated to
purchase any Securities in the remarketing or otherwise, and neither the Company
nor the Remarketing Agent shall be obligated in any case to provide funds to
make payment upon tender of Securities for remarketing.

      5. Delivery and Payment. Delivery of payment for the remarketed Securities
by the purchasers thereof identified by the Remarketing Agent and payment of the
Remarketing Fee shall be made on the Remarketing Closing Date at the location
and time specified in Schedule I hereto (or such later date not later than five
Business Days after such date as the Remarketing Agent shall designate), which
date and time may be postponed by agreement between the Remarketing Agent, the
Trust and the Company. Delivery of the remarketed Securities and payment of the
Remarketing Fee shall be made to the Remarketing Agent against payment by the
respective purchasers of the remarketed Securities of the consideration therefor
as specified herein, which consideration shall be paid to the Collateral Agent
for the account of the persons entitled thereto by certified or official bank
check or checks drawn on or by a New York Clearing House bank and payable in
immediately available funds or in immediately available funds by wire transfer
to an account or accounts designated by the Collateral Agent.

      If the Securities are not represented by a Global Security held by or on
behalf of The Depository Trust Company, certificates for the Securities shall be
registered in such names and denominations as the Remarketing Agent may request
not less than one full Business Day in advance of the Remarketing Closing Date,
and the Company, the Trust, the Collateral Agent and the registered holder or
holders thereof agree to have such certificates available for inspection,
packaging and checking by the Remarketing Agent in New York, New York not later
than 1:00 p.m. on the Business Day prior to the Remarketing Closing Date.

      6. Notices. Unless otherwise specified, any notices, requests, consents or
other communications given or made hereunder or pursuant hereto shall be made in
writing or transmitted by any standard form of telecommunication, including
telephone or telecopy, and confirmed in writing. All written notices and
confirmations of notices by telecommunication shall be deemed to have been
validly given or made when delivered or mailed, registered or certified mail,
return receipt requested and postage prepaid. All such notices, requests,
consents or other communications shall be addressed as follows: if to the
Company, to Public Service Enterprise Group Incorporated, 80 Park Plaza, P.O.
Box 1171, Newark, New Jersey 07101 Attention: Treasurer, with a copy to Ballard
Spahr Andrews & Ingersoll, LLP, 1735 Market

                                       20
<PAGE>

Street, Philadelphia, PA 19103-7599 Attention: Robert C. Gerlach; if to the
Trust, to PSEG Funding Trust I, 80 Park Plaza, P.O. Box 1171, Newark, New Jersey
07101, Attention: Treasurer; if to the Remarketing Agent or Reset Agent, to
Merrill Lynch, Pierce, Fenner & Smith Incorporated, at 4 World Financial Center,
New York, New York 10080, Attention: John Lynch, with a copy to Sidley Austin
Brown & Wood LLP, 787 Seventh Avenue, New York, New York 10019 Attention: Howard
G. Godwin, Jr.; and if to the Purchase Contract Agent, to Wachovia Bank,
National Association, at 21 South Street, Morristown, New Jersey 07960,
Attention: Corporate Trust Administration, or to such other address as any of
the above shall specify to the other in writing.

      7. Conditions to Obligations of Remarketing Agent. Anything herein to the
contrary notwithstanding, the parties hereto agree (and the holders and
beneficial owners of the Securities will be deemed to agree) that the
obligations of the Remarketing Agent under this Agreement and the Remarketing
Agreement are subject to the satisfaction of the conditions set forth in Section
7 of the Remarketing Agreement (which are incorporated herein by reference), and
to the satisfaction, on the Remarketing Closing Date, of the conditions
incorporated by reference herein from Section 5 of the Underwriting Agreement as
modified by Section 3(b) hereof (including, without limitation, the delivery of
opinions of counsel, officers' certificates and accountants' comfort letters in
form and substance satisfactory to the Remarketing Agent, the accuracy as of the
Remarketing Closing Date of the representations and warranties of the Company
and the Trust included and incorporated by reference herein and the performance
by the Company and the Trust of their obligations under the Remarketing
Agreement and this Agreement as and when required hereby and thereby). In
addition, anything herein or in the Remarketing Agreement to the contrary
notwithstanding, the Remarketing Agreement and this Agreement may be terminated
by the Remarketing Agent, by notice to the Company and the Trust at any time
prior to the time of settlement on the Remarketing Closing Date, if any of the
events or conditions set forth in Section 9 of the Underwriting Agreement, as
modified by Section 3(b) hereof, shall have occurred or shall exist.

      8. Indemnity and Contribution. Anything herein to the contrary
notwithstanding, the Remarketing Agent shall be entitled to indemnity and
contribution on the terms and conditions set forth in the Remarketing Agreement.

                                       21
<PAGE>

      If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company, the Trust and the Remarketing Agent.

                                    Very truly yours,

                                    PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

                                    By:
                                       -----------------------------------------
                                    Name:
                                    Title:

                                    PSEG FUNDING TRUST I

                                    By:
                                       -----------------------------------------
                                    Name:
                                    Title:

CONFIRMED AND ACCEPTED:
MERRILL LYNCH, PIERCE, FENNER & SMITH
            INCORPORATED

By:
   -----------------------------------
   Name:
   Title:

[Add other Remarketing Agents, if any]

WACHOVIA BANK, NATIONAL ASSOCIATION
not individually but solely as Purchase
Contract Agent and as attorney-in-fact
for the holders of the Purchase Contracts

By:
   -----------------------------------
   Name:
   Title:

                                       22
<PAGE>

                                   SCHEDULE I

      Securities subject to remarketing: ($460,000,000 aggregate liquidation
amount of 6.25% Preferred Securities of PSEG Funding Trust I) ($460,000,000
aggregate principal amount of 6.25% Senior Deferrable Notes of Public Service
Enterprise Group Incorporated).

      Purchase Contract Agreement, dated as of September 10, 2002 (the "Purchase
Contract Agreement") by and between Public Service Enterprise Group
Incorporated, a Delaware corporation, and Wachovia Bank, National Association, a
banking association organized under the laws of the United States.

      [Minimum Initial Remarketing Price]
      [Aggregate Liquidation Amount or Aggregate Principal Amount of Securities:
      $_________________]

      Remarketing Closing Date, Time and Location:

                                       23

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