-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, W2gH1N2cUcaHNab9ffqdcIjNiJQuwCwAJPYaua+BNAPZBlDcVVwTt2H76k4Y0X3M SYZddryM3jVHMVWzz2QYcw== 0000891092-02-000944.txt : 20020808 0000891092-02-000944.hdr.sgml : 20020808 20020808170845 ACCESSION NUMBER: 0000891092-02-000944 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20020808 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PSEG POWER LLC CENTRAL INDEX KEY: 0001158659 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 223663480 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-97825 FILM NUMBER: 02723324 BUSINESS ADDRESS: STREET 1: 80 PARK PLAZA T-6 STREET 2: ` CITY: NEWARK STATE: NJ ZIP: 07111 BUSINESS PHONE: 9734307000 MAIL ADDRESS: STREET 1: 80 PARK PLAZA T-6 CITY: NEWARK STATE: NJ ZIP: 07111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PSEG ENERGY RESOURCES & TRADE LLC CENTRAL INDEX KEY: 0001158662 IRS NUMBER: 223663483 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-97825-01 FILM NUMBER: 02723325 BUSINESS ADDRESS: STREET 1: 80 PARK PLAZA T-6 STREET 2: ` CITY: NEWARK STATE: NJ ZIP: 07111 BUSINESS PHONE: 9734307000 MAIL ADDRESS: STREET 1: 80 PARK PLAZA T-6 CITY: NEWARK STATE: NJ ZIP: 07111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PSEG NUCLEAR LLC CENTRAL INDEX KEY: 0001158661 IRS NUMBER: 223663482 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-97825-02 FILM NUMBER: 02723326 BUSINESS ADDRESS: STREET 1: 80 PARK PLAZA T-6 STREET 2: ` CITY: NEWARK STATE: NJ ZIP: 07111 BUSINESS PHONE: 9734307000 MAIL ADDRESS: STREET 1: 80 PARK PLAZA T-6 CITY: NEWARK STATE: NJ ZIP: 07111 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PSEG FOSSIL LLC CENTRAL INDEX KEY: 0001158660 IRS NUMBER: 223663481 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-97825-03 FILM NUMBER: 02723327 BUSINESS ADDRESS: STREET 1: 80 PARK PLAZA T-6 STREET 2: ` CITY: NEWARK STATE: NJ ZIP: 07111 BUSINESS PHONE: 9734307000 MAIL ADDRESS: STREET 1: 80 PARK PLAZA T-6 CITY: NEWARK STATE: NJ ZIP: 07111 S-4 1 e13549s-4.txt FORM S-4 As filed with the Securities and Exchange Commission on Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM S-4 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ---------- PSEG Power LLC (Exact name of registrant as specified in its charter) Delaware 4911 22-3663480 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or Classification Code Number) Identification organization) Number) ---------- PSEG Fossil LLC (Exact name of registrant as specified in its charter) Delaware 4911 22-3663481 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or Classification Code Number) Identification organization) Number) ---------- PSEG Nuclear LLC (Exact name of registrant as specified in its charter) Delaware 4911 22-3663482 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or Classification Code Number) Identification organization) Number) ---------- PSEG Energy Resources & Trade LLC (Exact name of registrant as specified in its charter) Delaware 6221 22-3663483 (State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer of incorporation or Classification Code Number) Identification organization) Number) ---------- 80 Park Plaza-T25 Newark, New Jersey 07102 (973) 430-7000 http://www.pseg.com (Address, including zip code and telephone number, including area code, of Registrants' principal executive offices) ---------- Thomas M. O'Flynn Executive Vice President and Chief Financial Officer PSEG Power LLC 80 Park Plaza-T4B Newark, New Jersey 07102 (973) 430-7000 (Name, address, including zip code and telephone number, including area code, of agent for service) ---------- Copies to: James T. Foran, Esquire Associate General Counsel Public Service Enterprise Group Incorporated 80 Park Plaza-T5B P.O. Box 1171 Newark, New Jersey 07101-1171 (973) 430-7000 ---------- Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective. If any of the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. |_| If this Form is filed to register additional securities for an offering pursuant to Rule 462 (b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. |_| If this Form is a post-effective amendment filed pursuant to Rule 462 (c) under the Securities Act, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. |_| CALCULATION OF REGISTRATION FEE
============================================================================================================= Proposed Proposed Maximum Maximum Title of Each Amount Offering Aggregate Amount of Class of Securities to be Price Per Offering Registration to be Registered Registered Unit Price Fee (1) - ------------------------------------------------------------------------------------------------------------- 6.95% Senior Notes due 2012 ............... $600,000,000 100% $600,000,000 $55,200 - ------------------------------------------------------------------------------------------------------------- Guarantees of 6.95% Senior Notes due 2012 ................................ (2) (2) (2) (2) =============================================================================================================
(1) The registration fee has been calculated pursuant to Rule 457(f)(2) under the Securities Act. The proposed maximum aggregate offering price represents the total value of the bonds being exchanged under this registration statement. (2) No additional consideration will be paid for the Guarantees. Pursuant to Rule 457(n) under the Securities Act, no separate fee is payable in respect of the Guarantees. The Registrants hereby amend this registration statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8 (a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8 (a), may determine. ================================================================================ The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to completion dated August 8, 2002 PRELIMINARY PROSPECTUS PSEG Power LLC 80 Park Plaza, P.O. Box 1170 Newark, NJ 07101-1170 (973) 430-7000 $600,000,000 [LOGO] PSEG Power LLC Offer to Exchange 6.95% Senior Notes Due 2012 Which have been registered under the Securities Act For Any and All Outstanding 6.95% Senior Notes Due 2012 Which have not been so registered TERMS OF THE EXCHANGE OFFER o The exchange offer expires at 5:00 p.m., Eastern Time, on , 2002, unless extended by us in our sole discretion, subject to applicable law. o The terms of the exchange notes are substantially identical to the original notes, except that the exchange notes are registered under the Securities Act and the transfer restrictions and registration rights applicable to the original notes do not apply to the exchange notes. o The exchange notes, like the original notes, will be fully and unconditionally guaranteed by PSEG Fossil LLC, PSEG Nuclear LLC and PSEG Energy Resources & Trade LLC on a joint and several basis. The guarantees will rank equally in right of payment to all existing and future senior unsecured indebtedness of the guarantors. o All original notes that are validly tendered and not validly withdrawn will be exchanged. o Tenders of original notes may be withdrawn at any time prior to expiration of the exchange offer. o We do not intend to apply for listing of the exchange notes on any securities exchange or to arrange for them to be quoted on any quotation system. o The exchange offer is subject to customary conditions, including the condition that the exchange offer not violate applicable law or any applicable interpretation of the staff of the Securities and Exchange Commission. o We will not receive any proceeds from the exchange offer. o You will not incur any material federal income tax consequences from your participation in the exchange offer. Please see "Risk Factors" beginning on page 14 for a discussion of factors you should consider in connection with the exchange offer. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the exchange notes or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. The date of this prospectus is , 2002. TABLE OF CONTENTS Page ---- Where to Find More Information ............................................ 2 Incorporation of Certain Documents by Reference ........................... 3 Prospectus Summary ........................................................ 4 Risk Factors .............................................................. 14 Forward-Looking Statements ................................................ 21 Use of Proceeds ........................................................... 21 Capitalization ............................................................ 22 The Exchange Offer ........................................................ 23 Description of the Exchange Notes ......................................... 31 Federal Income Tax Considerations ......................................... 50 Plan of Distribution ...................................................... 52 Legal Opinions ............................................................ 53 Experts ................................................................... 53 When we refer to the term "note" or "notes", we are referring to both the original notes and the exchange notes to be issued in the exchange offer. When we refer to "holders" of the notes, we are referring to those persons who are the registered holders of notes on the books of the registrar appointed under the indenture. Unless the context otherwise indicates, all references to "Power," "we," "us" or "our" herein mean PSEG Power LLC, a Delaware limited liability company, and its consolidated subsidiaries. (For periods prior to August 21, 2000, " Power," "we," "us" or "our" also includes the generation business of Public Service Electric and Gas Company.) No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to exchange only the notes offered by this prospectus, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date. NOTICE TO NEW HAMPSHIRE RESIDENTS ONLY NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES ANNOTATED, 1955, AS AMENDED ("RSA"), WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF THE STATE OF NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA CHAPTER 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH. WHERE TO FIND MORE INFORMATION We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission ("SEC"). You may read and copy any document that we file at the Public Reference Room of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. You may also obtain our filings on the Internet at the SEC's home page at http://www.sec.gov. 2 This prospectus is part of a registration statement on Form S-4 filed with the SEC under the Securities Act of 1933, as amended. It does not contain all of the information that is important to you. You should read the registration statement for further information with respect to the securities, the guarantors and us. Statements contained in this prospectus concerning the provisions of any document filed as an exhibit to the registration statement or otherwise filed with the SEC highlight selected information, and in each instance reference is made to the copy of the full document as filed with the SEC. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The SEC allows us to "incorporate by reference" information that we file with it, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference or deemed incorporated by reference is an important part of this prospectus, and information that we file later with the SEC will be deemed to automatically update and supersede this incorporated information. We incorporate by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934, as amended, prior to the termination of any particular offering of securities hereunder. o Our Annual Report on Form 10-K for the year ended December 31, 2001, File No. 000-49614; o Our Amended Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2002, File No. 000-49614; o Our Amended Current Report on Form 8-K/A dated July 29, 2002; and o Our Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, File No. 000-49614. You can get a free copy of any of the documents incorporated by reference by making an oral or written request directed to: J. Brian Smith Director, Investor Relations PSEG Services Corporation 80 Park Plaza, 6th Floor Newark, NJ 07102 Telephone (973) 430-6564 You should rely only on the information contained or incorporated by reference or deemed to be incorporated by reference in this prospectus. We have not authorized anyone else to provide you with different or additional information. You should not rely on any other information or representations. Our affairs may change after this prospectus has been distributed. You should not assume that the information in this prospectus is accurate as of any date other than its date of issuance or the dates otherwise disclosed herein. 3 - -------------------------------------------------------------------------------- PROSPECTUS SUMMARY The following information is qualified in its entirety by the more detailed information and financial statements appearing elsewhere in this prospectus. Summary of the Exchange Offer The Exchange Offer ................... We are offering to exchange an aggregate of $600 million principal amount of 6.95% Senior Notes due 2012 for $600 million of original notes of like series. The original notes may be exchanged only in minimum denominations of $1,000 and integral multiples thereof. Issuance of the Original Notes ....... The original notes were issued and sold on June 7, 2002 in a transaction not requiring registration under the Securities Act. Registration Rights .................. At the time we issued the original notes, we entered into a registration rights agreement which obligates us to make this exchange offer. Required Representations ............. In order to participate in the exchange offer, you will be required to make some representations in a letter of transmittal, including that: o you are not affiliated with us, o you are not a broker-dealer who bought your original notes directly from us, o you will acquire the exchange notes in the ordinary course of business, and o you have not agreed with anyone to distribute the exchange notes. If you are a broker-dealer that purchased original notes for your own account as part of market-making or trading activities, you may represent to us that you have not agreed with us or our affiliates to distribute the exchange notes. If you make this representation, you need not make the last representation provided for above. Resale of the Exchange Notes ......... We are making the exchange offer in reliance on the position of the staff of the Division of Corporation Finance of the SEC as defined in certain interpretive letters issued to third parties in other transactions. We believe that the exchange notes acquired in this exchange offer may be freely traded without compliance with the provisions of the Securities Act that call for registration and delivery of a prospectus, except as described in the following paragraph. The exchange notes will be freely tradable only if the holders meet the conditions described under "Required Representations" above. If you are a broker-dealer that purchased original notes for your own account as part of market-making or trading activities, you must deliver a prospectus when you sell exchange notes. We have agreed in the registration rights agreement relating to the original notes to allow you to use this prospectus for this purpose during the 90-day period following completion of the exchange offer, subject to our right under some circumstances to restrict your use of this prospectus. See "The Exchange Offer -- Resales of Exchange Notes". - -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- Broker-dealers who acquired original notes directly from us may not rely on the staff's interpretations and must comply with the registration and prospectus delivery requirements of the Securities Act, including being named as a selling security holder, in order to resell the original notes or the exchange notes. Accrued Interest on the Original Notes ..................... The exchange notes will bear interest at an annual rate of 6.95%. Any interest that has accrued on the original notes before their exchange in this exchange offer will be payable on the exchange notes on the first interest payment date after the conclusion of this exchange offer. Procedures for Exchanging Notes .............................. The procedures for exchanging original notes involve notifying the exchange agent before the expiration date of the exchange offer of your intention to do so. The procedures for properly making notification are described in this prospectus under the heading "The Exchange Offer -- Procedures for Tendering Original Notes". Expiration Date ...................... 5:00 p.m., Eastern Time, on , 2002, unless the exchange offer is extended. Exchange Date ........................ We will notify the exchange agent of the date of acceptance of the original notes for exchange. Withdrawal Rights .................... If you tender your original notes for exchange in this exchange offer and later wish to withdraw them, you may do so at any time before 5:00 p.m., Eastern Time, on the day this exchange offer expires. Acceptance of Original Notes and Delivery of Exchange Notes ..................... We will accept any original notes that are properly tendered for exchange before 5:00 p.m., Eastern Time, on the day this exchange offer expires. The exchange notes will be delivered promptly after expiration of this exchange offer. Tax Consequences ..................... You will not incur any material federal income tax consequences from your participation in this exchange offer. Use of Proceeds ...................... We will not receive any cash proceeds from this exchange offer. Exchange Agent ....................... The Bank of New York is serving as the exchange agent. Its address and telephone number are provided in this prospectus under the heading "The Exchange Offer-- Exchange Agent". Effect on Holders of Original Notes ..................... Any original notes that remain outstanding after this exchange offer will continue to be subject to restrictions on their transfer. After this exchange offer, holders of original notes will not (with limited exceptions) have any further rights under the registration rights agreement. Any market for original notes that are not exchanged could be adversely affected by the consummation of this exchange offer. - -------------------------------------------------------------------------------- 5 - -------------------------------------------------------------------------------- Summary of the Exchange Notes This exchange offer applies to $600 million aggregate principal amount of the original notes. The terms of the exchange notes will be essentially the same as the original notes, except that the exchange notes will not contain language restricting their transfer and holders of the exchange notes generally will not be entitled to further registration rights under the registration rights agreement. The exchange notes issued in the exchange offer will evidence the same debt as the outstanding original notes, which they will replace, and both the original notes and the exchange notes are governed by the same indenture. The exchange notes, like the original notes, will be fully and unconditionally guaranteed by our three principal operating subsidiaries, PSEG Fossil LLC ("Fossil"), PSEG Nuclear LLC ("Nuclear") and PSEG Energy Resources & Trade LLC ("ER&T"), on a joint and several basis. The guarantees will rank equally in right of payment to all existing and future senior unsecured indebtedness of the guarantors. Issuer ............................... PSEG Power LLC Securities Offered ................... $600 million of 6.95% Senior Notes due 2012 which have been registered under the Securities Act. Interest Payment Dates ............... June 1 and December 1 of each year, beginning December 1, 2002. Maturity June 1, 2012. Optional Redemption .................. We may redeem any or all of the exchange notes at any time at a price equal to the sum of (i) 100% of the principal amount of the exchange notes being redeemed, (ii) a make whole premium and (iii) unpaid interest accrued up to and including the applicable redemption date. See "Description of the Exchange Notes-- Optional Redemption". Ranking .............................. The exchange notes: o will be our senior unsecured obligations, o will rank equally with all of our senior unsecured indebtedness and o will rank senior to our subordinated unsecured indebtedness. As of June 30, 2002, we had approximately $1.9 billion of indebtedness outstanding that ranks equally with the exchange notes. Guarantees ........................... The exchange notes will be fully and unconditionally guaranteed by Fossil, Nuclear and ER&T on a joint and several basis. The guarantees will rank equally in right of payment to all existing and future senior unsecured indebtedness of the guarantors. We have issued a guarantee of the obligations of ER&T, which guarantee is subordinate to the exchange notes. Ratings .............................. The exchange notes have been assigned ratings of "Baa1" by Moody's Investors Service, Inc., "BBB+" by Fitch, Inc. and "BBB" by Standard & Poor's Ratings Services. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. Sinking Fund ......................... None. - -------------------------------------------------------------------------------- 6 Certain Covenants .................... The indenture under which the original notes were, and the exchange notes will be, issued contains covenants restricting us and the above-referenced restricted subsidiaries. These covenants limit our ability, and the ability of our restricted subsidiaries to, among other things: o in the case of our restricted subsidiaries, incur certain indebtedness; o create liens; o in the case of our restricted subsidiaries, create or permit to exist dividend or payment restrictions with respect to us; o sell assets; and o engage in mergers and consolidations. In addition, the indenture contains a covenant requiring one of our restricted subsidiaries, ER&T, to pay periodic dividends or distributions to us of the excess cash not required for its business operations. Each of these covenants is subject to a number of important qualifications and exceptions. See "Description of the Exchange Notes-- Selected Indenture Covenants." Book-Entry Form ...................... The exchange notes will be represented by one or more permanent global exchange notes in fully registered form without interest coupons, deposited with The Bank of New York as trustee, as custodian for, and registered in the name of, a nominee of DTC, except in certain limited circumstances described in this prospectus. Risk Factors ......................... An investment in the exchange notes involves certain risks relating to our business, prospects, financial condition and results of operations and the terms of the exchange notes. These risks are described in "Risk Factors." PSEG Power LLC We are one of the largest independent electric generating and wholesale energy marketing and trading companies in the United States. Through our three principal direct wholly-owned operating subsidiaries -- Nuclear, Fossil, and ER&T -- we generate and market electricity, capacity, ancillary services and natural gas products on a wholesale basis. We are one of four wholly-owned subsidiaries of Public Service Enterprise Group Incorporated ("PSEG"), an exempt public utility holding company. PSEG's other three subsidiaries are Public Service Electric and Gas Company ("PSE&G"), PSEG Energy Holdings Inc. and PSEG Services Corporation. - -------------------------------------------------------------------------------- 7 - -------------------------------------------------------------------------------- ------------------------- Public Service Enterprise Group Incorporated (PSEG) ------------------------- | ----------------------------------------------------------- | | | | - ------------------ -------------- ----------------- ------------------------- Public Service PSEG Power LLC PSEG Energy PSEG Services Corporation Electic and Gas (Power) Holdings Inc. (Services) Company (Energy Holdings) - ------------------ -------------- ----------------- ------------------------- | |------------------------------------ | | | ---------------- --------------- --------------------- PSEG Nuclear LLC PSEG Fossil LLC PSEG Energy Resources (Nuclear) (Fossil) & Trade LLC (ER&T) ---------------- --------------- --------------------- We were established to acquire, own and operate the electric generation-related business of our affiliate, PSE&G. This transfer occurred in August 2000. Our generation portfolio consists of 12,033 megawatts ("MW") of installed capacity, which is diversified by fuel source, technology and market segment. Of this total, approximately 11,653 MW are located within the Pennsylvania-New Jersey-Maryland Power Pool (the "PJM"). The portfolio's diversity represents a balance that helps to mitigate risks associated with fuel price volatility and market demand cycles. We are currently constructing projects which will increase capacity by over 2,950 MW, net of planned retirements and we are under contract to purchase an additional 1,019 MW in Connecticut. See "Recent Developments". PSEG Power's Installed Capacity [The following table was depicted as a Pie Chart in the printed material.] Market Segments Fuel Technology - ------------------- ------------------- ----------------------- Load-Following 39% Nuclear 28% Nuclear 28% Peaking 26% Pumped Storage 2% Pumped Storage 2% Base Load 35% Coal 17% Combustion Turbine 25% Gas 40% Steam 33% Oil 13% Combined Cycle 12% We derive our revenues and cash flows principally from our electric generation business, energy trading and related activities. Our generation asset operations are integrated with our wholesale energy, fuel supply, energy trading and risk management expertise. The generation segment of our business earns revenues by selling energy on a wholesale basis under contract to our affiliate, PSE&G, and to other power marketers and load serving entities ("LSE"), and by bidding energy, capacity and ancillary services into the wholesale energy market. The energy trading segment of our business derives revenues by trading energy, capacity, fixed transmission rights, fuel and emission allowances in the spot, forward and futures markets. Our target market, which is referred to herein as the "Super Region," extends from Maine to the Carolinas and the Atlantic Coast to Indiana, encompassing approximately 37% of the nation's power consumption. We are the largest power supplier in our primary market, the PJM, which is one of the nation's largest and most well-developed energy markets. As an Exempt Wholesale Generator ("EWG"), we do not directly serve any retail customers and use our generation facilities exclusively for the production of electricity for sale at the wholesale level. We have entered into one-year contracts commencing on August 1, 2002 with various direct bidders in the New Jersey basic generation service ("BGS") Auction, which were approved by the New Jersey Board of Public Utilities ("BPU") on February 15, 2002. As a result of this auction process, we surpassed our objective of securing contracts on more than 75% of our generation capacity. - -------------------------------------------------------------------------------- 8 - -------------------------------------------------------------------------------- On May 1, 2002, PSE&G's gas supply, interstate pipeline capacity and gas storage contracts were transferred to us. We will, under a requirements contract, provide gas supply to PSE&G to serve its basic gas supply service ("BGSS") through April 1, 2004. The energy trading segment of our business derives its revenues and cash flows principally from trading energy, capacity, fixed transmission rights, fuel and emission allowances in the spot, forward and futures markets. The energy trading segment also derives revenues and cash flows through financial transactions, including swaps, options and futures in the energy markets. ER&T is a fully integrated energy marketing and trading organization that is active in the long-term and spot wholesale energy markets. ER&T purchases all of the capacity and energy produced by Fossil and Nuclear. In conjunction with these purchases, ER&T uses commodity and financial instruments designed to cover estimated commitments under our power supply contracts. ER&T also markets and trades electricity, capacity, ancillary services and natural gas products on a wholesale basis throughout the Super Region. ER&T's principal objectives are to sell and deliver physical power from Power's generating assets, reduce earnings volatility through hedging activities, procure low cost fuel and natural gas supplies, and produce net earnings from trading energy-related products around Power's physical assets. ER&T does not engage in the practice of simultaneous trading for the purpose of increasing trading volume or revenue. Consistent with its business objectives, ER&T's incentive compensation programs are based on net earnings and overall team performance, not on volume or gross revenues. [MAP ARTWORK] We mark to market energy trading contracts with gains and losses included in earnings. The vast majority of these contracts have terms of less than one year and are valued using market exchange prices and broker quotes. The energy trading business provides the opportunity for greater returns on our assets. Our trading business utilizes a conservative risk management strategy to minimize exposure to long-term and short-term market risk. We have substantial commitments as part of our growth strategy and ongoing construction programs. We expect that the majority of our capital requirements over the next five years will be satisfied by internally generated funds, with the balance to be provided by the issuance of debt by us or at the project level and equity contributions from PSEG. For the year ended December 31, 2001, we had net plant additions of $1.5 billion. Our forecasted construction and investment expenditures in millions of dollars for the next five years are as follows: 2002 2003 2004 2005 2006 ------ ------ ------ ------ ------ $ 960 $ 700 $ 340 $ 250 $ 230 - -------------------------------------------------------------------------------- 9 - -------------------------------------------------------------------------------- The expenditures in 2001 and projected expenditures are primarily for developing the Lawrenceburg, Indiana station (1,150 MW), the Waterford, Ohio station (850 MW) and the Bethlehem, New York station (750 MW) and increasing capacity to the Bergen (546 MW), Linden (1,218 MW) and Kearny (175 MW) stations in New Jersey. Our agreement with federal and state governments to restore alleged non-compliance with New Source Review ("NSR") regulations (which is estimated to cost $337 million over the next ten years) and other environmental related costs are also included in the forecasts. The NSR agreement is subject to public comment and judicial approval, as to which no assurance can be given. Our capital needs will be dictated by our strategy to continue to develop as a profitable, growth-oriented supplier in the wholesale power market. We will size our portfolio of generation assets to take advantage of market opportunities, while seeking to increase our value and manage commodity price risk through our wholesale energy trading activity. Factors affecting actual expenditures and investments, including ongoing construction programs, include: availability of capital, suitable investment opportunities, prices of energy and supply in markets in which we participate, economic and political trends, revised load forecasts, business strategies, site changes, cost escalations under construction contracts, and requirements of regulatory authorities and laws. Competitive Strengths We believe that we are well positioned to build upon our successful history and existing asset base to remain one of the largest and one of the most competitive independent electric generating and wholesale energy marketing and trading companies in the United States. Our competitive strengths include the following: o We have one of the largest and most diversified unregulated generating portfolios in PJM and the eastern United States: o our generation assets represent a diversified mix in terms of fuel type, technology and energy market segments, which reduces our risk associated with market demand cycles and allows us to participate in each segment of the dispatch curve; o our assets are strategically located near concentrations of customers, allowing us to capture higher revenues during times of transmission constraints; and o our base load coal and nuclear assets continue to achieve high capacity factors, while our load-following and peaking units have high equivalent availability. o We have a wholesale marketing and trading function which is fully integrated with our generation assets, fuel procurement and trading activities. Our risk management, wholesale marketing, fuel procurement and energy trading skills allow us to optimize our portfolio of generation and natural gas assets by: o taking advantage of and profiting from regional supply and demand patterns; o giving us the ability to opportunistically trade and source fuel for our generation assets from various locations; o helping us identify attractive opportunities for expanding generation capacity through acquisitions, development or contractual arrangements; o hedging and protecting the value of our generation assets by hedging risks,and marketing and entering into customer-specific transactions; and o taking advantage of natural gas pipeline and storage contracts in supplying gas to service PSE&G, and other parties. o We possess extensive experience within PJM and surrounding regions, which provides us with in-depth knowledge and insight about the market's generation assets, market rules and transmission constraints. o We have a management team of seasoned individuals who have long-standing experience with our generation assets, market conditions, labor relations, business development, commodity trading and risk management. - -------------------------------------------------------------------------------- 10 - -------------------------------------------------------------------------------- o We utilize a conservative risk management strategy to minimize our market and counterparty credit risks, which has been instrumental in our ability to manage risk while consistently growing the profitability of our trading operations: o our corporate risk management committee provides oversight of the entire process and reports directly to the PSEG Board of Directors; o we have a corporate risk management group independent of our trading operations that reports to the Chief Financial Officer of PSEG and provides independent risk oversight of trading activity and monitors, measures and aggregates the financial risk activities of all trading operations; o we monitor the value-at-risk associated with our forward positions, including our generation and sales obligations on a weekly basis, and we mark our positions to market and stress test our portfolio on a daily basis; and o more than 95% of our trading counterparties are investment grade entities and we continue to monitor emerging issues that may impact our counterparty credit risk. o We are a committed environmental leader: o we led the industry as an advocate for an integrated power plant emissions strategy that would coordinate reductions of nitrogen oxides, sulfur dioxide, mercury and carbon dioxide; o we implemented the largest privately-funded wetlands restoration program in the United States; o we achieved a voluntary 80% reduction in nitrogen oxide emissions at our New Jersey facilities; and o we were cited by the United States Environmental Protection Agency ("EPA") for our efforts to reduce solid and hazardous wastes. Business Strategy Our objective is to continue to profitably build our generating and wholesale energy marketing and trading company based upon our successful formula of integrating generation asset operations with our wholesale energy, fuel supply, trading and risk management expertise. To implement our strategy we plan to: o Maximize the value of our existing generation assets based upon their location, low cost and fuel diversity. More specifically, we plan to: o provide for long-term power supply contracts associated with about 75% of our generation portfolio's capacity; o benefit from the advantageous location of generation assets near the load centers - therefore allowing us to benefit from the impacts of transmission; and o exploit the value of owning generation assets across the entire market spectrum - base load, load-following and peaking. o Continue the strong integration between the operation of our generation assets, fuel procurement, trading and risk management. More specifically, we plan to: o continue to optimize the value of our generation assets by coordinating their dispatch with our fuel management and electricity and natural gas trading operations; and o continue to maintain a strong risk management structure through the use of best practices in risk management oversight for both market and credit risk. o Profitably expand our generation asset base across the eastern United States -- focusing both within the PJM region and in adjoining regions. o Maintain our commitment to the environment -- both by improving the environmental performance of our generation assets and by taking a leadership position for a uniform set of stringent, but achievable, air pollution standards for all United States power plants. - -------------------------------------------------------------------------------- 11 - -------------------------------------------------------------------------------- Recent Developments In June 2002, Fossil announced that it had entered into a purchase agreement with Wisvest Corp., a wholly-owned subsidiary of Wisconsin Energy Corporation, pursuant to which Fossil has agreed to acquire Wisvest-Connecticut LLC, the owner of two fossil fueled electric generating facilities, the Bridgeport Harbor Station and the New Haven Harbor Station, for $220 million, plus up to $20 million for various expenditures made prior to closing plus the book value of inventory and fuel at the facilities at the time of closing. The closing of this transaction is subject to receipt of all applicable regulatory approvals. The Bridgeport Harbor Station is a three-unit coal- and oil-fired station with a total of 553 MW of capacity located on the west shore of Bridgeport Harbor in Bridgeport, Connecticut. The New Haven Harbor Station is a one-unit 466 MW oil- and natural gas-fired station located on the east shore of New Haven Harbor in New Haven Connecticut. - -------------------------------------------------------------------------------- 12 - -------------------------------------------------------------------------------- SELECTED FINANCIAL DATA The following table sets forth our summary selected consolidated financial data. The data as of December 31, 2001 and 2000, and for the three years ended December 31, 2001 have been derived from our audited financial statements incorporated by reference herein. The data as of December 31, 1999, 1998 and 1997, and for the two years ended December 31, 1998 has been derived from our audited financial statements not incorporated herein. The data as of June 30, 2002, and for the six months ended June 30, 2002 and 2001 have been derived from our unaudited financial statements incorporated by reference herein and, in the opinion of management, include all adjustments necessary for a fair presentation of our financial position and results of operations for these periods. The information set forth below should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") and the Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements found in our Annual Report on Form 10-K for the year ended December 31, 2001 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2002. Data related to periods prior to August 2000 have been derived from PSE&G's financial statements and are not necessarily indicative of the financial condition, results of operations or net cash flows that would have existed had PSE&G's generation-related business been an independent company during those periods.
For the Six Months Ended June 30, ------------------ For the Years Ended December 31, (unaudited) -------------------------------------------------------- 2002 2001 2001 2000 1999 1998 1997 ------- ------- ------- ------- ------- ------- ------- Income Statement Data (in millions) (in millions) Operating Revenue(1) .......................... $ 1,253 $ 1,237 $ 2,458 $ 2,280 $ 2,694 $ 2,574 $ 2,552 Operating Expenses(1) ......................... 853 800 1,671 1,568 1,763 1,940 1,925 ------- ------- ------- ------- ------- ------- ------- Operating Income .............................. 400 437 787 712 931 634 627 Interest Expense .............................. 56 89 143 198 112 216 223 Income Taxes .................................. 141 140 250 208 291 156 101 Income Before Extraordinary Item ......................................... 203 206 394 313 516 237 195 Extraordinary Item(2) ......................... -- -- -- -- (3,204) -- -- ------- ------- ------- ------- ------- ------- ------- Net Income (Loss) ............................. 203 206 394 313 (2,688) 237 195 Earnings (Loss) Available to PSEG ............. $ 203 $ 206 $ 394 $ 313 $(2,691) $ 232 $ 186
As of June 30, ------------- As of December 31, (unaudited) -------------------------------------------------------- 2002 2001 2000 1999 1998 1997 ------------- ------- ------- ------- ------- ------- Balance Sheet Data (in millions) (in millions) Assets ........................................ $ 6,515 $ 5,503 $ 4,530 $ 3,301 $ 8,045 $ 8,183 Current Liabilities ........................... 963 830 1,470 1,038 762 984 Noncurrent Liabilities ........................ 1,182 1,128 1,006 991 2,096 2,075 Long-Term Debt ................................ $ 3,314 $ 2,685 $ 2,786 $ 0 0 0 Capitalization(3) ............................. $ 4,370 $ 3,709 $ 2,054 $ 1,272 $ 5,187 $ 5,124
For the Six Months Ended June 30, ------------------ For the Years Ended December 31, (unaudited) -------------------------------------------------------- 2002 2001 2001 2000 1999 1998 1997 ------- ------- ------- ------- ------- ------- ------- (in millions) (in millions) Other Data EBITDA(4) ..................................... $ 450 $ 490 $ 882 $ 855 $ 1,155 $ 1,015 $ 905 Capital Expenditures .......................... $ 496 $ 763 $ 1,525 $ 493 $ 95 $ 272 $ 175 Ratio of Earnings to Fixed Charges ............................... 4.01x 3.78x 3.73x 3.39x 7.09x 2.51x 2.07x
- ---------- (1) Operating Revenue and Operating Expenses have been reclassified to conform with the net presentation of energy trading revenues and costs required by EITF 02-3. (2) Effective April 1, 1999, we discontinued the application of SFAS 71 and recorded an extraordinary charge. The extraordinary charge consisted primarily of a write-down of our nuclear and fossil generation stations. (3) Includes Note Payable-- Affiliated Company in the year 2000 and Accounts Payable-- due to Affiliates for 2001. (4) Earnings before Interest, Taxes, Depreciation and Amortization. Information concerning EBITDA is presented here not as a measure of operating results, rather as a measure of ability to service debt. In addition, EBITDA may not be comparable to similarly titled measures by other companies. EBITDA should not be construed as an alternative to operating income or cash flow from operating activities, each as determined according to generally accepted accounting principles. Although we are required to meet minimum EBITDA to interest charges tests as part of our debt covenants, we use these measures in our financial and business planning process to provide reasonable assurance that our forecasts will provide adequate interest coverage to maintain or improve our target credit ratings. - -------------------------------------------------------------------------------- 13 RISK FACTORS In addition to the information contained elsewhere in this prospectus, prospective investors should carefully consider the risks described below. Each of the following factors could have a material adverse effect on our business, prospects, financial condition, results of operations or net cash flows. Credit, Commodity and Financial Market Risks May Have an Adverse Impact The revenues generated by the operation of our generation stations are subject to market risks that are beyond our control. Our generation output will either be used to satisfy our wholesale contracts or be sold into the competitive power markets or under other bilateral contracts. Participants in the competitive power markets are not guaranteed any specified rate of return on their capital investments through recovery of mandated rates payable by purchasers of electricity. Although a majority of our revenue is generated by the BGS contract with PSE&G (which expires on July 31, 2002 and is being replaced with one-year contracts with various direct bidders in the New Jersey BGS Auction) and from bilateral contracts for the sale of electricity with LSEs and power marketers, our revenues and results of operations will be dependent upon prevailing market prices for energy, capacity and ancillary services in the markets we serve. Among the factors that will influence the market prices for energy, capacity and ancillary services are: o the extent of additional supplies of capacity, energy and ancillary services from current competitors or new market entrants, including the development of new generation facilities that may be able to produce electricity less expensively; o changes in the rules set by regulatory authorities with respect to the manner in which electricity sales will be priced; o transmission congestion and access in PJM and/or other competitive markets; o the operation of nuclear generation plants in PJM and other competitive markets beyond their presently expected dates of decommissioning; o prevailing market prices for enriched uranium, fuel oil, coal and natural gas and associated transportation costs; o fluctuating weather conditions; o reduced growth rate in electricity usage as a result of factors such as national and regional economic conditions and the implementation of conservation programs; and o changes in regulations applicable to PJM and other independent system operators ("ISOs"). As a result of the BGS auction, we have entered into contracts with the direct suppliers of the New Jersey electric utilities, including PSE&G, commencing August 1, 2002. These bilateral contracts are subject to credit risk. This credit risk relates to the ability of counterparties to meet their payment obligations for the power delivered under each BGS contract. Depending upon the creditworthiness of the counterparty, this risk may be substantially higher than the risk associated with potential nonpayment by PSE&G under the BGS contract expiring July 31, 2002. Any failure to collect these payments under the new BGS contracts with counterparties could have a material adverse impact on our results of operations, cash flows and financial position. Energy Obligations, Available Supply and Trading Risks May Have an Adverse Impact Our energy trading and marketing business frequently involves the establishment of energy trading positions in the wholesale energy markets on long-term and short-term bases. To the extent that we have forward contracts to provide or purchase energy in excess of demand, a downturn in the markets is likely to result in a loss from a decline in the value of such long positions as we attempt to sell energy in a falling market. Conversely, to the extent that we enter into forward sales contracts to deliver energy we do not own, or take short positions in the energy markets, an upturn in the energy markets is likely to expose us to losses as we attempt to cover our short positions by acquiring energy in a rising market. 14 If the strategy we utilize to hedge our exposures to these various risks is not effective, we could incur significant losses. Our substantial energy trading positions can also be adversely affected by the level of volatility in the energy markets that, in turn, depends on various factors, including weather in various geographical areas and short-term supply and demand imbalances, which cannot be predicted with any certainty. Counterparty Credit Risk or a Deterioration in Our Credit Quality May Have an Adverse Effect We are exposed to the risk that counterparties will not perform their obligations. Although we have devoted significant resources to develop our risk management policies, procedures and counterparty credit requirements and will continue to do so in the future, we can give no assurance that losses from our energy trading activities will not have a material adverse effect on our business, prospects, results of operations, financial condition or net cash flows. In connection with our energy trading business, we must meet certain credit quality standards as are required by counterparties. Standard industry contracts generally require trading counterparties to maintain investment grade ratings. These same contracts provide reciprocal benefits to us. If we lose our investment grade credit rating, ER&T would have to provide collateral in the form of letters of credit or cash, which would significantly impact the energy trading business. This would increase our costs of doing business and limit our ability to successfully conduct our energy trading operations. Upon Expiration of BGS Contracts, We Cannot Guarantee We Will Be Able to Replace those Revenues Our contract to provide PSE&G's energy, capacity and ancillary services necessary to fulfill its BPU-mandated BGS expired on July 31, 2002. We have entered into one-year contracts commencing on August 1, 2002 with various direct bidders in the New Jersey BGS Auction, which were approved by the BPU on February 15, 2002. Upon the expiration of these contracts, we will have the opportunity to participate in the bidding process for New Jersey LSEs for subsequent periods. Because this will be a competitive bidding process open to other market participants, any bids we may choose to make may not be successful. Even if we are a successful bidder, we can give no assurance that our revenue stream and cash flows from a BGS contract for future periods will be the same or higher than under current contracts. The Electric Energy Industry is Undergoing Substantial Change The electric energy industry in the State of New Jersey and across the country is undergoing major transformations. As a result of deregulation and the unbundling of energy supplies and services, the gas and electric retail markets are now open to competition from other suppliers. Increased competition from these suppliers could reduce the quantity of our sales and have a negative impact on our earnings and cash flows. We are affected by many issues that are common to the electric industry such as: o energy sales retention and growth; o revenue stability and growth; o nuclear operations and decommissioning; o increased capital investments attributable to environmental regulations; o managing energy trading operations; o ability to complete development or acquisition of current and future investments; o managing electric generation operations in locations outside of our traditional service territory; o exposure to market price fluctuations and volatility; o regulatory restrictions on affiliate transactions; and o debt and equity market concerns. 15 Generation Operating Performance May Fall Below Projected Levels Operation below expected capacity levels may result in lost revenues, increased expenses and penalties. Individual facilities may be unable to meet operating and financial obligations resulting in reduced cash flow. The risks associated with operating power generation facilities (each of which could result in performance below expected capacity levels) include: o breakdown or failure of equipment or processes; o disruptions in the transmission of electricity; o labor disputes; o fuel supply interruptions; o limitations which may be imposed by environmental or other regulatory requirements; o permit limitations; and o operator error or catastrophic events such as fires, earthquakes, explosions, floods, acts of terrorism or other similar occurrences. Operation below expected capacity levels may result in lost revenues, increased expenses and penalties. Individual facilities may be unable to meet operating and financial obligations resulting in reduced cash flow. We Are Subject to Substantial Competition From Well Capitalized Participants in the Worldwide Energy Markets We are subject to substantial competition in the United States from merchant generators, domestic and multi-national utility generators, fuel supply companies, engineering companies, equipment manufacturers and affiliates of other industrial companies. Restructuring of energy markets and the sale of utility-owned assets are creating opportunities for, and substantial competition from, well-capitalized entities which may adversely affect our ability to make investments on favorable terms and achieve our growth objectives. Increased competition could contribute to a reduction in prices offered for power and could result in lower returns which may affect our ability to service our outstanding indebtedness. Deregulation may continue to accelerate the current trend toward consolidation among domestic utilities and could also result in the further splitting of vertically-integrated utilities into separate generation, transmission and distribution businesses. As a result, additional competitors could become active in the independent power industry. Our Ability to Service Our Debt Could Be Limited We are a holding company with no material assets other than the stock of our subsidiaries. Accordingly, all of our operations are conducted by our subsidiaries. We depend on our subsidiaries' cash flow and our access to capital in order to service our indebtedness. The project-related debt agreements of subsidiaries generally restrict their ability to pay dividends, make cash distributions or otherwise transfer funds to us. These restrictions may include achieving and maintaining financial performance or debt coverage ratios, absence of events of default, or priority in payment of other current or prospective obligations. Our subsidiaries have financed some investments using non-recourse project level financing. Each non-recourse project financing is structured to be repaid out of cash flows provided by the investment. In the event of a default under a financing agreement which is not cured, the lenders would generally have rights to the related assets. In the event of foreclosure after a default, our subsidiary may lose its equity in the asset or may not be entitled to any cash that the asset may generate. We can give no assurances that our current and future capital structure, operating performance or financial condition will permit us to access the capital markets or to obtain other financing at the times, in the amounts and on the terms necessary or advisable for us to successfully carry out our business strategy or to service our indebtedness. 16 Power Transmission Facilities May Impact Our Ability to Deliver Our Output to Customers If transmission is disrupted, or if transmission capacity is inadequate, our ability to sell and deliver our electric energy products may be adversely impacted. If a region's power transmission infrastructure is inadequate, our ability to generate revenues may be limited. Regulatory Issues Significantly Impact Our Operations Federal, state and local authorities impose substantial regulation and permitting requirements on the electric power generation business. We are required to comply with numerous laws and regulations and to obtain numerous governmental permits in order to operate our generation stations. We believe that we have obtained all material energy-related federal, state and local approvals, including those required by the Nuclear Regulatory Commission (the "NRC"), currently required to operate our generation stations. Although not currently required, additional regulatory approvals may be required in the future due to a change in laws and regulations or for other reasons. No assurance can be given that we will be able to obtain any required regulatory approval that we may require in the future, or that we will be able to obtain any necessary extension in receiving any required regulatory approvals. If we fail to obtain or comply with any required regulatory approvals, there could be a material adverse effect on our ability to operate our generation stations or to sell electricity to third parties. We are subject to pervasive regulation by the NRC with respect to the operation of our nuclear generation stations. This regulation involves testing, evaluation and modification of all aspects of plant operation in light of NRC safety and environmental requirements. The NRC also requires continuous demonstrations that plant operations meet applicable requirements. The NRC has the ultimate authority to determine whether any nuclear generation unit may operate. We can give no assurance that existing regulations will not be revised or reinterpreted, that new laws and regulations will not be adopted or become applicable to us or any of our generation stations or that future changes in laws and regulations will not have a detrimental effect on our business. Environmental Regulation May Limit Our Operations We are required to comply with numerous statutes, regulations and ordinances relating to the safety and health of employees and the public, the protection of the environment and land use. These statutes, regulations and ordinances are constantly changing. While we believe that we have obtained all material environmental-related approvals currently required to own and operate our facilities or that such approvals have been applied for and will be issued in a timely manner, we may incur significant additional costs because of compliance with these requirements. Failure to comply with environmental statutes, regulations and ordinances could have a material adverse effect on us, including potential civil or criminal liability and the imposition of clean-up liens or fines and expenditures of funds to bring our facilities into compliance. We can give no assurance that we will be able to: o obtain all required environmental approvals that we do not yet have or that may be required in the future; o obtain any necessary modifications to existing environmental approvals; o maintain compliance with all applicable environmental laws, regulations and approvals; or o recover any resulting costs through future sales. Delay in obtaining or failure to obtain and maintain in full force and effect any such environmental approvals, or delay or failure to satisfy any applicable environmental regulatory requirements, could prevent construction of new facilities, operation of our existing facilities or sale of energy from these facilities or could result in significant additional cost to us. 17 We Are Subject to More Stringent Environmental Regulation than Many of Our Competitors Our facilities are subject to both federal and state pollution control requirements. Most of our generating facilities are located in the State of New Jersey. In particular, New Jersey's environmental programs are generally considered to be more stringent in comparison to similar programs in other states. As such, there may be instances where the facilities located in New Jersey are subject to more stringent and therefore more costly pollution control requirements than competitive facilities in other states. Insurance Coverage May Not Be Sufficient We have insurance for our generation stations, including: o all-risk property damage insurance; o commercial general public liability insurance; o boiler and machinery coverage; o nuclear liability; and, o for our nuclear units, replacement power and business interruption insurance in amounts and with deductibles that we consider appropriate. We can give no assurance that such insurance coverage will be available in the future on commercially reasonable terms nor that the insurance proceeds received for any loss of or any damage to any of the generation stations will be sufficient to permit us to continue to make payments on our debt. Additionally, certain properties that we own may not be insured in the event of an act of terrorism. Acquisition, Construction and Development Activities May Not Be Successful We may seek to acquire, develop and construct new energy projects, the completion of any of which is subject to substantial risk. This activity requires significant lead time and requires us to expend significant sums for preliminary engineering, permitting, fuel supply, legal and other expenses in preparation for competitive bids or before it can be established whether a project is economically feasible. The construction, expansion or refurbishment of a power generation facility may involve: o equipment and material supply interruptions; o labor disputes; o unforeseen engineering environmental and geological problems; and o unanticipated cost overruns. The proceeds of any insurance, vendor warranties or performance guarantees may not be adequate to cover lost revenues, increased expenses or payments of liquidated damages. In addition, some power purchase contracts permit the customer to terminate the related contract, retain security posted by the developer as liquidated damages or change the payments to be made to the subsidiary or the project affiliate in the event certain milestones, such as commencing commercial operation of the project, are not met by specified dates. If project start-up is delayed and the customer exercises these rights, the project may be unable to fund principal and interest payments under its project financing agreements. We can give no assurance that we will obtain access to the substantial debt and equity capital required to develop and construct new generation projects or to refinance existing projects to supply anticipated future demand. Changes in Technology May Make Our Power Generation Assets Less Competitive A key element of our business plan is that generating power at central power plants produces electricity at relatively low cost. There are other technologies that produce electricity, most notably fuel cells, microturbines, windmills and photovoltaic (solar) cells. While these methods are not currently 18 cost-effective, it is possible that advances in technology will reduce the cost of alternative methods of producing electricity to a level that is competitive with that of most central station electric production. If this were to happen, our market share could be eroded and the value of our power plants could be significantly impaired. Changes in technology could also alter the channels through which retail electric customers buy electricity, thereby adversely affecting our financial results. Recession, Acts of War or Terrorism Could Have an Adverse Impact The long-term consequences of the September 11, 2001 terrorist attacks on the United States are difficult to predict. The consequences of a prolonged recession and market conditions may include the continued uncertainty of energy prices and the capital and commodity markets. We cannot predict the impact of any continued economic slowdown or fluctuating energy prices; however, such impact could have a material adverse effect on our financial condition, results of operations and net cash flows. Like other operators of major industrial facilities, our generation plants may be targets of terrorist activities that could result in disruption of our ability to produce or distribute some portion of our energy products. Any such disruption could result in a significant decrease in revenues and/or significant additional costs to repair, which could have a material adverse impact on our financial condition, results of operation and net cash flows. Our Indenture May Restrict Our Ability to Enter into Certain Transactions Our Indenture restricts our ability and the ability of our Restricted Subsidiaries (as defined below under "Description of the Senior Notes -- Definitions") to, among other things: o in the case of our Restricted Subsidiaries, incur certain indebtedness; o create liens; o in the case of our Restricted Subsidiaries, create or permit to exist dividend or payment restrictions with respect to us; o sell assets; and o engage in mergers and consolidations. These restrictions may limit our ability to finance future operations, respond to changing business and economic conditions, secure any needed additional financing and engage in opportunistic transactions. See "Description of the Exchange Notes -- Selected Indenture Covenants." We are Subject to Control by PSEG Our sole limited liability company member, PSEG, controls the election of our directors and all other matters submitted for member approval and has control over our management and affairs. In circumstances involving a conflict of interest between PSEG, as the sole member, on the one hand, and our creditors, on the other, we can give no assurance that PSEG would not exercise its power to control us in a manner that would benefit PSEG to the detriment of our creditors, including the holders of the exchange notes. The Indenture imposes no limitations on our ability to pay dividends or to make other payments to PSEG or on our ability to enter into transactions with PSEG or our other affiliates. There is No Public Market for the Exchange Notes We do not intend to list the exchange notes on any U.S. securities exchange. We can give no assurance concerning the liquidity of any market that may develop for the exchange notes, the ability of any investor to sell the exchange notes or the price at which investors would be able to sell their exchange notes. Fraudulent Transfer Statutes and Similar Limitations May Limit Your Rights as a Noteholder Each of our Restricted Subsidiaries will guarantee our obligations on the exchange notes (each a "Subsidiary Guaranty"). See "Description of the Exchange Notes -- Guaranty of Senior Notes." 19 Under federal and state fraudulent transfer laws, a court could find that the Subsidiary Guaranty provided by a Restricted Subsidiary constituted a fraudulent conveyance by that Restricted Subsidiary. To do so, a court would typically have to find that, at the time the Subsidiary Guaranty was issued, the relevant Restricted Subsidiary: o issued the Subsidiary Guaranty with the intent of hindering, delaying or defrauding our current or future creditors; or o (a) received less than fair consideration or reasonably equivalent value for incurring the indebtedness represented by its Subsidiary Guaranty; and (b) either (x) was insolvent or was rendered insolvent by reason of the issuance of the Subsidiary Guaranty, (y) was engaged, or about to engage, in a business or transaction for which its assets were unreasonably small or (z) intended to incur, or believed or should have believed it would incur, debts beyond its ability to pay as such debts mature. Many of the foregoing terms are defined in or interpreted under those fraudulent transfer statutes. Different jurisdictions define "insolvency" differently. However, an entity generally would be considered insolvent at the time it incurred any particular obligation if (1) its liabilities exceeded its assets, at a fair valuation, or (2) the present saleable value of its assets is less than the amount required to pay its total existing debts and liabilities (including any probable liability related to contingent liabilities) as they become absolute or matured. We cannot assure you of the standard a court would apply in order to determine whether any Restricted Subsidiary was "insolvent" as of the date the applicable Subsidiary Guaranty was issued, or that regardless of the method of valuation, a court would not determine, regardless of whether such Restricted Subsidiary was insolvent on the date the Subsidiary Guaranty was issued, that the payments constituted fraudulent transfers on another ground. If a court were to make any such finding, it could: o avoid all or a portion of the relevant Restricted Subsidiary's obligations on the Subsidiary Guarantees; o subordinate the relevant Restricted Subsidiary's obligations on the Subsidiary Guarantees to obligations owed to its other existing and future creditors, entitling those creditors to be paid in full before any payment is made on the relevant Subsidiary Guaranty; and/or o take other actions detrimental to you, including invalidating the relevant Subsidiary Guaranty. In that event, we cannot assure you that you would receive any payment under the Subsidiary Guaranty of the relevant Restricted Subsidiary. If You Fail to Exchange Original Notes, They Will Remain Subject to Transfer Restrictions Any original notes that remain outstanding after this exchange offer will continue to be subject to restrictions on their transfer. After this exchange offer, holders of original notes will not (with limited exceptions) have any further rights under the exchange and registration rights agreement. Any market for original notes that are not exchanged could be adversely affected by the conclusion of this exchange offer. Late Deliveries of Notes and Other Required Documents Could Prevent a Holder From Exchanging Its Notes Holders are responsible for complying with all exchange offer procedures. Issuance of exchange notes in exchange for original notes will only occur upon completion of the procedures described in this prospectus under the heading "The Exchange Offer -- Procedures for Tendering Original Notes". Therefore, holders of original notes who wish to exchange them for exchange notes should allow sufficient time for timely completion of the exchange procedure. We are not obligated to notify you of any failure to follow the proper procedure. 20 If You Are a Broker-Dealer, Your Ability to Transfer the Notes May Be Restricted A broker-dealer that purchased original notes for its own account as part of market-making or trading activities must deliver a prospectus when it sells the exchange notes. Our obligation to make this prospectus available to broker-dealers is limited. Consequently, we cannot guarantee that a proper prospectus will be available to broker-dealers wishing to resell their exchange notes. FORWARD-LOOKING STATEMENTS This prospectus includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this prospectus that address activities, events or developments that we expect or anticipate will or may occur in the future, including such matters as our projections, future capital expenditures, business strategy, competitive strengths, goals, expansion, market and industry developments and the growth of our businesses and operations, are forward-looking statements. These statements are based on assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments as well as other factors we believe are appropriate under the circumstances. However, actual results and developments may differ materially from our expectations and predictions due to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties include: o the significant considerations and risk factors discussed in this prospectus; o general and local economic, market or business conditions; o demand (or lack thereof) for electricity, capacity and ancillary services in the markets served by our generation units; o increasing competition from other companies; o the acquisition and development opportunities (or lack thereof) that may be presented to and pursued by us; o changes in laws or regulations that are applicable to us; o environmental constraints on construction and operation; o the rapidly changing market for energy products; and o access to capital. Consequently, all of the forward-looking statements made in this prospectus are qualified by these cautionary statements and we cannot assure you that the results or developments anticipated by us will be realized or, even if realized, will have the expected consequences to or effects on us or our business, prospects, financial condition or results of operations. You should not place undue reliance on these forward-looking statements in making your investment decision. We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to these forward-looking statements to reflect events or circumstances that occur or arise or are anticipated to occur or arise after the date hereof. In making an investment decision regarding the exchange notes, we are not making, and you should not infer, any representation about the likely existence of any particular future set of facts or circumstances. USE OF PROCEEDS The exchange offer is intended to satisfy some of our obligations under the registration rights agreement. We will not receive any cash proceeds from the issuance of the exchange notes in the exchange offer. In exchange for issuing the exchange notes as described in this prospectus, we will receive an equal principal amount of original notes, which will be canceled. The net proceeds from the sale of the original notes were used to repay $545 million of inter-company indebtedness payable to affiliates and for general company purposes. 21 CAPITALIZATION The following table sets forth our consolidated capitalization as of June 30, 2002. As of June 30, 2002 ------------------- (unaudited) (in millions) Long-term Debt: 6 7/8% Senior Notes due 2006 .................. $ 500 7 3/4% Senior Notes due 2011 .................. 800 6.95% Senior Notes due 2012 ................... 600 8 5/8% Senior Notes due 2031 .................. 500 Project Level, Non-Recourse Debt .............. 800 Pollution Control Notes ....................... 124 Unamortized Discount .......................... (10) ------- Total Debt .................................... $ 3,314 ------- Member's Equity(1) .............................. 2,042 Basis Adjustment ................................ (986) ------- Total Capitalization ............................ $ 4,370 ======= - ---------- (1) We are a limited liability company of which PSEG, is the sole owner and member. 22 THE EXCHANGE OFFER Purpose of the Exchange Offer In connection with the sale of the original notes, we and the subsidiary guarantors entered into a registration rights agreement with the initial purchasers. Under the registration rights agreement, we and the subsidiary guarantors agreed to use our best efforts to complete the exchange offer and to file and cause to become effective with the SEC a registration statement for the exchange of the original notes for exchange notes. The terms of the exchange notes are the same as the terms of the original notes except that the exchange notes have been registered under the Securities Act and will not be subject to some restrictions on transfer that apply to the original notes. In that regard, the original notes provide, among other things, that if the exchange offer has not been consummated within the period specified in the registration rights agreement, the interest rate on the original notes will increase by 0.50% per annum, until the exchange offer is consummated. Upon completion of the exchange offer, holders of original notes will not be entitled to any further registration rights under the registration rights agreement, except under limited circumstances. See "Risk Factors -- If You Fail to Exchange Original Notes, They Will Remain Subject to Transfer Restrictions" and "Description of the Exchange Notes". The exchange offer is not being made to holders of original notes in any jurisdiction in which the exchange offer or the acceptance of the notes would not comply with securities or blue sky laws. Unless the context requires otherwise, the term "holder" with respect to the exchange offer means any person who has obtained a properly completed bond power from the registered holder, or any person whose original notes are held of record by The Depository Trust Company ("DTC") who desires to deliver such original notes by book-entry transfer at DTC. We will exchange as soon as practicable after the expiration date of the exchange offer the original notes for a like aggregate principal amount of the exchange notes. Completion of the exchange offer is subject to the conditions that the exchange offer not violate any applicable law or interpretation of the staff of the Division of Corporate Finance of the SEC and that no injunction, order or decree has been issued which would prohibit, prevent or materially impair our ability to proceed with the exchange offer. The exchange offer is also subject to various procedural requirements discussed below with which holders must comply. We reserve the right, in our absolute discretion, to waive compliance with these requirements subject to applicable law. Terms of the Exchange Offer We are offering, upon the terms and subject to the conditions described in this prospectus and in the accompanying letter of transmittal, to exchange up to $600 million aggregate principal amount of exchange notes for a like aggregate principal amount of original notes properly tendered on or before the expiration date of the exchange offer and not properly withdrawn in accordance with the procedures described below. We will issue, promptly after the expiration date of the exchange offer, an aggregate principal amount of up to $600 million of exchange notes in exchange for a like principal amount of outstanding original notes tendered and accepted in connection with the exchange offer. We will pay all charges and expenses, other than certain applicable taxes described below, in connection with the exchange offer. See "-- Fees and Expenses". Holders may tender their original notes in whole or in part in minimum denominations of $1,000 and integral multiples in excess thereof. The exchange offer is not conditioned upon any minimum principal amount of original notes being tendered. As of the date of this prospectus, $600 million aggregate principal amount of the original notes is outstanding. (Holders of original notes do not have any appraisal or dissenters' rights in connection with the exchange offer. Original notes which are not tendered for or are tendered but not accepted in connection with the exchange offer will remain outstanding and be entitled to the benefits of the indenture, but will not be entitled to any further registration rights under the registration rights agreement, except under limited circumstances. See "Risk Factors -- If You Fail to Exchange Original Notes, They Will Remain Subject to Transfer Restrictions" and "Description of the Exchange Notes". If any tendered original notes are not accepted 23 for exchange because of an invalid tender, the occurrence of other events described in this prospectus or otherwise, appropriate book-entry transfer will be made, without expense, to the tendering holder of the notes promptly after the expiration date of the exchange offer. Holders who tender original notes in connection with the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of original notes in connection with the exchange offer. Neither we nor our Board of Directors make any recommendation to holders of original notes as to whether to tender or refrain from tendering all or any portion of their original notes in the exchange offer. In addition, no one has been authorized to make any recommendation as to whether holders should tender notes in the exchange offer. Holders of original notes must make their own decisions whether to tender original notes in the exchange offer and, if so, the aggregate amount of original notes to tender based on the holders' own financial positions and requirements. Expiration Date; Extensions; Amendments The term "expiration date" means 5:00 p.m., Eastern Time, on , 2002. However, if the exchange offer is extended by us, the term "expiration date" will mean the latest date and time to which we extend the exchange offer. We expressly reserve the right in our sole and absolute discretion, subject to applicable law, at any time and from time to time: o to delay the acceptance of the original notes for exchange, o to extend the expiration date of the exchange offer and retain all original notes tendered in the exchange offer, subject, however, to the right of holders of original notes to withdraw their tendered original notes as described under "-- Withdrawal Rights", and o to waive any condition or otherwise amend the terms of the exchange offer in any respect. If the exchange offer is amended in a manner determined by us to constitute a material change, we will promptly o disclose the amendment in a prospectus supplement that will be distributed to the registered holders of the original notes, o we will file a post-effective amendment to the registration statement filed with the SEC with regard to the exchange notes and the exchange offer, and o we will extend the exchange offer to the extent required by Rule 14e-1 under the Exchange Act. We will promptly notify the exchange agent by making an oral or written public announcement of any delay in acceptance, extension, termination or amendment. This announcement in the case of an extension will be made no later than 9:00 a.m., Eastern Time, on the next business day after the previously scheduled expiration date. Without limiting the manner in which we may choose to make any public announcement and, subject to applicable law, we will have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a release to an appropriate news agency. Acceptance for Exchange and Issuance of Exchange Notes Upon the terms and subject to the conditions of the exchange offer, we will exchange and issue to the exchange agent, exchange notes for original notes validly tendered and not withdrawn promptly after the expiration date. In all cases, delivery of exchange notes in exchange for original notes tendered and accepted for exchange pursuant to the exchange offer will be made only after timely receipt by the exchange agent of: - original notes or a book-entry confirmation of a book-entry transfer of original notes into the exchange agent's account at DTC, including an agent's message (as defined below) if the tendering holder has not delivered a letter of transmittal, 24 - the letter of transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees or (in the case of a book-entry transfer) an agent's message instead of the letter of transmittal, and - any other documents required by the letter of transmittal. The term "book-entry confirmation" means a timely confirmation of a book-entry transfer of original notes into the exchange agent's account at DTC. The term "agent's message" means a message, transmitted by DTC to and received by the exchange agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the tendering DTC participant. This acknowledgment states that the participant has received and agrees to be bound by the letter of transmittal and that we may enforce the letter of transmittal against the participant. Subject to the terms and conditions of the exchange offer, we will be deemed to have accepted for exchange, and therefore exchanged, original notes validly tendered and not withdrawn as, if and when we give oral or written notice to the exchange agent of our acceptance of such original notes for exchange pursuant to the exchange offer. The exchange agent will act as agent for us for the purpose of receiving tenders of original notes, letters of transmittal and related documents, and as agent for tendering holders for the purpose of receiving original notes, letters of transmittal and related documents and transmitting exchange notes to validly tendering holders. This exchange will be made promptly after the expiration date. If, for any reason whatsoever, acceptance for exchange or the exchange of any tendered original notes is delayed, whether before or after our acceptance for exchange of original notes, or we extend the exchange offer or are unable to accept for exchange or exchange tendered original notes, then, without prejudice to the rights we have in the exchange offer, the exchange agent may, nevertheless, on our behalf and subject to Rule 14e-1(c) under the Exchange Act, retain tendered original notes. These original notes may not be withdrawn except to the extent tendering holders are entitled to withdrawal rights as described under "-- Withdrawal Rights". Under the letter of transmittal or agent's message, a holder of original notes will warrant and agree that it has full power and authority to tender, exchange, sell, assign and transfer original notes, that we will acquire good, marketable and unencumbered title to the tendered original notes, free and clear of all liens, restrictions, charges and encumbrances, and the original notes tendered for exchange are not subject to any adverse claims or proxies. The holder also will warrant and agree that it will, upon request, execute and deliver any additional documents deemed by us or the exchange agent to be necessary or desirable to complete the exchange, sale, assignment, and transfer of the original notes tendered in the exchange offer. Procedures for Tendering Original Notes Valid Tender. Except as indicated below, in order for original notes to be validly tendered in the exchange offer, an original copy or facsimile of a properly completed and duly executed letter of transmittal, with any required signature guarantees, or, in the case of a book-entry tender, an agent's message instead of the letter of transmittal, and any other required documents, must be received by the exchange agent at one of its addresses listed under "-- Exchange Agent". In addition, either: - tendered original notes must be received by the exchange agent, - the tender of original notes must follow the procedures for book-entry transfer described below and a book-entry confirmation, including an agent's message if the tendering holder has not delivered a letter of transmittal, must be received by the exchange agent, in each case on or before the expiration date, or - the guaranteed delivery procedures described below must be complied with. If less than all of the original notes are tendered, a tendering holder should fill in the amount of original notes being tendered in the appropriate box on the letter of transmittal. The entire amount of 25 original notes delivered to the exchange agent will be deemed to have been tendered unless otherwise indicated. The method of delivery of certificates, the letter of transmittal and all other required documents is at the option and sole risk of the tendering holder. Delivery will be deemed made only when actually received by the exchange agent. If delivery is by mail, we recommend properly insured registered mail, return receipt requested, or an overnight delivery service. In all cases, you should allow sufficient time to ensure timely delivery. Book-Entry Transfer. The exchange agent will establish an account with respect to the original notes at DTC for purposes of the exchange offer within two business days after the date of this prospectus. Any financial institution that is a participant in DTC's book-entry transfer facility system may make a book-entry delivery of the original notes by causing DTC to transfer such Original Notes into the exchange agent's account at DTC in accordance with DTC's procedures for transfers. However, although delivery of original notes may be effected through book-entry transfer into the exchange agent's account at DTC, the letter of transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an agent's message instead of the letter of transmittal, and any other required documents, must in any case be delivered to and received by the exchange agent at its address listed under "-- Exchange Agent" on or before the expiration date. Alternatively, the guaranteed delivery procedure described below must be complied with. Delivery of documents to DTC in accordance with DTC's procedures does not constitute delivery to the exchange agent. Signature Guarantees. Certificates for the original notes need not be endorsed and signature guarantees on the letter of transmittal are unnecessary unless (1) a certificate for the original notes is registered in a name other than that of the person surrendering the certificate or (2) such holder completes the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" in the letter of transmittal. In the case of (1) or (2) above, the certificates for original notes must be duly endorsed or accompanied by a properly executed bond power, with the endorsement or signature on the bond power and on the letter of transmittal guaranteed by a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an "eligible guarantor institution," including (as such terms are defined therein): - a bank; - a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; - a credit union; - a national securities exchange, registered securities association or clearing agency; or - a savings association that is a participant in a Securities Transfer Association (an "Eligible Institution"), unless surrendered on behalf of that Eligible Institution. See Instruction 1 to the letter of transmittal. Guaranteed Delivery. If a holder desires to tender original notes in the exchange offer and the certificates for the original notes are not immediately available or time will not permit all required documents to reach the exchange agent on or before the expiration date, or the procedures for book-entry transfer cannot be completed on a timely basis, the original notes may nevertheless be tendered, provided that all of the following guaranteed delivery procedures are complied with: (1) the tenders are made by or through an Eligible Institution; (2) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form accompanying the letter of transmittal, is received by the exchange agent, as provided below, on or before the expiration date; and (3) the certificates (or a book-entry confirmation) representing all tendered original notes, in proper form for transfer, together with a properly completed and duly executed letter of transmittal (or facsimile thereof), with any required signature guarantees, or an agent's message instead of the letter of 26 transmittal, and any other documents required by the letter of transmittal, are received by the exchange agent within three New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand, or transmitted by facsimile or mail to the exchange agent and must include a guarantee by an Eligible Institution in the form shown in the notice. Regardless of any other provision in this prospectus, the delivery of exchange notes in exchange for original notes tendered and accepted for exchange in the exchange offer will in all cases be made only after timely receipt by the exchange agent of original notes, or of a book-entry confirmation with respect to those original notes, and an original copy or facsimile of a properly completed and duly executed letter of transmittal, together with any required signature guarantees, or an agent's message instead of the letter of transmittal, and any other documents required by the letter of transmittal. Accordingly, the delivery of exchange notes might not be made to all tendering holders at the same time, and will depend upon when original notes, book-entry confirmations with respect to original notes and other required documents are received by the exchange agent. Our acceptance for exchange of original notes tendered under any of the procedures described above will constitute a binding agreement between the tendering holder and us upon the terms and subject to the conditions of the exchange offer. Determination of Validity. All questions as to the form of documents, validity, eligibility, including time of receipt, and acceptance for exchange of any tendered original notes will be determined by us, in our sole discretion. The interpretation by us of the terms and conditions of the exchange offer, including the letter of transmittal and the accompanying instructions, will be final and binding. We reserve the absolute right, in our sole and absolute discretion, to reject any and all tenders determined by us not to be in proper form or the acceptance of which, or exchange for, may, in the opinion of our counsel, be unlawful. We also reserve the absolute right, subject to applicable law, to waive any condition or irregularity in any tender of original notes of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. No tender of original notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Neither we, any of our affiliates or assigns, the exchange agent nor any other person will be under any duty to give any notification of any irregularities in tenders or incur any liability for failure to give any notification. If any letter of transmittal, endorsement, bond power, power of attorney, or any other document required by the letter of transmittal is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, that person should so indicate when signing, and unless waived by us, proper evidence satisfactory to us, in our sole discretion, of that person's authority must be submitted. A beneficial owner of original notes that are held by or registered in the name of a broker, dealer, commercial bank, trust company or other nominee or custodian is urged to contact that entity promptly if that beneficial holder wishes to participate in the exchange offer. Resales of Exchange Notes We are making the exchange offer for the exchange notes in reliance on the position of the staff of the Division of Corporation Finance of the SEC as defined in certain interpretive letters addressed to third parties in other transactions. However, we did not seek our own interpretive letter and we cannot assure you that the staff of the Division of Corporation Finance of the SEC would make a similar determination with respect to the exchange offer as it has in other interpretive letters to third parties. Based on these interpretations by the staff of the Division of Corporation Finance of the SEC, and subject to the two immediately following sentences, we believe that exchange notes issued pursuant to this exchange offer in exchange for original notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than a holder who is a broker-dealer) without further compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such exchange notes are acquired in the ordinary course of the holder's business and that the holder is not participating, and has no arrangement or understanding with any person to participate, in a distribution (within the meaning of the Securities Act) of the exchange notes. 27 However, any holder of original notes who is an "affiliate" of ours or who intends to participate in the exchange offer for the purpose of distributing exchange notes, or any broker-dealer who purchased original notes from us to resell pursuant to Rule 144A or any other available exemption under the Securities Act, (a) will not be able to rely on the interpretations of the staff of the Division of Corporation Finance of the SEC defined in the above-mentioned interpretive letters, (b) will not be permitted or entitled to tender such original notes in the exchange offer and (c) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any sale or other transfer of such original notes unless such sale is made pursuant to an exemption from such requirements. In addition, as described below, if any broker-dealer holds original notes acquired for its own account as a result of market-making or other trading activities and exchanges those original notes for exchange notes, then that broker-dealer must deliver a prospectus meeting the requirements of the Securities Act in connection with any resales of those exchange notes. Each holder of original notes who wishes to exchange original notes for exchange notes in the exchange offer will be required to represent that: - it is not an "affiliate" of ours, - any exchange notes to be received by it are being acquired in the ordinary course of its business, - it has no arrangement or understanding with any person to participate in a distribution (within the meaning of the Securities Act) of such exchange notes, and - if the tendering holder is not a broker-dealer, that holder is not engaged in, and does not intend to engage in, a distribution (within the meaning of the Securities Act) of its exchange notes. In addition, we may require the holder, as a condition to that holder's eligibility to participate in the exchange offer, to furnish to us (or an agent of ours) in writing, information as to the number of "beneficial owners" (within the meaning of Rule 13d-3 under the Exchange Act) on behalf of whom that holder holds the original notes to be exchanged in the exchange offer. Each broker-dealer that receives exchange notes for its own account in the exchange offer must acknowledge that it acquired the original notes for its own account as the result of market-making activities or other trading activities and must agree that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of those exchange notes. The letter of transmittal states that by making that acknowledgement and delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Based on the position taken by the staff of the Division of Corporation Finance of the SEC in the interpretive letters referred to above, we believe that participating broker-dealers who acquired original notes for their own accounts as a result of market-making activities or other trading activities may fulfill their prospectus delivery requirements with respect to the exchange notes received upon exchange of original notes (other than original notes which represent an unsold allotment from the initial sale of the original notes) with a prospectus meeting the requirements of the Securities Act, which may be the prospectus prepared for this exchange offer so long as it contains a description of the plan of distribution regarding the resale of the exchange notes. Accordingly, this prospectus, as it may be amended or supplemented from time to time, may be used by a participating broker-dealer in connection with resales of exchange notes received in exchange for original notes where the original notes were acquired by the participating broker-dealer for its own account as a result of market-making or other trading activities. See "Plan of Distribution". Subject to certain provisions contained in the registration rights agreement, we have agreed that this prospectus, as it may be amended or supplemented from time to time, may be used by a participating broker-dealer in connection with resales of exchange notes for a period not exceeding 90 days after the expiration date. However, a participating broker-dealer who intends to use this prospectus in connection with the resale of exchange notes received in exchange for original notes pursuant to the exchange 28 offer must notify us on or before the expiration date that it is a participating broker-dealer. This notice may be given in the space provided for that purpose in the letter of transmittal or may be delivered to the exchange agent at one of the addresses set forth herein under "-- Exchange Agent". Any participating broker-dealer who is an "affiliate" of ours may not rely on these interpretive letters and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. In that regard, each participating broker-dealer who surrenders original notes in the exchange offer will be deemed to have agreed, by execution of the letter of transmittal or an agent's message, that upon receipt of notice from us of the occurrence of any event or the discovery of: (1) any fact which makes any statement contained or incorporated by reference in this prospectus untrue in any material respect or (2) any fact which causes this prospectus to omit to state a material fact necessary in order to make the statements contained or incorporated by reference in this prospectus, in light of the circumstances under which they were made, not misleading, or (3) the occurrence of other events specified in the registration rights agreement, that participating broker-dealer will suspend the sale of exchange notes under this prospectus until we have amended or supplemented this prospectus to correct the misstatement or omission and have furnished copies of the amended or supplemented prospectus to the participating broker-dealer, or we have given notice that the sale of the exchange notes may be resumed, as the case may be. Withdrawal Rights Except as otherwise provided in this prospectus, tenders of original notes may be withdrawn at any time on or before the expiration date. In order for a withdrawal to be effective a written, telegraphic, telex or facsimile transmission of the notice of withdrawal must be timely received by the exchange agent at its address listed under "-- Exchange Agent" on or before the expiration date. Any notice of withdrawal must specify the name of the person who tendered the original notes to be withdrawn, the aggregate principal amount of original notes to be withdrawn, and, if certificates for the original notes have been tendered, the name of the registered holder of the original notes, if different from that of the person who tendered the original notes. If original notes have been delivered or otherwise identified to the exchange agent, then before the physical release of the original notes, the tendering holder must submit the serial numbers shown on the particular original notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of original notes tendered for the account of an Eligible Institution. For original notes tendered under the procedures for book-entry transfer described in "-- Procedures for Tendering Original Notes", the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of original notes, in which case a notice of withdrawal will be effective if delivered to the exchange agent by written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of original notes may not be rescinded. Original notes properly withdrawn will not be deemed validly tendered for purposes of the exchange offer, but may be retendered at any subsequent time on or before the expiration date by following any of the procedures described above under "-- Procedures for Tendering Original Notes". All questions as to the validity, form and eligibility, including time of receipt, of withdrawal notices will be determined by us, in our sole discretion, whose determination shall be final and binding on all parties. Neither we, the subsidiary guarantors, the exchange agent nor any other person is under any duty to give any notification of any irregularities in any notice of withdrawal nor will those parties incur any liability for failure to give that notice. Any original notes which have been tendered but which are withdrawn will be returned to the holder promptly after withdrawal. Interest on Exchange Notes Interest on the Senior Notes will accrue at the rate of 6.95% per annum and will be payable semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2002. We will 29 make each interest payment to the persons in whose names the exchange notes are registered at the close of business on the 15th day immediately preceding the applicable interest payment date. The exchange notes will bear interest from and including the last interest payment date on the original notes, or if one has not yet occurred, the date of issuance of the original notes. Accordingly, holders of original notes that are accepted for exchange will not receive accrued but unpaid interest on original notes at the time of tender. Rather, that interest will be payable on the exchange notes delivered in exchange for the original notes on the first interest payment date after the expiration date. Accounting Treatment The exchange notes will be recorded at the same carrying value as the original notes for which they are exchanged, which is the aggregate principal amount of the original notes, as reflected in our accounting records on the date of exchange. Accordingly, no gain or loss for accounting purposes will be recognized in connection with the exchange offer. The cost of the exchange offer will be amortized over the term of the exchange notes. Exchange Agent The Bank of New York has been appointed as the exchange agent for the exchange offer. Delivery of the letters of transmittal and any other required documents, questions, requests for assistance, and requests for additional copies of this prospectus or of the letters of transmittal should be directed to the exchange agent as follows: By Registered or Certified Mail: 101 Barclay Street Floor 7 East New York, NY 10286 Attention: Ms. Diane Amoroso Reorganization Department By Hand or Overnight Delivery Service: The Bank of New York 101 Barclay Street Corporate Trust Window -- Ground Level New York, NY 10286 Attention: Ms. Diane Amoroso Reorganization Department By Facsimile Transmission (for Eligible Institutions only): (212) 298-1915 Confirm by Telephone: or (212) 815-3798 Delivery to other than the above addresses or facsimile number will not constitute a valid delivery. Fees and Expenses We have agreed to pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses. We will also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of this prospectus and related documents to the beneficial owners of original notes, and in handling or tendering for their customers. Holders who tender their original notes for exchange will not be obligated to pay any transfer taxes in connection with the transfer. If, however, exchange notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the original notes tendered, or if a transfer tax is imposed for any reason other than the exchange of original notes in connection with the exchange offer, then the amount of any such transfer 30 taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the letter of transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. We will not make any payment to brokers, dealers or other nominees soliciting acceptances of the exchange offer. DESCRIPTION OF THE EXCHANGE NOTES General We issued the original notes and will issue the exchange notes under the indenture dated as of April 16, 2001 (the "indenture") between and among us, the Subsidiary Guarantors and The Bank of New York, as trustee (the "trustee"). The trustee's address is 101 Barclay Street, Floor 8W, New York, NY 10286. The terms of the exchange notes are stated in the indenture and include terms made part of the indenture by reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). You should refer to the indenture and the Trust Indenture Act for a statement of these terms. The indenture and the Senior Notes are governed by New York law. As used herein, "Senior Notes" means original notes and/or exchange notes as the context requires. The following summary of selected provisions of the indenture is not complete. We recommend that you read the indenture which may be obtained from the trustee. You can find the definitions of certain capitalized terms used in the following summary under the subheading "-- Definitions." The exchange notes will be our senior unsecured obligations. They will rank equally in right of payment to all of our existing and future senior unsecured indebtedness. Upon completion of the exchange, we will have approximately $2,500,000,000 of senior indebtedness outstanding. The exchange notes will rank junior to secured indebtedness to the extent of related collateral. We currently do not have any outstanding secured indebtedness. The exchange notes will be guaranteed, jointly and severally, by the Subsidiary Guarantors as described below. The Subsidiary Guaranties will rank equally in right of payment to all existing and future senior unsecured indebtedness of the Subsidiary Guarantors. Other than intercompany debt, the Subsidiary Guarantors currently have no indebtedness outstanding. Principal, Maturity and Interest The indenture does not limit the aggregate principal amount of debt securities that we may issue under it and provides that debt securities may be issued under it up to the principal amount as we may authorize from time to time. The debt securities may be issued from time to time in one or more series. We may "reopen" any series of debt securities, including the 6.95% Senior Notes due 2012, and issue additional debt securities of that series. The 6.95% Senior Notes due 2012 were initially limited to $600 million. This series of Senior Notes was issued in registered form only, without coupons, in minimum denominations of $1,000 and integral multiples in excess thereof. The 6.95% Senior Notes due 2012 will mature at par on June 1, 2012 (the "Stated Maturity Date") unless we redeem them in accordance with their terms prior to such date. Interest on the 6.95% Senior Notes due 2012 accrues at the rate of 6.95% per annum and is payable semi-annually in arrears on June 1 and December 1 of each year (each, an "Interest Payment Date"), commencing December 1, 2002. We will make each interest payment to the persons in whose names the Senior Notes are registered at the close of business on the 15th day immediately preceding the applicable Interest Payment Date. Interest on the exchange notes will accrue from the date of original issuance or, if interest has already been paid, from the most recent Interest Payment Date to which interest was paid or duly provided for. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. If any Interest Payment Date or the Stated Maturity Date or date of earlier redemption is not a Business Day, the required payment shall be made on the next succeeding day that is a Business Day, 31 without any interest or other payment in respect of the payment subject to delay, with the same force and effect as if made on the Interest Payment Date or Stated Maturity Date or date of earlier redemption. Payment and Paying Agents Interest on the exchange notes will be payable at any office or agency that we maintain for such purpose in West Paterson, New Jersey and The City of New York. At our option, however, interest may be paid (i) by check mailed to the address of the person entitled to the interest payment at the address that appears in the "security register" that we maintain for such purpose or (ii) by wire transfer to an account maintained by the person entitled to the interest payment as specified in the security register subject to the provisions described under "-- Book Entry, Delivery and Form". (Sections 301, 1001 and 1002 of the indenture.) Transfer and Exchange Under the indenture, debt securities of any series, including the exchange notes, may be presented for registration of transfer and may be presented for exchange (i) at each office or agency that we are required to maintain for payment of such series as described in "-- Payment and Paying Agents," above and (ii) at each other office or agency that we may designate from time to time for such purposes. No service charge will be made for any transfer or exchange of debt securities, including the exchange notes, but we may require payment of any tax or other governmental charge payable in connection with the transfer or exchange. (Section 305 of the indenture.) The indenture does not require us to (i) issue, register the transfer of or exchange debt securities during a period beginning at the opening of business 15 days before any selection of debt securities of that series to be redeemed and ending at the close of business on the day of mailing of the relevant notice of redemption; (ii) register the transfer of or exchange any debt security in registered form, or portion thereof, called for redemption, except the unredeemed portion of any debt security in registered form being redeemed in part; or (iii) issue, register the transfer of or exchange any debt security which has been surrendered for repayment at the option of the holder, except the portion, if any, of such debt security not to be so repaid. (Section 305 of the indenture.) The registered holder of an exchange note will be treated as its owner for all purposes. Mandatory Redemption We will not be required to make mandatory redemption or sinking fund payments with respect to the exchange notes. Optional Redemption We may redeem the exchange notes at any time, in whole or in part, upon not less than 30 nor more than 60 days' prior written notice, as more fully described under "-- Selection and Notice" below, at a price equal to the greater of: (a) 100 percent of the principal amount of the exchange notes being redeemed, or (b) as determined by the calculation agent, the sum of the present values of the remaining scheduled payments of principal and interest on the exchange notes being redeemed not including any portion of such payment of interest accrued on the date of redemption, from the redemption date to the maturity date, discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the treasury rate plus 30 basis points. plus any accrued and unpaid interest to the date of redemption and liquidated damages, if any, and additional amounts, if any. 32 "Treasury rate" means, with respect to any redemption date for any of the exchange notes being redeemed: (a) the yield for the maturity corresponding to the comparable treasury issue (as defined below), under the heading that represents the average for the immediately preceding week, appearing in the most recently published statistical release designated "H.15(519)" or any successor publication that is published weekly by the Board of Governors of the Federal Reserve System and that establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," provided, that if no maturity is within three months before or after the maturity date for any of the exchange notes being redeemed the yields for the two published maturities most closely corresponding to the comparable treasury issue will be determined and the treasury rate shall be interpolated or extrapolated from those yields on a straight line basis, rounding to the nearest month; or (b) if the release referred to in (a) (or any successor release) is not published during the week preceding the calculation date or does not contain the yields referred to above, the rate per annum equal to the semiannual equivalent yield to maturity of the comparable treasury issue, calculated using a price for the comparable treasury issue (expressed as a percentage of its principal amount) equal to the comparable treasury price for that redemption date. The treasury rate will be calculated on the third business day preceding the redemption date. "Comparable treasury issue" means, with respect to any redemption date for any of the exchange notes being redeemed, the United States Treasury security selected by an "independent investment banker" as having the maturity comparable to the remaining term of the exchange notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the exchange notes. "Independent investment banker" means one of the reference treasury dealers appointed by the trustee after consultation with us. "Comparable treasury price" means with respect to any redemption date for any of the exchange notes being redeemed: (a) the average of four reference treasury dealer quotations (as defined below) for the redemption date, after excluding the highest and lowest of those reference treasury dealer quotations, or (b) if the calculation agent obtains fewer than four reference treasury dealer quotations, the average of all reference treasury dealer quotations obtained. "Reference treasury dealer" means each of four primary U.S. Government securities dealers in New York City selected by the trustee in consultation with us and initially will include J.P. Morgan Securities Inc. and Salomon Smith Barney Inc. If any reference treasury dealer ceases to be a primary U.S. government securities dealer, the trustee will substitute another primary U.S. government securities dealer for that dealer. "Reference treasury dealer quotations" means, with respect to any redemption date, the average, as determined by the calculation agent, of the bid and asked prices for the comparable treasury issue (expressed in each case as a percentage of its principal amount) quoted to the calculation agent by that reference treasury dealer at 5:00 p.m. New York time on the third business day preceding the redemption date. Unless we default in payment of the redemption price, on and after the redemption date, interest will cease to accrue on the exchange notes called for redemption. Selection and Notice The trustee will select the exchange notes for redemption on a pro rata basis or in accordance with any other method the trustee considers fair and appropriate. Exchange notes in denominations of $1,000 or less may not be redeemed in part. Notices of redemption will be mailed by first class mail at least 15 but not more than 60 days prior to the redemption date to each holder of exchange notes to be redeemed at its registered address. The notice of redemption will state the portion of the principal 33 amount to be redeemed if the exchange note is to be redeemed in part. An exchange note in principal amount equal to the unredeemed portion will be issued in the name of the holder upon cancellation of the original exchange note. On and after the redemption date, interest will no longer accrue on those exchange notes or portions of exchange notes called for redemption (unless we default in the payment of any amount payable by us upon such redemption). Notices to the holders of the exchange notes shall be given by first class mail, postage prepaid, to the registered holders of such exchange notes at their addresses appearing in the note register. Selected Indenture Covenants Limitations on Obligations Restricted Subsidiaries. We will not permit any Restricted Subsidiary to, directly or indirectly, Incur any Obligations (including, without limitation, Acquired Obligations), except for (i) the Subsidiary Guaranties; (ii) Obligations existing on the date of the indenture; (iii) Obligations of ER&T related to the purchase and sale of fuel, capacity, energy (including, but not limited to, electric power, natural gas and coal), environmental credits or entitlements, utility services, fuel, water, related transportation services and other similar or related products and services in the ordinary course of business; (iv) Obligations of Nuclear related to the purchase and sale of fuel and related transportation services in the ordinary course of business; (v) Permitted Hedging Obligations; (vi) Obligations incurred in exchange for, or the net proceeds of which are used to refund, refinance, or replace Obligations described under "Limitations on Obligations", provided that the average life of the refinancing Obligations shall not be shorter than the average life of the Obligations being refinanced and the principal amount of the refinancing obligations shall not exceed the principal amount of the Obligations being so refinanced; and (vii) Obligations to us or any other Restricted Subsidiary which are subordinated to the Subsidiary Guaranty with respect to the Senior Notes of the Restricted Subsidiary incurring the Obligations. The foregoing notwithstanding, Restricted Subsidiaries may Incur Obligations not otherwise permitted by the preceding paragraph in an aggregate amount outstanding after giving effect to such Incurrence not to exceed at any one time the greater of $250 million or 15% of Consolidated Net Tangible Assets as of the last day of the preceding month. Subsidiaries Other Than Restricted Subsidiaries. Except for parental guaranties of debt service reserves, surety bonds, equity guarantees, performance bonds and bid bonds entered into in the ordinary course of business aggregating at any one time not more than $100 million, we shall not permit any Subsidiary that is not a Restricted Subsidiary to, directly or indirectly, Incur any Obligations (including, without limitation, Acquired Obligations) that are recourse to us or any Restricted Subsidiary. (Section 1008 of the indenture.) Limitation on Liens We may not, and may not permit any Restricted Subsidiary to, directly or indirectly, create, incur, assume or permit to exist any Lien of any kind on or with respect to any Property or interest in our Property or that of any of our Restricted Subsidiaries or any income or profits therefrom (in each case, whether the Property is owned at the date of the indenture or thereafter acquired), unless the Senior Notes are secured equally and ratably with (or prior to) any and all other Obligations secured by the Lien, provided, however, that these restrictions shall not apply to or prevent the creation, incurrence, assumption or existence of Permitted Liens. Permitted Liens shall include: o Liens existing on the date of the indenture; o Liens to secure or provide for the payment of all or part of the purchase price of any Property or the cost of construction or improvement thereof; provided that no such Lien shall extend to or cover any other of our or our Restricted Subsidiaries' Property; 34 o Liens existing on Property at the time such Property is acquired by us or any Restricted Subsidiary; provided that such Liens (x) are not created, Incurred or assumed in contemplation of such Property being acquired and (y) do not extend to or cover any other of our or our Restricted Subsidiaries' Property; o Liens existing on Property of any entity at the time such entity is merged with or into or consolidated with us or a Restricted Subsidiary; provided that such Liens (x) are not created, Incurred or assumed in contemplation of such merger or consolidation and (y) do not extend to any other of our or our Restricted Subsidiaries' Property; o Liens securing Permitted Hedging Obligations; o Liens for taxes, assessments or governmental charges that are not yet delinquent or that are being contested in good faith by any appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate reserve provision, if any, as is required in conformity with GAAP shall have been made; o Liens arising by reason of any judgment, decree or order of any court, so long as any such Lien is being contested in good faith and is bonded or such judgment, decree or order does not exceed $50 million, and any appropriate legal proceedings that may have been duly initiated for the review of such judgment, decree or order have not been finally terminated or the period within which such proceedings may be initiated has not expired; o Liens to secure pledges or deposits made in the ordinary course of business in connection with bids, tenders or contracts (other than for payment of indebtedness) or to secure guarantees, statutory or regulatory obligations or surety or performance bonds each made in the ordinary course of business; o Liens imposed by law such as carriers', warehousemen's and mechanics' Liens, in each case arising in the ordinary course of business and with respect to amounts not yet due or being contested in good faith by appropriate legal proceedings promptly instituted and diligently conducted and for which a reserve or other appropriate provision, if any, as is required in conformity with GAAP shall have been made; o Survey exceptions, encumbrances, easements or reservations of, or rights of others for, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real properties incidental to the conduct of the business or to the ownership of Properties which were not incurred in connection with indebtedness or other extensions of credit and which do not in the aggregate materially and adversely affect the value of the Properties or materially impair their use in the operation of the business; o Liens securing letters of credit entered into in the ordinary course of business; o Liens to secure pollution control revenue bonds or industrial revenue bonds; o Liens securing Non-Recourse Obligations of Unrestricted Subsidiaries; o Liens granted on the capital stock of Unrestricted Subsidiaries for the purpose of securing the Obligations of such Unrestricted Subsidiaries; o Liens pursuant to Capitalized Leases or Synthetic Leases permitted to be entered into under the "Limitation on Obligations" covenant; o Liens arising by reason of leases and subleases of Property pursuant to a Sale/Leaseback Transaction allowed pursuant to the "Limitation on Sale of Assets" covenant that do not materially interfere with the ordinary conduct of our or any of our Restricted Subsidiaries' business; o Liens created in connection with worker's compensation, unemployment insurance and other social security statutes or regulations; 35 o Liens by a Wholly-Owned Subsidiary to us or any Restricted Subsidiary; o Liens on Property, other than Capital Stock of Restricted Subsidiaries, to secure Obligations so long as the sum of the amount of outstanding Obligations secured by Liens Incurred pursuant to this provision does not exceed the greater of $250 million or 15% of Consolidated Net Tangible Assets as of the end of the most recent fiscal quarter for which financial statements are available; and o The replacement, extension or renewal (or successive replacements, extensions or renewals), as a whole or in part, of any Lien or of any agreement referred to above or the replacement, extension or renewal (not exceeding the outstanding principal amount of Indebtedness secured thereby together with any premium, interest, fee or expense payable in connection with any such replacement, extension or renewal) of Indebtedness secured thereby; provided that such replacement, extension or renewal is limited to all or part of the same Property that secured the Lien replaced, extended or renewed (plus improvements thereon or additions or accessions thereto). (Section 1005 of the indenture.) Guarantee of Senior Notes Each initial Subsidiary Guarantor (Fossil, Nuclear and ER&T) has executed and any subsequent Subsidiary Guarantor at or before the time the definition of Subsidiary Guarantor shall be applicable to it, shall execute, a Subsidiary Guaranty of the Senior Notes in substantially the form provided for by the indenture. (Section 1601 of the indenture.) Guarantee of ER&T Obligations We have executed a guarantee of the Obligations of ER&T substantially in the form provided for by the indenture. Our guarantee is subordinated to the Senior Notes. Payment of Dividends by ER&T to Us For so long as we continue to guarantee the Obligations of ER&T, we shall cause ER&T, to the extent permitted by applicable law, to pay, at least quarterly, dividends or distributions to us of the excess cash not then required for its business operations. (Section 1010 of the indenture.) Limitation on Dividend and Other Payment Restrictions Other than pursuant to the indenture or as otherwise may be required by law, we will not, and will not permit any Restricted Subsidiary to, directly or indirectly, create or cause to become, or as a result of the acquisition of any Person or Property, or upon any Person becoming a Restricted Subsidiary, remain subject to, any consensual encumbrance or consensual restriction of any kind on the ability of any Restricted Subsidiary to: (i) pay dividends or make any other distributions on its Capital Stock; (ii) make payments on any Obligations owed to us or any of our Restricted Subsidiaries; (iii) make loans or advances to us or to any of our Restricted Subsidiaries; (iv) transfer any of its Property to us or to any of our Restricted Subsidiaries; or (v) make payments under a Subsidiary Guaranty with respect to the Senior Notes. The foregoing shall not prohibit: (a) encumbrances and restrictions resulting from customary provisions relating to (i) transfers of Property that restrict the subletting or assignment of any lease or (ii) transfers of Property that are contained in licenses and that relate to the Property covered thereby, in each case entered into in the ordinary course of business; (b) encumbrances and restrictions on transfers of Property existing on any assets at the time such assets are acquired (or the entity owning such assets is acquired) by any Restricted Subsidiary, whether by merger, consolidation, purchase of such assets or otherwise; provided 36 that such restrictions and encumbrances (i) are not created, Incurred or assumed in contemplation of such assets or entity being acquired by the Restricted Subsidiary and (ii) do not extend to any other assets of the Restricted Subsidiary; and (c) restrictions on transfers of Property created in connection with sales or purchases of electricity, energy, capacity, natural gas, coal, ancillary services, environmental credits and/or entitlements, utility services, fuel, water, related transportation services and other similar products and services, in each case, in the ordinary course of business; provided that restrictions arising from any transaction or series of related transactions pursuant to this clause (c) shall not be materially more restrictive, taken as a whole, than encumbrances and restrictions customarily accepted as industry standard for similar transactions. (Section 1007 of the indenture.) Limitation on Sale of Assets Except for a sale of all or substantially all of our assets, as provided in the "Merger, Consolidation or Sale of Assets" covenant, and other than (1) assets required to be sold to conform with government regulations, laws or impositions, (2) sales or dispositions of surplus, obsolete or worn out equipment, (3) sales or dispositions of ownership interests in Unrestricted Subsidiaries, or (4) any other sale or disposition so long as after giving effect to such events, the Rating Agencies shall have confirmed their ratings on our debt securities in effect immediately prior to such sale or disposition, we may not, and may not permit any Restricted Subsidiary to, make any Asset Sale (other than short-term, readily marketable investments purchased for cash management purposes with funds not representing the proceeds of other Asset Sales) if, on a pro forma basis, the aggregate net book value of all such Asset Sales during the most recent 12-month period would exceed 15% of Consolidated Net Tangible Assets computed as of the most recent quarter preceding such sale; provided, however, that any such Asset Sale shall be disregarded for purposes of this 15% limitation if the Net Cash Proceeds are within 270 days thereafter (i) invested in a Permitted Business, (ii) used to purchase and retire Obligations ranking equal in right of payment to the Senior Notes or (iii) used to redeem the Senior Notes at a redemption price equal to 100% of the principal amount of the Senior Notes to be redeemed, plus accrued and unpaid interest thereon up to and including the applicable redemption date, plus a make-whole premium equal to, with respect to any Senior Note, the excess of (a) the aggregate present value as of the date of prepayment of the expected future cash flows of the Senior Note (for the avoidance of doubt, these amounts shall include all principal and interest payable with respect to the Senior Note) (exclusive of interest accrued to the date of prepayment) that, but for the prepayment, would have been payable if the prepayment had not been made, determined by discounting such amounts at a rate that is equal to the applicable treasury rate (as defined under "-- Optional Redemption" above) plus 0.30% for the 6.95% Senior Notes due 2012 (b) the aggregate principal amount of the Senior Note then to be prepaid. In addition, on a cumulative basis we may not sell or otherwise dispose of more than 25% of the assets or Capital Stock in Fossil, unless Net Cash Proceeds from such sale are invested in other non-nuclear generation assets or the capital stock of entities engaged in fossil generation and related businesses. (Section 1006 of the indenture.) Merger, Consolidation or Sale of Assets We may not, directly or indirectly, consolidate or merge with or into any other person (whether or not we are the surviving entity), or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of our assets, in one or more related transactions, to another Person unless: (i) the Person formed by the consolidation or surviving the merger or the Person that acquires by sale, assignment, transfer, conveyance or other disposition, or that leases, the assets (if other than us) (in each such case, the "Successor Entity"), is a corporation or limited liability company organized and existing under the laws of the United States, any state thereof or the District of Columbia and expressly assumes our obligations under the indenture and the Senior Notes; 37 (ii) if any of our or a Restricted Subsidiary's Property or assets would become subject to a Lien other than a Permitted Lien under the "Limitations on Liens" covenant, the Senior Notes shall be equally and ratably secured in accordance with such covenant; (iii) immediately after such transaction no event exists that is or with the passage of time or the giving of notice or both would be an Event of Default under the indenture; and (iv) each Subsidiary Guarantor shall have by amendment to its Subsidiary Guaranty with respect to the Senior Notes confirmed that its Subsidiary Guaranty shall apply to the obligations of the Successor Entity under the indenture and the Senior Notes. (Section 801 of the indenture.) Events of Default and Remedies Each of the following is an Event of Default under the indenture with respect to any series of the Senior Notes: (i) default for five days in the payment when due of interest on any of the exchange notes of such series; (ii) default in the payment when due of the principal of, or premium, if any, or make-whole amount, on, the exchange notes of such series; (iii) default in the deposit of any sinking fund payment, when and as due by the terms of the debt securities of such series; (iv) failure by us or any Restricted Subsidiary to comply with the provisions described under "Limitation on Sale of Assets" or "Merger, Consolidation or Sale of Assets"; (v) failure by us or any Restricted Subsidiary for 60 days after written notice by the trustee or to us and to the trustee by the holders of 25% or more in aggregate principal amount of the Senior Notes of such series to comply with any of our agreements in the indenture or the Senior Notes of such series that are not otherwise covered in clauses (i), (ii), (iii), (iv), (vi), (vii) or (viii); (vi) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any of our or any of our Subsidiaries; indebtedness (including indebtedness represented by any other series of debt securities under the indenture or the payment of which is guaranteed by us or by any of our Subsidiaries) (but other than Non-Recourse Obligations) which default (a) is caused by a failure to pay the principal of such indebtedness at the stated maturity of such indebtedness after the expiration of grace periods provided in the indebtedness (a "Payment Default") or (b) has resulted in the acceleration of the indebtedness prior to its stated maturity; and, in each case the principal amount of the indebtedness, together with the principal amount of any other indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $50 million or more; (vii) failure by us or any of our Restricted Subsidiaries to pay one or more final judgments not otherwise covered by insurance aggregating in excess of $50 million, which judgments are not paid, discharged or stayed for a period of 60 days; and (viii)certain events of bankruptcy or insolvency with respect to us or any of our Restricted Subsidiaries. (Section 501 of the indenture.) Each series of debt securities issued under the indenture may specify other events of default for such series of debt securities. We are required to file with the trustee, annually, an officer's certificate as to our compliance with all conditions and covenants under the indenture. (Section 1011 of the indenture.) The indenture provides that the trustee may withhold notice to the holders of debt securities of a series, including the Senior Notes, of any default (except payment defaults on the debt securities of that series) if it considers it in the interest of the holders of debt securities of the series to do so. (Section 515 of the indenture.) 38 If an Event of Default (other than an Event of Default occasioned by our or any of our Restricted Subsidiaries' bankruptcy or insolvency) with respect to debt securities of a series, including the Senior Notes, has occurred and is continuing, the trustee or the holders of not less than 25% in principal amount of outstanding debt securities of that series may declare the principal (or, if the debt securities of that series are issued with original issue discount or are "indexed debt securities" (i.e., debt securities, the interest and principal payments on which are determined by reference to a particular index, such as a foreign currency or commodity), such portion of the principal as may be specified in the terms of those debt securities) of all of the debt securities of that series to be due and payable immediately, by a notice in writing to us and any Restricted Subsidiary. If an Event of Default occasioned by our or any of our Restricted Subsidiaries' bankruptcy or insolvency occurs and is continuing, the principal of and interest on all debt securities, including the Senior Notes, shall, ipso facto become and be immediately due and payable without any declaration or other act on the part of the trustee or any holders of debt securities. (Section 502 of the indenture.) Subject to the provisions of the indenture relating to the duties of the trustee, in case an event of default with respect to debt securities of any series, including the Senior Notes, has occurred and is continuing, the trustee is under no obligation to exercise any of its rights or powers under the indenture at the request, order or direction of the holders of debt securities of that series, unless those holders have offered the trustee indemnity satisfactory to the trustee against the expenses and liabilities which might be incurred by it in compliance with such request. (Section 507 of the indenture.) Subject to such provisions for the indemnification of the trustee, the holders of a majority in principal amount of the outstanding debt securities of any series of debt securities, including each series of the Senior Notes, will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or exercising any trust or power conferred on the trustee with respect to the debt securities of that series. (Section 512 of the indenture.) The holders of a majority in principal amount of the outstanding debt securities of a series, including the Senior Notes, may, on behalf of the holders of all debt securities of such series and any related coupons, waive any past default under the indenture with respect to such series and its consequences, except a default (i) in the payment of the principal of (or premium, if any) or interest, if any, on or additional amounts payable in respect of any debt security of such series or any related coupons or (ii) in respect of a covenant or provision that cannot be modified or amended without the consent of the holder of each outstanding debt security of such series affected thereby. (Section 513 of the indenture.) Definitions "Acquired Obligations" means, with respect to any Person, (i) Obligations of any other Person existing at the time the other Person is merged with or into or became a Subsidiary of the Person, including, without limitation, Obligations Incurred in connection with, or in contemplation of, the other Person merging with or into or becoming a Subsidiary of the Person; and (ii) Obligations secured by a Lien encumbering any asset acquired by the Person at the time the asset is acquired by the Person. "Asset Sale" means any sale, transfer, conveyance, lease or other disposition (including by way of merger, consolidation or sale-leaseback) by us or any of our Restricted Subsidiaries to any Person (other than to us or a Restricted Subsidiary of ours and other than in the ordinary course of business) of any Capital Stock or other Property of ours or of any of our Restricted Subsidiaries (including Capital Stock of Subsidiaries). The term "Asset Sale" will not include (i) any sale, transfer, conveyance, lease or other disposition of Property governed by the "Merger, Consolidation or Sale of Assets" covenant and (ii) any transaction or series of related transactions consisting of the sale, transfer, conveyance, lease or other disposition of Capital Stock or other Property with a Fair Market Value aggregating less than $50 million in any fiscal year. The term "Asset Sale" also will not include (a) the grant of or realization upon a Lien permitted under the "Limitation on Liens" covenant or the exercise of remedies thereunder and (b) sales of fuel, capacity, energy (including, but not limited to, electric power, natural gas and coal), environmental credits or entitlements, related transportation services and other related services by ER&T and its Permitted Hedging Obligations as permitted by the "Limitation on Obligations" covenant. 39 "Attributable Debt" means with respect to any Sale/Leaseback Transaction, at the time of determination, the present value (discounted at a rate per annum equal to the weighted average interest rate of all outstanding debt securities, compounded semi-annually) of the total Obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which the lease has been extended). "Board of Directors" means either the Board of Directors of PSEG Power or any duly authorized committee of such Board. "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in Newark, New Jersey and The City of New York are authorized or obligated by law or executive order to close. "Capital Stock" means (i) in the case of a corporation, corporate stock, (ii) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock, (iii) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited) and (iv) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person. "Capitalized Lease" means as applied to any Person, any lease of any Property of which the discounted present value of the rental obligations of such Person as lessee, in conformity with GAAP, is required to be capitalized on the balance sheet of such Person, and "Capitalized Lease Obligation" means the rental obligations, as aforesaid, under such lease. "Commodity Trading Obligations," with respect to any Person, means the Obligations of such Person under (i) any commodity swap agreement, commodity future agreement, commodity option agreement, commodity cap agreement, commodity floor agreement, commodity collar agreement, commodity hedge agreement, and any put, call or other agreement or arrangement, or combination thereof, designed to protect such Person against fluctuations in commodity prices or (ii) any commodity swap agreement, commodity future agreement, commodity option agreement, commodity hedge agreement, and any put, call or other agreement or arrangement, or combination thereof (including an agreement or arrangement to hedge foreign exchange risks) in respect of commodities entered into by us pursuant to asset optimization and risk management policies and procedures adopted in good faith by the Board of Directors. "Consolidated Current Liabilities," as of the date of determination, means the aggregate amount of our and our Restricted Subsidiaries' liabilities on a consolidated basis which may properly be classified as current liabilities (including taxes accrued as estimated), after eliminating (i) all inter-company items between us and any consolidated Restricted Subsidiary, (ii) all current maturities of long-term indebtedness, all as determined in accordance with GAAP and (iii) all liabilities attributable to Subsidiaries that are not Restricted Subsidiaries. "Consolidated Net Tangible Assets" means, as of any date of determination, the total amount of assets (less accumulated depreciation or amortization, allowances for doubtful receivables, other applicable reserves and other properly deductible items) of us and our Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, consistently applied, and after giving effect to purchase accounting and after deducting therefrom, to the extent otherwise included, the amounts of: o Consolidated Current Liabilities; o excess of cost over fair value of assets of businesses acquired, as determined in good faith by the Board of Directors; o unamortized debt discount and expense and other unamortized deferred charges, goodwill, patents, trademarks, service marks, trade names, copyrights, licenses, deferred project costs, organization or developmental expenses and other intangible items; o treasury stock; 40 o any cash set apart and held in a sinking or other analogous fund established for the purpose of redemption or other retirement of Capital Stock to the extent such obligation is not reflected in Consolidated Current Liabilities; and o all assets attributable to Subsidiaries that are not Restricted Subsidiaries (including Capital Stock thereof), except to the extent of dividends or distributions received from such Subsidiaries. "Default" means any event, act or condition that is, or after notice or the passage of time or both would be, an Event of Default. "Event of Default" has the meaning specified in Section 501 of the indenture. "Fair Market Value" means the price that would be paid by a purchaser to a seller in an arm's-length transaction. "GAAP" means generally accepted accounting principles in the United States applied on a basis consistent with the principles, methods, procedures and practices employed in the preparation of our audited financial statements, including, without limitation, those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. "Hedging Obligations" means, with respect to any Person, the obligations of such Person under any interest rate or currency swap agreement, interest rate or currency future agreement, interest rate cap or collar agreement, interest rate or currency hedge agreement, and any put, call or other agreement or arrangement designed to protect such Person against fluctuations in interest rates or currency exchange rates. "Incur" means, with respect to any Obligation, to directly or indirectly create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable for or with respect to, or become responsible for payment of, contingently or otherwise, such Obligation. The term "Incurrence" has a corresponding meaning. "Lien" means any mortgage, pledge, hypothecation, charge, assignment, deposit arrangement, encumbrance, security interest, lien (statutory or other), or preference, priority, or other security or similar agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing). "Net Cash Proceeds" from an Asset Sale is defined to mean cash payments received (including any cash payments received by way of a payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received (including any cash received upon sale or disposition of any such note or receivable), excluding any other consideration received in the form of assumption by the acquiring Person of Obligations relating to the Property disposed of in such Asset Sale or received in any form other than cash) therefrom, in each case, net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses of any kind (including consent and waiver fees and any applicable premiums, earn-out or working interest payments or payments in lieu or in termination thereof) Incurred, (ii) all federal, state, provincial, foreign and local taxes and other governmental charges required to be accrued as a liability under GAAP as a consequence of such Asset Sale, (iii) a reasonable reserve for the after-tax cost of any indemnification payments (fixed and contingent) attributable to seller's indemnities to the purchaser undertaken by us or any of our Subsidiaries in connection with such Asset Sale, (iv) all payments made on any Obligation that is secured by such Property, in accordance with the terms of any Lien upon or with respect to such Property, or that must by its terms or by applicable law or in order to obtain a required consent or waiver be repaid out of the proceeds from or in connection with such Asset Sale and (v) all distributions and other payments made to holders of Capital Stock of Subsidiaries (other than us or our Restricted Subsidiaries) as a result of such Asset Sale. 41 "Non-Recourse Obligation" means, with respect to any Person, any financing that is or was Incurred with respect to the development, acquisition, design, engineering, procurement, construction, operation, ownership, servicing or management of one or more facilities used or useful in a Permitted Business in respect of which such Person has a direct or indirect interest, provided that such financing is without recourse to any Person or Property other than to (i) the Property that constitutes such facilities, (ii) the income from and proceeds of such facilities, (iii) the Capital Stock of, and other investments in, the Person that owns the Property that constitutes any such facilities and (iv) the Capital Stock of, and other investments in, any Person obligated with respect to such financing and of any Subsidiary of such Person that owns a direct or indirect interest in any such facilities. "Obligations" of any Person shall mean at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person arising under any conditional sale or other title retention arrangement or otherwise to pay the deferred purchase price of Property or services, (iv) all obligations of such Person Incurred in respect of Attributable Debt associated with any Sale/Leaseback Transaction, Capitalized Lease or Synthetic Lease, (v) all obligations of such Person under letters of credit, (vi) all obligations of such Person under trade or bankers' acceptances, (vii) all obligations of such Person under Hedging Obligations and Commodity Trading Obligations, (viii) trade payables in respect of fuel, labor, supplies or other materials or services or the obligation to provide power, (ix) Preferred Stock and Redeemable Stock issued to any Person other than us or a Restricted Subsidiary, (x) all obligations of others secured by a Lien on any asset of such Person, whether or not such obligations are assumed by such Person and (xi) all obligations of others to the extent guaranteed by such Person. The amount of any obligation shall be deemed to be the amount equal to the stated or determinable amount thereof or, if not stated or determinable, the maximum probable liability thereunder as determined by us in good faith. "Permitted Business" means any business in which we or any of our Subsidiaries were engaged on the date of the indenture or any other power or energy-related business, including the business of acquiring, developing, owning or operating electric power or thermal energy generation or cogeneration facilities, electric power transmission, fuel supply and fuel transportation facilities, together with their related power supply, thermal energy and fuel contracts and other facilities, services or goods that are ancillary, incidental, complementary or reasonably related to the marketing, trading, development, construction or management servicing, ownership or operation of the foregoing. "Permitted Hedging Obligations" of any Person shall mean (i) Hedging Obligations entered into in the ordinary course of business and in accordance with such Person's established risk management policies that are designed to protect such Person against, among other things, fluctuations in interest rates or currency exchange rates and which in the case of agreements relating to interest rates shall have a notional amount no greater than the payments due with respect to the Obligations being hedged thereby and (ii) Commodity Trading Obligations. "Person" means an individual, a corporation, a limited liability company, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Preferred Stock" means, with respect to any Person, any and all shares, interests, participations or other equivalents (however designated, whether voting or non-voting) or preferred or preference stock of such Person that is outstanding or issued on or after the date of original issuance of the debt securities under the indenture. "Property" of any Person is defined to mean all types of real, personal, tangible or mixed property owned by such Person whether or not included in the most recent consolidated balance sheet of such Person under GAAP. "Rating Agencies" means Moody's Investors Service Inc., Standard & Poor's Ratings Services, Fitch Inc. and any successor thereof. "Redeemable Stock" is defined to mean any class or series of Capital Stock of any Person that by its terms or otherwise is (i) required to be redeemed prior to the Stated Maturity of the Senior Notes, 42 (ii) redeemable at the option of the holder of such Capital Stock at any time prior to the Stated Maturity of the Senior Notes or (iii) convertible into or exchangeable for Capital Stock referred to in clause (i) or (ii) above or Obligations having a scheduled maturity prior to the Stated Maturity of the Senior Notes. "Restricted Subsidiary" means only PSEG Fossil LLC, PSEG Nuclear LLC, PSEG Energy Resources & Trade LLC and each other of our Subsidiaries that executes a Subsidiary Guaranty with respect to the Senior Notes and is subsequently designated by the Board of Directors by written notice to the trustee as a Restricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to Property now owned or hereafter acquired whereby we or one of our Subsidiaries transfers the Property to a Person and leases it back from that Person, other than leases for a term of not more than 12 months or between us and one of our Wholly-Owned Subsidiaries that is a Restricted Subsidiary or between Wholly-Owned Subsidiaries that are Restricted Subsidiaries. "Stated Maturity" means with respect to any Senior Note or any installment of interest thereon, the date specified in such Senior Note as the fixed date on which any principal of such Senior Note or any such installment of interest is due and payable. "Subsidiary" means, with respect to any Person, (i) any corporation, limited liability company, association or other business entity of which more than 50% of the total voting power of Voting Stock is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person (or a combination thereof) and (ii) any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or one or more Subsidiaries of such Person (or any combination thereof). "Subsidiary Guarantor" means all current and subsequently designated Restricted Subsidiaries. "Subsidiary Guaranty" means a guaranty of a Subsidiary Guarantor in favor of the trustee for the benefit of the holders of the Senior Notes in substantially the form provided for by the indenture or a guaranty of a Subsidiary Guarantor of any other of our Obligations. "Synthetic Lease" means (i) a lease pursuant to which the lessee is treated as the owner of the Property subject to the lease for tax purposes, whether or not such lease is treated as an operating lease for accounting purposes or (ii) a lease treated as an operating lease for accounting purposes but having at least three of the following characteristics, (a) the term of the lease, inclusive of all renewal periods at the lessee's option, is greater than 75% of the useful life of the Property subject to the lease as estimated at the inception of the Lease, (b) the lessee has the right to purchase such Property at a fixed price, (c) the lessee's payments under the lease are calculated to amortize and service the debt of the lessor incurred in order to acquire the asset and (d) the lessor obtains 80% or more of the cost of the asset from borrowed funds. "Unrestricted Subsidiary" means a Subsidiary that is not a Restricted Subsidiary. "Voting Stock" means any class or classes of Capital Stock pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors, managers or trustees of any Person (irrespective of whether or not, at the time, stock of any other class or classes shall have, or might have, voting power by reason of the happening of any contingency). "Weighted Average Life to Maturity" means, when applied to any Obligations at any date, the number of years obtained by dividing (i) the then outstanding principal amount of such Obligations into (ii) the total of the product obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (b) the numbers of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment. 43 "Wholly-Owned Subsidiary" means a Subsidiary all the Capital Stock of which (other than directors' qualifying shares) is owned by us and/or one or more of our Wholly-Owned Subsidiaries. Reports and Rule 144A Information Requirement We must file with the trustee, within 30 days of filing them with the SEC, copies of the current, quarterly and annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) that we are required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. If we are not subject to the requirements of Section 13 or 15(d) of the Exchange Act, we must nevertheless file with the SEC (if permitted) and the trustee, on the date upon which we would have been required to file with the SEC, current, quarterly and annual financial statements, including any notes thereto (and with respect to annual reports, an auditor's report by a firm of established national reputation, upon which the trustee may conclusively rely), and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," both comparable to that which we would have been required to include in such current, quarterly and annual reports, information, documents or other reports on Forms 8-K, 10-Q and 10-K if we were subject to the requirements of Section 13 or 15(d) of the Exchange Act; provided that we will not be required to register under the Exchange Act by virtue of this provision, if not otherwise required to do so. We have agreed to furnish to the holders of the Senior Notes and prospective purchasers of the Senior Notes designated by holders of the Senior Notes, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act until such time as the Senior Notes are no longer "restricted securities" within the meaning of Rule 144 under the Securities Act (assuming such Senior Notes have not been owned by an affiliate of ours). No Personal Liability of Directors, Officers, Employees and Members No past, present or future director, officer, employee, or member, as such, shall have any liability for any of our obligations under the Senior Notes and the indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder by accepting an exchange note waives and releases all such liability as part of the consideration for issuance of the exchange notes. This waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the SEC that such waiver is against public policy. (Section 113 of the indenture.) Satisfaction and Discharge According to the terms of the indenture, we may discharge certain obligations to holders of any series of debt securities, including the exchange notes, that have not already been delivered to the trustee for cancellation and that either have become due and payable or are by their terms due and payable within one year (or scheduled for redemption within one year) by irrevocably depositing with the trustee, in trust, funds in an amount sufficient to pay the entire indebtedness on such debt securities for principal (and premium, if any) and interest, if any, and any additional amounts with respect thereto, to the date of such deposit (if the debt securities have become due and payable) or to the maturity date or redemption date, as the case may be. (Section 401 of the indenture.) Legal Defeasance and Covenant Defeasance The indenture provides that, if the provisions of Article Fourteen of the indenture are made applicable to the debt securities of or within any series, including the exchange notes, and any related coupons pursuant to Section 301 thereunder, we may elect either (a) to defease and be discharged from any and all obligations with respect to such debt securities and any related coupons (except for the obligation to pay additional amounts, if any, upon the occurrence of certain events of tax, assessment or governmental charge with respect to payments on such debt securities and the obligations to register the transfer or exchange of such debt securities and any related coupons, to replace temporary or mutilated, destroyed, lost or stolen debt securities and any related coupons, to maintain an office or agency in respect of such debt securities and any related coupons, and to hold 44 moneys for payment in trust) (defeasance) (Section 1402 of the indenture) or (b) to be released from our obligations under any covenant specified pursuant to Section 301 with respect to such debt securities and any related coupons, and any omission to comply with such obligations shall not constitute a default or an event of default with respect to such debt securities and any related coupons (covenant defeasance) (Section 1403 of the indenture), in either case upon the irrevocable deposit by us with the trustee (or other qualifying trustee), in trust, of (i) an amount in United States Dollars, (ii) Government Obligations (as defined below) applicable to such debt securities and coupons that through the payment of principal and interest in accordance with their terms will provide money in an amount, or (iii) a combination thereof in an amount, sufficient to pay the principal of (and premium, if any) and interest, if any, on such debt securities and any related coupons, and any mandatory sinking fund or analogous payments thereon, on the scheduled due dates therefor. Such a trust may only be established if, among other things, we have delivered to the trustee an opinion of counsel to the effect that the holders of such debt securities and any related coupons will not recognize income, gain or loss for United States federal income tax purposes as a result of such defeasance or covenant defeasance and will be subject to United States federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance had not occurred. The opinion of counsel in the case of defeasance under clause (a) above must refer to and be based upon a ruling of the Internal Revenue Service or a change in applicable United States federal income tax law occurring after the date of the Indenture. (Section 1404 of the indenture.) "Government Obligations" means securities which are (i) direct obligations of the United States or (ii) obligations of a person controlled or supervised by and acting as an agency or instrumentality of the United States, the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States, which are not callable or redeemable at the option of the issuer of that obligation. Government Obligations also include a depository receipt issued by a bank or trust company as custodian with respect to any such Government Obligation or a specific payment of interest on or principal of any such Government Obligation held by such custodian for the account of the holder of a depository receipt; provided that, except as required by law, such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from the amount received by the custodian in respect of the Government Obligation or the specific payment of interest on or principal of the Government Obligation evidenced by such depository receipt. (Section 101 of the indenture.) In the event we effect covenant defeasance with respect to any debt securities and any related coupons and such debt securities and coupons are declared due and payable because of the occurrence of any event of default (other than the events of default described in clause (iii) under "Events of Default and Remedies" which provisions would no longer be applicable to such debt securities and coupons), the amount of Government Obligations and funds on deposit with the trustee will be sufficient to pay amounts due on such debt securities and coupons at the time of their stated maturity but may not be sufficient to pay amounts due on such debt securities and coupons at the time of the acceleration resulting from such event of default. In such case, we would remain liable to make payment of such amount due at the time of acceleration. (Section 501 of the indenture.) If the trustee or any paying agent is unable to apply any money in accordance with the indenture by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then our obligations under the indenture and such debt securities and any related coupons shall be revived and reinstated as though no deposit had occurred pursuant to the indenture, until such time as such trustee or paying agent is permitted to apply all such money in accordance with the Indenture; provided, however, that if we make any payment of principal of (or premium, if any) or interest, if any, on any such debt security or any related coupon following the reinstatement of its obligations, we shall be subrogated to the rights of the holders of such debt securities and any related coupons to receive such payment from the money held by such trustee or paying agent. 45 Amendment, Supplement and Waiver We and the trustee may modify and amend the indenture with the consent of the holders of a majority in principal amount of all outstanding debt securities that are affected by the modification or amendment; provided that no modification or amendment may, without the consent of the holder of each outstanding debt security affected thereby, among other things: o change the stated maturity date of the principal of (or premium, if any, on) or any installment of principal of or interest on any debt security; o reduce the principal amount of, or the rate or amount of interest in respect of, or any premium payable upon the redemption of, any debt security; o change the rate, or manner of calculating the rate, of interest; o change any of our obligations to pay additional amounts in respect of any debt security; o reduce the portion of the principal of a debt security issued with the original issue discount or an indexed debt security that would be due and payable upon a declaration of acceleration of the maturity of the debt security or provable in bankruptcy; o adversely affect any right of repayment at the option of the holder of any such debt security; o change the Place of Payment of principal of, or any premium or interest on, the debt security; o impair the right to institute suit for the enforcement of any payment on or after the stated maturity date of the debt security or on or after any redemption date or repayment date for the debt security; o adversely affect any right to convert or exchange any debt security; o reduce the percentage in principal amount of such outstanding debt securities, the consent of whose holders is required to amend or waive compliance with certain provisions of the indenture or to waive certain defaults under the indenture; o reduce the requirements for voting or quorum described below; or o modify any of the foregoing requirements or any of the provisions relating to waiving past defaults or compliance with certain restrictive provisions, except to increase the percentage of holders required to effect waiver or to provide that certain other provisions of the indenture cannot be modified or waived without the consent of the holder of each debt security affected by the modification or waiver; or o modify or affect the terms and conditions of the obligations of any Subsidiary Guarantor in respect of the due and punctual payment of principal of, or any premium or interest on, guaranteed securities. (Section 902 of the indenture.) The trustee and we may modify and amend the indenture without the consent of any holder, for any of the following purposes: o to evidence the succession of another person to us and the assumption by any successor of our covenants under the indenture and the debt securities; o to add to our covenants for the benefit of the holders of all or any series of debt securities issued under the indenture, including the exchange notes, and any related coupons or to surrender any right or power conferred upon us by the indenture; o to add events of default for the benefit of the holders of all or any series of debt securities, including the exchange notes, issued under the indenture; o to add to or change any provisions of the indenture to facilitate the issuance of, or to liberalize the terms of, debt securities issued in bearer form or to permit or facilitate the issuance of debt securities in uncertificated form, provided that any such actions do not adversely affect the interests of the holders of the debt securities issued under the indenture or any related coupons in any material respect; 46 o to change or eliminate any provisions of the indenture, provided that any change or elimination of this nature will become effective only when there are no debt securities outstanding of any series created prior to the change or elimination of the provisions which are entitled to the benefit of the provisions; o to secure the debt securities, including the exchange notes, under the indenture pursuant to the "Limitations on Liens" covenant of the indenture, or otherwise; o to establish the form or terms of debt securities of any series and any related coupons; o to evidence and provide for the acceptance of appointment by a successor trustee or facilitate the administration of the trusts under the indenture by more than one trustee; o to cure an ambiguity, defect or inconsistency in the indenture, provided such action does not adversely affect the interests of holders of debt securities of a series, including the exchange notes, issued under the indenture or any related coupons in any material way; or o to supplement any of the provisions of the indenture to the extent necessary to permit or facilitate defeasance and discharge of any series of debt securities issued under the indenture, including the exchange notes, provided that the action does not adversely affect the interests of the holders of the debt securities of that series, including the exchange notes, and any related coupons in any material way. (Section 901 of the indenture.) In determining whether the holders of the requisite principal amount of outstanding debt securities have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture or whether a quorum is present at a meeting of holders of debt securities thereunder: o the principal amount of a debt security issued with original issue discount that will be deemed to be outstanding will be the amount of the principal thereof that would be due and payable as of the date of such determination upon acceleration of the maturity of the debt security; o the principal amount of an indexed debt security that may be counted in making the determination of calculation and that will be deemed outstanding will be equal to the principal face amount of the indexed debt security at original issuance, unless otherwise provided pursuant to Section 301 of the indenture; and o Debt securities owned by us or any other obligor upon the debt securities or any affiliate of ours or of such other obligor shall be disregarded. (Section 101 of the indenture.) The indenture contains provisions for convening meetings of the holders of debt securities of a series if debt securities of that series are issuable in bearer form. (Section 1501 of the indenture.) A meeting may be called at any time by the trustee, and also, upon request, by us or the holders of at least 10% in principal amount of the outstanding debt securities of that series, in any such case upon notice given as provided in the indenture. (Section 1502 of the indenture.) Except for any consent that must be given by the holder of each debt security, as described above, any resolution presented at a meeting (or an adjourned meeting duly reconvened) at which a quorum is present may be adopted by the affirmative vote of the holders of a majority in principal amount of outstanding debt securities of that series; provided, however, that any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that may be made, given or taken by the holders of a specified percentage which is less than a majority in principal amount of outstanding debt securities of a series may be adopted at a meeting (or an adjourned meeting duly reconvened) at which a quorum is present by the affirmative vote of the holders of such specified percentage in principal amount of the outstanding debt securities of that series. Any resolution passed or decision taken at any meeting of the holders of debt securities of a series duly held in accordance with the Indenture will be binding on all holders of debt securities of that series and any related coupons. The quorum at any meeting called to adopt a resolution will be persons holding or representing a majority in principal amount of the outstanding debt securities of a series; provided, however, that, if any action is to be taken at a meeting with respect to a consent or waiver which may be given by the holders of not less than a specified percentage in principal amount of the outstanding debt securities of a series, the persons holding or representing the specified percentage in principal amount of the outstanding debt securities of that series will constitute a quorum. (Section 1504 of the indenture.) 47 Notwithstanding the foregoing provisions, if any action is to be taken at a meeting of holders of debt securities of a series, including the exchange notes, with respect to any request, demand, authorization, direction, notice, consent, waiver or other action that the Indenture expressly provides may be made, given or taken by the holders of a specified percentage in principal amount of all outstanding debt securities affected by the action or of the holders of that series and one or more additional series: o there shall be no minimum quorum requirement for that meeting; and o the principal amount of the outstanding debt securities of the series that vote in favor of the request, demand, authorization, direction, notice, consent, waiver or other action will be taken into account in determining whether such request, demand, authorization, direction, notice, consent, waiver or other action has been made, given or taken under the indenture. (Section 1504 of the indenture.) Concerning the Trustee The Bank of New York is the trustee under the indenture. The indenture provides that, except during the continuance of an Event of Default, the trustee will perform only such duties as are specifically set forth in the indenture. During the existence of an Event of Default, the trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the trustee will be under no obligation to exercise any of its rights or powers under the indenture at the request of any Holder of Senior Notes, unless such Holder will have offered to the trustee security and indemnity satisfactory to it against any loss, liability or expense. The trustee may resign at any time with respect to a series of debt securities by written notice in accordance with the indenture. In addition, the trustee may be removed upon the happening of certain events specified in the indenture. Following any resignation or removal of the trustee, our Board of Directors will promptly appoint a successor trustee with respect to the debt securities affected in accordance with the indenture. Book-Entry, Delivery and Form The certificates representing the exchange notes will be in fully registered form without interest coupons. Ownership of beneficial interests in a Global Note will be limited to persons who have accounts with DTC ("participants") or persons who hold interests through participants. Ownership of beneficial interests in a Global Note will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). So long as DTC or its nominee is the registered owner or holder of the Global Notes, DTC or such nominee, as the case may be, will be considered the sole record owner or holder of the exchange notes represented by such Global Notes for all purposes under the indenture. No beneficial owner of an interest in the Global Notes will be able to transfer that interest except in accordance with DTC's applicable procedures, in addition to those provided for under the indenture and, if applicable, Euroclear or Clearstream. Payments of the principal of, premium, if any, and interest on the Global Notes will be made to DTC or its nominee, as the case may be, as the registered owner thereof. None of us, the trustee, or any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Notes or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. We expect that DTC or its nominee, upon receipt of any payment of principal, premium, if any, or interest in respect of the Global Notes will credit participants, accounts with payments in amounts proportionate to their respective beneficial ownership interests in the principal amount of such Global Notes, as shown on the records of DTC or its nominee. We also expect that payments by participants to owners of beneficial interests in such Global Notes held through such participants will be governed 48 by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. DTC has advised us as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of the New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of Senior Notes. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants"). Neither the trustee nor we will have any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. If DTC is at any time unwilling or unable to continue as a depositary for the Global Notes and a successor depositary is not appointed within 90 days, we will issue definitive, certificated Senior Notes in exchange for the Global Notes. Euroclear has advised us as follows: Euroclear was created in 1968 to hold securities for its participants and to clear and settle transactions between its participants through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of certificates and any risk from lack of simultaneous transfers of securities and cash. Euroclear provides various other services, including securities lending and borrowing, and interfaces with domestic markets in several countries. Euroclear is operated by Euroclear Bank S.A./N.V. (the "Euroclear Operator"), under contract with Euroclear Clearance Systems, S.C., a Belgian cooperative corporation (the "Cooperative"). All operations are conducted by the Euroclear Operator, and all Euroclear securities clearance accounts and Euroclear cash accounts are accounts with the Euroclear Operator, not the Cooperative. The Cooperative establishes policy for Euroclear on behalf of Euroclear participants. Euroclear participants include banks (including central banks), securities brokers and dealers and other professional financial intermediaries. Indirect access to Euroclear is also available to others that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly. The Euroclear Operator was granted a banking license by the Belgian Banking and Finance Commission in 2000, authorizing it to carry out banking activities on a global basis. It took over operation of Euroclear from the Brussels, Belgium office of Morgan Guaranty Trust Company of New York on December 31, 2000. Securities clearance accounts and cash accounts with the Euroclear Operator are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System, and applicable Belgian law (collectively, the "Terms and Conditions"). The Terms and Conditions govern transfers of securities and cash within Euroclear, withdrawals of securities and cash from Euroclear, and receipts of payments with respect to securities in Euroclear. All securities in Euroclear are held on a fungible basis without attribution of specific certificates to specific securities clearance accounts. The Euroclear Operator acts under the Terms and Conditions only on behalf of Euroclear participants and has no record of or relationship with persons holding through Euroclear participants. Distributions with respect to exchange notes held beneficially through Euroclear will be credited to the cash accounts of Euroclear participants in accordance with the Terms and Conditions, to the extent received by Euroclear. Clearstream has advised us as follows: Clearstream is incorporated under the laws of The Grand Duchy of Luxembourg as a professional depositary. Clearstream holds securities for its participants and facilitates the clearance and settlement of securities transactions between its participants through 49 electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Clearstream provides to its participants, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream interfaces with domestic markets in several countries. As a professional depositary, Clearstream is subject to regulation by the Luxembourg Monetary Institute. Clearstream participants are financial institutions around the world, including securities brokers and dealers, banks, trust companies, clearing corporations and certain other organizations. Indirect access to Clearstream is also available to others that clear through or maintain a custodial relationship with a Clearstream participant either directly or indirectly. Distributions with respect to exchange notes held beneficially through Clearstream will be credited to cash accounts of Clearstream participants in accordance with its rules and procedures, to the extent received by Clearstream. FEDERAL INCOME TAX CONSIDERATIONS General The following is a summary of the material United States federal income tax consequences resulting from the exchange offer and from the ownership of the exchange notes. It deals only with exchange notes held as capital assets and not with special classes of noteholders, such as dealers in securities or currencies, life insurance companies, tax exempt entities, and persons that hold an exchange note in connection with an arrangement that completely or partially hedges the exchange note. The discussion is based upon the Internal Revenue Code of 1986, as amended, (the "Code") and regulations, rulings and judicial decisions thereunder as of the date hereof. Such authorities may be repealed, revoked or modified so as to produce federal income tax consequences different from those discussed below. The information contained in this section has been passed upon for us by James T. Foran, Esquire, Associate General Counsel of PSEG. We have received an opinion from Mr. Foran regarding the material federal income tax consequences of the exchange offer. Noteholders tendering their original notes or prospective purchasers of exchange notes should consult their own tax advisors concerning the United States federal income tax and any state or local income or franchise tax consequences in their particular situations and any consequences under the laws of any other taxing jurisdiction. Consequences of Tendering Original Notes The exchange of original notes for the exchange notes pursuant to the exchange offer will not be treated as an "exchange" for United States federal income tax purposes because the exchange notes will not be considered to differ materially in kind or extent from the original notes. Rather, the exchange notes received by a noteholder will be treated as a continuation of the original notes in the hands of such noteholder. As a result, there will be no United States federal income tax consequences to noteholders exchanging the original notes for the exchange notes pursuant to the exchange offer. The noteholder must continue to include stated interest in income as if the exchange had not occurred. The adjusted basis and holding period of the exchange notes for any noteholder will be the same as the adjusted basis and holding period of the original notes. Similarly, there would be no United States federal income tax consequences to a holder of original notes that does not participate in the exchange offer. United States Holders For purposes of this discussion, a "United States Holder" means: (1) a citizen or resident of the United States; (2) a partnership, corporation or other entity treated as a corporation or partnership for United States federal income tax purposes, created or organized in or under the law of the United States or of any State of the United States including the District of Columbia; 50 (3) an estate the income of which is subject to United States federal income tax regardless of its source; (4) a trust, if either: (a) a court within the United States is able to exercise primary supervision over the administration of the trust, and one or more United States persons have the authority to control all substantial decisions of the trust; or (b) the trust was in existence on August 20, 1996 and elected to be treated as a United States person at all times thereafter; (5) any other person that is subject to United States federal income tax on interest income derived from a note as a result of such income being effectively connected with the conduct by such person of a trade or business within the United States; or (6) certain former citizens of the United States whose income and gain on the exchange notes will be subject to U.S. income tax. Payments of Interest Interest on an exchange note will be taxable to a United States Holder as ordinary interest income at the time it is received or accrued, depending on the noteholder's method of accounting for tax purposes. Disposition of an Exchange Note Upon the sale, exchange or retirement of an exchange note, a United States Holder generally will recognize taxable gain or loss equal to the difference between the amount realized on the sale, exchange or retirement (other than amounts representing accrued and unpaid interest, which will be treated as ordinary income) and such holder's adjusted basis in the exchange note. Such gain or loss generally will be long-term capital gain or loss if the holder's holding period in the exchange note was more than one year at the time of disposition. Backup Withholding and Information Reporting In general, information reporting requirements will apply with respect to non-corporate United States Holders to payments of principal and interest on an exchange note and the proceeds of the sale of an exchange note before maturity. A "backup withholding" tax at the applicable statutory rate will apply to such payments if the United States Holder fails to provide an accurate taxpayer identification number or to report all interest and dividends required to be shown on its federal income tax returns. Payments to United States Aliens As used herein, a "United States Alien" is a person or entity that, for United States federal income tax purposes, is not a United States Holder (as defined above). Under current United States federal income and estate tax law: (1) payments of principal and interest on an exchange note by us or any paying agent to a noteholder that is a United States Alien will not be subject to withholding of United States federal income tax, provided that the noteholder: (a) does not actually or constructively own 10% or more of the combined voting power of our stock; (b) is not a controlled foreign corporation related to us through stock ownership; (c) is not a bank receiving interest described in Section 881(c)(3)(A) of the Code; and (d) provides a statement, under penalties of perjury (such as Form W-8BEN), to us that the holder is a United States Alien and provides its name and address; 51 (2) a noteholder that is a United States Alien will not be subject to United States federal income tax on gain realized on the sale, exchange or redemption of such note, unless: (a) the gain is effectively connected with the conduct of a trade or business within the United States by the United States Alien; or (b) in the case of a United States Alien who is a nonresident alien individual and holds the exchange note as a capital asset, such holder is present in the United States for 183 or more days in the taxable year and certain other requirements are met; and (3) an exchange note will not be subject to United States federal estate tax as a result of the death of a noteholder who is not a citizen or resident of the United States at the time of death, provided that: (a) such noteholder did not at the time of death actually or constructively own 10% or more of the combined voting power of all classes of our stock; and, (b) at the time of such noteholder's death, payments of interest on such exchange note would not have been effectively connected with the conduct by such noteholder of a trade or business in the United States. United States information reporting requirements and backup withholding tax will not apply to payments on an exchange note made outside the United States by us or any paying agent (acting in its capacity as such) to a noteholder that is a United States Alien provided that a statement described in (1)(d) above has been received and neither we nor our paying agent has actual knowledge that the payee is not a United States Alien. Information reporting requirements and backup withholding tax will not apply to any payment of the proceeds of the sale of an exchange note effected outside the United States by a foreign office of a "broker" (as defined in applicable Treasury regulations), provided that such broker: (1) is a United States Alien; (2) derives less than 50% of its gross income for certain periods from the conduct of a trade or business in the United States; and (3) is not a controlled foreign corporation as to the United States or a foreign partnership in which one or more of its partners are "U.S. persons" as defined in U.S. Treasury regulations, who, in the aggregate, hold more than 50% of the income or capital interest in the partnership or a foreign partnership engaged in a United States trade or business (a person described in (1), (2) and (3) above being hereinafter referred to as a "foreign controlled person"). Payment of the proceeds of the sale of an exchange note effected outside the United States by a foreign office of any broker that is not a foreign controlled person will not be subject to backup withholding tax, but will be subject to information reporting requirements unless such broker has documentary evidence in its records that the beneficial owner is a United States Alien and certain other conditions are met, or the beneficial owner otherwise establishes an exemption. PLAN OF DISTRIBUTION We are making the exchange offer in reliance on the position of the staff of the Division of Corporation Finance of the SEC as defined in certain interpretive letters issued to third parties in other transactions. Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such exchange notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for original notes where such original notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period not to exceed 90 days after the exchange offer has been completed, we will make this prospectus, as amended or supplemented, available to any broker-dealer that reasonably requests such document for use in connection with any such resale. Broker dealers who acquired original notes directly from us may 52 not rely on the staff's interpretations and must comply with the registration and prospectus delivery requirements of the Securities Act, including being named as a selling security holder, in order to resell the original notes or the exchange notes. We will not receive any proceeds from any sale of exchange notes by broker-dealers. Exchange notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the exchange notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such exchange notes. Any broker-dealer that resells exchange notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of such exchange notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of exchange notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 90 days after the exchange offer has been completed, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such document in the letter of transmittal. We have agreed to pay certain expenses incident to the exchange offer, other than commission or concessions of any brokers or dealers, and will indemnify the holders of the exchange notes (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. By acceptance of this exchange offer, each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer agrees that, upon receipt of notice from us of the happening of any event which makes any statement in the prospectus untrue in any material respect or requires the making of any changes in the prospectus in order to make the statements therein not misleading (which notice we agree to deliver promptly to such broker-dealer), such broker-dealer will suspend use of the prospectus until we have amended or supplemented the prospectus to correct such misstatement or omission and have furnished copies of the amended or supplemental prospectus to such broker-dealer. LEGAL OPINIONS The validity of the exchange notes will be passed upon for us by James T. Foran, Esquire, Associate General Counsel of PSEG. The information contained in "Federal Income Tax Considerations" has been passed upon for us by Mr. Foran. EXPERTS The financial statements and the related financial statement schedule, incorporated in this prospectus by reference from the PSEG Power LLC Annual Report on Form 10-K for the year ended December 31, 2001 and the financial statements from which the Selected Financial Data included in this prospectus under the captions "Income Statement Data", "Balance Sheet Data", and Capital Expenditures under the caption "Other Data" for each of the five years in the period ended December 31, 2001 have been derived, have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is incorporated herein by reference and have been so incorporated and included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 53 ================================================================================ $600,000,000 [Logo] PSEG Power LLC Offer to Exchange $600,000,000 6.95% Senior Notes due 2012 Which have been registered under the Securities Act For Any and All Outstanding $600,000,000 6.95% Senior Notes due 2012 Which have not been so registered ================================================================================ Part II Information not required in Prospectus Item 20. Indemnification of Directors and Officers Article 18 of each registrant's limited liability agreement provides, as follows: o No Member, Officer, Director, employee or agent of the Company and no employee, representative, agent or Affiliate of the Member (collectively, the "Covered Persons") shall be liable to the Company or any other Person who has an interest in or claim against the Company for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Person's willful misconduct. Article 18 also provides as follows: o To the fullest extent permitted by applicable law, a Covered Person shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Covered Person by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Covered Person by reason of such Covered Person's willful misconduct with respect to such acts or omissions; provided, however, that any indemnity under this Section 18 shall be provided out of and to the extent of Company assets only, and no Member shall have personal liability on account thereof. The directors and officers of the registrants are insured under policies of insurance, within the limits and subject to the limitations of the policies, against claims made against them for acts in the discharge of their duties, and each registrant is insured to the extent that it is required or permitted by law to indemnify the directors and officers for such loss. The premiums for such insurance are paid by the respective registrant. Item 21. Exhibits and Financial Statement Schedules (a) Exhibits. Exhibit Number Description - ------- ----------- 3.1 -- Certificate of Formation of PSEG Power LLC.(1) 3.2 -- PSEG Power LLC Limited Liability Company Agreement.(1) 3.3 -- Certificate of Formation of PSEG Fossil LLC.(1) 3.4 -- PSEG Fossil LLC Limited Liability Company Agreement.(1) 3.5 -- Certificate of Formation of PSEG Nuclear LLC.(1) 3.6 -- PSEG Nuclear LLC Limited Liability Company Agreement.(1) 3.7 -- Certificate of Formation of PSEG Energy Resources & Trade LLC.(1) 3.8 -- PSEG Energy Resources & Trade LLC Limited Liability Company Agreement.(1) 4.1 -- Indenture dated April 16, 2001 between Registrants and The Bank of New York and form of Subsidiary Guaranty included therein.(1) 4.2 -- Registration Rights Agreement dated June 4, 2002 between Registrants and the purchasers named therein. 4.3 -- Form of 6.95% Exchange Note. 5 -- Opinion of James T. Foran, Esquire. 8 -- Opinion of James T. Foran, Esquire regarding tax matters. 10 -- Basic Generation Service Contract with PSE&G.(1) 12 -- Statement regarding computation of ratios of earnings. II-1 Exhibit Number Description - ------- ----------- 21 -- Subsidiaries of the Registrants.(1) 23.1 -- Consent of James T. Foran, Esquire (contained in Exhibits 5 and 8). 23.2 -- Independent Auditors' Consent. 24 -- Power of Attorney. 25 -- Statement of Eligibility of Trustee on Form T-1. 99.1 -- Form of Letter of Transmittal. 99.2 -- Form of Notice of Guaranteed Delivery. - ---------- (1) Previously filed as the respectively numbered exhibit with Registrant's Registration Statement on Form S-4, No. 333-69228, September 10, 2001 and incorporated herein by reference. Item 22. Undertakings Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. The undersigned registrants hereby undertake to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act. The undersigned registrants hereby undertake (a): 1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933. (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change in such information in the registration statement; provided, however, that the registrant need not file a post-effective amendment to include the information required to be included by subsection (a)(1)(i) or (a)(l)(ii) if such information is contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. 2. That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-2 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant, PSEG Fossil LLC, certifies that it has reasonable grounds to believe it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newark, State of New Jersey, on this 8th day of August, 2002. PSEG Fossil LLC By: /s/ Thomas R. Smith ------------------- Thomas R. Smith President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Thomas R. Smith Principal Executive August 8, 2002 - ------------------------------------------------ Officer, Principal Financial Thomas R. Smith Officer and Director /s/ Patricia A. Rado Principal Accounting Officer August 8, 2002 - ------------------------------------------------ Patricia A. Rado /s/ Frank Cassidy Director August 8, 2002 - ------------------------------------------------ Frank Cassidy /s/ Harold W. Keiser Director August 8, 2002 - ------------------------------------------------ Harold W. Keiser /s/ Steven R. Teitelman Director August 8, 2002 - ------------------------------------------------ Steven R. Teitelman
II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant, PSEG Nuclear LLC, certifies that it has reasonable grounds to believe it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newark, State of New Jersey, on this 8th day of August, 2002. PSEG Nuclear LLC By: /s/ Harold W. Keiser -------------------- Harold W. Keiser President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on the dates indicated.
Signature Title Date --------- ---- ---- /s/ Harold W. Keiser Principal Executive August 8, 2002 - ------------------------------------------------ Officer, Principal Financial Harold W. Keiser Officer and Director /s/ Patricia A. Rado Principal Accounting Officer August 8, 2002 - ------------------------------------------------ Patricia A. Rado /s/ Frank Cassidy Director August 8, 2002 - ------------------------------------------------ Frank Cassidy /s/ Thomas R. Smith Director August 8, 2002 - ------------------------------------------------ Thomas R. Smith /s/ Steven R. Teitelman Director August 8, 2002 - ------------------------------------------------ Steven R. Teitelman
II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant, PSEG Energy Resources & Trade LLC, certifies that it has reasonable grounds to believe it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newark, State of New Jersey, on this 8th day of August, 2002. PSEG Energy Resources & Trade LLC By: /s/ Steven R. Teitelman ----------------------------- Steven R. Teitelman President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ---- ---- /s/ Steven R. Teitelman Principal Executive August 8, 2002 - ------------------------------------------------ Officer, Principal Financial Steven R. Teitelman Officer and Director /s/ Patricia A. Rado Principal Accounting Officer August 8, 2002 - ------------------------------------------------ Patricia A. Rado /s/ Frank Cassidy Director August 8, 2002 - ------------------------------------------------ Frank Cassidy /s/ Harold W. Keiser Director August 8, 2002 - ------------------------------------------------ Harold W. Keiser /s/ Thomas R. Smith Director August 8, 2002 - ------------------------------------------------ Thomas R. Smith
II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant, PSEG Power LLC, certifies that it has reasonable grounds to believe it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Newark, State of New Jersey, on this 8th day of August, 2002. PSEG POWER LLC By: /s/ Frank Cassidy ----------------- Frank Cassidy President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ---- ---- /s/ E. James Ferland Principal Executive August 8 , 2002 - ------------------------------------------------ Officer, and Director E. James Ferland /s/ Thomas M. O'Flynn Principal Financial Officer August 8, 2002 - ------------------------------------------------ and Director Thomas M. O'Flynn /s/ Patricia A. Rado Principal Accounting Officer August 8, 2002 - ------------------------------------------------ Patricia A. Rado /s/ Robert E. Busch Director August 8, 2002 - ------------------------------------------------ Robert E. Busch /s/ Robert J. Dougherty Jr. Director August 8, 2002 - ------------------------------------------------ Robert J. Dougherty, Jr. /s/ Frank Cassidy Director August 8, 2002 - ------------------------------------------------ Frank Cassidy /s/ R. Edwin Selover Director August 8, 2002 - ------------------------------------------------ R. Edwin Selover /s/ Michael J. Thomson Director August 8, 2002 - ------------------------------------------------ Michael J. Thomson
II-6 Exhibit Index ------------- 3.1 -- Certificate of Formation of PSEG Power LLC.(1) 3.2 -- PSEG Power LLC Limited Liability Company Agreement.(1) 3.3 -- Certificate of Formation of PSEG Fossil LLC.(1) 3.4 -- PSEG Fossil LLC Limited Liability Company Agreement.(1) 3.5 -- Certificate of Formation of PSEG Nuclear LLC.(1) 3.6 -- PSEG Nuclear LLC Limited Liability Company Agreement.(1) 3.7 -- Certificate of Formation of PSEG Energy Resources & Trade LLC.(1) 3.8 -- PSEG Energy Resources & Trade LLC Limited Liability Company Agreement.(1) 4.1 -- Indenture dated April 16, 2001 between Registrants and The Bank of New York and form of Subsidiary Guaranty included therein.(1) 4.2 -- Registration Rights Agreement dated June 4, 2002 between Registrants and the purchasers named therein. 4.3 -- Form of 6.95% Exchange Note. 5 -- Opinion of James T. Foran, Esquire. 8 -- Opinion of James T. Foran, Esquire regarding tax matters. 10 -- Basic Generation Service Contract with PSE&G.(1) 12 -- Statement regarding computation of ratios of earnings. 21 -- Subsidiaries of the Registrants.(1) 23.1 -- Consent of James T. Foran, Esquire (contained in Exhibits 5 and 8). 23.2 -- Independent Auditors' Consent. 24 -- Power of Attorney. 25 -- Statement of Eligibility of Trustee on Form T-1. 99.1 -- Form of Letter of Transmittal. 99.2 -- Form of Notice of Guaranteed Delivery. EX-4.2 3 e13549ex4_2.txt REGISTRATION RIGHTS AGREEMENT Exhibit 4.2 PSEG Power LLC 6.95% Senior Notes Due June 1, 2012 -------------------- Registration Rights Agreement June 4, 2002 J.P. Morgan Securities Inc. Salomon Smith Barney Inc. Banc One Capital Markets, Inc. Scotia Capital (USA) Inc. First Union Securities, Inc. c/o J.P. Morgan Securities Inc. 270 Park Avenue New York, New York 10017 and c/o Salomon Smith Barney Inc. 388 Greenwich Street New York, New York 10013 Ladies and Gentlemen: THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into June 4, 2002, among PSEG POWER LLC, a Delaware limited liability company (the "Company"), PSEG NUCLEAR LLC, a Delaware limited liability company ("Nuclear"), PSEG FOSSIL LLC, a Delaware limited liability company ("Fossil"), PSEG ENERGY RESOURCES & TRADE LLC, a Delaware limited liability company ("ER&T"), and J.P. MORGAN SECURITIES INC., SALOMON SMITH BARNEY INC., BANC ONE CAPITAL MARKETS, INC., SCOTIA CAPITAL (USA) INC. and FIRST UNION SECURITIES, INC. (collectively, the "Initial Purchasers"). Nuclear, Fossil and ER&T are individually referred to herein as a "Guarantor" and collectively referred to herein as the "Guarantors," as the context requires. 1 This Agreement is made pursuant to the Purchase Agreement dated June 4, 2002, among the Company, as issuer of the Notes (as defined below), Nuclear, Fossil and ER&T, as Guarantors of the Notes, and the Initial Purchasers (the "Purchase Agreement"), which provides for, among other things, the sale by the Company to the Initial Purchasers of an aggregate of $600,000,000 principal amount of its 6.95% Senior Notes due June 1, 2012 (the "Notes"). Each of Nuclear, Fossil and ER&T will jointly and severally and unconditionally guarantee the payment of principal and interest and any make-whole premium on the Notes (each, a "Guarantee" and collectively, the "Guarantees"). The Notes and the Guarantees will be issued under an indenture, dated as of April 16, 2001 (the "Indenture"), among the Company, Nuclear, Fossil, ER&T, and The Bank of New York, a New York banking corporation, as Trustee (the "Trustee"). The Notes will be issued in accordance with terms set forth in resolutions adopted by the Company's Sale and Pricing Committee on June 4, 2002. In order to induce the Initial Purchasers to enter into the Purchase Agreement, the Company and each Guarantor has agreed to provide to the Initial Purchasers and their direct and indirect transferees the registration rights set forth in this Agreement. The execution of this Agreement is one of the conditions to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: 1. Definitions. As used in this Agreement, the following capitalized defined terms shall have the following meanings: "1933 Act" shall mean the Securities Act of 1933, as amended from time to time. "1934 Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Closing Date" shall mean the Closing Date as defined in the Purchase Agreement. "Company" shall have the meaning set forth in the preamble hereto and shall also include the Company's successors. "Effectiveness Period" shall have the meaning set forth in Section 2(b) hereof. "ER&T" shall have the meaning set forth in the preamble hereto and shall include ER&T's successors. "Exchange Offer" shall mean the exchange offer by the Company and each Guarantor of Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof. "Exchange Offer Registration" shall mean a registration under the 1933 Act effected pursuant to Section 2(a) hereof. 2 "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Exchange Securities" shall mean securities issued by the Company and the Guarantors under the Indenture containing terms identical to the Securities (except that (i) interest on the notes issued by the Company pursuant to the Exchange Offer shall accrue from the last date on which interest was paid on the Notes or, if no such interest has been paid on the Notes, from June 7, 2002, (ii) the Exchange Securities will not contain restrictions on transfer under the 1933 Act, and (iii) the Exchange Securities will not provide for any Special Interest Premium thereon) to be offered to Holders of Securities in exchange for Securities pursuant to the Exchange Offer. "Fossil" shall have the meaning set forth in the preamble hereto and shall include Fossil's successors. "Guarantee" and "Guarantees" shall have the meanings set forth in the preamble hereto. "Guarantor" and "Guarantors" shall have the meanings set forth in the preamble hereto. "Holder" shall mean the Initial Purchasers, for so long as they own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become registered owners of Registrable Securities under the Indenture; provided that for purposes of Sections 4 and 5 of this Agreement, the term "Holder" shall include Participating Broker-Dealers. "Indenture" shall have the meaning set forth in the preamble hereto and shall include any amendments or supplements thereto. "Initial Purchasers" shall have the meaning set forth in the preamble hereto. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of outstanding Notes; provided that whenever the consent or approval of Holders of a specified percentage of Notes is required hereunder, Notes held by the Company, its affiliates or any of its direct or indirect subsidiaries, including each Guarantor, shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount. "Notes" shall have the meaning set forth in the preamble hereto. "Nuclear" shall have the meaning set forth in the preamble hereto and shall include Nuclear's successors. 3 "Participating Broker-Dealer" shall have the meaning set forth in Section 4(a) hereof. "Person" shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including all material incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble hereto. "Registrable Securities" shall mean the Securities; provided, however, that the Securities shall cease to be Registrable Securities (i) when a Registration Statement with respect to such Securities shall have been declared effective under the 1933 Act and such Securities shall have been exchanged or disposed of pursuant to such Registration Statement, (ii) when such Securities have been sold to the public pursuant to Rule 144 (or any similar provision then in force, but not Rule 144A) under the 1933 Act or are eligible to be sold pursuant to Rule 144(k) under the 1933 Act, or (iii) when such Securities shall have ceased to be outstanding. "Registration Expenses" shall mean any and all expenses incident to the performance of or compliance by the Company and each Guarantor with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. registration and filing fees and expenses, including fees and disbursements of counsel for the Initial Purchasers or underwriters in connection with any such registration or filing, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any underwriters or Holders in connection with blue sky qualification of any of the Exchange Securities or Registrable Securities), (iii) all expenses of any Persons in preparing or assisting in preparing, word processing, printing and distributing any Registration Statement, any Prospectus, any amendments or supplements thereto, any underwriting agreements, securities sales agreements and other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) the fees and disbursements of the Trustee and its counsel and any exchange agent or custodian, (vi) the fees and disbursements of counsel for the Company and each Guarantor, and, in the case of a Shelf Registration Statement, the fees and disbursements of one counsel for the Holders (which counsel shall be selected by the Majority Holders and which counsel may also be counsel for the Initial Purchasers) and (vii) the fees and disbursements of the independent public accountants of the Company and each Guarantor, including the expenses of any special audits or "cold comfort" letters required by or incident to such performance and compliance, but excluding fees and expenses of counsel to the underwriters (other than fees and expenses set forth in clause (ii) above) or the Holders and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder. 4 "Registration Statement" shall mean any registration statement of the Company and the Guarantors that covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, including an Exchange Offer Registration Statement or a Shelf Registration Statement, and all amendments and supplements to any such Registration Statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission. "Securities" shall mean the Notes and the Guarantees. "Shelf Registration" shall mean a registration effected pursuant to Section 2(b) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company and the Guarantors pursuant to the provisions of Section 2(b) of this Agreement which covers all of the Registrable Securities (but no other securities unless approved by the Holders whose Registrable Securities are covered by such Shelf Registration Statement) on an appropriate form under Rule 415 under the 1933 Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. "Special Interest Premium" shall have the meaning set forth in Section 2(d) hereof. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. "Underwriter" shall have the meaning set forth in Section 3 hereof. "Underwritten Registration" or "Underwritten Offering" shall mean a registration in which Registrable Securities are sold to an Underwriter for reoffering to the public. 2. Registration Under the 1933 Act. (a) To the extent not prohibited by any applicable law or applicable interpretation of the staff of the SEC, the Company and the Guarantors shall use their best efforts to cause to be filed an Exchange Offer Registration Statement covering the offer by the Company and the Guarantors to the Holders to exchange all of the Registrable Securities for Exchange Securities and to have such Exchange Offer Registration Statement remain effective until the closing of the Exchange Offer. The Company and the Guarantors shall commence the Exchange Offer promptly after the Exchange Offer Registration Statement has been declared effective by the SEC and shall use their best efforts to have the Exchange Offer consummated not later than 225 days after the Closing Date. The Company and the Guarantors shall commence the Exchange Offer by mailing the related exchange offer Prospectus and accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law,: 5 (i) that the Exchange Offer is being made pursuant to this Agreement and that all Registrable Securities validly tendered will be accepted for exchange; (ii) the dates of acceptance for exchange (which shall be a period of at least 30 business days from the date such notice is mailed) (collectively, the "Exchange Dates"); (iii) that any Registrable Security not tendered will remain outstanding and Notes not tendered will continue to accrue interest, but that any Registrable Security not tendered will not retain any rights under this Agreement (except in the case of the Initial Purchasers and Participating Broker-Dealers as provided herein); (iv) that Holders electing to have a Registrable Security exchanged for an Exchange Security pursuant to the Exchange Offer will be required to surrender such Registrable Security, together with the enclosed letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in such notice prior to the close of business on the last Exchange Date; and (v) that Holders will be entitled to withdraw their election to exchange a Registrable Security for an Exchange Security, not later than the close of business on the last Exchange Date, by sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange and a statement that such Holder is withdrawing his election to have such Registrable Securities exchanged. As soon as practicable after the last Exchange Date, the Company and each Guarantor shall: (i) accept for exchange Registrable Securities or portions thereof tendered and not validly withdrawn under the Exchange Offer; and (ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange by the Company and the Guarantors and issue, and cause the Trustee to promptly authenticate and mail to each Holder, an Exchange Security equal in principal amount to the principal amount of the Notes surrendered by such Holder. The Company and the Guarantors shall use their best efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the 1933 Act, the 1934 Act and other applicable laws and regulations in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate applicable law or any applicable interpretation of the staff of the SEC. The Company shall inform the Initial Purchasers of the names and addresses of the Holders to whom the Exchange Offer is made, and the Initial Purchasers shall have the right, subject to applicable law, to contact such Holders and otherwise facilitate the tender of Registrable Securities in the Exchange Offer. (b) In the event that (i) the Company determines that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be consummated as 6 soon as practicable after the last Exchange Date because it would violate applicable law or the applicable interpretations of the staff of the SEC, (ii) the Exchange Offer is not for any other reason consummated by the 225th day after the Closing Date, (iii) the Exchange Offer has been completed and, in the opinion of counsel for the Initial Purchasers, a Registration Statement must be filed and a Prospectus must be delivered by the Initial Purchasers in connection with any offering or sale of Registrable Securities, (iv) any Registrable Securities validly tendered pursuant to the Exchange Offer are not exchanged for Exchange Securities within 10 days of being accepted in the Exchange Offer, (v) any Initial Purchaser so requests with respect to Registrable Securities that are not eligible to be exchanged in the Exchange Offer, (vi) the Exchange Offer is not available to any Holder, or (vii) any Holder of Registrable Securities that participates in the Exchange Offer does not receive freely transferable Exchange Securities in exchange for its Registrable Securities, the Company and the Guarantors shall use their best efforts to cause to be filed as soon as practicable after (but in no event more than 45 days after) such determination, date or notice of such opinion of counsel is given to the Company, as the case may be, a Shelf Registration Statement providing for the sale by the Holders of all of the Registrable Securities and to have such Shelf Registration Statement declared effective by the SEC. In the event the Company and the Guarantors are required to file a Shelf Registration Statement solely as a result of the matters referred to in clause (iii) of the preceding sentence, the Company and the Guarantors shall use their best efforts to file and have declared effective by the SEC both an Exchange Offer Registration Statement pursuant to Section 2(a) hereof with respect to all Registrable Securities and a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Securities held by the Initial Purchasers after completion of the Exchange Offer. The Company and the Guarantors agree to use their best efforts to keep the Shelf Registration Statement continuously effective for the lesser of two years from the Closing Date or until all of the Registrable Securities are eligible for resale pursuant to Rule 144 under the 1933 Act or such shorter period that will terminate when all of the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement (the "Effectiveness Period"). The Company and the Guarantors further agree to supplement or amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company and the Guarantors for such Shelf Registration Statement or by the 1933 Act or by any other rules and regulations thereunder for shelf registrations or if reasonably requested by a Holder with respect to information relating to such Holder, and to use their best efforts to cause any such amendment to become effective and such Shelf Registration Statement to become usable as soon as thereafter practicable. The Company and the Guarantors agree to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC. (c) The Company and the Guarantors shall pay all Registration Expenses in connection with the registration of Registrable Securities and/or Exchange Securities pursuant to Section 2(a) and Section 2(b) hereof. Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Shelf Registration Statement. (d) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC; provided, however, that, if, 7 after such Registration Statement has been declared effective, the offering of Registrable Securities pursuant to a Shelf Registration Statement is interfered with by any stop order, injunction or other order or requirement of the SEC or any other governmental agency or court, such Registration Statement will be deemed not to have become effective during the period of such interference until the offering of Registrable Securities pursuant to such Registration Statement may legally resume. In the event that (i) the Exchange Offer is not consummated or the Shelf Registration Statement is not declared effective by the SEC on or prior to the 225th day after the Closing Date, or (ii) the Shelf Registration Statement has been declared effective by the SEC but thereafter ceases to be effective without being succeeded within 45 days after the Shelf Registration Statement cease to be effective by an additional registration statement covering the Registrable Securities that is declared effective by the SEC, the interest rate on the Securities will be increased by .50% per annum (the "Special Interest Premium") until the Exchange Offer is consummated or the Shelf Registration Statement is declared effective or again becomes effective, as the case may be. All accrued Special Interest Premium shall be paid to the Holders in the same manner and on the same dates as interest is payable on the Notes. (e) Without limiting the remedies available to the Initial Purchasers and the Holders, the Company and each Guarantor acknowledge that any failure by the Company or any Guarantor to comply with their obligations under Section 2(a) or Section 2(b) hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the obligations of the Company and each Guarantor under Section 2(a) or Section 2(b) hereof. 3. Registration Procedures. In connection with the obligations of the Company and each Guarantor with respect to the Registration Statements under Section 2(a) and Section 2(b) hereof, the Company and each Guarantor shall as expeditiously as possible: (a) prepare and file with the SEC a Registration Statement on the appropriate form under the 1933 Act, which form (x) shall be selected by the Company and the Guarantors and (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof, and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, and use their best efforts to cause such Registration Statement to become effective and remain effective in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period and cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the 1933 Act; to keep each Prospectus current during the period described under Section 4(3) of the 1933 Act and Rule 174 under the 1933 Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities or Exchange Securities; 8 (c) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, to counsel for the Initial Purchasers, to counsel for the Holders and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as many copies of each Prospectus, including each preliminary Prospectus, and any amendment or supplement thereto, and such other documents as such Holder or Underwriter may reasonably request, in order to facilitate the public sale or other disposition of the Registrable Securities; and the Company and the Guarantors consent to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Securities and any such Underwriters in connection with the offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law; (d) use their best efforts to register or qualify the Registrable Securities under all applicable state securities or "blue sky" laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC, to cooperate with such Holders in connection with any filings required to be made with the National Association of Securities Dealers, Inc. and do any and all other acts and things which may be reasonably necessary or advisable to enable such Holder to consummate the disposition in each such jurisdiction of such Registrable Securities owned by such Holder; provided, however, that the Company and each Guarantor shall not be required to (i) qualify as a foreign corporation or as a dealer in securities in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (ii) file any general consent to service of process, or (iii) subject itself to taxation in any such jurisdiction if it is not already so subject to taxation; (e) in the case of a Shelf Registration, notify each Holder of Registrable Securities, counsel for the Holders and counsel for the Initial Purchasers promptly and, if requested by any such Holder or counsel, confirm such advice in writing (i) when a Registration Statement has become effective and when any post-effective amendment thereto has been filed with the SEC and becomes effective, (ii) of any request by the SEC or any state securities authority for amendments or supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company or any Guarantor contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to the offering of Registrable Securities cease to be true and correct in all material respects or if the Company or any Guarantor receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (v) of the happening of any event during the period a Shelf Registration Statement is effective which makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or which requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading and (vi) of any determination by the Company or any Guarantor that a post-effective amendment to a Registration Statement would be appropriate; 9 (f) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment and provide immediate notice to each Holder of the withdrawal of any such order; (g) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested); (h) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and enable such Registrable Securities to be in such denominations (consistent with the provisions of the Indenture) and registered in such names as the selling Holders may reasonably request at least one business day prior to the closing of any sale of Registrable Securities; (i) in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(e)(v) hereof, use their best efforts to prepare and file with the SEC a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company and the Guarantors agree to notify the Holders to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and the Holders hereby agree to suspend use of the Prospectus until the Company and the Guarantors have amended or supplemented the Prospectus to correct such misstatement or omission; (j) a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus after the initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, the Holders and their counsel) and make such of the representatives of the Company and the Guarantors as shall be reasonably requested by the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their counsel) available for discussion of such document, and shall not at any time file or make any amendment to the Registration Statement, any Prospectus or any amendment of or supplement to a Registration Statement or a Prospectus or any document which is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, the Holders and their counsel) shall not have previously been advised and furnished a copy or to which the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their counsel) shall object; (k) obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of the applicable Registration Statement; 10 (l) cause the Indenture to continue to be qualified under the Trust Indenture Act of 1939, as amended (the "TIA"), in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be, cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to continue to be so qualified in accordance with the terms of the TIA and execute, and use their best efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to continue to be so qualified; (m) in the case of a Shelf Registration, make available for inspection by a representative of the Holders of the Registrable Securities, any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, all financial and other records, pertinent documents and properties of the Company and the Guarantors, and cause the respective officers, directors and employees of the Company and the Guarantors to supply all information reasonably requested by any such representative, Underwriter, attorney or accountant in connection with a Shelf Registration Statement; (n) in the case of a Shelf Registration, use their best efforts to cause all Registrable Securities to be listed on any securities exchange or any automated quotation system on which similar securities issued by the Company and the Guarantors are then listed if requested by the Majority Holders, to the extent such Registrable Securities satisfy applicable listing requirements; (o) use their best efforts to cause the Exchange Securities or Registrable Securities, as the case may be, to be rated by at least two nationally recognized statistical rating organizations (as such term is defined in Rule 436(g)(2) under the 1933 Act); (p) if reasonably requested by any Holder of Registrable Securities covered by a Registration Statement, (i) promptly incorporate in a Prospectus supplement or post-effective amendment to a Registration Statement such information with respect to such Holder as such Holder reasonably requests to be included therein and (ii) make all required filings of such Prospectus supplement or such post-effective amendment as soon as the Company or any Guarantor has received notification of the matters to be incorporated in such filing; and (q) in the case of a Shelf Registration, enter into such customary agreements and take all such other actions in connection therewith (including those requested by the Holders of a majority of the aggregate principal amount of Notes being sold) in order to expedite or facilitate the disposition of such Registrable Securities including, but not limited to, an Underwritten Offering and in such connection, (i) to the extent possible, make such representations and warranties to the Holders and any Underwriters of such Registrable Securities with respect to the business of the Company and the Guarantors and their direct and indirect subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed to be incorporated by reference therein, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested, (ii) obtain opinions of counsel to the Company and the Guarantors (which counsel and opinions, in form, scope and substance, shall be reasonably 11 satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Securities, covering the matters customarily covered in opinions requested in underwritten offerings, (iii) obtain "cold comfort" letters from the independent certified public accountants of the Company and the Guarantors (and, if necessary, any other certified public accountant of any subsidiary of the Company or any Subsidiary of any Guarantor, or of any business acquired by the Company and the Guarantors for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder and Underwriter of Registrable Securities, such letters to be in customary form and covering matters of the type customarily covered in "cold comfort" letters in connection with underwritten offerings, and (iv) deliver such documents and certificates as may be reasonably requested by the Holders of a majority of the aggregate principal amount of the Notes being sold or the Underwriters, and which are customarily delivered in underwritten offerings, to evidence the continued validity of the representations and warranties of the Company and the Guarantors made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in an underwriting agreement. In the case of a Shelf Registration Statement, the Company and the Guarantors may require each Holder of Registrable Securities to furnish to the Company and the Guarantors such information regarding the Holder and the proposed distribution by such Holder of such Registrable Securities as the Company and the Guarantors may from time to time reasonably request in writing. In the case of a Shelf Registration Statement, each Holder agrees that, upon receipt of any notice from the Company or any Guarantor of the happening of any event of the kind described in Section 3(e)(v) hereof, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(j) hereof, and, if so directed by the Company or any Guarantor, such Holder will deliver to the Company and the Guarantors (at its expense) all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. If the Company or any Guarantor shall give any such notice to suspend the disposition of Registrable Securities pursuant to a Registration Statement, the Company and the Guarantors shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. The Company and the Guarantors may give any such notice only twice during any 365 day period and any such suspensions may not exceed 30 days for each suspension and there may not be more than two suspensions in effect during any 365 day period. The Holders of Registrable Securities covered by a Shelf Registration Statement who desire to do so may sell such Registrable Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers (collectively, the "Underwriters") that will administer the offering will be selected by the Majority Holders of the Registrable Securities included in such offering. 12 4. Participation of Broker-Dealers in Exchange Offer. (a) The staff of the SEC has taken the position that any broker-dealer that receives Exchange Securities for its own account in the Exchange Offer in exchange for Securities that were acquired by such broker-dealer as a result of market-making or other trading activities (a "Participating Broker-Dealer"), may be deemed to be an "underwriter" within the meaning of the 1933 Act and must deliver a prospectus meeting the requirements of the 1933 Act in connection with any resale of such Exchange Securities. The Company and the Guarantors understand that it is the staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Securities, without naming the Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the 1933 Act in connection with resales of Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the 1933 Act. (b) In light of the above, notwithstanding the other provisions of this Agreement, the Company and the Guarantors agree that the provisions of this Agreement as they relate to a Shelf Registration shall also apply to an Exchange Offer Registration to the extent, and with such reasonable modifications thereto as may be, reasonably requested by the Initial Purchasers or by one or more Participating Broker-Dealers, in each case as provided in clause (ii) below, in order to expedite or facilitate the disposition of any Exchange Securities by Participating Broker-Dealers consistent with the positions of the staff recited in Section 4(a) above; provided that: (i) the Company and the Guarantors shall not be required to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(j) hereof, for a period exceeding 90 days after the last Exchange Date (as such period may be extended pursuant to the penultimate paragraph of Section 3 of this Agreement) and Participating Broker-Dealers shall not be authorized by the Company and the Guarantors to deliver and shall not deliver such Prospectus after such period in connection with resales of Exchange Securities contemplated by this Section 4; and (ii) the application of the Shelf Registration procedures set forth in Section 3 of this Agreement to an Exchange Offer Registration, to the extent not required by the positions of the staff of the SEC or the 1933 Act and the rules and regulations thereunder, will be in conformity with the reasonable request to the Company and the Guarantors by the Initial Purchasers or with the reasonable request in writing to the Company and the Guarantors by one or more broker-dealers who certify to the Initial Purchasers, the Company and the Guarantors in writing that they anticipate that they will be Participating Broker-Dealers; and provided further that, in connection with such application of the Shelf Registration procedures set forth in Section 3 hereof to an Exchange Offer Registration, the Company shall be obligated (x) to deal only with one entity representing the Participating Broker-Dealers, which shall be Salomon Smith Barney Inc. unless it elects not to act as such representative, (y) to pay the fees and expenses of only one counsel representing the Participating Broker-Dealers, which shall be 13 counsel to the Initial Purchasers unless such counsel elects not to so act, and (z) to cause to be delivered only one, if any, "cold comfort" letter with respect to the Prospectus in the form existing on the last Exchange Date and with respect to each subsequent amendment or supplement, if any, effected during the period specified in clause (i) above. (c) The Initial Purchasers shall have no liability to the Company, the Guarantors or any Holder with respect to any request that they may make pursuant to Section 4(b) above. 5. Indemnification and Contribution. (a) The Company and each of the Guarantors, jointly and severally, agree to indemnify and hold harmless the Initial Purchasers, each Holder and each Person, if any, who controls any Initial Purchaser or any Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, or is under common control with, or is controlled by, any Initial Purchaser or any Holder, from and against all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred by the Initial Purchaser, any Holder or any such controlling or affiliated Person in connection with defending or investigating any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (or any amendment thereto) pursuant to which Exchange Securities or Registrable Securities were registered under the 1933 Act, including all documents incorporated therein by reference, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or caused by any untrue statement or alleged untrue statement of a material fact contained in any Prospectus (as amended or supplemented if the Company or any Guarantor shall have furnished any amendments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in light of the circumstances under which they were made not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to the Initial Purchasers or any Holder furnished to the Company and the Guarantors in writing through Salomon Smith Barney Inc. or any selling Holder expressly for use therein. In connection with any Underwritten Offering permitted by Section 3 hereof, the Company and each of the Guarantors will also indemnify the Underwriters, if any, selling brokers, dealers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of the 1933 Act and the 1934 Act) to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection with any Registration Statement. (b) Each Holder agrees, severally and not jointly, to indemnify and hold harmless the Company and each of the Guarantors, the Initial Purchasers and the other selling Holders, and each of their respective directors, officers who sign the Registration Statement and each Person, if any, who controls the Company or any Guarantor, any Initial Purchaser and any other selling Holder within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing indemnity from the Company and each of the Guarantors to the Initial Purchasers and the Holders, but only with reference to information relating to such Holder furnished to the Company or any Guarantor in writing by such Holder expressly for use 14 in any Registration Statement (or any amendment thereto) or any Prospectus (or any amendment or supplement thereto). (c) In case any proceeding (including any governmental investigation) shall be instituted involving any Person in respect of which indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above, such Person (the "indemnified party") shall promptly notify the Person against whom such indemnity may be sought (the "indemnifying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to represent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the same jurisdiction, be liable for (a) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Initial Purchasers and all Persons, if any, who control any Initial Purchaser within the meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and expenses of more than one separate firm (in addition to any local counsel) for the Company and the Guarantors, their directors, their officers who sign the Registration Statement and each Person, if any, who controls the Company or any Guarantor within the meaning of either such Section and (c) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Holders and all Persons, if any, who control any Holders within the meaning of either such Section, and that all such fees and expenses shall be reimbursed as they are incurred. In such case involving the Initial Purchasers and Persons who control the Initial Purchasers, such firm shall be designated in writing by Salomon Smith Barney Inc. In such case involving the Holders and such Persons who control Holders, such firm shall be designated in writing by the Majority Holders. In all other cases, such firm shall be designated by the Company and the Guarantors. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but, if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the second and third sentences of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request, and (ii) such indemnifying party shall not have reimbursed the indemnified party for such fees and expenses of counsel in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceeding in respect of which such indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement 15 includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) If the indemnification provided for in paragraph (a) or paragraph (b) of this Section 5 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities in such proportion as is appropriate to reflect the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company, a Guarantor and the Holders shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, a Guarantor or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Holders' respective obligations to contribute pursuant to this Section 5(d) are several in proportion to the respective principal amount of Registrable Securities of such Holder that were registered pursuant to a Registration Statement. (e) The Company, each of the Guarantors and each Holder agree that it would not be just or equitable if contribution pursuant to this Section 5 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5, no Holder shall be required to indemnify or contribute any amount in excess of the amount by which the total price at which Registrable Securities were sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. 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. The remedies provided for in this Section 5 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. The indemnity and contribution provisions contained in this Section 5 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Initial Purchasers, any Holder or any Person controlling any Initial Purchaser or any Holder, or by or on behalf of the Company or any Guarantor, their officers or directors or any Person controlling either the Company or any Guarantor, (iii) acceptance of any of the Exchange Securities and (iv) any sale of Registrable Securities pursuant to a Shelf Registration Statement. 16 6. Miscellaneous. (a) No Inconsistent Agreements. The Company and each of the Guarantors have not entered into, and on or after the date of this Agreement will not enter into, any agreement which is inconsistent with the rights granted to the Holders of Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's or any Guarantor's other issued and outstanding securities under any such agreements. (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company and the Guarantors have obtained the written consent of Holders of at least a majority of the aggregate principal amount of the outstanding Notes affected by such amendment, modification, supplement, waiver or consent; provided, however, that no amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 5 hereof shall be effective as against any Holder of Registrable Securities unless consented to in writing by such Holder. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder, at the most current address given by such Holder to the Company and the Guarantors by means of a notice given in accordance with the provisions of this Section 6(c), which address initially is, with respect to the Initial Purchasers, the address set forth in the Purchase Agreement; and (ii) if to the Company and the Guarantors, initially at the address for the Company and each Guarantor set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 6(c). All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next business day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands, or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture. (d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement. If any transferee of any Holder shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, 17 and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. The Initial Purchasers (in their capacity as Initial Purchasers) shall have no liability or obligation to the Company or any Guarantor with respect to any failure by a Holder to comply with, or any breach by any Holder of, any of the obligations of such Holder under this Agreement. (e) Third Party Beneficiary. Each Holder and any Participating Broker-Dealer shall be third party beneficiaries to the agreements made hereunder among the Company, the Guarantors, and the Initial Purchasers, and the Initial Purchasers shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of Holders hereunder. (f) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (g) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. (i) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. 18 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. PSEG Power LLC By: /s/ Morton A. Plawner ------------------------------------------------- Name: Morton A. Plawner Title: Vice President and Treasurer PSEG Nuclear LLC By: /s/ Morton A. Plawner ------------------------------------------------- Name: Morton A. Plawner Title: Vice President and Treasurer PSEG Fossil LLC By: /s/ Morton A. Plawner ------------------------------------------------- Name: Morton A. Plawner Title: Vice President and Treasurer PSEG Energy Resources & Trade LLC By: /s/ Morton A. Plawner ------------------------------------------------- Name: Morton A. Plawner Title: Vice President and Treasurer 19 Confirmed and accepted as of the date first above written: J.P. MORGAN SECURITIES INC. SALOMON SMITH BARNEY INC. BANC ONE CAPITAL MARKETS, INC. SCOTIA CAPITAL (USA) INC. FIRST UNION SECURITIES, INC. By: J.P. MORGAN SECURITIES INC. By: /s/ Maria Sramek ---------------------------------------- Name: Maria Sramek Title: Vice President By: SALOMON SMITH BARNEY INC. By: /s/ Yukari Saegusa ---------------------------------------- Name: Yukari Saegusa Title: Vice President 20 EX-4.3 4 e13549ex4_3.txt GLOBAL NOTE EXHIBIT 4.3 GLOBAL NOTE UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) (THE "DEPOSITORY") TO PSEG POWER LLC OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND SUCH CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO., or such other name as requested by an authorized representative of the Depository, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL, since the registered owner hereof, CEDE & CO., has an interest herein. UNLESS AND UNTIL THIS CERTIFICATE IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR OF THE DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR. CUSIP NO. 69362BAK8 $[Principal Amount] No. R-1 PSEG POWER LLC 6.95% Senior Note due 2012 GLOBAL NOTE PSEG POWER LLC, a Delaware limited liability company (herein referred to as the "Company," which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of $[Principal Amount] (or such lesser amount as shall be the outstanding principal amount of this Global Note shown in Schedule A hereto) on June 1, 2012 (the "Stated Maturity Date"), unless redeemed in accordance with the provisions of this Global Note, and to pay interest on the outstanding principal amount of this Global Note from June 7, 2002, semi-annually in arrears on June 1 and December 1 of each year, commencing December 1, 2002 (each, an "Interest Payment Date") at 6.95% per annum until the principal hereof is paid or duly provided for. Interest payable on each Interest Payment Date will include interest accrued from and including June 7, 2002 or from and including the most recent Interest Payment Date to 2 which interest has been paid or duly provided for, as the case may be, to but excluding such Interest Payment Date. Interest will be computed based on a 360-day year consisting of twelve 30-day months. Each of Nuclear, Fossil and ER&T has jointly, severally and unconditionally, guaranteed the payment of principal, premium, if any, and interest with respect to this Global Note. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, except as provided below, be paid to the person (the "Holder") in whose name this Global Note (or one or more Predecessor Notes) is registered at the close of business on the fifteenth day (whether or not a Business Day (as defined below)) immediately preceding the applicable Interest Payment Date (a "Regular Record Date"). Any such interest not so punctually paid or duly provided for ("Defaulted Interest") will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the person in whose name this Global Note (or one or more Predecessor Notes) is registered at the close of business on a special record date (the "Special Record Date") for the payment of such Defaulted Interest to be fixed by the Trustee hereinafter referred to, notice whereof shall be given to the Holder of this Global Note not less than ten days prior to such Special Record Date, or may be paid at any time in any other lawful manner, all as more fully provided in the Indenture. For purposes of this Global Note, "Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in Newark, New Jersey and The City of New York are authorized or obligated by law or executive order to close. Payments of principal, premium, if any, and interest with respect to this Global Note will be made in such coin or currency of the United States of America as at the time of payment is legal tender for the payment of pubic and private debts. Payment of the principal of and any premium on this Global Note on the Stated Maturity Date or date of earlier redemption will be made in immediately available funds against presentation of this Global Note at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York. Payments of interest on an Interest Payment Date will be made, at the option of the Company, by check mailed to the Holder entitled thereto at the applicable address appearing in the Security Register or by transfer of immediately available funds to an account maintained by the payee with a bank located in the United States of America; provided, however, that so long as Cede & Co. is the Holder of this Global Note, payments of interest on an Interest Payment Date will be made in immediately available funds. Any payment of principal, premium or interest required to be made with respect to this Global Note on a day that is not a Business Day need not be made on such day, but may be made on the next succeeding Business Day with the same force and effect as if made on such day and no additional interest shall be payable on the next succeeding Business Day as a result of such delayed payment. General. This Global Note is one of the duly authorized series of securities of the Company (the "Securities"), issued or to be issued under the Indenture, dated as of April 16, 2001, among The Bank of New York, as trustee (the "Trustee"), the Company, Fossil, Nuclear 3 and ER&T (together with all supplements thereto, the "Indenture"), to which Indenture reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, Fossil, Nuclear, ER&T, the Trustee and each of the holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered and transferred. The Notes will be limited to $600,000,000 aggregate principal amount, except as permitted in the Indenture, and will be subject, without the consent of the holders of any series of Securities under the Indenture, to the issuance of additional Notes in the future having the same terms, other than the date of original issuance and the date on which interest begins to accrue, so as to form one series with the Notes. All terms used in this Global Note which are not defined herein shall have the meanings given to them in the Indenture. Guarantee of ER&T Obligations; Payment of Dividends by ER&T to the Company. The provisions of Section 1009 of the Indenture relating to the guarantee of the Obligations of ER&T by the Company and the provisions of Section 1010 of the Indenture relating to the payment of dividends by ER&T to the Company shall apply to this Global Note. Events of Default. If an Event of Default with respect to the Notes shall have occurred and be continuing, the principal of the Notes may be declared due and payable in the manner and with the effect provided in the Indenture. Redemption. This Global Note (or portion thereof) will be redeemable at the option of the Company, in whole or in part at any time, on at least 30 days but not more than 60 days prior written notice mailed to the Holder hereof, at a price the (the "Redemption Price") equal to the greater of (i) 100% of the principal amount of this Global Note (or portion thereof) to be redeemed, or (ii) the sum, as determined by the Calculation Agent (as defined below), of the present values of the principal amount of this Global Note (or portion thereof) to be redeemed and the remaining scheduled payments of interest thereon from the date of redemption (the "Redemption Date") to June 1, 2012 (the "Remaining Life"), discounted from their respective payment dates to the Redemption Date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus 30 basis points, plus, in either case, unpaid interest thereon accrued to the Redemption Date. If money sufficient to pay the Redemption Price of this Global Note (or portion hereof) to be redeemed on a Redemption Date is deposited with the Trustee or a Paying Agent on or before such Redemption Date and certain other conditions are satisfied, then on and after such Redemption Date, interest will cease to accrue on this Global Note (or such portion hereof) called for redemption. This Global Note will not be entitled to the benefit of, or be subject to, any sinking fund. Certain Definitions. "Comparable Treasury Issue" means, with respect to any redemption Date for this Global Note (or portion hereof) to be redeemed, the United States Treasury security selected by the Independent Investment Banker (as defined below) as having the maturity comparable to the Remaining Life of this Global Note (or portion hereof) to be redeemed that would be utilized, at the time of selection and in accordance with customary 4 financial practice, in pricing new issues of corporate debt securities of comparable maturity with the Remaining Life of this Global Note (or portion hereof) to be redeemed. "Calculation Agent" means The Bank of New York or such successor Calculation Agent as is appointed by the Company. "Comparable Treasury Price" means, with respect to any Redemption Date for this Global Note (or portion hereof) to be redeemed, (a) the average of four Reference Treasury Dealer Quotations (as defined below) for the Redemption Date for this Global Note (or portion hereof) to be redeemed, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, obtained by the Calculation Agent, or, (b) if the Calculation Agent obtains fewer than four Reference Treasury Dealer Quotations, the average of all such quotations. "Independent Investment Banker" means the Reference Treasury Dealer appointed by the Trustee after consultation with the Company. "Reference Treasury Dealer" means each of four primary U.S. Government securities dealers in New York City selected by the Trustee in consultation with the Company and initially will include J.P. Morgan Securities Inc. and Salomon Smith Barney Inc. If any Reference Treasury Dealer ceases to be a primary U.S. government securities dealer, the Trustee will substitute another primary U.S. government securities dealer for that dealer. "Reference Treasury Dealer Quotations" means, with respect to each Reference Treasury Dealer and any Redemption Date, the average, as determined by the Calculation Agent, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Calculation Agent by such Reference Treasury Dealer at 5:00 p.m., New York City time, on the third Business Day preceding such Redemption Date. "Treasury Rate" means, with respect to any Redemption Date: (a) the yield for the maturity corresponding to the Comparable Treasury Issue, under the heading that represents the average for the immediately preceding week appearing in the most recently published statistical release designated "H.15(519)" or any successor publication that is published weekly by the Board of Governors of the Federal Reserve System and that establishes yields on actively traded United States Treasury securities adjusted to constant maturity under the caption "Treasury Constant Maturities," provided, that if no maturity is within three months before or after the Stated Maturity Date, the yields for the two published maturities most closely corresponding to the Comparable Treasury Issue will be determined and the Treasury Rate shall be interpolated or extrapolated from those yields on a straight line basis, rounding to the nearest month; or (b) if the release referred to in clause (a) (or any successor release) is not published during the week preceding the calculation date or does not contain the yields referred to above, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date. The Treasury Rate will be calculated on the third Business Day preceding the Redemption Date. Reports. So long as this Global Note remains Outstanding, the Company will file with the Trustee, within 30 days of filing them with the Securities and Exchange Commission (the 5 "SEC"), copies of the current, quarterly and annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) that the Company is required to file with the SEC pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the Company is not subject to the requirements of Section 13 or Section 15(d) of the Exchange Act and this Global Note remains Outstanding, the Company must nevertheless file with the SEC (if permitted) and the Trustee, on the date upon which the Company would have been required to file with the SEC, current, quarterly and annual financial statements, including any notes thereto (and with respect to annual reports, an auditor's report by a firm of established national reputation, upon which the Trustee may conclusively rely), and a "Management's Discussion and Analysis of Financial Condition and Results of Operations," both comparable to that which the Company would have been required to include in such current, quarterly and annual reports, information, documents or other reports on Forms 8-K, 10-Q and 10-K if the Company was subject to the requirements of Section 13 or 15(d) of the Exchange Act; provided that the Company will not be required to register under the Exchange Act by virtue of this provision, if not otherwise required to do so. Modification and Waivers; Obligations of the Company Absolute. The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and each Guarantor and the rights of the Holders of the Securities of each series. Such amendment may be effected under the Indenture at any time by the Company, each Guarantor and the Trustee with the consent of the Holders of a majority in aggregate principal amount of all Securities issued under the Indenture at the time Outstanding and affected thereby. The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all Outstanding Securities, to waive compliance by the Company with certain provisions of the Indenture. Furthermore, provisions in the Indenture permit the Holders of a majority in aggregate principal amount of the Outstanding Securities of an individual series, to waive, on behalf of all of the Holders of Securities of such individual series, certain past defaults under the Indenture and their consequences. Any such consent or waiver shall be conclusive and binding upon the Holder of this Global Note and upon all future Holders of this Global Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not notation of such consent or waiver is made upon this Note. No reference herein to the Indenture and no provision of this Global Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal, premium, if any, and interest with respect to this Global Note at the times, place and rate, and in the coin or currency herein prescribed. Defeasance and Covenant Defeasance. The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Company on this Global Note and (b) certain restrictive covenants and the related defaults and Events of Default, upon compliance by the Company with certain conditions set forth in the Indenture, which provisions apply to this Global Note. Authorized Denominations. The Notes are issuable only in registered form without coupons in minimum denominations of $1,000 and integral multiples in excess thereof. 6 Registration of Transfer or Exchange of this Global Note. As provided in the Indenture and subject to certain limitations herein and therein set forth, the transfer of this Global Note is registrable in the Security Register upon surrender of this Global Note for registration of transfer at the office or agency of the Company in any place where the principal of (and premium, if any) and interest on this Global Note are payable, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Global Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees. As provided in the Indenture and subject to certain limitations herein and therein set forth, the Global Notes are exchangeable for a like aggregate principal amount of Global Notes of different authorized denominations, as requested by the Holders surrendering the same. This Global Note is a Global Security within the meaning of the Indenture. If The Depository Trust Company is at any time unwilling, unable or ineligible to continue as depository and a successor depository is not appointed by the Company within 90 days or an Event of Default under the Indenture has occurred and is continuing, the Company will issue Notes in certificated form in exchange for this Global Security. In addition, the Company may at any time determine not to have Notes represented by one or more Global Securities and, in such event, will issue Notes in certificated form in exchange in whole for this Global Security. In any such instance, an owner of a beneficial interest in this Global Note will receive Notes in certificated form equal in principal amount to such beneficial interest and to have such Notes registered in its name. Notes so issued in certificated form will be issued in denominations of $1,000 and integral multiples in excess thereof and will be issued in registered form only, without coupons. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Prior to due presentment of this Global Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Holder of this Global Note as the owner hereof for all purposes, whether or not this Global Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary. Interests in this Global Note are exchangeable or transferable in whole or in part for interests in the Temporary Regulation S Global Note or Regulation S Global Note, in each case of the same series, only if such exchange or transfer complies with the Indenture. Governing Law. This Global Note shall be governed by and construed in accordance with the law of the State of New York. 7 Unless the certificate of authentication hereon has been executed by the Trustee by manual signature, this Global Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose. IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed under its facsimile corporate seal. Dated: , 2002 PSEG POWER LLC By: ----------------------------------- Vice President and Treasurer Attest: ------------------------------- Assistant Secretary TRUSTEE'S CERTIFICATE OF AUTHENTICATION This is one of the Securities of the series designated therein referred to in the within-mentioned Indenture. THE BANK OF NEW YORK, as Trustee Dated: __________________ By: ----------------------------------- Authorized Signatory 8 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Insert assignee's soc. sec. or tax I.D. No.) (Print or type assignee's name, address and zip code) and irrevocably appoint ______________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. Dated:______________________________ Signed:_______________________________ _______________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee:____________________________________________________________ Dated:______________________________ Signed:_______________________________ _______________________________ (Sign exactly as your name appears on the other side of this Security) Signature Guarantee:____________________________________________________________ SCHEDULE A SCHEDULE OF EXCHANGES The following exchanges of Notes for Notes represented by this Global Note have been made:
=============================================================================================== Change in Principal Principal Amount of this Principal amount of this Global Note amount of this Notation made Global Note as Date exchange due to Global Note by or on behalf of , 2002 made exchange due to exchange of the Company - ----------------------------------------------------------------------------------------------- $[Principal Amount] - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- ===============================================================================================
EX-5 5 e13549ex_5.txt OPINION OF COUNSEL Exhibit 5 August 8, 2002 PSEG Power LLC 80 Park Plaza Newark, NJ 07101 RE: PSEG Power LLC Registration Statement on Form S-4 $600,000,000 6.95% Senior Notes due 2012 Ladies and Gentlemen: I am Associate General Counsel of Public Service Enterprise Group Incorporated and in that capacity have acted as counsel for its wholly-owned subsidiaries, PSEG Power LLC (the "Company"), PSEG Fossil LLC ("Fossil"), PSEG Nuclear LLC ("Nuclear") and PSEG Energy Resources & Trade LLC ("ER&T"), each a Delaware limited liability company), in connection with their preparation of a Registration Statement on Form S-4, to be filed with the Securities and Exchange Commission (the "Commission") under the Securities Act of 1933, as amended (the "Act"), relating to an offer (the "Exchange Offer") to exchange up to $600,000,000 aggregate principal amount of the Company's 6.95% Senior Notes due 2012 (the "Exchange Notes") for a like principal amount of its outstanding 6.95% Senior Notes due 2012 (the "Original Notes") under an indenture dated as of April 16, 2001 (the "Indenture") between and among the Company, Fossil, Nuclear, ER&T and The Bank of New York as Trustee (the "Trustee"). In connection with this opinion, I, or members of my staff, have examined such documents and records as I have deemed necessary or appropriate as a basis for the opinion set forth herein. In such examination, I have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to me as originals, the conformity to original documents of all documents submitted to me as certified, conformed or photostatic copies and the authenticity of the originals of such latter documents. In making such examination of documents, I have assumed that the parties thereto, other than the Company, Fossil, Nuclear and ER&T, had the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action corporate or other and execution and delivery by such parties of such documents and the validity and binding effect thereof on such parties. My opinion set forth herein is limited to the laws of the State of New Jersey and federal laws of the United States. I do not express any opinion with respect to the law of any other jurisdiction or the securities or blue sky laws of any state. Based upon and subject to the foregoing and the limitations, qualifications, exceptions and assumptions set forth herein, I am of the opinion that when (a) the Exchange Notes have been duly executed and authenticated in accordance with the terms of the Indenture and delivered upon consummation of the Exchange Offer against receipt of the Original Notes surrendered in exchange therefore in accordance with the terms of the Exchange Offer and (b) the Registration Statement shall have become effective under the Act and the Indenture shall have been qualified under the Trust Indenture Act of 1939, as amended, the Exchange Notes will constitute valid and binding obligations of the Company entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except to the extent the enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereinafter in effect relating to creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity). I hereby consent to the filing of this opinion as Exhibit 5 to the Registration Statement. I also consent to the reference to me under the caption "Legal Opinions" in the Registration Statement. Very truly yours, /s/ James T. Foran ------------------------- James T. Foran Associate General Counsel 2 EX-8 6 e13549ex_8.txt OPINION RE: TAX MATTERS Exhibit 8 August 8, 2002 PSEG Power LLC 80 Park Plaza Newark, NJ 07101 RE: PSEG Power LLC Exchange Offer for $600,000,000 6.95% Senior Notes due 2012 Certain Federal Income Tax Considerations Ladies and Gentlemen: I am Associate General Counsel of Public Service Enterprise Group Incorporated and in that capacity have acted as counsel for its wholly-owned subsidiaries, PSEG Power LLC (the "Company"), PSEG Fossil LLC ("Fossil"), PSEG Nuclear LLC ("Nuclear") and PSEG Energy Resources & Trade LLC ("ER&T"), each a Delaware limited liability company, in connection with their preparation of a Registration Statement on Form S-4 (the "Registration Statement), which is being filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"), relating to an offer (the "Exchange Offer") to exchange up to $600,000,000 aggregate principal amount of the Company's 6.95% Senior Notes due 2012 (the "Exchange Notes") for a like principal amount of its outstanding 6.95% Senior Notes due 2012 (the "Original Notes") under an indenture dated as of April 16, 2001 (the "Indenture") between and among the Company, Fossil, Nuclear, ER&T and The Bank of New York as Trustee (the "Trustee"). I, or members of my staff, have reviewed a copy of the Registration Statement and such other documents as I have deemed necessary or appropriate as a basis for the opinions set forth below. Based on the foregoing, I am of the opinion that if the offer and sale of the Exchange Notes are conducted in the manner described in the Prospectus and if the terms of the Exchange Notes are as contemplated by the Registration Statement, then the exchange of the Original Notes for Exchange Notes pursuant to the Exchange Offer will not constitute a significant modification of the terms of the Original Notes and, therefore, such exchange will not constitute an exchange for federal income tax purposes and will have no federal income tax consequences to holders of the Original Notes. The opinion expressed herein is based upon existing statutory, regulatory, and judicial authority, any of which may be changed at any time with retroactive effect. In addition, my opinion is based solely on the documents that I have examined, the authenticity of which I assume, such other information as I have deemed necessary or appropriate. My opinion cannot be relied upon if any of the facts contained in such documents or information is, or later becomes, inaccurate. Finally, my opinion is limited to the tax matters specifically covered herein, and I have not been asked to address, nor have I addressed, any other tax consequences of the Exchange Offer. I hereby consent to the filing of this opinion as Exhibit 8 to the Registration Statement. I also consent to the reference to me under the captions "Federal Income Tax Considerations" and "Legal Opinions" in the Registration Statement. Very truly yours, /s/ James T. Foran ------------------------- James T. Foran Associate General Counsel 2 EX-12 7 e13549ex_12.txt COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12 PSEG POWER LLC COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Six Months Ended June 30, Years Ended December 31, ---------------- ---------------------------------------------- 2002 2001 2001 2000 1999 1998 1997 ------ ------ ------ ------ ------ ------ ------ Earnings as Defined in Regulation S-K (A): Income Pre-Tax from Continuing Operations $ 344 $ 346 $ 644 $ 521 $ 807 $ 393 $ 296 Fixed Charges 100 116 213 212 132 256 269 Capitalized Interest (43) (24) (63) (14) (3) (7) (9) ----- ----- ----- ----- ----- ----- ----- Earnings $ 401 $ 438 $ 794 $ 719 $ 936 $ 642 $ 556 ===== ===== ===== ===== ===== ===== ===== Fixed Charges as Defined in Regulation S-K (B): Interest Expense $ 99 $ 113 $ 206 $ 212 $ 115 $ 223 $ 232 Interest Factor in Rentals 1 3 7 -- -- -- -- Subsidiaries' Preferred Securities Dividend Requirements -- -- -- -- 12 25 26 Preferred Stock Dividends -- -- -- -- 3 5 7 Adjustment to Preferred Stock Dividends to state on a pre-income tax basis -- -- -- -- 2 3 4 ----- ----- ----- ----- ----- ----- ----- Total Fixed Charges $ 100 $ 116 $ 213 $ 212 $ 132 $ 256 $ 269 ===== ===== ===== ===== ===== ===== ===== Ratio of Earnings to Fixed Charges 4.01 3.78 3.73 3.39 7.09 2.51 2.07 ===== ===== ===== ===== ===== ===== =====
(A) The term "earnings" shall be defined as pretax income from continuing operations. Add to pretax income the amount of fixed charges adjusted to exclude the amount of any interest capitalized during the period. (B) Fixed Charges represent (a) interest, whether expensed or capitalized, (b) amortization of debt discount, premium and expense and (c) an estimate of interest implicit in rentals. EX-23.2 8 e13549ex23_2.txt INDEPENDENT AUDITOR'S CONSENT Exhibit 23.2 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in this Registration Statement of PSEG Power LLC (the "Company"), PSEG Fossil LLC, PSEG Nuclear LLC and PSEG Energy Resources & Trade LLC on Form S-4 of our report dated February 15, 2002, appearing in the Annual Report on Form 10-K of the Company for the year ended December 31, 2001, and to the reference to us under the heading "Experts" in the Prospectus which is part of this Registration Statement. DELOITTE & TOUCHE LLP Parsippany, New Jersey August 8, 2002 EX-24 9 e13549ex_24.txt POWER OF ATTORNEY Exhibit 24 POWER OF ATTORNEY The undersigned hereby constitutes and appoints Thomas M. O'Flynn, the agent for service named in this Registration Statement on Form S-4, and James T. Foran, Esq. as attorney-in-fact and agent for and on behalf of the undersigned and in the undersigned's name, place and stead in the undersigned's capacity as a Director and /or Officer of the Registrants, PSEG Power LLC ("Power"), PSEG Nuclear LLC, PSEG Fossil LLC and PSEG Energy Resources & Trade LLC, to sign the Registration Statement to be filed with the Securities and Exchange Commission for the registration under the Securities Act of $600,000,000 aggregate principal amount of Power's Senior Notes due 2012 and any and all additional amendments, including post-effective amendments to this Registration Statement. IN WITNESS WHEREOF, each of the undersigned has executed this instrument as of the th day of July, 2002. /s/ E. JAMES FERLAND /s/ FRANK CASSIDY - -------------------------------- ------------------------------- E. James Ferland Frank Cassidy /s/ ROBERT E. BUSCH /s/ ROBERT J. DOUGHERTY, JR. - -------------------------------- ------------------------------- Robert E. Busch Robert J. Dougherty, Jr. /s/ THOMAS M. O'FLYNN /s/ R. EDWIN SELOVER - -------------------------------- ------------------------------- Thomas M. O'Flynn R. Edwin Selover /s/ MICHAEL J. THOMSON /s/ HAROLD W. KEISER - -------------------------------- ------------------------------- Michael J. Thomson Harold W. Keiser /s/ THOMAS R. SMITH /s/ STEVEN R. TEITELMAN - -------------------------------- ------------------------------- Thomas R. Smith Steven R. Teitelman /s/ PATRICIA A. RADO - -------------------------------- Patricia A. Rado EX-25 10 e13549ex_25.txt FORM T-1 Exhibit 25 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |__| ---------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) One Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ---------- PSEG Power LLC (Exact name of obligor as specified in its charter) Delaware 22-3663480 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) PSEG Fossil LLC (Exact name of obligor as specified in its charter) Delaware 22-3663481 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) PSEG Nuclear LLC (Exact name of obligor as specified in its charter) Delaware 22-3663482 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) PSEG Energy Resources & Trade LLC (Exact name of obligor as specified in its charter) Delaware 22-3663483 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 80 Park Plaza-T25 Newark, New Jersey 07102 (Address of principal executive offices) (Zip code) ---------- 6.95% Senior Notes due 2012 (Title of the indenture securities) ================================================================================ -2- 1. General information. Furnish the following information as to the Trustee: (a) Name and address of each examining or supervising authority to which it is subject. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006, State of New York and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) Whether it is authorized to exercise corporate trust powers. Yes. 2. Affiliations with Obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. None. 16. List of Exhibits. Exhibits identified in parentheses below, on file with the Commission, are incorporated herein by reference as an exhibit hereto, pursuant to Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 2nd day of August, 2002. THE BANK OF NEW YORK By: /s/ STACEY POINDEXTER -------------------------- Name: STACEY POINDEXTER Title: ASSISTANT TREASURER -4- Exhibit 7 - -------------------------------------------------------------------------------- Consolidated Report of Condition of THE BANK OF NEW YORK of One Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 2002, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act. Dollar Amounts ASSETS In Thousands Cash and balances due from depository institutions: Noninterest-bearing balances and currency and coin ........ $ 3,765,462 Interest-bearing balances ................................. 3,835,061 Securities: Held-to-maturity securities ............................... 1,232,736 Available-for-sale securities ............................. 10,522,833 Federal funds sold and Securities purchased under agreements to resell ...................................... 1,456,635 Loans and lease financing receivables: Loans and leases held for sale ............................ 801,505 Loans and leases, net of unearned income .................................................. 46,206,726 LESS: Allowance for loan and lease losses ............................................ 607,115 Loans and leases, net of unearned income and allowance .................................... 35,249,695 Trading Assets ............................................... 8,132,696 Premises and fixed assets (including capitalized leases) ................................................... 898,980 Other real estate owned ...................................... 911 Investments in unconsolidated subsidiaries and associated companies ...................................... 220,609 Customers' liability to this bank on acceptances outstanding ............................................... 574,020 Intangible assets Goodwill .................................................. 1,714,761 Other intangible assets ................................... 49,213 Other assets ................................................. 5,001,308 ------------ Total assets ................................................. $ 73,954,859 ============ Dollar Amounts In Thousands LIABILITIES Deposits: In domestic offices ....................................... $ 29,175,631 Noninterest-bearing ....................................... 11,070,277 Interest-bearing .......................................... 18,105,354 In foreign offices, Edge and Agreement subsidiaries, and IBFs .................................. 24,596,600 Noninterest-bearing ....................................... 321,299 Interest-bearing .......................................... 24,275,301 Federal funds purchased and securities sold under agreements to repurchase .................................. 1,922,197 Trading liabilities .......................................... 1,970,040 Other borrowed money: (includes mortgage indebtedness and obligations under capitalized leases) ................................. 1,577,518 Bank's liability on acceptances executed and outstanding ............................................... 575,362 Subordinated notes and debentures ............................ 1,940,000 Other liabilities ............................................ 5,317,831 ------------ Total liabilities ............................................ $ 67,075,179 ============ EQUITY CAPITAL Common stock ................................................. 1,135,284 Surplus ...................................................... 1,055,508 Retained earnings ............................................ 4,227,287 Accumulated other comprehensive income ....................... (38,602) Other equity capital components .............................. 0 Total equity capital ......................................... 6,379,477 ------------ Total liabilities and equity capital ......................... $ 73,954,859 ============ I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Thomas J. Mastro, Senior Vice President and Comptroller We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. - Thomas A. Renyi | Gerald L. Hassell | Directors Alan R. Griffith | - - -------------------------------------------------------------------------------- EX-99.1 11 e13549ex99_1.txt LETTER OF TRANSMITTAL Exhibit 99.1 LETTER OF TRANSMITTAL PSEG POWER LLC OFFER TO EXCHANGE ITS 6.95% SENIOR NOTES DUE 2012, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, FOR ANY AND ALL OUTSTANDING 6.95% SENIOR NOTES DUE 2012, WHICH HAVE NOT BEEN SO REGISTERED. PURSUANT TO THE PROSPECTUS DATED , 2002 THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN DAYLIGHT TIME, ON , 2002, UNLESS THE OFFER IS EXTENDED. To: THE BANK OF NEW YORK, Exchange Agent
Facsimile Transmissions: By Hand Or Overnight Delivery: (Eligible Institutions Only) By Registered Or Certified Mail: The Bank of New York The Bank of New York 101 Barclay Street (212) 298-1915 101 Barclay Street, 7th Floor, East Corporate Trust Services Window New York, New York, 10286 Ground Level Attention: Ms. Diane Amoroso New York, NY 10286 Reorganization Section Attention: Ms. Diane Amoroso Reorganization Section To Confirm by Telephone or for Information Call: (212) 815-3798
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. Certain terms used but not defined herein shall have the same meaning given them in the Prospectus (as defined below). This Letter of Transmittal is to be completed by holders of Original Notes (as defined below) either if Original Notes are to be forwarded herewith or if tenders of Original Notes are to be made by book-entry transfer to an account maintained by The Bank of New York (the "Exchange Agent") at The Depository Trust Company ("DTC") pursuant to the procedures set forth in "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus. Holders of Original Notes whose certificates (the "Certificates") for such Original Notes are not immediately available or who cannot deliver their Certificates and all other required documents to the Exchange Agent on or prior to the expiration date (as defined in the Prospectus) or who cannot complete the procedures for book-entry transfer on a timely basis must tender their Original Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY ALL TENDERING HOLDERS COMPLETE THIS BOX: DESCRIPTION OF ORIGINAL NOTES
Please print Name and Address Please Show Principal Amount Principal Amount of Registered Holder Certificate Number(s) of of Original Notes (Need not be Original Notes Tendered (if Completed by Tendered Principal Amount Book-Entry Holders) (Attach of Original Notes additional list is Less than All)* if needed) - ---------------------------------------------------------------------------------------------------------- TOTAL
* All Original Notes held shall be deemed tendered unless a lesser number is specified in this column. (BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY) [ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution:_______________________________________ DTC Account Number:__________________________________________________ Transaction Code Number:_____________________________________________ [ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name of Registered Holders(s):_______________________________________ Window Ticket Number (if any):_______________________________________ Date of Execution of Notice of Guaranteed Delivery:__________________ Name of Institution which Guaranteed Delivery:_______________________ If Guaranteed Delivery is to be made By Book-Entry Transfer:_________ Tendering Institution: DTC Account Number:___________________________ Transaction Code Number:_____________________________________________ [ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED ORIGINAL NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE. [n] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE ORIGINAL NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES ("PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name:________________________________________________________________ Address:_____________________________________________________________ To: The Bank of New York Ladies and Gentlemen: The undersigned hereby tenders to PSEG Power LLC, a limited liability company formed under the laws of the State of Delaware ("Power"), the above described aggregate principal amount of Power's 6.95% Senior Notes due 2012 (the "Original Notes") in exchange for a like aggregate principal amount of Power's 6.95% Senior Notes due 2012 (the "Exchange Notes") which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), upon the terms and subject to the conditions set forth in the Prospectus dated , 2002 (as the same may be amended or supplemented from time to time, the "Prospectus"), receipt of which is acknowledged, and in this Letter of Transmittal (which, together with the Prospectus, constitute the "Exchange Offer"). Subject to and effective upon the acceptance for exchange of all or any portion of the Original Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to or upon the order of Power all right, title and interest in and to such Original Notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its agent and attorney-in-fact (with full knowledge that the Exchange Agent is also acting as agent of Power in connection with the Exchange Offer) with respect to the tendered Original Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), subject only to the right of withdrawal described in the Prospectus, to (i) deliver Certificates for Original Notes to Power together with all accompanying evidences of transfer and authenticity to, or upon the order of, Power, upon receipt by the Exchange Agent, as the undersigned's agent, of the Exchange Notes to be issued in exchange for such Original Notes, (ii) present Certificates for such Original Notes for transfer, and to transfer the Original Notes on the books of Power, and (iii) receive for the account of Power all benefits and otherwise exercise all rights of beneficial ownership of such Original Notes, all in accordance with the terms and conditions of the Exchange Offer. THE UNDERSIGNED HEREBY REPRESENT(S) AND WARRANT(S) THAT THE UNDERSIGNED HAS FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE ORIGINAL NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, POWER WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE ORIGINAL NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY POWER OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE ORIGINAL NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE EXCHANGE AND REGISTRATION RIGHTS AGREEMENT DATED April 9, 2001 (THE "REGISTRATION RIGHTS AGREEMENT"). THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER. The name(s) and address(es) of the registered holder(s) of the Original Notes tendered hereby should be printed above, if they are not already set forth above, as they appear on the Certificates representing such Original Notes. The Certificate number(s) and the Original Notes that the undersigned wishes to tender should be indicated in the appropriate boxes above. If any tendered Original Notes are not exchanged pursuant to the Exchange Offer for any reason, or if Certificates are submitted for more Original Notes than are tendered or accepted for exchange, Certificates for such nonexchanged or nontendered Original Notes will be returned (or, in the case of Original Notes tendered by book-entry transfer, such Original Notes will be credited to an account maintained at DTC), without expense to the tendering holder, promptly following the expiration or termination of the Exchange Offer. The undersigned understands that tenders of Original Notes pursuant to any one of the procedures described in "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus and in the instructions hereto will, upon Power's acceptance for exchange of such tendered Original Notes, constitute a binding agreement among the undersigned and Power upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under certain circumstances set forth in the Prospectus, Power may not be required to accept for exchange any of the Original Notes tendered hereby. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions," below, the undersigned hereby directs that the Exchange Notes be issued in the name(s) of the undersigned or, in the case of a book-entry transfer of Original Notes, that such Exchange Notes be credited to the account indicated above maintained at DTC. If applicable, substitute Certificates representing Original Notes not exchanged or not accepted for exchange will be issued to the undersigned or, in the case of a book-entry transfer of Original Notes, will be credited to the account indicated above maintained at DTC. Similarly, unless otherwise indicated under "Special Delivery Instructions," please deliver Exchange Notes to the undersigned at the address shown below the undersigned's signature. BY TENDERING ORIGINAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL OR BY DELIVERING AN AGENT'S MESSAGE IN LIEU THEREOF, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN "AFFILIATE" OF POWER WITHIN THE MEANING OF RULE 405 UNDER THE SECURITIES ACT, (II) ANY EXCHANGE NOTES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH EXCHANGE NOTES, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER-DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH EXCHANGE NOTES. BY TENDERING ORIGINAL NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A HOLDER OF ORIGINAL NOTES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT (A) SUCH ORIGINAL NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR (B) SUCH ORIGINAL NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH EXCHANGE NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT). POWER HAS AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS DEFINED BELOW) IN CONNECTION WITH RESALES OF EXCHANGE NOTES RECEIVED IN EXCHANGE FOR ORIGINAL NOTES, WHERE SUCH ORIGINAL NOTES WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES. IN THAT REGARD, EACH BROKER-DEALER WHO ACQUIRED ORIGINAL NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER"), BY TENDERING SUCH ORIGINAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL OR BY DELIVERING AN AGENT'S MESSAGE IN LIEU THEREOF, AGREES THAT, UPON RECEIPT OF NOTICE FROM POWER OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF (I) ANY FACT WHICH MAKES ANY STATEMENT CONTAINED IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR (II) ANY FACT WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING OR (III) OF THE OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF EXCHANGE NOTES PURSUANT TO THE PROSPECTUS UNTIL POWER HAS AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF THE AMENDED OR -7- SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR POWER HAS GIVEN NOTICE THAT THE SALE OF THE EXCHANGE NOTES MAY BE RESUMED, AS THE CASE MAY BE. Holders of Original Notes whose Original Notes are accepted for exchange will not receive accrued interest on such Original Notes for any period from and after the last interest payment date to which interest has been paid or duly provided for on such Original Notes prior to the original issue date of the Exchange Notes or, if no such interest has been paid or duly provided for, will not receive any accrued interest on such Original Notes, and the undersigned waives the right to receive any interest on such Original Notes accrued from and after such interest payment date or, if no such interest has been paid or duly provided for, from and after June 7, 2002. All authority herein conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, legal representatives, successors and assigns of the undersigned. Except as stated in the Prospectus, this tender is irrevocable. Please be advised that Power is making the Exchange Offer in reliance upon the position of the staff of the Division of Corporation Finance of the Securities and Exchange Commission set forth in certain interpretive letters addressed to third parties in other transactions. In addition, Power has authorized us to inform you as follows: Power has not entered into any arrangement or understanding with any person to distribute the Exchange Notes to be received in the Exchange Offer and, to the best of its information and belief, each person participating in the Exchange Offer is acquiring the Exchange Notes in its ordinary course of business and has no arrangement or understanding with any person to participate in the distribution of the Exchange Notes to be received in the Exchange Offer. In this regard, Power will make each person participating in the Exchange Offer aware that if such person is participating in the Exchange Offer for the purpose of distributing the Exchange Notes to be acquired in the Exchange Offer, such person (a) could not rely on the staff position enunciated in the interpretative letters referred to above and (b) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Power acknowledges that such a secondary resale transaction by such person participating in the Exchange Offer for the purpose of distributing the Exchange Notes should be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K. Furthermore, Power will include in the transmittal letter to be executed by an exchange offeree in order to participate in the Exchange Offer (x) an acknowledgment that if such exchange offeree is a broker-dealer that will receive Exchange Notes for its own account in exchange for Original Notes that were acquired as a result of market-making activities or other trading activities, it will deliver a prospectus in connection with any resale of such Exchange Notes and (y) a statement that by so acknowledging and by delivering a prospectus, such exchange offeree will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF ORIGINAL NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE ORIGINAL NOTES AS SET FORTH IN SUCH BOX. HOLDER(S) SIGN HERE (SEE INSTRUCTIONS 2, 5 AND 6) (NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2) - -------------------------------------------------------------------------------- (Signature(s) of Holder(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Dated: _____________, 2002. Must be signed by registered holder(s) exactly as name(s) appear(s) on Certificate(s) for the Original Notes hereby tendered or on a security position listing, or by any person(s) authorized to become the registered holder(s) by endorsements and documents transmitted herewith (including such opinions of counsel, certifications and other information as may be required by Power for the Original Notes to comply with the restrictions on transfer applicable to the Original Notes). If signature is by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary capacity or representative capacity, please set forth the signer's full title. See Instruction 5. Name(s): _______________________________________________________________________ ________________________________________________________________________________ (Please Print) Capacity (full title): _________________________________________________________ Address: _______________________________________________________________________ (Include Zip Code) Area Code and Telephone Number: ________________________________________________ Tax ID Number:__________________________________________________________________ GUARANTEE OF SIGNATURE(S) (see instructions 2 and 5) Authorized Signature ___________________________________________________________ Date: ___________________, 2001 Name of Firm: __________________________________________________________________ (Please Print) Capacity (full title): _________________________________________________________ Address: _______________________________________________________________________ (Include Zip Code) Area Code and Telephone Number: ________________________________________________ SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 1, 5, and 6) To be completed ONLY if the Exchange Notes or Original Notes not tendered are to be issued in the name of someone other than the registered holder of the Original Notes whose name(s) appear(s) above. Issue [ ] Original Notes not tendered to: [ ] Exchange Notes to: Name(s):__________________________________________ ____________________________________________________ ____________________________________________________ Address: _________________________________________ ____________________________________________________ (Include Zip Code) Area Code and Telephone Number: __________________________________ Tax ID Number: ___________________________________ SPECIAL DELIVERY INSTRUCTIONS (See Instructions 1, 5, and 6) To be completed ONLY if the Exchange Notes or Original Notes not tendered are to be sent to someone other than the registered holder of the Original Notes whose name(s) appear(s) above. Mail [ ] Original Notes not tendered to: [ ] Exchange Notes to: Name(s):__________________________________________ ____________________________________________________ ____________________________________________________ Address: _________________________________________ ____________________________________________________ ____________________________________________________ (Include Zip Code) Area Code and Telephone Number: __________________________________ Tax ID Number: ___________________________________ INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer 1. Delivery of Letter of Transmittal and Certificates; Guaranteed Delivery Procedures. This Letter of Transmittal is to be completed either if (a) Certificates are to be forwarded herewith or (b) tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth in "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus and an Agent's Message is not delivered. Certificates, or timely confirmation of a book-entry transfer of such Original Notes into the Exchange Agent's account at DTC, as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at any of its addresses set forth herein on or prior to the Expiration Date. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter of Transmittal. The term "Agent's Message" means a message, transmitted by DTC to and received by the Exchange Agent and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the DTC participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal (including the representations contained herein) and that Power may enforce the Letter of Transmittal against such participant. Original Notes may be tendered in whole or in part in minimum denominations of $1,000 and integral multiples in excess thereof. Holders who wish to tender their Original Notes and (i) whose Original Notes are not immediately available or (ii) who cannot deliver their Original Notes, this Letter of Transmittal and all other required documents to the Exchange Agent on or prior to the Expiration Date or (iii) who cannot complete the procedures for delivery by book-entry transfer on a timely basis, may tender their Original Notes by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus. Pursuant to such procedures: (A) such tender must be made by or through an Eligible Institution (as defined below); (B) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Power, must be received by the Exchange Agent on or prior to the expiration date; and (C) the Certificates (or a book-entry confirmation (as defined in the Prospectus)) representing all tendered Original Notes, in proper form for transfer, together with a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent within three New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile or mail to the Exchange Agent, and must include a guarantee by an Eligible Institution in the form set forth in such Notice. For Original Notes to be properly tendered pursuant to the guaranteed delivery procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration Date. As used herein and in the Prospectus, "Eligible Institution" means a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as an "Eligible Guarantor Institution," including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer; (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association. THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Power will not accept any alternative, conditional or contingent tenders. Each tendering holder, by execution of a Letter of Transmittal (or facsimile thereof), waives any right to receive any notice of the acceptance of such tender. 2. Guarantee of Signatures. No signature guarantee on this Letter of Transmittal is required if: (i) this Letter of Transmittal is signed by the registered holder (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of the Original Notes) of Original Notes tendered herewith, unless such holder(s) has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above, or (ii) such Original Notes are tendered for the account of a firm that is an Eligible Institution. In all other cases, an Eligible Institution must guarantee the signature(s) on this Letter of Transmittal. See Instruction 5. 3. Inadequate Space. If the space provided in the box captioned "Description of Original Notes" is inadequate, the Certificate number(s) and/or the principal amount of Original Notes and any other required information should be listed on a separate signed schedule which is attached to this Letter of Transmittal. 4. Partial Tenders and Withdrawal Rights. If less than all the Original Notes evidenced by any Certificate submitted are to be tendered, fill in the principal amount of Original Notes which are to be tendered in the box entitled "Principal Amount of Original Notes Tendered (if Principal Amount of Original Notes is Less than All)." In such case, new Certificate(s) for the remainder of the Original Notes that were evidenced by your old Certificate(s) will be sent in accordance with the issuance and delivery instructions received promptly after the expiration date. All Original Notes represented by Certificates delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. Except as otherwise provided herein, tenders of Original Notes may be withdrawn at any time on or prior to the expiration date. In order for a withdrawal to be effective on or prior to that time, a written, telegraphic, telex or facsimile transmission of such notice of withdrawal must be timely received by the Exchange Agent at any of its addresses set forth above or in the Prospectus on or prior to the expiration date. Any such notice of withdrawal must specify the name of the person who tendered the Original Notes to be withdrawn, the aggregate principal amount of Original Notes to be withdrawn, and (if Certificates for Original Notes have been tendered) the name of the registered holder of the Original Notes as set forth on the Certificate for the Original Notes, if different from that of the person who tendered such Original Notes. If Certificates for the Original Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such Certificates for the Original Notes, the tendering holder must submit the serial numbers shown on the particular Certificates for the Original Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Original Notes tendered for the account of an Eligible Institution. If Original Notes have been tendered pursuant to the procedures for book-entry transfer set forth in the Prospectus under "The Exchange Offer -- Procedures for Tendering Original Notes," the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of Original Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of Original Notes may not be rescinded. Original Notes properly withdrawn will not be deemed validly tendered for purposes of the Exchange Offer, but may be retendered at any subsequent time on or prior to the expiration date by following any of the procedures described in the Prospectus under "The Exchange Offer -- Procedures for Tendering Original Notes." All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by Power, in its sole discretion, whose determination shall be final and binding on all parties. Power, any affiliates or assigns of Power, the Exchange Agent or any other person shall not be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Original Notes which have been tendered but which are withdrawn will be returned to the holder thereof without cost to such holder promptly after withdrawal. 5. Signatures on Letter of Transmittal, Assignments and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Original Notes tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the Certificate(s) without alteration, enlargement or any change whatsoever. If any of the Original Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Original Notes are registered in different name(s) on several Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles thereof) as there are different registrations of Certificates. If this Letter of Transmittal or any Certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and must submit proper evidence satisfactory to Power, in its sole discretion, of such persons' authority to so act. When this Letter of Transmittal is signed by the registered owner(s) of the Original Notes listed and transmitted hereby, no endorsement(s) of Certificate(s) or separate bond power(s) are required unless Exchange Notes are to be issued in the name of a person other than the registered holder(s). Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Original Notes listed, the Certificates must be endorsed or accompanied by appropriate bond powers, signed exactly as the name or names of the registered owner(s) appear(s) on the Certificates, and also must be accompanied by such opinions of counsel, certifications and other information as Power may require in accordance with the restrictions on transfer applicable to the Original Notes. Signatures on such Certificates or bond powers must be guaranteed by an Eligible Institution. 6. Special Issuance and Delivery Instructions. If Exchange Notes are to be issued in the name of a person other than the signer of this Letter of Transmittal, or if Exchange Notes are to be sent to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Certificates for Original Notes not exchanged will be returned by mail or, if tendered by book-entry transfer, by crediting the account indicated above maintained at DTC. See Instruction 4. 7. Irregularities. Power will determine, in its sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Original Notes, which determination shall be final and binding on all parties. Power reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance of which, or exchange for, may, in the view of counsel to Power, be unlawful, and Power also reserves the right to waive any conditions or irregularities in any tender of Original Notes of any particular holder whether or not similar conditions or irregularities are waived in the case of other holders. Power's interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of Original Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Power, any affiliates or assigns of Power, the Exchange Agent, or any other person shall not be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification. 8. Questions, Requests for Assistance and Additional Copies. Questions and requests for assistance may be directed to the Exchange Agent at any of its addresses and telephone number set forth on the front of this Letter of Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the Letter of Transmittal may be obtained from the Exchange Agent or from your broker, dealer, commercial bank, trust company or other nominee. 9. Backup Withholding; Substitute Form W-9. Under U.S. Federal income tax law, a holder whose tendered Original Notes are accepted for exchange is required to provide the Exchange Agent with such holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If the Exchange Agent is not provided with the correct TIN, the Internal Revenue Service (the "IRS") may subject the holder or other payee to a $50 penalty. In addition, payments to such holders or other payees with respect to Original Notes exchanged pursuant to the Exchange Offer may be subject to backup withholding. The box in Part 2 of the Substitute Form W-9 may be checked if the tendering holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 2 is checked, the holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 2 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Exchange Agent will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Exchange Agent. The Exchange Agent will retain such amounts withheld during the 60 day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent with its TIN within 60 days after the date of the Substitute Form W-9, the amounts retained during the 60 day period will be remitted to the holder and no further amounts shall be retained or withheld from payments made to the holder thereafter. If, however, the holder has not provided the Exchange Agent with its TIN within such 60 day period, amounts withheld will be remitted to the IRS as backup withholding. In addition, 31% of all payments made thereafter will be withheld and remitted to the IRS until a correct TIN is provided. The holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the registered owner of the Original Notes or of the last transferee appearing on the transfers attached to, or endorsed on, the Original Notes. If the Original Notes are registered in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. Certain holders (including, among others, corporations, financial institutions and certain foreign persons) may not be subject to these backup withholding and reporting requirements. Such holders should nevertheless complete the attached Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid possible erroneous backup withholding. A foreign person may qualify as an exempt recipient by submitting a properly completed IRS Form W-8, signed under penalties of perjury, attesting to that holder's exempt status. Please consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which holders are exempt from backup withholding. Backup withholding is not an additional U.S. Federal income tax. Rather, the U.S. Federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. 10. No Conditional Tenders. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Original Notes, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of Original Notes for exchange. Neither Power, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Original Notes nor shall any of them incur any liability for failure to give any such notice. 11. Lost, Destroyed or Stolen Certificates. If any Certificate(s) representing Original Notes have been lost, destroyed or stolen, the holder should promptly notify the Exchange Agent. The holder will then be instructed as to the steps that must be taken in order to replace the Certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen Certificate(s) have been followed. 12. SECURITY TRANSFER TAXES. Holders who tender their Original Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, Exchange Notes are to be delivered to, or are to be issued in the name of, any person other than the registered holder of the Original Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Original Notes in connection with the Exchange Offer, then the amount of any such transfer tax (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. Important: This Letter of Transmittal (or facsimile thereof) and all other required documents must be received by the exchange Agent on or prior to the Expiration Date. SUBSTITUTE FORM W-9 Department of the Treasury Internal Revenue Service Payor's Request for Taxpayer Identification Number (TIN) and Certification (TO BE COMPLETED BY ALL TENDERING SECURITY HOLDERS) (SEE INSTRUCTION 9) PAYOR'S NAME: THE BANK OF NEW YORK PART 1-- PLEASE PROVIDE YOUR TIN: _________________ TIN IN THE BOX AT RIGHT AND Social Security Number CERTIFY BY SIGNING AND or Employer DATING BELOW Identification Number PART 2-- Awaiting TIN n PART 3 -- CERTIFICATION -- UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me), (2) I am not subject to backup withholding either because (i) I am exempt from backup withholding, (ii) I have not been notified by the internal revenue service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the irs has notified me that I am no longer subject to backup withholding, and (3) any other information provided on this form is true and correct. Signature: _______________________ Date _____________________ You must cross out item (2) in Part 3 above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all payments made to me on account of the Exchange Notes shall be retained until I provide a taxpayer identification number to the Exchange Agent and that, if I do not provide my taxpayer identification number within 60 days, such retained amounts shall be remitted to the Internal Revenue Service as backup withholding and 31% of all reportable payments made to me thereafter will be withheld and remitted to the Internal Revenue Service until I provide a taxpayer identification number. Signature: ______________________________________ Date: __________________, 2002 NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. EX-99.2 12 e13549ex99_2.txt NOTICE OF GUARANTEE DELIVERY Exhibit 99.2 NOTICE OF GUARANTEED DELIVERY PSEG POWER LLC OFFER TO EXCHANGE ITS 6.95% SENIOR NOTES DUE 2012 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 FOR ANY AND ALL OUTSTANDING 6.95% SENIOR NOTES DUE 2012, WHICH HAVE NOT BEEN SO REGISTERED. PURSUANT TO THE PROSPECTUS DATED , 2002 As set forth in the Exchange Offer (as described in the Prospectus (as defined below)), this form or one substantially equivalent hereto must be used to accept the Exchange Offer if certificates for unregistered 6.95% Senior Notes due 2012 (the "Original Notes"), of PSEG Power LLC ("Power"), are not immediately available or time will not permit a holder's Original Notes or other required documents to reach the Exchange Agent (as defined below) on or prior to the Expiration Date (as defined below), or the procedure for book-entry transfer cannot be completed on a timely basis. This form may be delivered by facsimile transmission, by registered or certified mail, by hand, or by overnight delivery service to the Exchange Agent. See "The Exchange Offer -- Procedures for Tendering Original Notes" in the Prospectus. THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., EASTERN DAYLIGHT TIME, ON , 2002 (THE "EXPIRATION DATE"), UNLESS THE EXCHANGE OFFER IS EXTENDED BY POWER. THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS: THE BANK OF NEW YORK
Facsimile Transmissions: By Hand Or Overnight Delivery: (Eligible Institutions Only) By Registered Or Certified Mail: The Bank of New York The Bank of New York 101 Barclay Street (212) 298-1915 101 Barclay Street,7th Floor, East Corporate Trust Services Window New York, New York, 10286 Ground Level Attention: Ms. Diane Amoroso New York, NY 10286 Reorganization Section Attention: Ms. Diane Amoroso Reorganization Section To Confirm by Telephone or for Information Call: (212) 815-3798
(Originals of all documents sent by facsimile should be sent promptly by registered or certified mail, by hand, or by overnight delivery service.) DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. Ladies and Gentlemen: The undersigned hereby tenders to Power, in accordance with Power's offer, upon the terms and subject to the conditions set forth in the prospectus dated , 2002 (the "Prospectus"), and in the accompanying Letter of Transmittal, receipt of which is hereby acknowledged, $ in the aggregate principal amount of Original Notes pursuant to the guaranteed delivery procedures described in the Prospectus. Name(s) of Registered Holder(s): (Please Type or Print) Address: Area Code and Telephone Number: Certificate Number(s) for Original Notes (if available): Total Principal Amount Tendered and Represented by Certificate(s): $ Signature of Registered Holder(s): Date: [ ] The Depository Trust Company (check if Original Notes will be tendered by book-entry transfer) Account Number THE GUARANTEE BELOW MUST BE COMPLETED GUARANTEE (Not to be used for signature guarantee) The undersigned, being a member firm of a registered national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office in the United States, hereby guarantees (a) that the above-named person(s) "own(s)" the Original Notes tendered hereby within the meaning of Rule 14e-4 ("Rule 14e-4") under the Securities Exchange Act of 1934, as amended, (b) that the tender of such Original Notes complies with Rule 14e-4, and (c) to deliver to the Exchange Agent the certificates representing the Original Notes tendered hereby or confirmation of book-entry transfer of such Original Notes into the Exchange Agent's account at The Depository Trust Company, in proper form for transfer, together with the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other required documents, within three New York Stock Exchange trading days after the expiration date. Name of Firm: Address: Area Code and Telephone Number: Authorized Signature: Name: Title: Date: NOTE: DO NOT SEND CERTIFICATES OF ORIGINAL NOTES WITH THIS FORM. CERTIFICATES FOR ORIGINAL NOTES SHOULD BE SENT ONLY WITH YOUR LETTER OF TRANSMITTAL. -----END PRIVACY-ENHANCED MESSAGE-----