The information in this preliminary prospectus supplement and the accompanying
prospectus is not complete and may be changed. This preliminary prospectus
supplement and accompanying prospectus are not an offer to sell these securities
and are not soliciting an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted.
Subject to Completion
Preliminary Prospectus Supplement dated July 29, 2005
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 3, 2002)
$
PSEG Funding Trust I
% Preferred Trust Securities
$50 Liquidation Amount per Preferred Trust Security
Fully and Unconditionally Guaranteed, as Described Herein, by
Public Service Enterprise Group Incorporated
----------
In September 2002, PSEG Funding Trust I (the "trust"), a Delaware
statutory trust, issued $460,000,000 aggregate liquidation amount of preferred
trust securities ("preferred trust securities") with an initial distribution
rate of 6.25% per annum. The preferred trust securities were issued as a
component of the Participating Units of Public Service Enterprise Group
Incorporated. Each Participating Unit initially consisted of a unit referred to
as a Corporate Unit that included (i) a purchase contract obligating the holder
to purchase, for $50, shares of our common stock no later than November 16,
2005, and (ii) a preferred trust security with a liquidation amount of $50. This
prospectus supplement relates to the remarketing of $ aggregate
liquidation amount of those preferred trust securities on behalf of holders of
Corporate Units and holders of preferred trust securities held separately from
Corporate Units, if any, who elect to participate in the remarketing.
The preferred trust securities represent undivided beneficial ownership
interests in the assets of the trust, which consist solely of senior deferrable
notes due 2007 that were issued by us to the trust. Following the successful
remarketing of the preferred trust securities, the trust will make distributions
on the preferred trust securities on May 16 and November 16 of each year,
commencing November 16, 2005, subject to our right to defer payments on the
senior deferrable notes as described in this prospectus supplement. These
distributions will accumulate at a rate of % per year from August 8, 2005. We
irrevocably guarantee, on a senior unsecured basis, payments on the preferred
trust securities out of moneys held by the trust to the extent of available
trust funds.
The preferred trust securities are redeemable upon the payment in full of
the senior deferrable notes, which will mature on November 16, 2007. In
addition, the preferred trust securities are redeemable, at our option, in whole
but not in part, upon the occurrence and continuation of a "Tax Event" under the
circumstances and at the price described in this prospectus supplement. See
"Description of the Preferred Trust Securities--Tax Event Redemption" and
"Description of the Senior Deferrable Notes--Tax Event Redemption" in this
prospectus supplement.
We will remarket the preferred trust securities in denominations of $50
and integral multiples of $50 in excess thereof.
Prior to this offering, there has been no public market for the preferred
trust securities. The preferred trust securities will not be listed on any
exchange.
Investing in the preferred trust securities involves risks. See "Risk
Factors" beginning on page S-9 of this prospectus supplement.
----------
Per Preferred
Trust Security Total
-------------- -----
Price to the Public (1).............................. % $
Remarketing Fee to the Remarketing Agents (2)........ % $
Net Proceeds to Participating Holders................ % $
(1) Plus accumulated distributions from and including August 8, 2005, if
settlement occurs after that date.
(2) Payable from the proceeds of the remarketing. This amount represents %
of the proceeds of the remarketing.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The preferred trust securities will be ready for delivery in book-entry
only form through the facilities of The Depository Trust Company on or about
August 8, 2005.
----------
Remarketing Agents
Banc of America Securities LLC Merrill Lynch & Co.
----------
Credit Suisse First Boston HSBC Wachovia Securities
----------
The date of this prospectus supplement is , 2005.
TABLE OF CONTENTS
Prospectus Supplement Page
About this Prospectus Supplement........................................ S-3
Incorporation of Certain Documents by Reference......................... S-3
Prospectus Supplement Summary........................................... S-4
Risk Factors............................................................ S-9
Forward-Looking Statements.............................................. S-20
Ratio of Earnings to Fixed Charges...................................... S-22
Use of Proceeds......................................................... S-23
Description of the Preferred Trust Securities........................... S-24
Description of the Senior Deferrable Notes.............................. S-30
Description of the Guarantee............................................ S-35
Certain United States Federal Income Tax Considerations................. S-37
ERISA Considerations.................................................... S-43
Remarketing............................................................. S-45
Legal Matters........................................................... S-46
Experts................................................................. S-46
Prospectus
About this Prospectus................................................... 3
Information about the Issuers........................................... 3
Risk Factors............................................................ 5
Forward-Looking Statements.............................................. 12
Use of Proceeds......................................................... 13
Accounting Treatment Relating to Preferred Trust Securities............. 13
Description of the Senior and Subordinated Debt Securities.............. 13
Description of the Trust Debt Securities................................ 24
Description of the Preferred Trust Securities........................... 29
Description of the Preferred Securities Guarantee....................... 36
Relationship among the Preferred Trust Securities,
the Trust Debt Securities and the Preferred Securities Guarantee...... 38
Description of the Capital Stock........................................ 39
Description of the Stock Purchase Contracts and Stock Purchase Units.... 40
Plan of Distribution.................................................... 41
Legal Matters........................................................... 42
Experts................................................................. 42
Where You Can Find More Information..................................... 43
Incorporation of Certain Documents by Reference......................... 43
----------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We,
PSEG Funding Trust I and the Remarketing Agents have not authorized anyone to
provide you with additional or different information. If anyone provides you
with different or inconsistent information, you should not rely on it. We, PSEG
Funding Trust I and the Remarketing Agents are offering to sell these securities
only in jurisdictions where offers and sales are permitted. You should assume
that the information appearing in this prospectus supplement and the
accompanying prospectus is accurate only as of the date on the front of the
document and that any information we have incorporated by reference is accurate
only as of the date of the document incorporated by reference. Our business,
financial condition, results of operations and prospects may have changed since
these dates.
S-2
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first is this prospectus supplement,
which describes the specific terms of this remarketing. The second part, the
accompanying prospectus, gives more general information, some of which may not
apply to this remarketing.
If the description of this remarketing varies between this prospectus
supplement and the accompanying prospectus, you should rely on the information
contained in or incorporated by reference into this prospectus supplement.
Unless we have indicated otherwise, or the context otherwise requires,
references in this prospectus supplement to (1) the "trust" are to PSEG Funding
Trust I, a Delaware statutory trust and the issuer of the preferred trust
securities, (2) "PSEG," "we," "us" and "our" or similar terms are to Public
Service Enterprise Group Incorporated and its consolidated subsidiaries, (3) the
"preferred trust securities" are to the preferred trust securities issued by the
trust, (4) the "senior deferrable notes" are to the senior deferrable notes
issued to the trust by us in September 2002, (5) the "indenture" are to the
indenture under which the senior deferrable notes were issued, and (6) the
"guarantee" are to the guarantee of payment by us of distributions on the
preferred trust securities to the extent there is cash available in the trust to
make distributions therewith.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information from certain
documents that we file with the SEC, which means that we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this prospectus supplement and
the accompanying 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 in File No. 1-9120 listed
below and any future filings made by us 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 the offering hereunder.
o Our Annual Report on Form 10-K and Form 10-K/A for the year ended
December 31, 2004;
o Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2005;
o Our Definitive Joint Proxy Statement filed on June 8, 2005 and June
13, 2005; and
o Our Current Reports on Form 8-K filed on January 24, 2005, February
3, 2005, February 4, 2005, April 6, 2005, April 22, 2005, May 4,
2005 (except with respect to Item 2.02), May 20, 2005, May 27, 2005,
June 16, 2005, July 12, 2005, July 19, 2005 and July 29, 2005.
You can get a free copy of any of the documents incorporated by reference
by making an oral or written request directed to:
Director, Investor Relations
PSEG Services Corporation
80 Park Plaza, 6th Floor
Newark, NJ 07101
Telephone (973) 430-6565
S-3
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PROSPECTUS SUPPLEMENT SUMMARY
The following summary should be read in conjunction with the information
contained elsewhere in this prospectus supplement, the accompanying prospectus
and the documents incorporated by reference. You should carefully read this
entire prospectus supplement and the accompanying prospectus, including the
section of this prospectus supplement entitled "Risk Factors" and the
information we have incorporated by reference, before making a decision to
invest in the preferred trust securities.
Public Service Enterprise Group Incorporated
We are an integrated energy and energy services company engaged in power
generation, regulated delivery of power and gas service and wholesale energy
marketing and trading. We are an exempt public utility holding company under the
Public Utility Holding Company Act of 1935 and neither own nor operate any
physical properties. Through our subsidiaries, we are one of the leading
providers of energy and energy-related services in the nation. We have four
direct, wholly-owned subsidiaries:
o Public Service Electric and Gas Company ("PSE&G"), which is an
operating public utility company engaged principally in the
transmission and distribution of electric energy and gas service in
New Jersey;
o PSEG Power LLC ("Power"), which is a multi-regional independent
electric generation and wholesale energy marketing and trading
company;
o PSEG Energy Holdings LLC ("Energy Holdings"), which participates
nationally and internationally in energy-related lines of business
through its subsidiaries; and
o PSEG Services Corporation, which provides administrative and support
services to us and our subsidiaries.
We are a New Jersey corporation with our principal offices located at 80
Park Plaza, Newark, New Jersey 07101. Our telephone number is (973) 430-7000.
Proposed Merger with Exelon Corporation
On December 20, 2004, we entered into a merger agreement (the "Merger
Agreement") with Exelon Corporation ("Exelon"). Under the Merger Agreement, our
common stock will be converted into Exelon common stock, and Exelon will be the
surviving entity in the merger (the "Merger"). If the Merger is completed,
Exelon will change its name to Exelon Electric & Gas Corporation. We believe the
proposed Merger would create a strong combined company that will deliver
important benefits to our shareholders, to our customers and to the communities
we serve.
Subject to the terms and conditions of the Merger Agreement, if the Merger
is completed, our shareholders will receive 1.225 shares of Exelon common stock
for each share of our common stock they hold, and each outstanding option to
purchase shares of our common stock will be assumed by Exelon and substituted
with an option to purchase shares of Exelon common stock, exercisable on
generally the same terms and conditions that applied before the Merger but
adjusted for the exchange ratio. The exchange ratio is fixed in the Merger
Agreement, and neither we nor Exelon has the right to terminate the Merger
Agreement based solely on changes in either party's stock price. If the Merger
is completed, Exelon, as the surviving entity in the Merger, will succeed to all
of our obligations under the senior deferrable notes, the indenture, the trust
agreement governing the trust and the guarantee.
The Discussion of the Merger Agreement Above is Qualified in Its Entirety
by the Merger Agreement Itself, Which was Filed as Annex a to Our Definitive
Joint Proxy Statement Filed With the SEC On June 8, 2005 and June 13, 2005 (The
"Joint Merger Proxy"). for More Information Relating to the Merger, Please Refer
to the Documents Incorporated by Reference in This Prospectus Supplement,
Including the Joint Merger Proxy. See "Incorporation of Certain Documents by
Reference."
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S-4
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PSEG Funding Trust I
PSEG Funding Trust I is a statutory trust that was created under the
Delaware Statutory Trust Act and is governed by an amended and restated trust
agreement among Wachovia Bank, National Association, as property trustee,
Wachovia Trust Company, National Association, as Delaware trustee, three of our
employees, as administrative trustees, and us. The trust agreement, as amended,
was qualified under the Trust Indenture Act of 1939, as amended. The assets of
the trust consist solely of our senior deferrable notes due 2007. We hold all of
the common securities of the trust.
The principal offices of the trust are located at 80 Park Plaza, Newark,
New Jersey 07101 and its telephone number is (973) 430-7000.
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S-5
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The Remarketing
In this portion of the summary, references to "PSEG," "we," "our" and "us"
mean Public Service Enterprise Group Incorporated excluding, unless otherwise
expressly stated or the context otherwise requires, its subsidiaries.
Issuer...................... PSEG Funding Trust I.
Securities Remarketed....... $ aggregate liquidation amount of preferred
trust securities, $50 liquidation amount per
preferred trust security. The preferred trust
securities represent undivided beneficial
ownership interests in the assets of the trust.
Those assets consist solely of the senior
deferrable notes described below.
Distributions............... Following the successful remarketing of the
preferred trust securities, distributions on the
preferred trust securities will accumulate at a
rate of % per year of the liquidation amount of
$50 per preferred trust security from and
including August 8, 2005. These distributions will
be payable semi-annually in arrears on May 16 and
November 16 of each year, commencing November 16,
2005, subject to deferral as described below. The
trust will pay distributions on the preferred
trust securities on the dates payable to the
extent it has funds available for the payment
received from us on the senior deferrable notes.
Distribution Deferral....... If no event of default under the senior deferrable
notes has occurred and is continuing, we have the
right at any time during the term of the senior
deferrable notes to defer the payment of interest
for a period not extending beyond November 16,
2007, the maturity date of the senior deferrable
notes, or any date of earlier redemption. We refer
to any such period of deferral as an "extension
period."
If we defer interest payments on the senior
deferrable notes, the trust will defer
distributions on the preferred trust securities.
During any extension period, distributions on the
preferred trust securities will continue to
accumulate semi-annually, at the rate of % per
year of the liquidation amount of $50 per
preferred trust security. In addition, the
deferred distributions will themselves accumulate
additional distributions, compounded
semi-annually, at the rate of % per year.
The Guarantee.............. We fully and unconditionally guarantee the payment
of all amounts due on the preferred trust
securities to the extent the trust has funds
available for payment of such amount.
We are also obligated to pay most of the trust's
expenses and obligations (other than the trust's
obligations to make payments on the preferred
trust securities, which are covered only by the
guarantee).
The guarantee does not cover payments if the trust
does not have sufficient funds to make payments on
the preferred trust securities. This means that if
we do not make a payment on the senior deferrable
notes, the trust will not have sufficient funds to
make payments on the preferred trust securities,
and the guarantee will not obligate us to make
those payments on behalf of the trust. Our
obligations under the guarantee are unsecured and
rank equal in right of payment to all our other
existing and future unsecured senior indebtedness.
See "Description of the Guarantee" in this
prospectus supplement.
Senior Deferrable Notes..... The trust is the holder of the senior deferrable
notes and uses payments received on the senior
deferrable notes to make corresponding payments on
--------------------------------------------------------------------------------
S-6
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the preferred trust securities. Our obligations
under the senior deferrable notes are unsecured
and rank equal in right of payment to all our
other existing and future unsecured senior
indebtedness. See "Description of the Senior
Deferrable Notes" in this prospectus supplement.
Redemption.................. The preferred trust securities are redeemable upon
the payment in full of the senior deferrable
notes, which mature on November 16, 2007. Upon
payment of the senior deferrable notes on that
date, the trust is required to redeem the
preferred trust securities at their aggregate
liquidation amount plus any accumulated and unpaid
distributions.
Prior to November 16, 2007, if the tax laws change
or are interpreted in a way that adversely affects
the tax treatment of the trust, we may elect to
redeem the senior deferrable notes held by the
trust at the redemption price described under
"Description of the Senior Deferrable Notes--Tax
Event Redemption." The proceeds from any such
redemption will be used by the trust to redeem the
preferred trust securities at a redemption price
per preferred trust security equal to the
redemption price per each $50 principal amount of
senior deferrable notes. See "Description of the
Preferred Trust Securities--Tax Event Redemption."
Ranking of Preferred
Trust Securities.......... The preferred trust securities generally rank on
parity, and payments thereon are made pro rata,
with the common securities of the trust. However,
upon the occurrence and during the continuance of
an event of default under the indenture relating
to the senior deferrable notes, the rights of the
holders of the common trust securities to receive
distributions and payments upon liquidation,
redemption and otherwise will be subordinated to
the rights of the holders of the preferred trust
securities.
Use of Proceeds............ We will not receive any proceeds from the
remarketing of the preferred trust securities. For
more information, see "Use of Proceeds" in this
prospectus supplement.
Listing..................... The preferred trust securities will not be listed
on any national securities exchange.
Risk Factors................ Your investment in the preferred trust securities
will involve risks. You should carefully consider
the discussion of risks set forth in this
prospectus supplement under "Risk Factors" before
deciding whether an investment in the preferred
trust securities is suitable for you.
Form of the Preferred
Trust Securities.......... The preferred trust securities will be represented
by one or more global securities deposited with
and registered in the name of The Depository Trust
Company, New York, New York ("DTC"). This means
that you will not receive a certificate for your
preferred trust securities and the preferred trust
securities will not be registered in your name.
Rather, your broker or other direct or indirect
participant of DTC will maintain your position in
the preferred trust securities. See "Description
of the Preferred Trust Securities--Book-Entry
Clearance and Settlement" in this prospectus
supplement.
United States Federal
Income Taxation........... We have treated and will continue to treat the
senior deferrable notes for United States federal
income tax purposes as indebtedness that is
subject to the Treasury regulations governing
contingent payment debt instruments.
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S-7
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These regulations are complex and, in some
respects, uncertain in application. In addition,
we have treated and will continue to treat the
trust as a grantor trust and the preferred trust
securities as undivided beneficial interests in
the senior deferrable notes held by the trust for
United States federal income tax purposes.
Generally, assuming that you report your income in
a manner consistent with the method described in
this prospectus supplement, the amount of income
that you will recognize in respect of the
preferred trust securities should correspond to
the economic accrual of income on the preferred
trust securities to you and the amount of income
you would have recognized if the senior deferrable
notes were not subject to the contingent payment
debt regulations. However, no assurance can be
given that the Internal Revenue Service will agree
with our position. For a detailed discussion,
please see the section of this prospectus
supplement entitled "Certain United States Federal
Income Tax Considerations."
--------------------------------------------------------------------------------
S-8
RISK FACTORS
Your investment in the preferred trust securities involves a number of
risks. You should carefully consider the following discussion as well as the
other information contained and incorporated by reference into this prospectus
supplement and the accompanying prospectus, including the section beginning on
page 21 of our Joint Merger Proxy entitled "Risk Factors" relating to risks
associated with the Merger and the combined company resulting from the Merger,
before making a decision to invest in the preferred trust securities.
Risks Relating to PSEG
Generation operating performance may fall below projected levels.
Operating our generating stations below expected capacity levels may
result in lost revenues, increased expenses, higher maintenance costs 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.
Credit, commodity and financial market risks could negatively impact our
business.
The revenues generated by the operation of our generating 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.
Our generation revenues and results of operations are dependent upon
prevailing market prices for energy, capacity, ancillary services and fuel
supply in the markets we serve.
The following factors are among those that influence the market prices for
energy, capacity and ancillary services:
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 Pennsylvania, New Jersey,
Maryland Interconnection ("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;
S-9
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.
As a result of the Basic Generation Service ( "BGS") auction, Power
entered into contracts with the direct suppliers of the New Jersey electric
utilities, including PSE&G. 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. Any failure
to collect these payments under these BGS contracts with counterparties could
have a material impact on our results of operations, cash flows and financial
position.
Energy obligations, available supply and trading risks could negatively impact
our business.
Our energy trading and marketing activities frequently involve 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 purchase
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 our 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.
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 risks or a deterioration of Power's credit quality may have
an adverse impact on our business.
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 and procedures as well as 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 its energy trading activities, Power must meet credit
quality standards required by counterparties. Standard industry contracts
generally require trading counterparties to maintain investment grade ratings.
These same contracts provide reciprocal benefits to Power. If Power loses its
investment grade credit rating, its subsidiary, PSEG Energy Resources & Trade
LLC ("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.
The electric energy industry is undergoing substantial change.
The electric energy industry in the State of New Jersey, across the
country and around the world 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
wholesale sales and have a negative impact on earnings and cash flows. We are
affected by many issues that are common to the electric industry such as:
o ability to obtain adequate and timely rate relief, cost recovery,
including unsecuritized stranded costs, and other necessary
regulatory approvals;
o deregulation, the unbundling of energy supplies and services and the
establishment of a competitive energy marketplace for products and
services;
o the possibility of reregulation in some deregulated markets;
S-10
o energy sales retention and growth;
o revenue and price 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 utility service territory;
o exposure to market price fluctuations and volatility;
o regulatory restrictions on affiliate transactions; and
o debt and equity market concerns.
Because a portion of our business is conducted outside the United States,
adverse international developments could negatively impact our business.
A component of our business strategy has been the development, acquisition
and operation of projects outside the United States. The economic and political
conditions in certain countries where Energy Holdings' subsidiary, PSEG Global
Inc. ("Global"), has interests, or in which Global is or could be exploring
development or acquisition opportunities, present risks that may be different
than those found in the United States including:
o delays in permitting and licensing;
o construction delays and interruption of business;
o risks of war;
o expropriation;
o nationalization;
o renegotiation or nullification of existing contracts; and
o changes in law or tax policy.
Changes in the legal environment in foreign countries in which Global may
develop or acquire projects could make it more difficult to obtain non-recourse
project refinancing on suitable terms and could impair Global's ability to
enforce its rights under agreements relating to such projects.
Operations in foreign countries also present risks associated with
currency exchange and convertibility, inflation and repatriation of earnings. In
some countries in which Global may develop or acquire projects in the future,
economic and monetary conditions and other factors could affect Global's ability
to convert its cash distributions to United States Dollars or other freely
convertible currencies, or to move funds offshore from these countries.
Furthermore, the central bank of any of these countries may have the authority
to suspend, restrict or otherwise impose conditions on foreign exchange
transactions or to approve distributions to foreign investors. Although Global
generally seeks to structure power purchase contracts and other project revenue
agreements to provide for payments to be made in, or indexed to, United States
Dollars or a currency freely convertible into United States Dollars, its ability
to do so in all cases may be limited.
If our operating performance falls below projected levels, we may not be able to
service our debt.
The risks associated with operating power generation facilities include,
among others, those described above under "--Generation operating performance
may fall below projected levels." Operation below expected capacity levels may
result in lost revenues, increased expenses, higher maintenance costs and
penalties, in which case there may not be sufficient cash available to service
project debt. In addition, many of Global's generation projects rely on a single
fuel supplier and a single customer for the purchase of the facility's output
under a long term contract.
S-11
While Global generally has liquidated damage provisions in its contracts, the
default by a supplier under a fuel contract or a customer under a power purchase
contract could adversely affect the facility's cash generation and ability to
service project debt.
Countries in which Global owns and operates electric and gas distribution
facilities may impose financial penalties if reliability performance standards
are not met. In addition, inefficient operation of the facilities may cause lost
revenue and higher maintenance expenses, in which case there may not be
sufficient cash available to service project debt.
Because we are a holding company, our ability to service our debt could be
limited.
We are a holding company with no material assets other than the stock or
membership interests of our subsidiaries and project affiliates. Accordingly,
all of our operations are conducted by our subsidiaries and project affiliates
which are separate and distinct legal entities that have no obligation,
contingent or otherwise, to pay any amounts when due on our debt or to make any
funds available to us to pay such amounts. As a result, our debt will
effectively be subordinated to all existing and future debt, trade creditors,
and other liabilities of our subsidiaries and project affiliates and our rights
and hence the rights of our creditors to participate in any distribution of
assets of any subsidiary or project affiliate upon its liquidation or
reorganization or otherwise would be subject to the prior claims of that
subsidiary's or project affiliate's creditors, except to the extent that our
claims as a creditor of such subsidiary or project affiliate may be recognized.
We depend on our subsidiaries' and project affiliates' cash flow and our
access to capital in order to service our indebtedness. The project-related debt
agreements of subsidiaries and project affiliates 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. Although a default under a project financing
agreement will not cause a default with respect to our debt and that of our
subsidiaries, it may materially affect our ability to service our outstanding
indebtedness.
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.
Our ability to control cash flow from our minority investments is limited.
Our ability to control investments in which we own a minority interest is
limited. Assuming a minority ownership role presents additional risks, such as
not having a controlling interest over operations and material financial and
operating matters or the ability to operate the assets more efficiently. As
such, neither we nor Global are able to unilaterally cause dividends or
distributions to be made to us or Global from these operations.
Minority investments may involve risks not otherwise present for
investments made solely by us and our subsidiaries, including the possibility
that a partner, majority investor or co-venturer might become bankrupt, may have
different interests or goals, and may take action contrary to our instructions,
requests, policies or business objectives. Also, if no party has full control,
there could be an impasse on decisions. In addition, certain investments of
Energy Holdings' subsidiary, PSEG Resources LLC ("Resources"), are managed by
unaffiliated entities which limits Resources' ability to control the activities
or performance of such investments and managers.
S-12
Failure to obtain adequate and timely rate relief could negatively impact our
business.
As a public utility, PSE&G's rates are regulated by the New Jersey Board
of Public Utilities ("BPU") and the Federal Energy Regulatory Commission
("FERC"). These rates are designed to allow PSE&G to recover its operating
expenses and earn a fair return on its rate base, which primarily consists of
its property, plant and equipment less various adjustments. These rates include
its electric and gas tariff rates that are subject to regulation by the BPU as
well as its transmission rates that are subject to regulation by the FERC.
PSE&G's base rates are set by the BPU for electric distribution and gas
distribution and are effective until the time a new rate case is brought to the
BPU. These base rate cases generally take place every few years. Limited
categories of costs are recovered through adjustment charges that are
periodically reset to reflect actual costs. If these costs exceed the amount
included in PSE&G's adjustment charges, there will be a negative impact on
earnings or cash flows.
If PSE&G's operating expenses, other than costs recovered through
adjustment charges, exceed the amount included in its base rates and in its FERC
jurisdictional rates, there will be a negative impact on our earnings and
operating cash flows.
Global's electric and gas distribution facilities are rate-regulated
enterprises. Governmental authorities establish rates charged to customers.
While these rates are designed to cover all operating costs and provide a
return, considerable fiscal and cash uncertainties in certain countries due to
economic, political and social crisis could have an adverse impact.
We can give no assurances that rates will, in the future, be sufficient to
cover Global's costs and provide a return on its investment. In addition, future
rates may not be adequate to provide cash flow to pay principal and interest on
the debt of Global's subsidiaries and affiliates or to enable its subsidiaries
and affiliates to comply with the terms of debt agreements.
We may not have access to sufficient capital in the amounts and at the times
needed.
Capital for our projects and investments has been provided by
internally-generated cash flow and borrowings by us and our subsidiaries. We
require continued access to debt capital from outside sources in order to
efficiently fund our capital needs and assure the success of our future projects
and acquisitions. Our ability to arrange financing on a non-recourse basis and
the costs of capital depend on numerous factors including, among other things,
general economic and market conditions, the availability of credit from banks
and other financial institutions, investor confidence, the success of current
projects and the quality of new projects.
We can give no assurances that our current and future capital structure or
financial condition will permit access to bank and debt capital markets. The
availability of capital is not assured since it is dependent upon our
performance and that of our other subsidiaries. As a result, there is no
assurance that we or our subsidiaries will be successful in obtaining financing
for our projects and acquisitions or funding the equity commitments required for
such projects and acquisitions in the future.
We and our subsidiaries are subject to substantial competition from well
capitalized participants in the worldwide energy markets.
We and our subsidiaries are subject to substantial competition in the
United States and in international markets from:
o merchant generators;
o domestic and multi-national utility generators;
o energy traders, including affiliates of financial institutions;
o fuel supply companies;
o engineering companies;
o equipment manufacturers; and
o affiliates of other industrial companies.
S-13
Restructuring of worldwide energy markets, including the privatization of
government-owned utilities and the sale of utility-owned assets, is 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, including
short-term debt.
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. Resources faces
competition from numerous well-capitalized investment and finance company
affiliates of banks, utilities and industrial companies.
Power transmission facilities may impact our ability to deliver our output to
customers.
Our ability to sell and deliver our electric energy products and grow our
business may be adversely impacted and our ability to generate revenues may be
limited if:
o transmission is disrupted;
o transmission capacity is inadequate; or
o a region's power transmission infrastructure is inadequate.
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 ("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. We
cannot assure that we will be able to obtain any required regulatory approval in
the future, or that we will be able to obtain any necessary extension in
receiving any required regulatory approvals. Any failure to obtain or comply
with any required regulatory approvals could materially adversely affect our
ability to operate our generation stations or 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 these 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 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.
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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 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.
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 facilities, 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 generating units, replacement power and business
interruption insurance in amounts and with deductibles that we
consider appropriate.
We can give no assurance that this insurance coverage will be available in
the future on commercially reasonable terms or that the insurance proceeds
received for any loss of or any damage to any of our facilities will be
sufficient to permit us to continue to make payments on our debt. Additionally,
some of our properties 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 a significant lead time and requires us to expend significant sums for
preliminary engineering, permitting, fuel supply, resource exploration, legal
and other development 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 generation, transmission
or distribution 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
S-15
permit the customer to terminate the 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 specified milestones, such as
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. 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, which could affect our financial results.
Recession, acts of war or terrorism could negatively impact our business.
The consequences of a prolonged recession and adverse 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, fuel storage facilities and transmission and distribution facilities 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.
Many of these contingent liabilities can remain open for extended periods
of time after the sales are closed. Depending on the extent to which the buyers
may ultimately seek to enforce their rights under these contractual provisions,
and the resolution of any disputes we may have concerning them, these
liabilities could have a material adverse effect on our financial condition,
liquidity, cash flow and results of operations.
Each of Exelon and PSEG has established reserves with respect to the
obligations under the agreements described above; however, we cannot assure you
that such reserves would be sufficient to cover any payments required under the
agreements described above.
Risks Relating to the Preferred Trust Securities
Other than under the guarantee, you will have limited enforcement rights with
respect to the senior deferrable notes.
Except as described below or in the accompanying prospectus, you, as a
holder of preferred trust securities, will not be able to exercise directly any
rights with respect to the senior deferrable notes.
The guarantee has been qualified as an indenture under the Trust Indenture
Act. The guarantee trustee, Wachovia Bank, National Association, acts as
indenture trustee under the guarantee for purposes of compliance with the
provisions of the Trust Indenture Act. The guarantee trustee holds the guarantee
for the benefit of holders of preferred trust securities.
The guarantee will guarantee, generally on an unsecured basis, the payment
of the following:
o any accumulated and unpaid distributions that are required to be
paid on the preferred trust securities, to the extent the trust has
funds available for this purpose;
S-16
o the redemption price, including all accumulated and unpaid
distributions to the date of redemption, of preferred trust
securities that we may have redeemed upon the occurrence of a tax
event redemption, to the extent the trust has funds available for
this purpose; and
o upon a voluntary or involuntary dissolution of the trust, other than
in connection with the distribution of senior deferrable notes to
you, the lesser of (a) the aggregate liquidation amount and all
accumulated and unpaid distributions on the preferred trust
securities to the date of payment to the extent the trust has funds
available for this purpose and (b) the amount of assets of the trust
remaining available for distribution to holders of the preferred
trust securities in liquidation of the trust.
The holders of a majority in liquidation amount of the preferred trust
securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the guarantee trustee or to direct the
exercise of any trust or power conferred upon the guarantee trustee under the
guarantee. Notwithstanding the above, but only under limited circumstances,
holders of the preferred trust securities may institute a legal proceeding
directly against us to enforce their rights under the guarantee without first
instituting a legal proceeding against the trust, the guarantee trustee or any
other person or entity.
If we were to default on our obligation to pay amounts payable on the
senior deferrable notes or otherwise, the trust would lack funds for the payment
of distributions or amounts payable on redemption of the preferred trust
securities or otherwise, and, in that event, a holder of preferred trust
securities would not be able to rely upon the guarantee for payment of these
amounts.
Instead, the holder would rely on the enforcement
o by the property trustee of its rights as registered holder of the
senior deferrable notes against us pursuant to the terms of the
indenture and the senior deferrable notes or
o by that holder of the property trustee's or that holder's own
limited rights against us to enforce payments on the senior
deferrable notes.
The amended and restated declaration of trust provides that each holder of
preferred trust securities, by its acceptance, agrees to the provisions of the
guarantee and the indenture.
Indebtedness and borrowings by our subsidiaries effectively will be senior to
the preferred trust securities and we are dependent on payments from our
subsidiaries to enable us to pay principal and interest on the senior deferrable
notes that are the sole assets of the trust.
We are a holding company. Our senior deferrable notes that constitute the
sole assets of the trust, as well as our guarantee, are senior unsecured
obligations of ours but are effectively subordinated to all obligations and
preferred equity of our subsidiaries, whether secured or unsecured. As a result,
the preferred trust securities are structurally subordinated to all existing and
future obligations of our subsidiaries, including claims with respect to trade
payables. This means that holders of the preferred trust securities have a
junior position to the claims of creditors and preferred stockholders of our
direct and indirect subsidiaries on the assets and earnings of such
subsidiaries. In addition, the indenture does not limit the amount of
indebtedness that we can incur. See "Description of the Debt Securities" in the
accompanying prospectus. At March 31, 2005, we had consolidated total
indebtedness of $13.6 billion, of which $11.7 billion was at the subsidiary
level.
We conduct our operations through our subsidiaries, which generate
substantially all of our operating income and cash flow. As a result,
distributions or advances from our subsidiaries are a major source of funds
necessary to meet our debt service and other obligations, including any funds
required to make payments of principal and interest on the senior deferrable
notes that represent the sole assets of the trust. Contractual provisions, laws
or regulations, as well as any subsidiary's financial condition and operating
performance and requirements, may limit our ability to obtain cash required to
pay our debt service and other obligations, including payment of principal and
interest on our senior deferrable notes and the related payments on the
preferred trust securities.
S-17
Holders of preferred trust securities will have limited voting rights.
You will not be entitled to vote to appoint, remove, replace or change the
number of the trustees of the trust, and generally will have no voting rights,
except in the limited circumstances described in this prospectus supplement and
the accompanying prospectus.
The secondary market for the preferred trust securities or, if we distribute
them to you, the senior deferrable notes, may be illiquid.
It is not possible to predict how the preferred trust securities will
trade in the secondary market or whether the market will be liquid or illiquid.
There is currently no secondary market for the preferred trust securities and we
do not currently plan to list the preferred trust securities on any national
securities exchange. There can be no assurance as to the liquidity of any market
that may develop for the preferred trust securities, your ability to sell these
securities or whether a trading market, if it develops, will continue.
Likewise, if we distribute the senior deferrable notes to the holders of
the preferred trust securities upon dissolution of the trust, we will not list
the senior deferrable notes on any national securities exchange and we cannot
assure you that a public market will develop for the senior deferrable notes.
The senior deferrable notes would be subject to liquidity and volatility issues
similar to those for the preferred trust securities outlined in the previous
paragraph.
We may redeem the preferred trust securities upon the occurrence of a tax event.
We have the option to redeem the senior deferrable notes, and, therefore
the preferred trust securities, on not less than 30 days' or more than 60 days'
prior written notice, in whole but not in part, at any time before November 16,
2007, if a tax event occurs and continues under the circumstances described
under "Description of the Senior Deferrable Notes--Tax Event Redemption," in
this prospectus supplement (a "tax event redemption"). If we exercise this
option, we will redeem the senior deferrable notes at the redemption price plus
accrued and unpaid interest (including deferred interest), if any. If we redeem
all of the senior deferrable notes, the trust must redeem all of the preferred
trust securities and pay the redemption price in cash to the holders of the
preferred trust securities. A tax event redemption will be a taxable event to
the holders of the preferred trust securities. In addition, if the trust
preferred securities are redeemed, you may not be able to reinvest the money you
receive upon redemption at a rate that is equal to or higher than the rate at
which distributions are paid on the preferred trust securities.
Distributions on the trust preferred securities will be deferred if we defer
interest payments on the senior deferrable notes.
Distributions to you on the preferred trust securities may be deferred if
we exercise our right to defer interest payments on our senior deferrable notes.
As the senior deferrable notes are the only assets of the trust, if we defer
those interest payments, the trust will not have enough funds to make
distributions on the preferred trust securities. However, distributions will
still accumulate semi-annually at a rate of % per year and the deferred
distributions will themselves accumulate additional distributions, compounded
semi-annually, at the rate of % per year, to the extent permitted by law. In
this case, even though you would not be receiving distributions on your
preferred trust securities, you would be required to include the stated
distribution, compounded semi-annually, in gross income, as original issue
discount, on a daily economic accrual basis, regardless of your method of
accounting. As a result, you would recognize income for United States federal
income tax purposes in advance of the receipt of cash attributable to such
income and would not receive cash distributions on your preferred trust
securities until we make an interest payment on the senior deferrable notes. See
"Certain United States Federal Income Tax Considerations" in this prospectus
supplement.
If we exercise our right to defer payments of interest on the senior
deferrable notes and the distributions on the preferred trust securities are
similarly deferred, the market price of the preferred trust securities is likely
to decrease. If you sell your trust preferred securities during a deferral
period, you may not receive the same return on your investment as a holder who
continues to hold the preferred trust securities. In addition, the mere
existence
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of the right to defer interest payments and distributions may cause the market
price of the preferred trust securities to be more volatile than the market
price of other securities that are not subject to such deferrals. There is no
limitation in the number of times that we may elect to defer interest payments.
In the event a large number of holders of preferred trust securities who elected
not to participate in the remarketing decide to sell such preferred trust
securities, the price of your preferred trust securities may be adversely
affected.
Pursuant to the terms of the Corporate Units and the preferred trust
securities, holders of preferred trust securities held separately from Corporate
Units may choose not to participate in the remarketing by taking certain
actions. In the event that a significant number of such holders decide to sell
their preferred trust securities after the remarketing, the price of your
preferred trust securities may be adversely affected and may decrease below the
price paid by you.
S-19
FORWARD LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus include
"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 supplement, the accompanying
prospectus or in the documents incorporated by reference in this prospectus
supplement and the accompanying 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. Forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those anticipated. These statements are based
on management's beliefs as well as assumptions made by and information currently
available to management. When used in this prospectus supplement, the
accompanying prospectus or in the documents incorporated by reference in this
prospectus supplement and the accompanying prospectus, the words "will,"
"anticipate," "intend," "estimate," "believe," "expect," "plan," "hypothetical,"
"potential," "forecast," "project," and variations of such words and similar
expressions are intended to identify forward-looking statements. The following
review of factors should not be construed as exhaustive or as any admission
regarding the adequacy of our disclosures prior to the effective date of the
Private Securities Litigation Reform Act of 1995. These risks and uncertainties
include:
o market, credit rating and other risks that could result from any
inability to close the pending Merger with Exelon;
o credit, commodity, interest rate, counterparty and other financial
market risks;
o liquidity and the ability to access capital and credit markets and
maintain adequate credit ratings;
o adverse or unanticipated weather conditions that significantly
impact costs and/or operations, including generation;
o changes in the electric industry, including changes to power pools;
o changes in the number of market participants and the risk profiles
of such participants;
o changes in technology that make generation, transmission, and/or
distribution assets less competitive;
o availability of power transmission facilities that impact the
ability to deliver output to customers;
o growth in costs and expenses;
o operating performance or cash flow from investments falling below
projected levels;
o environmental regulations that significantly impact operations;
o changes in rates of return on overall debt and equity markets that
could adversely impact the value of pension assets and liabilities
and the Nuclear Decommissioning Trust Funds;
o ability to maintain satisfactory regulatory results;
o changes in political conditions, recession, acts of war or
terrorism;
o continued availability of insurance coverage at commercially
reasonable rates;
o involvement in lawsuits, including liability claims and commercial
disputes;
o inability to attract and retain management and other key employees,
particularly in consideration of the pending Merger with Exelon;
o acquisitions, divestitures, mergers, restructurings or strategic
initiatives that change PSEG's, PSE&G's, Power's and Energy
Holdings' structure;
o business combinations among competitors and major customers;
o general economic conditions, including inflation or deflation;
S-20
o regulatory issues that significantly impact operations;
o changes to accounting standards or accounting principles generally
accepted in the U.S., which may require adjustments to financial
statements;
o changes in tax laws and regulations;
o ability to recover investments or service debt as a result of any of
the risks or uncertainties mentioned herein;
o ability to obtain adequate and timely rate relief;
o energy transmission constraints or lack thereof;
o adverse changes in the market for energy, capacity, natural gas,
emissions credits, congestion credits and other commodity prices,
especially during extreme price movements for natural gas and power;
o surplus of energy capacity and excess supply;
o substantial competition in the worldwide energy markets;
o inability to effectively manage portfolios of electric generation
assets, gas supply contracts and electric and gas supply
obligations;
o margin posting requirements, especially during significant price
movements for natural gas and power;
o availability of fuel and timely transportation at reasonable prices;
o effects on competitive position of actions involving competitors or
major customers;
o changes in product or sourcing mix;
o delays, cost escalations or unsuccessful acquisitions, construction
and development;
o changes in regulation and safety and security measures at nuclear
facilities;
o changes in political regimes in foreign countries;
o international developments negatively impacting business;
o changes in foreign currency exchange rates;
o deterioration in the credit of lessees and their ability to
adequately service lease rentals; and
o ability to realize tax benefits.
In addition, the risks and uncertainties related to the proposed Merger as
set forth beginning on page 35 of our Joint Merger Proxy under the caption
"Forward-Looking Statements" also could cause actual results to differ
materially from those anticipated.
All of the forward-looking statements made in this prospectus supplement,
the accompanying prospectus and the documents incorporated by reference in this
prospectus supplement and the accompanying 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 securities, we are not making,
and you should not infer, any representation about the likely existence of any
particular future set of facts or circumstances. The forward-looking statements
contained in this prospectus supplement, the accompanying prospectus and the
documents incorporated by reference in this prospectus supplement and the
accompanying prospectus are intended to qualify for the safe harbor provisions
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended.
S-21
RATIO OF EARNINGS TO FIXED CHARGES
Our ratios of earnings to fixed charges for each of the periods indicated
is as follows:
(unaudited) Years Ended December 31,
Three Months Ended ---------------------------------------
March 31, 2005 2000 2001 2002 2003 2004
------------------ ---- ---- ---- ---- ----
Ratios of Earnings to Fixed Charges...... 2.71 2.67 2.14 1.58 2.29 2.14
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose earnings consist of pre-tax income from
continuing operations excluding extraordinary items, plus the amount of fixed
charges adjusted to exclude the amount of any interest capitalized during the
period; and the actual amount of any preferred stock dividend requirements of
majority-owned subsidiaries which were included in such fixed charges amount but
not deducted in the determination of pre-tax income. Fixed charges consist of:
interest, whether expensed or capitalized; amortization of debt discount,
premium and expense; an estimate of interest implicit in rentals; and preferred
securities dividend requirements of subsidiaries and preferred stock dividends,
increased to reflect our pre-tax earnings requirement.
S-22
USE OF PROCEEDS
We are remarketing $ aggregate liquidation amount of preferred
trust securities on behalf of holders of Corporate Units and holders of
preferred trust securities held separately from Corporate Units, if any, who
elect to participate in the remarketing. We will not receive any cash proceeds
from the remarketing of the preferred trust securities. Instead, the proceeds of
the remarketing will be used as follows:
o $ of the proceeds (which is equal to the treasury portfolio
purchase price described under "Remarketing") will be used to
purchase the treasury portfolio (described under "Remarketing") that
will then be pledged to us, on behalf of holders of Corporate Units,
as security against the purchase contract obligations of such
holders;
o $ of the proceeds (which is equal to the separate preferred
securities purchase price described under "Remarketing") will be
remitted to The Bank of New York, as the custodial agent, for
payment to the holders of preferred trust securities held separately
from Corporate Units, if any, who have elected to participate in the
remarketing;
o $ of the proceeds, which equals the lesser of (i) 25 basis
points (0.25%) of the sum of the treasury portfolio purchase price
and the separate preferred securities purchase price, if any, and
(ii) the amount of the proceeds, if any, in excess of the sum of the
treasury portfolio purchase price and the separate preferred
securities purchase price, if any, will be deducted and retained by
the remarketing agents as a remarketing fee;
o any proceeds from the remarketing of preferred trust securities that
are components of the Corporate Units remaining after deducting the
treasury portfolio purchase price and the remarketing fee
attributable to such preferred trust securities will be remitted to
Wachovia Bank, National Association, as the purchase contract agent,
for payment to the holders of the Corporate Units; and
o any proceeds from the remarketing of preferred trust securities held
separately from the Corporate Units remaining after deducting the
separate preferred securities purchase price and the remarketing fee
attributable to such preferred trust securities will be remitted to
The Bank of New York, as the custodial agent, for payment to the
holders of such remarketed preferred trust securities.
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DESCRIPTION OF THE PREFERRED TRUST SECURITIES
The preferred trust securities have been issued according to the terms of
the amended and restated trust agreement which has been qualified as an
indenture under the Trust Indenture Act. We refer to the amended and restated
trust agreement, as amended from time to time, as the "declaration." The
property trustee, Wachovia Bank, National Association, acts as trustee for the
preferred trust securities under the declaration for purposes of compliance with
the provisions of the Trust Indenture Act. The terms of the preferred trust
securities include those stated in the declaration and those made part of the
declaration by the Trust Indenture Act. We believe that all of the material
provisions of the preferred trust securities and the declaration are set forth
below. However, because the description below is a summary, it is not
necessarily complete, and reference is made to the copy of the declaration,
including the definitions, which is filed as an exhibit to or incorporated by
reference in the registration statement of which the accompanying prospectus
forms a part. Whenever particular defined terms are referred to in this
prospectus supplement, the definitions of those defined terms are incorporated
by reference in this prospectus supplement. The following description of the
terms of the preferred trust securities supplements and, to the extent
inconsistent with, replaces the description of the general terms of the
preferred trust securities contained in the accompanying prospectus.
In this section, references to "PSEG," "we," "our" and "us" mean Public
Service Enterprise Group Incorporated excluding, unless otherwise expressly
stated or the context otherwise requires, its subsidiaries.
Overview
The declaration authorizes the administrative trustees to issue on behalf
of the trust the preferred trust securities and the common trust securities,
which we refer to collectively as the trust securities, representing undivided
beneficial ownership interests in the assets of the trust. For so long as the
preferred trust securities remain outstanding, we will own, directly or
indirectly, all of the common trust securities. The common trust securities rank
on a parity, and related payments will be made on a proportionate basis, with
the preferred trust securities. However, upon the occurrence and during the
continuance of an event of default under the indenture relating to our senior
deferrable notes, which we refer to as an indenture event of default, the rights
of the holders of the common trust securities to receive distributions and
payments upon liquidation, redemption and otherwise will be subordinated to the
rights of the holders of the preferred trust securities. The declaration does
not permit the issuance by the trust of any securities other than the trust
securities or the incurrence of any indebtedness by the trust.
Under the declaration, the property trustee holds the senior deferrable
notes purchased by the trust for the benefit of the holders of the trust
securities. The payment of distributions out of money held by the trust, and
payments upon redemption of the preferred trust securities or liquidation of the
trust, are guaranteed by us to the extent described under "Description of the
Guarantee" in this prospectus supplement. The guarantee, when taken together
with our obligations under the senior deferrable notes and the indenture and our
obligations under the declaration, and our obligation to pay costs, expenses,
debts and liabilities of the trust other than with respect to the preferred
trust securities, provides a full and unconditional guarantee of amounts due on
the preferred trust securities. Wachovia Bank, National Association, the
guarantee trustee, holds the guarantee for the benefit of the holders of the
preferred trust securities. The guarantee does not cover payment of
distributions when the trust does not have sufficient available funds to pay
those distributions. In that case, except in the limited circumstances in which
the holder may take direct action, the remedy of a holder of preferred trust
securities is to vote to direct the property trustee to enforce the property
trustee's rights under the senior deferrable notes.
Following the successful remarketing of the trust preferred securities as
contemplated by this prospectus supplement, the preferred trust securities will
be represented by one or more global preferred trust securities deposited with,
or on behalf of, The Depository Trust Company, as depositary, and registered in
the name of Cede & Co., its nominee, and payments on those preferred trust
securities will be made to the depositary, a successor depositary or, in the
event no depositary is used, to a paying agent for the preferred trust
securities. This means that you will not be entitled to receive a certificate
for the preferred trust securities that you purchase except under the limited
circumstances described below under "--Book-Entry Clearance and Settlement."
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Distributions
Following the successful remarketing of the trust preferred securities as
contemplated by this prospectus supplement, distributions on the preferred trust
securities will accumulate at a rate per year of % of the liquidation amount
of $50 from August 8, 2005. The amount of the distribution payable for any
distribution period will be computed on the basis of a 360-day year of twelve
30-day months.
Distributions on the preferred trust securities will be cumulative and
will accumulate from August 8, 2005 and will be payable semi-annually in arrears
on May 16 and November 16 of each year, commencing November 16, 2005 when, as
and if funds are available for payment. If any date on which distributions on
the preferred trust securities are to be made is not a business day, payment of
the distributions payable on that date will be made on the next succeeding day
that is a business day, without any interest or other payment in respect of that
delay, but if the next succeeding business day is in the next calendar year, the
payment shall be made on the immediately preceding business day, in each case
with the same force and effect as if made on that date. As used in this
prospectus supplement, "business day" means any day other than a Saturday or a
Sunday or any other day on which banking institutions in The City of New York
are permitted or required by any applicable law to close.
The trust must pay distributions on the preferred trust securities on the
dates payable to the extent that it has funds available in the property account
for the payment of those distributions. The trust's funds available for
distribution to you as a holder of the preferred trust securities will be
limited to payments received from us on our senior deferrable notes. Therefore,
the trust will defer payment of distributions on the preferred trust securities
to the extent that we have deferred interest payments on our senior deferrable
notes.
Distributions on the preferred trust securities will be payable to holders
as they appear on the books and records of the trust on the relevant record
dates. As long as the preferred trust securities remain in book-entry only form,
the record dates will be one business day prior to the relevant payment dates.
Distributions will be paid by the trust through the property trustee, who will
hold amounts received in respect of our senior deferrable notes in the property
account for your benefit. Subject to any applicable laws and regulations and the
provisions of the declaration, each payment will be made as described under
"--Book-Entry Clearance and Settlement" below. With respect to preferred trust
securities not in book-entry form, the administrative trustees shall have the
right to select relevant record dates, which shall be at least one business day
but not more than 60 business days prior to the relevant payment dates.
Tax Event Redemption
The senior deferrable notes are redeemable at our option, in whole but not
in part, on not less than 30 days' nor more than 60 days' prior written notice,
upon the occurrence and continuation of a tax event under the circumstances
described under "Description of the Senior Deferrable Notes--Tax Event
Redemption." If we redeem our senior deferrable notes upon the occurrence and
continuation of a tax event, the proceeds from that redemption shall
simultaneously be applied on a proportionate basis to redeem preferred trust
securities having an aggregate liquidation amount equal to the aggregate
principal amount of the senior deferrable notes so redeemed at a redemption
price, per preferred trust security, equal to the redemption amount plus accrued
and unpaid distributions, if any, to the tax event redemption date. Those
proceeds will be payable in cash to the holders of the preferred trust
securities.
Redemption Procedures
If the trust gives a notice of redemption, which will be irrevocable, in
respect of all of the preferred trust securities, then, by 12:00 noon, New York
City time, on the redemption date, the trust will irrevocably deposit with the
depositary funds sufficient to pay the redemption price, but only if we have
paid to the property trustee a sufficient amount of cash in connection with the
related redemption or maturity of our senior deferrable notes. The trust will
give the depositary irrevocable instructions and authority to pay the redemption
price to the holders of the preferred trust securities called for redemption.
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If notice of redemption has been given and funds deposited as required,
then, immediately prior to the close of business on the date of the deposit,
distributions will cease to accumulate and all rights of holders of those
preferred trust securities called for redemption will cease, except for the
right of the holders of those preferred trust securities to receive the
redemption price without interest on the redemption date.
If any date fixed for redemption of preferred trust securities is not a
business day, then payment of the redemption price payable on that date will be
made on the next succeeding day that is a business day, without any interest or
other payment in respect of any delay, except that if the next succeeding
business day falls in the next calendar year, the payment will be made on the
immediately preceding business day.
Distribution of the Senior Deferrable Notes
We will have the right at any time to dissolve the trust and, after
satisfaction, or reasonable provision for satisfaction, of liabilities of
creditors of the trust as provided by applicable law, to cause our senior
deferrable notes to be distributed to the holders of the trust securities, but
only if such dissolution does not result in a taxable event to holders of the
preferred trust securities. As of the date of any distribution of senior
deferrable notes upon dissolution of the trust,
o the preferred trust securities will no longer be deemed to be
outstanding,
o with respect to any preferred trust securities held in book-entry
form, the depositary or its nominee, as the record holder of the
preferred trust securities, will receive a registered global
certificate or certificates representing our senior deferrable notes
to be delivered by us upon the distribution,
o any certificates representing preferred trust securities not held by
the depositary or its nominee will be deemed to represent our senior
deferrable notes having an aggregate principal amount equal to the
aggregate liquidation amount of, with an interest rate identical to
the distribution rate of, and accrued and unpaid interest equal to
accrued and unpaid distributions on, those preferred trust
securities until the certificates are presented to us or our agent
for transfer or reissuance,
o we will use our best efforts to list the senior deferrable notes on
any exchange on which the preferred trust securities are then
listed, and
o all rights of holders of preferred trust securities, other than the
right to receive the senior deferrable notes, will cease.
We cannot predict the market prices for our senior deferrable notes that
may be distributed in exchange for the preferred trust securities if a
dissolution of the trust were to occur. Accordingly, the senior deferrable notes
that an investor may receive if a dissolution of the trust were to occur may
trade at a discount to the price that the investor paid to purchase the
preferred trust securities in this remarketing.
Declaration Events of Default
An indenture event of default constitutes an event of default under the
declaration, which we refer to as a declaration event of default. However, under
the declaration, the holder of common trust securities will be deemed to have
waived any declaration event of default with respect to the common trust
securities until all declaration events of default with respect to the preferred
trust securities have been cured, waived or otherwise eliminated. Until any
declaration events of default with respect to the preferred trust securities
have been so cured, waived or otherwise eliminated, the property trustee will be
deemed to be acting solely on behalf of the holders of the preferred trust
securities. Only the holders of the preferred trust securities will have the
right to direct the property trustee with respect to particular matters under
the declaration and, therefore, the indenture. If a declaration event of default
with respect to the preferred trust securities is waived by holders of preferred
trust securities, the waiver will also constitute the waiver of the declaration
event of default with respect to the common trust securities without any further
act, vote or consent of the holders of the common trust securities.
If the property trustee fails to enforce its rights under the declaration
or our senior deferrable notes in respect of an indenture event of default after
a holder of preferred trust securities has made a written request therefor, any
holder of preferred trust securities may, to the fullest extent permitted by
applicable law, institute a legal
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proceeding against us to enforce the property trustee's rights under the
declaration or our senior deferrable notes without first proceeding against the
property trustee or any other person or entity. Notwithstanding the above, if a
declaration event of default has occurred and is continuing and that event is
attributable to our failure to pay the principal of, or interest on, our senior
deferrable notes on the date that interest or principal is otherwise payable,
then you, as a holder of preferred trust securities, may directly institute a
proceeding against us, which we refer to as a direct action, after the
respective due date specified in the senior deferrable notes for enforcement of
payment to you directly of the principal of or interest on the senior deferrable
notes having a principal amount equal to the aggregate liquidation amount of
your preferred trust securities. In connection with the direct action, we shall
have the right under the indenture to set off any payment made to you. The
holders of preferred trust securities will not be able to exercise directly any
other remedy available to the holders of the senior deferrable notes.
Upon the occurrence of a declaration event of default, the property
trustee, as the sole holder of the senior deferrable notes, will have the right
under the indenture to declare the principal of and interest on the senior
deferrable notes to be immediately due and payable. We and the trust are each
required to file annually with the property trustee an officers' certificate as
to our compliance with all conditions and covenants under the declaration.
Book-Entry Clearance and Settlement
The preferred trust securities will be held as one or more
fully-registered global preferred trust securities certificates representing the
total aggregate number of preferred trust securities. DTC will act as securities
depositary for the preferred trust securities, and the preferred trust
securities will be issued only as fully-registered securities registered in the
name of Cede & Co., the depositary's nominee. However, under some circumstances,
the administrative trustees with our consent may decide not to use the system of
book-entry transfers through DTC with respect to the preferred trust securities.
In that case, certificates for the preferred trust securities will be printed
and delivered to the holders.
The laws of some jurisdictions require that some purchasers of securities
take physical delivery of securities in definitive form. These laws may impair
the ability to transfer beneficial interests in the global preferred trust
securities.
Purchases of preferred trust securities within the depositary's system
must be made by or through direct participants, which will receive a credit for
the preferred trust securities on the depositary's records. The beneficial
ownership interest of each actual purchaser of each preferred trust security is
in turn to be recorded on the direct and indirect participants' records.
Beneficial owners will not receive written confirmation from the depositary of
their purchases, but beneficial owners are expected to receive written
confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the direct or indirect participants through
which the beneficial owners purchased preferred trust securities. Transfers of
ownership interests in the preferred trust securities are to be accomplished by
entries made on the books of participants acting on behalf of beneficial owners.
Beneficial owners will not receive certificates representing their ownership
interests in the preferred trust securities, except if use of the book-entry
system for the preferred trust securities is discontinued.
The depositary has no knowledge of the actual beneficial owners of the
preferred trust securities. The depositary's records reflect only the identity
of the direct participants to whose accounts those preferred trust securities
are credited, which may or may not be the beneficial owners. The participants
will remain responsible for keeping account of their holdings on behalf of their
customers.
So long as the depositary or its nominee is the registered holder of
global preferred trust securities, the depositary or the nominee will be
considered the sole owner or holder of the preferred trust securities
represented thereby for all purposes under the declaration and the preferred
trust securities. No beneficial owner of an interest in global preferred trust
securities will be able to transfer that interest except in accordance with the
depositary's applicable procedures, in addition to those provided for under the
declaration.
The depositary has advised us that it will take any action permitted to be
taken by a holder of preferred trust securities, including the presentation of
preferred trust securities for exchange, only at the direction of one or more
participants to whose account the depositary's interests in the global preferred
trust securities are credited and only
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in respect of the portion of the liquidation amount of preferred trust
securities as to which such participant or participants has or have given such
directions. However, if there is a declaration event of default under the
preferred trust securities, the depositary will exchange the global preferred
trust securities for certificated securities, which it will distribute to its
participants.
Conveyance of notices and other communications by the depositary to direct
participants and indirect participants and by direct participants and indirect
participants to beneficial owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements that may be in force from
time to time.
Although voting with respect to the preferred trust securities is limited,
in those cases in which a vote is required, neither the depositary nor Cede &
Co. will itself consent or vote with respect to preferred trust securities.
Under its usual procedures, the depositary would mail an omnibus proxy to the
trust as soon as possible after the record date. The omnibus proxy assigns Cede
& Co.'s consenting or voting rights to those direct participants to whose
accounts the preferred trust securities are credited on the record date. The
direct participants are identified in a listing attached to the omnibus proxy.
Distribution and other payments on the global preferred trust securities
will be made to the depositary in immediately available funds. The depositary's
practice is to credit direct participants' accounts on the relevant payment date
in accordance with their respective holdings shown on the depositary's records
unless the depositary has reason to believe that it will not receive payments on
that payment date. Payments by participants to beneficial owners will be
governed by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
street name. Those payments will be the responsibility of the participant and
not of the depositary, the trust or us, subject to any statutory or regulatory
requirements to the contrary that may be in force from time to time. Payment of
distributions and other amounts in respect of the global preferred trust
securities to the depositary is the responsibility of the trust, disbursement of
such payments to direct participants is the responsibility of the depositary,
and disbursement of those payments to the beneficial owners is the
responsibility of direct and indirect participants.
Except as provided here, a beneficial owner of an interest in global
preferred trust securities will not be entitled to receive physical delivery of
preferred trust securities in certificated form. Accordingly, each beneficial
owner must rely on the procedures of the depositary to exercise any rights under
the global preferred trust securities.
Although the depositary has agreed to the above procedure to facilitate
transfer of beneficial interests in the global preferred trust securities among
participants, the depositary is under no obligation to perform or continue to
perform these procedures and these procedures may be discontinued at any time.
Neither us, the trust nor any trustee will have any responsibility for the
performance by the depositary or its participants or indirect participants under
the rules and procedures governing the depositary. The depositary may
discontinue providing its services as securities depositary with respect to the
preferred trust securities at any time by giving reasonable notice to the trust.
Under these circumstances, if a successor depositary is not obtained, preferred
trust securities certificates are required to be printed and delivered to
holders. Additionally, if a declaration event of default were to occur or the
administrative trustees, with our consent, decide to discontinue use of the
system of book-entry transfers through the depositary or any successor
depositary, with respect to the preferred trust securities, certificates for the
preferred trust securities will be printed and delivered to holders. In each of
the above circumstances, we will appoint a paying agent with respect to the
preferred trust securities. The information in this section concerning the
depositary and the depositary's book-entry system has been obtained from sources
that we and the trust believe to be reliable, but neither we nor the trust take
responsibility for its accuracy.
Registrar, Transfer Agent and Paying Agent
Payments in respect of the preferred trust securities represented by the
global certificates shall be made to the depositary. The depositary shall credit
the relevant accounts at the depositary on the applicable distribution dates. In
the case of certificated securities, distribution payments shall be made by
check mailed to the address of each holder of record as that address appears on
the register, while payments of the liquidation amount upon redemption shall be
made in immediately available funds against presentation and surrender.
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The property trustee will act as registrar, transfer agent and paying
agent for the preferred trust securities. The paying agent shall be permitted to
resign as paying agent upon 30 days' prior written notice to the trustees. If
Wachovia Bank, National Association shall no longer be the paying agent, the
administrative trustees shall appoint a successor to act as paying agent, which
shall be a bank or trust company.
Registration of transfers of preferred trust securities will be made
without charge by or on behalf of the trust. However, payment shall be made and
any indemnity as the trust or we may reasonably require shall be given in
respect of any tax or other government charge which may be imposed in relation
to it.
Miscellaneous
The administrative trustees are authorized and directed to operate the
trust in a way that the trust will not be required to register as an "investment
company" under the 1940 Act or be characterized as other than a grantor trust
for United States federal income tax purposes. We are authorized and directed to
conduct our affairs so that the senior deferrable notes will be treated as our
indebtedness for United States federal income tax purposes. In this connection,
we and the administrative trustees are authorized to take any action not
inconsistent with applicable law, the declaration, the certificate of trust of
the trust or our certificate of incorporation, that we and the administrative
trustees determine in our discretion to be necessary or desirable to achieve
that end, as long as that action does not adversely affect the interests of the
holders of the preferred trust securities or vary its terms in any material
respect.
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DESCRIPTION OF THE SENIOR DEFERRABLE NOTES
The following description is a summary of the terms of our senior
deferrable notes. It supplements the description of the debt securities in the
accompanying prospectus and, to the extent inconsistent with, replaces the
description in the accompanying prospectus. The senior deferrable notes were
issued under an indenture dated as of November 1, 1998, as supplemented from
time to time, between us and Wachovia Bank, National Association (formerly known
as First Union National Bank), as indenture trustee. The descriptions in this
prospectus supplement and the accompanying prospectus contain a description of
the material terms of the senior deferrable notes and the indenture but do not
purport to be complete, and reference is hereby made to the indenture (and any
supplemental indenture thereto) and the form of senior deferrable note that have
been filed as exhibits to or incorporated by reference in the registration
statement and to the Trust Indenture Act.
In this section, references to "PSEG," "we," "our" and "us" mean Public
Service Enterprise Group Incorporated excluding, unless otherwise expressly
stated or the context otherwise requires, its subsidiaries.
General
The senior deferrable notes are our direct, unsecured senior obligations
and rank without preference or priority among themselves and equally with all of
our existing and future unsecured and unsubordinated indebtedness. The senior
deferrable notes are limited in aggregate principal amount to $474,226,850, such
amount being the sum of the aggregate liquidation amounts of the preferred trust
securities and the common trust securities.
The senior deferrable notes are not subject to a sinking fund provision.
Unless a tax event redemption occurs, the entire principal amount of the senior
deferrable notes will mature and become due and payable, together with any
accrued and unpaid interest thereon, on November 16, 2007.
We have the right to dissolve the trust and cause the senior deferrable
notes to be distributed to the holders of the trust securities. If the trust is
dissolved (other than as a result of a tax event redemption), you will receive
your pro rata share of the senior deferrable notes held by the trust (after any
creditors of the trust have been paid).
If the senior deferrable notes are distributed to the holders of the trust
securities in liquidation of such holders' interests in the trust, the senior
deferrable notes will initially be issued in the form of one or more global
certificates deposited with the depositary. Under certain limited circumstances,
the senior deferrable notes may be issued in certificated form in exchange for
the global certificates. In the event that the senior deferrable notes are
issued in certificated form, the senior deferrable notes will be in
denominations of $50 and integral multiples thereof and may be transferred or
exchanged at the offices described below. Payments on senior deferrable notes
issued as global certificates will be made to the depositary, a successor
depositary or, in the event that no depositary is used, to a paying agent for
the senior deferrable notes. In the event the senior deferrable notes are issued
in certificated form, principal and interest will be payable, the transfer of
the senior deferrable notes will be registrable and the senior deferrable notes
will be exchangeable for senior deferrable notes of other denominations of a
like aggregate principal amount at the corporate trust office or agency of the
indenture trustee in the Borough of Manhattan, The City of New York; provided
that at our option, payment of interest may be made by check. Notwithstanding
the foregoing, so long as the holder of any senior deferrable notes is the
property trustee, we will make payment of principal of, and interest on, the
senior deferrable notes held by the property trustee in immediately available
funds at such place and to such account as may be designated by the property
trustee.
The indenture does not contain provisions that afford holders of the
senior deferrable notes protection in the event we are involved in a highly
leveraged transaction or other similar transaction that may adversely affect
such holders. We and the trust will treat the senior deferrable notes as our
indebtedness for all United States tax purposes. There is, however, no
statutory, administrative or judicial authority that directly addresses this
treatment.
Interest
Following the successful remarketing of the preferred trust securities as
contemplated by this prospectus supplement, each senior deferrable note will
bear interest at the rate of % per year from and including August 8, 2005.
Subject to the deferral provisions set forth in the next succeeding paragraph,
interest on the senior deferrable notes will be payable semi-annually in arrears
on May 16 and November 16 of each year, commencing
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November 16, 2005, to the persons in whose names such senior deferrable notes
are registered, subject to certain exceptions, at the close of business on the
business day preceding such interest payment date. In the event the senior
deferrable notes do not remain in book-entry only form, the record date will be
fifteen business days prior to each interest payment date. We refer to each date
on which interest is payable on the senior deferrable notes as an interest
payment date.
The amount of interest payable on the senior deferrable notes for any
interest payment period will be computed on the basis of a 360-day year of
twelve 30-day months. In the event that any date on which interest is payable on
the senior deferrable notes is not a business day, then payment of the interest
payable on such date will be made on the next day that is a business day (and
without any interest or other payment in respect of any such delay), except
that, if the next business day is in the next calendar year, then such payment
will be made on the preceding business day.
Option to Defer Interest Payments on the Senior Deferrable Notes
So long as no indenture event of default has occurred and is continuing,
we have the right under the indenture at any time during the term of the senior
deferrable notes to defer the payment of interest for a period not extending
beyond the maturity date or earlier redemption of the senior deferrable notes.
We refer to any such period of deferral as an "extension period." During an
extension period, the trust will no longer have sufficient funds to make
semi-annual distribution payments on the preferred trust securities, but such
distribution payments will continue to accrue. At the end of an extension
period, we must pay all interest then accrued and unpaid (together with accrued
interest at %, compounded on each succeeding interest payment date) to the
trust. At the end of an extension period, the trust will make all unpaid
distributions (together with accrued distribution payments at %, compounded
on each succeeding payment date) to holders of the preferred trust securities.
During any extension period, we may not take any of the prohibited actions
described under "--Covenants of PSEG." Prior to the expiration of any extension
period, we may further extend the extension period but not beyond the maturity
date or earlier redemption of the senior deferrable notes. Upon the termination
of any extension period and the payment of all amounts then due on any interest
payment date, we may elect to begin a new extension period, subject to the same
requirements as described above. No interest will be due and payable during an
extension period except that, at the end thereof, we at our option may pay on
any interest payment date all or any portion of the interest accrued during the
elapsed portion of the extension period. We must give the indenture trustee
written notice of our election to begin (or further extend) any extension period
at least ten business days prior to the earlier of:
o the date the interest on the senior deferrable notes would have been
payable except for the election to begin or extend the extension
period;
o the date the indenture trustee is required to give notice to any
securities exchange or to holders of the senior deferrable notes of
the record date or the date the interest is payable; and
o the record date.
The indenture trustee must give notice of our election to begin or
continue an extension period to the holders of the senior deferrable notes.
There is no limitation on the duration of an extension period or the number of
times that we may elect to begin an extension period.
Covenants of PSEG
We will covenant that during an extension period or during the continuance
of an indenture event of default, we will not:
o redeem, purchase, acquire, or make a liquidation payment with
respect to, any of our capital stock;
o declare or pay dividends or distributions in our capital stock;
o make any distribution on any security of a grantor trust which ranks
pari passu with the preferred trust securities or pay interest on
our senior debt with similar deferral provisions to the senior
deferrable notes; or
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o make any payment of principal, interest or premium, if any, on or
repay, repurchase or redeem any debt securities that rank
subordinate in right of payment to the senior deferrable notes or
make any guarantee payments with respect to any guarantee by us of
the debt of any subsidiary of ours if such guarantee ranks
subordinate in right of payment to the senior deferrable notes.
However, even during such circumstances, we may:
o purchase or acquire our capital stock in connection with the
satisfaction by us of our obligations under any employee or director
compensation or benefit plans, under our direct stock purchase and
dividend reinvestment plan, or pursuant to any contract or security
outstanding on the first day of any such event requiring us to
purchase our capital stock;
o reclassify our capital stock or exchange or convert one class or
series of our capital stock for another class or series of our
capital stock;
o purchase fractional interests in shares of our capital stock
pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged;
o redeem or repurchase any rights pursuant to a rights agreement; and
o make payments under the guarantee related to the preferred trust
securities.
In addition, as long as preferred trust securities issued by the trust are
outstanding, we will agree that we will:
o maintain, directly or indirectly, 100% ownership of the common
securities, except as permitted by the declaration;
o cause the trust to remain a statutory trust and not to voluntarily
dissolve, wind up, liquidate or be terminated, except as permitted
by the declaration;
o use commercially reasonable efforts to ensure that the trust will
not be an "investment company" required to be registered under the
1940 Act;
o not take any action that would be reasonably likely to cause the
trust to be classified as an association or a publicly traded
partnership taxable as a corporation for United States federal
income tax purposes; and
o pay all of the debts and obligations of the trust (other than with
respect to the securities issued by the trust) and all costs and
expenses of the trust and any and all taxes, duties, assessments or
governmental charges of whatever nature (other than withholding
taxes) imposed on the trust by the United States, or any other
taxing authority, so that the net amounts received and retained by
the trust after paying such expenses will be equal to the amounts
the trust would have received had no debts, obligations, costs,
expenses, taxes, duties, assessments or governmental charges been
incurred by or imposed on the trust.
Tax Event Redemption
If a tax event shall occur and be continuing, we may, at our option,
redeem the senior deferrable notes in whole but not in part. The redemption
price shall equal, for each senior deferrable note, the redemption amount plus
accrued and unpaid interest, including compound interest and expenses and taxes
of the trust, if any, to the date of redemption. If, following the occurrence of
a tax event, we exercise our option to redeem the senior deferrable notes, then
the proceeds of that redemption will be applied to redeem trust securities
having a liquidation amount equal to the principal amount of senior deferrable
notes to be paid, in accordance with their terms, at the redemption price. The
redemption price will be payable in cash to the holders of the preferred trust
securities and common trust securities.
Tax event means the receipt by the trust of an opinion of a nationally
recognized independent tax counsel experienced in such matters that, as a result
of,
(a) any amendment to, or change, including any announced prospective
change in, the laws or any regulations of the United States or any
political subdivision or taxing authority,
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(b) any amendment to or change in an interpretation or application
of these laws or regulations by any legislative body, court, governmental
agency or regulatory authority, or
(c) any interpretation or pronouncement that provides for a position
with respect to these laws or regulations that differs from the generally
accepted position on the date the trust securities are issued,
which amendment or change is effective or which interpretation or
pronouncement is announced on or after the date of issuance of the
preferred trust securities under the declaration, there is more than an
insubstantial risk that,
(a) interest payable by us on the senior deferrable notes is
not or, within 90 days of the date of the opinion will not be,
deductible, in whole or in part, by us for United States federal
income tax purposes,
(b) the trust is or, within 90 days of the date of the
opinion, will be subject to United States federal income tax with
respect to income received or accrued on the senior deferrable
notes, or
(c) the trust is or, within 90 days of the date of the
opinion, will be subject to more than a de minimis amount of taxes,
duties or other governmental charges.
Redemption amount means, for each senior deferrable note, the product of
o the principal amount of that senior deferrable note and
o a fraction whose numerator is the Treasury portfolio purchase price
and whose denominator is the applicable principal amount.
Applicable principal amount means the aggregate principal amount of the
senior deferrable notes corresponding to the aggregate liquidation amount of the
preferred trust securities outstanding on that tax event redemption date.
Solely for purposes of determining the redemption amount,
o Treasury portfolio means a portfolio of zero-coupon U.S. Treasury
securities consisting of:
o principal or interest strips of U.S. Treasury securities which
mature on or prior to November 15, 2007 in an aggregate amount
equal to the applicable principal amount; and
o with respect to each scheduled interest payment date on the
senior deferrable notes that occurs after the tax event
redemption date, interest or principal strips of the U.S.
Treasury securities which mature prior to that interest
payment date in an aggregate amount equal to the aggregate
interest payment that would be due on the applicable principal
amount of the senior deferrable notes on that date, and
o Treasury portfolio purchase price means the lowest aggregate price
quoted by a primary U.S. government securities dealer in The City of
New York to the quotation agent on the third business day
immediately preceding the tax event redemption date for the purchase
of the Treasury portfolio for settlement on the tax event redemption
date.
Quotation agent means
o Merrill Lynch, Pierce, Fenner & Smith Incorporated and its
respective successors; however, if Merrill Lynch, Pierce, Fenner &
Smith Incorporated ceases to be a primary Treasury dealer, we shall
substitute another primary Treasury dealer, and
o any other primary Treasury dealer selected by us.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the tax event redemption date to each holder of senior deferrable
notes to be redeemed at its registered address. Unless we default in payment of
the redemption price, on and after the tax event redemption date interest shall
cease to accrue on the redeemed senior deferrable notes.
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Additional Indenture Provisions Applicable to the Senior Deferrable Notes
As long as the senior deferrable notes are held by the trust, it will be
an event of default with respect to the senior deferrable notes if the trust
voluntarily or involuntarily dissolves, winds up its business or otherwise
terminates its existence except in connection with (1) the distribution of the
senior deferrable notes to holders of preferred trust securities and common
trust securities in liquidation of their interests in the trust, (2) the
redemption of all of the outstanding preferred trust securities and common trust
securities, or (3) certain mergers, consolidations or amalgamations, each as
permitted by the declaration.
Book-Entry Issuance
If distributed to holders of preferred trust securities in connection with
the involuntary or voluntary dissolution of the trust, the senior deferrable
notes will be issued in accordance with the procedures set forth in this
prospectus supplement under "Description of Preferred Trust
Securities--Overview" and "--Book-Entry Clearance and Settlement."
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DESCRIPTION OF THE GUARANTEE
The following description is a summary of the terms of the guarantee
agreement that has been executed and delivered by us for the benefit of the
holders of the preferred trust securities. It supplements the description of the
guarantee in the accompanying prospectus and, to the extent it is inconsistent,
replaces the description in the accompanying prospectus. The terms of the
guarantee are those set forth in the guarantee agreement and those made part of
the guarantee agreement by the Trust Indenture Act. The descriptions contained
in this prospectus supplement and the accompanying prospectus do not purport to
be complete, and reference is hereby made to the form of guarantee agreement
(including definitions of certain terms used therein) that has been filed as an
exhibit to or incorporated by reference in the registration statement.
In this section, references to "PSEG," "we," "our" and "us" mean Public
Service Enterprise Group Incorporated excluding, unless otherwise expressly
stated or the context otherwise requires, its subsidiaries.
General
To the extent described below, we will agree to pay the following amounts
in full if they are not paid by the trust:
o any accrued and unpaid distributions on the preferred trust
securities, to the extent we have made corresponding payments on our
senior deferrable notes to the property trustee;
o the redemption price for any preferred trust securities called for
redemption by the trust, including all accrued and unpaid
distributions to the date of redemption, to the extent we have made
corresponding payments on our senior deferrable notes to the
property trustee; and
o payments upon the dissolution, winding-up or termination of the
trust equal to the lesser of:
o the liquidation amount plus all accrued and unpaid
distributions on the preferred trust securities to the extent
the trust has funds legally available for those payments; and
o the amount of assets of the trust remaining legally available
for distribution to the holders of the preferred trust
securities in liquidation of the trust.
We will not be required to make these liquidation payments if:
o the trust distributes our senior deferrable notes to the holders of
the preferred trust securities in exchange for their preferred trust
securities; or
o the trust redeems the preferred trust securities in full upon the
maturity or redemption of our senior deferrable notes.
The guarantee is a guarantee from the time of issuance of the preferred
trust securities. We will be obligated to make guarantee payments when due,
regardless of any defense, right of set-off or counterclaim that the trust may
have or assert. We may satisfy our obligations to make guarantee payments either
by making payments directly to holders of the preferred trust securities or to
the guarantee trustee for remittance to the holders or by causing the trust to
make the relevant payments to the holders.
The guarantee only covers distributions and other payments on the
preferred trust securities if and to the extent we have made corresponding
payments on our senior deferrable notes to the property trustee. If we do not
make those corresponding payments:
o the property trustee will not make distributions or other payments
on the preferred trust securities;
o the trust will not have funds available for payments on the
preferred trust securities; and
o we will not be obligated to make guarantee payments.
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Covenants of PSEG
If we are in default on our guarantee payments or other payment
obligations under the guarantee, we will agree that, as long as any preferred
trust securities issued by the trust are outstanding, we will not make those
payments and distributions referred to above under "Description of the Senior
Deferrable Notes--Covenants of PSEG."
Status of the Guarantee
Our obligation to make guarantee payments is:
o unsecured;
o equal in right of payment to our unsecured senior liabilities or
unsecured senior guarantees entered into relating to our unsecured
senior liabilities;
o senior in right of payment to our subordinated liabilities or
subordinated guarantees entered into relating to our subordinated
liabilities; and
o senior to our equity.
The guarantee constitutes a guarantee of payment and not merely of
collection. This means that the guarantee trustee may institute a legal
proceeding directly against us to enforce its rights under the guarantee without
first instituting a legal proceeding against any other person or entity.
By your acceptance of the preferred trust securities, you agree to all of
the terms of the guarantee.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain of the United States federal income
tax considerations related to the purchase, ownership and disposition of the
preferred trust securities, but does not purport to be a complete analysis of
all the potential tax considerations relating thereto. This summary is based
upon the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations promulgated thereunder, administrative rulings and
judicial decisions as of the date hereof. These authorities may be changed,
possibly retroactively, so as to result in United States federal income tax
consequences different from those set forth below. We have not sought any ruling
from the Internal Revenue Service ("IRS") with respect to the statements made
and the conclusions reached in the following summary, and there can be no
assurance that the IRS will agree with such statements and conclusions.
This discussion is limited to holders that purchase preferred trust
securities in the remarketing and that hold the preferred trust securities as
capital assets (generally, property held for investment). This discussion also
does not address the tax considerations arising under the laws of any foreign,
state or local jurisdiction, or under United States federal estate or gift tax
laws. In addition, this discussion does not address all tax considerations that
may be applicable to a holder's particular circumstances or to holders that may
be subject to special tax rules, including, without limitation:
o holders subject to the alternative minimum tax;
o banks, insurance companies, or other financial institutions;
o foreign persons or entities (except to the extent specifically set
forth below);
o tax-exempt organizations;
o dealers in securities or commodities;
o traders in securities that elect to use a mark-to-market method of
accounting for their securities holdings;
o U.S. holders (as defined below) whose "functional currency" is not
the United States dollar;
o holders that hold preferred trust securities as a position in a
hedging transaction, "straddle," "conversion transaction,"
"integrated transaction" or other risk reduction transaction; or
o persons deemed to sell the preferred trust securities under the
constructive sale provisions of the Code.
In addition, if a partnership (including any entity treated as partnership
for United States federal tax purposes) or other pass-through entity holds
preferred trust securities, the tax treatment of a partner in the partnership or
owner of the applicable pass-through entity generally will depend upon the
status of the partner or owner and the activities of the partnership or
pass-through entity. If you are a partnership or pass-through entity, or a
partner or owner of a partnership or other pass-through entity, holding our
preferred trust securities, you should consult your tax advisor regarding the
tax consequences of the ownership and disposition of the preferred trust
securities.
No statutory, administrative or judicial authority directly addresses the
treatment of the preferred trust securities or instruments similar to the
preferred trust securities for United States federal income tax purposes. As a
result, no assurance can be given that the IRS will agree with the tax
consequences described herein. Each prospective investor is urged to consult its
tax advisor as to the particular tax consequences of purchasing, owning and
disposing of the preferred trust securities, including the application and
effect of United States federal, state, local and foreign tax laws.
Classification of the Senior Deferrable Notes, the Trust, and the Preferred
Trust Securities
Generally, characterization of an obligation as indebtedness for United
States federal income tax purposes is made at the time of the issuance of the
obligation. In connection with the issuance of the senior deferrable notes,
Ballard Spahr Andrews & Ingersoll, LLP, tax counsel to the Company and the trust
("Tax Counsel"), rendered a legal opinion generally to the effect that, under
then current law and assuming full compliance with the terms of the indenture
and certain other documents, the senior deferrable notes would be classified as
indebtedness for United States federal income tax purposes. Consistent with the
foregoing, we have treated and will continue to treat
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the senior deferrable notes in that manner and the remainder of this discussion
assumes that the senior deferrable notes will be so treated. It is possible that
the IRS will successfully assert that the senior deferrable notes are not
properly treated as indebtedness, in which case your tax consequences from the
ownership and disposition of the preferred trust securities will differ from
those described below. By acquiring preferred trust securities in the
remarketing, you will be deemed to have agreed to treat the senior deferrable
notes as indebtedness for United States federal income tax purposes.
Because of the manner in which the interest rate on the senior deferrable
notes is reset, the senior deferrable notes should be classified, and we have
treated and will continue to treat the senior deferrable notes for United States
federal income tax purposes, as contingent payment debt instruments subject to
the "noncontingent bond method" for accruing original issue discount, as set
forth in the applicable Treasury regulations (the "contingent payment debt
regulations"). We intend to treat the senior deferrable notes as such and the
remainder of this discussion assumes that the senior deferrable notes will be so
treated for United States federal income tax purposes. However, the proper
application of the contingent payment debt regulations to the senior deferrable
notes following the remarketing is uncertain in a number of respects, and no
assurance can be given that the IRS will not successfully assert that the senior
deferrable notes should be treated differently than as described below. A
different treatment of the senior deferrable notes could materially affect the
timing and character of income, gain or loss with respect to an investment in
the senior deferrable notes. Accordingly, we urge you to consult your tax
advisor regarding the United States federal income tax consequences of owning
the preferred trust securities and senior deferrable notes.
In connection with the issuance of the preferred trust securities, Tax
Counsel rendered a legal opinion generally to the effect that, under then
current law and assuming full compliance with the terms of the declaration and
certain other documents, the trust would be classified as a grantor trust and
not as a partnership or an association taxable as a corporation for United
States federal income tax purposes. As a result, each U.S. holder of preferred
trust securities will be treated as owning an undivided beneficial interest in
the senior deferrable notes held by the trust. Accordingly, you will be required
to include in your gross income your pro rata share of the income accruing on
the senior deferrable notes, as described below under "U.S. Holders--Interest
Accruals Based on Comparable Yield and Projected Payment Schedule" and to take
into account your pro rata share of any adjustments to accrued interest, as
described below under "U.S. Holders--Adjustments to Reflect the Actual Reset
Rate" and "U.S. Holders--Adjusted Tax Basis of the Preferred Trust Securities;
Additional Potential Adjustments."
The remainder of this discussion assumes that the senior deferrable notes
will be treated as contingent payment debt instruments subject to the contingent
payment debt regulations and that the preferred trust securities represent
undivided beneficial interests in the senior deferrable notes held by the trust
for United States federal income tax purposes.
U.S. Holders
The following is a summary of the United States federal income tax
consequences that will apply to you if you are a U.S. holder of preferred trust
securities. Certain consequences to "Non-U.S. holders" of preferred trust
securities are described under "--Non-U.S. Holders" below. You are a "U.S.
holder" if you are a holder of preferred trust securities, and you are:
o a citizen or resident of the United States as determined for federal
income tax purposes;
o a corporation (or any entity treated as corporation for United
States federal tax purposes) or partnership (or any entity treated
as partnership for United States federal tax purposes) created or
organized in or under the laws of the United States or any political
subdivision of the United States;
o an estate the income of which is subject to United States federal
income taxation regardless of its source; or
o a trust that (1) is subject to the supervision of a court within the
United States and the control of one or more United States persons
or (2) has a valid election in effect under applicable Treasury
Regulations to be treated as a United States person.
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Interest Accruals Based on Comparable Yield and Projected Payment Schedule
Under the contingent payment debt regulations (subject to the discussion
below), regardless of your method of accounting for United States federal income
tax purposes, interest income on the senior deferrable notes will accrue on a
constant-yield basis at an assumed yield (the "comparable yield") that was
determined at the time of the issuance of the senior deferrable notes, and, as
the owner of a preferred trust security, you are required to include a pro rata
share of such interest income in your gross income. You are also required to
take into account your pro rata share of any differences between the actual
payments received at the reset interest rate and the projected schedule of
payments we constructed at the time of the original issuance of the senior
deferrable notes, as more fully described below. The comparable yield for the
senior deferrable notes was based on the yield at which we could have issued, at
the time of issuance of the senior deferrable notes, a fixed-rate noncontingent
debt instrument with terms otherwise similar to those of the senior deferrable
notes. Solely for purposes of determining the amount of interest income that
accrues on the senior deferrable notes, we were required, at the time of
issuance of the senior deferrable notes, to construct a "projected payment
schedule" in respect of the senior deferrable notes representing a series of
payments the amount and timing of which would produce a yield to maturity on the
senior deferrable notes equal to the comparable yield. A difference between the
actual amount of a payment and the projected amount of a payment generally is
taken into account as an adjustment to interest income.
For United States federal income tax purposes, you generally are required
under the contingent payment debt regulations to use the comparable yield and
the projected payment schedule in determining interest accruals and adjustments
in respect of your interest in the senior deferrable notes, unless you timely
disclose and justify the use of a different comparable yield and projected
payment schedule to the IRS. However, there is uncertainty regarding the manner
in which the contingent payment debt regulations apply to the remarketing,
including whether there should be a change in the projected payment schedule and
the precise mechanics for determining the total amount and timing of the
adjustments to the interest accruals. For our own reporting purposes, we intend
not to change the original projected payment schedule created at the time of the
issuance of the senior deferrable notes. The following discussion assumes that
you will use this original projected payment schedule, as well.
Furthermore, assuming that you report your income in a manner consistent
with our position described below, the amount of income that you will recognize
in respect of the preferred trust securities generally should correspond to the
economic accrual of income on the preferred trust securities to you and the
amount of income you would have recognized if the senior deferrable notes were
not subject to the contingent payment debt regulations. No assurance can be
given that the IRS will agree with the application of the contingent payment
debt regulations to the remarketing in the manner described below.
The amount of interest on a senior deferrable note that accrues in an
accrual period is the product of the comparable yield on the senior deferrable
note (adjusted to reflect the length of the accrual period) and the adjusted
issue price of the senior deferrable note. The daily portions of interest in
respect of a senior deferrable note are determined by allocating to each day in
an accrual period the ratable portion of interest on the senior deferrable note
that accrues in the accrual period. The initial adjusted issue price of your
interest in the senior deferrable notes represented by a preferred trust
security acquired by you in the remarketing will equal $ per $50 principal
amount as of the date of the remarketing (the "initial adjusted issue price").
For any accrual period thereafter, the adjusted issue price will be (x) the sum
of the initial adjusted issue price of the senior deferrable note and all
interest previously accrued on such senior deferrable note starting from August
8, 2005 (disregarding any positive or negative adjustments described below,
including the adjustments reflecting the actual reset rate and additional
potential adjustments) minus (y) the total amount of the projected payments
scheduled to have been made on the senior deferrable note for all previous
accrual periods starting from August 8, 2005.
At the time of the issuance of the senior deferrable notes, we determined
that the comparable yield was 7.00% per annum, compounded semi-annually, and the
projected payment schedule for the senior deferrable notes, per $50 principal
amount, consisted of payments equal to $0.78 for each quarter ending after
November 16, 2002 and ending on or prior to August 16, 2005, $1.01 for the
period ending November 16, 2005, and $2.02 for each semi-annual period ending
after November 16, 2005. We also determined that the projected payment for the
senior deferrable notes, per $50 principal amount, at the maturity date was
$52.02 (which included the stated principal amount of the senior deferrable
notes as well as the final projected interest payment). Based on the comparable
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yield of 7.00% and the initial adjusted issue price of $ per $50 principal
amount, you will be required (regardless of your accounting method) to include
in gross income your pro rata share of the sum of the aggregate daily portions
of interest on the senior deferrable notes held by the trust for each day in the
taxable year on which you hold the preferred trust securities, adjusted to
reflect the actual reset rate, as discussed below.
Adjustments to Reflect the Actual Reset Rate
Following the remarketing of the preferred trust securities, the senior
deferrable notes will be subject to special rules that are applicable to
contingent payment debt instruments for which all of the contingent payments
have become fixed at the same time. Under these rules, you must take into
account your pro rata share of positive or negative adjustments to the projected
payment schedule in a reasonable manner over the period to which such
adjustments relate. Further, you must allocate in a reasonable manner any
difference between your purchase price for the preferred trust securities and
the adjusted issue price of the senior deferrable notes at the time you purchase
such preferred trust securities in the remarketing to daily portions of original
issue discount or projected payments over the remaining term of the senior
deferrable notes. However, there is uncertainty regarding the manner in which
these rules should apply to the senior deferrable notes after the remarketing,
including whether the projected payment schedule should be modified and the
method for determining the total amount and timing of the adjustments.
Based on the reset rate of %, actual payments on the senior deferrable
notes, per $50 principal amount, will be approximately $ for each semi-annual
payment date ending after November 16, 2005. Because these payments will differ
from the projected semi-annual payments of $2.02, you and we will be required to
account for these differences as a negative adjustment to interest accrued based
on the comparable yield of 7.00% in a reasonable manner over the period to which
they relate. For our own reporting purposes, we intend to treat the difference
of $ between the projected payment of $ and the actual payment of
approximately $ on the senior deferrable note as a negative adjustment to the
interest accrued (based on the 7.00% comparable yield) during each quarter. You
are not required to use the same method to account for the differences between
your pro rata share of the actual payments and the projected payment schedule so
long as you make these adjustments in a reasonable manner.
Adjusted Tax Basis of the Preferred Trust Securities; Additional Potential
Adjustments
Your initial adjusted tax basis in a preferred trust security acquired by
you in the remarketing will equal the amount that you pay for the preferred
trust security. Your adjusted tax basis in the preferred trust securities for
any accrual period following the remarketing will be (x) the sum of your initial
adjusted tax basis in the preferred trust securities and your pro rata share of
any interest previously accrued on the senior deferrable notes starting from
August 8, 2005 (disregarding any positive or negative adjustments, other than
those described immediately below) minus (y) the total amount of the projected
payments on the senior deferrable note for all previous accrual periods starting
from the remarketing date.
If your initial adjusted tax basis in a preferred trust security acquired
in the remarketing differs from your pro rata share of the adjusted issue price
of the senior deferrable notes on the date of your purchase, you will be
required to make additional negative or positive adjustments to interest accrued
in each period. You will take into account any difference between your initial
adjusted tax basis in the preferred trust security and your pro rata share of
the adjusted issue price of the senior deferrable notes on the date of your
purchase by reasonably allocating this difference to daily portions of interest
or to projected payments over the remaining term of the senior deferrable notes.
If your initial adjusted tax basis in a preferred trust security is greater than
your pro rata share of the adjusted issue price of the senior deferrable notes
on the date of your purchase, you will take the difference into account as a
negative adjustment to interest on the date the daily portion accrues or the
projected payment is made. If your initial adjusted tax basis in a preferred
trust security is less than your pro rata share of the adjusted issue price of
the senior deferrable notes on the date of your purchase, you will take the
difference into account as a positive adjustment to interest on the date the
daily portion accrues or the projected payment is made. Your adjusted tax basis
in your preferred trust security will be decreased by any such negative
adjustments and increased by any such
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positive adjustments. To the extent that a negative adjustment exceeds a
positive adjustment, such excess is a net negative adjustment that is not
subject to the two percent floor limitation imposed on miscellaneous deductions
under Section 67 of the Code.
Upon accruing interest income based on the comparable yield of 7.00% and
making positive and negative adjustments that reflect the actual reset rate as
described above under "--Adjustments to Reflect the Actual Reset Rate" and the
possible difference between your initial adjusted tax basis in the preferred
trust security and your pro rata share of the adjusted issue price of the senior
deferrable notes on the date of your purchase as described in the preceding
paragraph, the amount of income that you will recognize in respect of the
preferred trust securities generally should correspond to the economic accrual
of income on the preferred trust securities to you and the amount of income you
would have recognized if the senior deferrable notes were not subject to the
contingent payment debt regulations.
Sale, Exchange or Other Disposition of the Preferred Trust Securities
Upon a sale, exchange or other disposition of a preferred trust security
(including a redemption), you will generally recognize gain or loss equal to the
difference between the amount realized on the disposition and your adjusted tax
basis in the preferred trust security. Such gain or loss generally will be
capital gain or loss (except to the extent of your pro rata share of any
positive adjustment that you have not yet accrued and included in income, which
will be treated as interest income) and generally will be long-term capital gain
or loss if you held the preferred trust security for more than one year
immediately prior to such disposition. Long-term capital gains of individuals
are eligible for reduced rates of taxation. The deductibility of capital losses
is subject to limitations.
Tax Event Redemption of Preferred Trust Securities
A tax event redemption of a preferred trust security will be a taxable
event, and you will recognize gain or loss in the manner described above under
"--Sale, Exchange or Other Disposition of the Preferred Trust Securities."
Distribution of the Senior Deferrable Notes
Under current law, a distribution by the trust of the senior deferrable
notes generally will not be taxable. You will have an aggregate tax basis in the
senior deferrable notes received in the liquidation equal to your aggregate tax
basis in the preferred trust securities surrendered, and the holding period of
the distributed senior deferrable notes will include the period during which you
held the related preferred trust securities.
Non-U.S. Holders
The following discussion applies to you if you are a holder of preferred
trust securities that is not a U.S. holder (a "Non-U.S. holder"). Special rules
may apply to you if you are a "controlled foreign corporation," "passive foreign
investment company," or are otherwise subject to special treatment under the
Code. If you are or may be subject to these special rules, you should consult
your tax advisor to determine the particular United States federal, state and
local and other tax consequences that would apply to you. All payments on a
preferred trust security made to you and any gain realized on a sale, exchange
or other disposition of a preferred trust security will be exempt from United
States federal income and withholding tax, provided that:
o you do not own, actually or constructively, 10% or more of the total
combined voting power of all classes of our stock entitled to vote;
o you are not a controlled foreign corporation related, directly or
indirectly, to us through stock ownership;
o you are not a bank receiving certain types of interest;
o you have fulfilled the certification requirement described below;
o such payments are not effectively connected with the conduct by you
of a trade or business in the United States; and
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o in the case of gain realized on the sale, exchange or other
disposition of a preferred trust security, if you are a nonresident
alien individual, you are not present in the United States for 183
or more days in the taxable year of the disposition where certain
other conditions are met.
The certification requirement referred to above will be fulfilled if you
certify to us on IRS Form W-8BEN, under penalties of perjury, that you are not a
United States person and provide your name and address.
If you are engaged in a trade or business in the United States, and if
payments on a preferred trust security are effectively connected with the
conduct of this trade or business, you will generally be taxed in the same
manner as a U.S. holder (see "--U.S. Holders" above), except that you will be
required to provide a properly executed IRS Form W-8ECI in order to claim an
exemption from withholding tax. You should consult your tax advisor with respect
to other tax consequences of the ownership of the preferred trust securities,
including the possible imposition of a 30% branch profits tax.
Information Reporting and Backup Withholding
If you are a U.S. holder, information reporting requirements generally
will apply to all payments we make to you and to the proceeds paid to you from a
sale of preferred trust securities, unless you are an exempt recipient such as a
corporation. Backup withholding tax will apply to those payments if you fail to
provide a taxpayer identification number or a certification of exempt status, or
if you fail to report interest income in full.
If you are a Non-U.S. holder, we must report annually to the IRS and to
you the amount of payments we make to you and the tax withheld with respect to
such payments, regardless of whether withholding is required. Copies of the
information returns reporting such payments and withholding may also be made
available to the tax authorities in the country in which you reside under the
provisions of an applicable income tax treaty. In general, you will not be
subject to backup withholding regarding payments we make to you provided that we
do not have actual knowledge or reason to know that you are a United States
person and we have received from you the statement described above under
"--Non-U.S. Holders." In addition, you will be subject to information reporting
and, depending on the circumstances, backup withholding with respect to the
proceeds of the sale of a preferred trust security made within the United States
or conducted through a United States-related intermediary, unless the payor
receives the statement described above and does not have actual knowledge or
reason to know that you are a U.S. holder, or you otherwise establish and
exemption.
Regardless of whether you are a U.S. holder or a Non-U.S. holder, any
amounts withheld under the backup withholding rules will be allowed as a credit
against your United States federal income tax liability and may entitle you to a
refund, provided that you timely furnish the required information to the IRS.
S-42
ERISA CONSIDERATIONS
The following is a summary of certain considerations associated with the
purchase of the preferred trust securities by employee benefit plans that are
subject to Title I of the U.S. Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), plans, individual retirement accounts and other
arrangements that are subject to Section 4975 of the Code or provisions under
any federal, state, local, non-U.S. or other laws or regulations that are
similar to such provisions of the Code or ERISA (collectively, "similar laws"),
and entities whose underlying assets are considered to include "plan assets" of
such plans, accounts and arrangements (each, a "plan").
General Fiduciary Matters
ERISA and the Code impose certain duties on persons who are fiduciaries of
a plan subject to Title I of ERISA or Section 4975 of the Code and prohibit
certain transactions involving the assets of a plan and its fiduciaries or other
interested parties. Under ERISA and the Code, any person who exercises any
discretionary authority or control over the administration of such a plan or the
management or disposition of the assets of such a plan, or who renders
investment advice for a fee or other compensation to such a plan, is generally
considered to be a fiduciary of the plan.
In considering an investment in the preferred trust securities of a
portion of the assets of any plan, a fiduciary should determine whether the
investment is in accordance with the documents and instruments governing the
plan and the applicable provisions of ERISA, the Code or any similar law
relating to a fiduciary's duties to the plan including, without limitation, the
prudence, diversification, delegation of control and prohibited transaction
provisions of ERISA, the Code and any other applicable similar laws.
Any insurance company proposing to invest assets of its general account in
the preferred trust securities should consider the extent that such investment
would be subject to the requirements of ERISA in light of the U.S. Supreme
Court's decision in John Hancock Mutual Life Insurance Co. v Harris Trust and
Savings Bank and under any subsequent legislation or other guidance that has or
may become available relating to that decision, including the enactment of
Section 401(c) of ERISA by the Small Business Job Protection Act of 1996 and the
regulations promulgated thereunder.
Prohibited Transaction Issues
Section 406 of ERISA and Section 4975 of the Code prohibit plans subject
to Title I of ERISA or Section 4975 of the Code from engaging in specified
transactions involving plan assets with persons or entities who are "parties in
interest," within the meaning of ERISA, or "disqualified persons," within the
meaning of Section 4975 of the Code, unless an exemption is available. A party
in interest or disqualified person who engaged in a non-exempt prohibited
transaction may be subject to excise taxes and other penalties and liabilities
under ERISA and the Code. In addition, the fiduciary of the plan that engaged in
such a non-exempt prohibited transaction may be subject to penalties and
liabilities under ERISA and the Code.
Whether or not the underlying assets of the trust or PSEG were deemed to
be "plan assets," as described below, the acquisition and/or holding of the
preferred trust securities by a plan with respect to which PSEG, the trust, the
remarketing agents or any of their respective affiliates is considered a party
in interest or a disqualified person may constitute or result in a direct or
indirect prohibited transaction under Section 406 of ERISA and/or Section 4975
of the Code, unless the investment is acquired and is held in accordance with an
applicable statutory, class or individual prohibited transaction exemption. In
this regard, the U.S. Department of Labor (the "DOL") has issued prohibited
transaction class exemptions, or "PTCEs," that may apply to the acquisition and
holding of the preferred trust securities. These class exemptions include,
without limitation, PTCE 84-14 respecting transactions determined by independent
qualified professional asset managers, PTCE 90-1 respecting insurance company
pooled separate accounts, PTCE 91-38 respecting bank collective investment
funds, PTCE 95-60 respecting life insurance company general accounts and PTCE
96-23 respecting transactions determined by in-house asset managers, although
there can be no assurance that all of the conditions of any such exemptions will
be satisfied.
S-43
Because of the foregoing, the preferred trust securities should not be
purchased or held by any person investing "plan assets," as described below, of
any plan, if such purchase and holding will constitute a non-exempt prohibited
transaction under ERISA and the Code or similar violation of any applicable
similar laws.
Plan Asset Issues
ERISA and the Code do not define "plan assets." However, regulations (the
"Plan Asset Regulations") promulgated under ERISA by the DOL generally provide
that when a plan subject to Title I of ERISA or Section 4975 of the Code
acquires an equity interest in an entity that is neither a "publicly-offered
security" nor a security issued by an investment company registered under the
Investment Company Act of 1940, the plan's assets include both the equity
interest and an undivided interest in each of the underlying assets of the
entity unless it is established either that equity participation in the entity
by "benefit plan investors" is not significant or that the entity is an
"operating company," in each case as defined in the Plan Asset Regulations. For
purposes of the Plan Asset Regulations, equity participation in an entity by
benefit plan investors will not be significant if they hold, in the aggregate,
less than 25% of the value of any class of such entity's equity, excluding
equity interests held by persons (other than benefit plan investors) with
discretionary authority or control over the assets of the entity or who provide
investment advice for a fee (direct or indirect) with respect to such assets,
and any affiliates thereof. For purposes of this 25% test, "benefit plan
investors" include all employee benefit plans, whether or not subject to ERISA
or the Code, including "Keogh" plans, individual retirement accounts and pension
plans maintained by foreign corporations, as well as any entity whose underlying
assets are deemed to include "plan assets" under the Plan Asset Regulations
(e.g., an entity of which 25% or more of the value of any class of equity
interests is held by benefit plan investors and which does not satisfy another
exception under the Plan Asset Regulations).
There can be no assurance that equity participation by benefit plan
investors in the trust will not be significant and it is not anticipated that
the trust will qualify as an operating company or register as an investment
company under the Investment Company Act of 1940. Nor can there be any assurance
that the trust will qualify for any other exception to the 25% test.
Plan Asset Consequences
If the assets of the trust were deemed to be "plan assets" under ERISA,
this would result, among other things, in (i) the application of the prudence
and other fiduciary responsibility standards of ERISA to investments made by the
trust, and (ii) the possibility that certain transactions in which the trust
might seek to engage constitute "prohibited transactions" under ERISA and the
Code.
Representations
Accordingly, by acceptance of the preferred trust securities, each
purchaser and subsequent transferee of the preferred trust securities will be
deemed to have represented and warranted that either (i) no portion of the
assets used by such purchaser or transferee to acquire the preferred trust
securities constitutes assets of any plan or (ii) the purchase and holding of
the preferred trust securities by such purchaser or transferee will not
constitute a non-exempt prohibited transaction under Section 406 of ERISA or
Section 4975 of the Code or similar violation under any applicable similar laws.
Due to the complexity of these rules and the penalties that may be imposed
upon persons involved in non-exempt prohibited transactions, it is particularly
important that fiduciaries, or other persons considering purchasing the
preferred trust securities on behalf of, or with the assets of, any plan,
consult with their counsel regarding the potential applicability of ERISA,
Section 4975 of the Code and any similar laws to such investment and whether an
exemption would be applicable to the purchase and holding of the preferred trust
securities.
S-44
REMARKETING
Under the terms and conditions contained in the remarketing agreement,
dated as of September 10, 2002, among us, the trust, Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Wachovia Bank, National Association, as
supplemented by the supplemental remarketing agreement, dated as of August ,
2005, among us, the trust, Banc of America Securities LLC, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Credit Suisse First Boston LLC, HSBC
Securities (USA) Inc. and Wachovia Capital Markets, LLC, as remarketing agents
(the "remarketing agents"), and Wachovia Bank, National Association, as purchase
contract agent (as so supplemented, the "remarketing agreement"), the
remarketing agents have severally agreed to use their reasonable efforts to
remarket the preferred trust securities on August 3, 2005 at an aggregate price
of approximately 100.25% of the sum of the treasury portfolio purchase price and
the separate preferred securities purchase price, if any.
The "treasury portfolio purchase price" is the price to be paid to
purchase the treasury portfolio that will be substituted for the preferred trust
securities as a component of the Corporate Units and that will be pledged to us,
on behalf of holders of the Corporate Units, as security against the purchase
contract obligations of such holders. The "treasury portfolio" is a portfolio of
zero-coupon Treasury securities consisting of:
o interest or principal strips of U.S. Treasury securities that mature
on or prior to November 15, 2005 in an aggregate amount equal to the
liquidation amount of the preferred trust securities included in the
Corporate Units, and
o with respect to each scheduled distribution payment date on the
preferred trust securities that occurs after August 8, 2005 and on
or before November 16, 2005, interest or principal strips of U.S.
Treasury securities that mature on or prior to that distribution
payment date in an aggregate amount equal to the aggregate quarterly
distribution that would be due on that distribution payment date on
the liquidation amount of the preferred trust securities included in
the Corporate Units assuming no reset of the distribution rate on
the preferred trust securities in connection with the remarketing to
which this prospectus supplement relates and that, with respect to
the distribution on August 16, 2005, that the distribution payment
on such date includes only distributions accumulated from August 8,
2005.
The "separate preferred securities purchase price" is equal to the product
of (A) the total number of separately held preferred trust securities, if any,
that are remarketed multiplied by (B) the quotient of (1) the treasury portfolio
purchase price divided by (2) the number of preferred trust securities that are
components of Corporate Units.
In connection with the remarketing, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as reset agent, has reset the distribution rate on the preferred
trust securities equal to % per year, which will be effective upon the
closing of the remarketing on August 8, 2005.
The remarketing agreement provides that the remarketing is subject to
customary conditions precedent, including the delivery of officers' certificates
and legal opinions. The proceeds of the remarketing will be used in the manner
described under "Use of Proceeds."
Pursuant to the remarketing agreement, the remarketing agents will deduct
as a remarketing fee an amount equal to 25 basis points (0.25%) of the treasury
portfolio purchase price and separate preferred securities purchase price, if
any. In addition, we have agreed to reimburse the remarketing agents for certain
of their expenses in connection with the remarketing. Neither we nor the holders
of preferred trust securities participating in this remarketing will otherwise
be responsible for any remarketing fee or commission in connection with the
remarketing.
The preferred trust securities have no established trading market. The
remarketing agents have advised us that they intend to make a market in the
preferred trust securities, but they have no obligation to do so and may
discontinue market making at any time without providing any notice. No assurance
can be given as to the liquidity of any trading market for the preferred trust
securities.
In order to facilitate the remarketing of the preferred trust securities,
the remarketing agents may engage in transactions that stabilize, maintain or
otherwise affect the price of the preferred trust securities. These transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the preferred trust securities. In general, purchases of a security
for the purpose of stabilization could cause the price of the security to be
higher than it might be in the absence of these purchases. We and the
remarketing agents make no
S-45
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the preferred trust
securities. In addition, we and the remarketing agents make no representation
that the remarketing agents will engage in these transactions or that these
transactions, once commenced, will not be discontinued without notice.
Because the NASD views securities such as the preferred trust securities
as interests in a direct participation program, the remarketing is being made in
compliance with Rule 2810 of the NASD's Conduct Rules. The remarketing agents
may not confirm sales to any discretionary account without the prior specific
written approval of a customer. In recommending the purchase, sale or exchange
of a preferred trust security, the remarketing agents had reasonable grounds to
believe that the preferred trust securities are a suitable investment for the
investor.
We have agreed to indemnify the remarketing agents against, or to
contribute to payments that the remarketing agents may be required to make in
respect of, certain liabilities, including liabilities under the Securities Act.
The remarketing agents and their affiliates have in the past provided, and may
in the future provide, investment banking, underwriting, lending, commercial
banking and other advisory services to us and our affiliates for which they have
received, or will receive, customary compensation.
LEGAL MATTERS
Certain legal matters with respect to the remarketing of these securities
will be passed on for us by James T. Foran, Esq., our Associate General Counsel,
and by Ballard Spahr Andrews & Ingersoll, LLP, and for the remarketing agents by
Sidley Austin Brown & Wood LLP. Sidley Austin Brown & Wood llp will rely upon
the opinion of Mr. Foran as to all matters of New Jersey law. Several matters of
Delaware law with respect to the validity of the preferred trust securities
offered hereby will be passed upon for us and the trust by Richards, Layton &
Finger, P.A. Ballard Spahr Andrews & Ingersoll, LLP will rely upon the opinion
of Richards, Layton & Finger, P.A. with respect to matters of Delaware law
relating to the preferred trust securities.
EXPERTS
The consolidated financial statements, the related consolidated financial
statement schedule and management's report on the effectiveness of internal
control over financial reporting of PSEG, incorporated into this prospectus
supplement and the accompanying prospectus dated July 3, 2002 by reference from
PSEG's Annual Report on Form 10-K for the year ended December 31, 2004, have
been audited by Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their reports (which reports (1) express an
unqualified opinion on the consolidated financial statements and consolidated
financial statement schedule, and include explanatory paragraphs relating to the
adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" and Statement of Financial Accounting Standards No.
143, "Accounting for Asset Retirement Obligations" described in Note 2, (2)
express an unqualified opinion on management's assessment regarding the
effectiveness of internal control over financial reporting, and (3) express an
unqualified opinion on the effectiveness of internal control over financial
reporting), and have been so incorporated in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Exelon Corporation and
management's assessment of the effectiveness of internal control over financial
reporting (which is included in Management's Report on Internal Control over
Financial Reporting) incorporated into this prospectus by reference to our
Definitive Joint Proxy Statement filed June 8, 2005 and June 13, 2005, which
incorporated by reference the Exelon Corporation Current Report on Form 8-K
filed by Exelon Corporation on May 13, 2005, and the financial statement
schedule incorporated into this prospectus by reference to our Definitive Joint
Proxy Statement filed June 8, 2005 and June 13, 2005, which incorporated by
reference the Exelon Corporation's Annual Report on Form 10-K for the year ended
December 31, 2004, have been so incorporated in reliance on the reports of
PricewaterhouseCoopers LLP, an independent registered public accounting firm,
given on the authority of said firm as experts in auditing and accounting.
S-46
PROSPECTUS
PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
PSEG FUNDING TRUST I
By this prospectus, we offer up to
$1,500,000,000
of
Public Service Enterprise Group Incorporated
Common Stock, Preferred Stock,
Stock Purchase Contracts, Stock Purchase Units and
Debt Securities
and
PSEG Funding Trust I
Preferred Trust Securities
Guaranteed as described in this prospectus by
Public Service Enterprise Group Incorporated
We will provide the specific terms of each series or issue of securities
in supplements to this prospectus. You should read this prospectus and the
applicable supplement carefully before you invest.
See "Risk Factors" beginning on page 5 for certain risks you should
consider.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is July 3, 2002.
TABLE OF CONTENTS
Page
----
About this Prospectus ................................................... 3
Information about the Issuers ........................................... 3
Risk Factors ............................................................ 5
Forward-Looking Statements .............................................. 12
Use of Proceeds ......................................................... 13
Accounting Treatment Relating to Preferred Trust Securities ............. 13
Description of the Senior and Subordinated Debt Securities .............. 13
Description of the Trust Debt Securities ................................ 24
Description of the Preferred Trust Securities ........................... 29
Description of the Preferred Securities Guarantee ....................... 36
Relationship among the Preferred Trust Securities, the Trust
Debt Securities and the Preferred Securities Guarantee ................ 38
Description of the Capital Stock 39
Description of the Stock Purchase Contracts and Stock Purchase Units .... 40
Plan of Distribution .................................................... 41
Legal Matters ........................................................... 42
Experts ................................................................. 42
Where You Can Find More Information ..................................... 43
Incorporation of Certain Documents by Reference ......................... 43
2
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we and PSEG
Funding Trust I filed with the SEC using a "shelf" registration process. Under
this shelf process, we and the Trust may, from time to time, sell the securities
described in this prospectus or combinations thereof in one or more offerings
with a maximum aggregate initial offering price of up to $1,500,000,000.
This prospectus provides a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described under "Where You Can
Find More Information."
In this prospectus, unless the context indicates otherwise, the words and
terms "PSEG," "the company," "we," "our," "ours" and "us" refer to Public
Service Enterprise Group Incorporated and its consolidated subsidiaries. "Trust"
refers to PSEG Funding Trust I.
We may use this prospectus to offer from time to time:
o shares of our common stock, without par value;
o shares of our preferred stock, without par value, which may be
convertible into our common stock;
o stock purchase contracts to purchase shares of our common stock;
o our unsecured debt securities, which may include senior,
subordinated and trust debt securities and which may be convertible
into our common stock. In this prospectus, we refer to the debt
securities, which may include senior debt securities, subordinated
debt securities and trust debt securities, as the "debt securities;"
o stock purchase units, consisting of a stock purchase contract and
our debt securities, the Trust's preferred securities or debt
obligations of third parties, including United States Treasury
securities, that are pledged to secure the stock purchase unit
holders' obligations under the stock purchase contracts.
The Trust may also use this prospectus to offer from time to time its
preferred securities, which we refer to in this prospectus as the "preferred
trust securities." We will execute a preferred securities guarantee covering the
preferred trust securities and will guarantee the Trust's obligations under the
preferred trust securities as described herein.
We sometimes refer to our common stock, preferred stock, stock purchase
contracts, stock purchase units, the debt securities, the preferred trust
securities and the preferred securities guarantee collectively as the
"securities."
For more detailed information about the securities, you should also review
the exhibits to the registration statement, which were either filed with the
registration statement or incorporated by reference to other SEC filings.
INFORMATION ABOUT THE ISSUERS
Public Service Enterprise Group Incorporated
We are an integrated energy and energy services company engaged in power
generation, regulated delivery of power and gas service and wholesale energy
marketing and trading. We are an exempt public utility holding company under the
Public Utility Holding Company Act of 1935 and neither own nor operate any
physical properties. Through our subsidiaries, we are one of the leading
providers of energy and energy-related services in the nation. We have four
direct, wholly-owned subsidiaries:
o Public Service Electric and Gas Company ("PSE&G"), which is an
operating public utility company engaged principally in the
transmission and distribution of electric energy and gas service in
New Jersey;
3
o PSEG Power LLC ("Power"), which is a multi-regional independent
electric generation and wholesale energy marketing and trading
company;
o PSEG Energy Holdings Inc. ("Energy Holdings"), which participates
nationally and internationally in energy-related lines of business
through its subsidiaries; and
o PSEG Services Corporation ("Services"), which provides
administrative and support services to us and our subsidiaries.
We are a New Jersey corporation with our principal offices located at 80
Park Plaza, Newark, New Jersey 07101. Our telephone number is (973) 430-7000.
Ratios of Earnings to Fixed Charges
Our ratios of earnings to fixed charges for each of the periods indicated
is as follows:
(unaudited) Years Ended December 31,
Quarter Ended --------------------------------
March 31, 2002 1997 1998 1999 2000 2001
-------------- ---- ---- ---- ---- ----
Ratios of Earnings to
Fixed Charges ........... 2.14 2.55 2.86 3.09 2.73 2.30
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose earnings consist of pre-tax income from
continuing operations excluding extraordinary items, plus the amount of fixed
charges adjusted to exclude: the amount of any interest capitalized during the
period; and the actual amount of any preferred stock dividend requirements of
majority-owned subsidiaries which were included in such fixed charges amount but
not deducted in the determination of pre-tax income. Fixed charges consist of:
interest, whether expensed or capitalized; amortization of debt discount,
premium and expense; an estimate of interest implicit in rentals; and preferred
securities dividend requirements of subsidiaries and preferred stock dividends,
increased to reflect our pre-tax earnings requirement.
Ratios of Earnings to Combined Fixed Charges and Preference Dividends
Our ratios of earnings to combined fixed charges and preference dividends
for each of the periods indicated is the same as our ratios of earnings to fixed
charges.
The Trust
The Trust is a statutory business trust created under the Delaware
Business Trust Act and operating under a trust agreement among us, Wachovia
Bank, National Association (formerly known as First Union National Bank), as the
property trustee, Wachovia Trust Company, National Association (formerly known
as First Union Trust Company, National Association), as Delaware trustee and one
of our employees, as administrative trustee. In this prospectus, we refer to
this agreement, as amended and restated, as the "trust agreement." The Trust
exists only to issue and sell its preferred trust securities and common trust
securities, to acquire and hold our trust debt securities as trust assets and to
engage in activities incidental to the foregoing. We will own all of the Trust's
outstanding common trust securities. The common trust securities will represent
at least 3% of the total capital of the Trust. Payments will be made on the
common trust securities pro rata with the preferred trust securities, except
that the right to payment on the common trust securities will be subordinated to
the rights of the preferred trust securities if there is a default under the
trust agreement resulting from an event of default under the trust debt
indenture.
The Trust's business and affairs will be conducted by its trustees and us,
as depositor, as set forth in the trust agreement. The office of the Delaware
trustee in the State of Delaware is One Rodney Square, 920 King Street, Suite
102, Wilmington, Delaware 19801. The Trust's offices are located at 80 Park
Plaza, Newark, NJ 07102 and its telephone number is (973) 430-7000.
4
RISK FACTORS
The following factors should be considered when reviewing our business and
are relied upon by us in issuing any forward-looking statements. These factors
could affect actual results and cause our results to differ materially from
those expressed in any forward-looking statements made by, or on behalf of us.
Some or all of these factors may apply to us and our subsidiaries.
Because A Portion Of Our Business Is Conducted Outside The United States,
Adverse International Developments Could Negatively Impact Our Business
A key component of our business strategy is the development, acquisition
and operation of projects outside the United States. The economic and political
conditions in certain countries where Global has interests, or in which Global
is or could be exploring development or acquisition opportunities, present risks
that may be different than those found in the United States including:
o delays in permitting and licensing;
o construction delays and interruption of business;
o risks of war;
o expropriation;
o nationalization;
o renegotiation or nullification of existing contracts; and
o changes in law or tax policy.
Changes in the legal environment in foreign countries in which Global may
develop or acquire projects could make it more difficult to obtain non-recourse
project refinancing on suitable terms and could impair Global's ability to
enforce its rights under agreements relating to such projects.
Operations in foreign countries also present risks associated with
currency exchange and convertibility, inflation and repatriation of earnings. In
some countries in which Global may develop or acquire projects in the future,
economic and monetary conditions and other factors could affect Global's ability
to convert its cash distributions to United States Dollars or other freely
convertible currencies, or to move funds offshore from these countries.
Furthermore, the central bank of any of these countries may have the authority
to suspend, restrict or otherwise impose conditions on foreign exchange
transactions or to approve distributions to foreign investors. Although Global
generally seeks to structure power purchase contracts and other project revenue
agreements to provide for payments to be made in, or indexed to, United States
Dollars or a currency freely convertible into United States Dollars, its ability
to do so in all cases may be limited.
Credit, Commodity And Financial Market Risks Could Negatively Impact Our
Business
The revenues generated by the operation of our generating 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.
A majority of our revenue is generated by the current BGS contract with
PSE&G, which expires on July 31, 2002 and is replaced with one-year contracts
with various direct bidders of the New Jersey BGS Auction, and from bilateral
contracts for the sale of electricity with third-party LSEs and power marketers.
Nonetheless, generation revenues and results of operations will be dependent
upon prevailing market prices for energy, capacity and ancillary services in the
markets we serve.
The following factors are among those that will influence the market
prices for energy, capacity and ancillary services:
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;
5
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 (ISO).
As a result of the BGS auction, Power 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 impact on our results of
operations, cash flows and financial position.
Energy Obligations, Available Supply And Trading Risks Could Negatively Impact
Our Business
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 purchase
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 our 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.
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 Risks Or A Deterioration Of Power's Credit Quality May Have
An Adverse Impact On Our Business
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 and procedures as well as 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 its energy trading business, Power must meet credit
quality standards required by counterparties. Standard industry contracts
generally require trading counterparties to maintain investment grade ratings.
These same contracts provide reciprocal benefits to Power. If Power loses its
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.
Substantial Change In The Electric Energy Industry Could Negatively Impact Our
Business
The electric energy industry in the State of New Jersey, across the
country and around the world is undergoing major transformations. As a result of
deregulation and the unbundling of energy supplies and services, the electric
energy markets are now open to competition from other suppliers in most markets.
6
Increased competition from these suppliers could have a negative impact on our
wholesale and retail sales. Among the factors that are common to the electric
industry that affect our business are:
o ability to obtain adequate and timely rate relief, cost recovery,
including unsecuritized stranded costs, and other necessary
regulatory approvals;
o deregulation, the unbundling of energy supplies and services and the
establishment of a competitive energy marketplace for products and
services;
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 and distribution operations in
locations outside of traditional utility service territory;
o exposure to market price fluctuations and volatility;
o regulatory restrictions on affiliate transactions; and
o debt and equity market concerns.
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.
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 and project affiliates. Accordingly, all of our operations are
conducted by our subsidiaries and project affiliates which are separate and
distinct legal entities that have no obligation, contingent or otherwise, to pay
any amounts when due on our debt or to make any funds available to us to pay
such amounts. As a result, our debt will effectively be subordinated to all
existing and future debt, trade creditors, and other liabilities of our
subsidiaries and project affiliates and our rights and hence the rights of our
creditors to participate in any distribution of assets of any subsidiary or
project affiliate upon its liquidation or reorganization or otherwise would be
subject to the prior claims of that subsidiary's or project affiliate's
creditors, except to the extent that our claims as a creditor of such subsidiary
or project affiliate may be recognized.
We depend on our subsidiaries' and project affiliates' cash flow and our
access to capital in order to service our indebtedness. The project-related debt
agreements of subsidiaries and project affiliates 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.
7
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. Although a default under a project financing
agreement will not cause a default with respect to our debt and that of our
subsidiaries, it may materially affect our ability to service our outstanding
indebtedness.
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.
If Our Operating Performance Falls Below Projected Levels, We May Not Be Able to
Service Our Debt
The risks associated with operating power generation facilities include
the breakdown or failure of equipment or processes, labor disputes and fuel
supply interruption, each of which could result in performance below expected
capacity levels. Operation below expected capacity levels may result in lost
revenues, increased expenses, higher maintenance costs and penalties, in which
case there may not be sufficient cash available to service project debt. In
addition, many of Global's generation projects rely on a single fuel supplier
and a single customer for the purchase of the facility's output under a long
term contract. While Global generally has liquidated damage provisions in its
contracts, the default by a supplier under a fuel contract or a customer under a
power purchase contract could adversely affect the facility's cash generation
and ability to service project debt.
Countries in which Global owns and operates electric and gas distribution
facilities may impose financial penalties if reliability performance standards
are not met. In addition, inefficient operation of the facilities may cause lost
revenue and higher maintenance expenses, in which case there may not be
sufficient cash available to service project debt.
Our Ability To Control Cash Flow From Our Minority Investments Is Limited
Our ability to control investments in which we own a minority interest is
limited. Assuming a minority ownership role presents additional risks, such as
not having a controlling interest over operations and material financial and
operating matters or the ability to operate the assets more efficiently. As
such, neither we nor Global are able to unilaterally cause dividends or
distributions to be made to us or Global from these operations.
Minority investments may involve risks not otherwise present for
investments made solely by us and our subsidiaries, including the possibility
that a partner, majority investor or co-venturer might become bankrupt, may have
different interests or goals, and may take action contrary to our instructions,
requests, policies or business objectives. Also, if no party has full control,
there could be an impasse on decisions. In addition, certain investments of
Resources are managed by unaffiliated entities which limits Resources' ability
to control the activities or performance of such investments and managers.
Failure to Obtain Adequate and Timely Rate Relief Could Negatively Impact Our
Business
As a public utility, PSE&G's rates are regulated by the BPU and the FERC.
These rates are designed to recover its operating expenses and allow it to earn
a fair return on its rate base, which primarily consists of its property, plant
and equipment less various adjustments. These rates include its electric and gas
tariff rates that are subject to regulation by the BPU as well as its
transmission rates that are subject to regulation by the FERC. PSE&G's base
rates are set by the BPU for electric distribution and gas distribution and are
effective until the time a new rate case is brought to the BPU. These base rate
cases generally take place every few years. Limited categories of costs are
recovered through adjustment charges that are periodically reset to reflect
actual costs. If these costs exceed the amount included in PSE&G's adjustment
charges, there will be a negative impact on cash flows.
If PSE&G's operating expenses, other than costs recovered through
adjustment charges, exceed the amount included in its base rates and in its FERC
jurisdictional rates, there will be a negative impact on our earnings or
operating cash flows.
Global's electric and gas distribution facilities are rate-regulated
enterprises. Governmental authorities establish rates charged to customers.
These rates are currently sufficient to cover all operating costs and provide
8
a return. However, in Argentina, we face considerable fiscal and cash
uncertainties including potential asset impairments, due to the current
economic, political and social crisis.
We can give no assurances that rates will, in the future, be sufficient to
cover Global's costs and provide a return on its investment. In addition, future
rates may not be adequate to provide cash flow to pay principal and interest on
the debt of Global's subsidiaries' and affiliates and to enable its subsidiaries
and affiliates to comply with the terms of debt agreements.
We May Not Have Access To Sufficient Capital In The Amounts And At The Times
Needed
Capital for our projects and investments has been provided by
internally-generated cash flow and borrowings by us and our subsidiaries. We
require continued access to debt capital from outside sources in order to
efficiently fund our capital needs and assure the success of our future projects
and acquisitions. Our ability to arrange financing on a non-recourse basis and
the costs of capital depend on numerous factors including, among other things,
general economic and market conditions, the availability of credit from banks
and other financial institutions, investor confidence, the success of current
projects and the quality of new projects.
We can give no assurances that our current and future capital structure or
financial condition will permit access to bank and debt capital markets. The
availability of capital is not assured since it is dependent upon our
performance and that of our other subsidiaries. As a result, there is no
assurance that we or our subsidiaries will be successful in obtaining financing
for our projects and acquisitions or funding the equity commitments required for
such projects and acquisitions in the future.
We And Our Subsidiaries Are Subject To Substantial Competition From Well
Capitalized Participants In The Worldwide Energy Markets
We and our subsidiaries are subject to substantial competition in the
United States and in international markets from:
o merchant generators;
o domestic and multi-national utility generators;
o fuel supply companies;
o engineering companies;
o equipment manufacturers;
o and affiliates of other industrial companies.
Restructuring of worldwide energy markets, including the privatization of
government-owned utilities and the sale of utility-owned assets, is 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, including
short-term debt.
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 merchant generation business. Resources faces
competition from numerous well-capitalized investment and finance company
affiliates of banks, utilities and industrial companies. Energy Technologies
faces substantial competition from utilities and their affiliates, and HVAC and
mechanical contractors.
Power Transmission Facilities May Impact Our Ability To Deliver Our Output To
Customers
Our ability to sell and deliver our electric energy products and grow our
business may be adversely impacted and our ability to generate revenues may be
limited if:
o transmission is disrupted,
o transmission capacity is inadequate, or
o a region's power transmission infrastructure is inadequate.
9
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 (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. We
cannot assure that we will be able to obtain any required regulatory approval in
the future, or that we will be able to obtain any necessary extension in
receiving any required regulatory approvals. Any failure to obtain or comply
with any required regulatory approvals, could materially adversely affect our
ability to operate our generation stations or 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 these 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 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 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.
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 facilities, including:
o all-risk property damage insurance;
o commercial general public liability insurance;
10
o boiler and machinery coverage;
o nuclear liability; and
o for our nuclear generating units, replacement power and business
interruption insurance
in amounts and with deductibles that we consider appropriate.
We can give no assurance that this 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 our facilities will be
sufficient to permit us to continue to make payments on our debt. Additionally,
some of our properties 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 a significant lead time and requires us to expend significant sums for
preliminary engineering, permitting, fuel supply, resource exploration, legal
and other development 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 generation, transmission
or distribution 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 specified 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
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, which could affect our
financial results.
Recession, Acts Of War Or Terrorism Could Negatively Impact Our Business
The consequences of a prolonged recession and adverse 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, fuel storage facilities and transmission and distribution facilities 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.
11
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 or in the
documents or information incorporated by reference or deemed to be incorporated
by reference 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. Forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
anticipated. These statements are based on management's beliefs as well as
assumptions made by and information currently available to management. When used
herein, the words "will," "anticipate," "intend," "estimate," "believe,"
"expect," "plan," "hypothetical," "potential," and variations of such words and
similar expressions are intended to identify forward-looking statements. The
following review of factors should not be construed as exhaustive or as any
admission regarding the adequacy of our disclosures prior to the effective date
of the Private Securities Litigation Reform Act of 1995. These risks and
uncertainties include:
o the significant considerations and risks discussed in any
incorporated document or prospectus supplement;
o general and local economic, market or business conditions;
o industrial, commercial and residential growth in the markets we
serve;
o since a portion of our business is conducted outside the United
States, adverse international developments;
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 terrorist threats and activities, particularly with respect to our
generation facilities, economic uncertainty caused by recent terror
attacks on the United States and potential adverse reactions to
United States anti-terrorism activities;
o nuclear decommissioning and the availability of storage facilities
for spent nuclear fuel;
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;
o licensing approval for our nuclear and other operating stations;
o the ability to economically and safely operate our generating
facilities in accordance with regulatory requirements;
o the ability to obtain adequate and timely rate relief in our
regulated businesses;
o the ability to maintain insurance for our operations and facilities
at reasonable rates;
o access to capital;
o credit, commodity and financial market risks; and
o other factors, such as weather conditions, many of which are beyond
our control.
12
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
securities, we are not making, and you should not infer, any representation
about the likely existence of any particular future set of facts or
circumstances. The forward-looking statements contained in this prospectus, any
prospectus supplement and the documents incorporated by reference or deemed to
be incorporated by reference into this prospectus and any related prospectus
supplement are intended to qualify for the safe harbor provisions of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended.
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, we
will use the net proceeds from the sale of the securities for general corporate
purposes, including repayment of outstanding debt. The Trust will use all of the
proceeds received from the sale of its preferred trust securities and common
trust securities to purchase our trust debt securities.
ACCOUNTING TREATMENT RELATING TO PREFERRED TRUST SECURITIES
The financial statements of the Trust will be consolidated with our
financial statements, with the preferred trust securities shown on our
consolidated financial statements as our guaranteed preferred beneficial
interest in trust debt securities. Our financial statements will include a
footnote that discloses, among other things, that the assets of the Trust
consist of our trust debt securities and will specify the designation, principal
amount, interest rate or formula and maturity date of the trust debt securities.
DESCRIPTION OF THE SENIOR AND SUBORDINATED DEBT SECURITIES
We may issue from time to time one or more series of the senior debt
securities under our Senior Indenture dated as of November 1, 1998 between us
and Wachovia Bank, National Association (formerly known as First Union National
Bank), as Senior Trustee, or one or more series of the subordinated debt
securities under our Subordinated Indenture to be entered into between us and
Wachovia Bank, National Association, as Subordinated Trustee. The term "Trustee"
refers to either the Senior Trustee or the Subordinated Trustee, as appropriate.
We will provide information about these debt securities in a prospectus
supplement.
The Senior Indenture and the form of Subordinated Indenture (sometimes
together referred as the "Indentures" and, individually, as an "Indenture") are
filed or incorporated by reference as exhibits to the registration statement of
which this prospectus is a part. The Indentures are subject to and governed by
the Trust Indenture Act of 1939. We have summarized the material terms and
provisions of the Indentures. Because this section is a summary, it does not
describe every aspect of the debt securities and the Indentures. We urge you to
read the Indenture that governs your debt securities for provisions that may be
important to you.
Provisions Applicable to Both the Senior and Subordinated Indentures
General
The debt securities will be our unsecured obligations. The senior debt
securities will rank equally with all other of our unsecured and unsubordinated
indebtedness. The subordinated debt securities will be subordinated in right of
payment to the prior payment in full of our senior indebtedness as described
below under " Subordinated Indenture Provisions." In this section, unless the
context requires, the words "we," "our," "ours" and "us" refer to Public Service
Enterprise Group Incorporated and not its consolidated subsidiaries.
13
Because we are a holding company and conduct all of our operations through
our subsidiaries, holders of our debt securities will generally have a junior
position to claims of creditors of those subsidiaries, including trade
creditors, debt holders, secured creditors, taxing authorities, guarantee
holders and any preferred stockholders other than, in each case, where we are
the creditor. As of March 31, 2002, PSE&G had 795,234 shares of its preferred
stock outstanding with an aggregate par value of approximately $80 million. Our
subsidiaries have ongoing corporate debt programs used to finance their business
activities. As of March 31, 2002, our subsidiaries had approximately $11.8
billion of debt outstanding.
Each Indenture provides that any debt securities proposed to be sold under
this prospectus and the accompanying prospectus supplement may be issued in an
unlimited amount under that Indenture in one or more series, in each case as
authorized by us from time to time.
You should read the relevant prospectus supplement for a description of
the material terms of any debt securities being offered, including:
o the title of the debt securities and whether the debt securities
will be senior debt securities or subordinated debt securities;
o the aggregate principal amount of the debt securities and any limit
on the aggregate principal amount of the debt securities of that
series;
o if less than the principal amount of the debt securities are payable
upon acceleration of the maturity of the debt securities, the
portion that will be payable or how this portion will be determined;
o the date or dates, or how the date or dates will be determined or
extended, on which the principal of the debt securities will be
payable;
o the rate or rates of interest, which may be fixed or variable, that
the debt securities will bear, if any, or how the rate or rates will
be determined;
o the terms of any remarketing of the debt securities;
o the date or dates from which interest, if any, on the debt
securities will accrue or how the date or dates will be determined;
o the interest payment dates, if any, and the record dates for any
interest payments or how the date or dates will be determined;
o the basis upon which interest will be calculated if other than that
of a 360-day year of twelve 30-day months;
o the right, if any, to extend interest payment periods and the
duration of any extension;
o any optional redemption provisions;
o any sinking fund or other provisions that would obligate us to
repurchase or otherwise redeem the debt securities;
o whether the debt securities will be issued as registered securities,
bearer securities or both and any applicable restrictions;
o whether the debt securities will be issuable in temporary or
permanent global form and any applicable restrictions or
limitations;
o the place or places where the principal of and any premium and
interest on the debt securities will be payable and to whom and how
those payments will be made;
o whether the debt securities are convertible or exchangeable into any
other securities and, if so, the applicable terms and conditions;
o the denominations in which the debt securities will be issuable, if
other than $1,000 or any integral multiple thereof in the case of
registered securities and $5,000 in the case of bearer securities;
o the index, if any, with reference to which the amount of principal
of or any premium or interest on the debt securities will be
determined;
14
o if other than the applicable Trustee, the identity of each security
registrar and/or paying agent;
o the applicability of the provisions of the applicable Indenture
described below under "-- Satisfaction and Discharge, Defeasance and
Covenant Defeasance" and any provisions in modification of, in
addition to or in lieu of any of these provisions;
o whether and under what circumstances we will pay additional amounts
in respect of any tax, assessment or governmental charge and, if so,
whether we will have the option to redeem the debt securities rather
than pay the additional amounts (and the terms of this option);
o any deletions, additions or changes in the events of default in the
applicable Indenture and any change in the right of the Trustee or
the holders to declare the principal amount of the debt securities
due and payable;
o any deletions, additions or changes in the covenants in the
applicable Indenture;
o the applicability of or any change in the subordination provisions
of the Indenture for a series of debt securities;
o any provisions granting special rights to holders of the debt
securities upon the occurrence of specified events; and
o any other material terms of the debt securities.
If applicable, the prospectus supplement will also set forth information
concerning any other securities offered thereby and a discussion of federal
income tax considerations relevant to the debt securities being offered.
For purposes of this prospectus, any reference to the payment of principal
of or premium or interest, if any, on the debt securities will include the
payment of any additional amounts required by the terms of the debt securities.
Debt securities may provide for less than the entire principal amount to
be payable upon acceleration of the maturity date ("original issue discount
securities"). Federal income tax and other matters concerning any original issue
discount securities will be discussed in the applicable prospectus supplement.
Neither Indenture limits the amount of debt securities that may be issued
in distinct series from time to time. Debt securities issued under an Indenture
are referred to, when a single Trustee is acting as trustee for all debt
securities issued under an Indenture, as the "indenture securities." Each
Indenture provides that there may be more than one Trustee thereunder, each with
respect to one or more different series of indenture securities. See "--
Resignation of Trustee" below. At a time when two or more Trustees are acting
under either Indenture, each with respect to only certain series, the term
indenture securities will mean the one or more series with respect to which each
respective Trustee is acting. In the event that there is more than one Trustee
under either Indenture, the powers and trust obligations of each Trustee as
described herein will extend only to the one or more series of indenture
securities for which it is Trustee. If two or more Trustees are acting under
either Indenture, then the indenture securities for which each Trustee is acting
would in effect be treated as if issued under separate indentures.
The general provisions of the Indentures do not contain any provisions
that would limit our ability to incur indebtedness or that would afford holders
of debt securities protection in the event of a highly leveraged or similar
transaction involving us. Please refer to the prospectus supplement for
information with respect to any deletions from, modifications of or additions to
the events of default or our covenants that are described below, including any
addition of a covenant or other provision providing event risk or similar
protection.
We have the ability to issue indenture securities with terms different
from those of indenture securities previously issued and, without the consent of
the holders thereof, to reopen a previous series of indenture securities and
issue additional indenture securities of that series, unless the reopening was
restricted when that series was created.
Denominations, Registration and Transfer
Debt securities of a series may be issuable solely as registered
securities, solely as bearer securities or as both registered securities and
bearer securities. The Indentures also provide that debt securities of a series
may be issuable in global form. See "-- Book-Entry Debt Securities." Unless
otherwise provided in the prospectus
15
supplement, debt securities denominated in U.S. dollars (other than global
securities, which may be of any denomination) are issuable in denominations of
$1,000 or any integral multiples of $1,000 (in the case of registered
securities) and in the denomination of $5,000 (in the case of bearer
securities). Unless otherwise indicated in the prospectus supplement, bearer
securities will have interest coupons attached.
Registered securities will be exchangeable for other registered securities
of the same series. If provided in the prospectus supplement, bearer securities
(with all unmatured coupons, except as provided below, and all matured coupons
which are in default) of any series may be similarly exchanged for registered
securities of the same series of any authorized denominations and of a like
aggregate principal amount and tenor. If so provided, bearer securities
surrendered in exchange for registered securities between a regular record date
or a special record date and the relevant date for payment of interest will be
surrendered without the coupon relating to that date for payment of interest,
and interest will not be payable in respect of the registered security issued in
exchange for the bearer security, but will be payable only to the holder of the
coupon when due in accordance with the terms of the applicable Indenture. Unless
otherwise specified in the prospectus supplement, bearer securities will not be
issued in exchange for registered securities.
Registered securities of a series may be presented for registration of
transfer and debt securities of a series may be presented for exchange
o at each office or agency required to be maintained by us for payment
of that series as described in " Payment and Paying Agents" below,
and
o at each other office or agency that we may designate from time to
time for those purposes.
No service charge will be made for any transfer or exchange of debt
securities, but we may require payment of any tax or other governmental charge
payable in connection with the transfer or exchange.
We will not be required to
o 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
- if debt securities of the series are issuable only as
registered securities, the day of mailing of the relevant
notice of redemption and
- if debt securities of the series are issuable as bearer
securities, the day of the first publication of the relevant
notice of redemption, or, if debt securities of the series are
also issuable as registered securities and there is no
publication, the day of mailing of the relevant notice of
redemption;
o register the transfer of or exchange any registered security, or
portion thereof, called for redemption, except the unredeemed
portion of any registered security being redeemed in part;
o exchange any bearer security called for redemption, except to
exchange the bearer security for a registered security of that
series and like tenor that is simultaneously surrendered for
redemption; or
o 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 that debt security not to be so
repaid.
Payment and Paying Agents
Unless otherwise provided in the prospectus supplement, premium, interest
and additional amounts, if any, on registered securities will be payable at any
office or agency to be maintained by us in Morristown, New Jersey and The City
of New York, except that at our option interest may be paid
o by check mailed to the address of the person entitled thereto
appearing in the security register or
o by wire transfer to an account maintained by the person entitled
thereto as specified in the security register.
Unless otherwise provided in the prospectus supplement, payment of any
installment of interest due on any interest payment date for registered
securities will be made to the person in whose name the registered security is
registered at the close of business on the regular record date for that
interest.
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If debt securities of a series are issuable solely as bearer securities or
as both registered securities and bearer securities, unless otherwise provided
in the prospectus supplement, we will be required to maintain an office or
agency
o outside the United States where, subject to any applicable laws and
regulations, the principal of and premium, and interest, if any, on
the series will be payable and
o in The City of New York for payments with respect to any registered
securities of that series (and for payments with respect to bearer
securities of that series in the limited circumstances described
below, but not otherwise);
provided that, if required in connection with any listing of debt securities on
the Luxembourg Stock Exchange or any other stock exchange located outside the
United States, we will maintain an office or agency for those debt securities in
any city located outside the United States required by the applicable stock
exchange. The initial locations of those offices and agencies will be specified
in the prospectus supplement. Unless otherwise provided in the prospectus
supplement, principal of and premium, if any and interest, if any, on bearer
securities may be paid by wire transfer to an account maintained by the person
entitled thereto with a bank located outside the United States. Unless otherwise
provided in the prospectus supplement, payment of installments of interest on
any bearer securities on or before maturity will be made only against surrender
of coupons for those interest installments as they mature. Unless otherwise
provided in the prospectus supplement, no payment with respect to any bearer
security will be made at any office or agency of ours in the United States or by
check mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States. However, payments of
principal of and premium, if any and interest, if any, on bearer securities
payable in U.S. dollars will be made at the office of our paying agent in The
City of New York if payment of the full amount thereof in U.S. dollars at all
offices or agencies outside the United States is illegal or effectively
precluded by exchange controls or other similar restrictions.
We may from time to time designate additional offices or agencies, approve
a change in the location of any office or agency and, except as provided above,
rescind the designation of any office or agency.
Events of Default
The following will constitute events of default under each Indenture with
respect to any series of debt securities, unless we state otherwise in the
applicable prospectus supplement:
o we do not pay interest on a debt security of that series within 30
days of its due date;
o we do not pay principal of, or any premium on, a debt security of
the series on its due date;
o we do not deposit any sinking fund payment when due by the terms of
any debt security of that series;
o we remain in breach of a covenant in respect of the debt securities
of the series for 60 days after we receive a written notice of
default stating we are in breach. The notice must be sent by either
the Trustee or holders of at least 25% of the principal amount of
debt securities of the series;
o we file for bankruptcy or a court appoints a custodian or orders our
liquidation under any bankruptcy law or certain other events in
bankruptcy, insolvency or reorganization occur; and
o any other event of default provided with respect to debt securities
of that series occurs.
We are required to file with the applicable Trustee, annually, an
officer's certificate as to our compliance with all conditions and covenants
under the applicable Indenture. Each Indenture provides that the applicable
Trustee may withhold notice to the holders of debt securities of a series 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 such series to
do so.
If an event of default with respect to debt securities of a series has
occurred and is continuing, the applicable Trustee or the holders of not less
than 25% in principal amount of outstanding debt securities of that series may
declare the applicable principal amount of all of the debt securities of that
series to be due and payable immediately.
Subject to the provisions of the applicable Indenture relating to the
duties of the Trustee, in case an event of default with respect to debt
securities of a series 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
17
holders of debt securities of that series, unless the holders have offered the
Trustee reasonable indemnity against the expenses and liabilities which might be
incurred by it in compliance with that request. Subject to such provisions for
the indemnification of the applicable Trustee, the holders of a majority in
principal amount of the outstanding debt securities of a series 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.
The holders of a majority in principal amount of the outstanding debt
securities of a series may, on behalf of the holders of all debt securities of
that series and any related coupons, waive any past default with respect to that
series and its consequences, except a default
o in the payment of the principal of, or premium, or interest, if any,
on any debt security of that series or any related coupons or
o relating to a covenant or provision that cannot be modified or
amended without the consent of the holder of each outstanding debt
security of that series affected by the modification or amendment.
Merger or Consolidation
Each Indenture provides that we may not consolidate with or merge with or
into any other corporation or convey or transfer our properties and assets as an
entirety or substantially as an entirety to any person, unless either we are the
continuing corporation or such corporation or person assumes by supplemental
indenture all of our obligations under such Indenture and the securities issued
thereunder and immediately after the transaction no default shall exist.
Modification or Waiver
Modification and amendment of an Indenture may be made by us and the
Trustee thereunder with the consent of the holders of a majority in principal
amount of all outstanding indenture securities issued thereunder that are
affected by the modification or amendment. The consent of the holder of each
outstanding indenture security affected is, however, required to:
o change the maturity of the principal of or any installment of
principal of or interest on that indenture 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, that
indenture security, or change the manner of calculation thereof;
o change our obligation, if any, to pay additional amounts in respect
of that indenture security;
o reduce the portion of the principal of an original issue discount
security or indexed security that would be due and payable upon a
declaration of acceleration of the maturity date thereof or provable
in bankruptcy;
o adversely affect any right of repayment at the option of the holder
of that indenture security;
o change the place or currency of payment of principal, premium or
interest on that indenture security;
o impair the right to institute suit for the enforcement of any such
payment on or after the maturity date, redemption date or repayment
date;
o adversely affect any right to convert or exchange that indenture
security;
o reduce the percentage in principal amount of that outstanding
indenture securities required to amend or waive compliance with
certain provisions of the applicable Indenture or to waive certain
defaults;
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 any such waiver or to provide that certain other
provisions of the Indenture cannot be modified or waived without the
consent of the holders of each indenture security affected thereby.
18
In addition, under the Subordinated Indenture, no modification or
amendment thereof may, without the consent of the holder of each outstanding
subordinated security affected thereby, modify any of the provisions of that
Indenture relating to the subordination of the subordinated securities in a
manner adverse to the holders and no such modification or amendment may
adversely affect the rights of any holder of senior indebtedness described under
the caption "-- Subordinated Indenture Provisions" without the consent of that
holder of senior indebtedness.
The holders of a majority in aggregate principal amount of outstanding
indenture securities have the right to waive our compliance with certain
covenants in the applicable Indenture.
Modification and amendment of an Indenture may be made by the applicable
Trustee and us, without the consent of any holder, for any of the following
purposes:
o to evidence the succession of another person to us as obligor under
such Indenture;
o to add to our covenants for the benefit of the holders of all or any
series of indenture securities issued under the Indenture 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 indenture securities;
o to add to or change any provisions of the Indenture to facilitate
the issuance of, or to liberalize the terms of, bearer securities,
or to permit or facilitate the issuance of indenture securities in
uncertificated form, provided that any such actions do not adversely
affect the holders of the indenture securities or any related
coupons;
o to change or eliminate any provisions of the Indenture, as long as
that change or elimination will become effective only when there are
no indenture securities outstanding entitled to the benefit of those
provisions;
o to secure the indenture securities under the applicable Indenture
pursuant to any requirements of the Indenture, or otherwise;
o to establish the form or terms of indenture securities of any series
and any related coupons;
o to 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 any ambiguity, defect or inconsistency in the Indenture,
provided that action does not adversely affect the interests of
holders of indenture securities of a series issued thereunder or any
related coupons in any material respect; 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 indenture securities thereunder, provided that the action
does not adversely affect the interests of the holders of any
indenture securities and any related coupons in any material
respect.
In determining whether the holders of the requisite principal amount of
outstanding indenture securities have given any request, demand, authorization,
direction, notice, consent or waiver under the applicable Indenture or whether a
quorum is present at a meeting of holders of indenture securities thereunder,
o the principal amount of an original issue discount security 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 thereof,
o the principal amount of an indexed security that may be counted in
making such determination will be equal to the principal face amount
of the indexed security at original issuance, unless otherwise
provided with respect to the indexed security pursuant to the
Indenture and
o indenture securities owned by us or any other obligor upon the
indenture securities or any affiliate of ours or of any other
obligor shall be disregarded.
Each Indenture contains provisions for convening meetings of the holders
of indenture securities of a series if indenture securities of that series are
issuable as bearer securities. A meeting may be called at any time by the
applicable Trustee, and also, upon request, by us or the holders of at least 10%
in principal amount of the
19
outstanding indenture securities of that series, in any such case upon notice
given as provided in the applicable Indenture. Except for any consent that must
be given by the holder of each indenture security affected thereby, as described
above, any resolution presented at a meeting at which a quorum is present may be
adopted by the affirmative vote of the holders of a majority in principal amount
of the outstanding indenture securities of that series; except that any
resolution with respect to any 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 the outstanding indenture securities of a series may be adopted at a
meeting at which a quorum is present by the affirmative vote of the holders of
that specified percentage in principal amount of the outstanding indenture
securities of that series. Any resolution passed or decision taken at any
meeting of holders of indenture securities of a series held in accordance with
the applicable Indenture will be binding on all holders of indenture 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 indenture securities of a series; except
that, if any action is to be taken at the 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 indenture securities of a series, the
persons holding or representing that specified percentage in principal amount of
the outstanding indenture securities of that series will constitute a quorum.
Satisfaction and Discharge, Full Defeasance and Covenant Defeasance
We may discharge certain of our obligations to holders of debt securities
of a series that have not already been delivered to the applicable Trustee for
cancellation and that either have become due and payable or are due and payable
within one year (or scheduled for redemption within one year) by irrevocably
depositing with the applicable Trustee, in trust, funds in an amount sufficient
to make interest, principal and any other payments on the debt securities on
their various due dates.
Each Indenture provides that, if the series of the debt securities
provides for it, we may elect either to defease and be discharged from any and
all obligations with respect to the debt securities and any related coupons,
with certain limited exceptions (this is called "full defeasance") or to be
released from our obligations under any specified covenant with respect to those
debt securities and any related coupons, and any omission to comply with those
obligations shall not constitute a default or an event of default with respect
to those debt securities and any related coupons (this is called "covenant
defeasance").
In order to effect full defeasance or covenant defeasance, we must deposit
for the benefit of all holders of the debt securities of the particular series a
combination of cash and/or U.S. government securities or U.S. government agency
notes or bonds that will generate enough cash to make interest, principal and
other payments on the debt securities on their various due dates.
A trust may only be established if, among other things, we have delivered
to the applicable Trustee a legal opinion stating that the holders of the debt
securities and any related coupons will not recognize income, gain or loss for
United States federal income tax purposes as a result of the 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 the defeasance or covenant defeasance had not occurred, and the
legal opinion, in the case of full defeasance 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.
In the event we effect covenant defeasance with respect to any debt
securities and any related coupons and those debt securities and coupons are
declared due and payable because of the occurrence of certain events of default
with respect to any covenant as to which there has been covenant defeasance, the
amount of funds on deposit with the applicable Trustee will be sufficient to pay
amounts due on those debt securities and coupons at the time of their stated
maturity date but may not be sufficient to pay amounts due on those debt
securities and coupons at the time of the acceleration resulting from the event
of default. In such case, we would remain liable to make payment of those
amounts due at the time of acceleration.
If the applicable Trustee or any paying agent is unable to apply any money
in accordance with the applicable 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 the
debt securities and any related coupons will be revived and reinstated as though
no deposit had occurred pursuant to the Indenture, until the Trustee or paying
agent is permitted to apply all such money in accordance with such Indenture.
20
The prospectus supplement may further describe the provisions, if any,
permitting full defeasance or covenant defeasance, including any modifications
to the provisions described above, with respect to the debt securities of or
within a particular series and any related coupons.
Book-Entry Debt Securities
Debt securities of a series may be issued, in whole or in part, in global
form that will be deposited with, or on behalf of, a depositary identified in
the prospectus supplement. Global securities may be issued in either registered
or bearer form and in either temporary or permanent form (a "global security").
Unless otherwise provided in the prospectus supplement, debt securities that are
represented by a global security will be issued in denominations of $1,000 and
any integral multiple thereof, and will be issued in registered form only,
without coupons. Payments of principal of (and premium, if any) and interest, if
any, on debt securities represented by a global security will be made by us to
the applicable Trustee and then by such Trustee to the depositary.
We anticipate that any global securities will be deposited with, or on
behalf of, The Depository Trust Company ("DTC"), New York, New York, that global
securities will be registered in the name of DTC's nominee, and that the
following provisions will apply to the depositary arrangements with respect to
any global securities. Additional or differing terms of the depositary
arrangements will be described in the prospectus supplement.
So long as DTC or its nominee is the registered owner of a global
security, DTC or its nominee, as the case may be, will be considered the sole
holder of the debt securities represented by such global security for all
purposes under the applicable Indenture. Except as provided below, owners of
beneficial interests in a global security will not be entitled to have debt
securities represented by the global security registered in their names, will
not receive or be entitled to receive physical delivery of debt securities in
certificated form and will not be considered the owners or holders thereof under
the applicable Indenture. The laws of some states require that certain
purchasers of securities take physical delivery of such securities in
certificated form; those laws may limit the transferability of beneficial
interests in a Global Security.
If
o DTC is at any time unwilling, unable or ineligible to continue as
depositary and a successor depositary is not appointed by us within
90 days following notice to us;
o we determine, in our sole discretion, not to have any debt
securities represented by one or more global securities; or
o an event of default under the applicable Indenture has occurred and
is continuing, then we will issue individual debt securities in
certificated form in exchange for the relevant global securities.
In any such instance, an owner of a beneficial interest in a global
security will be entitled to physical delivery of individual debt securities in
certificated form of like tenor and rank, equal in principal amount to such
beneficial interest and to have such debt securities in certificated form
registered in its name. Unless otherwise provided in the prospectus supplement,
debt securities so issued in certificated form will be issued in denominations
of $1,000 or any integral multiple thereof and will be issued in registered form
only, without coupons.
The following is based on information furnished by DTC and applies to the
extent that it is the depositary, unless otherwise provided in the prospectus
supplement:
Registered Owner. The debt securities will be issued as fully registered
securities in the name of Cede & Co., which is DTC's partnership nominee. The
applicable Trustee will deposit the global securities with the depositary. The
deposit with the depositary and its registration in the name of Cede & Co. will
not change the nature of the actual purchaser's ownership interest in the debt
securities.
DTC's Organization. DTC is a limited-purpose trust company organized under
the New York Banking Law, a "banking organization" within the meaning of that
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 Securities Exchange
Act of 1934.
DTC is owned by a number of its direct participants and the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and some other
organizations that
21
directly participate in DTC. Other entities may access DTC's system by clearing
transactions through or maintaining a custodial relationship with direct
participants. The rules applicable to DTC and its participants are on file with
the SEC.
DTC's Activities. DTC holds securities that its participants deposit with
it. DTC also facilitates the settlement among participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in participants' accounts. Doing so
eliminates the need for physical movement of securities certificates.
Participant's Records. Except as otherwise provided in this prospectus or
a prospectus supplement, purchases of debt securities must be made by or through
a direct participant, which will receive a credit for the debt securities on the
depositary's records. The purchaser's interest is in turn to be recorded on the
participant's records. Actual purchasers will not receive written confirmation
from the depositary of their purchase, but they generally receive confirmations,
along with periodic statements of their holdings, from the participants through
which they entered into the transaction.
Transfers of interests in the global securities will be made on the books
of the participants on behalf of the actual purchasers. Certificates
representing the interest in debt securities will not be issued unless the use
of global securities is suspended.
The depositary has no knowledge of the actual purchasers of global
securities. The depositary's records only reflect the identity of the direct
participants, who are responsible for keeping account of their holdings on
behalf of their customers.
Notices among the Depositary, Participants and Actual Purchasers. Notices
and other communications by the depositary, its participants and the actual
purchasers will be governed by arrangements among them, subject to any legal
requirements in effect. Any redemption notices will be sent to DTC. If less than
all of the securities within an issue are being redeemed, DTC's practice is to
determine by lot the amount of the interest of each direct participant in such
issue to be redeemed.
Voting Procedures. Neither DTC nor Cede & Co. will give consents for or
vote the global securities. The depositary generally mails an omnibus proxy to
us just after the applicable record date. That proxy assigns Cede & Co.'s voting
rights to the direct participants to whose accounts the debt securities are
credited at that time.
Payments. Principal and interest payments made by us will be delivered to
the depositary. DTC's practice is to credit direct participants' accounts on the
applicable payment date unless it has reason to believe that it will not receive
payment on that date. Payments by participants to actual purchasers will be
governed by standing instructions and customary practices, as is the case with
securities held for customers in bearer form or registered in "street name."
Those payments will be the responsibility of that participant and not the
depositary, the applicable Trustee or us, subject to any legal requirements in
effect at that time.
We are responsible for payment of principal, interest and premium, if any,
to the applicable Trustee who is responsible for paying it to the depositary.
The depositary is responsible for disbursing those payments to direct
participants. The participants are responsible for disbursing payments to the
actual purchasers.
DTC may discontinue providing its services as securities depositary with
respect to the debt securities at any time by giving reasonable notice to the
applicable paying agent or us. Under such circumstances, in the event that a
successor securities depositary is not appointed, debt security certificates are
required to be printed and delivered.
We may decide to discontinue use of the system of book-entry transfers
through DTC (or a successor securities depositary). In that event, debt security
certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources (including DTC) that we believe to be reliable,
but we take no responsibility for the accuracy thereof.
Unless stated otherwise in the prospectus supplement, the underwriters or
agents with respect to a series of debt securities issued as global securities
will be direct participants in DTC.
22
None of any underwriter or agent, the Trustees, any applicable paying
agent or us will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial interests in a
global security, or for maintaining, supervising or reviewing any records
relating to such beneficial interests.
Resignation of Trustee
The Trustee may resign or be removed with respect to one or more series of
indenture securities and a successor Trustee may be appointed to act with
respect to the series. In the event that two or more persons are acting as
Trustee with respect to different series of indenture securities under one of
the Indentures, each such Trustee shall be a Trustee of a trust thereunder
separate and apart from the trust administered by any other Trustee, and any
action described herein to be taken by the Trustee may then be taken by each
Trustee with respect to, and only with respect to, the one or more series of
indenture securities for which it is Trustee.
Subordinated Indenture Provisions
Upon any distribution of our assets upon any dissolution, winding up,
liquidation or reorganization, the payment of the principal of and premium and
interest, if any, on subordinated securities is to be subordinated to the extent
provided in the Subordinated Indenture in right of payment to the prior payment
in full of all Senior Indebtedness, but our obligation to make payment of the
principal of and premium and interest, if any, on the subordinated securities
will not otherwise be affected. In addition, no payment on account of principal
or premium, sinking fund or interest, if any, may be made on the subordinated
securities at any time unless full payment of all amounts due in respect of the
principal and premium, sinking fund and interest on Senior Indebtedness has been
made or duly provided for in money.
In the event that, notwithstanding the foregoing, any payment by us is
received by the Subordinated Trustee or the holders of any of the subordinated
securities before all Senior Indebtedness is paid in full, the payment or
distribution shall be paid over to the holders of the Senior Indebtedness or on
their behalf for application to the payment of all the Senior Indebtedness
remaining unpaid until all the Senior Indebtedness has been paid in full, after
giving effect to any concurrent payment or distribution to the holders of the
Senior Indebtedness. Subject to the payment in full of all Senior Indebtedness
upon this distribution, the holders of the subordinated securities will be
subrogated to the rights of the holders of the Senior Indebtedness to the extent
of payments made to the holders of the Senior Indebtedness out of the
distributive share of the subordinated securities.
By reason of the subordination, in the event of a distribution of assets
upon insolvency, certain of our general creditors may recover more, ratably,
than holders of the subordinated securities. The Subordinated Indenture provides
that the subordination provisions thereof will not apply to money and securities
held in trust pursuant to the defeasance provisions of the Subordinated
Indenture.
"Senior Indebtedness" is defined in the Subordinated Indenture as the
principal of and premium, if any, and unpaid interest on
o our indebtedness (including indebtedness of others guaranteed by
us), whether outstanding on the date of the Subordinated Indenture
or thereafter created, incurred, assumed or guaranteed, for money
borrowed, unless in the instrument creating or evidencing the same
or pursuant to which the same is outstanding it is provided that
such indebtedness is not senior or prior in right of payment to the
junior subordinated debt securities, and
o renewals, extensions, modifications and refundings of any of this
indebtedness.
The subordinated securities, are pari passu with and equal in right of
payment to our 7.44% Deferrable Interest Subordinated Debentures, Series A, our
Floating Rate Deferrable Interest Subordinated Debentures, Series B, our 7.25%
Deferrable Interest Subordinated Debentures, Series C and any guarantees issued
in connection therewith and will be pari passu with and equal in right of
payment to any debt securities or guarantees which may be issued in connection
with issuances of trust preferred securities by the Trust.
23
If this prospectus is being delivered in connection with a series of
subordinated securities, the accompanying prospectus supplement or the
information incorporated by reference therein will set forth the approximate
amount of Senior Indebtedness outstanding as of a recent date.
Governing Law
The Indentures and the debt securities will be governed by, and construed
in accordance with, the laws of the State of New Jersey.
The Trustee under the Senior Indenture and the Subordinated Indenture
Wachovia Bank, National Association, the Trustee under our Senior
Indenture dated as of November 1, 1998 with respect to our senior debt
securities, will also be trustee under the Subordinated Indenture with respect
to our Subordinated Securities and the Trust Debt Indenture with respect to our
trust debt securities. Wachovia Bank, National Association, is trustee under
various indentures relating to our subsidiaries and affiliates. Our
subsidiaries, our affiliates and we maintain other normal banking relationships,
including credit facilities and lines of credit, with Wachovia Bank, National
Association.
DESCRIPTION OF THE TRUST DEBT SECURITIES
General
The trust debt securities will be issued in one or more series under the
Trust Debt Indenture to be entered into between us and Wachovia Bank, National
Association. The initial series of trust debt securities is provided for in the
form of the Trust Debt Indenture which is filed as an exhibit to the
registration statement of which this prospectus is part. The ranking of each
series of trust debt securities will be specified in the applicable prospectus
supplement. Each series of junior subordinated trust debt securities will rank
subordinate and junior in right of payment, to the extent and in the manner set
forth in the Trust Debt Indenture, to all of our Senior Indebtedness. See "--
Subordination." The Trust Debt Indenture does not limit the incurrence or
issuance of Senior Indebtedness by us.
You should read the relevant prospectus supplement for a description of
the material terms of any series of trust debt securities being offered,
including:
o the title of the series of trust debt securities;
o the aggregate principal amount of the series and any limit on the
aggregate principal amount of such series of trust debt securities;
o the date or dates on which the principal of the trust debt
securities shall be payable or how the date or dates will be
determined;
o the interest rate or rates, which may be fixed or variable, that the
trust debt securities will bear, if any, or how the rate or rates
will be determined;
o any terms regarding redemption;
o the ranking of the series of trust debt securities;
o the maximum Extension Period for such series of trust debt
securities; and
o any other material terms of the series of trust debt securities.
Certain federal income tax consequences and special considerations
relating to the applicable series of trust debt securities will be described in
an accompanying prospectus supplement.
Option to Extend Interest Payment Period
Under the Trust Debt Indenture, we have the right to defer payments of
interest by extending the interest payment period for a series of trust debt
securities for up to the specified maximum extension period provided
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for that series, except that no extension period can extend beyond the maturity
or any redemption date of that series of trust debt securities. We can also
extend or shorten an existing extension period. At the end of an extension
period, we will be obligated to pay all interest then accrued and unpaid
(together with interest on those accrued and unpaid amounts to the extent
permitted by applicable law). During any extension period, we may not declare or
pay any dividend on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of our capital stock. Upon the termination of any extension
period and the payment of all amounts then due, we can elect to begin a new
extension period. We will be required to give notice to the Trustee and cause
the Trustee to give notice to the holders of the applicable series of trust debt
securities of our election to begin an extension period, or any shortening or
extension of a period in advance of the applicable record date.
Subordination
Payments on the junior subordinated debt trust securities will be
subordinated to the prior payment in full of all amounts payable on our Senior
Indebtedness.
"Senior Indebtedness" is defined in the Trust Debt Indenture as the
principal of and premium, if any, and unpaid interest on
o our indebtedness (including indebtedness of others guaranteed by
us), whether outstanding on the date of the Trust Debt Indenture or
created later, incurred, assumed or guaranteed, for money borrowed,
unless the terms of that indebtedness provide that it is not senior
or prior in right of payment to the junior subordinated trust debt
securities, and
o renewals, extensions, modifications and refundings of that
indebtedness.
Upon any payment or distribution of our assets or securities, upon our
dissolution or winding-up or total or partial liquidation or reorganization,
whether voluntary or involuntary, or in bankruptcy, insolvency, receivership or
other proceedings, all amounts payable on Senior Indebtedness (including any
interest accruing on the Senior Indebtedness after the commencement of a
bankruptcy, insolvency or similar proceeding) will be paid in full before the
holders of the junior subordinated trust debt securities will be entitled to
receive from us any payment of principal of, premium, if any, or interest on,
the junior subordinated trust debt securities or distributions of any assets or
securities.
No direct or indirect payment by or on our behalf of principal of,
premium, if any, or interest on, the junior subordinated trust debt securities
will be made if there is
o a default in the payment of all or any portion of any Senior
Indebtedness or
o any other default pursuant to which the maturity of Senior
Indebtedness has been accelerated and, in either case, the required
notice has been given to the Trustee and the default has not have
been cured or waived by or on behalf of the holders of the Senior
Indebtedness.
If the Trustee or any holder of the junior subordinated trust debt
securities receives any payment of the principal of, premium, if any, or
interest on, the junior subordinated trust debt securities when that payment is
prohibited and before all amounts payable on Senior Indebtedness are paid in
full, then that payment will be received and held in trust for the holders of
Senior Indebtedness and will be paid to the holders of the Senior Indebtedness
remaining unpaid to the extent necessary to pay the Senior Indebtedness in full.
Nothing in the Trust Debt Indenture limits the right of the Trustee or the
holders of the junior subordinated trust debt securities to take any action to
accelerate the maturity of the junior subordinated trust debt securities or to
pursue any rights or remedies against us, as long as all Senior Indebtedness is
paid before holders of the junior subordinated trust debt securities are
entitled to receive any payment from us of principal of, premium, if any, or
interest on, the junior subordinated trust debt securities.
Upon the payment in full of all Senior Indebtedness, the holders of the
junior subordinated trust debt securities will be subrogated to the rights of
the holders of the Senior Indebtedness to receive payments from us or
distributions of our assets made on the Senior Indebtedness until the junior
subordinated trust debt securities are paid in full.
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Denominations, Registration and Transfer
Trust debt securities of a series are issuable only in registered form.
The Trust Debt Indenture also provides that trust debt securities of a series
may be issuable in global form. See "Description of the Senior and Subordinated
Debt Securities -- Book-Entry Debt Securities." Unless otherwise provided in the
prospectus supplement, trust debt securities (other than global securities,
which may be of any denomination) are issuable in denominations of $1,000 or any
integral multiples of $1,000.
Trust debt securities will be exchangeable for other registered securities
of the same series. Registered securities of a series may be presented for
registration of transfer and for exchange
o at each office or agency required to be maintained by us for payment
of such series as described in " Payment and Paying Agents" below,
and
o at each other office or agency that we may designate from time to
time for those purposes.
No service charge will be made for any transfer or exchange of trust
debt securities, but we may require payment of any tax or other
governmental charge payable in connection with the transfer or
exchange.
We will not be required to
o issue, register the transfer of or exchange trust debt securities
during a period beginning at the opening of business 15 days before
any selection of trust 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;
o register the transfer of or exchange any trust debt security, or
portion thereof, called for redemption, except the unredeemed
portion of any trust debt security being redeemed in part; or
o issue, register the transfer of or exchange any trust debt security
which has been surrendered for repayment at the option of the
holder, except the portion, if any, of the trust debt security not
to be so repaid.
Payment and Paying Agents
Unless otherwise provided in the prospectus supplement, premium, if any,
and interest, if any, on trust debt securities will be payable at any office or
agency to be maintained by us in Morristown, New Jersey and The City of New
York, except that at our option interest may be paid
o by check mailed to the address of the person entitled thereto
appearing in the security register or
o by wire transfer to an account maintained by the person entitled
thereto as specified in the security register. Unless otherwise
provided in the prospectus supplement, payment of any installment of
interest due on any interest payment date for trust debt securities
will be made to the person in whose name the trust debt security is
registered at the close of business on the regular record date for
that interest.
We may from time to time designate additional offices or agencies, approve
a change in the location of any office or agency and, except as provided above,
rescind the designation of any office or agency.
Certain Additional Covenants
We will covenant that we may not declare or pay any distribution on, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
our capital stock
o during an extension period,
o if there has occurred and is continuing an event of default under
the Trust Debt Indenture, or
o if we are in default under the preferred securities guarantee.
Any waiver of any event of default will require the approval of at least a
majority of the aggregate principal amount of the trust debt securities of a
particular series or, if the trust debt securities are held by the Trust, the
approval of the holders of at least a majority in aggregate liquidation amount
of the preferred trust securities of the Trust; except that an event of default
resulting from the failure to pay the principal of, premium, if any, or interest
on, the trust debt securities cannot be waived.
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Modification of the Trust Debt Indenture
We and the Trustee, without notice to or the consent of any holders of
trust debt securities, may amend or supplement the Trust Debt Indenture for any
of the following purposes:
o to cure any ambiguity, defect or inconsistency;
o to comply with the provisions of the Trust Debt Indenture regarding
consolidation, merger or sale, conveyance, transfer or lease of our
properties as an entirety or substantially as an entirety;
o to provide for uncertificated trust debt securities in addition to
or in place of certificated trust debt securities;
o to make any other change that does not in our reasonable judgment
adversely affect the rights of any holder of the trust debt
securities; or
o to set forth the terms and conditions, which shall not be
inconsistent with the Trust Debt Indenture, of any additional series
of trust debt securities and the form of trust debt securities of
that series.
In addition, we and the Trustee may modify the Trust Debt Indenture or any
supplemental indenture or waive our future compliance with the provisions of the
Trust Debt Indenture, with the consent of the holders of at least a majority of
the aggregate principal amount of the trust debt securities of each affected
series except that we need the consent of each holder of affected trust debt
securities, for any modification that would:
o reduce the principal amount of, or interest on, the trust debt
securities or change how the principal or interest is calculated;
o reduce the principal amount of outstanding trust debt securities of
any series the holders of which must consent to an amendment of the
Trust Debt Indenture or a waiver;
o change the stated maturity of the principal of, or interest on, the
trust debt securities;
o change the redemption provisions applicable to the trust debt
securities adversely to the holders thereof;
o impair the right to institute suit for the enforcement of any
payment with respect to the trust debt securities;
o change the currency in which payments with respect to the trust debt
securities are to be made; or
o change the ranking provisions applicable to the trust debt
securities adversely to the holders thereof.
If the trust debt securities are held by the Trust, no modification will be made
that adversely affects the holders of the preferred trust securities of the
Trust, and no waiver of any event of default with respect to the trust debt
securities or compliance with any covenant under the Trust Debt Indenture will
be effective, without the prior consent of the holders of at least a majority of
the aggregate liquidation amount of the preferred trust securities of the Trust
or the holder of each preferred trust security, as applicable.
Events of Default
The following are events of default under the Trust Debt Indenture with
respect to any series of trust debt securities unless we state otherwise in the
applicable prospectus supplement:
o we do not pay interest on a trust debt security of the series within
30 days of its due date (other than the deferral of interest
payments during an extension period);
o we do not pay the principal of, or premium on, a trust debt security
of the series on its due date;
o we remain in breach of a covenant in respect of the trust debt
securities of the series for 60 days after we receive written notice
of default stating we are in breach;
o we file for bankruptcy or a court appoints a custodian or orders our
liquidation under any bankruptcy law or certain other events of
bankruptcy, insolvency or reorganization occur.
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In case an event of default has occurred and is continuing, other than one
relating to bankruptcy, insolvency or reorganization affecting us in which case
the principal of, premium, if any, and any interest on, all of the trust debt
securities shall become immediately due and payable, the Trustee or the holders
of at least 25% in aggregate principal amount of the trust debt securities of
that series may declare the principal, together with interest accrued thereon,
of all the trust debt securities of that series to be due and payable. If
neither the Trustee nor the holders make that declaration then, if the trust
debt securities are held by the Trust, the holders of at least 25% in aggregate
liquidation amount of the preferred trust securities shall have the right to
make that declaration by written notice to us and the Trustee. The holders of at
least a majority in aggregate principal amount of the series of trust debt
securities, by notice to the Trustee, can rescind an acceleration, but if the
declaration was made by the holders of the preferred trust securities, the
holders of at least a majority in aggregate liquidation amount of the preferred
trust securities must consent to the rescission of the acceleration. We will be
required to furnish to the Trustee an annual statement as to our compliance with
all conditions and covenants under the Trust Debt Indenture and the trust debt
securities and as to any event of default.
Consolidation, Merger, Sale or Conveyance
We may not consolidate with or merge with or into any other person or
sell, convey, transfer or lease our properties and assets as an entirety or
substantially as an entirety to any person, unless
o the successor person is organized under the laws of the United
States or any state thereof or the District of Columbia and
expressly assumes by a supplemental indenture all of our obligations
under the trust debt securities and the Trust Debt Indenture;
o immediately after the transaction, no default exists; and
o certain other conditions in the Trust Debt Indenture are met.
Defeasance and Discharge
Under the terms of the Trust Debt Indenture, we will be discharged from
any and all obligations in respect of the trust debt securities of any series
if, among other conditions, we deposit with the Trustee, in trust, (1) cash
and/or (2) U.S. government or U.S. government agency notes or bonds that will
generate enough cash to make interest principal and other payments on the trust
debt securities on their various due dates.
Information Concerning the Trustee
Subject to the provisions of the Trust Debt Indenture relating to its
duties, the Trustee will be under no obligation to exercise any of its rights or
powers under the Trust Debt Indenture at the request or direction of the holders
of any series of trust debt securities or the holders of the preferred trust
securities, unless those holders provide to the Trustee reasonable security and
indemnity. If the required indemnity is provided, the holders of at least a
majority in aggregate principal amount of any series of trust debt securities
affected or the holders of at least a majority in aggregate liquidation amount
of the preferred trust securities (with each series voting as a class), as
applicable, will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee with respect
to that series of trust debt securities or exercising any trust or power
conferred on the Trustee.
The Trust Debt Indenture will contain limitations on the right of the
Trustee, as our creditor, to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security or
otherwise. In addition, the Trustee may be deemed to have a conflicting interest
and may be required to resign as Trustee if at the time of an event of default
(1) it is our creditor or (2) there is a default under the indenture(s) referred
to below.
Wachovia Bank, National Association will be the Trustee under our Trust
Debt Indenture and also is the trustee under our Senior Indenture and will be
trustee under our Subordinated Indenture and is trustee under various indentures
relating to our subsidiaries and affiliates. Our subsidiaries, our affiliates
and we maintain other normal banking relationships, including credit facilities
and lines of credit, with Wachovia Bank, National Association.
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Governing Law
The Trust Debt Indenture and the trust debt securities will be governed by
and construed in accordance with the laws of the State of New Jersey.
DESCRIPTION OF THE PREFERRED TRUST SECURITIES
The Trust may issue preferred trust securities and common trust securities
under the Trust Agreement, which we refer to in this prospectus as the "trust
securities." Material provisions of the Trust Agreement are summarized below.
Because this section is a summary, it does not describe every aspect of the
trust securities and the Trust Agreement. The form of Trust Agreement was filed
with the SEC and you should read the Trust Agreement for provisions that may be
important to you. The Trust Agreement has been qualified as an indenture under
the Trust Indenture Act of 1939.
General
The Trust Agreement authorizes the Trust to issue the preferred trust
securities and the common trust securities. These trust securities will
represent undivided beneficial interests in the assets of the Trust. We will own
all of the issued and outstanding common trust securities of the Trust, with an
aggregate liquidation amount equal to at least 3% of the total capital of the
Trust. When the Trust issues its preferred trust securities, holders of the
preferred trust securities will own all of the issued and outstanding preferred
trust securities of the Trust. The preferred trust securities will be
substantially identical to the common trust securities and will rank equally
with the common trust securities, except as described under "Subordination of
Common Trust Securities." The proceeds from the sale of the preferred trust
securities and the common trust securities will be used by the Trust to purchase
our trust debt securities which will be held in trust by the property trustee
for the benefit of the holders of the trust securities. We will execute a
guarantee agreement for the benefit of the holders of preferred trust securities
(the "guarantee") which will be subordinate and junior in right of payment to
all of our general liabilities. Under the guarantee, we will agree to make
payments of distributions and payments on redemption or liquidation with respect
to the preferred trust securities, but only to the extent the Trust holds funds
available for these payments and has not made them. See "Description of the
Preferred Securities Guarantee" below.
A prospectus supplement relating to the preferred trust securities will
include specific terms of those securities and of the trust debt securities. For
a description of some specific terms that will affect both the preferred trust
securities and the trust debt securities and your rights under each, see
"Description of the Trust Debt Securities" above.
Distributions
The only income of the Trust available for distribution to the holders of
preferred trust securities will be payments on the trust debt securities. If we
fail to make interest payments on the trust debt securities, the Trust will not
have funds available to pay distributions on preferred trust securities. The
payment of distributions, if and to the extent the Trust has sufficient funds
available for the payment of such distributions, is guaranteed by us as
described below.
Distributions on the preferred trust securities will be payable at a rate
specified (or at a rate whose method of determination is described) in an
accompanying prospectus supplement. Unless otherwise specified in the prospectus
supplement, the amount of distributions payable for any period will be computed
on the basis of a 360-day year of twelve 30-day months.
Unless otherwise specified in the prospectus supplement, distributions on
the preferred trust securities will be cumulative and will accumulate whether or
not there are funds of the Trust available for payment of distributions from the
date of original issuance and will be payable in arrears on the dates specified
in the prospectus supplement except as otherwise described below. Unless
otherwise specified in the prospectus supplement, distribution payments due on a
day that is not a business day will be made on the next day that is a business
day (and without any interest or other payment in respect to the delay), except
that if the next business
29
day falls in the next calendar year, payment will be made on the immediately
preceding business day (each date on which distributions are payable as
described is referred to as a "distribution date"). Unless otherwise specified
in the prospectus supplement, a "business day" means any day other than a
Saturday, Sunday or a day on which banks in The City of New York or the State of
New Jersey are required to remain closed.
Distributions on the preferred trust securities will be payable to the
holders thereof as they appear on the securities register of the Trust on the
relevant record date, which, as long as the preferred trust securities remain in
book-entry-only form, will be one business day prior to the relevant
distribution date. Payments will be made as described under "Description of the
Senior and Subordinated Debt Securities -- Book-Entry Debt Securities." In the
event that any preferred trust securities are not in book-entry-only form, the
relevant record date for those preferred trust securities will be specified in
the applicable prospectus supplement.
So long as no event of default has occurred and is continuing with respect
to the trust debt securities, we will have the right to time to defer payments
of interest by extending the interest payment period on the trust debt
securities for up to the maximum period specified in the accompanying prospectus
supplement except that no extension period can extend beyond the maturity or any
redemption date of the trust debt securities. We can also extend or shorten an
existing extension period. If interest payments on the trust debt securities are
deferred, distributions on the preferred trust securities would also be deferred
by the Trust during that extension period, but the amount of distributions to
which holders of the preferred trust securities would be entitled will continue
to accumulate at the annual rate applicable to those distributions, compounded
with the same frequency with which distributions are payable. During any
extension period, we may not declare or pay any distribution on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of our
capital stock. Upon the termination of any extension period and the payment of
all amounts then due, we can elect to begin a new extension period. See
"Description of the Trust Debt Securities -- Option to Extend Interest Payment
Period."
Redemption
Upon the payment of the trust debt securities at maturity or upon
redemption, the proceeds from that payment will be applied by the property
trustee to redeem the same amount of the trust securities at a redemption price
equal to the liquidation amount of the trust securities plus all accumulated and
unpaid distributions to the redemption date. The redemption terms of the trust
debt securities and the trust securities will be set forth in the accompanying
prospectus supplement.
If less than all the trust securities are to be redeemed on a redemption
date, then the aggregate amount of trust securities to be redeemed will be
selected by the property trustee among the preferred trust securities and common
trust securities pro rata based on the respective aggregate liquidation amounts
of the preferred trust securities and common trust securities, subject to the
provisions of "-- Subordination of Common Trust Securities" below.
Redemption Procedures
Notice of any redemption of trust securities will be given by the property
trustee to the holders of the trust securities to be redeemed not less than 30
nor more than 60 days prior to the redemption date. If a notice of redemption is
given with respect to any trust securities, then, to the extent funds are
available therefor, the Trust will irrevocably deposit with the paying agent for
the trust securities funds sufficient to pay the applicable redemption price for
the trust securities being redeemed on the redemption date and will give the
paying agent irrevocable instructions and authority to pay the redemption price
to the holders of the trust securities upon surrender thereof. Notwithstanding
the foregoing, distributions payable on or prior to the redemption date for any
trust securities called for redemption shall be payable to the holders of the
trust securities as they appear on the securities register for the trust
securities on the relevant record dates for the related distribution dates.
If notice of redemption shall have been given and funds irrevocably
deposited as required, then upon the date of such deposit, all rights of the
holders of the trust securities so called for redemption will cease, except the
right of the holders of the trust securities to receive the redemption price,
but without interest thereon, and the trust securities will cease to be
outstanding. In the event that any redemption date for trust securities is not a
business day, then the redemption price will be payable on the next day that is
a business day (and without any interest or other payment in respect of any such
delay), except that if such business day falls in the next calendar year, the
redemption price will be payable on the immediately preceding business day. In
the event that payment
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of the redemption price in respect of any trust securities called for redemption
is improperly withheld or refused and not paid either by the Trust thereof or by
us pursuant to the guarantee as described under "Description of the Preferred
Securities Guarantee," Distributions on those trust securities will continue to
accumulate at the then applicable rate from the original redemption date to the
date of payment, in which case the actual payment date will be considered the
redemption date for purposes of calculating the redemption price.
Subject to applicable law, including United States federal securities law,
we or our affiliates may at any time and from time to time purchase outstanding
preferred trust securities by tender, in the open market or by private
agreement.
If preferred trust securities are partially redeemed on a redemption date,
a corresponding percentage of the common trust securities will be redeemed. The
particular preferred trust securities to be redeemed will be selected by the
property trustee by such method as the property trustee shall deem fair and
appropriate. The property trustee will promptly notify the preferred trust
security registrar in writing of the preferred trust securities selected for
redemption and, where applicable, the partial amount to be redeemed.
Subordination of Common Trust Securities
Payments on the trust securities will be made pro rata based on the
respective aggregate liquidation amounts of the common and preferred trust
securities. If an event of default has occurred and is continuing with respect
to the trust debt securities, no payments will be made on any common trust
securities unless payment in full in cash of all accumulated and unpaid
distributions on all outstanding preferred trust securities for all distribution
periods terminating on or prior to that time, or in the case of a dissolution or
redemption, the full amount of the redemption price or liquidation distribution
on all outstanding preferred trust securities shall have been made or provided
for, and all funds available to the property trustee shall first be applied to
the payment in full in cash of all payments on all outstanding preferred trust
securities then due and payable.
If an event of default has occurred and is continuing with respect to the
trust debt securities, the holder of the common trust securities will be deemed
to have waived any right to act with respect to the event of default until the
effect of the event of default has been cured, waived or otherwise eliminated
with respect to the preferred trust securities. Until the event of default has
been cured, waived or otherwise eliminated, the property trustee shall act
solely on behalf of the holders of the preferred trust securities and not on
behalf of us, as holder of the common trust securities, and only the holders of
the preferred trust securities will have the right to direct the property
trustee to act on their behalf.
Liquidation Distribution upon Dissolution
Under the Trust Agreement, the Trust will be dissolved on the earliest to
occur of:
o the expiration of the term of the Trust;
o our bankruptcy, dissolution or liquidation or an acceleration of the
maturity of the trust debt securities held by the Trust;
o our election to dissolve the Trust and, after satisfaction of
liabilities to creditors of the Trust, the distribution of the trust
debt securities to the holders of the trust securities;
o the redemption of all the trust securities; and
o an order for the dissolution of the Trust entered by a court of
competent jurisdiction.
Our election to dissolve the Trust shall be made by giving written notice
to the trustees not less than 30 days prior to the date of distribution of the
trust debt securities and shall be accompanied by a legal opinion stating that
the event will not be a taxable event to the holders of the trust securities for
federal income tax purposes.
If the Trust is dissolved as a result of the expiration of its term, a
bankruptcy event, acceleration of maturity of the trust debt securities or a
court order, it will be liquidated by the trustees as expeditiously as the
trustees determine to be possible by distributing, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, to the
holders of its trust securities a like amount of the trust debt securities,
unless that distribution is determined by the property trustee not to be
practical, in which event holders will be entitled
31
to receive out of the Trust's assets available for distribution to holders,
after satisfaction of liabilities to its creditors as provided by applicable
law, an amount equal to the aggregate liquidation amount per trust security
specified in the accompanying prospectus supplement plus accumulated and unpaid
distributions to the date of payment (the "liquidation distribution"). If the
liquidation distribution with respect to the preferred trust securities can be
paid only in part because the Trust has insufficient assets available to pay in
full the aggregate liquidation distribution, then the amounts payable by the
Trust on the preferred trust securities shall be paid on a pro rata basis. The
holders of the common trust securities will be entitled to receive the
liquidation distribution upon any liquidation pro rata with the holders of
preferred trust securities, except that if an event of default has occurred and
is continuing, the preferred trust securities will have a priority over the
common trust securities with respect to payment of the liquidation distribution.
Trust Agreement Event of Default; Notice
An event of default with respect to the trust debt securities will
constitute a "Trust Agreement event of default" with respect to the preferred
trust securities.
Within 90 days after the occurrence of any Trust Agreement event of
default actually known to the property trustee, the property trustee will send
notice of it to the holders of the trust securities, the administrative trustee
and us, unless it has been cured or waived. We and the administrative trustee
are required to file annually with the property trustee a certificate as to
whether or not we are in compliance with all the conditions and covenants
applicable to us under the Trust Agreement.
Under the Trust Agreement, if the property trustee has failed to enforce
its rights under the Trust Agreement or the Trust Debt Indenture to the fullest
extent permitted by law and subject to the terms of the Trust Agreement and the
Trust Debt Indenture, any holder of the preferred trust securities may institute
a legal proceeding directly to enforce the property trustee's rights under the
Trust Agreement or the Trust Debt Indenture with respect to trust debt
securities having an aggregate principal amount equal to the aggregate
liquidation amount of the preferred trust securities of such holder without
first instituting a legal proceeding against the property trustee or any other
person. To the extent that any action under the Trust Debt Indenture is entitled
to be taken by the holders of at least a specified percentage of the principal
amount of the trust debt securities, holders of that specified percentage of the
preferred trust securities may take that action if it is not taken by the
property trustee. If a Trust Agreement event of default attributable to our
failure to pay principal of or premium, if any, or interest on the trust debt
securities has occurred and is continuing, then each holder of preferred trust
securities may institute a legal proceeding directly against us for enforcement
of payment to that holder, all as provided in the Trust Debt Indenture.
If an event of default has occurred and is continuing with respect to a
series of trust debt securities, the preferred trust securities will have a
preference over the common trust securities with respect to the payment of
distributions and amounts payable on redemption and liquidation as described
above. See " Liquidation Distribution upon Dissolution" and "-- Subordination of
Common Trust Securities."
Removal of Trustees
Unless a Trust Agreement event of default has occurred and is continuing,
we, as the holder of the common trust securities, may remove any trustee under
the trust agreement at any time. If a Trust Agreement event of default has
occurred and is continuing, the holders of a majority of the total liquidation
amount of the outstanding preferred trust securities may remove the property
trustee or the Delaware trustee, or both of them. We, as the holder of the
common trust securities, may remove the administrative trustee at any time. Any
resignation or removal of a trustee under the trust agreement will take effect
only on the acceptance of appointment by the successor trustee.
Holders of preferred trust securities will have no right to appoint or
remove the administrative trustee of the Trust, who may be appointed, removed or
replaced solely by us as the holder of the common trust securities.
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Co-Trustees and Separate Property Trustee
Unless a Trust Agreement event of default has occurred and is continuing,
in order to meet various legal requirements, the holder of the common trust
securities and the administrative trustee shall have the power
o to appoint one or more persons approved by the property trustee
either to act as co-trustee, jointly with the property trustee, of
all or any part of specified trust property, or to act as separate
trustee of that trust property, and
o to vest in that person or persons in that capacity any property,
title, right or power deemed necessary or desirable, subject to the
provisions of the Trust Agreement.
If a Trust Agreement event of default has occurred and is continuing, only
the property trustee will have power to make this appointment.
Merger or Consolidation of Trustees
Any corporation or other entity into which any trustee may be merged or
converted or with which it may be consolidated, or any corporation or other
entity resulting from any merger, conversion or consolidation to which any
trustee shall be a party, or any corporation or other entity succeeding to all
or substantially all the corporate trust business of any trustee, shall be the
successor of such trustee under the Trust Agreement, as long as the corporation
or other entity is otherwise qualified and eligible.
Mergers, Consolidations, Amalgamations or Replacements of the Trust
The Trust may not merge with or into, consolidate, amalgamate, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any corporation or other entity,
except as described below or in "-- Liquidation Distribution upon Dissolution."
The Trust may, at our request, with the consent of the administrative trustee
and without the consent of the holders of the trust securities, merge with or
into, consolidate, amalgamate, or be replaced by a trust organized under the
laws of any state, as long as
o the successor entity either
- expressly assumes all of the obligations of the Trust with
respect to the trust securities or
- substitutes for the trust securities other securities
substantially similar to the trust securities (the "successor
securities") so long as the successor securities rank the same
as the trust securities with respect to the payment of
distributions and payments upon redemption, liquidation and
otherwise;
o we appoint a trustee of the successor entity with the same powers
and duties as the property trustee with respect to the trust debt
securities;
o the successor securities are listed on any national securities
exchange or other organization on which the trust securities are
then listed;
o the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not cause the rating of preferred trust
securities (including any successor securities) to be downgraded,
placed under surveillance or review or withdrawn by any nationally
recognized statistical rating organization;
o the merger, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences
and privileges of the holders of the trust securities (including any
successor securities) in any material respect;
o the successor entity has a purpose substantially similar to that of
the Trust;
o prior to the merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease, we and the property trustee have
received a legal opinion stating that
- such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the
rights, preferences and privileges of the holders of the trust
securities (including any successor securities) in any
material respect, and
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- following the merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease neither the Trust
nor the successor entity will be required to register as an
investment company under the Investment Company Act of 1940,
and the Trust (or the successor entity) will continue to be
classified as a grantor trust for United States federal income
tax purposes; and
o we or any permitted successor assignee own all of the common
securities of the successor entity and guarantee the obligations of
the successor entity under the successor securities at least to the
extent provided by the related guarantee and Trust Agreement.
The Trust will not, except with the consent of all holders of the trust
securities, consolidate, amalgamate, merge with or into, or be replaced by, any
other entity, or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if that action would cause the Trust or the successor
entity not to be classified as a grantor trust for federal income tax purposes.
Voting Rights; Amendment of Trust Agreement
Except as provided below and under "-- Mergers, Consolidations,
Amalgamations or Replacements of the Trust" and "Description of the Preferred
Securities Guarantee -- Amendments and Assignment" and as otherwise required by
law and the Trust Agreement, the holders of the trust securities will have no
voting rights.
The Trust Agreement may be amended from time to time by us and the
trustees, without the consent of the holders of the trust securities, (1) to
cure any ambiguity, defect or inconsistency or (2) to make any other change that
does not adversely affect in any material respect the interests of any holder of
the preferred trust securities.
The Trust Agreement may be amended by us and the trustees in any other
respect, with the consent of the holders of a majority in aggregate liquidation
amount of the outstanding preferred trust securities, except to
o change the amount, timing or currency or otherwise adversely affect
the method of payment of any distribution or liquidation
distribution,
o restrict the right of a holder of any preferred trust securities to
institute suit for enforcement of any distribution, redemption price
or liquidation distribution,
o change the purpose of the Trust,
o authorize the issuance of any additional beneficial interests in the
Trust,
o change the redemption provisions,
o change the conditions precedent for us to elect to dissolve the
Trust and distribute the trust debt securities to the holders of the
preferred trust securities or
o affect the limited liability of any holder of the preferred trust
securities, which amendment requires the consent of each affected
holder of the preferred trust securities.
No amendment may be made without receipt by the Trust of a legal opinion
stating that the amendment will not affect the Trust's status as a grantor trust
for federal income tax purposes or its exemption from regulation as an
investment company under the Investment Company Act of 1940.
The Trustees shall not
o direct the time, method and place of conducting any proceeding for
any remedy available to a trustee under the Trust Debt Indenture or
executing any trust or power conferred on that trustee with respect
to the trust debt securities,
o waive any past default under the Trust Debt Indenture,
o exercise any right to rescind or annul an acceleration of the
principal of the trust debt securities or
o consent to any amendment or modification of the Trust Debt
Indenture, where consent shall be required,
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without, in each case, obtaining the consent of the holders of a majority in
aggregate liquidation amount of all outstanding preferred trust securities;
provided, however, that where a consent under the Trust Debt Indenture would
require the consent of each affected holder of trust debt securities, no consent
shall be given by the property trustee without the prior consent of each holder
of the preferred trust securities. The trustees shall not revoke any action
previously authorized or approved by a vote of the holders of the preferred
trust securities except by subsequent vote of those holders. The property
trustee shall notify all holders of preferred trust securities of any notice
received from the trustee under the Trust Debt Indenture as a result of the
Issuer thereof being the holder of the trust debt securities. In addition to
obtaining the consent of the holders of the preferred trust securities prior to
taking any of these actions, the trustees shall obtain a legal opinion stating
that the Trust will not be classified as an association taxable as a corporation
or a partnership for federal income tax purposes as a result of that action and
will continue to be classified as a grantor trust for federal income tax
purposes.
Any required consent of holders of preferred trust securities may be given
at a meeting of holders of the preferred trust securities convened for that
purpose or pursuant to written consent without a meeting and without prior
notice. The property trustee will cause a notice of any meeting at which holders
of preferred trust securities are entitled to vote, to be given to each holder
of record of preferred trust securities in the manner set forth in the Trust
Agreement.
Notwithstanding that holders of preferred trust securities are entitled to
vote or consent under certain circumstances, any preferred trust securities that
are owned by us, the Trustees or any affiliate of ours or any Trustee shall, for
purposes of a vote or consent, be treated as if they were not outstanding.
Global Preferred Trust Securities
Unless otherwise specified in the applicable prospectus supplement, the
preferred trust securities will initially be issued in fully registered global
form that will be deposited with, or on behalf of, a depositary. Global
preferred trust securities may be issued only in fully registered form and in
either temporary or permanent form. Unless and until a global preferred trust
security is exchanged in whole or in part for the individual preferred trust
securities represented thereby, the depositary holding the global preferred
trust security may transfer the global preferred trust security only to its
nominee or successor depositary or vice versa and only as a whole. Unless
otherwise indicated in the applicable prospectus supplement, the depositary for
the global preferred trust securities will be DTC. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. These limits and laws may
impair the ability to transfer beneficial interests in global preferred trust
securities. See "Description of the Senior and Subordinated Debt Securities --
Book-Entry Debt Securities" for a description of DTC and its procedures.
Information Concerning the Property Trustee
The property trustee is the sole trustee under the Trust Agreement for
purposes of the Trust Indenture Act of 1939 and will have and be subject to all
of the duties and responsibilities of an indenture trustee under the Trust
Indenture Act of 1939. The property trustee, other than during the occurrence
and continuance of a Trust Agreement event of default, undertakes to perform
only such duties as are specifically set forth in the Trust Agreement and, upon
a Trust Agreement event of default, must use the same degree of care and skill
in the exercise thereof as a prudent person would exercise or use in the conduct
of his or her own affairs. Subject to this provision, the property trustee is
under no obligation to exercise any of the powers vested in it by the Trust
Agreement at the request of any holder of preferred trust securities unless it
is offered reasonable security or indemnity against the costs, expenses and
liabilities that might be incurred thereby. If no Trust Agreement event of
default has occurred and is continuing, and the property trustee is required to
decide between alternative courses of action, construe ambiguous provisions in
the Trust Agreement or is unsure of the application of any provision of the
Trust Agreement, and the matter is not one on which holders of preferred trust
securities are entitled under the Trust Agreement to vote, then the property
trustee shall take such action as is directed by us and, if not so directed, may
take such action as it deems advisable and in the best interests of the holders
of the trust securities and will have no liability except for its own negligent
action, negligent failure to act or willful misconduct.
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Books and Records
The books and records of the Trust will be maintained at the principal
office of the Trust and will be open for inspection by each holder of preferred
trust securities or any authorized representative for any purpose reasonably
related to the holder's interest in the Trust during normal business hours.
Payment of Preferred Trust Securities and Paying Agent
Unless we indicate differently in a prospectus supplement, payments in
respect of the preferred trust securities will be made to the depositary, which
will credit the relevant participants' accounts on the applicable distribution
dates or, if the preferred trust securities are not held by the depositary,
payments will be made on the applicable distribution dates by check mailed to
the address of the holder entitled thereto appearing on the preferred trust
security register or in immediately available funds upon redemption. The paying
agent will initially be the property trustee and any co-paying agent chosen by
the property trustee and acceptable to the administrative trustee and us, which
may be us. The paying agent may resign upon 30 days' written notice to the
administrative trustee, the property trustee and us. In the event that the
property trustee shall no longer be the paying agent, the administrative trustee
will appoint a successor, which shall be a bank, trust company or affiliate of
ours acceptable to the property trustee and us to act as paying agent.
Registrar and Transfer Agent
The property trustee will act as registrar and transfer agent for the
preferred trust securities. Registration of transfers of preferred trust
securities will be made without charge by or on behalf of the Trust, but the
Trust may require payment of any tax or other governmental charges that may be
imposed in connection with any transfer or exchange of preferred trust
securities.
Miscellaneous
Holders of the preferred trust securities have no preemptive or similar
rights.
Governing Law
The Trust Agreement, the preferred trust securities and the common trust
securities provide that they are to be governed by and construed in accordance
with the laws of the State of Delaware.
DESCRIPTION OF THE PREFERRED SECURITIES GUARANTEE
Material provisions of the preferred securities guarantee that we will
execute and deliver for the benefit of the holders of the preferred trust
securities are summarized below. Because this section is a summary, it does not
describe every aspect of the preferred securities guarantee. The form of
preferred securities guarantee was filed with the SEC and you should read it for
provisions that may be important to you. The preferred securities guarantee will
be qualified as an indenture under the Trust Indenture Act of 1939.
Wachovia Bank, National Association, will act as guarantee trustee under
the preferred securities guarantee. The guarantee trustee will hold the
preferred securities guarantee for the benefit of the holders of the preferred
trust securities.
General
We will irrevocably agree, to pay in full, to the holders of the preferred
trust securities, the guarantee payments set forth below (except to the extent
previously paid), as and when due, regardless of any defense, right of set-off
or counterclaim which the Trust may have or assert. The following payments, to
the extent not paid by the Trust, will be subject to the applicable guarantee:
o any accumulated and unpaid distributions required to be paid on the
preferred trust securities, to the extent that the Trust has funds
available therefor,
o the redemption price, to the extent that the Trust has funds
available therefor, and
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o upon a voluntary or involuntary termination, winding-up or
liquidation of the Trust (unless the trust debt securities are
redeemed or distributed to holders of the preferred trust securities
in accordance with their terms), the lesser of
- the aggregate of the liquidation amount specified in the
prospectus supplement per preferred trust security plus all
accumulated and unpaid distributions on the preferred trust
securities to the date of payment, to the extent the Trust has
funds available therefor and
- the amount of assets of the Trust remaining available for
distribution to holders of the preferred trust securities upon
a dissolution and liquidation of the Trust.
Our obligation to make a guarantee payment may be satisfied by direct
payment by us of the required amounts to the holders of the preferred trust
securities or by causing the Trust to pay those amounts to the holders. While
our assets will not be available pursuant to the guarantee for the payment of
any distribution, liquidation distribution or redemption price on any preferred
trust securities if the Trust does not have funds available therefor as
described above, we have agreed under the Trust Agreement to pay all expenses of
the Trust except its obligations under its trust securities.
No single document executed by us in connection with the issuance of the
preferred trust securities will provide for our full, irrevocable and
unconditional guarantee of the preferred trust securities. It is only the
combined operation of our obligations under the guarantee, the Trust Agreement,
the trust debt securities and the Trust Debt Indenture that has the effect of
providing a full, irrevocable and unconditional guarantee of the Trust's
obligations under the preferred trust securities. See "Relationship Among the
Preferred Trust Securities, the Trust Debt Securities and the Preferred
Securities Guarantee."
Status of the Guarantee
The guarantee will constitute our unsecured obligation and will rank
subordinate and junior in right of payment to all of our general liabilities.
The Trust Agreement provides that each holder of preferred trust securities by
acceptance thereof agrees to the subordination provisions and other terms of the
guarantee. The guarantee will rank equally with all other guarantees issued by
us. The guarantee will constitute a guarantee of payment and not of collection
(i.e., the guaranteed party may institute a legal proceeding directly against us
to enforce its rights under the guarantee without first instituting a legal
proceeding against any other person or entity). The guarantee will not be
discharged except by payment of the guarantee payments in full to the extent not
previously paid or upon distribution to the holders of the preferred trust
securities of the trust debt securities pursuant to the trust agreement.
Amendments and Assignment
Except with respect to any changes that do not materially adversely affect
the rights of holders of the preferred trust securities (in which case no
consent of the holders will be required), the guarantee may only be amended with
the prior approval of the holders of a majority in aggregate liquidation amount
of the preferred trust securities (excluding any preferred trust securities held
by us or an affiliate). The manner of obtaining any approval will be as set
forth under "Description of the Preferred Trust Securities -- Voting Rights;
Amendment of Trust Agreement." All agreements contained in the guarantee will
bind our successors, assigns, receivers, trustees and representatives and will
inure to the benefit of the holders of the preferred trust securities.
Guarantee Events of Default
An event of default under a guarantee (a "guarantee event of default")
will occur upon our failure to perform any of our payment or other obligations
thereunder, provided that except with respect to a guarantee event of default
resulting from a failure to make any of the guarantee payments, we shall have
received notice of the guarantee event of default from the guarantee trustee and
shall not have cured such guarantee event of default within 60 days after
receipt of such notice. The holders of a majority in aggregate liquidation
amount of the preferred trust securities (excluding any preferred trust
securities held by us or an affiliate) will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
guarantee trustee under the guarantee or to direct the exercise of any trust or
power conferred upon the guarantee trustee under the guarantee.
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Any holder of the preferred trust securities may institute a legal
proceeding directly against us to enforce that holder's rights under the
guarantee without first instituting a legal proceeding against the Trust, the
guarantee trustee or any other person or entity.
We, as guarantor, will be required to file annually with the guarantee
trustee a certificate as to whether or not we are in compliance with all the
conditions and covenants applicable to us under the guarantee.
Information Concerning the Guarantee Trustee
The guarantee trustee, other than during the occurrence and continuance of
a guarantee event of default, undertakes to perform only such duties as are
specifically set forth in the guarantee and, upon a guarantee event of default,
must exercise the rights and powers vested in it by the guarantee and use the
same degree of care and skill in the exercise thereof as a prudent person would
exercise or use in the conduct of his or her own affairs. Subject to this
provision, the guarantee trustee is under no obligation to exercise any of the
powers vested in it by any guarantee at the request of any holder of preferred
trust securities unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby.
Termination of the Guarantee
The guarantee will terminate and be of no further force and effect upon
full payment of the redemption price or liquidation distribution for the
preferred trust securities or upon distribution of the trust debt securities to
the holders of the preferred trust securities. The guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of the preferred trust securities must restore payment of any sums paid under
the preferred trust securities or the guarantee.
Governing Law
The preferred securities guarantee provides that it is to be governed by
and construed in accordance with the laws of the State of New Jersey.
RELATIONSHIP AMONG THE PREFERRED TRUST SECURITIES, THE TRUST
DEBT SECURITIES AND THE PREFERRED SECURITIES GUARANTEE
Payments of distributions and redemption and liquidation payments due on
the preferred trust securities (to the extent the Trust has funds available for
such payments) will be guaranteed by us as set forth under "Description of the
Preferred Securities Guarantee." No single document executed by us in connection
with the issuance of the preferred trust securities will provide for our full,
irrevocable and unconditional guarantee of the preferred trust securities. It is
only the combined operation of our obligations under the guarantee, the Trust
Agreement, the trust debt securities and the Trust Debt Indenture that has the
effect of providing a full, irrevocable and unconditional guarantee of the
Trust's obligations under the preferred trust securities.
A holder of any preferred trust security may institute a legal proceeding
directly against us to enforce the property trustee's rights under the Trust
Agreement, Trust Debt Indenture or guarantee without first instituting a legal
proceeding against the property trustee, trustee under the Trust Debt Indenture
or the guarantee trustee, the Trust or any other person or entity if that
trustee fails to enforce that particular holder's rights thereunder.
Notwithstanding the foregoing, if a Trust Agreement event of default
attributable to our failure to pay principal of or premium, if any, or interest
on the trust debt securities has occurred and is continuing, then each holder of
preferred trust securities of the series may institute a legal proceeding
directly against us for enforcement of any such payment to such holder, all as
provided in the Trust Debt Indenture.
As long as we make payments of interest and other payments when due on the
trust debt securities, those payments will be sufficient to cover the payment of
distributions and redemption and liquidation distributions due on the preferred
trust securities, primarily because
o the aggregate principal amount of the trust debt securities will be
equal to the sum of the aggregate liquidation amount of the
preferred trust securities and common trust securities,
o the interest rate and interest and other payment dates of the trust
debt securities will match the distribution rate and distribution
and other payment dates for the preferred trust securities,
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o the Trust Agreement provides that we will pay for all and any costs,
expenses and liabilities of the Trust except the Trust's obligations
under its preferred trust securities and common trust securities,
and
o the Trust Agreement provides that the Trust will not engage in any
activity that is not consistent with its limited purposes.
If and to the extent that we do not make payments on the trust debt
securities, the Trust will not have funds available to make payments of
distributions or other amounts due on the preferred trust securities.
A principal difference between the rights of a holder of a preferred trust
security (which represents an undivided beneficial interest in the assets of the
Trust) and a holder of a trust debt security is that a holder of a trust debt
security will accrue, and (subject to the permissible extension of the interest
payment period) is entitled to receive, interest on the principal amount of
trust debt securities held, while a holder of preferred trust securities is
entitled to receive distributions only if and to the extent the Trust has funds
available for the payment of those distributions.
Upon any voluntary or involuntary dissolution or liquidation of the Trust
not involving a redemption or distribution of any trust debt security, after
satisfaction of liabilities to creditors of the Trust, the holders of the
preferred trust securities will be entitled to receive, out of assets held by
the Trust, the liquidation distribution in cash. See "Description of the
Preferred Trust Securities -- Liquidation Distribution upon Dissolution". Upon
our voluntary liquidation or bankruptcy, the Trust, as holder of the trust debt
securities, would be a creditor of ours, subordinated in the case of junior
subordinated trust debt securities, in right of payment to all Senior
Indebtedness, but entitled to receive payment in full of principal, premium, if
any, and interest, before any of our stockholders receive payments or
distributions.
A default or event of default under any Senior Indebtedness would not
constitute an event of default with respect to junior subordinated trust debt
securities under the Trust Debt Indenture. However, in the event of payment
defaults under, or acceleration of, Senior Indebtedness, the subordination
provisions of the junior subordinated trust debt securities provide that no
payments may be made in respect of the junior subordinated trust debt securities
until the Senior Indebtedness has been paid in full or any payment default
thereunder has been cured or waived. Failure to make required payments on the
junior subordinated trust debt securities would constitute an event of default.
We and the Trust believe that the above mechanisms and obligations, taken
together, are the equivalent of a full and unconditional guarantee by us of
payments due in respect of the preferred trust securities.
DESCRIPTION OF THE CAPITAL STOCK
The following description summarizes the material terms of our capital
stock. Because this section is a summary, it does not describe every aspect of
our common stock. For additional information, you should refer to the applicable
provisions of the New Jersey Business Corporation Act and our Certificate of
Incorporation, as amended (the "Charter") and By-Laws. Our Charter and By-Laws
are exhibits to the registration statement of which this prospectus is a part.
Authorized Capital
Our authorized capital stock consists of 500,000,000 shares of common
stock, without par value, and 50,000,000 shares of preferred stock, without par
value.
Common Stock
General. As of March 31, 2002, 206,194,509 shares of our common stock were
issued and outstanding. The outstanding shares of our common stock are, and any
common stock offered hereby when issued and paid for will be, fully paid and
non-assessable.
Dividend Rights. Holders of our common stock are entitled to such
dividends as may be declared from time to time by our board of directors from
legally available funds after payment of all amounts owed on any preferred stock
that may be outstanding.
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Voting Rights. Holders of our common stock are entitled to one vote for
each share held by them on all matters presented to shareholders. In the
election of directors, shareholders have cumulative voting rights.
Liquidation Rights. After satisfaction of the preferential liquidation
rights of any preferred stock, the holders of our common stock are entitled to
share, ratably, in the distribution of all remaining net assets.
Preemptive Conversion or Redemption Rights. The holders of our common
stock have preemptive rights as to additional issues of our common stock not
issued on a competitive basis or by an offering to or through underwriters. The
shares of our common stock are not subject to redemption or to any further calls
or assessments and are not entitled to the benefit of any sinking fund
provisions.
Transfer Agents and Registrars
The co-transfer agents and co-registrars for our common and preferred
stock are the Shareholder Services Department of Services and the Continental
Stock Transfer and Trust Company.
Preferred Stock
Our board of directors is authorized, without further shareholder action,
to divide the preferred stock into one or more classes or series and to
determine the designations, preferences, limitations and special rights of any
class or series including, but not limited to, the following:
o the rate of dividend, if any;
o the rights, if any, of the holders of shares of the series upon our
voluntary or involuntary liquidation, dissolution or winding-up;
o the terms and conditions upon which shares may be converted into
shares of other series or other capital stock, if issued with the
privilege of conversion;
o the price at and the terms and conditions upon which shares may be
redeemed; and
o the voting rights, if any.
No shares of preferred stock have been issued.
DESCRIPTION OF THE STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
We may issue stock purchase contracts representing contracts obligating
holders to purchase from us, and us to sell to the holders, a specified number
of shares of our common stock (or a range of numbers of shares pursuant to a
predetermined formula) at a future date or dates. The price per share of our
common stock and number of shares of our common stock may be fixed at the time
the stock purchase contracts are issued or may be determined by reference to a
specific formula set forth in the stock purchase contracts.
The stock purchase contracts may be issued separately or as a part of
units, known as stock purchase units, consisting of (1) a stock purchase
contract or (2) a stock purchase contract and our debt securities, preferred
trust securities or debt obligations of third parties (including United States
Treasury securities), that would secure the holders' obligations to purchase our
common stock under the stock purchase contract. The stock purchase contracts may
require us to make periodic payments to the holders of the stock purchase units
or vice-versa. These payments may be unsecured or prefunded on some basis. The
stock purchase contracts may require holders to secure their obligations in a
specified manner and in certain circumstances we may deliver newly issued
prepaid stock purchase contracts, often known as prepaid securities, upon
release to a holder of any collateral securing the holder's obligations under
the original stock purchase contract.
The applicable prospectus supplement will describe the terms of any stock
purchase contracts or stock purchase units and, if applicable, debt securities
or preferred trust securities and will contain a discussion of the material
United States federal income tax considerations applicable to the stock purchase
contracts and stock purchase units. The description in the applicable prospectus
supplement will not contain all of the information you may find useful, and
reference will be made to the stock purchase contracts, and, if applicable,
collateral or depositary arrangements, relating to the stock purchase contracts
or stock purchase units.
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PLAN OF DISTRIBUTION
The Trust and we may sell the securities directly to purchasers or
indirectly through underwriters, dealers or agents. The names of any such
underwriters, dealers or agents will be set forth in the relevant prospectus
supplement. We may determine the price or other terms of the securities offered
under this prospectus by use of an electronic auction. We will describe how any
auction will determine the price or any other terms, how potential investors may
participate in the auction and the nature of the underwriters' obligations in
the related supplement to this prospectus. We will also set forth in the
relevant prospectus supplement:
o the terms of the offering of the securities;
o the proceeds we will receive from the offering;
o any underwriting discounts and other items constituting
underwriters' compensation;
o any initial public offering price;
o any discounts or concessions allowed or reallowed or paid to
dealers; and
o any securities exchanges on which we may list the securities.
The Trust and we may distribute the securities from time to time in one or
more transactions at:
o a fixed price;
o prices that may be changed;
o market prices at the time of sale;
o prices related to prevailing market prices; or
o negotiated prices.
We will describe the method of distribution in the relevant prospectus
supplement.
If we use underwriters with respect to an offering of the securities, we
will set forth in the relevant prospectus supplement:
o the name of the managing underwriter, if any;
o the name of any other underwriters; and
o the terms of the transaction, including any underwriting discounts
and other items constituting compensation of the underwriters and
dealers, if any.
The underwriters will acquire any securities for their own accounts and
they may resell the securities from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price and at
varying prices determined at the time of sale.
Any initial public offering price and any discounts or concessions allowed
or reallowed or paid to dealers may be changed from time to time. We anticipate
that any underwriting agreement pertaining to any securities will:
o entitle the underwriters to indemnification by us against certain
civil liabilities, including liabilities under the Securities Act,
or to contribution with respect to payments that the underwriters
may be required to make related to any such civil liability;
o subject the obligations of the underwriters to certain conditions
precedent; and
o obligate the underwriters to purchase all securities offered in a
particular offering if any such securities are purchased.
If we use a dealer in an offering of the securities, we will sell such
securities to the dealer, as principal. The dealer may then resell the
securities to the public at varying prices to be determined by such dealer at
the time of resale. We will set forth the name of the dealer and the terms of
the transaction in the prospectus supplement.
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If we use an agent in an offering of the securities, we will name the
agent and describe the terms of the agency in the relevant prospectus
supplement. Unless we indicate otherwise in the prospectus supplement, we will
require an agent to act on a best efforts basis for the period of its
appointment.
Dealers and agents named in a prospectus supplement may be considered
underwriters of the securities described in the prospectus supplement under the
Securities Act. We may indemnify them against certain civil liabilities under
the Securities Act.
In the ordinary course of business, we may engage in transactions with
underwriters, dealers, agents and their affiliates and they may perform services
for us.
The Trust and we may solicit offers to purchase the securities and make
sales directly to institutional investors or others who may be considered
underwriters under the Securities Act with respect to such sales. We will
describe the terms of any such offer in the relevant prospectus supplement.
If we authorize underwriters or other agents to solicit offers to purchase
the securities from institutional investors pursuant to contracts providing for
payment and delivery at a future date, we will indicate that we are doing so in
the relevant prospectus supplement. We must approve all purchasers under such
contracts; the institutional investors may include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others.
We will not subject the obligations of such purchasers to any conditions
except that:
o we will not allow such purchases if they violate the laws of any
jurisdiction to which a proposed purchaser is subject; and
o if we are also selling the securities to underwriters, we will not
sell to the underwriters subject to delayed delivery.
Underwriters and other agents will not be responsible for the validity or
performance of such contracts providing for payment and delivery at a future
date.
We will set forth in the relevant prospectus supplement the anticipated
delivery date of the securities and the prospectus delivery obligations of
dealers.
Each series of securities will be a new issue and, except for the Common
Stock, which is listed on the New York Stock Exchange, will have no established
trading market. We may elect to list any series of new securities on an
exchange, or in the case of the Common Stock, on any additional exchange, but
unless we advise you differently in the prospectus supplement, we have no
obligation to cause any securities to be so listed. Any underwriters that
purchase securities for public offering and sale may make a market in the
securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. We make no assurance
as to the liquidity of, or the trading markets for, any securities.
LEGAL MATTERS
The validity of the securities, including the binding nature of debt
securities, to be issued by us will be passed upon for us by R. Edwin Selover,
Esquire, our Vice President and General Counsel or James T. Foran, Esquire, our
Associate General Counsel and/or such other counsel as is indicated in the
applicable prospectus supplement.
Certain matters of Delaware law relating to the validity of the preferred
trust securities, the enforceability of the trust agreement and the creation of
the Trust will be passed upon by Richards, Layton & Finger, P.A., Wilmington,
Delaware, special Delaware counsel to the Trust. The validity of any offered
securities may be passed on for any underwriters, dealers or agents by Sidley
Austin Brown & Wood LLP, New York, New York, who may rely on the opinion of Mr.
Selover or Mr. Foran as to matters of New Jersey law.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from our Annual Report on Form 10-K
for the year ended December 31, 2001, 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 in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the 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. Our common stock is
listed on the New York Stock Exchange under the ticker symbol "PEG." You can
obtain information about us at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
This prospectus is part of a registration statement on Form S-3 filed with
the SEC under the Securities Act of 1933. 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 Trust 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. 1-9120;
o Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2002, File No. 1-9120; and
o Our Current Reports on Form 8-K filed with the SEC on January 25,
2002, February 7, 2002 and April 16, 2002, File No. 1-9120.
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 07101
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 or in a
related prospectus supplement. 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 and
any related prospectus supplement are distributed. You should not assume that
the information in this prospectus and any related prospectus supplement is
accurate as of any date other than the dates on the front of those documents.
You should read all information supplementing this prospectus.
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