Exhibit 4 (j) 

           INDENTURE,  dated as of June 1,  1997,  between  ELIZABETHTOWN  WATER
COMPANY,  a corporation  duly  organized and existing under and by virtue of the
laws of the State of New Jersey  (hereinafter  sometimes  called the "Company"),
party  of the  first  part,  and  THE  BANK  OF NEW  YORK,  a New  York  banking
corporation  (hereinafter  sometimes called the "Trustee"),  party of the second
part.

           WHEREAS, the Company is empowered to issue debentures
for any of the objects and purposes of the Company;

           WHEREAS,  for its lawful  corporate  purposes,  the  Company has duly
authorized  an issue of  debentures  designated  1997  Series  A  Variable  Rate
Debentures  - due 2027  (hereinafter  referred  to as the  "Debentures"),  in an
aggregate  principal  amount of $25,000,000,  to be issued under and pursuant to
the provisions hereof; and

           WHEREAS,   the   Debentures   and  the   Trustee's   certificate   of
authentication  to be borne by the  Debentures  are to be  substantially  in the
following forms, respectively:

                               [FORM OF DEBENTURE]

                                     [FACE]

$___________________                      No. _______________


                           ELIZABETHTOWN WATER COMPANY

         1997 Series A Variable Rate Debenture - due 2027

           ELIZABETHTOWN   WATER  COMPANY,  a  corporation  duly  organized  and
existing  under the laws of the State of New Jersey  (herein  referred to as the
"Company"),  for value  received,  hereby  promises  to pay to Summit  Bank,  or
registered  assigns,  on June 1, 2027 or upon the earlier  redemption  hereof as
hereinafter  provided,  the principal sum of Twenty-Five Million Dollars in such
coin or currency of the United States of America as at the time of payment shall
be legal tender for the payment of public and private  debts.  The 1997 Series A
Variable  Rate  Debentures  have been issued to the Bond Trustee to evidence the
obligations  of the  Company  under  the Loan  Agreement  pursuant  to which the
Company is obligated for the payment of the principal of,  premium,  if any, and
interest  due  on the  Bonds  issued  by  the  Authority  pursuant  to the  Bond
Indenture. This 1997 Series A Variable Rate Debenture bears interest at the same
rate,  and interest on this 1997 Series A Variable Rate  Debenture is payable on
the same  dates  and to the same  extent as  interest  is  payable  on the Bonds
pursuant to the terms thereof.  The interest rate on this Debenture  shall in no
event  exceed  10%.  Principal  and  interest  shall  be paid  at the  principal
corporate  trust  office of The Bank of New York,  New York,  New York or at the
office of the Company,  Westfield,  New Jersey, or at the duly designated office
of any duly appointed alternate or successor paying agent.

           The  obligation  of the Company to make  payments with respect to the
principal of, premium,  if any, and interest on the Debentures shall be fully or
partially,  as the case may be,  satisfied and discharged to the extent that the
principal of, premium,  if any and interest on the Bonds shall have been paid or
shall be deemed to have been paid in accordance with the Bond Indenture.

           Reference is hereby made to the further  provisions of this Debenture
set forth on the  reverse  hereof,  and such  further  provisions  shall for all
purposes have the same effect as though fully set forth at this place.

           This  Debenture  shall  not be valid  or  become  obligatory  for any
purpose until the certificate of authentication hereon shall have been signed by
the Trustee under the Indenture.

           IN WITNESS  WHEREOF,  ELIZABETHTOWN  WATER  COMPANY  has caused  this
Debenture to be signed in its corporate name by its President or one of its Vice
Presidents by his or her  signature or a facsimile  thereof and by its Secretary
or one of its  Assistant  Secretaries  by his or her  signature  or a  facsimile
thereof,  and its  corporate  seal, or a facsimile  thereof,  to be impressed or
imprinted hereon.

                               ELIZABETHTOWN WATER COMPANY

                               By___________________________
                                      Title

(Seal)

By___________________________
      Title

#30160546.5


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         [FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]

Dated:  ________ __, 1997

            This  is one of the  Debentures  described  in the  within-mentioned
                  Indenture.

                                              THE BANK OF NEW YORK,
                                               as Trustee,

                                      By___________________________
                                              Authorized Signatory.

                                    [REVERSE]

                           ELIZABETHTOWN WATER COMPANY

         1997 Series A Variable Rate Debenture - due 2027

           This Debenture is one of a duly authorized issue of Debentures of the
Company  (herein  referred  to as the  "Debentures"),  limited to the  aggregate
principal amount of $25,000,000,  except as otherwise  provided in the Indenture
referred to below, all issued or to be issued under and pursuant to an indenture
dated as of June 1, 1997 (herein referred to as the "Indenture"),  duly executed
and delivered by the Company to The Bank of New York,  Trustee (herein  referred
to as the "Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a  description  of the rights of the holders of the
Debentures,  the rights, duties and immunities of the Trustee and the rights and
obligations of the Company  thereunder.  The Debentures will not be transferable
except to a successor Bond Trustee.

           In case an Event of Default, as defined in the Indenture,  shall have
occurred  and be  continuing,  the  principal  of all of the  Debentures  may be
declared,  and upon such  declaration  shall  become,  due and  payable,  in the
manner, with the effect and subject to the conditions provided in the Indenture.

           The  Indenture  contains  provisions  permitting  the Company and the
Trustee,  with the  consent  of the  holders  of more than 50% in the  aggregate
principal amount of the Debentures at the time outstanding,  evidenced as in the
Indenture provided, to execute supplemental  indentures adding any provisions to
or changing in any manner or eliminating  any of the provisions of the Indenture
or of any indenture  supplemental  thereto or modifying in any manner the rights
and  obligations of the holders of the Debentures and of the Company;  provided,
however, that no such supplemental indenture shall (i) extend the fixed maturity
of any Debenture,  or reduce the principal amount thereof, or reduce the rate or
extend the time of payment  of  interest  thereon,  without  the  consent of the
holder of each Debenture so affected, or (ii) reduce the aforesaid percentage of
Debentures,   the  holders  of  which  are  required  to  consent  to  any  such
supplemental  indenture,  without the  consent of the holders of all  Debentures
then  outstanding.  It is also  provided  in the  Indenture  that  prior  to any
declaration  of the maturity of the  Debentures the holders of a majority in the
aggregate  principal  amount of the  Debentures at the time  outstanding  may on
behalf of the holders of all of the Debentures  waive any past default under the
Indenture and its  consequences,  except a default in the payment of interest on
or the  principal  of any of the  Debentures.  Any such consent or waiver by the
registered  holder of this  Debenture  shall be conclusive and binding upon such
holder  and upon all future  holders  and  owners of this  Debenture  and of any
Debenture issued in exchange herefor or in place hereof, irrespective of whether
or not any notation of such consent or waiver is made upon this Debenture.

           No  reference  herein  to the  Indenture  and no  provision  of  this
Debenture  or of the  Indenture  shall  alter or impair  the  obligation  of the
Company,  which is  absolute  and  unconditional,  to pay the  principal  of and
interest on this Debenture at the time and place and at the rate and in the coin
or currency herein prescribed.

           The Debentures are issuable as registered Debentures without coupons,
in  denominations  of  $5,000  and  any  multiple  thereof.  This  Debenture  is
transferable  in the manner  authorized  by law.  Upon due  presentment  of this
Debenture for  registration of transfer at the office or agency to be maintained
by the Company in the Borough of  Manhattan,  City and State of New York,  a new
Debenture or  Debentures,  of  authorized  denominations,  for a like  aggregate
principal amount,  will be issued to the transferee as provided,  and subject to
the limitations,  in the Indenture.  No service charge will be made for any such
registration  of  transfer,  but  the  Company  may  require  payment  of a  sum
sufficient to reimburse it for any tax or other governmental  charge that may be
imposed in relation  thereto.  This  Debenture  may in like manner be  exchanged
without  service  charge  for one or more new  Debentures  of  other  authorized
denominations  but of the same aggregate  principal  amount,  all subject to the
terms and conditions set forth in the Indenture.

           The  Debentures  are subject to optional and mandatory  redemption by
the Company,  at the times, and to the extent that,  certain New Jersey Economic
Development  Authority  Water  Facilities  Bonds  (Elizabethtown  Water  Company
Project  -- 1997  Series A) are called for  redemption  at a price  equal to the
principal  amount  to be  redeemed,  accrued  interest  to the  date  fixed  for
redemption and any premium due in respect of such Bonds.  As more fully provided
in the Indenture,  the Debentures are also redeemable as a whole or in part with
the proceeds of Released Property,  at the principal amount thereof plus accrued
interest to the date fixed for redemption.

           The Indenture provides that under the circumstances specified therein
funds or certain  securities may be deposited with the Trustee in advance of the
maturity or redemption date of any of the  Debentures,  in trust for the payment
or redemption of such Debentures, and the interest due or to become due thereon,
and that thereupon all  obligations of the Company in respect of such Debentures
shall  cease and be  discharged  and the holders  thereof  shall  thereafter  be
restricted  exclusively to such funds or securities for any and all other claims
on their part under the Indenture or with respect to such Debentures.

           The  Company,  the  Trustee,  any  paying  agent  and  any  Debenture
registrar may deem and treat the registered  holder hereof as the absolute owner
hereof (whether or not this Debenture shall be overdue and  notwithstanding  any
notice of ownership or writing  hereon) for the purpose of receiving  payment of
or on account of the principal  hereof and interest due hereon and for all other
purposes,  and neither the Company nor the Trustee nor any paying  agent nor any
Debenture registrar shall be affected by any notice to the contrary.  So long as
the Bond Trustee (as defined in the Indenture) is the sole registered  holder of
this Debenture, and has specified an account for such payments in writing to the
Company,  the Trustee and any paying  agent,  all payments of interest  required
hereunder shall be made by wire transfer.

           No recourse  shall be had for the payment of the  principal of or the
interest on this  Debenture,  or for any claim based  hereon,  or  otherwise  in
respect  hereof,  or based on or in respect of the  Indenture  or any  indenture
supplemental thereto, against any incorporator, stockholder, officer, trustee or
director, past, present or future, as such, of the Company or of any predecessor
or successor corporation, whether by virtue of any constitution, statute or rule
of law or  equity,  or by  the  enforcement  of any  assessment  or  penalty  or
otherwise, all such liability being, by the acceptance hereof and as part of the
consideration  for the issue  hereof,  expressly  waived and  released  by every
holder hereof, as more fully provided in the Indenture.

                      ----------------------


           AND WHEREAS,  all acts and things  necessary to make the  Debentures,
when executed by the Company and  authenticated  and delivered by the Trustee as
in this  Indenture  provided,  the valid,  binding and legal  obligations of the
Company, and to constitute these presents a valid indenture and agreement,  have
been done and  performed,  and the  execution  of this  Indenture  and the issue
hereunder of the Debentures have in all respects been duly  authorized,  and the
Company,  in the  exercise of the legal  right and power in it vested,  executes
this Indenture and proposes to make, execute, issue and deliver the Debentures;

           NOW, THEREFORE, THIS INDENTURE WITNESSETH:

           That in order to  declare  the terms and  conditions  upon  which the
Debentures  are  and  are to be  authenticated,  issued  and  delivered,  and in
consideration of the premises,  of the purchase and acceptance of the Debentures
by the  holders  thereof  and of the sum of one  dollar  to it duly  paid by the
Trustee  at the  execution  of these  presents,  the  receipt  whereof is hereby
acknowledged,  the Company  covenants  and agrees with the Trustee for the equal
and  proportionate  benefit of the  respective  holders from time to time of the
Debentures, as follows:

                                  ARTICLE ONE.

#30160546.5

                                -2-


<PAGE>




                                  Definitions.

           Section 1.01.  The terms  defined in this Section  (except as in this
Indenture otherwise expressly provided or unless the context otherwise requires)
for all purposes of this  Indenture  and of any  indenture  supplemental  hereto
shall have the respective  meanings  specified in this Section.  All other terms
used in this Indenture  which are defined in the Trust  Indenture Act of 1939 or
which are by reference  in such act defined in the  Securities  Act of 1933,  as
amended  (except as herein  otherwise  expressly  provided or unless the context
otherwise  requires),  shall have the  meanings  assigned  to such terms in said
Trust  Indenture Act and in said  Securities  Act as in force at the date of the
execution of this Indenture.

           "Authority" shall mean the New Jersey Economic
Development Authority.

           "Board of Directors" shall mean the Board of Directors of the Company
or any  committee  thereof  duly  authorized  by the Board of  Directors  to act
hereunder.

           "Board  Resolution" or  "Resolution of the Board of Directors"  shall
mean a copy of a resolution certified by the Secretary or an Assistant Secretary
of the Company to have been duly adopted by the Board of Directors  and to be in
full force and effect on the date of such certification.

           "Company" shall mean Elizabethtown Water Company, and, subject to the
provisions of Article Twelve, shall also include its successors and assigns.

           "Debenture" or  "Debentures"  shall mean any Debenture or Debentures,
as the case may be, authenticated and delivered under this Indenture.

           The term  "outstanding",  when used  with  reference  to  Debentures,
shall, subject to the provisions of Section 9.04 and Article Thirteen,  mean, as
of any  particular  time,  all  Debentures  authenticated  and  delivered by the
Trustee under this Indenture, except

           (a)  Debentures theretofore canceled by the Trustee or
      delivered to the Trustee for cancellation;

           (b)  Debentures or portions  thereof for the payment or redemption of
      which moneys in the  necessary  amount shall have been  deposited in trust
      with the Trustee,  provided that if such  Debentures or portions are to be
      redeemed prior to the maturity  thereof,  notice of such redemption  shall
      have been given as in Article Four provided, or provision  satisfactory to
      the Trustee shall have been made for giving such notice; and

           (c)  Debentures  in  lieu  of  or in  substitution  for  which  other
      Debentures  shall have been  authenticated  and delivered  pursuant to the
      terms of  Section  2.06,  unless  proof  satisfactory  to the  Trustee  is
      presented  that any such  Debentures are held by holders for value without
      notice of any defense.

#30160546.5

                                -3-


<PAGE>



           "Debentureholder", "holder of Debentures", "holder", or other similar
terms,  shall mean the registered holder of any Debenture.  The term "registered
holder"  shall mean the  person or  persons in whose name or names a  particular
Debenture  shall  be  registered  on the  register  kept  for  that  purpose  in
accordance with the terms of this Indenture.

           "Event of Default"  shall mean any event  specified  in Section  7.01
continued for the period of time, if any, therein designated.

           "Indenture" shall mean this instrument as originally executed, or, if
amended or supplemented, as so amended or supplemented.

           "Loan  Agreement"  shall mean the Loan Agreement  dated as of June 1,
1997 between the Company and the Authority  relating to, among other things, the
issuance   of   $25,000,000   principal   amount  of  Water   Facilities   Bonds
(Elizabethtown Water Company Project -- 1997 Series A), or if further amended or
supplemented, as so further amended or supplemented.

           "Officers'  Certificate"  shall  mean  a  certificate  signed  by the
President or a Vice President and by the Treasurer or an Assistant  Treasurer or
the Secretary or an Assistant  Secretary of the Company.  Each such  certificate
shall include the statements provided for in Section 15.06, if and to the extent
required by the provisions thereof.

           "Opinion of Counsel" shall mean an opinion in writing signed by legal
counsel who shall be satisfactory to the Trustee,  and who may be an employee of
or counsel to the  Company.  Each such  opinion  shall  include  the  statements
provided for in Section 15.06,  if and to the extent  required by the provisions
thereof.

           "Person"   shall  mean  an  individual,   partnership,   corporation,
association,  joint  venture,  trust or  unincorporated  association  and  shall
include a  government  or  political  subdivision  thereof and any  governmental
agency or public benefit corporation.

           "Principal Corporate Trust Office" means the office of the Trustee in
New York,  New York at which any  particular  time its corporate  trust business
shall be principally administered, which office at the date hereof is located at
101 Barclay Street, 21st Floor, New York, New York 10286,  Attention:  Corporate
Trust  Trustee  Administration,  except that,  with respect to  presentation  of
Securities  for payment or  registration  of  transfers  and  exchanges  and the
location of the Security Registrar,  such term means the office or agency of the
Trustee  in said  city at which at any  particular  time  its  corporate  agency
business shall be conducted,  which at the date hereof is located at 101 Barclay
Street, New York, New York 10286, Attention: Corporate Trust Services Window.

           "Project" shall mean those certain facilities of the Company financed
pursuant to the Loan Agreement and described therein.

           "Responsible  Officer"  when used with  respect to the Trustee  shall
mean the chairman or vice  chairman of the board of  directors,  the chairman of
the executive committee,  the president,  any vice president, the secretary, the
treasurer,  any senior trust officer, any trust officer, any second or assistant
vice president,  any assistant secretary, any assistant treasurer, any assistant
cashier,  or any other officer or assistant  officer of the Trustee  customarily
performing  functions  similar to those performed by the persons who at the time
shall be such officers,  respectively,  or to whom any corporate trust matter is
referred  because  of his  knowledge  of and  familiarity  with  the  particular
subject.

           "Bonds" shall mean the Authority's  $25,000,000  principal  amount of
Water Facilities Bonds (Elizabethtown Water Company Project -- 1997 Series A).

           "Bond Indenture" shall mean the Trust Indenture  (Series A), dated as
of June 1, 1997 between the Authority  and the Bond  Trustee,  pursuant to which
the Bonds are  issued,  or if  further  amended or  supplemented,  as so further
amended or supplemented.

           "Bond  Trustee"  shall mean the trustee under the Bond  Indenture for
the time being, whether original or successor.

           "Trustee"  shall mean the Trustee  under this  Indenture for the time
being, whether original or successor.

           "Trust Indenture Act of 1939",  subject to the provisions of Sections
11.01 and 11.02,  shall mean the Trust  Indenture Act of 1939 as in force at the
date of execution of this Indenture.

           Certain  other  terms are defined in Articles  Two,  Five,  Seven and
Eight.

                                  ARTICLE TWO.

        Description, Execution and Exchange of Debentures.

           Section 2.01. The Debentures shall mature on June 1, 2027.

           Section  2.02.  The  Debentures  and  the  Trustee's  certificate  of
authentication to be borne by the Debentures shall be substantially of the tenor
and  purport as in this  Indenture  above  recited,  and may have such  letters,
numbers  or other  marks of  identification  and such  legends  or  endorsements
printed,  lithographed or engraved  thereon as the Company may deem  appropriate
and as are not inconsistent with the provisions of this Indenture,  or as may be
required to comply  with any law or with any rule or  regulation  made  pursuant
thereto  or with any law or  regulation  of any  stock  exchange  on  which  the
Debentures may be listed, or to conform to usage.

           Section  2.03.  The  Debentures   shall  be  issuable  as  registered
Debentures without coupons in denominations of $5,000 and multiples thereof.

           Each Debenture  shall be dated the date of its  authentication.  Each
Debenture  shall bear  interest at the same rate,  and interest and premium,  if
any,  on each  Debenture  shall be  payable on the same  dates,  and to the same
extent that interest is payable on the Bonds pursuant to the terms thereof.

           The  obligation  of the Company to make  payments with respect to the
principal of, premium,  if any, and interest on the Debentures shall be fully or
partially,  as the case may be,  satisfied and discharged to the extent that the
principal of, premium, if any, and interest on the Bonds shall have been paid or
shall be deemed to have been paid in accordance with the Bond Indenture.

           Section 2.04. The Debentures shall be signed on behalf of the Company
by its  President  or a Vice  President,  and by its  Secretary  or an Assistant
Secretary,  and its  corporate  seal, or a facsimile  thereof,  shall be thereon
impressed or imprinted.  The signature of any such  President,  Vice  President,
Secretary  or  Assistant  Secretary  may be  facsimile.  The Company may use the
signature or facsimile  signature or any person who shall be any such officer of
the Company at the time of the execution of Debentures, irrespective of the date
as of which the same  shall be  authenticated,  or of any  person who shall have
been any such officer of the Company,  notwithstanding the fact that at the time
the  Debentures  shall be  authenticated  and delivered or disposed of, he shall
have ceased to be such officer of the Company.

           The  Company may  deliver  Debentures  executed by the Company to the
Trustee for  authentication.  The Trustee shall thereupon  authenticate and make
available  for delivery  said  Debentures  to or upon the written  orders of the
Company.   Only  such   Debentures  as  shall  bear  thereon  a  certificate  of
authentication  substantially in the form herein before recited, executed by the
Trustee,  shall be entitled to the  benefits  of this  Indenture  or be valid or
obligatory for any purpose.  Such  certificate by the Trustee upon any Debenture
executed by the Company  shall be  conclusive  evidence  that the  Debenture  so
authenticated has been duly  authenticated and delivered  hereunder and that the
holder is entitled to the benefits of this Indenture.

           Section  2.05.  The Company  shall keep at the office or agency to be
maintained by the Company as provided in Section 5.02 a register or registers in
which,  subject to such  reasonable  regulations  as it may  prescribe,  it will
register all Debentures,  and upon due presentment for  registration or transfer
of any  Debenture  at such  office or agency,  the  Company  shall  execute  and
register  and the  Trustee  shall  authenticate  and  deliver in the name of the
transferee or  transferees a new  Debenture or Debentures  for a like  aggregate
principal amount of Debentures of any authorized denominations,  bearing numbers
not contemporaneously outstanding.

           The  several   authorized   denominations   of  Debentures  shall  be
interchangeable in equal aggregate principal amounts. Debentures to be exchanged
shall be surrendered at the office or agency to be maintained by the Company for
the  purpose as  provided  in Section  5.02 and the  Company  shall  execute and
register and the Trustee shall authenticate and deliver in exchange therefor the
Debenture or Debentures  which the Debenture holder making the exchange shall be
entitled to receive, bearing numbers not contemporaneously outstanding.

#30160546.5

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<PAGE>



           All Debentures presented or surrendered for registration of transfer,
exchange,  redemption  or payment  shall (if so  required  by the Company or the
Trustee) be duly  endorsed  by, or be  accompanied  by a written  instrument  or
instruments of transfer in form satisfactory to the Company and the Trustee duly
executed by, the registered holder or his attorney duly authorized in writing.

           For any  exchange or  registration  of transfer  of  Debentures,  the
Company, at its option, may require the payment of a sum sufficient to reimburse
it for any tax or other  governmental  charge  that may be imposed  in  relation
thereto. No service charge shall be made for any such transaction.

           The Company shall not be required to make  registration  of transfers
or  exchanges of  Debentures  for a period of fifteen  days next  preceding  any
selection  of  Debentures  to be  redeemed,  nor  shall it be  required  to make
registration  of transfers  or exchange of any  Debentures  or portions  thereof
called or being called for redemption,  except,  in the case of any Debenture to
be redeemed in part only, the portion thereof not being redeemed.

           Section  2.06.  In case any  Debenture  shall become  mutilated or be
destroyed,  lost or  stolen,  the  Company  in its  discretion  may  issue a new
Debenture of like tenor bearing a number not contemporaneously  outstanding,  in
exchange  and  substitution  for  the  mutilated  Debenture  or in  lieu  of and
substitution for the Debenture so destroyed,  lost or stolen.  In every case the
applicant  for a substituted  Debenture  shall furnish to the Company and to the
Trustee  such  security or  indemnity as may be required by them to save each of
them,  and, if  requested,  any paying  agents and  Debenture  registrars of the
Company,  harmless from all risk,  however remote,  and the applicant shall also
furnish to the Company and to the Trustee evidence to their  satisfaction of the
mutilation,  destruction,  loss or theft of the applicant's Debenture and of the
ownership thereof. The Trustee shall authenticate any such substituted Debenture
and deliver the same upon the written request or authorization of any officer of
the  Company.  Upon the issue of any  substituted  Debenture,  the  Company  may
require  the  payment  of a sum  sufficient  to  cover  any  stamp  tax or other
governmental charge that may be imposed incident thereto and any other expenses,
including counsel fees and expenses,  of the Company, the Trustee and any paying
agent or Debenture registrar,  connected therewith.  In case any Debenture which
has matured or is about to mature shall become  mutilated or be destroyed,  lost
or stolen,  the Company may, instead of issuing a substitute  Debenture,  pay or
authorize the payment of the same (without  surrender thereof except in the case
of a mutilated Debenture) if the applicant for such payment shall furnish to the
Company and to the Trustee such security or indemnity as may be required by them
to save each of them harmless,  and evidence to the  satisfaction of the Company
and the Trustee of the mutilation,  destruction, loss or theft of such Debenture
and of the ownership thereof.

           Every Debenture  issued pursuant to the provisions of this Section in
substitution  for  any  Debenture  which  is  destroyed,  lost or  stolen  shall
constitute an additional contractual  obligation of the Company,  whether or not
the  destroyed,  lost or  stolen  Debenture  shall be found at any  time,  or be
enforceable  by  anyone,  and  shall be  entitled  to all the  benefits  of this
Indenture  equally and  proportionately  with any and all other  Debentures duly
issued  hereunder.  All  Debentures  shall be held and  owned  upon the  express
condition  that the  foregoing  provisions  are  exclusive  with  respect to the
replacement or payment of mutilated,  destroyed,  lost or stolen  Debentures and
shall preclude any and all other rights or remedies,  notwithstanding any law or
statute  existing or  hereinafter  enacted to the  contrary  with respect to the
replacement  or payment of negotiable  instruments or other  securities  without
their surrender.

           Section 2.07. All Debentures  surrendered for the purpose of payment,
redemption,  exchange or  registration  of transfer  shall be  delivered  to the
Trustee  and  canceled by it, and no  Debentures  shall be issued in lieu of any
thereof  except as expressly  required or permitted by any of the  provisions of
this Indenture.  With the consent of the Company, the Trustee may, but shall not
be required to, destroy canceled Debentures and deliver a certificate thereof to
the Company. If the Company shall acquire any of the Debentures,  however,  such
acquisition   shall  not  operate  as  a  redemption  or   satisfaction  of  the
indebtedness  represented  by such  Debentures  unless  and  until  the same are
delivered to the Trustee, or surrendered to the Trustee, for cancellation.

           Section  2.08.  Nothing  in  this  Indenture  or in  the  Debentures,
expressed or implied,  shall give or be construed to give to any person, firm or
corporation,  other than the parties  hereto and the holders of the  Debentures,
any legal or  equitable  right,  remedy  or claim  under or in  respect  of this
Indenture, or under any covenant,  condition or provision herein contained,  all
of the covenants, conditions and provisions herein being for the sole benefit of
the parties hereto and of the holders of the Debentures.

           Section 2.09.  The Company in issuing the  Debentures may use "CUSIP"
numbers (if then  generally in use),  and, if so, the Trustee  shall use "CUSIP"
numbers in notices of  redemption  as a  convenience  to holders of  Debentures;
provided that any such notice may state that no representation is made as to the
correctness  of such numbers either as printed on the Debentures or as contained
in any notice of a redemption  and that reliance may be placed only on the other
identification numbers printed on the Debentures,  and any such redemption shall
not be affected by any defect in or omission of such numbers.

                                 ARTICLE THREE.

                              Issue of Debentures.

           Section 3.01. Debentures not to exceed the aggregate principal amount
of  $25,000,000,  except as provided in Section 2.06, may, upon the execution of
this Indenture or from time to time  thereafter,  be executed by the Company and
delivered to the Trustee for  authentication,  and the Trustee  shall  thereupon
authenticate  and deliver said  Debentures  to or upon the written  order of the
Company  signed by its President or a Vice  President and by its Treasurer or an
Assistant Treasurer or its Secretary or an Assistant Secretary,  without further
action by the Company.  As a general  matter,  the Debentures  issued under this
Indenture   evidence   indebtedness   under  the  Loan  Agreement  and  are  not
transferable except to a successor Bond Trustee.

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                                  ARTICLE FOUR.

                            Redemption of Debentures.

           Section 4.01. The Debentures  are  redeemable  prior to maturity,  in
accordance  with the  provisions of this Article  Four, at the principal  amount
thereof and accrued  interest to the date fixed for redemption  (but if the date
fixed for  redemption  is a  semi-annual  interest  payment  date,  the interest
installment  payable  on such date  shall be paid to the  holder at the close of
business  on the record  date for such  interest  payment  date),  together,  in
certain  cases,  with a  premium,  all as set  forth  in the  form of  Debenture
provided for herein. The Trustee,  upon the request of the Company (evidenced by
a copy of a Board Resolution, delivered to the Trustee at least 60 days prior to
the  redemption  date) and  notification  by the Bond Trustee,  signed by a Vice
President or Trust  Officer  (delivered to the Trustee at least 35 days prior to
the redemption date), that an equal principal amount of Bonds are to be redeemed
and specifying the premium,  if any, to be paid on such  redemption,  shall, for
and on  behalf of and in the name of the  Company,  mail or cause to be mailed a
notice  of  redemption  with  respect  to the  principal  amount  of  Debentures
specified in such request.

           Section  4.02.  In  case  of a  redemption  of a  part  only  of  the
Debentures, the Trustee shall select the particular Debentures or parts thereof,
which shall be $5,000 or multiples thereof,  so to be redeemed according to such
method as the Trustee shall deem proper in its discretion.

           Notice of redemption  to the holder of any  Debenture  which is to be
redeemed in whole or in part shall be mailed by or on behalf of the Company, not
less than thirty days prior to the date fixed for redemption, to him at his last
address appearing upon the registry books.

           Failure  duly to give such  notice by  mailing  to the  holder of any
Debenture  designated  for  redemption  in whole or in part shall not affect the
validity of the proceedings for the redemption of any other Debenture.

           The notice of  redemption to each holder of Debentures to be redeemed
shall  specify  the  Debentures  or  parts  thereof  held by such  holder  to be
redeemed,  which  shall be  $5,000  or  multiples  thereof,  the date  fixed for
redemption,  the CUSIP numbers (if any) of such Debentures, the redemption price
at which  Debentures  are to be  redeemed  and the place  where  payment  of the
redemption price is to be made upon surrender of the Debentures, and shall state
that  interest  accrued  to the date  fixed for  redemption  will be paid in the
manner specified in said notice, that from said date interest thereon will cease
to accrue,  and,  in the case of any  Debenture  which is to be redeemed in part
only, that on and after the redemption date, upon surrender of such Debenture, a
new Debenture or Debentures of authorized  denominations in aggregate  principal
amount equal to the unremedied  portion of such  Debenture will be issued.  Such
notice  shall also state  that it is  subject to the  receipt of the  redemption
moneys by the  Trustee  prior to the date  fixed for  redemption,  and that such
notice,  and the Company's request to the Trustee to mail such notice,  shall be
of no effect unless such moneys are received prior to such date.

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           Section  4.03.  Notice of  redemption  having  been  mailed,  and the
Trustee having prior to the date fixed for redemption specified in the notice of
redemption  received for the purpose an amount in cash  sufficient to redeem all
of the Debentures  called for redemption,  the Debentures  called for redemption
shall become due and payable on such date fixed for redemption.

           Section  4.04.  On and after the date  fixed for  redemption,  if the
moneys for the  redemption  of the  Debentures  to be  redeemed  shall have been
received by the  Trustee,  such  Debentures  shall cease to bear  interest.  All
moneys on deposit  with the  Trustee for the  redemption  of  Debentures  shall,
subject to the provisions of Section 13.04 hereof,  be held in trust for account
of the holders of the  Debentures so to be redeemed,  and shall be paid to them,
respectively, upon presentation and surrender of said Debentures.

           If any Debenture of a denomination larger than $5,000 shall be called
for redemption in part only,  upon  presentation of any such Debenture so called
for  redemption,  the payment with respect to said  Debenture  shall be made and
Debentures  for the unpaid  balance of the principal  amount of the Debenture so
presented  shall be  authenticated  and delivered by the Trustee  without charge
therefor to the holder thereof. On and after the date fixed for such redemption,
interest  shall be payable only on the portion of such  Debenture  not so called
for redemption and only such portion shall be deemed outstanding and continue to
be entitled to the benefits of this Indenture.

           Anything in this Indenture contained to the contrary notwithstanding,
if the giving of the notice of redemption  shall have been completed as provided
in Section 4.02, or if provision  satisfactory  to the Trustee for the giving of
such notice  shall have been made,  and if the Company  shall have  deposited in
trust with the  Trustee  funds  sufficient  to redeem the  Debentures  (or parts
thereof) to be redeemed on the date fixed for redemption, together with interest
accrued to the date fixed for redemption, then all obligations of the Company in
respect of such  Debentures (or parts thereof) shall cease and be discharged and
the holders of such Debentures or parts thereof) shall  thereafter be restricted
exclusively  to such funds for any and all claims of whatsoever  nature on their
part under this Indenture or in respect to such Debentures (or parts thereof).

                                  ARTICLE FIVE.

               Particular Covenants of the Company.

           The Company covenants as follows:

           Section 5.01. The Company will duly and punctually pay or cause to be
paid the principal of,  premium,  if any, and interest on each of the Debentures
at the time and place and in the manner provided herein and in the Debentures.

           Section 5.02. As long as any of the  Debentures  remain  outstanding,
the  Company  will  maintain  an office or agency or offices or  agencies in the
Borough of Manhattan,  City and State of New York,  where the  Debentures may be
presented  for  registration  of  transfer  and  exchange  as in this  Indenture
provided, and where notices and demands to or upon the Company in respect of the
Debentures or of this  Indenture may be served,  and where the Debentures may be
presented for payment.  Until otherwise designated by the Company in a notice to
the Trustee,  such office or agency for all of the above  purposes  shall be the
principal  corporate  trust  office of the Trustee in the Borough of  Manhattan,
City and State of New York.

           Section  5.03.  The  Company,  whenever  necessary to avoid or fill a
vacancy in the office of  Trustee,  will  appoint,  in the  manner  provided  in
Section  8.10,  a  Trustee,  so that  there  shall  at all  times  be a  Trustee
hereunder.

           Section  5.04.  (a) If the Company shall appoint a paying agent other
than the Trustee,  it will cause such paying agent to execute and deliver to the
Trustee an instrument in which such agent shall agree with the Trustee,  subject
to the provisions of this Section,

           (1)  that it will  hold  all sums  held by it as such  agent  for the
      payment  of  the  principal  of,  premium,  if  any,  or  interest  on the
      Debentures  (whether  such sums have been paid to it by the  Company or by
      any other  obligor  on the  Debentures)  in trust for the  benefit  of the
      holders of the Debentures, or of the Trustee, as the case may be,

           (2) that it will  give  the  Trustee  notice  of any  failure  by the
      Company (or by any other obligor on the Debentures) to make any payment of
      the principal of or interest on the Debentures  when the same shall be due
      and payable, and

           (3) that at any time during the  continuance  of any Event of Default
      upon the written  request of the  Trustee,  it will  forthwith  pay to the
      Trustee all sums so held by such paying agent.

           (b) If the Company shall act as its own paying agent,  it will, on or
before each due date of the principal of,  premium,  if any, or interest on, the
Debentures,  set  aside,  segregate  and hold in trust  for the  benefit  of the
holders of the Debentures,  a sum sufficient to pay such principal,  premium, if
any, or interest so becoming  due and payable and will notify the Trustee of any
failure (by it or any other obligor on the Debentures) to take such action.

           (c) Whenever  the Company  shall have one or more paying  agents,  it
will,  prior to each due date of the principal of, premium,  if any, or interest
on, the  Debentures,  deposit  with a paying agent a sum  sufficient  to pay the
principal, premium, if any, or interest, so becoming due, such sum to be held in
trust for the benefit of the persons  entitled to such  principal,  premium,  if
any, or interest, and (unless such paying agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.

           (d)  Anything in this Section to the  contrary  notwithstanding,  the
Company  may, at any time,  for the  purpose of  obtaining  a  satisfaction  and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the  Trustee  all sums held in trust by it, or any paying  agent  hereunder,  as
required by this  Section,  such sums to be held by the Trustee  upon the trusts
herein contained.

           (e)  Anything in this Section to the  contrary  notwithstanding,  the
agreement  to hold sums in trust as provided  in this  Section is subject to the
provisions of Section 13.04 hereof.

           Section 5.05. The Company  covenants  that, so long as any Debentures
shall be outstanding under this Indenture,  it will not create, assume or incur,
or in any other manner become  directly or indirectly  liable in respect of, any
indebtedness,  in  addition  to  its  7.20%  Debentures  due  2019,  its 7  1/2%
Debentures  due 2020, its 6.60%  Debentures  due 2021, its 6.70%  Debentures due
2021,  its 8 3/4%  Debentures  due 2021,  its 8% Debentures due 2022, its 7 1/4%
Debentures due 2028,  its 5.60%  Debentures due 2025, its 1997 Series B Variable
Rate Debentures due 2027 and the Debentures, except the following:

           (a) current  operating  liabilities and current or other  obligations
      (other  than for  borrowed  money)  incurred  in the  ordinary  course  of
      business;

           (b)  Current Indebtedness;

           (c)  indebtedness (in addition to that referred to in
      subdivisions (a) and (b) above and (d) below) in an
      aggregate amount not in excess of $10,000,000 at any one
      time outstanding; and

           (d)  indebtedness  (in addition to that  referred to in  subdivisions
      (a), (b) and (c) above) in an aggregate amount not in excess of the sum of
      $20,000,000  plus 65% of the Amount of Net Property  Additions at the time
      the Company first becomes liable in respect of any such indebtedness.

           The  Company  covenants  that,  so long as any  Debentures  shall  be
outstanding under this Indenture, it will not create, assume or incur, or in any
manner become directly or indirectly  liable in respect of, any indebtedness (in
addition to (as hereinafter  defined) its 7.20%  Debentures due 2019, its 7 1/2%
Debentures  due 2020, its 6.60%  Debentures  due 2021, its 6.70%  Debentures due
2021,  its 8 3/4%  Debentures  due 2021,  its 8% Debentures due 2022, its 7 1/4%
Debentures due 2028,  its 5.60%  Debentures due 2025, its 1997 Series B Variable
Rate  Debentures,  the Debentures and that referred to in subdivisions  (a), (b)
and (c)  above),  unless  the Gross  Income of the  Company,  for a period of 12
consecutive calendar months within the 15 calendar months immediately  preceding
the  incurring  by the  Company of such  indebtedness,  shall have been at least
equal to twice the Annual Interest Charges.

           The  term   "Current   Indebtedness"   as  used  herein   shall  mean
indebtedness  in an  aggregate  amount  not  in  excess  of  20%  of  the  total
capitalization  of the Company at the time and which is  expressed to be payable
on demand or to mature less than one year after the date of creation or issuance
thereof.  The total  capitalization of the Company shall be deemed to consist of
the sum of (i) the  principal  amount  of all  outstanding  indebtedness  of the
Company  represented  by  bonds,   debentures,   notes  or  other  evidences  of
indebtedness (other than Current Indebtedness), (ii) the aggregate of the par or
stated value  represented  by all issued and  outstanding  capital  stock of all
classes of the Company, including premiums received on the issue of such capital
stock, and (iii) the surplus of the Company,  including earned, capital, paid-in
and other surplus.

           The term "Amount of Net Property Additions" as used herein shall mean
the balance,  if any,  remaining after deducting the Retirements from the Amount
of Property Additions, as of any particular time.

           The term "Amount of Property Additions" as used herein shall mean the
Cost or,  if less,  the fair  value  to the  Company  at the time of the  actual
acquisition by the Company, of Property

Additions.

           The term "Property  Additions" as used herein shall mean all tangible
property owned by the Company and made,  constructed or otherwise acquired by it
subsequent to December 31, 1975, which the Company is authorized to acquire, own
and operate and which is used or useful in the business of impounding,  storing,
transmitting, producing, manufacturing,  transporting, distribution or supplying
water for any and all purposes. Permanent improvements, extensions, additions or
replacements in the process or  construction  or erection,  shall be included as
Property Additions as of any particular time, insofar as actually constructed or
erected after December 31, 1975, and before such  particular  time.  There shall
not be included as Property Additions (a) Excepted Property,  (b) going value or
good will, as such, (c) any item of property retired the retirement of which has
not been credited to utility plant account, (d) any item of property acquired to
replace a similar item of property  whose  retirement  has not been  credited to
utility plant account, or any item of property whose cost has been charged or is
properly  chargeable to repairs,  maintenance or other operating expense account
or whose cost has been charged or is not properly  chargeable  to utility  plant
account,  or (e) any  property  not  located  in the State of New Jersey or in a
State contiguous thereto.

           The term "Retirements" as used herein shall mean the Cost of Fundable
Property which,  subsequent to December 31, 1975,  shall have become worn out or
permanently unserviceable,  or shall have been lost, sold, destroyed, abandoned,
surrendered  on lapse  of  title,  taken by  eminent  domain,  purchased  by any
governmental  or public body pursuant to any right  reserved to or vested in it,
or otherwise  disposed of by the Company or retired from service for any reason,
or shall have  permanently  ceased to be used or useful in the  business  of the
Company. Accounting adjustments of utility plant accounts or reclassification of
utility plant accounts or  amortization  of any plant account to comply with any
order of any regulatory body and which do not represent or reflect the permanent
retirement from a plant account  subsequent to December 31, 1975 of any Fundable
Property shall not be included in Retirements.

           The  term  "Fundable  Property"  as used  herein  shall  mean (a) all
property  owned by the Company on December  31, 1975  (except  such  property as
would not be included in Property  Additions if acquired  subsequent to December
31, 1975) and (b) Property Additions.

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           The term  "Cost"  as used  herein,  when  used  with  respect  to any
particular  property,  shall mean the cost (or,  if not known,  estimated  cost)
thereof to the person first  devoting it to public  service,  without  deducting
therefrom   applicable  reserves  for  depreciation  and/or  retirements  and/or
depletion and/or  obsolescence.  In determining Cost in cases in which property,
part of which  constitutes  Fundable  Property and part does not, is or has been
acquired for a consideration  not divided between such parts, or, in cases where
the  consideration  given for property is not  allocated to the various items of
property  acquired,  the consideration may be allocated to the various parts and
items of property  acquired in any reasonable manner which is in accordance with
the  requirements  of any  systems  of  accounting  with  which the  Company  is
compelled  to  comply  by  any  provision  of  law,  or,  if  there  be no  such
requirements, in accordance with good accounting practice.

           The term  "Gross  Income" as used herein  shall mean gross  operating
revenues  from all sources  (whether or not subject to refund)  after  deducting
therefrom operating expenses. In computing gross operating revenues, there shall
be  included  net  non-operating   revenues,   if  any  (including  income  from
securities,  whether of  subsidiaries or not), in an amount not more than 20% of
Gross Income after deducting therefrom net non-operating  revenues. In computing
operating expenses,  there shall be included all operating  expenses,  including
accruals for taxes  (except  that taxes on  undistributed  earnings,  income and
excess  profits and any like taxes measured by income and charges in lieu of any
thereof  made  because  of the  deferment  in  payment  of any such tax shall be
excluded from operating expenses,  and any credit to income subsequently made on
account  of any  such  prior  charge  shall be  excluded  from  gross  operating
revenues),   rentals,   insurance,   actual  charges  for  current  repairs  and
maintenance  and  charges  to expense  or income to  provide  for  depreciation,
renewals,  replacements,  depletion or  retirement  of property and for property
loss (but excluding  interest,  charges deducted in computing net  non-operating
revenues  and charges to income for the  amortization  (i) of debt  discount and
expense and (ii) of utility plant account or amounts transferred therefrom).  If
any of the property  owned by the Company at the time any  computation  of Gross
Income is made  shall  have been  acquired  during or after any period for which
Gross Income is to be computed,  the Gross Income of such property  (computed in
the manner in this Section  provided for the  computation of the Gross Income of
the  Company)  during  such  period  or such part of such  period as shall  have
preceded the acquisition thereof, to the extent that the same have not otherwise
been  included and can be  determined,  shall be included in the Gross Income of
the Company for all purposes of this  Indenture,  and the Gross Income which can
be  determined of any property  disposed of by the Company  during or after such
period shall not be treated as Gross Income of the Company.

           The term  "Annual  Interest  Charges" as used  herein  shall mean the
interest  requirements  for twelve months upon all  indebtedness  of the Company
(including any  indebtedness,  whether or not created or assumed by the Company,
on which the Company  customarily pays interest charges or which is secured by a
lien on any property of the Company, but excluding (a) indebtedness  represented
by customers' deposits,  (b) current operating  liabilities and current or other
obligations  (other than for borrowed  money) incurred in the ordinary course of
business,  (c)  indebtedness  for the  purchase,  payment or redemption of which
money in the  necessary  amount  shall  have been  deposited  in trust,  and (d)
Current Indebtedness) to be outstanding upon the incurring by the Company of the
indebtedness  in  connection  with  which  the  computation  is made;  provided,
however, that the interest requirements on the Debentures shall be determined by
reference  to the rate in  effect on the date  next  preceding  the date of such
computation.

           Section 5.06. The Company  covenants  that, so long as any Debentures
shall be outstanding  under the  Indenture,  it will not at any time mortgage or
pledge, or permit any other lien (other than Excepted  Encumbrances) to become a
lien on, any property  owned by the Company  just prior to such time,  to secure
any  other   indebtedness,   without  making  effective  provision  whereby  the
Debentures shall (so long as any such other indebtedness shall be so secured) be
secured (along with any other indebtedness  similarly entitled to be equally and
ratably  secured) by a direct  lien (on all the  property,  other than  Excepted
Property, owned by the Company just prior to the time such other lien shall have
become a lien on any of the property of the Company)  prior to the lien or liens
securing  any and all such  other  indebtedness;  provided,  however,  that this
restriction shall not be applicable to nor prevent

           (a) the  pledging by the  Company of its assets as  security  for the
      payment of any tax,  assessment  or other similar  charge  demanded of the
      Company  by any  governmental  authority  or  public  body  so long as the
      Company  in good  faith  contests  its  liability  to pay the same,  or as
      security to be deposited  with any  governmental  authority or public body
      for any purpose at any time required by law or governmental  regulation as
      a condition  to the  transaction  of any  business or the  exercise of any
      privilege, license or right; or

           (b) the  pledging  by the  Company of any  assets for the  purpose of
      securing a stay or discharge or for any other purpose in the course of any
      legal proceeding in which the Company is a party; or

           (c) making good faith deposits in connection with tenders,  contracts
      or leases to which the Company is a party.

           The  Company  covenants  that,  so long as any  Debentures  shall  be
outstanding  under this Indenture,  if, upon any  consolidation or merger of the
Company with or into any other  corporation,  or upon any sale or  conveyance of
all or substantially all of the property of the Company as an entirety,  or upon
any  acquisition  by  the  Company  of  the  property  of  another   corporation
substantially  as an entirety or upon any merger of any other  corporation  into
the Company,  any of the property  (other than Excepted  Property)  owned by the
Company just prior thereto,  would  thereupon  become subject to any lien (other
than Excepted Encumbrances),  the Company, prior to such consolidation,  merger,
sale,  conveyance  or  acquisition,  will take  appropriate  action  whereby the
Debentures  shall (so long as such  property  shall be  subject to such lien) be
secured (along with any other indebtedness  similarly entitled to be equally and
ratably secured) by a direct lien on such portion of the property of the Company
prior to all other liens,  other than Excepted  Encumbrances  and other than any
liens  existing  thereon  just  prior  to  such  consolidation,   merger,  sale,
conveyance or acquisition.

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           Any instrument  creating a lien pursuant to the  requirements of this
Section shall contain reasonable and customary provisions for the enforcement of
such lien and for the release of, or substitution for, the property subjected to
such lien.  Such direct lien shall be evidenced by an appropriate  instrument or
instruments  executed  and  delivered  to the Trustee (or to the extent  legally
necessary,  to another trustee as additional or separate trustee).  The Trustee,
subject to the  provisions  of Section  8.01  hereof,  may receive an Opinion of
Counsel as conclusive evidence that any such instrument is in customary form and
complies with the foregoing provisions of this paragraph;  and the Trustee shall
not be under any duty or  responsibility  to any  holder of any  Debenture  with
respect to the form,  validity or enforceability of any such instrument which it
may accept in reliance in good faith upon any such opinion.

           If the  Company  shall  fail to create a direct  lien to  secure  the
Debentures,  as  required  by the  foregoing  provisions  of  this  Section,  an
equitable lien shall exist to the same extent and on the same property as though
the Company had created such direct lien.

           The term "Excepted  Encumbrances" as used herein shall mean as of any
particular time any of the following:

              (i) liens for  taxes,  assessments  or  governmental  charges  not
      delinquent  and  liens  for  workmen's  compensation  awards  and  similar
      obligations   not   delinquent   and  liens  for  taxes,   assessments  or
      governmental  charges  delinquent  but the  validity  of  which  is  being
      contested  at the  time  by the  Company  in  good  faith  by  appropriate
      proceedings diligently conducted;

             (ii) any liens securing indebtedness neither assumed nor guaranteed
      by the Company nor on which it customarily  pays interest,  existing in or
      relating  to  real  estate  acquired  by  the  Company  for  transmission,
      distribution  or  right-of-way  purposes,  or in connection with its usual
      operations;

            (iii)  easements  or  reservations  in any  property  of the Company
      created for the purpose of roads, railroads, railroadside tracks, electric
      lines,  pipe lines,  sewers,  water and gas  transmission and distribution
      mains,  conduits,  water  rights  of the State of New  Jersey  or  others,
      building and use  restrictions  and defects of title to, or leases of, any
      parts of the  property of the  Company  which do not in the opinion of the
      Company's counsel materially impair the use of the property as an entirety
      in the operation of the business of the Company;

               (iv)  undetermined   liens  and  charges  incidental  to  current
      construction,  including mechanics', laborers',  materialmen's and similar
      liens not delinquent;

              (v) any  obligations  or  duties  affecting  the  property  of the
      Company  to any  municipality  or public  authority  with  respect  to any
      franchise, grant, license, permit or certificate;

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             (vi)  rights  reserved to or vested in any  municipality  or public
      authority  to control or  regulate  any  property of the Company or to use
      such property in a manner which does not materially impair the use of such
      property for the purposes for which it is held by the Company;

            (vii)    judgments in course of appeal or otherwise in
      contest and secured by sufficient bond or security;

           (viii) any  irregularities  in or deficiencies of title to any rights
      of  way  for  mains  or  pipes  and/or  appurtenances   thereto  or  other
      improvements  thereon and to any real estate used or to be used  primarily
      for right of way  purposes,  provided that the Company shall have obtained
      from the apparent owner of the lands or estates  covered by any such right
      of way an instrument  purporting by its terms to grant the use thereof for
      the   construction,   operation  or  maintenance   of  such  main,   pipe,
      appurtenance or improvement for which the same are used or are to be used,
      or provided that the Company has power,  under  eminent  domain or similar
      statutes, to remove such irregularities or deficiencies; or

             (ix) any other lien on any property  owned by the Company to secure
      any  indebtedness  so long as the aggregate  principal  amount of all such
      indebtedness is not in excess of $10,000,000.

           The term  "Excepted  Property"  as used  herein  shall mean (a) cash,
bonds, stocks,  obligations and other securities; (b) choses in action, accounts
and  bills  receivable,  judgments  and  other  evidences  of  indebtedness  and
contracts,  leases and operating  agreements;  (c) stock in trade,  merchandise,
equipment,  apparatus,  materials or supplies  manufactured  or acquired for the
purpose of sale and/or  resale in the usual course of business or  consumable in
the operation of any of the properties of the Company or held for the purpose of
repairing or replacing  (in whole or in part) any rolling  stock,  buses,  motor
coaches,  trucks,  automobiles or other vehicles or aircraft;  (d) timber,  gas,
oil,  minerals  (including  developed and  undeveloped  natural gas reserves and
natural gas in underground storage or otherwise),  mineral rights and royalties;
(e) materials or products generated, manufactured,  produced or purchased by the
Company for sale,  distribution  or use in the ordinary  course of its business;
(f) office furniture and equipment,  tools, rolling stock, buses, motor coaches,
trucks,  automobiles  and other  vehicles and  aircraft;  and (g) the  Company's
franchise to be a corporation.

           Section 5.07. The Company  covenants  that, so long as any Debentures
shall be  outstanding  under  this  Indenture,  it will not  declare  or pay any
dividends  or  make  any  other   distribution   (except  dividends  payable  or
distributions  made in shares of capital  stock of the Company) on or in respect
of any of its Common Stock, or purchase or otherwise acquire for a consideration
any shares of its Common Stock (except out of the proceeds derived from the sale
of  additional  shares of its Common Stock  subsequent  to April 1, 1997, if the
aggregate  of such  dividends  and  distributions  and  such  consideration  for
purchase or other  acquisition of shares of its Common Stock made by the Company
after  December 31, 1975 would  exceed the sum of (a) the earned  surplus of the
Company accumulated after December 31, 1975 and determined without any deduction
on account of such dividends, distributions or acquisitions and (b) $10,000,000.
The term  "consideration"  as used in this Section shall mean cash or fair value
if the  consideration  be other  than  cash.  Charges  to  earned  surplus  with
corresponding credits to utility plant acquisition adjustment account or utility
plant  adjustment  account  or any  similar  account or to any  reserve  for the
purpose of ultimately  disposing  thereof and any provisions for amortization of
any  amounts  included in utility  plant  acquisition  account or utility  plant
adjustment account or in any similar account shall be disregarded in determining
earned surplus accumulated after December 31, 1975.

           Section 5.08. The Company  covenants  that, so long as any Debentures
shall be outstanding under this Indenture,  if the Proceeds of Released Property
in any period of 12  consecutive  calendar  months shall amount to $5,000,000 or
more, and if,  immediately  subsequent to the receipt of such $5,000,000 (or the
part  hereof  making the total  thereof  $5,000,000  or more),  the ratio of the
aggregate  principal  amount  of all  outstanding  indebtedness  of the  Company
represented  by bonds,  debentures,  notes or other  evidences  of  indebtedness
(other than Current Indebtedness) to the net book value of the Company's utility
plant accounts  exceeds 60%, then the Company will use such Proceeds of Released
Property  to redeem  all or any  portion of  Debentures  or redeem to all or any
portion of 7.20%  Debentures  due 2019 issued by the Company  (herein called the
"7.20%  Debentures  due  2019")  or to  redeem  all  or  any  portion  of 7 1/2%
Debentures due 2020 issued by the Company  (herein called the "7 1/2% Debentures
due 2020") or to redeem all or any portion of 6.60%  Debentures  due 2021 issued
by the Company (herein called the "6.60%  Debentures due 2021") or to redeem all
or any portion of 6.70% Debentures due 2021 issued by the Company (herein called
the  "6.70%  Debentures  due  2021") or to redeem  all or any  portion of 8 3/4%
Debentures due 2021 issued by the Company  (herein called the "8 3/4% Debentures
due 2021") or to redeem all or any portion of 8%  Debentures  due 2022 issued by
the Company (herein called the "8% Debentures due 2022") or to redeem all or any
portion of 7 1/4%  Debentures due 2028 issued by the Company  (herein called the
"7  1/4%  Debentures  due  2028")  or to  redeem  all or any  portion  of  5.60%
Debentures due 2025 issued by the Company  (herein called the "5.60%  Debentures
due 2025") or to redeem all or any  portion  of other  debentures  issued by the
Company  under  indentures  having a  provision  substantially  similar  to this
Section 5.08  ("Subsequent  Debentures") at the earliest  practicable  date at a
redemption  price equal to the principal amount thereof plus accrued interest to
the date of  redemption;  provided,  however,  that  the  Company  shall  not be
required so to use any part of such  Proceeds  of Released  Property as to which
the Company shall have given to the Trustee  (within 30 days after such receipt)
an Officers'  Certificate  stating that the Company intends,  within a period of
one year thereafter, to apply such part to the making, constructing or otherwise
acquiring of Property  Additions.  If any such  Officers'  Certificate  shall so
state,  the  Company  covenants  so to apply such part  within  such one year as
stated in such Officers' Certificate or, to the extent that it does not so apply
such part,  to use such part  within  such one year to redeem  Debentures  or to
redeem 7.20%  Debentures due 2019 or to redeem 7 1/2%  Debentures due 2020 or to
redeem 6.60%  Debentures  due 2021 or to redeem 6.70%  Debentures due 2021 or to
redeem 8 3/4%  Debentures  due 2021 or to  redeem 8%  Debentures  due 2022 or to
redeem 7 1/4%  Debentures due 2028 or to redeem 5.60%  Debentures due 2025 or to
redeem Subsequent Debentures.

           In  lieu  of  using  any  such  Proceeds  of  Released  Property  for
redemption as aforesaid, the Company may deliver to the Trustee for cancellation
Debentures  or may deliver for  cancellation  to the trustee under the indenture
pursuant to which the 7.20% Debentures due 2019 were issued 7.20% Debentures due
2019,  or may  deliver  for  cancellation  to the  trustee  under the  indenture
pursuant to which the 7 1/2%  Debentures due 2020 were issued 7 1/2%  Debentures
due 2020,  or may deliver for  cancellation  to the trustee  under the indenture
pursuant to which the 6.60% Debentures due 2021 were issued 6.60% Debentures due
2021,  or may  deliver  for  cancellation  to the  Trustee  under the  indenture
pursuant to which the 6.70% Debentures due 2021 were issued 6.70% Debentures due
2021,  or may  deliver  for  cancellation  to the  trustee  under the  indenture
pursuant to which the 8 3/4%  Debentures due 2021 were issued 8 3/4%  Debentures
due 2021,  or may deliver for  cancellation  to the trustee  under the indenture
pursuant to which the 8% Debentures due 2022 were issued 8% Debentures due 2022,
or may deliver for  cancellation to the trustee under the indenture  pursuant to
which the 7 1/4%  Debentures due 2028 were issued 7 1/4% Debentures due 2028, or
may deliver for  cancellation  to the Trustee  under the  Indenture  pursuant to
which the 5.60%  Debentures  due 2025 were issued 5.60%  Debentures due 2025, or
may deliver for  cancellation  to the trustee  under any  indenture  pursuant to
which any Subsequent Debentures were issued such Subsequent Debentures,  in each
case with all  unmatured  coupons,  if any,  appertaining  thereto,  theretofore
reacquired by the Company and not theretofore so delivered, and in any such case
the  obligation  of the Company to use such  Proceeds of Released  Property  for
redemption  shall be reduced to the extent of the aggregate  principal amount of
Debentures or the 7.20%  Debentures  due 2019 or 7 1/2%  Debentures  due 2020 or
6.60  Debentures due 2021 or 6.70%  Debentures due 2021 or 8 3/4% Debentures due
2021 or 8% Debentures due 2022 or 7 1/4% Debentures due 2028 or 5.60% Debentures
due 2025 or Subsequent  Debentures so delivered.  All Debentures so delivered to
the Trustee shall be canceled by the Trustee.

           The term  "Proceeds  of Released  Property" as used herein and in the
Debentures shall mean the aggregate amount of the  consideration  received or to
be  received  by the  Company on the  actual  sale or other  actual  disposition
(subsequent  to the  execution of this  Indenture)  of any property  included in
utility plant accounts  (including  therein an amount  equivalent to any part of
such  consideration  consisting  of other than cash at the fair value thereof to
the Company at the time of such sale or other disposition, as determined in good
faith by the Board of  Directors  of the  Company,  and  excluding  therefrom an
amount equivalent to any consideration received or to be received by the Company
on the sale or other  disposition  of any property (i) which property shall have
become worn out or permanently  unserviceable  and the book value of which shall
have been credited to utility plant accounts upon the retirement thereof or (ii)
to the  extent  that the  consideration  so  received  or to be  received  shall
constitute  Property  Additions) after deducting from such amount, to the extent
paid or payable by the Company,  all expenses  and all taxes  (including  income
taxes, if any) upon or in respect of any such sale or other disposition.

           Section 5.09. The Company will deliver to the Trustee within 120 days
after the end of each  fiscal  year of the  Company  the  Officers'  Certificate
required by Section  314(a)(4) of the Trust Indenture Act. See Section 314(a)(4)
of the Trust Indenture Act.

           Section  5.10.  The  Company  will  deliver to the  Trustee  true and
correct  copies  of the Loan  Agreement  and the Bond  Indenture  as  originally
executed and all amendments or supplements thereto.

#30160546.5

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<PAGE>





                                  ARTICLE SIX.

              Debentureholders' Lists and Reports by

                          the Company and the Trustee.

           Section   6.01.   The   Company   shall   deliver  to  the   Trustee,
semi-annually,  not more than 15 days after each record  date,  the  information
required by Section  312(a) of the Trust  Indenture  Act. See Section 312 of the
Trust Indenture Act.

           Section 6.02.  See Section 312 of the Trust Indenture
Act.

           Section 6.03.  See Section 314(a) of the Trust
Indenture Act.

           Section  6.04.  On or before June 1 in each year,  beginning  June 1,
1997, so long as any Debentures  are  outstanding  hereunder,  the Trustee shall
transmit by mail to the  Debentureholders  the report required by Section 313(a)
of the Trust Indenture Act, if such report is required.  See Trust Indenture Act
Sections 311(b) and 313.

                                 ARTICLE SEVEN.

                    Remedies  of the Trustee  and  Debentureholders  on Event of
               Default.

           Section 7.01. In case one or more of the following  Events of Default
shall have occurred and be continuing, that is to say:

           (a) default in the due and  punctual  payment of any  installment  of
      interest upon any of the  Debentures as and when the same shall become due
      and payable,  and continuance of such default for a period of thirty days;
      or

           (b) default in the due and punctual  payment of the  principal of any
      of the Debentures as and when the same shall become due and payable either
      at maturity, by declaration as authorized by this Indenture, or otherwise;
      or

           (c) failure on the part of the Company duly to observe or perform any
      other  of the  covenants,  conditions  or  agreements  on the  part of the
      Company in the Debentures or in this  Indenture  contained for a period of
      sixty  days  after  the  date on which  written  notice  of such  failure,
      requiring the same to be remedied, shall have been given to the Company by
      the Trustee,  or to the Company and the Trustee by the holders of at least
      25%  in  aggregate   principal  amount  of  the  Debentures  at  the  time
      outstanding; or

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<PAGE>


           (d) a decree or order by a court having  jurisdiction in the premises
      shall have been entered adjudging the Company a bankrupt or insolvent,  or
      approving a petition seeking reorganization of the Company under Title 11,
      United States Code or any other similar  applicable  Federal or State law,
      and such decree or order shall have  continued  undischarged  and unstayed
      for a  period  of sixty  days;  or a  decree  or  order of a court  having
      jurisdiction  in  the  premises  for  the  appointment  of a  receiver  or
      liquidator  or trustee or  assignee in  bankruptcy  or  insolvency  of the
      Company or of all or substantially all of its property, or for the winding
      up or liquidation of its affairs shall have been entered,  and such decree
      or order shall have  remained in force  undischarged  and  unstayed  for a
      period of sixty days; or

           (e) the Company  shall  institute  proceedings  to be  adjudicated  a
      voluntary  bankrupt,  or  shall  consent  to the  filing  of a  bankruptcy
      proceeding  against  it, or shall  file a  petition  or answer or  consent
      seeking  reorganization  under Title 11,  United  States Code or any other
      similar applicable Federal or State law, or shall consent to the filing of
      any such  petition,  or shall consent to the  appointment of a receiver or
      liquidator  or trustee or assignee in bankruptcy or insolvency of it or of
      all or substantially all of its property,  or shall make an assignment for
      the benefit of  creditors,  or shall admit in writing its inability to pay
      its debts generally as they become due; or

           (f) an event of  default,  as defined in (i) any  indenture  or trust
      agreement  securing or protecting any debt of the Company now or hereafter
      outstanding aggregating more than $10,000,000, or (ii) the Bond Indenture,
      shall happen and be then  continuing  and such debt shall be or become due
      and payable,  prior to the date on which the same would  otherwise  become
      due  and  payable,  provided  that,  in  the  case  of  clause  (i),  such
      acceleration  shall not be  rescinded  or  annulled  within ten days after
      written  notice  thereof to the Company from the Trustee or to the Company
      and the Trustee from the holders of not less than 25% in principal  amount
      of the Debentures then outstanding hereunder;

then and in each and every such case, so long as such Event of Default shall not
have been  remedied,  unless  the  principal  of all the  Debentures  shall have
already  become due and  payable,  either the Trustee or the holders of not less
than 25% in  aggregate  principal  amount  of the  Debentures  then  outstanding
hereunder,  by notice in writing to the Company  (and to the Trustee if given by
the  Debentureholders),  may declare the  principal of all the  Debentures  then
outstanding to be due and payable immediately, and upon any such declaration the
same  shall  become  and shall be  immediately  due  payable,  anything  in this
Indenture or in the said Debentures  contained to the contrary  notwithstanding.
This provision,  however, is subject to the condition that if, at any time after
the principal of the Debentures shall have been so declared due and payable, but
before  the  Debentures  shall  have  become  due by their  terms and before any
judgment or decree for the payment of the monies due shall have been obtained or
entered as hereinafter provided, the Company shall pay or shall deposit with the
Trustee a sum  sufficient to pay all matured  installments  of interest upon all
the Debentures then outstanding and the principal of any and all Debentures then
outstanding  which shall have become due otherwise  than by  acceleration  (with
interest upon such principal and, to the extent that payment of such interest is
enforceable under applicable law, upon overdue installments of interest,  at the
rate per  annum  expressed  in the  Debentures  to the date of such  payment  or
deposit) and the amount  payable to the Trustee under Section 8.06,  and any and
all defaults  under the  Indenture,  other than the  nonpayment  of principal on
Debentures  then  outstanding  which shall not have  become due by their  terms,
shall have been  remedied  or  provisions  shall have been made  therefor to the
satisfaction  of the  Trustee  -- then and in every  such case the  holders of a
majority in aggregate  principal amount of the Debentures then  outstanding,  by
written  notice to the Company and to the  Trustee,  may waive all  defaults and
rescind and annul such declaration and its  consequences;  but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default,
or shall impair any right consequent thereon.

           In case the Trustee  shall have  proceeded to enforce any right under
this Indenture and such  proceedings  shall have been  discontinued or abandoned
because of such  rescission  or  annulment or for any other reason or shall have
been  determined  adversely  to the  Trustee,  then and in every  such  case the
Company and the Trustee shall be restored respectively to their former positions
and rights hereunder, and all rights, remedies and powers of the Company and the
Trustee shall continue as though no such proceedings had been taken,  subject to
any applicable order or ruling in a court of competent jurisdiction.

           Section 7.02. The Company covenants that (1) in case default shall be
made in the payment of any installment of interest on any of the Debentures,  as
and when the same shall  become due and  payable,  and such  default  shall have
continued  for a period of thirty days,  or (2) in case default shall be made in
the payment of the principal of any of the  Debentures  when the same shall have
become  due  and  payable,  whether  upon  maturity  of the  Debentures  or upon
declaration as authorized by this Indenture or otherwise -- then, upon demand of
the Trustee, the Company will pay to the Trustee, for the benefit of the holders
of the Debentures then outstanding, the whole amount that then shall have become
due and payable on all such  Debentures  for principal or interest,  as the case
may be, with interest upon the overdue principal and (to the extent that payment
of such interest is enforceable under applicable law) upon overdue  installments
of interest at the rate per annum expressed in the Debentures;  and, in addition
thereto,  such  further  amount  as shall be  sufficient  to cover the costs and
expenses of  collection,  and the amount  payable to the Trustee  under  Section
8.06.

           In case the Company  shall fail  forthwith  to pay such  amounts upon
such demand,  the Trustee,  in its own name and as trustee of an express  trust,
shall be entitled and empowered to institute any action or proceedings at law or
in equity for the  collection  of the sums so due and unpaid,  and may prosecute
any such action or proceeding  to judgment or final decree,  and may enforce any
such  judgment or final  decree  against the Company or other  obligor  upon the
Debentures and collect in the manner provided and to the extent permitted by law
out of the property of the Company or other obligor upon the Debentures wherever
situated the monies adjudged or decreed to be payable.

           The Trustee shall be entitled and  empowered,  either in its own name
or as trustee of an express trust, or as attorney-in-fact for the holders of the
Debentures,  or in any one or more of such  capacities,  to file  such  proof of
debt,  amendment of proof of debt,  claim,  petition or other document as may be
necessary  or  advisable  in order to have the claims of the  Trustee and of the
holders  of the  Debentures  allowed  in any  equity  receivership,  insolvency,
bankruptcy,   liquidation,   readjustment,   reorganization  or  other  judicial
proceedings  relative to the Company or any other  obligor on the  Debentures or
their creditors,  or affecting their property. The Trustee is hereby irrevocably
appointed (and the successive respective holders of the Debentures by taking and
holding the same shall be conclusively  deemed to have so appointed the Trustee)
the  true  and  lawful   attorney-in-fact  of  the  respective  holders  of  the
Debentures,  with  authority  to make  and file in the  respective  names of the
holders of the  Debentures  or on behalf of the holders of the  Debentures  as a
class,  subject to  deduction  from any such claims of the amounts of any claims
filed by any of the  holders of the  Debentures  themselves,  any proof of debt,
amendment  of proof of  debt,  claim,  petition  or other  document  in any such
proceedings and to receive payment of any sums becoming distributable on account
thereof,  and to execute  any such  other  papers  and  documents  and to do and
perform  any and all such acts and things  for and on behalf of such  holders of
the Debentures as may be necessary or advisable in the opinion of the Trustee in
order to have the  respective  claims of the  Trustee  and of the holders of the
Debentures  against the Company or its property  allowed in any such proceeding,
and to receive payment of or on account of such claims; provided,  however, that
nothing  contained in this Indenture  shall be deemed to give to the Trustee any
right to accept or consent to any plan of  reorganization or otherwise by action
of any character in any such  proceeding to waive or change in any way any right
of any Debentureholder.

           All rights of action and of asserting claims under this Indenture, or
under  any of the  Debentures,  may be  enforced  by  the  Trustee  without  the
possession of any of the Debentures,  or the production  thereof on any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall be for the ratable  benefit of the holders of the
Debentures, subject to the provisions of this Indenture.

           In case of an Event  of  Default  hereunder  the  Trustee  may in its
discretion  proceed  to protect  and  enforce  the  rights  vested in it by this
Indenture by such  appropriate  judicial  proceedings  as the Trustee shall deem
most  effectual to protect and enforce any of such  rights,  either at law or in
equity or in bankruptcy or otherwise,  whether for the specific  enforcement  of
any covenant or agreement  contained in this Indenture or in aid of the exercise
of any power  granted  in this  Indenture,  or to  enforce  any  other  legal or
equitable right vested in the Trustee by this Indenture or by law.

           Section 7.03. Any monies collected by the Trustee pursuant to Section
7.02, shall be applied in the order following, at the date or dates fixed by the
Trustee,  upon presentation of the several Debentures,  and stamping thereon the
payment, if only partially paid, and upon surrender thereof if fully paid:

           First:  To the payment of costs and expenses of
      collection and of all amounts payable to the Trustee under

      Section 8.06;

           Second: In case the principal of the outstanding Debentures shall not
      have  become  due  and  be  unpaid,  to the  payment  of  interest  on the
      Debentures,  in the  order of the  maturity  of the  installments  of such
      interest,  with interest (so far as may be lawful and if such interest has
      been collected by the Trustee) upon the overdue  installments  of interest
      at the rate per annum  expressed in the  Debentures,  such  payments to be
      made ratably to the persons entitled  thereto,  without  discrimination or
      preference;

           Third:  In case the principal of the outstanding

      Debentures  shall have become due, by  declaration  as  authorized by this
      Indenture or otherwise,  to the payment of the whole amount then owing and
      unpaid upon the  Debentures  for principal and interest,  with interest on
      the overdue  principal  and (so far as may be lawful and if such  interest
      has been collected by the Trustee) upon overdue  installments  of interest
      at the rate per annum expressed in the Debentures; and in case such monies
      shall be  insufficient  to pay in full the whole  amount so due and unpaid
      upon the  Debentures,  then to the payment of such principal and interest,
      without preference or priority of principal over interest,  or of interest
      over  principal,  or  of  any  installment  of  interest  over  any  other
      installment  of interest,  or of any Debenture  over any other  Debenture,
      ratably  to the  aggregate  of  such  principal  and  accrued  and  unpaid
      interest; and

           Fourth:  To the payment of the remainder, if any, to
      the Company, its successors or assigns, or to whomsoever may
      be lawfully entitled to receive the same, or as a court of

      competent jurisdiction may direct.

           Section 7.04. Except as otherwise expressly provided in this Section,
no holder of any Debenture  shall have any right by virtue or by availing of any
provision  in this  Indenture or  otherwise  to  institute  any suit,  action or
proceeding in equity or at law upon or under or with respect to this  Indenture,
for the appointment of a receiver or trustee,  for the execution of any trust or
power hereof, or for any other remedy  hereunder,  unless such holder previously
shall have given to the Trustee written notice of default and of the continuance
thereof, as hereinbefore  provided, and unless also the holders of not less than
25% in aggregate  principal amount of the Debentures then outstanding shall have
made written  request upon the Trustee  either to proceed to exercise the powers
hereinbefore  granted or to institute such action, suit or proceeding in its own
name as trustee  hereunder  and shall have  offered or caused the holders of the
Bonds to have  offered,  to the  Trustee  such  reasonable  indemnity  as it may
require against the costs,  expenses and  liabilities to be incurred  therein or
thereby,  and the Trustee  within a reasonable  time (which in no event shall be
less than sixty  days) after its  receipt of such  notice,  request and offer of
indemnity,  shall have failed to proceed to exercise such powers or to institute
any such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by the taker and holder of every Debenture with every other
taker and  holder and the  Trustee,  that no one or more  holders of  Debentures
shall  have any right in any manner  whatever  by virtue or by  availing  of any
provision of this  Indenture to affect,  disturb or prejudice  the rights of the
holders of any other of such Debentures, or to obtain or seek to obtain priority
over or preference to any other such holder,  or to enforce any right under this
Indenture,  except in the manner herein provided and for the equal,  ratable and
common benefit of all holders of Debentures.  For the protection and enforcement
of the  provisions  of this  Section,  each and  every  Debentureholder  and the
Trustee  shall be entitled  to such  relief as can be given  either at law or in
equity.

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           Nothing herein contained shall, however,  affect or impair the right,
which is absolute and  unconditional,  of any  Debentureholder to receive and to
institute  suit to enforce the payment of the  principal  of and interest on his
Debentures  at and after the  respective  due dates  (including,  subject to the
provisions of Section 7.01,  maturity by declaration  pursuant to this Indenture
or otherwise) of such  principal or interest,  or the obligation of the Company,
which is also absolute and  unconditional,  to pay the principal of and interest
on each of the  Debentures to the  respective  holders  thereof at the times and
places in the Debentures expressed.

           Section 7.05. No delay or omission of the Trustee or of any holder of
any of the  Debentures to exercise any right or power accruing upon any Event of
Default  shall  impair  any such  right or power or shall be  construed  to be a
waiver of any such  default  or an  acquiescence  therein;  and,  subject to the
provisions of Section  7.04,  every power and remedy given by this Article or by
law to the  Trustee or to the  Debentureholders  may be  exercised  from time to
time,  and as often  as shall be  deemed  expedient,  by the  Trustee  or by the
Debentureholders.

           Section 7.06.  See Section 316(a)(1) of the Trust
Indenture Act.

           Section 7.07.  See Section 315(b) of the Trust
Indenture Act.

           Section 7.08.  See Section 315(e) of the Trust
Indenture Act.

                                 ARTICLE EIGHT.

                             Concerning the Trustee.

           Section 8.01. See Trust Indenture Act, including Section 315(a), (b),
(c) and (d) thereof.

           Section 8.02.  Except as otherwise provided in Section
8.01:

           (a) The  Trustee  may  rely and  shall  be  protected  in  acting  or
      refraining  from  acting  upon  any  resolution,   Officers'  Certificate,
      certificate of auditors, or any other certificate,  statement, instrument,
      opinion,  report,  notice,  request,  consent,  order,  appraisal,   bond,
      debenture  or  other  paper  or  document,  including  without  limitation
      documents  delivered to it pursuant to Section 5.10 (which  documents  the
      Trustee may rely on as not being amended or supplemented other than to the
      extent any amendments or  supplements  have been delivered to it) believed
      by it to be genuine  and to have been  signed or  presented  by the proper
      party or parties;

           (b) Any request,  direction, order or demand of the Company mentioned
      herein shall be sufficiently evidenced by an Officers' Certificate (unless
      other evidence in respect thereof be herein specifically prescribed);  and
      any  resolution  of the Board of Directors may be evidenced to the Trustee
      by a copy thereof certified by the Secretary or an Assistant  Secretary of
      the Company;

           (c) The Trustee may consult  with  counsel of its  selection  and any
      Opinion of Counsel shall be full and complete authorization and protection
      in respect of any action  taken or suffered or omitted by it  hereunder in
      good faith and in accordance with such Opinion of Counsel;

           (d) The Trustee  shall be under no  obligation to exercise any of the
      trusts or powers vested in it by this  Indenture at the request,  order or
      direction of any of the  Debentureholders,  pursuant to the  provisions of
      this Indenture,  unless such  Debentureholders or the holders of the Bonds
      shall have offered to the Trustee reasonable security or indemnity against
      the costs,  expenses  and  liabilities  which may be  incurred  therein or
      thereby;

           (e) The Trustee shall not be  personally  liable for any action taken
      or omitted  by it in good faith and  believed  by it to be  authorized  or
      within  the  discretion  or  rights or  powers  conferred  upon it by this
      Indenture;

           (f) Prior to the  occurrence  of an Event of  Default  hereunder  and
      after the curing or waiving of all Events of Default,  the  Trustee  shall
      not be bound to make any investigation into the facts or matters stated in
      any  resolution,  certificate,  statement,  instrument,  opinion,  report,
      notice, request,  consent, order, approval, bond, debenture or other paper
      or  document  unless  requested  in writing so to do by the holders of not
      less  than  a  majority  in  principal   amount  of  the  Debentures  then
      outstanding;  provided,  however,  that if the payment within a reasonable
      time to the  Trustee of the costs,  expenses or  liabilities  likely to be
      incurred by it in the making of such  investigation  is, in the opinion of
      the  Trustee,  not  reasonably  assured  to the  Trustee  by the  security
      afforded  to it by the terms of this  Indenture,  the  Trustee may require
      reasonable  indemnity  against such expense or liability as a condition to
      so proceeding. The reasonable expense of every such investigation shall be
      paid by the  Company  or, if paid by the  Trustee,  shall be repaid by the
      Company upon demand;

           (g) The Trustee may execute any of the trusts or powers  hereunder or
      perform any duties  hereunder  either  directly or by or through agents or
      attorneys and the Trustee shall not be  responsible  for any misconduct or
      negligence on the part of any agent or attorney appointed by it hereunder;
      and

           (h)  None of the  provisions  of this  Indenture  shall  require  the
      Trustee to expend or risk its own funds or  otherwise  incur any  personal
      financial liability in the performance of any of its duties hereunder,  or
      in the  exercise  of any  of  its  rights  or  powers,  if it  shall  have
      reasonable  grounds for believing that repayment of such funds or adequate
      indemnity against such risk or liability is not reasonably assured to it.

           Section 8.03.  The recitals  contained  herein and in the  Debentures
(other than the certificate of  authentication on the Debentures) shall be taken
as the statements of the Company,  and the Trustee assumes no responsibility for
the  correctness  of the same.  The Trustee makes no  representations  as to the
validity or  sufficiency  of this  Indenture or of the  Debentures.  The Trustee
shall not be accountable for the use or application by the Company of any of the
Debentures or of the proceeds of such Debentures,  or for the use or application
of any moneys paid over by the Trustee in accordance  with any provision of this
Indenture,  or for the use or application  of any moneys  received by any paying
agent.

           Section  8.04.  The  Trustee  or any  paying  agent or any  Debenture
registrar,  in its  individual  or any other  capacity,  may become the owner or
pledgee of Debentures with the same rights it would have if it were not Trustee,
paying agent or Debenture registrar.

           Section 8.05.  Subject to the provisions of Section 13.04, all moneys
received by the Trustee shall, until used or applied as herein provided, be held
in  trust  for the  purposes  for  which  they  were  received,  but need not be
segregated  from other funds  except to the extent  required by law. The Trustee
shall be under no liability for interest on any moneys  received by it hereunder
except such as it may agree in writing with the Company to pay thereon.  So long
as no Event of Default  shall have  occurred  and be  continuing,  all  interest
allowed  on any such  moneys  shall be paid from  time to time upon the  written
order of the Company,  signed by its President, a Vice President,  its Treasurer
or an Assistant Treasurer.

           Section 8.06. The Company  covenants and agrees to pay to the Trustee
from time to time,  and the Trustee shall be entitled to, such  compensation  as
the Company and the Trustee  shall from time to time agree to in writing  (which
shall not be limited by any provision of law in regard to the  compensation of a
trustee of an express trust) for all services rendered by it in the execution of
the trusts  hereby  created and in the  exercise and  performance  of any of the
powers  and  duties  hereunder  of the  Trustee,  and the  Company  will  pay or
reimburse   the  Trustee   upon  its  request  for  all   reasonable   expenses,
disbursements  and advances  incurred or made by the Trustee in accordance  with
any of the provisions of this Indenture  (including the reasonable  compensation
and the  expenses  and  disbursements  of its  counsel  and of all  persons  not
regularly in its employ) except any such expense, disbursement or advance as may
arise from its negligence or bad faith.  The Company also covenants to indemnify
the Trustee  for,  and to hold it harmless  against,  any and all loss,  damage,
claims,  liability or expense  incurred  without  negligence or bad faith on the
part of the Trustee,  and arising out of or in connection with the acceptance or
administration  of this trust,  including  the costs and  expenses of  defending
itself  against any claim of liability in the premises.  The  obligations of the
Company  under this Section to compensate  the Trustee,  to pay or reimburse the
Trustee for  expenses,  disbursements  and advances and to indemnify the Trustee
shall constitute additional indebtedness hereunder. Such additional indebtedness
shall be secured by a lien prior to that of the Debentures upon all property and
funds held or collected  by the Trustee as such,  except funds held in trust for
the benefit of the holders of particular Debentures.

           Section 8.07. Except as otherwise provided in Section 8.01,  whenever
in the  administration of the trusts of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
suffering or omitting any action  hereunder,  such matter (unless other evidence
in  respect  thereof  be  herein  specifically  prescribed)  may be deemed to be
conclusively  proved  and  established  by an  Officers'  Certificate,  and such
certificate shall be full warrant to the Trustee for any action taken,  suffered
or omitted by it under the provisions of this Indenture upon the faith thereof.

           Section  8.08.  See  Section  310(b) of the Trust  Indenture  Act. In
addition,  excluded  from  the  operation  of  Section  310(b)(1)  of the  Trust
Indenture  Act are the  following:  the  Indenture  dated as of December 1, 1989
between the Company and Citibank, N.A., Trustee, pursuant to which the Company's
7.20% Debentures due 2019 are outstanding,  the Indenture dated as of October 1,
1990 between the Company and Citibank, N.A., Trustee,

pursuant to which the Company's 7 1/2% Debentures due 2020 are outstanding,  the
Indenture  dated as of August 1, 1991  between  the  Company and The Bank of New
York,  Trustee,  pursuant to which the Company's  6.60%  Debentures due 2021 are
outstanding,  and the  Indenture  dated as of August 1, 1991 between the Company
and The Bank of New  York,  Trustee,  pursuant  to  which  the  Company's  6.70%
Debentures due 2021 are  outstanding,  the Indenture dated as of October 1, 1991
between  the Company  and The Bank of New York,  Trustee,  pursuant to which the
Company's 8 3/4% Debentures due 2021 are outstanding,  the Indenture dated as of
September  1,  1992  between  the  Company  and The Bank of New  York,  Trustee,
pursuant to which the  Company's 8%  Debentures  due 2022 are  outstanding,  the
Indenture  dated as of November 1, 1993  between the Company and The Bank of New
York,  Trustee,  pursuant to which the Company's 7 1/4%  Debentures due 2028 are
outstanding,  and the Indenture dated as of December 1, 1995 between the Company
and The Bank of New  York,  Trustee,  pursuant  to  which  the  Company's  5.60%
Debentures due 2025 are outstanding.

           Section  8.09.  The  Trustee  hereunder  shall  at  all  times  be  a
corporation  organized and doing business under the laws of the United States or
any State or Territory or of the District of Columbia authorized under such laws
to exercise corporate trust powers,  having a combined capital and surplus of at
least  $5,000,000,  subject to supervision  or  examination  by Federal,  State,
Territorial,  or District of Columbia authority.  If such corporation  publishes
reports of condition at least annually,  pursuant to law or to the  requirements
of the aforesaid  supervising or examining  authority,  then for the purposes of
this  Section,  the combined  capital and surplus of such  corporation  shall be
deemed to be its  combined  capital  and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 8.10.

           Section 8.10. (a) The Trustee, or any successor hereafter  appointed,
may at any time  resign  and be  discharged  from the trust  hereby  created  by
mailing  notice thereof to the Company and to the  Debentureholders  whose names
and addresses appear in the information  preserved at the time by the Trustee in
accordance with the provisions of Section  6.02(a)  hereof.  Upon receiving such
notice of resignation, the Company shall promptly appoint a successor trustee by
written instrument, in duplicate, executed by order of the Board of Directors of
the Company,  one copy of which  instrument  shall be delivered to the resigning
Trustee and one copy to the  successor  trustee.  If no successor  trustee shall
have been so appointed  and have accepted  appointment  within thirty days after
the mailing of such notice of  resignation,  the resigning  Trustee may petition
any court of competent  jurisdiction for the appointment of a successor trustee,
or any  Debentureholder  who has  been a bona  fide  holder  of a  Debenture  or
Debentures  for at least six months may,  subject to the  provisions  of Section
7.08, on behalf of himself and all others similarly situated,  petition any such
court for the appointment of a successor trustee. Such court may thereupon after
such notice,  if any, as it may deem proper and  prescribe,  appoint a successor
trustee.

           (b)  In case at any time any of the following shall
occur--

                (1) the  Trustee  shall fail to comply  with the  provisions  of
      Section 310(b) of the Trust Indenture Act after written  request  therefor
      by the Company or by any  Debentureholder  who has been a bona fide holder
      of a Debenture or Debentures for at least six months, or

                (2) the Trustee  shall cease to be eligible in  accordance  with
      the  provisions  of Section  8.09 and shall fail to resign  after  written
      request therefor by the Company or by any such Debentureholder, or

                (3) the Trustee  shall become  incapable of acting,  or shall be
      adjudged a bankrupt or  insolvent,  or a receiver of the Trustee or of its
      property  shall be appointed,  or any public  officer shall take charge or
      control of the  Trustee or of its  property  or affairs for the purpose of
      rehabilitation, conservation or liquidation,

then,  in any such  case,  the  Company  may remove the  Trustee  and  appoint a
successor trustee by written instrument, in duplicate,  executed by order of the
Board  of  Directors  of the  Company,  one copy of  which  instrument  shall be
delivered to the Trustee so removed and one copy to the successor  trustee,  or,
subject to the  provisions of Section 7.08, any  Debentureholder  who has been a
bona fide holder of a Debenture  or  Debentures  for at least six months may, on
behalf of  himself  and all others  similarly  situated,  petition  any court of
competent  jurisdiction  for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon after such notice, if any, as it may
deem proper and prescribe, remove the Trustee and appoint a successor trustee.

           (c) The holders of a majority in  aggregate  principal  amount of the
Debentures  at the time  outstanding  may at any time  remove  the  Trustee  and
appoint a successor trustee.

           (d) Any  resignation or removal of the Trustee and any appointment of
a successor  trustee  pursuant to any of the  provisions  of this Section  shall
become  effective upon  acceptance of  appointment  by the successor  trustee as
provided in Section 8.11.

           Section 8.11. Any successor  trustee appointed as provided in Section
8.10  shall  execute,  acknowledge  and  deliver  to  the  Company  and  to  its
predecessor  trustee an instrument  accepting such  appointment  hereunder,  and
thereupon the  resignation  or removal of the  predecessor  trustee shall become
effective  and  such  successor  trustee,  without  any  further  act,  deed  or
conveyance,  shall become fully vested with all the rights,  powers,  duties and
obligations  of its  predecessor  hereunder,  with like effect as if  originally
named as trustee herein.  The predecessor  trustee shall,  nevertheless,  at the
written  request of the successor  trustee,  and upon payment of any amount then
due it pursuant to Section 8.06, pay over to the successor trustee all moneys at
the time held by it hereunder; and the Company and the predecessor trustee shall
execute and deliver such  instruments and do such other things as may reasonably
be required for more fully and certainly vesting and confirming in the successor
trustee all such rights, powers, duties and obligations.  Any Trustee ceasing to
act shall  nevertheless  retain a lien on all funds  held or  collected  by such
Trustee to secure any amount due it pursuant to Section 8.06.

           No successor  trustee  shall accept  appointment  as provided in this
Section unless at the time of such  acceptance  such successor  trustee shall be
qualified under the provisions of Section 8.08 and eligible under the provisions
of Section 8.09.

           Upon acceptance of appointment by a successor  trustee as provided in
this Section,  the Company  shall mail notice of the  succession of such trustee
hereunder to all  Debentureholders  at their last  addresses  appearing upon the
register.  If the  Company  fails to mail such notice in the  prescribed  manner
within 10 days after the acceptance of appointment by the successor trustee, the
successor  trustee  shall  cause such  notice to be mailed at the expense of the
Company.

           Section 8.12. Any corporation into which the Trustee may be merged or
with which it may be consolidated,  or any corporation resulting from any merger
or  consolidation  to which the  Trustee  shall be a party,  or any  corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder,  provided such corporation shall be qualified under the provisions of
Section 8.08 and eligible  under the  provisions  of Section  8.09,  without the
execution  or filing of any paper or any  further  act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.

           In case at the time such  successor to the Trustee  shall  succeed to
the  trusts  created by this  Indenture  any of the  Debentures  shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate  of  authentication  of any  predecessor  trustee,  and deliver such
Debentures  so  authenticated;  and in case at that  time any of the  Debentures
shall not have been authenticated, any successor to the Trustee may authenticate
such Debentures  either in the name of any predecessor  hereunder or in the name
of the successor trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Debentures or in this Indenture  provided
that the  certificate  of the Trustee shall have;  provided,  however,  that the
right to adopt the certificate of authentication  of any predecessor  trustee or
authenticate  Debentures in the name of any predecessor trustee shall apply only
to its successor or successors by merger, conversion or consolidation.

           Section 8.13.  See Section 311 of the Trust Indenture
Act.

                                  ARTICLE NINE.

                        Concerning the Debentureholders.

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           Section  9.01.  Whenever in this  Indenture  it is provided  that the
holders  of  a  specified  percentage  in  aggregate  principal  amount  of  the
Debentures  may take any action  (including the making of any demand or request,
the giving of any notice,  consent or waiver or the taking of any other action),
the fact  that at the  time of  taking  any  such  action  the  holders  of such
specified  percentage have joined therein may be evidenced (a) by any instrument
or any number of instruments of similar tenor  executed by  Debentureholders  in
person or by attorney or proxy appointed in writing, or (b) by the record of the
holders of Debentures voting in favor thereof at any meeting of Debentureholders
duly called and held in accordance with the provisions of Article Ten, or (c) by
a combination of such  instrument or  instruments  and any such record of such a
meeting of Debentureholders.

           Section 9.02. Subject to the provisions of Section 8.01, proof of the
execution of any  instrument by a  Debentureholder  or his attorney or proxy and
proof of the holding by any person of any of the Debentures  shall be sufficient
for any purpose of this  Indenture if made in  accordance  with such  reasonable
rules and  regulations  as may be prescribed by the Trustee or in such manner as
shall be  satisfactory  to the Trustee.  The  ownership of  Debentures  shall be
proved by the register of such  Debentures or by a certificate  of the Debenture
registrar.

           The record of any  Debentureholders'  meeting  shall be proved in the
manner provided in Section 10.06.

           Section  9.03.  The Company,  the  Trustee,  any paying agent and any
Debenture  registrar  may deem and treat the person in whose name any  Debenture
shall be registered  upon the register as the absolute  owner of such  Debenture
(whether or not such Debenture shall be overdue and  notwithstanding  any notice
of ownership or writing thereon),  for the purpose of receiving payment of or on
account of the principal of and interest and premium,  if any, on such Debenture
and for all other  purposes,  and  neither  the  Company nor the Trustee nor any
paying agent nor any Debenture  registrar shall be affected by any notice to the
contrary.  All such payments so made to any such registered holder, for the time
being or upon his order,  shall be valid,  and, to the extent of the sum or sums
so paid,  effectual to satisfy and discharge  the  liability for moneys  payable
upon any such Debenture.

           Section  9.04.  In  determining  whether the holders of the requisite
aggregate  principal  amount of  Debentures  have  concurred  in any  direction,
consent  or  waiver  under  this  Indenture,  Debentures  which are owned by the
Company or any other  obligor on the  Debentures  or by any person  directly  or
indirectly  controlling  or  controlled  by or under  direct or indirect  common
control  with the  Company  or any  other  obligor  on the  Debentures  shall be
disregarded  and  deemed  not to be  outstanding  for the  purpose  of any  such
determination,  except that for the purpose of  determining  whether the Trustee
shall be  protected  in relying on any such  direction,  consent or waiver  only
Debentures  which  the  Trustee  knows  are so owned  shall  be so  disregarded.
Debentures  so owned  which have been  pledged in good faith may be  regarded as
outstanding for the purposes of this Section,  if the pledgee shall establish to
the  satisfaction of the Trustee the pledgee's right to vote such Debentures and
that  the  pledgee  is  not a  person  directly  or  indirectly  controlling  or
controlled by or under direct or indirect common control with the Company or any
such other obligor.  In case of a dispute as to such right,  any decision by the
Trustee  taken  upon the  advice  of  counsel  shall be full  protection  to the
Trustee.

           Section 9.05.  Any demand,  request,  waiver,  consent or vote of the
holder of any  Debenture  shall be  conclusive  and binding upon such holder and
upon all future  holders  and  owners of such  Debenture,  and of any  Debenture
issued in exchange therefor or in place thereof,  irrespective of whether or not
any notation in regard thereto is made upon such Debenture.  Any action taken by
the holders of the majority or percentage in aggregate  principal  amount of the
Debentures  specified in this Indenture in connection  with such action shall be
conclusively  binding upon the  Company,  the Trustee and the holders of all the
Debentures.

                                  ARTICLE TEN.

                           Debentureholders' Meetings.

           Section  10.01.  A meeting of  Debentureholders  may be called at any
time and from time to time  pursuant to the  provisions  of this Article Ten for
any of the following purposes:

           (1) to give any notice to the Company or to the  Trustee,  or to give
      any directions to the Trustee, or to consent to the waiving of any default
      hereunder and its consequences,  or to take any other action authorized to
      be taken by Debentureholders  pursuant to any of the provisions of Article
      Seven;

           (2)  to remove the Trustee and appoint a successor
      trustee pursuant to the provisions of Article Eight;

           (3)  to consent to the execution of an indenture or
      indentures supplemental hereto pursuant to the provisions of
      Section 11.02; or

           (4) to take any other action  authorized  to be taken by or on behalf
      of  the  holders  of  any  specified  aggregate  principal  amount  of the
      Debentures  under any other provision of this Indenture,  or authorized or
      permitted by law.

           Section  10.02.  The  Trustee  may at any  time  call  a  meeting  of
Debentureholders  to take any action  specified in Section 10.01,  to be held at
such time and at such place in the Borough of  Manhattan,  City and State of New
York,  as  the  Trustee  shall  determine.   Notice  of  every  meeting  of  the
Debentureholders,  setting  forth the time and the place of such  meeting and in
general terms the action  proposed to be taken at such meeting,  shall be mailed
not less  than  fifteen  days  prior to the date  fixed for the  meeting  to the
Debentureholders  whose names and addresses appear in the information  preserved
at the time by the Trustee in accordance  with the provisions of Section 6.02(a)
hereof or obtained in accordance with the provisions of Section 6.01 hereof.

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<PAGE>



           Any meeting of Debentureholders  shall be valid without notice if the
holders of all Debentures then  outstanding are present in person or by proxy or
if notice is waived before or after the meeting by the holders of all Debentures
outstanding,  and if the  Company  and the  Trustee  are either  present by duly
authorized representatives or have, before or after the meeting, waived notice.

           Section  10.03.  In case  at any  time  the  Company,  pursuant  to a
resolution of its Board of Directors or the holders of at least 20% in aggregate
principal amount of the Debentures then  outstanding,  shall request the Trustee
to call a meeting of  Debentureholders  to take any action  specified in Section
10.01, by written request setting forth in reasonable detail the action proposed
to be taken at the meeting  and the time and place in the Borough of  Manhattan,
City and State of New York,  for such meeting,  the Trustee shall mail notice of
such meeting as provided in Section  10.02 within  twenty days after  receipt of
such request.

           Section   10.04.   To  be   entitled   to  vote  at  any  meeting  of
Debentureholders a person shall (a) be a holder of one or more Debentures or (b)
be a person  appointed  by an  instrument  in writing as proxy for the holder or
holders of  Debentures by a holder of one or more  Debentures.  The only persons
who  shall  be   entitled   to  be  present  or  to  speak  at  any  meeting  of
Debentureholders shall be the persons entitled to vote at such meeting and their
counsel  and  any  representatives  of the  Trustee  and  its  counsel  and  any
representatives of the Company and its counsel.

           Section 10.05. Notwithstanding any other provision of this Indenture,
the Trustee may make such  reasonable  regulations  as it may deem advisable for
any meeting of Debentureholders, in regard to proof of the holding of Debentures
and of the  appointment of proxies,  and in regard to the appointment and duties
of inspectors of votes, the submission and examination of proxies,  certificates
and other evidence of the right to vote,  and such other matters  concerning the
conduct of the meeting as it shall think fit.  Except as otherwise  permitted or
required by any such  regulations,  the holding of Debentures shall be proved in
the manner  specified in Section 9.02 and the  appointment of any proxy shall be
proved in the  manner  specified  in Section  9.02.  Pursuant  to the  foregoing
authority  the  Trustee  may  fix,  in  advance,  a date as a  record  date  for
determining  the  Debentureholders  entitled  to notice  of, or to vote at,  any
meeting,  such date to be not less than  fifteen nor more than  forty-five  days
prior to the date fixed for such meeting.

           The Trustee shall,  by an instrument in writing,  appoint a temporary
chairman of the meeting, unless the meeting shall have been called by request of
the Company or  Debentureholders as provided in Section 10.03, in which case the
Company  or such  Debentureholders,  as the  case may be,  shall in like  manner
appoint a temporary chairman.  A permanent chairman and a permanent secretary of
the meeting  shall be elected by vote of the holders of a majority in  principal
amount of the Debentures represented at the meeting and entitled to vote.

           Subject  to the  provisions  of Section  9.04,  at any  meeting  each
Debentureholder or proxy shall be entitled to one vote for each $1,000 principal
amount of Debentures,  provided,  however, that no vote shall be cast or counted
at any meeting in respect of any Debentures  challenged as not  outstanding  and
ruled by the chairman of the meeting to be not outstanding.  The chairman of the
meeting shall have no right to vote other than by virtue of  Debentures  held by
him or instruments in writing as aforesaid duly designating him as the person to
vote on behalf of other  Debentureholders.  Any meeting of Debentureholders duly
called  pursuant to the  provisions  of Section  10.02 or 10.03 may be adjourned
from time to time, and the meeting may be held as so adjourned  without  further
notice.

           Section 10.06. The vote upon any resolution  submitted to any meeting
of Debentureholders shall be by written ballots on which shall be subscribed the
signatures of the holders of Debentures  or of their  representatives  by proxy.
The permanent chairman of the meeting shall appoint two inspectors of votes, who
shall count all votes cast at the meeting for or against any  resolution and who
shall make and file with the  secretary of the meeting  their  verified  written
reports in duplicate of all votes cast at the meeting.  A record in duplicate of
the  proceedings  of each meeting of  Debentureholders  shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports  of the  inspectors  of votes on any vote by ballot  taken  thereat  and
affidavits by one or more person having knowledge of the facts,  setting forth a
copy of the notice of the  meeting  and  showing  that said notice was mailed as
provided  in Section  10.02.  The record  shall be signed  and  verified  by the
affidavits of the permanent chairman and secretary of the meeting and one of the
duplicates  shall be delivered to the Company and the other to the Trustee to be
preserved by the Trustee,  the latter to have attached thereto the ballots voted
at the meeting.

           Any record so signed and verified shall be conclusive evidence of the
matters therein stated.

           Section 10.07.  Nothing in this Article Ten contained shall be deemed
or  construed  to  authorize  or  permit,  by reason of any call of a meeting of
Debentureholders  or any rights  expressly or impliedly  conferred  hereunder to
make such call,  any  hindrance  or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the  Debentureholders  under any
of the provisions of this Indenture or of the Debentures.

                                 ARTICLE ELEVEN.

                            Supplemental Indentures.

           Section 11.01.  The Company,  when  authorized by a resolution of its
Board of Directors,  and the Trustee, subject to the conditions and restrictions
of this Indenture contained, may from time to time and at any time enter into an
indenture  or  indentures  supplemental  hereto  (which  shall  conform  to  the
provisions of the Trust Indenture Act of 1939 as then in effect) for one or more
of the following purposes:

           (a) to evidence the succession of another corporation to the Company,
      or successive successions, and the assumption by the successor corporation
      of the covenants,  agreements and  obligations of the Company  pursuant to
      Article Twelve;

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           (b) to add to the  covenants  and  agreements  of the Company in this
      Indenture contained such further covenants and agreements thereafter to be
      observed,  and to  surrender  any  right or power  herein  reserved  to or
      conferred upon the Company; and

           (c) to cure any ambiguity or to correct or  supplement  any defective
      or  inconsistent   provisions  contained  in  this  Indenture  or  in  any
      supplemental indenture.

           The  Trustee  is hereby  authorized  to join with the  Company in the
execution of any supplemental  indenture authorized or permitted by the terms of
this Indenture and to make any further  appropriate  agreements and stipulations
which may be therein contained,  but the Trustee shall not be obligated to enter
into any such  supplemental  indenture  which  affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.

           Any  supplemental  indenture  authorized  by the  provisions  of this
Section may be  executed  by the Company and the Trustee  without the consent of
the holders of any of the  Debentures at the time  outstanding,  notwithstanding
any of the provisions of Section 11.02.

           Section  11.02.  With the consent  (evidenced  as provided in Section
9.01)  of the  holders  (or  persons  entitled  to  vote,  or to  give  consents
respecting  the  same) of more  than 50% in  aggregate  principal  amount of the
Debentures at the time outstanding, the Company, when authorized by a resolution
of its Board of Directors, and the Trustee may from time to time and at any time
enter into an indenture or indentures  supplemental  hereto (which shall conform
to the provisions of the Trust  Indenture Act of 1939 as then in effect) for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the  provisions  of this  Indenture  or of any  supplemental  indenture or of
modifying  in any  manner  the  rights  and  obligations  of the  holders of the
Debentures  and of the Company;  provided,  however,  that no such  supplemental
indenture  shall (i) extend the fixed maturity of any  Debenture,  or reduce the
principal  amount  thereof,  or reduce the rate or extend the time of payment of
interest  thereon,  without  the  consent  of the  holder of each  Debenture  so
affected, or (ii) reduce the aforesaid percentage of Debentures,  the holders of
which are required to consent to any such  supplemental  indenture,  without the
consent of the holders of all Debentures then outstanding.

           Upon  the  request  of  the  Company,  accompanied  by  a  copy  of a
resolution of its Board of Directors  certified by the secretary or an assistant
secretary of the Company  authorizing  the  execution  of any such  supplemental
indenture,  and upon the filing  with the  Trustee of evidence of the consent of
Debentureholders  as  aforesaid,  the Trustee shall join with the Company in the
execution of such  supplemental  indenture  unless such  supplemental  indenture
affects the Trustee's own rights,  duties or immunities  under this Indenture or
otherwise,  in which case the  Trustee  may in its  discretion  but shall not be
obligated to enter into such supplemental indenture.

           It shall not be  necessary  for the  consent of the  Debentureholders
under this Section to approve the particular  form of any proposed  supplemental
indenture,  but it  shall  be  sufficient  if such  consent  shall  approve  the
substance thereof.

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           Promptly  after the  execution  by the Company and the Trustee of any
supplemental  indenture pursuant to the provisions of this Section,  the Company
shall  mail a notice,  setting  forth in  general  terms the  substance  of such
supplemental   indenture,  to  all  Debentureholders  at  their  last  addresses
appearing upon the register.  Any failure of the Company to mail such notice, or
any defect therein, shall not, however, in any way impair or affect the validity
of any such supplemental indenture.

           Section  11.03.  Upon the  execution  of any  supplemental  indenture
pursuant to the  provisions  of this  Article,  this  Indenture  shall be and be
deemed to be modified and amended in  accordance  therewith  and the  respective
rights,  limitation of rights,  obligations,  duties and  immunities  under this
Indenture  of the  Trustee,  the  Company and the  holders of  Debentures  shall
thereafter  be  determined,  exercised  and  enforced  hereunder  subject in all
respects to such modifications and amendments,  and all the terms and conditions
of any such  supplemental  indenture  shall be and be  deemed  to be part of the
terms and conditions of this Indenture for any and all purposes.

           Section  11.04.  Debentures  authenticated  and  delivered  after the
execution  of any  supplemental  indenture  pursuant to the  provisions  of this
Article,  or after any action taken at a  Debentureholders'  meeting pursuant to
Article  Ten,  may bear a notation  in form  approved  by the  Trustee as to any
matter provided for in such supplemental  indenture or as to any action taken at
any  such  meeting;  and,  in such  case,  suitable  notation  may be made  upon
outstanding  Debentures after proper  presentation and demand. If the Company or
the Trustee shall so determine, new Debentures so modified as to conform, in the
opinion  of the  Trustee  and the  Board of  Directors  of the  Company,  to any
modification of this Indenture contained in any such supplemental  indenture, or
to any  action  taken at any  such  meeting,  may be  prepared  by the  Company,
authenticated  by the Trustee and delivered in exchange for the Debentures  then
outstanding,  upon demand of, and without  cost to, the  holders  thereof,  upon
surrender of such Debentures.

           Section  11.05.  The Trustee,  subject to the  provisions  of Section
8.01,  may  receive  an  Opinion of  Counsel  as  conclusive  evidence  that any
supplemental indenture executed pursuant to this Article Eleven is authorized or
permitted  by the  terms  of this  Indenture  and  that  it is not  inconsistent
therewith.

                                 ARTICLE TWELVE.

                         Consolidation, Merger and Sale.

           Section 12.01.  Nothing  contained in this Indenture or in any of the
Debentures shall prevent any consolidation or merger of the Company with or into
any other  corporation  or  corporations  (whether  or not  affiliated  with the
Company),  or successive  consolidations  or mergers in which the Company or its
successor or successors  shall be a party or parties,  or shall prevent any sale
or conveyance (or successive sales or conveyances) of the property and assets of
the Company (or of its successor or successors) as an entirety or  substantially
as an entirety,  to any other  corporation  (whether or not affiliated  with the
Company)  authorized  to acquire the same;  provided,  however,  and the Company
hereby covenants and agrees that, upon any such  consolidation,  merger, sale or
conveyance, the due and punctual payment of the principal of and interest on all
the Debentures,  according to their tenor, and the due and punctual  performance
and  observance of all the terms,  covenants and conditions of this Indenture to
be kept or performed by the Company,  shall be expressly  assumed,  by indenture
supplemental hereto, satisfactory in form to the Trustee, executed and delivered
to the Trustee by the corporation  formed by such  consolidation,  or into which
the  Company  shall have been  merged,  or by the  corporation  which shall have
acquired such  property and assets.  In the event of any such sale or conveyance
the  predecessor  Company may be dissolved,  wound up and liquidated at any time
thereafter.

           Section 12.02.  In case of any such  consolidation,  merger,  sale or
conveyance  and upon the execution by the successor  corporation of an indenture
supplemental  hereto, as provided in Section 12.01,  such successor  corporation
shall succeed to and be substituted for the Company,  with the same effect as if
it had  been  named  herein  as the  party of the  first  part.  Such  successor
corporation  thereupon  may  issue  either in its own name or in the name of the
Company,  with such suitable reference,  if any, to such consolidation,  merger,
sale  or  conveyance  as  may be  required  by  the  Trustee,  any or all of the
Debentures  issuable  hereunder which  theretofore shall not have been issued by
the Company and  delivered to the Trustee;  and,  upon the written order of such
successor  corporation,  instead of the  Company,  and subject to all the terms,
conditions  and  limitations  in this  Indenture  prescribed,  the Trustee shall
authenticate  and shall deliver any Debentures  which previously shall have been
executed by the  Company and any  Debentures  which such  successor  corporation
thereafter  shall cause to be executed in accordance with the provisions of this
Indenture and delivered to the Trustee for that purpose.  All the  Debentures so
issued  shall in all  respects  have the same legal rank and benefit  under this
Indenture as the Debentures  theretofore or thereafter issued in accordance with
the terms of this Indenture as though all of such  Debentures had been issued at
the date of the execution hereof.

           In case of any such  consolidation,  merger,  sale or conveyance such
changes  in  phraseology  and  form  (but not in  substance)  may be made in the
Debentures thereafter to be issued as may be appropriate).

           Nothing contained in this Indenture or in any of the Debentures shall
prevent  the  Company  from  consolidating  with,  or merging  into  itself,  or
acquiring by purchase or otherwise all or any part of the property of, any other
corporation (whether or not affiliated with the Company).

           Section  12.03.  The Trustee,  subject to the  provisions  of Section
8.01,  may receive an Opinion of Counsel as  conclusive  evidence  that any such
consolidation,  merger,  sale or conveyance,  and any such assumption,  complies
with the provisions of this Article.

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                                ARTICLE THIRTEEN.

    Satisfaction and Discharge of Indenture; Deposited Moneys.

           Section 13.01.  If:

           (1)  Either  (i)  the  Company  shall  deliver  to  the  Trustee  for
cancellation all Debentures  (other than Debentures deemed not to be outstanding
under  clause  (c)  of the  definition  thereof)  not  theretofore  canceled  or
delivered  to the  Trustee  for  cancellation,  or (ii) the  Company  shall have
deposited in trust with the Trustee cash  sufficient  to pay at maturity or upon
redemption  (after notice of redemption has been duly given or provided for) all
of the Debentures  (other than  Debentures  deemed not to be  outstanding  under
clause (c) of the definition  thereof) not theretofore  canceled or delivered to
the Trustee for cancellation, including principal, premium, if any, and interest
due or to become due to such date of maturity or  redemption  date,  as the case
may be, or (iii) the  Company  shall have  deposited  in trust with the  Trustee
direct  obligations  of the United  States or  obligations  the principal of and
interest on which are fully  guaranteed by the United States,  and which are not
subject to  prepayment,  redemption or call prior to their stated  maturity,  in
such amounts and  maturing at such times that the proceeds of said  obligations,
together  with the  income  that can be  predetermined  will  accrue  thereon by
reference  to the  terms  thereof  (without  consideration  of any  reinvestment
thereof),  to be received upon their respective  maturities and interest payment
dates will provide funds sufficient to pay the principal,  premium,  if any, and
interest due or to become due to the date of maturity or to the redemption date,
as the case may be, with respect to all of the Debentures (other than Debentures
deemed not to be  outstanding  under clause (c) of the  definition  thereof) not
theretofore canceled or delivered to the Trustee for cancellation, provided that
the Trustee shall have been irrevocably instructed to apply the proceeds of said
obligations to the payment of such principal,  premium and interest with respect
to such  Debentures,  or (iv) the Company shall have deposited in trust with the
Trustee any combination of cash or obligations referred to in (ii) and (iii),

           (2)  the Company shall pay or cause to be paid all
other sums payable with respect to the Debentures, and

           (3) the Company  shall deliver to the Trustee and the Bond Trustee an
Officers'  Certificate  and  an  Opinion  of  Counsel,  each  stating  that  all
conditions  precedent  herein  provided  for  relating to the  satisfaction  and
discharge of the entire  indebtedness on the Debentures have been complied with,
then

           (a) this  Indenture  shall cease to be of further  effect  (except as
      otherwise  provided  herein)  and  on  or  after  such  maturity  date  or
      redemption date, as the case may be, the Trustee, on demand of, and at the
      expense of, the Company,  shall execute proper  instruments  acknowledging
      satisfaction and discharge of this Indenture; and

           (b) all obligations of the Company in respect of the Debentures shall
      cease  and  be  discharged  and  the  holders  of  such  Debentures  shall
      thereafter be restricted  exclusively to such funds for any and all claims
      of whatever  nature on their part under this  Indenture or with respect to
      such Debentures; provided, however, that, in no event shall the Company be
      discharged from (i) any payment obligation in respect of Debentures deemed
      not to be outstanding  under clause (c) of the definition  thereof if such
      obligations  continue to be valid  obligations  under applicable law, (ii)
      any  obligations  under  Sections  2.05 and 2.06 (except  that  Debentures
      issued upon  registration of transfer or exchange or in lieu of mutilated,
      lost,  destroyed  or  stolen  Debentures  shall  not be  deemed to be such
      obligations) or (iii) any obligations  under Sections 6.01,  8.06,  13.02,
      13.03 and 13.04; further provided, however, that the rights and privileges
      of the Trustee under this Indenture shall survive any such discharge.

           The Company  hereby  agrees to reimburse the Trustee for any costs or
expenses  thereafter   reasonably  and  properly  incurred  by  the  Trustee  in
connection  with this  Indenture  or the  Debentures,  and  without bad faith or
negligence.

           Section  13.02.  All moneys  deposited  with the Trustee  pursuant to
Section  13.01 shall be held in trust and applied by it to the  payment,  to the
holders of the particular Debentures for the payment or redemption of which such
moneys have been deposited  with the Trustee,  of all sums due and to become due
thereon for principal, premium, if any, and interest.

           Section 13.03. In connection with the  satisfaction  and discharge of
this  Indenture all moneys then held by any paying agent under the provisions of
this  Indenture  shall,  upon demand of the  Company or Trustee,  be paid to the
Trustee  and  thereupon  such paying  agent  shall be released  from all further
liability with respect to such moneys.

           Section  13.04.  In case the  holder  of any  Debenture  entitled  to
payment hereunder at any time outstanding  hereunder shall not, within two years
after the maturity date of such  Debenture or the date fixed for the  redemption
of any such  Debenture,  claim the amount on deposit  with the  Trustee or other
depositary for the payment of such  Debenture,  the Trustee or other  depositary
shall  pay over to or upon  the  written  order of the  Company  the  amount  so
deposited, upon receipt of a request signed by the President or a Vice President
of the Company,  and thereupon the Trustee or other depositary shall be released
from any and all further liability with respect to the payment of such Debenture
and the holder of said  Debenture  shall be entitled  (subject to any applicable
statute of limitations) to look only to the Company as an unsecured creditor for
the payment thereof.

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<PAGE>



                                ARTICLE FOURTEEN.

        Immunity of Incorporators, Stockholders, Officers,
                      Trustees and Directors.

           Section 14.01. No recourse under or upon any obligation,  covenant or
agreement of this Indenture, or of any Debenture, or for any claim based thereon
or  otherwise  in  respect  thereof,  shall  be had  against  any  incorporator,
stockholder,  officer, trustee or director, as such, past, present or future, of
the Company or of any  predecessor  or successor  corporation,  either  directly
through the Company or any such predecessor or successor corporation, whether by
virtue  of any  constitution,  statute  or  rule  of law  or  equity,  or by the
enforcement  of any  assessment  or penalty  or  otherwise;  it being  expressly
understood that this Indenture and the obligations  issued  hereunder are solely
corporate obligations, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, the  incorporators,  stockholders,  officers,
trustees  or  directors  of the  Company,  as  such,  or of any  predecessor  or
successor  corporation,  or  any  of  them,  because  of  the  creation  of  the
indebtedness  hereby  authorized,  or under  or by  reason  of the  obligations,
covenants or agreements  contained in this Indenture or in any of the Debentures
or implied  therefrom;  and that any and all such liability is hereby  expressly
waived and released by every holder of  Debentures  as a condition  of, and as a
consideration  for,  the  execution  of this  Indenture  and the  issue  of such
Debentures.

                                ARTICLE FIFTEEN.

                            Miscellaneous Provisions.

           The provisions of the Trust  Indenture Act which impose duties on any
person (including  provisions  automatically  deemed included in an indenture by
the Trust  Indenture Act unless the indenture  provides that such provisions are
excluded  which  provision  is hereby  expressly  excluded  other  than  Section
316(a)(2) of the Trust  Indenture Act) are a part of and govern this  Indenture.
If any provision  hereof  limits,  qualifies or conflicts with any of the duties
imposed by operation of the Trust  Indenture Act, the Trust  Indenture Act shall
control.

           Section  15.01.  All  the  covenants,   stipulations,   promises  and
agreements in this Indenture contained by or in behalf of the Company shall bind
its successors and assigns, whether so expressed or not.

           Section  15.02.  Any  act or  proceeding  by any  provision  of  this
Indenture authorized or required to be done or performed by any board, committee
or officer of the Company  shall and may be done and  performed  with like force
and effect by the like board, committee or officer of any corporation that shall
at the time be the lawful successor of the Company.

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           Section  15.03.  The Company by  instruments  in writing  executed by
authority of its Board of Directors  and  delivered to the Trustee may surrender
any  of  the  powers  reserved  to the  Company  and  thereupon  such  power  so
surrendered  shall  terminate  both as to the  Company  and as to any  successor
corporation.

           Section  15.04.  Any notice or demand which by any  provision of this
Indenture  is required or  permitted  to be given or served by the Trustee or by
the holders of  Debentures  to or on the Company may be given or served by being
deposited  postage prepaid in a post-office  letterbox  addressed (until another
address  is filed in writing  by the  Company  with the  Trustee),  as  follows:
Elizabethtown Water Company,  600 South Avenue,  Westfield NJ 07090. Any notice,
election,  request or demand by any Debentureholder to or upon the Trustee shall
be deemed to have been sufficiently given or made, for all purposes, if given or
made at the  principal  corporate  trust office of the Trustee in the Borough of
Manhattan, City and State of New York.

           Section 15.05.  This Indenture and each Debenture  shall be deemed to
be a contract made under the laws of the State of New York, and for all purposes
shall be construed in accordance with the laws of said state.

           Section 15.06.  Upon any  application or demand by the Company to the
Trustee to take any action under any of the  provisions of this  Indenture,  the
Company shall furnish to the Trustee an Officers'  Certificate  stating that all
conditions  precedent,  if any,  provided for in this Indenture  relating to the
proposed  action have been complied with and an Opinion of Counsel  stating that
in the opinion of such counsel all such conditions  precedent have been complied
with.

           Each  certificate  or  opinion  provided  for in this  Indenture  and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this  Indenture  shall  include (1) a statement  that the person
making such  certificate  or opinion has read such covenant or condition;  (2) a
brief statement as to the nature and scope of the  examination or  investigation
upon which the statements or opinions  contained in such  certificate or opinion
are based; (3) a statement that, in the opinion of such person, he has made such
examination  or  investigation  as is  necessary  to enable  him to  express  an
informed  opinion as to  whether  or not such  covenant  or  condition  has been
complied  with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.

           Any  certificate,  statement  or opinion of an officer of the Company
may be based,  in so far as it relates to legal  matters,  upon a certificate or
opinion of or  representations  by counsel,  unless such officer  knows that the
certificate or opinion or representations with respect to the matters upon which
his  certificate,  statement or opinion may be based as aforesaid are erroneous,
or in the exercise of reasonable  care should know that the same are  erroneous.
Any  certificate,  statement or opinion of counsel may be based (in so far as it
relates  to  factual  matters  information  with  respect  to  which  is in  the
possession  of the  Company)  upon the  certificate,  statement or opinion of or
representations  by an officer or officers of the  Company,  unless such counsel
knows that the certificate, statement or opinion or representations with respect
to the matters upon which his certificate,  statement or opinion may be based as
aforesaid are erroneous,  or in the exercise of reasonable care should know that
the same are erroneous.

           Any certificate, statement or opinion of an officer of the Company or
of counsel may be based, in so far as it relates to accounting  matters,  upon a
certificate  or  opinion  of or  representations  by an  accountant  or  firm of
accountants in the employ of the Company, unless such officer or counsel, as the
case may be,  knows that the  certificate  or opinion  or  representations  with
respect to the  accounting  matters  upon which his  certificate,  statement  or
opinion  may  be  based  as  aforesaid  are  erroneous,  or in the  exercise  of
reasonable care should know that the same are erroneous.

           Section 15.07.  In any case where the date of maturity of interest on
or principal of the Debentures or the date fixed for redemption of any Debenture
shall be a Sunday or legal  holiday or a date on which banking  institutions  in
the city of payment are  authorized  by law to close,  then payment of interest,
principal  or premium may be made on the next  succeeding  day not a Sunday or a
legal holiday or a date on which banking institutions in the city of payment are
authorized  by law to close  with the same  force  and  effect as if made on the
nominal  date and no interest  shall  accrue for the period  after such  nominal
date.

           Section  15.08.  If and to the  extent  that  any  provision  of this
Indenture limits, qualifies or conflicts with another provision included in this
Indenture  which is required to be included in this Indenture by any of Sections
310 to 317,  inclusive,  of the  Trust  Indenture  Act of  1939,  such  required
provision shall control.

           Section 15.09. In case any one or more of the provisions contained in
this Indenture or in the Debentures  shall for any reason be held to be invalid,
illegal  or  unenforceable  in  any  respect,  such  invalidity,  illegality  or
unenforceability  shall not affect any other  provisions of this Indenture or of
such Debentures, but this Indenture and such Debentures shall be construed as if
such  invalid or illegal or  unenforceable  provision  had never been  contained
herein or therein.

           Section  15.10.  This  Indenture  may be  executed  in any  number of
counterparts,  each of which shall be an original;  but such counterparts  shall
together constitute but one and the same instrument.

           The Bank of New York,  the party of the second part,  hereby  accepts
the  trusts  in this  Indenture  declared  and  provided,  upon  the  terms  and
conditions hereinabove set forth.

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<PAGE>



           IN WITNESS  WHEREOF,  Elizabethtown  Water Company,  the party of the
first part,  has caused this  Indenture to be signed in its  corporate  name and
acknowledged by its President, or one of its Vice Presidents,  and its corporate
seal to be affixed  hereunto,  duly  attested by its  Secretary  or an Assistant
Secretary;  and The Bank of New York,  the party of the second part,  has caused
this Indenture to be signed and acknowledged by one of its Responsible Officers,
all as of the day and year first above written.

                                  ELIZABETHTOWN WATER COMPANY,

(Seal)

                                       By

                                          Vice President

Attest:

Secretary

                                          THE BANK OF NEW YORK,

                                           as Trustee

                                       By

                                                                           Title

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STATE OF NEW JERSEY  )
                     ) ss.:

COUNTY OF UNION      )

           On this fourth day of June, 1997, before me, the subscriber, a Notary
Public  within  and for  the  County  of  Union,  in the  State  of New  Jersey,
personally appeared Gail P. Brady, to me personally known, who, being by me duly
sworn, did say that she resides at 49 Howell Drive,  Verona, New Jersey and is a
Vice President of Elizabethtown Water Company, one of the corporations described
in and which  executed the  foregoing  instrument;  that she knows the corporate
seal of the said corporation and that the seal affixed to said instrument is the
corporate  seal of said  corporation;  and that said  instrument  was signed and
sealed in behalf of said  corporation by authority of its Board of Directors and
that she  subscribed  her name  thereto by like  authority;  and said  Walter M.
Braswell  acknowledged  said  instrument  to be the  free  act and  deed of said
corporation.

           My commission as Notary Public as aforesaid expires

                                    -------------------------------



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<PAGE>



STATE OF NEW YORK )
                  ) ss.:

COUNTY OF NEW YORK)

           On this fourth day of June, 1997, before me, the subscriber, a Notary
Public  within  and for the  County  of New  York,  in the  State  of New  York,
personally appeared

                            , to me personally known, who, being

by me duly sworn, did say that he resides

at and is an  Assistant  Vice  President  of The  Bank of New  York,  one of the
corporations  described in and which executed the foregoing instrument;  that he
knows the corporate  seal of the said  corporation  and that the seal affixed to
said  instrument  is the  corporate  seal of said  corporation;  and  that  said
instrument  was signed and sealed in behalf of said  corporation by authority of
its  Board  of  Directors  and  that he  subscribed  his  name  thereto  by like
authority;  and said acknowledged said instrument to be the free act and deed of
said corporation.

           My commission as Notary Public as aforesaid expires

                                    -------------------------------


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                                                                  EXECUTION COPY

    -----------------------------------------------------------






                           ELIZABETHTOWN WATER COMPANY

                                       TO

                          THE BANK OF NEW YORK, TRUSTEE

                            -----------


                                    INDENTURE

                            Dated as of June 1, 1997

                          --------------



          1997 Series A Variable Rate Debentures due 2027

    -----------------------------------------------------------


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                                TABLE OF CONTENTS

                                                                            Page

                                    ARTICLE ONE.

                                   Definitions

      Section 1.01.............................................. 6

                                  ARTICLE TWO.

         Description, Execution and Exchange of Debentures

      Section 2.01.............................................. 8
      Section 2.02.............................................. 8
      Section 2.03.............................................. 9
      Section 2.04.............................................. 9
      Section 2.05............................................. 10
      Section 2.06............................................. 10
      Section 2.07............................................. 11
      Section 2.08............................................. 11
      Section 2.09............................................. 12

                                 ARTICLE THREE.

                               Issue of Debentures

      Section 3.01............................................. 12

                                  ARTICLE FOUR.

                            Redemption of Debentures

      Section 4.01............................................. 12
      Section 4.02............................................. 12
      Section 4.03............................................. 13
      Section 4.04............................................. 13

                                  ARTICLE FIVE.

                Particular Covenants of the Company

      Section 5.01............................................. 14
      Section 5.02............................................. 14
      Section 5.03............................................. 14

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      Section 5.04............................................. 14
      Section 5.05............................................. 15
      Section 5.06............................................. 18
      Section 5.07............................................. 21
      Section 5.08............................................. 21
      Section 5.09............................................. 23
      Section 5.10............................................. 23

                                  ARTICLE SIX.

              Debentureholders' Lists and Reports by

                           the Company and the Trustee

      Section 6.01............................................. 23
      Section 6.02............................................. 23
      Section 6.03............................................. 23
      Section 6.04............................................. 23

                                 ARTICLE SEVEN.

                           Remedies of the Trustee and

               Debentureholders on Event of Default

      Section 7.01............................................. 24
      Section 7.02............................................. 25
      Section 7.03............................................. 27
      Section 7.04............................................. 28
      Section 7.05............................................. 28
      Section 7.06............................................. 28
      Section 7.07............................................. 28
      Section 7.08............................................. 29

                                 ARTICLE EIGHT.

                             Concerning the Trustee

      Section 8.01............................................. 29
      Section 8.02............................................. 29
      Section 8.03............................................. 30
      Section 8.04............................................. 30
      Section 8.05............................................. 30
      Section 8.06............................................. 30
      Section 8.07............................................. 31
      Section 8.08............................................. 31
      Section 8.09............................................. 32
      Section 8.10............................................. 32
      Section 8.11............................................. 33
      Section 8.12............................................. 33
      Section 8.13............................................. 34

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                                  ARTICLE NINE.

                         Concerning the Debentureholders

      Section 9.01............................................. 34
      Section 9.02............................................. 34
      Section 9.03............................................. 34
      Section 9.04............................................. 35
      Section 9.05............................................. 35

                                  ARTICLE TEN.

                           Debentureholders' Meetings

      Section 10.01............................................ 35
      Section 10.02............................................ 36
      Section 10.03............................................ 36
      Section 10.04............................................ 36
      Section 10.05............................................ 37
      Section 10.06............................................ 37
      Section 10.07............................................ 38

                                 ARTICLE ELEVEN.

                             Supplemental Indentures

      Section 11.01............................................ 38
      Section 11.02............................................ 38
      Section 11.03............................................ 39
      Section 11.04............................................ 39
      Section 11.05............................................ 40

                                 ARTICLE TWELVE.

                         Consolidation, Merger and Sale

      Section 12.01............................................ 40
      Section 12.02............................................ 40
      Section 12.03............................................ 41

                                ARTICLE THIRTEEN.

     Satisfaction and Discharge of Indenture; Deposited Moneys

      Section 13.01............................................ 41
      Section 13.02............................................ 42
      Section 13.03............................................ 42
      Section 13.04............................................ 43

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                                ARTICLE FOURTEEN.

        Immunity of Incorporators, Stockholders, Officers,

                             Trustees and Directors

      Section 14.01............................................ 43

                                    ARTICLE FIFTEEN.

                            Miscellaneous Provisions

      Section 15.01............................................ 44
      Section 15.02............................................ 44
      Section 15.03............................................ 44
      Section 15.04............................................ 44
      Section 15.05............................................ 44
      Section 15.06............................................ 44
      Section 15.07............................................ 45
      Section 15.08............................................ 45
      Section 15.09............................................ 46
      Section 15.10............................................ 46

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