EXHIBIT 4





                              E'town Corporation


                                  $30,000,000


                    7.69% Senior Notes due February 1, 2010




                               ________________


                            Note Purchase Agreement

                               ________________




                         Dated as of February 1, 2000












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                                      -2-
                               Table of Contents

Section                        Heading                         Page

Section 1.      Authorization of Notes............................1


Section 2.      Sale and Purchase of Notes........................1


Section 3.      Closing...........................................1


Section 4.      Conditions to Closing.............................2

    Section 4.1.  Representations and Warranties..................2
    Section 4.2.  Performance; No Default.........................2
    Section 4.3.  Compliance Certificates.........................2
    Section 4.4.  Opinions of Counsel.............................2
    Section 4.5.  Purchase Permitted by Applicable Law, etc.......3
    Section 4.6.  Governmental Approvals..........................3
    Section 4.7.  Payment of Special Counsel Fees.................3
    Section 4.8.  Private Placement Number........................3
    Section 4.9.  Changes in Corporate Structure..................3
    Section 4.10. Proceedings and Documents.......................3

Section 5.      Representations and Warranties of the Company.....4

    Section 5.1.  Organization; Power and Authority...............4
    Section 5.2.  Authorization, etc..............................4
    Section 5.3.  Disclosure......................................4
    Section 5.4.  Organization and Ownership of Shares of
                  Subsidiaries....................................4
    Section 5.5.  Financial Statements............................5
    Section 5.6.  Compliance with Laws, Other Instruments, etc....5
    Section 5.7.  Governmental Authorizations, etc................5
    Section 5.8.  Litigation; Observance of Statutes and Orders...5
    Section 5.9.  Taxes...........................................6
    Section 5.10. Title to Property; Leases.......................6
    Section 5.11. Licenses, Permits, etc..........................6
    Section 5.12. Compliance with ERISA...........................6
    Section 5.13. Private Offering by the Company.................7
    Section 5.14. Use of Proceeds; Margin Regulations.............7
    Section 5.15. Existing Indebtedness...........................8
    Section 5.16. Foreign Assets Control Regulations, etc.........8
    Section 5.17. Status under Certain Statutes...................8
    Section 5.18. Year 2000 Compliant.............................8

Section 6.      Representations of the Purchaser..................8

    Section 6.1.  Purchase for Investment.........................8
    Section 6.2.  Source of Funds.................................9

Section 7.      Information as to Company........................10

    Section 7.1.  Financial and Business Information.............10
    Section 7.2.  Officer's Certificate..........................12
    Section 7.3.  Inspection.....................................13

Section 8.      Prepayment of the Notes..........................13

    Section 8.1.  Prepayments....................................13
    Section 8.2.  Optional Prepayments with Make-Whole Amount....13
    Section 8.3.  Allocation of Partial Prepayments..............14
    Section 8.4.  Maturity; Surrender, etc.......................14
    Section 8.5.  Purchase of Notes..............................14
    Section 8.6.  Make-Whole Amount..............................14

Section 9.      Affirmative Covenants............................16

    Section 9.1.  Compliance with Law............................16
    Section 9.2.  Insurance......................................16
    Section 9.3.  Maintenance of Properties......................16
    Section 9.4.  Payment of Taxes...............................16
    Section 9.5.  Corporate Existence, etc.; Maintenance of
                  Ownership of Elizabethtown Water Company.......17
    Section 9.6.  Year 2000 Compliance...........................17

Section 10.     Negative Covenants...............................17

    Section 10.1. Transactions with Affiliates...................17
    Section 10.2. Merger, Consolidation, etc.....................17
    Section 10.3. Fixed Charges Coverage Ratio...................18
    Section 10.4. Consolidated Common Shareholders' Equity.......18
    Section 10.5. Consolidated Debt..............................18
    Section 10.6. Liens..........................................18
    Section 10.7. Sale of Assets of Elizabethtown Water Company and
                  The Mount Holly Water Company..................18
    Section 10.8. Restricted Investments.........................19

Section 11.     Events of Default................................19


Section 12.     Remedies on Default, Etc.........................21

    Section 12.1. Acceleration...................................21
    Section 12.2. Other Remedies.................................21
    Section 12.3. Rescission.....................................22
    Section 12.4. No Waivers or Election of Remedies, Expenses, etc
                  22

Section 13.     Registration; Exchange; Substitution of Notes....22

    Section 13.1. Registration of Notes..........................22
    Section 13.2. Transfer and Exchange of Notes.................22
    Section 13.3. Replacement of Notes...........................23

Section 14.     Payments on Notes................................23

    Section 14.1. Place of Payment...............................23
    Section 14.2. Home Office Payment............................24

Section 15.     Expenses, Etc....................................24

    Section 15.1. Transaction Expenses...........................24
    Section 15.2. Survival.......................................24

Section 16.     Survival of Representations and Warranties; Entire
                Agreement........................................24


Section 17.     Amendment and Waiver.............................25

    Section 17.1. Requirements...................................25
    Section 17.2. Solicitation of Holders of Notes...............25
    Section 17.3. Binding Effect, etc............................25
    Section 17.4. Notes Held by Company, etc.....................26

Section 18.     Notices..........................................26


Section 19.     Reproduction of Documents........................26


Section 20.     Confidential Information.........................27


Section 21.     Substitution of Purchaser........................28


Section 22.     Miscellaneous....................................28

    Section 22.1. Successors and Assigns.........................28
    Section 22.2. Payments Due on Non-Business Days..............28
    Section 22.3. Severability...................................28
    Section 22.4. Construction...................................28
    Section 22.5. Counterparts...................................28
    Section 22.6. Governing Law..................................29

Signatures.......................................................30



Schedule A         Information Relating To Purchaser

Schedule B         Defined Terms

Schedule 5.3       Financial Statements and Other Information

Schedule 5.4       Subsidiaries of the Company and Ownership of Subsidiary
Stock

Schedule 5.15      Existing Indebtedness

Exhibit 1          Form of 7.69% Senior Note due February 1, 2010

Exhibit 4.4(a)     Form of Opinion of  Counsel to the Company

Exhibit 4.4(b)     Form of Opinion of Special New York Counsel for the Company

Exhibit 4.4(c)     Form of Opinion of Special Counsel to the Purchaser



E'town Corporation                          Note Purchase Agreement



                              E'town Corporation
                               600 South Avenue
                       Westfield, New Jersey 07091-0788


                    7.69% Senior Notes due February 1, 2010


                                                                    Dated as of
                                                               February 1, 2000
Teachers Insurance and Annuity
Association of America
730 Third Avenue
New York, New York 10017-3263

Ladies and Gentlemen:

      E'town  Corporation,  a New Jersey  corporation (the  "Company"),  agrees
with you as follows:

Section 1.   Authorization of Notes.

      The Company will  authorize the issue and sale of  $30,000,000  aggregate
principal  amount of its 7.69% Senior Notes due February 1,  2010 (the "Notes",
such term to include any such notes issued in  substitution  therefor  pursuant
to  Section 13  of this  Agreement).  The Notes shall be  substantially  in the
form set out in  Exhibit 1,  with such  changes  therefrom,  if any,  as may be
approved  by you  and  the  Company.  Certain  capitalized  terms  used in this
Agreement  are  defined  in  Schedule B;  references  to  a  "Schedule"  or  an
"Exhibit"  are,  unless  otherwise  specified,  to a  Schedule  or  an  Exhibit
attached to this Agreement.

Section 2.   Sale and Purchase of Notes.

      Subject to the terms and conditions of this  Agreement,  the Company will
issue and sell to you and you will  purchase  from the Company,  at the Closing
provided for in Section 3,  Notes in the principal  amount  specified  opposite
your name in Schedule A at the purchase  price of 100% of the principal  amount
thereof.

Section 3.   Closing.

      The sale and  purchase of the Notes to be purchased by you shall occur at
the offices of Chapman and Cutler,  111 West Monroe Street,  Chicago,  Illinois
60603,  at 10:00 a.m.  Chicago time, at a closing (the  "Closing")  which shall
take place on  February 11,  2000 or on such other  Business Day  thereafter on
or prior to  February 25,  2000 as may be agreed  upon by the  Company and you.
At the Closing the Company  will  deliver to you the Notes to be  purchased  by
you on such  date in the form of a  single  Note (or  such  greater  number  of
Notes in  denominations  of at least  $100,000  as you may  request)  dated the
date of the  Closing  and  registered  in  your  name  (or in the  name of your
nominee),  against  delivery by you to the Company or its order of  immediately
available  funds in the amount of the purchase  price therefor by wire transfer
of  immediately  available  funds for the  account  of the  Company  to account
number  2083605002512  at First Union National Bank,  Newark,  New Jersey,  ABA
number  031201467.  If at the  Closing  the  Company  shall fail to tender such
Notes to you as  provided  above in this  Section 3,  or any of the  conditions
specified in  Section 4  shall not have been  fulfilled  to your  satisfaction,
you shall,  at your  election,  be relieved of all  further  obligations  under
this  Agreement,  without  thereby waiving any rights you may have by reason of
such failure or such nonfulfillment.

Section 4.   Conditions to Closing.

      Your  obligation  to purchase  and pay for the Notes to be sold to you at
the Closing is subject to the  fulfillment  to your  satisfaction,  prior to or
at the Closing, of the following conditions:

 Section 4.1.  Representations   and  Warranties.   The   representations   and
warranties of the Company in this  Agreement  shall be correct when made and at
the time of the Closing.

 Section 4.2.  Performance;  No Default.  The Company shall have  performed and
complied  with  all  agreements  and  conditions  contained  in this  Agreement
required to be  performed  or complied  with by it prior to or at the  Closing,
and  after  giving  effect  to the  issue  and  sale  of  the  Notes  (and  the
application  of the  proceeds  thereof as  contemplated  by  Section 5.14),  no
Default or Event of Default shall have occurred and be continuing.

 Section 4.3.  Compliance Certificates.

          (a)   Officer's  Certificate.  The Company  shall have  delivered  to
      you an Officer's Certificate,  dated the date of the Closing,  certifying
      that the  conditions  specified  in  Sections 4.1,  4.2 and 4.9 have been
      fulfilled.

          (b)   Secretary's  Certificate.  The Company shall have  delivered to
      you a certificate  certifying as to the resolutions  attached thereto and
      other corporate proceedings relating to the authorization,  execution and
      delivery of the Notes and this Agreement.

 Section 4.4.  Opinions of Counsel.  You shall have  received  opinions in form
and  substance  satisfactory  to you,  dated the date of the  Closing  (a) from
Walter M. Braswell,  Esq.,  Secretary of the Company,  covering the matters set
forth in  Exhibit 4.4(a)  and  covering  such  other  matters  incident  to the
transactions  contemplated  hereby  as  you  or  your  counsel  may  reasonably
request (and the Company  hereby  instructs its counsel to deliver such opinion
to you),  (b)  from  Winthrop,  Stimson,  Putnam &  Roberts,  special  New York
counsel for the  Company,  covering  the  matters set forth in  Exhibit 4.4(b),
and  covering  such other  matters  incident to the  transactions  contemplated
hereby as you or your counsel may  reasonably  request (and the Company  hereby
instructs  its counsel to deliver  such  opinion to you) and  (c)from  Chapman
and  Cutler,  your  special  counsel  in  connection  with  such  transactions,
substantially in the form set forth in  Exhibit 4.4(c)  and covering such other
matters incident to such transactions as you may reasonably request.

 Section 4.5.  Purchase  Permitted by  Applicable  Law, etc. On the date of the
Closing  your  purchase  of  Notes  shall  (i) be  permitted  by the  laws  and
regulations of each  jurisdiction  to which you are subject,  without  recourse
to  provisions  (such  as  Section 1405(a)(8)  of the New York  Insurance  Law)
permitting limited  investments by insurance  companies without  restriction as
to  the  character  of  the  particular   investment,   (ii) not   violate  any
applicable law or regulation (including,  without limitation,  Regulation T,  U
or X of the Board of Governors  of the Federal  Reserve  System) and  (iii) not
subject  you  to any  tax,  penalty  or  liability  under  or  pursuant  to any
applicable  law or  regulation,  which law or  regulation  was not in effect on
the date hereof.  If  requested  by you,  you shall have  received an Officer's
Certificate  certifying  as to such  matters  of  fact  as you  may  reasonably
specify to enable you to determine whether such purchase is so permitted.

 Section 4.6.  Governmental  Approvals.  The Company  shall have  received  all
necessary   consents,   authorizations  and  approvals  from  all  Governmental
Authorities,  if any, necessary for the execution,  delivery and performance by
the  Company  of  this   Agreement  and  the  Notes,   and  any  such  consent,
authorization or approval shall be final and unappealable.

 Section 4.7.  Payment  of  Special   Counsel   Fees.   Without   limiting  the
provisions  of  Section 15.1,  the  Company  shall  have paid on or before  the
Closing  the  reasonable  fees,  charges  and  disbursements  of  your  special
counsel  referred to in Section 4.4  to the extent  reflected in a statement of
such  counsel  rendered to the Company at least one  Business  Day prior to the
Closing.

 Section 4.8.  Private  Placement  Number. A Private Placement number issued by
Standard & Poor's CUSIP  Service  Bureau (in  cooperation  with the  Securities
Valuation  Office  of the  National  Association  of  Insurance  Commissioners)
shall have been obtained for the Notes.

 Section 4.9.  Changes  in  Corporate  Structure.  The  Company  shall not have
changed  its  jurisdiction  of  incorporation  or been a party to any merger or
consolidation  (other  than the pending  merger  between the Company and Thames
Water  plc.  described  in the  Company's  Current  Report  on Form  8-K  dated
November 21, 1999  included in the Investor  Packet,  as defined in Section 5.3
hereof)  and shall not have  succeeded  to all or any  substantial  part of the
liabilities  of any other  entity,  at any time  following the date of the most
recent financial statements referred to in Section 5.5.

Section 4.10.  Proceedings and Documents.  All corporate and other  proceedings
in connection  with the  transactions  contemplated  by this  Agreement and all
documents and instruments  incident to such transactions  shall be satisfactory
to you and your special  counsel,  and you and your special  counsel shall have
received  all such  counterpart  originals or certified or other copies of such
documents as you or they may reasonably request.

Section 5.   Representations and Warranties of the Company

      The Company represents and warrants to you that:

 Section 5.1.  Organization;   Power   and   Authority.   The   Company   is  a
corporation  duly  organized,  validly  existing and in good standing under the
laws of its jurisdiction of  incorporation,  and is duly qualified as a foreign
corporation  and is in  good  standing  in  each  jurisdiction  in  which  such
qualification  is required by law, other than those  jurisdictions  as to which
the failure to be so qualified or in good standing would not,  individually  or
in the  aggregate,  reasonably be expected to have a Material  Adverse  Effect.
The Company has the  corporate  power and  authority to own or hold under lease
the  properties  it  purports  to own or hold  under  lease,  to  transact  the
business it transacts  and  proposes to  transact,  to execute and deliver this
Agreement and the Notes and to perform the provisions hereof and thereof.

 Section 5.2.  Authorization,  etc.  This  Agreement  and the  Notes  have been
duly authorized by all necessary  corporate  action on the part of the Company,
and this Agreement  constitutes,  and upon execution and delivery  thereof each
Note will  constitute,  a legal,  valid and binding  obligation  of the Company
enforceable  against the Company in accordance  with its terms,  except as such
enforceability  may  be  limited  by  (i) applicable  bankruptcy,   insolvency,
reorganization,  moratorium or other similar laws affecting the  enforcement of
creditors' rights generally and (ii) general  principles of equity  (regardless
of whether such  enforceability  is  considered in a proceeding in equity or at
law).

 Section 5.3.  Disclosure.  The  Company,  through  its agent,  A.G.  Edwards &
Sons,   Inc.,  has  delivered  to  you  the  financial   statements  and  other
information  listed in Schedule 5.3  (the "Investor  Packet"),  relating to the
transactions  contemplated  hereby.  This  Agreement  and the  Investor  Packet
(other  than items 1 and 8 through 11 on  Schedule  5.3,  as to which items the
Company makes no  representation),  taken as a whole, do not contain any untrue
statement of a material  fact or omit to state any material  fact  necessary to
make the  statements  therein  not  misleading  in  light of the  circumstances
under  which  they were  made.  Except as  disclosed  in the  Investor  Packet,
since December 31,  1998, there has been no change in the financial  condition,
operations,  business or properties  of the Company or any of its  Subsidiaries
except changes that  individually  or in the aggregate  would not reasonably be
expected to have a Material Adverse Effect.

 Section 5.4.  Organization   and   Ownership   of  Shares   of   Subsidiaries.
(a) Schedule 5.4  is (except as noted  therein) a complete  and correct list of
the Company's  Subsidiaries,  showing, as to each Subsidiary,  the correct name
thereof,  the  jurisdiction of its  organization,  and the percentage of shares
of each class of its  capital  stock or similar  equity  interests  outstanding
owned by the Company and each other Subsidiary.

    (b)  All of the  outstanding  shares of  capital  stock or  similar  equity
interests  of each  Subsidiary  shown in  Schedule 5.4  as  being  owned by the
Company  and its  Subsidiaries  have been  validly  issued,  are fully paid and
nonassessable  and are owned by the  Company  or  another  Subsidiary  free and
clear of any Lien (except as otherwise disclosed in Schedule 5.4).

    (c)  Each  Subsidiary  identified in Schedule 5.4 is a corporation or other
legal entity duly  organized,  validly  existing and in good standing under the
laws of its  jurisdiction of  organization,  and is duly qualified as a foreign
corporation   or  other  legal   entity  and  is  in  good   standing  in  each
jurisdiction in which such  qualification  is required by law, other than those
jurisdictions  as to which the failure to be so qualified  or in good  standing
would not,  individually or in the aggregate,  reasonably be expected to have a
Material  Adverse  Effect.  Each such  Subsidiary  has the  corporate  or other
power and  authority to own or hold under lease the  properties  it purports to
own or  hold  under  lease  and to  transact  the  business  it  transacts  and
proposes to transact.

 Section 5.5.  Financial Statements.  The consolidated  financial statements of
the  Company  and its  Subsidiaries  included  as part of the  Investor  Packet
(including  in each case the related  schedules  and notes)  fairly  present in
all material  respects the consolidated  financial  position of the Company and
its Subsidiaries as of their  respective dates and the consolidated  results of
their  operations  and cash flows for their  respective  periods  and have been
prepared in accordance with GAAP  consistently  applied  throughout the periods
involved  except  as set forth in the notes  thereto  (subject,  in the case of
any interim financial statements, to normal year-end adjustments).

 Section 5.6.  Compliance  with Laws,  Other  Instruments,  etc. The execution,
delivery and  performance  by the Company of this  Agreement and the Notes will
not  (i) contravene,  result in any breach of, or  constitute a default  under,
or  result  in the  creation  of any Lien in  respect  of any  property  of the
Company  or any  Subsidiary  under,  any  indenture,  mortgage,  deed of trust,
loan,  purchase or credit agreement,  lease,  corporate charter or by-laws,  or
any  other  Material  agreement  or  instrument  to which  the  Company  or any
Subsidiary  is bound or by which the Company or any  Subsidiary or any of their
respective  properties may be bound or affected,  (ii) conflict  with or result
in a  breach  of any of the  terms,  conditions  or  provisions  of any  order,
judgment,   decree,  or  ruling  of  any  court,   arbitrator  or  Governmental
Authority  applicable  to the Company or any  Subsidiary or  (iii) violate  any
provision  of any  statute  or other  rule or  regulation  of any  Governmental
Authority applicable to the Company or any Subsidiary.

 Section 5.7.  Governmental  Authorizations,   etc.  No  consent,  approval  or
authorization   of,  or   registration,   filing  or   declaration   with,  any
Governmental  Authority  (including,  without limitation,  the New Jersey Board
of Public  Utilities) is required in connection  with the  execution,  delivery
or performance by the Company of this Agreement or the Notes.

 Section 5.8.  Litigation;  Observance  of Statutes and Orders.  (a) Except  as
disclosed in the Investor  Packet,  there are no actions,  suits or proceedings
pending or, to the  knowledge of the Company,  threatened  against or affecting
the  Company  or  any  Subsidiary  or  any  property  of  the  Company  or  any
Subsidiary  in any court or before any  arbitrator  of any kind or before or by
any  Governmental  Authority  that,  individually  or in the  aggregate,  would
reasonably be expected to have a Material Adverse Effect.

    (b)  Neither the Company nor any  Subsidiary is in default under any order,
judgment,  decree or ruling of any court,  arbitrator or Governmental Authority
or is in  violation  of any  applicable  law,  ordinance,  rule  or  regulation
(including   without  limitation   Environmental   Laws)  of  any  Governmental
Authority,  which  default  or  violation,  individually  or in the  aggregate,
would reasonably be expected to have a Material Adverse Effect.

 Section 5.9.  Taxes.  The Company and its  Subsidiaries  have filed all income
tax  returns  that are  required  to have been filed in any  jurisdiction,  and
have paid all taxes shown to be due and  payable on such  returns and all other
taxes  and  assessments   payable  by  them,  to  the  extent  such  taxes  and
assessments   have   become  due  and  payable  and  before  they  have  become
delinquent,  except for any taxes and  assessments  (i) the  amount of which is
not   individually   or  in  the   aggregate   Material  or  (ii) the   amount,
applicability  or validity of which is currently  being contested in good faith
by  appropriate  proceedings  and  with  respect  to  which  the  Company  or a
Subsidiary,  as the case may be, has established  adequate reserves (if any) in
accordance  with GAAP.  The Federal  income tax  liabilities of the Company and
its  Subsidiaries  have been determined by the Internal Revenue Service for all
fiscal years up to and including the fiscal year ended December 31, 1995.

Section 5.10.  Title to  Property;  Leases.  The Company  and its  Subsidiaries
have  good  and  sufficient  title  to their  respective  Material  properties,
including  all such  properties  reflected in the most recent  audited  balance
sheet  referred to in  Section 5.5  or purported  to have been  acquired by the
Company  or any  Subsidiary  after  said  date  (except  as sold  or  otherwise
disposed of in the ordinary  course of  business),  in each case free and clear
of Liens  prohibited  by this  Agreement,  except  for those  defects  in title
that,  individually  or in the  aggregate,  would not have a  Material  Adverse
Effect.  All  Material  leases are valid and  subsisting  and are in full force
and effect in all material respects.

Section 5.11.  Licenses,  Permits,  etc. The Company and its  Subsidiaries  own
or  possess  all  licenses,  permits,  franchises,   authorizations,   patents,
copyrights,  service  marks,  trademarks  and trade names,  or rights  thereto,
that are  Material,  without known  conflict with the rights of others,  except
for those  conflicts that,  individually or in the aggregate,  would not have a
Material Adverse Effect.

Section 5.12.  Compliance   with   ERISA.   (a) The   Company  and  each  ERISA
Affiliate  have  operated and  administered  each Plan in  compliance  with all
applicable  laws  except  for  such  instances  of  noncompliance  as have  not
resulted  in and could  not  reasonably  be  expected  to result in a  Material
Adverse  Effect.  Neither the Company nor any ERISA  Affiliate has incurred any
liability  pursuant  to  Title I  or IV of ERISA or the  penalty  or excise tax
provisions  of the Code  relating  to  employee  benefit  plans (as  defined in
Section 3 of ERISA),  and no event,  transaction  or condition  has occurred or
exists that would  reasonably  be expected to result in the  incurrence  of any
such liability by the Company or any ERISA  Affiliate,  or in the imposition of
any Lien on any of the  rights,  properties  or  assets of the  Company  or any
ERISA  Affiliate,  in either case pursuant to Title I or IV of ERISA or to such
penalty or excise tax provisions or to  Section 401(a)(29)  or 412 of the Code,
other than such  liabilities  or Liens as would not be  individually  or in the
aggregate Material.

    (b)  The projected  benefit  obligation under each of the Plans (other than
Multiemployer  Plans),  determined as of  December 31,  1998 in accordance with
Financial  Accounting  Standards Board Statement No. 87, is as disclosed in the
Company's  filings  with the  Securities  and  Exchange  Commission  under  the
Exchange  Act  included  in the  Investor  Packet  and does not exceed the fair
value  of the  assets  of  such  Plan  as of  such  date.  To the  best  of the
Company's  knowledge,  the projected benefit obligation under each of the Plans
(other  than  Multiemployer  Plans)  as of  December 31,  1999,  determined  in
accordance with Financial  Accounting  Standards Board Statement  No.87,  does
not  exceed  the fair  value of the  assets  of such Plan as of such date by an
amount that is Material.

    (c)  The  Company and its ERISA  Affiliates  have not  incurred  withdrawal
liabilities (and are not subject to contingent  withdrawal  liabilities)  under
section 4201  or  4204  of  ERISA  in  respect  of  Multiemployer   Plans  that
individually or in the aggregate are Material.

    (d)  The expected post  retirement  benefit  obligation  (determined  as of
December 31,  1998 in accordance  with  Financial  Accounting  Standards  Board
Statement No. 106,  without regard to liabilities  attributable to continuation
coverage  mandated  by  section 4980B  of the  Code)  of the  Company  and  its
Subsidiaries  is  $7,938,000.  To the best of the  Company's  knowledge,  there
has been no material  adverse  change since  December 31,  1998 in the expected
post  retirement  benefit  obligation  (determined in accordance with Financial
Accounting  Standards  Board Statement  No. 106,  without regard to liabilities
attributable to continuation  coverage  mandated by  section 4980B of the Code)
of the Company and its Subsidiaries.

    (e)  The  execution  and  delivery of this  Agreement  and the issuance and
sale of the Notes  hereunder will not involve any  transaction  that is subject
to the  prohibitions  of section 406 of ERISA or in connection with which a tax
could  be  imposed  pursuant  to  section 4975(c)(1)(A)-(D)  of the  Code.  The
representation  by the Company in the first  sentence  of this  Section 5.12(e)
is made in  reliance  upon and subject to the  accuracy of your  representation
in  Section 6.2  as to the sources of the funds to be used to pay the  purchase
price of the Notes to be purchased by you.

Section 5.13.  Private  Offering  by  the  Company.  Neither  the  Company  nor
anyone  acting on its behalf has offered  the Notes or any  similar  securities
for sale to, or solicited  any offer to buy any of the same from,  or otherwise
approached  or negotiated  in respect  thereof with,  any person other than you
and not more than seven (7) other  Institutional  Investors,  each of which has
been  offered the Notes at a private sale for  investment.  Neither the Company
nor  anyone  acting on its behalf has  taken,  or will  take,  any action  that
would  subject  the  issuance  or  sale  of  the  Notes  to  the   registration
requirements of Section 5 of the Securities Act.

Section 5.14.  Use of  Proceeds;  Margin  Regulations.  The Company  will apply
the  proceeds  of the sale of the Notes to (i)  refinance  existing  short-term
indebtedness  and  (ii) to fund  future  capital  expenditures  for  water  and
wastewater  systems.  No part  of the  proceeds  from  the  sale  of the  Notes
hereunder will be used,  directly or  indirectly,  for the purpose of buying or
carrying any margin stock  within the meaning of  Regulation U  of the Board of
Governors of the Federal  Reserve  System  (12 CFR 221),  or for the purpose of
buying or carrying or trading in any  securities  under such  circumstances  as
to involve  the Company in a violation  of  Regulation  X of said Board (12 CFR
224) or to  involve  any broker or dealer in a  violation  of  Regulation T  of
said  Board (12 CFR  220).  The  Company  does not own or  presently  intend to
carry  or  purchase  any  margin  stock.  As used in this  Section,  the  terms
"margin  stock" and  "purpose of buying or  carrying"  shall have the  meanings
assigned to them in said Regulation U.

Section 5.15.  Existing  Indebtedness.  Schedule 5.15 sets forth a complete and
correct  list  of  all   outstanding   Indebtedness  of  the  Company  and  its
Subsidiaries  as of  January 31,  2000,  since  which  date  there  has been no
Material  change in the amounts,  interest  rates,  sinking funds,  installment
payments   or   maturities   of  the   Indebtedness   of  the  Company  or  its
Subsidiaries.  Neither  the  Company  nor any  Subsidiary  is in default and no
waiver of default is  currently in effect,  in the payment of any  principal or
interest on any  Indebtedness  of the Company or such  Subsidiary  and no event
or  condition  exists with  respect to any  Indebtedness  of the Company or any
Subsidiary  the  outstanding  principal  amount of which exceeds  $500,000 that
would  permit  (or that  with  notice  or the  lapse of  time,  or both,  would
permit)  one or more  Persons  to cause  such  Indebtedness  to become  due and
payable before its stated  maturity or before its regularly  scheduled dates of
payment.

Section 5.16.  Foreign Assets  Control  Regulations,  etc.  Neither the sale of
the Notes by the Company  hereunder  nor its use of the  proceeds  thereof will
violate  the  Trading  with the Enemy Act,  as  amended,  or any of the foreign
assets control  regulations of the United States  Treasury  Department (31 CFR,
Subtitle B,  Chapter V, as amended) or any  enabling  legislation  or executive
order relating thereto.

Section 5.17.  Status  under  Certain  Statutes.  Neither  the  Company nor any
Subsidiary is subject to regulation  under the Investment  Company Act of 1940,
as amended,  the Public Utility  Holding  Company Act of 1935, as amended,  the
ICC Termination Act of 1995, as amended, or the Federal Power Act, as amended.

Section 5.18.  Year 2000 Compliant.  The Company  reasonably  believes that the
internal  computer  systems of the Company and its  Subsidiaries  are Year 2000
Compliant  in all  Material  respects  and that the advent of the year 2000 and
its impact on said  internal  computer  systems  has not  resulted,  and is not
reasonably  expected to result,  in a Material  Adverse Effect.  The term "Year
2000 Compliant" means that all computer  applications and equipment  containing
embedded  microchips  material to the  business and  operations  of the Company
and its  Subsidiaries  are able to  recognize  correctly  and perform  properly
date-sensitive  functions  for all dates before and after  January 1,  2000 or,
alternatively,  the Company and its Subsidiaries  have designed and implemented
contingency  plans  so that any  failure  of their  computer  applications  and
equipment to recognize  correctly or to perform  properly  such  functions  for
such dates will not reasonably be expected to have a Material Adverse Effect.

Section 6.   Representations of the Purchaser.

 Section 6.1.  Purchase for  Investment.  You represent that you are purchasing
the  Notes  for  your  own  account  or  for  one  or  more  separate  accounts
maintained  by you or for the  account of one or more  pension  or trust  funds
and  not  with  a  view  to  the  distribution   thereof,   provided  that  the
disposition  of your or their  property  shall at all times be  within  your or
their control.  You understand  that the Notes have not been  registered  under
the  Securities  Act  and may be  resold  only if  registered  pursuant  to the
provisions  of the  Securities  Act or if an  exemption  from  registration  is
available,  except under  circumstances  where  neither such  registration  nor
such an  exemption  is required by law, and that the Company is not required to
register the Notes.

 Section 6.2.  Source  of  Funds.  You  represent  that  at  least  one  of the
following  statements is an accurate  representation as to each source of funds
(a  "Source")  to be used by you to pay the  purchase  price of the Notes to be
purchased by you hereunder:

          (a)   the Source is an "insurance  company  general  account"  within
      the  meaning  of  Department  of  Labor  Prohibited   Transaction   Class
      Exemption ("PTCE") 95-60 (issued July 12,  1995) and there is no employee
      benefit  plan,  treating as a single plan,  all plans  maintained  by the
      same employer or employee organization,  with respect to which the amount
      of the general  account  reserves and  liabilities for all contracts held
      by or on behalf of such  plan,  exceeds  ten  percent  (10%) of the total
      reserves and liabilities of such general  account  (exclusive of separate
      account  liabilities)  plus  surplus,  as set  forth in the  NAIC  Annual
      Statement filed with your state of domicile; or

          (b)   the Source is either (i) an  insurance  company pooled separate
      account,  within the meaning of PTCE 90-1 (issued  January 29, 1990),  or
      (ii) a bank collective  investment  fund,  within the meaning of the PTCE
      91-38  (issued  July 12, 1991) and,  except as you have  disclosed to the
      Company in writing  pursuant to this paragraph  (b), no employee  benefit
      plan or group of  plans  maintained  by the  same  employer  or  employee
      organization  beneficially  owns more than 10% of all assets allocated to
      such pooled separate account or collective investment fund; or

          (c)   the Source  constitutes  assets of an "investment fund" (within
      the meaning of Part V(b) of the QPAM  Exemption)  managed by a "qualified
      professional  asset  manager" or "QPAM"  (within the meaning of Part V(a)
      of the QPAM  Exemption),  no  employee  benefit  plan's  assets  that are
      included in such  investment  fund,  when combined with the assets of all
      other  employee  benefit  plans  established  or  maintained  by the same
      employer or by an  affiliate  (within the meaning of  Section V(c)(1)  of
      the  QPAM   Exemption)   of  such   employer  or  by  the  same  employee
      organization  and  managed by such QPAM,  exceed 20% of the total  client
      assets  managed by such QPAM,  the conditions of Part I(c) and (g) of the
      QPAM Exemption are satisfied,  neither the QPAM nor a person  controlling
      or  controlled  by the QPAM  (applying  the  definition  of  "control" in
      Section V(e)  of the QPAM  Exemption)  owns a 5% or more  interest in the
      Company  and  (i) the  identity  of such QPAM and  (ii) the  names of all
      employee  benefit plans whose assets are included in such investment fund
      have been disclosed to the Company in writing  pursuant to this paragraph
      (c); or

          (d)   the Source is a governmental plan; or

          (e)   the  Source  is  one  or  more  employee  benefit  plans,  or a
      separate  account or trust fund comprised of one or more employee benefit
      plans,  each of which  has been  identified  to the  Company  in  writing
      pursuant to this paragraph (e); or

          (f)   the Source  does not  include  assets of any  employee  benefit
      plan, other than a plan exempt from the coverage of ERISA.

      If a proposed  transferee  of the Notes  identifies  a plan  pursuant  to
paragraph  (b), (c) or (e) above,  the Company shall  deliver a certificate  on
or prior to the date of any  transfer  of the Notes to such  transferee,  which
certificate  shall  either  state that (i) it is neither a "party in  interest"
(as defined in Title I,  Section 3(14)  of ERISA) nor a  "disqualified  person"
(as defined in Section  4975(e)(2)  of the Internal  Revenue  Code of 1986,  as
amended),  with respect to any plan  identified  pursuant to paragraphs  (b) or
(e) above, or (ii) with respect to any plan,  identified  pursuant to paragraph
(c) above,  neither it nor any  "affiliate"  (as defined in Section V(c) of the
QPAM  Exemption)  has at this time,  and during the  immediately  preceding one
year has exercised  the authority to appoint or terminate  said QPAM as manager
of the assets of any plan  identified  in writing  pursuant  to  paragraph  (c)
above or to negotiate the terms of said QPAM's  management  agreement on behalf
of any such identified plans.

As used in this Section 6.2,  the terms "employee benefit plan",  "governmental
plan",  "party in interest" and "separate  account"  shall have the  respective
meanings assigned to such terms in Section 3 of ERISA.

Section 7.   Information as to Company

 Section 7.1.  Financial  and Business  Information.  The Company shall deliver
to each holder of Notes that is an Institutional Investor:

          (a)   Quarterly  Statements- promptly,  and in any event,  within 60
      days after the end of each  quarterly  fiscal  period in each fiscal year
      of the Company (other than the last quarterly  fiscal period of each such
      fiscal year), duplicate copies of,

               (i)   a  consolidated  balance  sheet  of the  Company  and  its
           Subsidiaries as at the end of such quarter, and

              (ii)   consolidated    statements    of   income,    changes   in
           shareholders'   equity  and  cash  flows  of  the  Company  and  its
           Subsidiaries,  for such  quarter  and (in the case of the second and
           third  quarters) for the portion of the fiscal year ending with such
           quarter,

      setting  forth  in each  case in  comparative  form the  figures  for the
      corresponding  periods in the  previous  fiscal year,  all in  reasonable
      detail,   prepared  in  accordance  with  GAAP  applicable  to  quarterly
      financial  statements  generally,  and  certified  by a Senior  Financial
      Officer as fairly  presenting,  in all material  respects,  the financial
      position  of the  companies  being  reported  on  and  their  results  of
      operations  and cash flows,  subject to changes  resulting  from year-end
      adjustments,  provided  that  delivery  within the time period  specified
      above of copies of the Company's  Quarterly  Report on Form 10-Q prepared
      in  compliance  with  the  requirements   therefor  and  filed  with  the
      Securities  and  Exchange  Commission  shall be  deemed  to  satisfy  the
      requirements of this Section 7.1(a);

          (b)   Annual  Statements  -  promptly,  and in any event,  within 105
      days after the end of each fiscal year of the Company,  duplicate  copies
      of,

               (i)   a  consolidated  balance  sheet  of the  Company  and  its
           Subsidiaries, as at the end of such year, and

              (ii)   consolidated    statements    of   income,    changes   in
           shareholders'   equity  and  cash  flows  of  the  Company  and  its
           Subsidiaries, for such year,

      setting  forth  in each  case in  comparative  form the  figures  for the
      previous  fiscal year, all in reasonable  detail,  prepared in accordance
      with  GAAP,  and   accompanied  by  an  opinion  thereon  of  independent
      certified  public  accountants  of recognized  national  standing,  which
      opinion shall state that such financial  statements  present  fairly,  in
      all material  respects,  the financial  position of the  companies  being
      reported  upon and their  results of  operations  and cash flows and have
      been prepared in conformity  with GAAP, and that the  examination of such
      accountants in connection  with such  financial  statements has been made
      in accordance with generally accepted auditing  standards,  and that such
      audit provides a reasonable basis for such opinion in the  circumstances,
      provided that the delivery within the time period  specified above of the
      Company's  Annual Report on Form 10-K for such fiscal year (together with
      the Company's annual report to shareholders,  if any,  prepared  pursuant
      to Rule 14a-3 under the Exchange Act)  prepared in  accordance  with the
      requirements   therefor  and  filed  with  the  Securities  and  Exchange
      Commission   shall  be  deemed  to  satisfy  the   requirements  of  this
      Section 7.1(b);

          (c)   SEC  and  Other   Reports  -  promptly   upon  their   becoming
      available,  one copy of (i) each financial statement,  report,  notice or
      proxy  statement  sent  by  the  Company  or  any  Subsidiary  to  public
      securities holders generally,  (ii) each regular or periodic report, each
      registration   statement  that  shall  have  become  effective   (without
      exhibits  except as expressly  requested by such holder),  and each final
      prospectus  and  all  amendments  thereto  filed  by the  Company  or any
      Subsidiary with the Securities and Exchange Commission,  and (iii) a copy
      of each  Annual  Report of each of  Elizabethtown  Water  Company and The
      Mount Holly Water  Company  delivered  to the New Jersey  Board of Public
      Utilities;

          (d)   Notice of Default  or Event of  Default -  promptly  following,
      and in any event within five Business  Days after a  Responsible  Officer
      becoming  aware of, the  existence of any Default or Event of Default,  a
      written notice  specifying the nature and period of existence thereof and
      what  action  the  Company  is taking or  proposes  to take with  respect
      thereto;

          (e)   ERISA  Matters - promptly  following,  and in any event  within
      five Business Days after a Responsible  Officer becoming aware of, any of
      the following,  a written notice setting forth the nature thereof and the
      action,  if any, that the Company or an ERISA Affiliate  proposes to take
      with respect thereto:

               (i)   with  respect  to  any  Plan,  any  reportable  event,  as
           defined in section 4043(c) of ERISA and the regulations  thereunder,
           for  which  notice  thereof  has not been  waived  pursuant  to such
           regulations as then in effect on the date hereof; or

              (ii)   the  taking  by the  PBGC of steps  to  institute,  or the
           threatening by the PBGC of the  institution  of,  proceedings  under
           section 4042  of ERISA for the termination of, or the appointment of
           a trustee to administer,  any Plan, or the receipt by the Company or
           any ERISA Affiliate of a notice from a Multiemployer  Plan that such
           action   has  been   taken  by  the  PBGC  with   respect   to  such
           Multiemployer Plan; or

             (iii)   any event,  transaction  or condition that could result in
           the  incurrence  of any  liability  by  the  Company  or  any  ERISA
           Affiliate  pursuant  to  Title I or IV of ERISA  or the  penalty  or
           excise tax  provisions  of the Code  relating  to  employee  benefit
           plans,  or in the  imposition  of  any  Lien  on any of the  rights,
           properties or assets of the Company or any ERISA Affiliate  pursuant
           to Title I or IV of ERISA or such penalty or excise tax  provisions,
           if such  liability  or Lien,  taken  together  with any  other  such
           liabilities or Liens then existing,  would reasonably be expected to
           have a Material Adverse Effect; and

          (f)   Requested Information - with reasonable promptness,  such other
      data and  information  relating  to the  business,  operations,  affairs,
      financial  condition,  assets or  properties of the Company or any of its
      Subsidiaries  or  relating  to the  ability of the Company to perform its
      obligations  hereunder  and  under  the Notes as from time to time may be
      reasonably requested by any such holder of Notes.

 Section 7.2.  Officer's   Certificate.   Each  set  of  financial   statements
delivered to a holder of Notes  pursuant to  Section 7.1(a)  or  Section 7.1(b)
hereof shall be  accompanied  by a certificate  of a Senior  Financial  Officer
setting forth:

          (a)   Covenant  Compliance  -  the  information  (including  detailed
      calculations)  required in order to establish  whether the Company was in
      compliance with the  requirements  of  Section 10.2  through 10.8 hereof,
      inclusive,   during  the  quarterly  or  annual  period  covered  by  the
      statements  then being  furnished  (including  with  respect to each such
      Section,  where  applicable,  the  calculations of the maximum or minimum
      amount,  ratio or percentage,  as the case may be,  permissible under the
      terms of such  Sections,  and the  calculation  of the  amount,  ratio or
      percentage then in existence); and

          (b)   Event of Default - a statement  that such  officer has reviewed
      the relevant  terms hereof and has made, or caused to be made,  under his
      or her  supervision,  a review of the  transactions and conditions of the
      Company and its  Subsidiaries  from the  beginning  of the  quarterly  or
      annual period covered by the statements  then being furnished to the date
      of the  certificate  and that such review  shall not have  disclosed  the
      existence  during such period of any condition or event that  constitutes
      a  Default  or an Event of  Default  or, if any such  condition  or event
      existed  or exists  (including,  without  limitation,  any such  event or
      condition  resulting from the failure of the Company or any Subsidiary to
      comply with any Environmental  Law),  specifying the nature and period of
      existence  thereof  and what  action  the  Company  shall  have  taken or
      proposes to take with respect thereto.

 Section 7.3.  Inspection.  The Company  shall  permit the  representatives  of
each holder of Notes that is an Institutional Investor:

          (a)   No Default - if no Default or Event of Default then exists,  at
      the  expense  of such  holder  and upon  reasonable  prior  notice to the
      Company,  to visit the  principal  executive  office of the  Company,  to
      discuss  the  affairs,  finances  and  accounts  of the  Company  and its
      Subsidiaries  with the Company's  officers,  and, with the consent of the
      Company  (which consent will not be  unreasonably  withheld) to visit the
      other offices and properties of the Company and each  Subsidiary,  all at
      such  reasonable  times and as often (but not more than twice by any such
      holder  within any 12 month  period) as may be  reasonably  requested  in
      writing; and

          (b)   Default - if a Default or Event of Default then exists,  at the
      expense  of the  Company  to visit  and  inspect  any of the  offices  or
      properties  of the  Company  or any  Subsidiary,  to  examine  all  their
      respective books of account,  records,  reports and other papers, to make
      copies and extracts  therefrom,  and to discuss their respective affairs,
      finances  and  accounts   with  their   respective   officers  and  their
      independent  public  accountants  (and  by  this  provision  the  Company
      authorizes  said  accountants  to  discuss  the  affairs,   finances  and
      accounts of the Company and its  Subsidiaries),  all at such times and as
      often as may be requested.

Section 8.   Prepayment of the Notes.

 Section 8.1.  Prepayments.  The  entire  outstanding  principal  amount of the
Notes shall be due on  February 1,  2010.  Except as set forth in  Section 8.2,
the Notes may not be prepaid prior to maturity at the option of the Company.

 Section 8.2.  Optional  Prepayments with Make-Whole  Amount.  The Company may,
at its option,  upon notice as provided below,  prepay at any time all, or from
time to time any part of, the Notes,  in an amount not less than  $1,000,000 in
the case of a partial  prepayment,  at 100% of the principal amount so prepaid,
and accrued  interest  thereon to the date of  prepayment,  plus the Make-Whole
Amount  determined  for the  prepayment  date with  respect  to such  principal
amount.  The  Company  will give each  holder of Notes  written  notice of each
optional  prepayment  under this Section 8.2 not less than 30 days and not more
than 60 days  prior to the date  fixed for such  prepayment.  Each such  notice
shall  specify such date,  the  aggregate  principal  amount of the Notes to be
prepaid on such date,  the  principal  amount of each Note held by such  holder
to be prepaid  (determined in accordance  with  Section 8.3),  and the interest
to be paid on the prepayment  date with respect to such principal  amount being
prepaid,  and  shall be  accompanied  by a  certificate  of a Senior  Financial
Officer  as to the  estimated  Make-Whole  Amount due in  connection  with such
prepayment  (calculated  as if the  date of such  notice  were  the date of the
prepayment),  setting  forth the  details  of such  computation.  Two  Business
Days prior to such  prepayment,  the  Company  shall  deliver to each holder of
Notes a certificate of a Senior  Financial  Officer  specifying the calculation
of such Make-Whole Amount as of the specified prepayment date.

 Section 8.3.  Allocation of Partial  Prepayments.  In the case of each partial
prepayment  of the  Notes,  the  principal  amount of the  Notes to be  prepaid
shall  be  allocated  among  all  of  the  Notes  at the  time  outstanding  in
proportion,  as nearly  as  practicable,  to the  respective  unpaid  principal
amounts thereof.

 Section 8.4.  Maturity;  Surrender,  etc.  In the case of each  prepayment  of
Notes  pursuant  to this  Section 8,  the  principal  amount of each Note to be
prepaid  shall  mature and  become  due and  payable on the date fixed for such
prepayment,  together with interest on such  principal  amount  accrued to such
date and the applicable  Make-Whole  Amount,  if any. From and after such date,
unless the  Company  shall fail to pay such  principal  amount  when so due and
payable,  together  with  the  interest  and  Make-Whole  Amount,  if  any,  as
aforesaid,  interest on such principal  amount shall cease to accrue.  Any Note
paid or prepaid in full shall be  surrendered  to the Company and cancelled and
shall not be  reissued,  and no Note  shall be  issued  in lieu of any  prepaid
principal amount of any Note.

 Section 8.5.  Purchase  of Notes.  The  Company  will not and will not  permit
any Affiliate to purchase,  redeem,  prepay or otherwise  acquire,  directly or
indirectly,  any of the  outstanding  Notes  except  (a) upon  the  payment  or
prepayment  of the Notes in  accordance  with the terms of this  Agreement  and
the Notes or  (b) pursuant  to an offer to  purchase  made by the Company or an
Affiliate  pro rata to the  holders of all Notes at the time  outstanding  upon
the same terms and  conditions.  Any such offer shall  provide each holder with
sufficient  information to enable it to make an informed  decision with respect
to such offer,  and shall  remain open for at least 10  Business  Days.  If the
holders  of  more  than  25%  of  the  principal   amount  of  the  Notes  then
outstanding   accept  such  offer,   the  Company  shall  promptly  notify  the
remaining  holders of such fact and the  expiration  date for the acceptance by
holders  of Notes  of such  offer  shall  be  extended  by the  number  of days
necessary  to give each such  remaining  holder at least 10 Business  Days from
its  receipt of such notice to accept such  offer.  The Company  will  promptly
cancel all Notes  acquired  by it or any  Affiliate  pursuant  to any  payment,
prepayment  or purchase of Notes  pursuant to any  provision of this  Agreement
and no Notes may be issued in substitution or exchange for any such Notes.

 Section 8.6.  Make-Whole  Amount.  The term  "Make-Whole  Amount" means,  with
respect to any Note, an amount equal to the excess,  if any, of the  Discounted
Value  of  the  Remaining   Scheduled  Payments  with  respect  to  the  Called
Principal  of such Note  over the  amount of such  Called  Principal,  provided
that  the  Make-Whole  Amount  may in no  event  be  less  than  zero.  For the
purposes of determining  the Make-Whole  Amount,  the following  terms have the
following meanings:

           "Called  Principal"  means,  with respect to any Note, the principal
      of such Note that is to be prepaid  pursuant to Section 8.2 or has become
      or  is  declared  to  be   immediately   due  and  payable   pursuant  to
      Section 12.1, as the context requires.

           "Discounted  Value" means,  with respect to the Called  Principal of
      any Note,  the amount  obtained by  discounting  all Remaining  Scheduled
      Payments  with  respect to such Called  Principal  from their  respective
      scheduled  due dates to the  Settlement  Date with respect to such Called
      Principal,  in  accordance  with  accepted  financial  practice  and at a
      discount  factor  (applied  on the same  periodic  basis as that on which
      interest on the Notes is payable)  equal to the  Reinvestment  Yield with
      respect to such Called Principal.

           "Reinvestment  Yield" means, with respect to the Called Principal of
      any Note,  0.50% over the yield to  maturity  implied  by (i) the  yields
      reported,  as of 10:00 A.M.  (New York City time) on the second  Business
      Day preceding the Settlement Date with respect to such Called  Principal,
      on the  display  designated  as "Page  678" on the Dow Jones  Markets,  a
      division of Dow & Jones Company,  Telerate  Access Service (or such other
      display as may  replace  Page 678 on the  Telerate  Access  Service)  for
      actively traded  on-the-run U.S.  Treasury  securities  having a maturity
      equal to the Remaining  Average Life of such Called  Principal as of such
      Settlement  Date, or (ii) if such yields are not reported as of such time
      or the  yields  reported  as of  such  time  are not  ascertainable,  the
      Treasury  Constant  Maturity Series Yields  reported,  for the latest day
      for which such yields  have been so  reported  as of the second  Business
      Day preceding the Settlement Date with respect to such Called  Principal,
      in Federal  Reserve  Statistical  Release  H.15 (519) (or any  comparable
      successor  publication)  for actively  traded  on-the-run  U.S.  Treasury
      securities  having a constant  maturity  equal to the  Remaining  Average
      Life of such Called  Principal as of such  Settlement  Date. Such implied
      yield will be determined,  if necessary,  by (a) converting U.S. Treasury
      bill  quotations to  bond-equivalent  yields in accordance  with accepted
      financial  practice  and   (b) interpolating   linearly  between  (1) the
      actively  traded  on-the-run  U.S.  Treasury  security  with the maturity
      closest  to and  greater  than the  Remaining  Average  Life and  (2) the
      actively  traded  on-the-run  U.S.  Treasury  security  with the maturity
      closest to and less than the Remaining Average Life.

           "Remaining   Average  Life"  means,   with  respect  to  any  Called
      Principal,  the number of years  (calculated  to the nearest  one-twelfth
      year) obtained by dividing  (i) such  Called  Principal into (ii) the sum
      of the products obtained by multiplying  (a) the  principal  component of
      each Remaining  Scheduled  Payment with respect to such Called  Principal
      by (b) the number of years  (calculated to the nearest  one-twelfth year)
      that will elapse between the Settlement  Date with respect to such Called
      Principal and the scheduled due date of such Remaining Scheduled Payment.

            Remaining  Scheduled  Payments   means,  with respect to the Called
      Principal  of any  Note,  all  payments  of  such  Called  Principal  and
      interest  thereon  that  would be due  after  the  Settlement  Date  with
      respect to such Called  Principal if no payment of such Called  Principal
      were  made  prior  to its  scheduled  due  date,  provided  that  if such
      Settlement  Date is not a date on which  interest  payments are due to be
      made  under  the  terms  of the  Notes,  then  the  amount  of  the  next
      succeeding  scheduled  interest  payment will be reduced by the amount of
      interest  accrued to such Settlement Date and required to be paid on such
      Settlement Date pursuant to Section 8.2 or 12.1.

           "Settlement  Date" means,  with  respect to the Called  Principal of
      any  Note,  the date on which  such  Called  Principal  is to be  prepaid
      pursuant to  Section 8.2  or has become or is declared to be  immediately
      due and payable pursuant to Section 12.1, as the context requires.

Section 9.   Affirmative Covenants.

      The Company covenants that so long as any of the Notes are outstanding:

 Section 9.1.  Compliance  with Law.  The  Company  will and will cause each of
its Subsidiaries to comply with all laws,  ordinances or governmental  rules or
regulations to which each of them is subject,  including,  without  limitation,
Environmental  Laws,  and will  obtain and  maintain  in effect  all  licenses,
certificates,   permits,   franchises  and  other  governmental  authorizations
necessary to the  ownership of their  respective  properties  or to the conduct
of  their  respective  businesses,  in each  case to the  extent  necessary  to
ensure that  non-compliance  with such laws,  ordinances or governmental  rules
or  regulations  or failures  to obtain or  maintain  in effect such  licenses,
certificates,  permits,  franchises and other governmental authorizations would
not  reasonably  be  expected,  individually  or in the  aggregate,  to  have a
Material  Adverse  Effect,  provided  that such  compliance  with any such law,
ordinance,  rule or  regulation by the Company or any  Subsidiary  shall not be
required  to  the  extent  that  the   applicability  or  validity  thereof  is
contested  by the Company or such  Subsidiary  on a timely  basis in good faith
and in appropriate  proceedings,  the Company or a Subsidiary  has  established
adequate  reserves  therefor  in  accordance  with  GAAP  on the  books  of the
Company or such  Subsidiary  and such contest would not  reasonably be expected
to have a Material Adverse Effect.

 Section 9.2.  Insurance.   The  Company  will  and  will  cause  each  of  its
Subsidiaries  to  maintain,  with  financially  sound and  reputable  insurers,
insurance with respect to their  respective  properties and businesses  against
such  casualties and  contingencies,  of such types,  on such terms and in such
amounts (including  deductibles,  co-insurance and self-insurance,  if adequate
reserves are  maintained  with respect  thereto) as is customary in the case of
entities of established  reputations  engaged in the same or a similar business
and similarly situated.

 Section 9.3.  Maintenance  of  Properties.  The  Company  will and will  cause
each of its  Subsidiaries  to maintain and keep, or cause to be maintained  and
kept, their respective  properties in good repair,  working order and condition
(other  than  ordinary  wear and  tear),  so that the  business  carried  on in
connection  therewith  may be properly  conducted at all times,  provided  that
this   Section shall   not  prevent  the   Company  or  any   Subsidiary   from
discontinuing  the operation and the  maintenance  of any of its  properties if
such  discontinuance  is  desirable  in the  conduct  of its  business  and the
Company has concluded that such  discontinuance  would not,  individually or in
the aggregate, have a Material Adverse Effect.

 Section 9.4.  Payment of Taxes.  The  Company  will and will cause each of its
Subsidiaries  to file all income  tax or similar  tax  returns  required  to be
filed in any  jurisdiction  and to pay and  discharge all taxes shown to be due
and payable on such  returns  and all other  taxes,  assessments,  governmental
charges,  or  levies  payable  by any of them,  to the  extent  such  taxes and
assessments   have   become  due  and  payable  and  before  they  have  become
delinquent,  provided that neither the Company nor any Subsidiary  need pay any
such tax or assessment if (i) the  amount,  applicability  or validity  thereof
is  contested  by the  Company  or such  Subsidiary  on a timely  basis in good
faith and in  appropriate  proceedings,  and the  Company or a  Subsidiary  has
established  adequate  reserves  therefor in accordance  with GAAP on the books
of the  Company or such  Subsidiary  or (ii) the  nonpayment  of all such taxes
and  assessments  in the aggregate  would not  reasonably be expected to have a
Material Adverse Effect.

 Section 9.5.  Corporate   Existence,   etc.;   Maintenance   of  Ownership  of
Elizabethtown  Water  Company.  (a) Except as permitted by  Section 10.2,  the
Company  will at all  times  preserve  and keep in full  force and  effect  its
corporate  existence.  Subject to Section  10.7,  the Company will at all times
preserve and keep in full force and effect the  corporate  existence of each of
its  Utility  Subsidiaries  (unless  merged  into  the  Company  or  a  Utility
Subsidiary)  and all rights  and  franchises  of the  Company  and its  Utility
Subsidiaries   unless,  in  the  good  faith  judgment  of  the  Company,   the
termination  of or failure to  preserve  and keep in full force and effect such
corporate  existence,  right or  franchise  would not,  individually  or in the
aggregate, have a Material Adverse Effect.

    (b)  The  Company  will at all times own and hold 100% of the shares of the
outstanding common stock of Elizabethtown Water Company.

  Section 9.6  Year 2000  Compliance.  The Company  shall  continue to take all
necessary  steps to ensure  that the "Year  2000  Problem"  (that is,  the risk
that computer  applications  or equipment  containing  embedded  microchips are
unable to recognize  correctly and perform  properly  date-sensitive  functions
involving  all  dates  before  and  after  January 1,  2000),  will  not have a
Material Adverse Effect.

Section 10.  Negative Covenants.

      The Company covenants that so long as any of the Notes are outstanding:

Section 10.1.  Transactions  with  Affiliates.  The  Company  will not and will
not permit any  Subsidiary to enter into  directly or  indirectly  any Material
transaction  or  Material  group of  related  transactions  (including  without
limitation the purchase,  lease,  sale or exchange of properties of any kind or
the  rendering of any service)  with any  Affiliate  (other than the Company or
another  Subsidiary),  except  pursuant to the reasonable  requirements  of the
Company's or such  Subsidiary's  business and upon fair and reasonable terms no
less  favorable to the Company or such  Subsidiary  than would be obtainable in
a comparable arm's-length transaction with a Person not an Affiliate.

Section 10.2.  Merger,  Consolidation,  etc. The Company shall not  consolidate
with or merge with any other corporation unless:

          (a)   the successor  formed by such  consolidation or the survivor of
      such merger, as the case may be (the "Successor  Corporation"),  shall be
      a  solvent  corporation  organized  and  existing  under  the laws of the
      United States of America, any State thereof or the District of Columbia;

          (b)   if the  Company  is not  the  Successor  Corporation,  (i) such
      Successor  Corporation  shall have  executed and delivered to each holder
      of  Notes  its  assumption  of  the  due  and  punctual  performance  and
      observance  of each  covenant  and  condition of this  Agreement  and the
      Notes and  (ii) shall  have caused to be  delivered to each holder of any
      Notes an opinion of nationally  recognized  independent counsel, or other
      independent  counsel reasonably  satisfactory to the Required Holders, in
      form and substance  reasonably  satisfactory to the Required Holders,  to
      the effect that all agreements or instruments  effecting such  assumption
      are  enforceable in accordance with their terms and comply with the terms
      hereof; and

          (c)   immediately after giving effect to such transaction:

               (i)   no Default or Event of Default would exist, and

              (ii)   the Successor  Corporation would be in compliance with the
           provisions of Section 10.5 hereof if the ratio specified  thereunder
           were calculated as of the date of such  transaction and after giving
           effect thereto.

Section 10.3.  Fixed Charges  Coverage Ratio.  The Company will not, at the end
of any fiscal quarter of the Company,  permit the Fixed Charges  Coverage Ratio
to be less than 1.5 to 1.

Section 10.4.  Consolidated  Common  Shareholders'  Equity.  The  Company  will
not, at any time, permit  Consolidated Common  Shareholders'  Equity to be less
than $165,000,000.

Section 10.5.  Consolidated  Debt.  The  Company  will  not at  the  end of any
calendar  year  permit the ratio of (a) the sum of (i)  Consolidated  Debt plus
(ii) the  aggregate   Redeemable   Preferred  Stock  of  the  Company  and  its
Subsidiaries  outstanding on such date,  minus  $10,000,000,  to (b) the sum of
(i) Consolidated  Debt plus (ii) the  aggregate  Preferred Stock of the Company
and its Subsidiaries  outstanding on such date plus  (iii) Consolidated  Common
Shareholders' Equity, to exceed 0.65 to 1.

Section 10.6.  Liens.  The  Company  will not  directly or  indirectly  create,
incur,  assume or  permit to exist  (upon the  happening  of a  contingency  or
otherwise)  any  Consensual  Lien on or with respect to any of the common stock
of Elizabethtown Water Company,  or any income or profits therefrom,  or assign
or otherwise convey any right to receive such income or profits.

Section 10.7.  Sale of  Assets of  Elizabethtown  Water  Company  and The Mount
Holly Water Company.  The Company will not permit  Elizabethtown  Water Company
or  its  Subsidiary,   The  Mount  Holly  Water  Company,  to  make  any  Asset
Disposition unless:

          (a)   in  the  good  faith   opinion  of  the   Company,   the  Asset
      Disposition is in exchange for  consideration  having a Fair Market Value
      at  least  equal  to that of the  property  exchanged  and is in the best
      interest  of (i) the  Company  and  (ii) Elizabethtown  Water  Company or
      Mount Holly Water Company, as the case may be; and

          (b)   immediately  after giving effect to the Asset  Disposition,  no
      Default or Event of Default would exist; and

          (c)   immediately after giving effect to the Asset  Disposition,  the
      Disposition  Value of all  property  that was the  subject  of any  Asset
      Disposition occurring on or after December 22,  1997 would not exceed 25%
      of Consolidated  Assets of Elizabethtown Water Company as of December 31,
      1997.

If the Net  Proceeds  Amount for any  Transfer  is  applied to (i) a  Debenture
Indenture  Application,   (ii)  a  Debt  Prepayment  Application,  or  (iii)  a
Property  Reinvestment  Application,  then such Transfer,  only for the purpose
of determining  compliance with  subsection (c) of this  Section 10.7 as of any
date, shall be deemed not to be an Asset Disposition.

Section 10.8.  Restricted Investments.

    (a)  Limitation.  The  Company  will not,  and will not  permit  any of its
Subsidiaries to, declare,  make or authorize any Restricted  Investment  unless
immediately after giving effect to such action:

          (i)   the  aggregate  value  of  all  Restricted  Investments  of the
      Company  and its  Subsidiaries  (valued  immediately  after such  action)
      would not exceed $30,000,000; and

         (ii)   no Default or Event of Default would exist.

    (b)  Investments  of  Subsidiaries.  Each Person which becomes a Subsidiary
of the Company  after the date of the Closing  will be deemed to have made,  on
the date such  Person  becomes a  Subsidiary  of the  Company,  all  Restricted
Investments of such Person in existence on such date.

Section 11.  Events of Default.

      An "Event of Default"  shall exist if any of the following  conditions or
events shall occur and be continuing:

          (a)   the  Company  defaults  in  the  payment  of any  principal  or
      Make-Whole  Amount,  if any,  on any Note when the same  becomes  due and
      payable,  whether at  maturity  or at a date fixed for  prepayment  or by
      declaration or otherwise; or

          (b)   the  Company  defaults  in the  payment of any  interest on any
      Note for more than five  Business  Days  after the same  becomes  due and
      payable; or

          (c)   the Company  defaults in the  performance of or compliance with
      any term  contained  herein  (other than those  referred to in paragraphs
      (a) and (b) of this  Section 11)  and such default is not remedied within
      30 Business Days; or

          (d)   any  representation or warranty made in writing by or on behalf
      of the Company or by any officer of the Company in this  Agreement  or in
      any writing  furnished in connection with the  transactions  contemplated
      hereby proves to have been false or incorrect in any material  respect on
      the date as of which made; or

          (e)   either  (i) the  Company or any  Subsidiary  is in default  (as
      principal  or as  guarantor  or  other  surety)  in  the  payment  of any
      principal  of  or  premium  or  Make-Whole  Amount  or  interest  on  any
      Indebtedness  that is outstanding in an aggregate  principal amount of at
      least  $5,000,000  beyond  any  period  of grace  provided  with  respect
      thereto,  or  (ii) the  Company  or any  Subsidiary  is in default in the
      performance  of or  compliance  with  any  term  of any  evidence  of any
      Indebtedness  in an aggregate  outstanding  principal  amount of at least
      $5,000,000  or of any  mortgage,  indenture or other  agreement  relating
      thereto  or any other  condition  exists,  and as a  consequence  of such
      default or condition such  Indebtedness has become,  or has been declared
      due and  payable  before its  stated  maturity  or before  its  regularly
      scheduled dates of payment; or

          (f)   the Company or any Principal  Subsidiary  (i) is  generally not
      paying,  or admits in writing  its  inability  to pay,  its debts as they
      become due, (ii) files,  or consents by answer or otherwise to the filing
      against it of, a petition for relief or  reorganization or arrangement or
      any other  petition in bankruptcy,  for  liquidation or to take advantage
      of  any  bankruptcy,  insolvency,  reorganization,  moratorium  or  other
      similar  law of any  jurisdiction,  (iii) makes  an  assignment  for  the
      benefit  of  its  creditors,   (iv) consents  to  the  appointment  of  a
      custodian,  receiver,  trustee or other officer with similar  powers with
      respect to it or with respect to any  substantial  part of its  property,
      (v) is  adjudicated  as  insolvent  or to be  liquidated,  or  (vi) takes
      corporate action for the purpose of any of the foregoing; or

          (g)   a court or  governmental  authority of  competent  jurisdiction
      enters  an  order  appointing,  without  consent  by the  Company  or any
      Principal  Subsidiary,  a custodian,  receiver,  trustee or other officer
      with  similar   powers  with  respect  to  it  or  with  respect  to  any
      substantial part of its property,  or constituting an order for relief or
      approving a petition for relief or  reorganization  or any other petition
      in bankruptcy or for  liquidation  or to take advantage of any bankruptcy
      or  insolvency  law of any  jurisdiction,  or ordering  the  dissolution,
      winding-up  or  liquidation  of the  Company  or  any  of  its  Principal
      Subsidiaries,  or any such petition shall be filed against the Company or
      any  of  its  Principal  Subsidiaries  and  such  petition  shall  not be
      dismissed within 60 days; or

          (h)   a  final  judgment  or  judgments  for  the  payment  of  money
      aggregating  in excess of 5% of  Consolidated  Total  Assets are rendered
      against  one or more of the Company and its  Principal  Subsidiaries  and
      are not,  within 60 days  after  entry  thereof,  bonded,  discharged  or
      stayed pending  appeal,  or are not  discharged  within 60 days after the
      expiration of such stay; or

          (i)   if  (i) any  Plan shall fail to  satisfy  the  minimum  funding
      standards  of ERISA or the Code for any plan  year or part  thereof  or a
      waiver of such  standards  or  extension  of any  amortization  period is
      sought or granted under  section 412 of the Code, (ii) a notice of intent
      to  terminate  any Plan  shall  have been filed with the PBGC or the PBGC
      shall have instituted  proceedings under ERISA  section 4042 to terminate
      or  appoint a  trustee  to  administer  any Plan or the PBGC  shall  have
      notified  the  Company  or any ERISA  Affiliate  that a Plan may become a
      subject  of  any  such  proceedings,   (iii) the  Company  or  any  ERISA
      Affiliate shall have incurred any liability  pursuant to Title I or IV of
      ERISA or the  penalty or excise tax  provisions  of the Code  relating to
      employee  benefit plans,  (iv) the  Company or any ERISA Affiliate incurs
      withdrawal   liability  in  connection   with  the  withdrawal  from  any
      Multiemployer  Plan, or (v) the Company or any Subsidiary  establishes or
      amends any employee  welfare  benefit plan that provides  post-employment
      welfare  benefits in a manner that would  increase  the  liability of the
      Company or any  Subsidiary  thereunder;  provided,  however,  none of the
      events  described in  clauses (i)  through (v) above shall  constitute an
      Event of Default  unless any such  event or events  described  in clauses
      (i) through (v) above,  either  individually  or together  with any other
      such event or events,  would  reasonably  be  expected to have a Material
      Adverse Effect.

As used in  Section 11(i),  the terms  "employee  benefit  plan" and  "employee
welfare  benefit  plan"  shall have the  respective  meanings  assigned to such
terms in Section 3 of ERISA.

Section 12.  Remedies on Default, Etc.

Section 12.1.  Acceleration.  (a) If an Event of  Default  with  respect to the
Company  described in paragraph (f) or (g) of  Section 11  (other than an Event
of Default  described  in clause (i) of  paragraph  (f) or  described in clause
(vi) of  paragraph  (f) by  virtue of the fact  that  such  clause  encompasses
clause (i) of  paragraph  (f)) has  occurred,  all the Notes  then  outstanding
shall automatically become immediately due and payable.

    (b)  If any other  Event of Default has  occurred  and is  continuing,  any
holder  or  holders  of at least  51% in  principal  amount of the Notes at the
time  outstanding may at any time at its or their option,  by written notice or
notices  to  the  Company,  declare  all  the  Notes  then  outstanding  to  be
immediately due and payable.

    (c)  If  any  Event  of  Default  described  in  paragraph  (a)  or  (b) of
Section 11  has occurred and is  continuing,  any holder or holders of Notes at
the time  outstanding  affected  by such Event of Default  may at any time,  at
its or their  option,  by notice or notices  to the  Company,  declare  all the
Notes held by it or them to be immediately due and payable.

      Upon  any  Note s  becoming  due and  payable  under  this  Section 12.1,
whether  automatically  or by declaration,  such Note will forthwith mature and
the entire  unpaid  principal  amount of such Note,  plus  (x) all  accrued and
unpaid interest  thereon and (y) the  Make-Whole  Amount  determined in respect
of such  principal  amount (to the full extent  permitted by  applicable  law),
shall  all be  immediately  due and  payable,  in each and every  case  without
presentment,  demand,  protest  or  further  notice,  all of which  are  hereby
waived.  The Company  acknowledges,  and the parties  hereto  agree,  that each
holder of a Note has the right to  maintain  its  investment  in the Notes free
from  repayment by the Company  (except as herein  specifically  provided  for)
and that the  provision  for payment of a  Make-Whole  Amount by the Company in
the event  that the  Notes are  prepaid  or are  accelerated  as a result of an
Event of Default,  is intended to provide  compensation  for the deprivation of
such right under such circumstances.

Section 12.2.  Other  Remedies.   If  any  Default  or  Event  of  Default  has
occurred and is continuing,  and  irrespective of whether any Notes have become
or have been  declared  immediately  due and payable  under  Section 12.1,  the
holder of any Note at the time  outstanding  may proceed to protect and enforce
the  rights  of such  holder  by an  action  at law,  suit in  equity  or other
appropriate  proceeding,  whether for the specific performance of any agreement
contained  herein or in any Note, or for an  injunction  against a violation of
any of the terms  hereof or  thereof,  or in aid of the  exercise  of any power
granted hereby or thereby or by law or otherwise.

Section 12.3.  Rescission.  At any time after any Notes have been  declared due
and payable pursuant to clause (b) of Section 12.1,  the Required  Holders,  by
written notice to the Company,  may rescind and annul any such  declaration and
its  consequences  if (a) the  Company  has paid all  overdue  interest  on the
Notes,  all principal of and Make-Whole  Amount,  if any, on any Notes that are
due and payable and are unpaid  other than by reason of such  declaration,  and
all interest on such overdue  principal and Make-Whole  Amount, if any, and (to
the extent  permitted  by  applicable  law) any overdue  interest in respect of
the Notes, at the Default Rate,  (b) all Events of Default and Defaults,  other
than  non-payment  of  amounts  that have  become  due solely by reason of such
declaration,  have been cured or have been waived  pursuant to Section 17,  and
(c) no  judgment  or decree has been  entered for the payment of any monies due
pursuant  hereto or to the  Notes.  No  rescission  and  annulment  under  this
Section 12.3  will  extend to or affect  any  subsequent  Event of  Default  or
Default or impair any right consequent thereon.

Section 12.4.  No Waivers or Election  of  Remedies,  Expenses,  etc. No course
of  dealing  and no delay on the part of any  holder of any Note in  exercising
any  right,  power or remedy  shall  operate as a waiver  thereof or  otherwise
prejudice  such  holder's  rights,  powers  or  remedies.  No  right,  power or
remedy  conferred  by this  Agreement  or by any Note upon any  holder  thereof
shall be exclusive of any other  right,  power or remedy  referred to herein or
therein  or now or  hereafter  available  at law,  in  equity,  by  statute  or
otherwise.  Without  limiting the obligations of the Company under  Section 15,
the Company will pay to the holder of each Note on demand such  further  amount
as  shall  be  sufficient  to cover  all  costs  and  expenses  of such  holder
incurred in any  enforcement or collection  under this  Section 12,  including,
without limitation, reasonable attorneys' fees, expenses and disbursements.

Section 13.  Registration; Exchange; Substitution of Notes.

Section 13.1.  Registration  of Notes.  The Company shall keep at its principal
executive   office  a  register  for  the   registration  and  registration  of
transfers  of  Notes.  The  name  and  address  of each  holder  of one or more
Notes,  each  transfer  thereof and the name and address of each  transferee of
one  or  more  Notes  shall  be  registered  in  such  register.  Prior  to due
presentment  for  registration  of transfer,  the Person in whose name any Note
shall be  registered  shall be deemed  and  treated  as the  owner  and  holder
thereof for all purposes  hereof,  and the Company shall not be affected by any
notice or knowledge to the  contrary.  The Company  shall give to any holder of
a Note that is an  Institutional  Investor  promptly upon request  therefor,  a
complete  and  correct  copy  of the  names  and  addresses  of all  registered
holders of Notes.

      Section 13.2.  Transfer  and  Exchange of Notes.  Upon  surrender  of any
Note at the  principal  executive  office of the  Company for  registration  of
transfer  or  exchange  (and in the case of a  surrender  for  registration  of
transfer,  duly  endorsed or  accompanied  by a written  instrument of transfer
duly  executed  by the  registered  holder  of such Note or its  attorney  duly
authorized  in writing  and  accompanied  by the  address  for  notices of each
transferee  of such  Note or part  thereof),  the  Company  shall  execute  and
deliver,  at the Company s expense (except as provided below),  one or more new
Notes  (as  requested  by the  holder  thereof)  in  exchange  therefor,  in an
aggregate  principal  amount  equal  to  the  unpaid  principal  amount  of the
surrendered  Note.  Each such new Note shall be payable to such  Person as such
holder may  request and shall be  substantially  in the form of Exhibit 1. Each
such  new  Note  shall  be  dated  and  bear  interest  from  the date to which
interest  shall  have  been paid on the  surrendered  Note or dated the date of
the  surrendered  Note  if no  interest  shall  have  been  paid  thereon.  The
Company  may  require  payment  of a sum  sufficient  to cover any stamp tax or
governmental  charge  imposed in respect of any such  transfer of Notes.  Notes
shall not be  transferred  in  denominations  of less than  $100,000,  provided
that if  necessary  to enable the  registration  of transfer by a holder of its
entire  holding  of  Notes,  one Note  may be in a  denomination  of less  than
$100,000.  Any transferee of a Note, or purchaser of a  participation  therein,
shall,   by  its   acceptance   of  such  Note  be  deemed  to  make  the  same
representations  to the  Company  regarding  the Note or  participation  as you
have made pursuant to  Section 6.2,  provided that such entity may (in reliance
upon  information  provided by the  Company,  which  shall not be  unreasonably
withheld)  make a  representation  to the  effect  that  the  purchase  by such
entity of any Note will not  constitute  a  non-exempt  prohibited  transaction
under Section 406(a) of ERISA.

Section 13.3.  Replacement  of Notes.  Upon  receipt by the Company of evidence
reasonably  satisfactory  to it of  the  ownership  of  and  the  loss,  theft,
destruction  or  mutilation of any Note (which  evidence  shall be, in the case
of an Institutional  Investor,  notice from such Institutional Investor of such
ownership and such loss, theft, destruction or mutilation), and

          (a)   in the  case  of  loss,  theft  or  destruction,  of  indemnity
      reasonably  satisfactory  to it (provided that if the holder of such Note
      is, or is a nominee for,  you or another  holder of a Note with a minimum
      net worth of at least $50,000,000,  such Person's own unsecured agreement
      of indemnity shall be deemed to be satisfactory), or

          (b)   in the case of  mutilation,  upon  surrender  and  cancellation
      thereof,

the Company at its own expense  shall execute and deliver,  in lieu thereof,  a
new Note,  dated and bearing  interest  from the date to which  interest  shall
have been paid on such lost,  stolen,  destroyed or mutilated Note or dated the
date of such lost,  stolen,  destroyed or mutilated  Note if no interest  shall
have been paid thereon.

Section 14.  Payments on Notes.

Section 14.1.  Place  of  Payment.   Subject  to   Section 14.2,   payments  of
principal,  Make-Whole  Amount,  if any, and interest  becoming due and payable
on the Notes shall be made in  Westfield,  New Jersey at the  principal  office
of the Company in such  jurisdiction.  The  Company may at any time,  by notice
to each  holder of a Note,  change the place of payment of the Notes so long as
such place of payment  shall be either the  principal  office of the Company in
such  jurisdiction  or the principal  office of a bank or trust company in such
jurisdiction.

Section 14.2.  Home Office  Payment.  So long as you or your  nominee  shall be
the  holder  of  any  Note,   and   notwithstanding   anything   contained   in
Section 14.1  or in such Note to the  contrary,  the Company  will pay all sums
becoming  due on such  Note  for  principal,  Make-Whole  Amount,  if any,  and
interest  by the method and at the address  specified  for such  purpose  below
your name in  Schedule A, or by such other  method or at such other  address as
you shall have from time to time  specified  to the Company in writing for such
purpose,  without the  presentation  or surrender of such Note or the making of
any  notation  thereon,  except that upon  written  request of the Company made
concurrently  with or reasonably  promptly  after payment or prepayment in full
of any  Note,  you  shall  surrender  such  Note for  cancellation,  reasonably
promptly  after any such  request,  to the Company at its  principal  executive
office or at the place of  payment  most  recently  designated  by the  Company
pursuant  to  Section 14.1.  The  Company  will  afford  the  benefits  of this
Section 14.2  to any  Institutional  Investor  that is the  direct or  indirect
transferee  of any Note  purchased  by you under  this  Agreement  and that has
made  the  same  agreement  relating  to  such  Note as you  have  made in this
Section 14.2.

Section 15.  Expenses, Etc.

Section 15.1.  Transaction   Expenses.   Whether   or  not   the   transactions
contemplated  hereby  are  consummated,  the  Company  will pay all  costs  and
expenses  (including  reasonable  attorneys'  fees of a special counsel and, if
reasonably  required,  local or other counsel)  incurred by you and each holder
of a Note in  connection  with such  transactions  and in  connection  with any
amendments,  waivers or consents  under or in respect of this  Agreement or the
Notes (whether or not such  amendment,  waiver or consent  becomes  effective),
including,   without  limitation:   (a) the  costs  and  expenses  incurred  in
enforcing or  defending  (or  determining  whether or how to enforce or defend)
any rights under this  Agreement or the Notes or in  responding to any subpoena
or other legal  process or informal  investigative  demand issued in connection
with this  Agreement or the Notes,  or by reason of being a holder of any Note,
and (b) the costs and expenses,  including  financial  advisors' fees, incurred
in  connection  with  the  insolvency  or  bankruptcy  of  the  Company  or any
Subsidiary  or  in  connection  with  any  work-out  or  restructuring  of  the
transactions  contemplated  hereby and by the Notes.  The Company will pay, and
will save you and each  other  holder of a Note  harmless  from,  all claims in
respect of any fees,  costs or expenses,  if any, of brokers and finders (other
than those retained by you).

Section 15.2.  Survival.  The  obligations of the Company under this Section 15
will survive the payment or transfer of any Note,  the  enforcement,  amendment
or  waiver  of  any  provision  of  this  Agreement  or  the  Notes,   and  the
termination of this Agreement.

Section 16.  Survival of Representations and Warranties; Entire Agreement.

      All  representations  and warranties  contained  herein shall survive the
execution  and  delivery  of this  Agreement  and the Notes,  the  purchase  or
transfer  by you of any Note or portion  thereof or  interest  therein  and the
payment  of any Note,  and may be  relied  upon by any  subsequent  holder of a
Note,  regardless of any investigation  made at any time by or on behalf of you
or any other holder of a Note.  All  statements  contained  in any  certificate
or other  instrument  delivered by or on behalf of the Company pursuant to this
Agreement shall be deemed  representations  and warranties of the Company under
this  Agreement.  Subject to the  preceding  sentence,  this  Agreement and the
Notes  embody  the  entire  agreement  and  understanding  between  you and the
Company and supersede all prior agreements and  understandings  relating to the
subject matter hereof.

Section 17.  Amendment and Waiver.

Section 17.1.  Requirements.  This Agreement and the Notes may be amended,  and
the  observance  of any term  hereof  or of the  Notes  may be  waived  (either
retroactively  or  prospectively),  with (and only with) the written consent of
the Company and the Required  Holders,  except that (a) no  amendment or waiver
of  the  notice  periods  in  Section 8  hereof,   any  of  the  provisions  of
Section 1,  2, 3, 4, 5, 6 or 21  hereof,  or any  defined  term  (as it is used
therein),  will be effective  as to you unless  consented to by you in writing,
and (b) no such  amendment  or waiver may,  without the written  consent of the
holder of each Note at the time outstanding  affected  thereby,  (i) subject to
the provisions of Section 12  relating to  acceleration  or rescission,  change
the amount or time of any  prepayment  or payment  of  principal  of, or reduce
the rate or change  the time of payment or method of  computation  of  interest
or of the Make-Whole  Amount on, the Notes,  (ii) change  the percentage of the
principal  amount of the Notes the holders of which are  required to consent to
any such  amendment  or waiver,  or  (iii) amend  any of Sections 8 (other than
the notice periods therein), 11(a), 11(b), 12, 17 or 20.

Section 17.2.  Solicitation of Holders of Notes.

    (a)  Solicitation.  The  Company  will  provide  each  holder  of the Notes
(irrespective  of the  amount  of  Notes  then  owned  by it)  with  sufficient
information,  sufficiently  far in advance of the date a decision is  required,
to  enable  such  holder  to make an  informed  and  considered  decision  with
respect to any proposed  amendment,  waiver or consent in respect of any of the
provisions  hereof or of the Notes.  The Company will deliver  executed or true
and correct copies of each amendment,  waiver or consent  effected  pursuant to
the  provisions  of  this  Section 17  to  each  holder  of  outstanding  Notes
promptly  following  the date on which it is  executed  and  delivered  by,  or
receives the consent or approval of, the requisite holders of Notes.

    (b)  Payment.  The Company will not directly or indirectly  pay or cause to
be  paid  any  remuneration,  whether  by way  of  supplemental  or  additional
interest,  fee or otherwise,  or grant any security,  to any holder of Notes as
consideration  for or as an  inducement  to the entering  into by any holder of
Notes or any waiver or amendment of any of the terms and  provisions  hereof or
of the Notes unless such  remuneration  is  concurrently  paid,  or security is
concurrently  granted, on the same terms,  ratably to each holder of Notes then
outstanding whether or not such holder consented to such waiver or amendment.

Section 17.3.  Binding  Effect,  etc. Any  amendment or waiver  consented to as
provided  in this  Section 17  applies  equally to all  holders of Notes and is
binding  upon  them  and  upon  each  future  holder  of any  Note and upon the
Company  without  regard to whether such Note has been marked to indicate  such
amendment  or waiver.  No such  amendment  or waiver  will  extend to or affect
any  obligation,   covenant,   agreement,  Default  or  Event  of  Default  not
expressly  amended  or waived  or  impair  any  right  consequent  thereon.  No
course  of  dealing  between  the  Company  and the  holder of any Note nor any
delay in exercising  any rights  hereunder or under any Note shall operate as a
waiver of any  rights of any  holder of such  Note.  As used  herein,  the term
"this  Agreement"  and  references  thereto shall mean this Agreement as it may
from time to time be amended or supplemented.

Section 17.4.  Notes  Held  by  Company,   etc.   Solely  for  the  purpose  of
determining  whether the holders of the  requisite  percentage of the aggregate
principal  amount  of Notes  then  outstanding  approved  or  consented  to any
amendment,  waiver or consent to be given  under this  Agreement  or the Notes,
or have  directed the taking of any action  provided  herein or in the Notes to
be taken upon the  direction  of the holders of a specified  percentage  of the
aggregate  principal  amount  of Notes  then  outstanding,  Notes  directly  or
indirectly  owned by the Company or any of its  Affiliates  shall be deemed not
to be outstanding.

Section 18.  Notices.

      All  notices  and  communications  provided  for  hereunder  shall  be in
writing  and sent  (a) by  telefacsimile  if the sender on the same day sends a
confirming  copy of such  notice by a  recognized  overnight  delivery  service
(charges  prepaid),  or (b) by registered or certified mail with return receipt
requested  (postage  prepaid),   or  (c) by  a  recognized  overnight  delivery
service (with charges prepaid).  Any such notice must be sent:

          (i)   if to  you  or  your  nominee,  to  you  or it at  the  address
      specified  for  such  communications  in  Schedule  A, or at  such  other
      address as you or it shall have specified to the Company in writing,

         (ii)   if to any  other  holder of any  Note,  to such  holder at such
      address  as such other  holder  shall have  specified  to the  Company in
      writing, or

        (iii)   if to the  Company,  to the Company at its address set forth at
      the beginning hereof to the attention of the Treasurer,  or at such other
      address as the Company  shall have  specified  to the holder of each Note
      in writing.

Notices  under  this  Section 18  will  be  deemed  given  only  when  actually
received.

Section 19.  Reproduction of Documents.

      This Agreement and all documents  relating  thereto,  including,  without
limitation,  (a) consents,  waivers and  modifications  that may  hereafter  be
executed,  (b) documents  received  by you at the  Closing  (except  the  Notes
themselves),  and (c) financial statements,  certificates and other information
previously  or  hereafter  furnished to you,  may be  reproduced  by you by any
photographic,  photostatic,  microfilm,  microcard,  miniature  photographic or
other   similar   process  and  you  may  destroy  any  original   document  so
reproduced.  The Company  agrees and stipulates  that, to the extent  permitted
by  applicable  law, any such  reproduction  shall be admissible in evidence as
the original itself in any judicial or  administrative  proceeding  (whether or
not the  original  is in  existence  and whether or not such  reproduction  was
made by you in the regular course of business) and any  enlargement,  facsimile
or further  reproduction of such  reproduction  shall likewise be admissible in
evidence.  This  Section 19  shall not prohibit the Company or any other holder
of Notes from  contesting  any such  reproduction  to the same  extent  that it
could contest the original,  or from  introducing  evidence to demonstrate  the
inaccuracy of any such reproduction.

Section 20.  Confidential Information.

      For the purposes of this  Section 20,  "Confidential  Information"  means
information  delivered to you by or on behalf of the Company or any  Subsidiary
in connection with the  transactions  contemplated by or otherwise  pursuant to
this  Agreement  that is  proprietary  in nature and that was clearly marked or
labeled  or  otherwise  adequately  identified  when  received  by you as being
confidential  information  of the  Company or such  Subsidiary,  provided  that
such  term  does  not  include  information  that  (a) was  publicly  known  or
otherwise known to you prior to the time of such  disclosure,  (b) subsequently
becomes  publicly  known through no act or omission by you or any person acting
on  your  behalf,  (c) otherwise  becomes  known  to  you  other  than  through
disclosure  by the  Company  or any  Subsidiary  or  (d) constitutes  financial
statements  delivered  to you under  Section 7.1  that are  otherwise  publicly
available.   You  will  maintain  the   confidentiality  of  such  Confidential
Information  in  accordance  with  procedures  adopted  by you in good faith to
protect  confidential  information of third parties  delivered to you, provided
that  you  may  deliver  or  disclose  Confidential   Information  to  (i) your
directors,  officers,  employees,  agents,  attorneys  and  affiliates  (to the
extent  such  disclosure  reasonably  relates  to  the  administration  of  the
investment  represented by your Notes),  (ii) your financial advisors and other
professional   advisors  who  agree  to  hold   confidential  the  Confidential
Information  substantially  in  accordance  with the terms of this  Section 20,
(iii) any other holder of any Note,  (iv) any  Institutional  Investor to which
you sell or offer to sell such Note or any part  thereof  or any  participation
therein  (if such  Person has agreed in  writing  prior to its  receipt of such
Confidential  Information  to be bound by the  provisions of this  Section 20),
(v) any federal or state  regulatory  authority having  jurisdiction  over you,
(vi) the  National  Association  of  Insurance  Commissioners  or  any  similar
organization,  or any nationally  recognized rating agency that requires access
to information  about your investment  portfolio,  or (vii) any other Person to
which such  delivery or  disclosure  may be  necessary  or  appropriate  (w) to
effect  compliance with any law, rule,  regulation or order  applicable to you,
(x) in  response  to any  subpoena or other legal  process,  (y) in  connection
with any  litigation  involving  or related to the Company,  this  Agreement or
the Notes to which you are a party or (z) if an Event of Default  has  occurred
and is  continuing,  to the extent you may  reasonably  determine such delivery
and  disclosure to be necessary or  appropriate  in the  enforcement or for the
protection  of the rights  and  remedies  under your Notes and this  Agreement.
Each  holder of a Note,  by its  acceptance  of a Note,  will be deemed to have
agreed to be bound by and to be  entitled to the  benefits  of this  Section 20
as though  it were a party to this  Agreement.  On  reasonable  request  by the
Company  in  connection   with  the  delivery  to  any  holder  of  a  Note  of
information  required to be delivered  to such holder  under this  Agreement or
requested  by  such  holder  (other  than a  holder  that  is a  party  to this
Agreement  or its  nominee  or any other  holder  that  shall  have  previously
delivered  such a  confirmation),  such holder will  confirm in writing that it
is bound by the provisions of this Section 20.

Section 21.  Substitution of Purchaser.

      You shall have the right to substitute any one of your  Affiliates as the
purchaser of the Notes that you have agreed to purchase  hereunder,  by written
notice  to the  Company,  which  notice  shall be  signed  by both you and such
Affiliate,  shall  contain  such  Affiliate's  agreement  to be  bound  by this
Agreement and shall contain a  confirmation  by such  Affiliate of the accuracy
with  respect  to it of  the  representations  set  forth  in  Section 6.  Upon
receipt  of such  notice,  wherever  the word  "you" is used in this  Agreement
(other  than in this  Section 21),  such word  shall be deemed to refer to such
Affiliate in lieu of you. In the event that such  Affiliate  is so  substituted
as a purchaser  hereunder and such  Affiliate  thereafter  transfers to you all
of the Notes  then held by such  Affiliate,  upon  receipt  by the  Company  of
notice of such  transfer,  wherever  the word  "you" is used in this  Agreement
(other than in this  Section 21),  such word shall no longer be deemed to refer
to such  Affiliate,  but shall refer to you,  and you shall have all the rights
of an original holder of the Notes under this Agreement.

Section 22.  Miscellaneous.

Section 22.1.  Successors  and  Assigns.  All  covenants  and other  agreements
contained in this  Agreement by or on behalf of any of the parties  hereto bind
and  inure  to  the  benefit  of  their   respective   successors  and  assigns
(including,  without  limitation,  any subsequent  holder of a Note) whether so
expressed or not.

Section 22.2.  Payments Due on  Non-Business  Days.  Anything in this Agreement
or the Notes to the  contrary  notwithstanding,  any payment of principal of or
Make-Whole  Amount or  interest  on any Note that is due on a date other than a
Business  Day  shall  be made  on the  next  succeeding  Business  Day  without
including  the  additional  days  elapsed in the  computation  of the  interest
payable on such next succeeding Business Day.

Section 22.3.  Severability.   Any   provision  of  this   Agreement   that  is
prohibited  or   unenforceable   in  any   jurisdiction   shall,   as  to  such
jurisdiction,   be   ineffective   to  the  extent  of  such   prohibition   or
unenforceability  without  invalidating the remaining  provisions  hereof,  and
any such  prohibition or  unenforceability  in any  jurisdiction  shall (to the
full extent  permitted  by law) not  invalidate  or render  unenforceable  such
provision in any other jurisdiction.

Section 22.4.  Construction.   Each   covenant   contained   herein   shall  be
construed  (absent express  provision to the contrary) as being  independent of
each  other  covenant  contained  herein,  so  that  compliance  with  any  one
covenant  shall not (absent such an express  contrary  provision)  be deemed to
excuse  compliance with any other covenant.  Where any provision  herein refers
to action to be taken by any Person,  or which such Person is  prohibited  from
taking,  such  provision  shall be  applicable  whether  such  action  is taken
directly or indirectly by such Person.

Section 22.5.  Counterparts.  This  Agreement  may be executed in any number of
counterparts,  each of which  shall be an  original  but all of which  together
shall  constitute one instrument.  Each  counterpart may consist of a number of
copies  hereof,  each signed by less than all, but  together  signed by all, of
the parties hereto.

Section 22.6.  Governing  Law. This  Agreement  shall be construed and enforced
in  accordance  with,  and the rights of the parties  shall be governed by, the
law of the State of New York excluding  choice-of-law  principles of the law of
such State that would  require the  application  of the laws of a  jurisdiction
other than such State.

                                   * * * * *




      If you are in  agreement  with  the  foregoing,  please  sign the form of
agreement on the  accompanying  counterpart  of this Agreement and return it to
the Company,  whereupon the foregoing shall become a binding  agreement between
you and the Company.

                                  Very truly yours,

                                  E'town Corporation


                                  By
                                    [Title]


The foregoing is hereby
agreed to as of the
date thereof.

Teachers Insurance and Annuity
Association of America



By
---------------------------------------
    Its



                                  Schedule A
                         (to Note Purchase Agreement)
                       Information Relating to Purchaser


   Name and Address of Purchaser     Principal Amount of Notes to Be
                                                Purchased
Teachers Insurance and Annuity                  $30,000,000
  Association of America
730 Third Avenue
New York, New York  10017-3263

Payments

All  payments  on or  in  respect  of  the  Notes  to be  made  in  immediately
available funds  (identifying each payment as E'town  Corporation)  through the
Automated Clearing House System to:

      The Chase Manhattan Bank
      ABA #021-000-021
      New York, New York
      Account Number 900-9-000200
      For Further Credit to the TIAA Account Number G07040
      Reference:  PPN#/Maturity Date/Coupon Rate/P&I Breakdown

with  sufficient  information  to identify the source and  application  of such
funds.

Notices

Contemporaneous  with the  above  electronic  funds  transfer,  advice  setting
forth  (a) the  full  name,   private  placement   number,   and  coupon  rate;
(b) allocation of payment between principal,  interest, premium and any special
payment;  and (c) name  and address of Bank from which wire  transfer was sent,
shall be delivered, mailed, or telecopied to:

      Teachers Insurance and Annuity Association of America
      730 Third Avenue
      New York, New York  10017-3206
      Attention:  Securities Accounting Division
      Telephone:  (212) 916-4188
      Telefacsimile:  (212) 916-6955

All other notices and communications to be addressed to:

      Teachers Insurance and Annuity Association of America
      730 Third Avenue, 4th Floor
      New York, New York  10017-3206
      Attention:  Jose Almonte, Securities Division
      Telephone:  (212) 916-6539 (Analyst's Number) or (212) 490-9000 (General
      Number)
      Telefacsimile:  (212) 916-6667 (Team Fax Number)

Name of Nominee in which Notes are to be issued:  None

Taxpayer I.D. Number:  13-1624203




                                     B-11

                                  Schedule B
                         (to Note Purchase Agreement)
                                 Defined Terms

General Provisions

      Where  the  character  or amount  of any  asset or  liability  or item of
income or expense is required to be  determined or any  consolidation  or other
accounting  computation  is  required  to be  made  for  the  purposes  of this
Agreement,  the same  shall be done in  accordance  with  GAAP,  to the  extent
applicable,  except where such  principles  are  inconsistent  with the express
requirements of this Agreement.

Definitions

      As used herein,  the  following  terms have the  respective  meanings set
forth below or set forth in the Section hereof following such term:

      "Affiliate"  means,  at any time,  and with  respect to any  Person,  any
other  Person  that at such time  directly  or  indirectly  through one or more
intermediaries  Controls,  or is  Controlled  by,  or is under  common  Control
with,  such  first  Person.  As used in this  definition,  "Control"  means the
possession,  directly  or  indirectly,  of the  power to  direct  or cause  the
direction  of the  management  and  policies of a Person,  whether  through the
ownership of voting  securities,  by contract or otherwise.  Unless the context
otherwise clearly  requires,  any reference to an "Affiliate" is a reference to
an Affiliate of the Company.

      "Asset Disposition" means any Transfer except:

          (a)   any

               (i)   Transfer from a Subsidiary of Elizabethtown  Water Company
           to  Elizabethtown  Water  Company or a  Wholly-Owned  Subsidiary  of
           Elizabethtown Water Company;

              (ii)   Transfer   from   Elizabethtown   Water   Company   to   a
           Wholly-Owned Subsidiary of Elizabethtown Water Company; and

             (iii)   Transfer from Elizabethtown  Water Company to a Subsidiary
           of   Elizabethtown   Water  Company   (other  than  a   Wholly-Owned
           Subsidiary of  Elizabethtown  Water Company) or from a Subsidiary of
           Elizabethtown  Water Company to another  Subsidiary of Elizabethtown
           Water   Company   (other   than   a   Wholly-Owned   Subsidiary   of
           Elizabethtown  Water  Company),  which  in  either  case is for Fair
           Market Value,

      so long as immediately  before and immediately  after the consummation of
      any such  Transfer and after giving effect  thereto,  no Default or Event
      of Default exists; and

          (b)   any  Transfer  made in the  ordinary  course  of  business  and
      involving  only property  that is either (i)  inventory  held for sale or
      (ii)  pipes  and  other  utility  plant  assets,   equipment,   vehicles,
      fixtures,  supplies or materials no longer  required in the  operation of
      the  business  of  Elizabethtown  Water  Company  or  any  Subsidiary  of
      Elizabethtown   Water   Company   or  that  is  worn   out,   permanently
      unserviceable or obsolete.

      "Business  Day" means (a) for the purposes of  Section 8.6  only, any day
other  than a  Saturday,  a Sunday  or a day on which  commercial  banks in New
York City are  required or  authorized  to be closed,  and (b) for the purposes
of any other  provision  of this  Agreement,  any day other than a Saturday,  a
Sunday or a day on which  commercial  banks in Newark,  New Jersey or New York,
New York are required or authorized to be closed.

      "Capital  Lease"  means,  at any time,  a lease with respect to which the
lessee is required  concurrently  to recognize the  acquisition of an asset and
the incurrence of a liability in accordance with GAAP.

      "Capital  Lease  Obligation"  means,  with  respect  to any  Person and a
Capital  Lease,  the  amount of the  obligation  of such  Person as the  lessee
under such Capital  Lease which would,  in  accordance  with GAAP,  appear as a
liability on a balance sheet of such Person.

      "Closing" is defined in Section 3.

      "Code" means the Internal  Revenue Code of 1986,  as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.

      "Company" means E'town Corporation, a New Jersey corporation.

      "Confidential Information" is defined in Section 20.

      "Consensual  Lien"  means  any  Lien  that is  voluntarily  agreed  to or
consented  to by the  Company  or that  has  been  granted  or  created  by the
Company for the benefit of any other Person.

      "Consolidated  Assets"  means,  at any  time,  the  total  assets  of the
Company and its  Subsidiaries  which would be shown as assets on a consolidated
balance sheet of the Company and its  Subsidiaries  as of such time prepared in
accordance with GAAP, after  eliminating all amounts  properly  attributable to
minority interests, if any, in the stock and surplus of Subsidiaries.

      "Consolidated Common Shareholders' Equity" means, at any time,

          (a)   the sum of (i) the par value  (or value  stated on the books of
      the  corporation) of the common stock of the Company and its Subsidiaries
      plus (ii) the amount of the paid-in capital and retained  earnings of the
      Company  and its  Subsidiaries,  in each  case as such  amounts  would be
      shown  on  a   consolidated   balance   sheet  of  the  Company  and  its
      Subsidiaries as of such time prepared in accordance  with GAAP,  provided
      that there  shall be excluded  from this  clause (a)  treasury  stock and
      common stock subscribed and unissued, minus

          (b)   to the extent  included  in clause (a),  all  amounts  properly
      attributable to minority  interests,  if any, in the stock and surplus of
      Subsidiaries.

      "Consolidated Debt" means, as of any date of determination,  the total of
all Debt of the Company and its  Subsidiaries  outstanding on such date,  after
eliminating  all  offsetting  debits and  credits  between  the Company and its
Subsidiaries  and all other items  required to be  eliminated  in the course of
the  preparation of  consolidated  financial  statements of the Company and its
Subsidiaries in accordance with GAAP.

      "Consolidated  Income Available for Fixed Charges" means, with respect to
any period,  Consolidated  Net Income for such period plus all amounts deducted
in the  computation  thereof on  account of  (a) Fixed  Charges  and  (b) taxes
imposed on or measured by income or excess profits.

      "Consolidated  Net Income"  means,  with  reference  to any  period,  the
income (or loss) of the Company and its  Subsidiaries  for such period,  before
Distributions  paid during  such  period by the  Company  and its  Subsidiaries
(taken as a cumulative whole excluding  Extraordinary  Items), as determined in
accordance  with GAAP,  after  eliminating  all  offsetting  debits and credits
between  the Company and its  Subsidiaries  and all other items  required to be
eliminated  in  the  course  of  the  preparation  of  consolidated   financial
statements of the Company and its Subsidiaries in accordance with GAAP.

      "Consolidated  Operating  Revenues" means, for any period,  the operating
revenues  of  the  Company  and  its  Subsidiaries  which  would  be  shown  as
operating  revenues on a  consolidated  statement  of income of the Company and
its Subsidiaries for such period prepared in accordance with GAAP.

      "Debenture Indenture  Application" means, with respect to any Transfer of
property,  the  application by  Elizabethtown  Water Company within 365 days of
such  Transfer  of the Net  Proceeds  Amount with  respect to such  Transfer in
accordance  with Section 5.08 (and the related  definitions)  of the  Indenture
dated  as  of  October 15,   1988  between   Elizabethtown  Water  Company  and
Citibank,  N.A.,  as  trustee,  as amended  through the date of the Closing (or
any  provision of any other  Debenture  Indenture  which is  substantially  the
same as such Section 5.08 (and the related definitions)).

      "Debenture  Indentures"  means (i) the  Indentures  pursuant to which the
Debentures of  Elizabethtown  Water Company listed on Schedule 5.15 were issued
and are outstanding,  and  (ii) substantially  similar  Indentures  pursuant to
which future  series of the  Debentures of  Elizabethtown  Water Company may be
issued.

      "Debt" means, with respect to any Person, without duplication,

          (a)   its liabilities for borrowed money;

          (b)   its  liabilities  for the deferred  purchase  price of property
      acquired  by such  Person  (excluding  accounts  payable  arising  in the
      ordinary  course of  business  but  including,  without  limitation,  all
      liabilities  created or arising under any conditional sale or other title
      retention agreement with respect to any such property);

          (c)   its Capital Lease Obligations;

          (d)   all  liabilities  for borrowed  money  secured by any Lien with
      respect  to any  property  owned by such  Person  (whether  or not it has
      assumed or otherwise become liable for such liabilities); and

          (e)   any  Guaranty of such Person with respect to  liabilities  of a
      type described in any of clauses (a) through (d) hereof.

Debt  of any  Person  shall  include  all  obligations  of such  Person  of the
character  described  in clauses  (a)  through  (e) to the extent  such  Person
remains  legally  liable  in  respect  thereof  notwithstanding  that  any such
obligation is deemed to be extinguished under GAAP.

      "Debt  Prepayment  Application"  means,  with  respect to any Transfer of
property,  the  application  within  180 days of such Transfer (other than in a
Debenture  Indenture  Application)  of  cash  in an  amount  equal  to the  Net
Proceeds  Amount with  respect to such  Transfer to pay Debt of the  Subsidiary
of the  Company  making  such  Transfer,  Elizabethtown  Water  Company  or any
Wholly-Owned  Subsidiary  (other  than Debt  owing to the  Company,  any of its
Subsidiaries  or any Affiliate  and Debt in respect of any revolving  credit or
similar credit facility  providing the Company or any of its Subsidiaries  with
the  right to obtain  loans or other  extensions  of credit  from time to time,
except  to the  extent  that in  connection  with  such  payment  of  Debt  the
availability  of credit under such credit  facility is  permanently  reduced by
an amount not less than the amount of such  proceeds  applied to the payment of
such Debt).

      "Default"  means an event or  condition  the  occurrence  or existence of
which  would,  with the lapse of time or the  giving of notice or both,  become
an Event of Default.

      "Default  Rate" means that rate of interest that is the greater of (i) 2%
per  annum  above  the rate of  interest  stated  in  clause  (a) of the  first
paragraph  of  the  Notes  or  (ii) 2%  over  the  rate  of  interest  publicly
announced  by The  Bank of New York in New  York,  New  York as its  "base"  or
"prime" rate.

      "Disposition Value" means, at any time, with respect to any property

          (a)   in the case of  property  that does not  constitute  Subsidiary
      Stock, the book value thereof,  valued at the time of such disposition in
      good faith by the Company, and

          (b)   in the case of property that constitutes  Subsidiary  Stock, an
      amount  equal  to that  percentage  of book  value of the  assets  of the
      Subsidiary  that issued such stock as is equal to the percentage that the
      book value of such Subsidiary  Stock  represents of the book value of all
      of the outstanding capital stock of such Subsidiary (assuming,  in making
      such  calculations,  that all  Securities  convertible  into such capital
      stock are so converted  and giving full effect to all  transactions  that
      would  occur  or  be  required  in  connection   with  such   conversion)
      determined at the time of the disposition  thereof,  in good faith by the
      Company.

      "Distribution"  means,  in respect  of any  corporation,  association  or
other business entity  dividends paid on Preferred  Stock of such  corporation,
association or other business  entity  (except  distributions  in such stock or
other equity interest).

      "Environmental  Laws"  means  any  and all  Federal,  state,  local,  and
foreign statutes,  laws, regulations,  ordinances,  rules,  judgments,  orders,
decrees, permits,  concessions,  grants,  franchises,  licenses,  agreements or
governmental  restrictions  relating to  pollution  and the  protection  of the
environment  or the release of any materials  into the  environment,  including
but not  limited  to those  related to  hazardous  substances  or  wastes,  air
emissions and discharges to waste or public systems.

      "ERISA"  means the Employee  Retirement  Income  Security Act of 1974, as
amended  from  time  to  time,  and  the  rules  and  regulations   promulgated
thereunder from time to time in effect.

      "ERISA   Affiliate"   means  any  trade  or  business   (whether  or  not
incorporated)  that is treated as a single  employer  together with the Company
under section 414 of the Code.

      "Event of Default" is defined in Section 11.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended.

      "Extraordinary  Items"  shall mean  extraordinary  items as  defined  and
determined in accordance with GAAP.

      "Fair Market Value" means,  at any time and with respect to any property,
the sale value of such  property  that  would be  realized  in an  arm's-length
sale at such time  between an informed  and willing  buyer and an informed  and
willing seller (neither being under a compulsion to buy or sell).

      "Fixed  Charges"  means,   with  respect  to  any  period,   the  sum  of
(a) Interest Charges for such period plus (b) Lease Rentals for such period.

      "Fixed Charges  Coverage  Ratio" means,  at the end of any fiscal quarter
of the  Company,  the  ratio of (a)  Consolidated  Income  Available  for Fixed
Charges for the period of four  consecutive  fiscal  quarters ending at the end
of such fiscal  quarter,  to (b) the sum of  (i) Fixed  Charges for such period
plus  (ii) Distributions  paid  during  such  period  by the  Company  and  its
Subsidiaries.

      "GAAP" means generally accepted  accounting  principles as in effect from
time to time in the United States of America.

      "Governmental Authority" means

          (a)   the government of

               (i)   the  United  States  of  America  or any  State  or  other
           political subdivision thereof, or

              (ii)   any  jurisdiction  in which the Company or any  Subsidiary
           conducts  all  or  any  part  of  its  business,  or  which  asserts
           jurisdiction  over any properties of the Company or any  Subsidiary,
           or

          (b)   any  entity  exercising   executive,   legislative,   judicial,
      regulatory or  administrative  functions  of, or pertaining  to, any such
      government  (including,  without  limitation,  the New  Jersey  Board  of
      Public Utilities).

      "Guaranty" means, with respect to any Person,  any obligation (except the
endorsement in the ordinary  course of business of negotiable  instruments  for
deposit or collection) of such Person  guaranteeing  or in effect  guaranteeing
(whether by reason of being a general  partner of a  partnership  or otherwise)
any  Indebtedness,  dividend  or other  obligation  of any other  Person in any
manner,   whether  directly  or  indirectly,   including  (without  limitation)
obligations  incurred  through an agreement,  contingent or otherwise,  by such
Person:

          (a)   to purchase  such  Indebtedness  or  obligation or any property
      constituting security therefor;

          (b)   to advance or supply  funds (i) for the  purchase or payment of
      such indebtedness or obligation,  or (ii) to maintain any working capital
      or other balance  sheet  condition or any income  statement  condition of
      any other Person or otherwise to advance or make available  funds for the
      purchase or payment of such Indebtedness or obligation;

          (c)   to lease  properties  or to  purchase  properties  or  services
      primarily for the purpose of assuring the owner of such  Indebtedness  or
      obligation  of the  ability  of any other  Person to make  payment of the
      Indebtedness or obligation; or

          (d)   otherwise  to  assure  the  owner  of  such   Indebtedness   or
      obligation against loss in respect thereof.

      In any  computation  of the  Indebtedness  or  other  liabilities  of the
obligor under any Guaranty,  the  Indebtedness  or other  obligations  that are
the  subject of such  Guaranty  shall be assumed  to be direct  obligations  of
such obligor.

      "holder"  means,  with respect to any Note, the Person in whose name such
Note is  registered  in the  register  maintained  by the  Company  pursuant to
Section 13.1.

      "Indebtedness"  with respect to any Person  means,  at any time,  without
duplication,

          (a)   its   liabilities   for  borrowed   money  and  its  redemption
      obligations in respect of mandatorily Redeemable Preferred Stock;

          (b)   its  liabilities  for the deferred  purchase  price of property
      acquired  by such  Person  (excluding  accounts  payable  arising  in the
      ordinary  course of business but  including  all  liabilities  created or
      arising under any  conditional  sale or other title  retention  agreement
      with respect to any such property);

          (c)   all  liabilities  appearing on its balance  sheet in accordance
      with GAAP in respect of Capital Leases;

          (d)   all  liabilities  for borrowed  money  secured by any Lien with
      respect  to any  property  owned by such  Person  (whether  or not it has
      assumed or otherwise become liable for such liabilities);

          (e)   all  its  liabilities  in  respect  of  letters  of  credit  or
      instruments  serving  a  similar  function  issued  or  accepted  for its
      account  by  banks  and  other  financial  institutions  (whether  or not
      representing obligations for borrowed money);

          (f)   Swaps of such Person; and

          (g)   any  Guaranty of such Person with respect to  liabilities  of a
      type described in any of clauses (a) through (f) hereof.

      "Institutional  Investor"  means  (a) any  original  purchaser of a Note,
(b) any  holder  of a Note  holding  more than 10% of the  aggregate  principal
amount  of the  Notes  then  outstanding,  and  (c) any  bank,  trust  company,
savings  and loan  association  or other  financial  institution,  any  pension
plan,  any  investment  company,  any insurance  company,  any broker or dealer
holding Notes other than in trading  accounts,  or any other similar  financial
institution or entity, regardless of legal form.

      "Interest  Charges" means,  with respect to any period,  the sum (without
duplication)  of the  following  (in  each  case,  eliminating  all  offsetting
debits and  credits  between the  Company  and its  Subsidiaries  and all other
items  required  to  be  eliminated  in  the  course  of  the   preparation  of
consolidated  financial  statements  of the  Company  and its  Subsidiaries  in
accordance with GAAP):  (a) all  interest in respect of Debt of the Company and
its Subsidiaries  (including  imputed interest on Capital Lease Obligations) to
the extent  deducted in  determining  Consolidated  Net Income for such period,
together with all interest  capitalized or deferred  during such period and not
deducted in determining  Consolidated  Net Income for such period,  and (b) all
debt  discount  and  expense  amortized  or  required  to be  amortized  in the
determination of Consolidated Net Income for such period.

      "Investor Packet" is defined in Section 5.3.

      "Lease  Rentals"  means,  with  respect  to any  period,  the  sum of the
minimum  amount of rental  and other  obligations  required  to be paid  during
such  period by the  Company or any  Subsidiary  as lessee  under all leases of
real or personal  property  (other than (i) any leases with annual rentals that
do not  exceed  $10,000  in the case of any single  lease and  $100,000  in the
aggregate  for all such leases  excluded  pursuant to this clause (i), and (ii)
Capital  Leases),  excluding  any  amounts  required  to be paid by the  lessee
(whether or not therein  designated as rental or additional  rental)  (a) which
are on account of  maintenance  and  repairs,  insurance,  taxes,  assessments,
water rates and similar  charges,  or (b) which are based on profits,  revenues
or sales  realized by the lessee from the leased  property or  otherwise  based
on the performance of the lessee.

      "Lien" means,  with respect to any Person,  any mortgage,  lien,  pledge,
charge,  security  interest or other  encumbrance,  or any interest or title of
any vendor,  lessor,  lender or other  secured party to or of such Person under
any  conditional  sale or other title  retention  agreement  or Capital  Lease,
upon or with  respect to any  property  or asset of such Person  (including  in
the case of stock,  stockholder  agreements,  voting trust  agreements  and all
similar arrangements).

      "Make-Whole Amount" is defined in Section 8.6.

      "Material"  means  material  in  relation  to the  business,  operations,
affairs,  financial  condition,  assets,  or  properties of the Company and its
Subsidiaries taken as a whole.

      "Material  Adverse  Effect"  means a material  adverse  effect on (a) the
business,  operations,  affairs,  financial condition,  assets or properties of
the Company and its  Subsidiaries  taken as a whole,  or (b) the ability of the
Company to perform  its  obligations  under this  Agreement  and the Notes,  or
(c) the validity or enforceability of this Agreement or the Notes.

      "Multiemployer  Plan" means any Plan that is a  "multiemployer  plan" (as
such term is defined in section 4001(a)(3) of ERISA).

      "Net  Proceeds  Amount"  means,  with  respect  to  any  Transfer  of any
Property by any Person, an amount equal to the difference of

          (a)   the aggregate amount of the  consideration  (valued at the Fair
      Market Value of such  consideration  at the time of the  consummation  of
      such Transfer) received by such Person in respect of such Transfer, minus

          (b)   all ordinary and  reasonable  out-of-pocket  costs and expenses
      actually incurred by such Person in connection with such Transfer.

      "Notes" is defined in Section 1.

      "Officer's  Certificate"  means  a  certificate  of  a  Senior  Financial
Officer or of any other  officer of the Company whose  responsibilities  extend
to the subject matter of such certificate.

      "PBGC" means the Pension  Benefit  Guaranty  Corporation  referred to and
defined in ERISA or any successor thereto.

      "Person"  means  an   individual,   partnership,   corporation,   limited
liability  company,  association,  trust,  unincorporated  organization,  or  a
government or agency or political subdivision thereof.

      "Plan" means an "employee  benefit plan" (as defined in  section 3(3)  of
ERISA) that is or, within the preceding  five years,  has been  established  or
maintained,  or to  which  contributions  are or,  within  the  preceding  five
years,  have been made or  required  to be made,  by the  Company  or any ERISA
Affiliate  or with  respect  to which the  Company or any ERISA  Affiliate  may
have any liability.

      "Preferred  Stock" means,  in respect of any  corporation,  shares of the
capital stock of such  corporation  that are entitled to preference or priority
over any other shares of the capital  stock of such  corporation  in respect of
payment of dividends or distribution of assets upon liquidation.

      "Principal  Subsidiary"  means any Subsidiary for which either  (i) total
assets equal or exceed 30% of Consolidated  Assets or  (ii) operating  revenues
for the  immediately  preceding  four  fiscal  quarters  equal or exceed 30% of
Consolidated Operating Revenues for such period.

      "property" or "properties" means, unless otherwise  specifically limited,
real or  personal  property  of any kind,  tangible  or  intangible,  choate or
inchoate.

      "Property  Reinvestment  Application" means, with respect to any Transfer
of property, the satisfaction of each of the following conditions:

          (a)   the  application  within  180 days of such Transfer (other than
      in a  Debenture  Indenture  Application)  of an  amount  equal to the Net
      Proceeds  Amount with respect to such Transfer to the  acquisition by the
      Subsidiary  of the Company  making  such  Transfer,  Elizabethtown  Water
      Company  or  a  Wholly-Owned  Subsidiary  of  utility  property  of  such
      Subsidiary  to be  used  in the  ordinary  course  of  business  of  such
      Subsidiary  and which has a Fair Market  Value (after  deduction  for any
      Liens  attributable  thereto) at least equal to the Disposition  Value of
      the property sold; and

          (b)   the  Company   shall  have   delivered  a   certificate   of  a
      Responsible  Officer of the Company to each holder of a Note referring to
      Section 10.7  and  identifying  the property that was the subject of such
      Transfer if such Transfer  shall have  resulted in a Net Proceeds  Amount
      greater than $500,000,  the Disposition  Value of such property,  and the
      nature, terms, amount and application of the proceeds from the Transfer.

      "QPAM  Exemption"  means  Prohibited  Transaction  Class  Exemption 84-14
issued by the United States Department of Labor.

      "Redeemable"  means,  with  respect to the  capital  stock of any Person,
each share of such Person's capital stock that is:

          (a)   redeemable,  payable or required to be  purchased  or otherwise
      retired or  extinguished,  or convertible into Debt of such Person (i) at
      a fixed or  determinable  date,  whether by  operation of sinking fund or
      otherwise,  (ii) at the option of any Person other than such  Person,  or
      (iii) upon  the  occurrence  of a condition not solely within the control
      of such Person; or

          (b)   convertible into other Redeemable capital stock.

      "Required  Holders"  means,  at any time,  the holders of at least 51% in
principal  amount  of the  Notes at the time  outstanding  (exclusive  of Notes
then owned by the Company or any of its Affiliates).

      "Responsible  Officer" means any Senior  Financial  Officer and any other
officer  of the  Company  with  responsibility  for the  administration  of the
relevant portion of this Agreement.

      "Restricted  Investments"  means all  investments  in cash in the  common
equity   interests  of  Persons  which  are  not   primarily   engaged  in  the
generation,  distribution  or sale of  electric  energy or  natural  gas or the
distribution  or sale of water, or the furnishing of  communications  services,
or water treatment and analysis services, or in the treatment of wastewater.

      "Security"  shall  have the same  meaning  as in  Section  2(a)(1) of the
Securities Act.

      "Securities  Act" means the  Securities Act of 1933, as amended from time
to time.

      "Senior Financial Officer" means the chief financial  officer,  principal
accounting officer, treasurer or controller of the Company.

      "Subsidiary"  means,  as to any  Person,  any  corporation,  association,
limited liability  company,  or other business entity (a "Business  Entity") in
which  such  Person  and/or one or more of its  Subsidiaries  own  directly  or
indirectly  a  majority  of (a) the  combined  voting  power of all  classes of
voting  stock  having  general  voting power under  ordinary  circumstances  to
elect  a  majority  of  the  directors  of  such  Business  Entity,  if it is a
corporation,  (b) the  capital  interest or profits  interest of such  Business
Entity,  if it is a  partnership,  joint  venture or similar  entity or (c) the
beneficial  interest of such Business Entity, if it is a trust,  association or
other  unincorporated  organization.   Unless  the  context  otherwise  clearly
requires,  any  reference to a  "Subsidiary"  is a reference to a Subsidiary of
the Company.

      "Subsidiary  Stock" means, with respect to any Person,  the stock (or any
options or warrants to purchase stock or other  Securities  exchangeable for or
convertible into stock) of any Subsidiary of such Person.

      "Swaps"  means,  with  respect to any Person,  payment  obligations  with
respect  to  interest  rate  swaps,  currency  swaps  and  similar  obligations
obligating  such  Person to make  payments,  whether  periodically  or upon the
happening  of a  contingency.  For the purposes of this  Agreement,  the amount
of the  obligation  under any Swap  shall be the amount  determined  in respect
thereof as of the end of the then most  recently  ended fiscal  quarter of such
Person,  based on the  assumption  that such Swap had  terminated at the end of
such  fiscal  quarter,  and in  making  such  determination,  if any  agreement
relating to such Swap  provides  for the  netting of amounts  payable by and to
such Person  thereunder or if any such agreement  provides for the simultaneous
payment of amounts by and to such  Person,  then in each such case,  the amount
of such obligation shall be the net amount so determined.

      "Transfer"  means,  with respect to any Person,  any transaction in which
such  Person  sells,  conveys,  transfers  or  leases  (as  lessor)  any of its
property,  including,  without  limitation,  Subsidiary  Stock. For purposes of
determining  the  application  of the Net  Proceeds  Amount in  respect  of any
Transfer,  the  Company may  designate  any  Transfer  as one or more  separate
Transfers  each  yielding a separate  Net  Proceeds  Amount.  In any such case,
the Disposition  Value of any property  subject to each such separate  Transfer
shall be determined by ratably  allocating the aggregate  Disposition  Value of
all  property  subject to all such  separate  Transfers  to each such  separate
Transfer on a proportionate basis.

      "Utility  Subsidiary"  means  any  Subsidiary  of  the  Company  that  is
generally  subject to  regulation  by the New Jersey Board of Public  Utilities
or any other public service  commission,  public utility  commission or similar
regulatory  authority  in the  United  States of  America or any State or other
political subdivision thereof.

      "Wholly-Owned  Subsidiary"  means any Subsidiary of  Elizabethtown  Water
Company all of the equity interests (except  director's  qualifying shares) and
voting  interests are owned by any one or more of  Elizabethtown  Water Company
and Elizabethtown Water Company's other Wholly-Owned Subsidiaries.


                                 Schedule 5.3
                         (to Note Purchase Agreement)
                  Financial Statements and Other Information

1.    Note  Purchase  Agreement  dated  as of  December 15,  1997  between  the
      Company and American General Life Insurance Company.

2.    Form 10-K of the Company for the year ended December 31,  1998, including
      audited financial statements for the fiscal year ended December 31, 1998.

3.    Form 10-Q of the Company for the quarter ended March 31,  1999, including
      unaudited  financial  statements for the fiscal  quarter ended  March 31,
      1999.

4.    Form  10-Q/A  of  the  Company  for  the  quarter  ended  June 30,  1999,
      including  unaudited  financial  statements  for the fiscal quarter ended
      June 30, 1999, filed November 15, 1999.

5.    Form  10-Q of the  Company  for the  quarter  ended  September 30,  1999,
      including  unaudited  financial  statements  for the fiscal quarter ended
      September 30, 1999.

6.    Form 8-K of the Company dated November 21, 1999.

7.    Press  release  re:  proposed  merger  of  E'town   Corporation   with  a
      subsidiary of Thames Water plc.

8.    A.G. Edwards Research Report on the Company, dated November 12, 1999.

9.    A.G. Edwards Water Utility Stock update, dated November 29, 1999.

10.   Reports of Standard & Poor's  Ratings Group dated  November 22,  1999 and
      Moody's Investors Service Inc., dated November 30, 1999.

11.   Thames Water plc. 1999 annual report.



                                 Schedule 5.4
                         (to Note Purchase Agreement)
         Subsidiaries of the Company and Ownership of Subsidiary Stock





                                 Schedule 5.15
                         (to Note Purchase Agreement)
                             Existing Indebtedness






                                     E-1-2

                                   Exhibit 1
                         (to Note Purchase Agreement)
                                [Form of Note]

      This Note has not been  registered  under the  Securities Act of
      1933, as amended,  or any state  securities  law, and may not be
      transferred in violation thereof.

                              E'town Corporation

                    7.69% Senior Note due February 1, 2010

No.  R-[_______]                                             [Date]
$[__________]                                       PPN 269242 B# 9

      For Value Received,  the undersigned,  E'town Corporation  (herein called
the  "Company"),  a corporation  organized  and existing  under the laws of the
State of New  Jersey,  hereby  promises  to pay to  [_____________________]  or
registered  assigns,   the  principal  sum  of   [______________]   Dollars  on
February 1,  2010 with  interest  (computed  on the basis of a 360-day  year of
twelve 30-day months)  (a) on the unpaid  balance  thereof at the rate of 7.69%
per  annum  from the date  hereof,  payable  semiannually,  on the first day of
February and August in each year,  commencing  with the  February 1 or August 1
next succeeding the date hereof,  until the principal  hereof shall have become
due  and  payable,  and  (b) to  the  extent  permitted  by law on any  overdue
payment  (including any overdue  prepayment) of principal,  any overdue payment
of interest  and any overdue  payment of any  Make-Whole  Amount (as defined in
the Note  Purchase  Agreement  referred  to  below),  payable  semiannually  as
aforesaid (or, at the option of the registered  holder hereof,  on demand),  at
a rate per  annum  from  time to time  equal to the  greater  of  (i) 9.69%  or
(ii) 2%  over the rate of interest  publicly  announced by The Bank of New York
from time to time in New York, New York as its "base" or "prime" rate.

      Payments of  principal  of,  interest on and any  Make-Whole  Amount with
respect  to this Note are to be made in lawful  money of the  United  States of
America in  Westfield,  New Jersey at the  principal  office of the  Company in
such  jurisdiction  or at such other place as the Company shall have designated
by written  notice to the holder of this Note as provided in the Note  Purchase
Agreement referred to below.

      This Note is one of a series of Senior Notes (herein  called the "Notes")
issued pursuant to the Note Purchase  Agreement,  dated as of February 1,  2000
(as from time to time  amended,  the "Note  Purchase  Agreement"),  between the
Company  and  Teachers  Insurance  and  Annuity  Association  of America and is
entitled  to the  benefits  thereof.  Each  holder of this Note will be deemed,
by  its  acceptance   hereof,   (i) to  have  agreed  to  the   confidentiality
provisions  set forth in Section 20 of the Note Purchase  Agreement and (ii) to
have made the  representation  set forth in  Section 6.2  of the Note  Purchase
Agreement,  provided  that  such  holder  may  (in  reliance  upon  information
provided by the  Company,  which  shall not be  unreasonably  withheld)  make a
representation  to the  effect  that the  purchase  by such  holder of any Note
will not constitute a non-exempt  prohibited  transaction under  Section 406(a)
of ERISA.

      This Note is a  registered  Note and, as  provided  in the Note  Purchase
Agreement,  upon  surrender of this Note for  registration  of  transfer,  duly
endorsed,  or  accompanied  by a written  instrument of transfer duly executed,
by the registered  holder hereof or such holder's  attorney duly  authorized in
writing,  a new  Note  for a like  principal  amount  will be  issued  to,  and
registered  in the name  of,  the  transferee.  Prior  to due  presentment  for
registration  of transfer,  the Company may treat the person in whose name this
Note is  registered  as the owner hereof for the purpose of  receiving  payment
and for all  other  purposes,  and the  Company  will  not be  affected  by any
notice to the contrary.

      This Note is subject  to  optional  prepayment,  in whole or from time to
time in part,  at the  times and on the terms  specified  in the Note  Purchase
Agreement, but not otherwise.

      If an Event of  Default,  as  defined  in the  Note  Purchase  Agreement,
occurs  and is  continuing,  the  principal  of this  Note may be  declared  or
otherwise  become due and payable in the manner,  at the price  (including  any
applicable  Make-Whole  Amount)  and  with  the  effect  provided  in the  Note
Purchase Agreement.

      This Note shall be construed  and enforced in  accordance  with,  and the
rights of the parties  shall be  governed  by, the law of the State of New York
excluding  choice-of-law  principles  of  the  law of  such  State  that  would
require the application of the laws of a jurisdiction other than such State.

                                  E'town Corporation


                                  By
                                    Its:  Treasurer


                                  By
                                    Its:  Secretary

[Seal]




                                  E-4.4(a)-2

                                Exhibit 4.4(a)
                         (to Note Purchase Agreement)
                          Form of Opinion of Counsel
                                to the Company



      The  closing  opinion  of  Walter  M.  Braswell,  Esq.,  counsel  for the
Company,  which is called for by  Section 4.4  of the Note Purchase  Agreement,
shall  be  dated  the  date of the  Closing  and  addressed  to you,  shall  be
satisfactory in scope and form to you and shall be to the effect that:

           1.   The  Company  is a  corporation,  duly  organized  and  validly
      existing and in good  standing  under the laws of the State of New Jersey
      and has the corporate  power and the  corporate  authority to execute and
      perform the Note  Purchase  Agreement  and to issue the Notes and has the
      full  corporate  power  and  the  corporate   authority  to  conduct  the
      activities  in which it is now engaged and is duly  licensed or qualified
      and is in good standing as a foreign  corporation in each jurisdiction in
      which  such   qualification   is  required  by  law,   other  than  those
      jurisdictions as to which the failure to be so qualified,  licensed or in
      good  standing  would  not be  reasonably  expected  to  have a  Material
      Adverse Effect.

           2.   Each  Subsidiary of the Company is a corporation or other legal
      entity duly  organized,  validly  existing and in good standing under the
      laws  of its  jurisdiction  of  incorporation  and is  duly  licensed  or
      qualified as a foreign  corporation  or other legal entity and is in good
      standing in each jurisdiction in which such  qualification is required by
      law,  other than  those  jurisdictions  as to which the  failure to be so
      qualified,  licensed or in good standing would not be reasonably expected
      to have a Material Adverse Effect,  and all of the issued and outstanding
      shares of capital  stock of each such  Subsidiary  have been duly issued,
      are fully paid and nonassessable and are owned by the Company,  by one or
      more Subsidiaries, or by the Company and one or more Subsidiaries.

           3.   The Note Purchase Agreement has been duly authorized,  executed
      and delivered by the Company.

           4.   The Notes have been duly  authorized,  executed  and issued and
      constitute valid obligations of the Company.

           5.   No approval,  consent or  withholding  of objection on the part
      of, or filing,  registration or qualification  with, any New Jersey state
      or  local  governmental  body  (including,  without  limitation,  the New
      Jersey Board of Public  Utilities),  is necessary in connection  with the
      execution,  delivery and  performance  of the Note Purchase  Agreement or
      the Notes (other than such approvals,  consents,  filings,  registrations
      or  qualifications  as  may  be  required  under  the  provisions  of the
      securities or "Blue Sky" laws, or of any  regulatory  laws  applicable to
      the  Purchaser  as  an  insurance  company,  as  to  which  such  counsel
      expresses no opinion).

           6.   The issuance and sale of the Notes and the execution,  delivery
      and  performance  by the Company of the Note  Purchase  Agreement and the
      Notes  will  not  conflict  with  any law or any  order  of any  court or
      governmental  authority  or  agency  applicable  to  or  binding  on  the
      Company,  or  conflict  with  or  result  in  any  breach  of  any of the
      provisions  of or constitute a default under or result in the creation or
      imposition  of any Lien upon any of the property of the Company  pursuant
      to the  Certificate  of  Incorporation  or By-laws of the  Company or any
      agreement or other  instrument known to such counsel to which the Company
      is a party or by which the Company may be bound.

           7.   Except  as  disclosed  in  the  Investor  Packet,  there  is no
      litigation pending or, to the best knowledge of such counsel,  threatened
      which in such  counsel's  opinion could  reasonably be expected to have a
      materially  adverse effect on the Company's  business or assets, or which
      would  question the validity of the Note Purchase  Agreement or the Notes
      or impair the  ability of the  Company to issue and  deliver the Notes or
      to comply with the provisions of the Note Purchase Agreement.

The  opinion  of Walter M.  Braswell,  Esq.  shall  cover  such  other  matters
relating  to the  sale  of  the  Notes  as you  may  reasonably  request.  With
respect to matters of fact on which such opinion is based,  such counsel  shall
be  entitled  to rely on  appropriate  certificates  of  public  officials  and
officers of the Company.




                                  E-4.4(b)-2

                                Exhibit 4.4(b)
                         (to Note Purchase Agreement)
                  Form of Opinion of Special New York Counsel
                                for the Company



      The closing opinion of Winthrop,  Stimson, Putnam & Roberts,  special New
York counsel for the Company,  which is called for by  Section 4.4  of the Note
Purchase  Agreement,  shall be dated the date of the Closing and  addressed  to
you,  shall  be  satisfactory  in  scope  and  form to you and  shall be to the
effect that:

           1.   The Note  Purchase  Agreement  constitutes  a legal,  valid and
      binding  obligation  of the Company,  enforceable  against the Company in
      accordance  with its terms,  provided  that no opinion is expressed as to
      (i) the  enforceability  of the  provisions  of Section  12.1 of the Note
      Purchase  Agreement  requiring  the payment of a  Make-Whole  Amount upon
      acceleration  of the Notes to the  extent  such  payment  may be deemed a
      penalty,  and (ii) the  enforceability of the provisions of Section 15 of
      the Note Purchase  Agreement  requiring the payment by the Company of the
      costs and  expenses  of the holders of the Notes  incurred in  connection
      with the insolvency or bankruptcy of the Company or any  Subsidiary,  and
      except as the  binding  effect and  enforceability  of the Note  Purchase
      Agreement   against  the  Company  may  be  limited  by  (i)   applicable
      bankruptcy,    insolvency,    fraudulent   conveyance,    reorganization,
      moratorium and other similar laws affecting  creditors' rights generally,
      (ii)  general   principles   of  equity   (regardless   of  whether  such
      enforceability  is considered  in a proceeding in equity or in law),  and
      (iii) an implied covenant of good faith and fair dealing.

           2.   The Notes  constitute  legal  and  binding  obligations  of the
      Company  enforceable  in  accordance  with  their  terms,  except  as the
      binding effect and  enforceability  against the Company may be limited by
      (i)   applicable   bankruptcy,    insolvency,    fraudulent   conveyance,
      reorganization,  moratorium  and other  similar  laws now or hereafter in
      effect affecting creditors' rights generally,  (ii) general principles of
      equity  (regardless  of whether such  enforceability  is  considered in a
      proceeding  in equity or in law),  and (iii) an implied  covenant of good
      faith and fair dealing.

           3.   No approval,  consent or  withholding  of objection on the part
      of,  or  filing,  registration  or  qualification  with,  any New York or
      Federal   governmental   body,  is  necessary  in  connection   with  the
      execution,  delivery and  performance  of the Note Purchase  Agreement or
      the Notes (other than such approvals,  consents,  filings,  registrations
      or  qualifications  as  may  be  required  under  the  provisions  of the
      securities or "Blue Sky" laws, or of any  regulatory  laws  applicable to
      the  Purchaser  as  an  insurance  company,  as  to  which  such  counsel
      expresses no opinion).

           4.   The issuance and sale of the Notes and the execution,  delivery
      and  performance  by the Company of the Note  Purchase  Agreement and the
      Notes  will not  conflict  with any law or any  order of any court or New
      York or Federal  governmental  authority  or agency known to such counsel
      applicable  to or binding on the Company,  or conflict  with or result in
      any breach of any of the  provisions  of or constitute a default under or
      result  in the  creation  or  imposition  of  any  Lien  upon  any of the
      property of the Company  pursuant to the Certificate of  Incorporation or
      By-laws of the  Company or any  agreement  or other  instrument  known to
      such  counsel to which the Company is a party or by which the Company may
      be bound.

           5.   The  issuance,  sale  and  delivery  of  the  Notes  under  the
      circumstances  contemplated  by the  Note  Purchase  Agreement  does  not
      require the  registration  of the Notes under the Securities Act of 1933,
      as  amended,  or  the  qualification  of an  indenture  under  the  Trust
      Indenture Act of 1939, as amended.

           6.   Neither  the issue and sale of the Notes by the Company nor the
      intended use of the proceeds in the manner  contemplated  by Section 5.14
      of the Note Purchase  Agreement will violate  Regulation T, U or X of the
      Board of Governors of the Federal  Reserve System of the United States of
      America.

           7.   The  Company  is  not an  "investment  company",  or a  company
      "controlled"  by an  "investment  company",  subject to  registration  or
      regulation under the Investment Company Act of 1940, as amended.

The  opinion of  Winthrop,  Stimson,  Putnam & Roberts  shall  cover such other
matters  relating  to the  sale of the  Notes  as you may  reasonably  request.
With  respect to matters of fact on which such  opinion is based,  such counsel
shall be entitled to rely on appropriate  certificates of public  officials and
officers of the Company.



                                  E-4.4(c)-3

                                Exhibit 4.4(c)
                         (to Note Purchase Agreement)
                      Form of Opinion of Special Counsel
                               to the Purchaser


                              February ___, 2000



Teachers Insurance and Annuity
Association of America
New York, New York


      Re:          $30,000,000 7.69% Senior Notes
                              Due February 1, 2010
                                       of
                               E'town Corporation

Ladies and Gentlemen:

      We have acted as your special  counsel in  connection  with your purchase
on the date  hereof  of  $30,000,000  aggregate  principal  amount of the 7.69%
Senior Notes due February 1,  2010 (the "Notes") of E'town  Corporation,  a New
Jersey  corporation  (the  "Company"),  issued  under and  pursuant to the Note
Purchase  Agreement as of  February 1,  2000 (the "Note  Purchase  Agreement"),
between the Company and you.

      In that connection, we have examined the following:

          (a)   The Note Purchase Agreement;

          (b)   A copy of the Certificate of  Incorporation  of the Company and
      all amendments  thereto  certified by the Secretary of State of the State
      of New Jersey and the  Certificate of the Secretary of State of the State
      of New Jersey  evidencing  that the  Company is in good  standing in such
      state (the "Good Standing Certificate");

          (c)   A copy of the  By-laws of the  Company,  as amended to the date
      hereof,  and a copy of the resolutions  adopted by the Board of Directors
      of the Company with  respect to the  authorization  of the Note  Purchase
      Agreement,  the  issuance,  sale and  delivery  of the Notes and  related
      matters, each as certified by the Secretary of the Company;

          (d)   The  opinion  of  Walter M.  Braswell,  Esq.,  counsel  for the
      Company,   dated   the  date   hereof   and   delivered   responsive   to
      Section 4.4(a)  of the  Note  Purchase  Agreement,  and  the  opinion  of
      Winthrop,  Stimson,  Putnam & Roberts,  special  New York  counsel to the
      Company,  dated the date  hereof  and  delivered  responsive  to  Section
      4.4(b) of the Note Purchase Agreement;

          (e)   The Notes delivered on the date hereof;

          (f)   Such  certificates  of  officers  of the  Company and of public
      officials as we have deemed  necessary  to give the opinions  hereinafter
      expressed; and

          (g)   Such  other  documents  and  matters  of law as we have  deemed
      necessary to give the opinions hereinafter expressed.

      We  believe  that  each  opinion  referred  to in  clause  (d)  above  is
satisfactory  in  scope  and  form  and  that  you  are  justified  in  relying
thereon.  Our opinion as to matters  referred to in paragraph 1  below is based
solely upon an examination of the  Certificate  of  Incorporation,  the By-laws
and the Good Standing  Certificate of the Company and the Business  Corporation
Act of the State of New  Jersey.  We have also  relied,  as to certain  factual
matters,  upon  appropriate  certificates  of public  officials and officers of
the  Company and upon  representations  of the  Company  and you  delivered  in
connection with the issuance and sale of the Notes.

      Based upon the foregoing, we are of the opinion that:

           1.   The  Company is a  corporation,  validly  existing  and in good
      standing  under the laws of the State of New Jersey and has the corporate
      power  and the  corporate  authority  to  execute  and  deliver  the Note
      Purchase Agreement and to issue the Notes.

           2.   The Note  Purchase  Agreement  has been duly  authorized by all
      necessary  corporate  action  on the part of the  Company,  has been duly
      executed and delivered by the Company and  constitutes  the legal,  valid
      and binding  contract of the Company  enforceable in accordance  with its
      terms,  subject to  bankruptcy,  insolvency,  fraudulent  conveyance  and
      similar  laws  affecting   creditors'  rights   generally,   and  general
      principles  of equity  (regardless  of whether  the  application  of such
      principles is considered in a proceeding in equity or at law).

           3.   The Notes have been duly authorized by all necessary  corporate
      action on the part of the Company,  and the Notes being  delivered on the
      date  hereof have been duly  executed  and  delivered  by the Company and
      constitute  the  legal,  valid and  binding  obligations  of the  Company
      enforceable  in  accordance  with their  terms,  subject  to  bankruptcy,
      insolvency,  fraudulent  conveyance and similar laws affecting creditors'
      rights  generally,  and  general  principles  of  equity  (regardless  of
      whether the  application of such principles is considered in a proceeding
      in equity or at law).

           4.   The  issuance,  sale  and  delivery  of  the  Notes  under  the
      circumstances  contemplated by the Note Purchase  Agreement do not, under
      existing law,  require the registration of the Notes under the Securities
      Act of 1933, as amended,  or the  qualification of an indenture under the
      Trust Indenture Act of 1939, as amended.

      Our  opinion  is  limited  to the  laws of the  State  of New  York,  the
Business  Corporation  Act of the State of New Jersey and the  Federal  laws of
the  United  States  and we  express  no  opinion  on  the  laws  of any  other
jurisdiction.

                                  Respectfully submitted,









                        E'TOWN CORPORATION
              7.69% SENIOR NOTES DUE JANUARY 15, 2010
                           SCHEDULE 5.4
                       LIST OF SUBSIDIARIES




                                          State of        Percentage
                                        Incorporation       Owned


E'town Corporation

Elizabethtown Water Company               New Jersey          100%

E'town Properties, Inc.                   Delaware            100%

Applied Water Management, Inc.            New Jersey          100%

Applied Wastewater Services, Inc.         New Jersey          100%

Applied Wastewater Technology, Inc.       New Jersey          100%

Applied Environmental Services, Inc.      New Jersey          100%

Applied Watershed Management, Inc.        New Jersey          100%

Edison Water Company                      New Jersey          100%

Liberty Water Company                     New Jersey          100%

Elizabethtown Water Company

The Mount Holly Water Company             New Jersey          100%











                             SCHEDULE  5.4