DEFERRED COMPENSATION PLAN
                           FOR CERTAIN EMPLOYEES OF
                 ENTERPRISE DIVERSIFIED HOLDINGS INCORPORATED

                               December 21, 1992














                                                  As Amended December 17, 1996


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                               TABLE OF CONTENTS

                                                                           Page
                                                                          Number

1.    Purpose                                                                 1
2.    Definitions Of Terms Used In This Plan                                  1
      (a)   Account
      (b)   Assets
      (c)   Beneficiary
      (d)   Company
      (e)   Compensation
      (f)   Deferred Compensation
      (g)   Disability
      (h)   Employee
      (i)   Pension Plan
      (j)   Plan
3.    Election as to Amount of Compensation That Is To Be Deferred            2
4.    How The Account Is To Be Maintained                                     2
      (a)   Establishment of Account
      (b)   Interest on Assets in the Account
      (c)   Title to be Beneficial Ownership of Assets
5.    Distribution From The Account                                           3
      (a)   Election as to the Commencement of the Distribution
      (b)   Election as to the Timing of the Distribution(s)
      (c)   Distribution in Case of Certain Disability
      (d)   Distribution in Case of Death
      (e)   Request for Change in Distribution
      (f)   Not Terminated if Transferred to Company-Owned Corporation
      (g)   Company may Distribute in Lump-Sum if Distributable Amount
      Less Than $5,000
6.    Unfunded Adjustments to Make Up For Reduced Benefit Under Pension Plan  6
7.    Assignment                                                              6
8.    Plan Does Not Constitute An Employment Agreement                        7
9.    Amendment Or Termination Of The Plan By The Company                     7
10.   What Constitutes Notice                                                 7
11.   Advance Disclaimer Of Any Waiver On The Part Of The Company             7
12.   Effect Of Invalidity Of Any Part Of The Plan                            8
13.   Plan Binding On Any Successor Owner                                     8
14.   Laws Governing This Plan                                                8
15.   Miscellaneous                                                           8

Schedule A - Elections In Connection With Deferral Of Compensation            9
Schedule B - Designation Of Beneficiary(ies)                                  11


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                    DEFERRED COMPENSATION PLAN FOR CERTAIN EMPLOYEES OF
                       ENTERPRISE DIVERSIFIED HOLDINGS INCORPORATED
                                December 21, 1992

1.    Purpose.
      The purpose of this Plan is to provide a method to certain  select and key
employees of the Company to defer compensation as provided herein.
2. Definitions Of Terms Used In This Plan.
      As used in this  Plan,  the  following  words and  phrases  shall have the
meanings indicated:
     (a) "Account" - The Deferred  Compensation Account described in Paragraph 4
of this Plan.
     (b) "Assets" - All  Compensation and interest that have been credited to an
Employee's Account in accordance with Paragraph 4 of this Plan.
     (c) "Beneficiary" - The  individual(s)  and/or  entity(ies)  designated and
defined by Schedule B of the Plan.
     (d) "Company" - Enterprise Diversified Holdings Incorporated. 
     (e)  "Compensation"  - The  total  remuneration  paid  to an  Employee  for
services rendered to the Company, excluding the Company's cost for any public or
private  employee  benefit plan.  Compensation  deferrable under this Plan shall
specifically   include  any  and  all  amounts  transferred  from  the  deferred
compensation   accounts  of  the  Management  Incentive   Compensation  Plan  of
Enterprise Diversified Holdings Incorporated;
     (f) "Deferred  Compensation" - The amount of Compensation deferred pursuant
to Paragraph 3 of this Plan.

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      (g) "Disability" - Disability so as to be incapable of performing  further
work for the Company that results in termination of employment.
      (h) "Employee" - Each employee of the Company as may be designated by the
Company.
      (i) "Pension Plan" - The Pension Plan of Public Service Electric and Gas
Company.
      (j) "Plan" - The Deferred Compensation Plan for Certain Employees of
Enterprise Diversified Holdings Incorporated.

3.  Election As To The Amount Of  Compensation  That Is To Be Deferred. 
    An employee  may elect to defer any portion of his  compensation  otherwise
payable for services rendered for the Company after the date of adoption of this
Plan.
      Any such election must be made by filing with the Company an "Election in
Connection with Deferral of Compensation", the form of which is attached to this
Plan as Schedule A and is  hereinafter  referred to as "Schedule A". An Employee
may change (using Schedule A for such  purposes),  not later than December 31 of
any year, the amount of  Compensation  to be deferred by him with respect to the
next  succeeding  calendar year or years.  In the calendar year that an Employee
first becomes  eligible to participate in this Plan,  such Employee may elect to
defer  Compensation  for part of that calendar year but only if such election is
made  within  thirty  (30) days after the  Employee  first  becomes  eligible to
participate in this Plan.  Compensation may be deferred  prospectively only, and
the amount of  Compensation  to be deferred  may be changed only with respect to
future calendar years.
      4. How The Account Is To Be Maintained.
      (a)  Establishment of Account - The Company shall establish an Account for
each Employee who elects to participate  in the Plan.  Each  Employee's  Account
shall be credited at the end of each month with an amount  equal to the Deferred
Compensation which would have otherwise been payable to him that month.
<PAGE>
      (b)  Interest  on Assets  in the  Account - The  Assets  credited  to each
Employee's Account shall accrue interest each calendar quarter at an annual rate
equal to the rate  charged  by The  Chase  Manhattan  Bank,  N.A.  on the  first
business  day of such  calendar  quarter  for prime  commercial  loans of 90-day
maturity  (based on actual numbers of days,  360 days to the year),  plus 1/2 of
1%.  Such  interest  shall be  computed  on the  average  daily  balance  in the
Employee's Account during each calendar quarter, excluding any Assets which have
been distributed from the Employee's  Account during such quarter,  and shall be
credited  to the  Employee's  Account and  compounded  on the last day of March,
June,  September  and  December,  and  interest  on Assets  distributed  from an
Employee's  Account  shall accrue in the same manner to the date of, be credited
to the Employee's Account on the date of, and be paid with, such distribution.
      (c)  Title to and  Beneficial  Ownership  of  Assets  - The Plan  shall be
unfunded. The Company shall not be required to segregate any amounts credited to
any  Employee's  Account,  which shall be  established  merely as an  accounting
convenience.  Title to and beneficial ownership of any Assets,  whether Deferred
Compensation  or  interest  credited  to  an  Employee's   Account  pursuant  to
Paragraphs 4(a) and (b) herein above,  shall at all times remain in the Company,
and no  Employee  nor  Beneficiary  shall have any  interest  whatsoever  in any
specific assets of the Company.  All Assets shall at all times remain solely the
property  of the  Company  subject to the claims of its  general  creditors  and
available for the Company's use for whatever purpose desired.
      5. Distribution From The Account
      (a) Election as to the  Commencement of the  Distribution - By election on
Schedule A filed with the Company,  an Employee  may elect to have  distribution
from his Account  commence  either (l) within thirty (30) days after the date he
ceases to be employed by the Company or, in the alterative,  (2) in the month of
January of any calendar year following  termination of employment elected by the
Employee,  but in any event,  no later than the later of (a) the  January of the
<PAGE>
year  following  the year of the  Employee's  70th  birthday  or (b) the January
following  termination  of  employment.  An Employee may change such election by
filing a  subsequent  Schedule A, but any such change shall apply only to future
deferrals.  The actual date that  distribution  shall  commence  shall be a date
within  the  elected  period  to be  determined  by  the  Company  in  its  sole
discretion.
      (b)  Election  as to the Timing of the  Distribution(s)  - By  election on
Schedule  A filed  with  the  Company  an  Employee  may  elect to  receive  the
distribution of his Account in the form of (l) one lump-sum payment,  (2) annual
distributions over a five-year period or (3) annual distributions over a 10-year
period. An Employee may change such election by filing a subsequent  Schedule A,
but any such  change  shall  apply  only to  future  deferrals.  In the  event a
lump-sum  payment is made under this Plan, the Assets  credited to an Employee's
Account,  including interest at the rate provided in Paragraph 4(b) of this Plan
to the  date  of  distribution,  shall  be  paid  to the  Employee  on the  date
determined under Paragraph S(a) of this Plan. In the case of a distribution over
a period of years,  the Company shall pay to the Employee on the date determined
under Paragraph S(a) of this Plan and on the yearly  anniversaries of such date,
annual  installments   of the unpaid   balance of the  Assets in the  Employee's
Account,  including  interest  on the  unpaid  balance at the rate  provided  in
Paragraph  4(b) of this  Plan to the date of  distribution.  The  amount of each
installment  shall be determined by multiplying  the then unpaid  balance,  plus
accrued  interest,  in the  Employee's  Account by a fraction,  the numerator of
which is one and the  denominator of which is the number of annual  installments
remaining to be paid.
      (c)  Distribution  in Case of  Certain  Disability  - In the  event  of an
Employee's  Disability  prior to a calendar  year elected by the Employee  under
Paragraph S(a)(2) of this Plan for distribution to commence, distribution of the
Employee's  Account shall commence in the month following the month in which the
Employee terminates employment for disability, in accordance with the Employee's
election under Paragraph 5(b) of this Plan as to the form of  distribution.  The
actual date that  distribution  shall commence shall be a date within such month
determined by the Company in its sole discretion.

<PAGE>
      (d)  Distribution in Case of Death - In the event of an Employee's  death,
the balance of the Employee's Account  shall be  distributed  to the  Employee's
Beneficiary(ies)  over a period of not more than five (S) years,  in  accordance
with his election on Schedules A and B (filed with the Company) for distribution
in case of death.  Any change in the period  over which such  payments  are made
shall  only  apply to future  deferrals.  Such  distribution  shall be made in a
manner  consistent  with  Paragraph  S(b) of this Plan and shall commence in the
month of January of the year after the year of the Employee's  death,  on a date
within  said  month to be  determined  by the  Company  in its sole  discretion.
Additional annual payment for distributions  made over a period of more than one
year shall be made on the yearly  anniversaries of such date. In the event of an
Employee's death after  distribution of his Account has commenced,  any election
under this  Paragraph  S(d) shall not extend the time of payment of his  Account
beyond the time when distribution  would have been completed if he had lived. An
Employee may change Beneficiary  designations by filing a subsequent  Schedule B
with the Company.
      (e) Request for Change in  Distribution  - An Employee,  Beneficiary  or a
legal representative may request a change in the timing,  frequency or amount of
payments made from an Employee's  Account by filing a written  request  therefor
with the  Company.  The Company may, in it sole  discretion,  grant such request
only if the  Company  determines  that an  emergency  beyond the  control of the
Employee,  Beneficiary or legal representative exists and which would cause such
Employee,  Beneficiary or legal representative  severe financial hardship if the
payment of such benefits were not approved.  Any such  distribution for hardship
shall be limited to the amount  needed to meet such  emergency.  An Employee who
makes a hardship  withdrawal  may not reenter  this Plan for 12 months after the
date of withdrawal.  Any  distribution  under this Paragraph S(e) shall commence
within 30 days after the Company grants such request for hardship withdrawal.
<PAGE>
      (f) Employment not Terminated if Transferred to  Company-owned or Commonly
Controlled  Corporation.  - For the  purposes of this  Paragraph  5, an Employee
shall not be deemed to have  terminated  his  employment if he is transferred to
the  employ  of a  corporation  in which the  Company  owned a  majority  equity
interest  or  in  which  a  majority  equity  interest  is  owned,  directly  or
indirectly, by a company under common control with the Company.
      (g) Company may Distribute in Lump-Sum if  Distributable  Amount Less Than
$5,000  The  Company  reserves  the  right  to  make  a  lump-sum  distribution,
notwithstanding  any other  provision  of this Plan,  if the total  Assets in an
Employee's  Account are $5,000 or less at any time after the Employee  ceases to
be employed by the Company.
      6. Unfunded Adjustments To Make Up For Reduced Benefit Under Pension Plan.
If an Employee, on termination of employment or thereafter,  or a Beneficiary of
the  Employee  under the Pension  Plan,  is  entitled  to any benefit  under the
Pension Plan,  the Company  shall pay out of its general  funds a  supplementary
benefit (as such time after the Employee's  retirement and in such manner as the
Company in its sole discretion shall determine)  equivalent to the excess of the
amount computed in (a) below over the amount computed in (b) below:
      (a) The benefit to which the Employee or such Beneficiary  would have been
entitled if the Employee's  Final Earnings,  as defined in the Pension Plan, had
included all  Compensation  earned  which would have been  included in his Final
Earnings if this Plan were not in effect.
      (b) The  actual  benefit  to which the  Employee  or such  Beneficiary  is
entitled under the Pension Plan.
      7.    Assignment.
      No  benefit  under  the  Plan  shall in any  manner  or to any  extent  be
assigned,  alienated,  or transferred  by any Employee or Beneficiary  under the
Plan or subject to attachment, garnishment or other legal process.
<PAGE>
      8. Plan Does Not Constitute An Employment Agreement.
      This Plan shall not constitute a contract for the continued  employment of
any  Employee  by the  Company.  The  Company  reserves  the  right to modify an
Employee's  compensation  at any  time  and  from  time to time as it  considers
appropriate  and to  terminate  its  employment  for  any  reason  at  any  time
notwithstanding this Plan.
      9. Amendment Or Termination Of The Plan By The Company.
      The Board of Directors of the Company may, in its sole discretion,  amend,
modify  or  terminate  this Plan at any time,  provided,  however,  that no such
amendment,  modification or termination  shall  materially  adversely affect the
right of an Employee in respect of Deferred  Compensation  previously  earned by
him which has not been paid,  unless such  Employee or his legal  representative
shall consent to such change.
      10.   What Constitutes Notice.
Any notice to an Employee,  Beneficiary or legal representative  hereunder shall
be give either by  delivering  it or by depositing it in the United States mail,
postage prepaid,  addressed to his last-known address. Any notice to the Company
hereunder  (including  the filing of Schedules A and B) shall be given either by
delivering it, or depositing it in the United States mail,  postage prepaid,  to
the Secretary of the Company,  c/o Public Service Enterprise Group Incorporated,
80 Park Plaza, T-4B, P.O. Box 570, Newark, New Jersey 07101.
      11. Advance  Disclaimer Of Any Waiver On The Part Of The Company.  
     Failure by the  Company to insist upon  strict  compliance  with any of the
terms,  covenants or conditions  hereof shall not be deemed a waiver of any such
term, covenant or condition, nor shall any waiver or relinquishment of any right
or power hereunder at any one or more times be deemed a waiver or relinquishment
of any such right or power at any other time or times.
<PAGE>
      12. Effect On Invalidity Of Any Part Of The Plan.
The  invalidity  or  unenforceability  of any  provision  hereof shall in no way
affect the validity or enforceability of any other provision.
      13.   Plan Binding On Any Successor Owner.
Except as otherwise provided herein, this Plan shall inure to the benefit of and
be binding upon the Company,  its  successors  and  assigns,  including  but not
limited to any  corporation  which may acquire all or  substantially  all of the
Company's  assets  and  business  or with  or  into  which  the  Company  may be
consolidated or merged.
      14.   Laws Governing This Plan.
      Except to the extent  federal law applies,  this Plan shall be governed by
the laws of the State of New Jersey.
      15.   Miscellaneous.
      The masculine pronoun shall mean the feminine wherever appropriate.

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                                                                      Schedule A
                    DEFERRED COMPENSATION PLAN FOR CERTAIN EMPLOYEES OF
                 ENTERPRISE DIVERSIFIED HOLDINGS INCORPORATED (THE PLAN)

                   Elections in Connection with Deferral of Compensation
Section 1.  Election as to Compensation to be Deferred.
Note:       THIS SECTION IS TO BE USED TO MAKE OR CHANGE AN ELECTION UNDER
            PARAGRAPH  3 OF THE PLAN,  ANY  CHANGE IN  ELECTION  MUST BE MADE
            NO LATER THAN DECEMBER 31 OF THE YEAR PRECEDING THE YEAR IN
            WHICH YOU WISH THE CHANGE TO APPLY.

            I hereby elect to defer, in accordance with the provisions of the
            Plan:
            (a)           a month of my Compensation; or
            (b)           All of my Compensation in excess of S        per year.
             $            per year.

Section 2.  Election as to Commencement of Distribution From Account
Note:       THIS  SECTION  IS TO BE USED  (A)  WHEN  FIRST  BECOMING  AN
            EMPLOYEE COVERED BY THE PLAN AND (B) PRIOR TO DECEMBER 31 OF
            ANY GIVEN YEAR IF THERE IS TO BE ANY CHANGE IN THE  ORIGINAL
            ELECTION.   ANY  SUCH  CHANGE  WILL  ONLY  APPLY  TO  FUTURE
            DEFERRALS.

            I hereby  elect,  in accordance  with the  provisions of the Plan,
            to have distribution from my Account commence:

            (a) Within  thirty (30) days after I cease to be employed by the
            Company.
            (b) In the month of January, unless I am employed by the Company
            at such  time,  in which  case  within  30 days  after I cease to be
            employed by the Company.

                                                            Employee's Initials

                                                            Date





<PAGE>


                                                                      Schedule A
Section 3.  Election as to the Timing of the Distribution.
Note:       THIS  SECTION  IS TO BE USED  (A)  WHEN  FIRST  BECOMING  AN
            EMPLOYEE COVERED BY THE PLAN AND (B) PRIOR TO DECEMBER 31 OF
            ANY GIVEN YEAR IF THERE IS TO BE ANY CHANGE IN THE  ORIGINAL
            ELECTION.   ANY  SUCH  CHANGE  WILL  ONLY  APPLY  TO  FUTURE
            DEFERRALS.

            I hereby elect, in accordance with the provisions of the Plan, to
            have the distribution of my Account paid:
            (a) In one lump-sum.
            (b) In annual  installments  over a period of five (S)        years.
            (c) In annual installments over a period of ten (10) years.

Section 4.  Election As To Method Of Distribution In Case of Death.
Note:       THIS SECTION TO BE USED TO SELECT THE METHOD OF DISTRIBUTION IN
            THE CASE OF DEATH. PERIOD SELECTED MAY NOT BE MORE THAN FIVE
            (5) YEARS.

               In case of my  death,  I hereby  elect,  in  accordance  with the
provisions  of the Plan,  to have the  distribution  of my  Account  paid over a
period of year(s) to my Beneficiary(ies) designated on Schedule B.

___________________, 19___



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WITNESS                                   EMPLOYEE SIGNATURE


<PAGE>


                                                                Schedule B

SECONDARY  BENEFICIARIES  - The  following  beneficiary(ies)  shall  receive all
benefits  payable  under  the Plan in the  event of my death in the  proportions
designated  hereunder only if all of my Primary  Beneficiaries  have predeceased
me. If all Primary  Beneficiaries  have predeceased me and if any one or more of
the Secondary  Beneficiaries  designated  hereunder  shall  predecease  me, such
Secondary  Beneficiary's  share(s) shall be divided  equally among the Secondary
Beneficiaries.

   NAME AND PRESENT                 PROPORTIONATE INTEREST
ADDRESS OF PRIMARY                       OF PRIMARY              RELATIONSHIP
  BENEFICIARY(IES)                     BENEFICIARY(IES)            TO EMPLOYEE

-------------------------               ----------%            ---------------

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

-------------------------               ----------%            ---------------

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

-------------------------               ----------%            ---------------

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

-------------------------               ----------%            ---------------

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


                                               
      ESTATE - In the event I have declined to designate a Beneficiary hereunder
or if all of the  Beneficiaries  that I have designated  predecease me, then all
benefits payable under the Plan shall be payable to my Estate.

Date:




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WITNESS                                   EMPLOYEE SIGNATURE