M O R T G A G E




                       TWENTY-SIXTH SUPPLEMENTAL INDENTURE



                             MIDDLESEX WATER COMPANY


                                       TO



                            FIRST UNION NATIONAL BANK
                                     Trustee




                          Dated as of October 15, 1999



                                                     Record and Return to:

                                                     Peter D. Hutcheon, Esq.
                                                     Norris, McLaughlin & Marcus
                                                     721 Route 202/206
                                                     P.O. Box 1018
                                                     Somerville, NJ  08876
                                                     (908) 722-0700



Prepared By:________________________
            Peter D. Hutcheon, Esq.



<PAGE>

                  THIS  TWENTY-SIXTH  SUPPLEMENTAL  INDENTURE,  dated  as of the
Fifteenth day of October 1999,  between  MIDDLESEX WATER COMPANY,  a corporation
organized  and  existing  under the laws of the State of New Jersey,  having its
principal office in the Township of Iselin, New Jersey (herein called the "Water
Company"),  and FIRST UNION  NATIONAL  BANK, (as successor to Meridian Bank, the
successor to United  Counties  Trust  Company in turn the successor to the Union
County Trust  Company),  a corporation  organized and existing under the laws of
the United States, having its principal New Jersey corporate trust office in the
Town of  Morristown,  New Jersey,  as Trustee  under the  Indenture  of Mortgage
hereinafter mentioned (herein called the "Trustee"):

                  WHEREAS,   on  April  1,  1927,  Water  Company  executed  and
delivered to the Trustee an Indenture of Mortgage (herein called the "Mortgage")
to secure its First and Refunding Mortgage Gold Bonds,  Series A, 5-1/2%,  which
bonds have since been redeemed by Water  Company,  and which  Mortgage  provides
that bonds of other  series may be issued  under and  pursuant  to an  indenture
supplemental thereto; and

                  WHEREAS, on May 14, 1935, Water Company executed and delivered
to the  Trustee  a  Supplemental  Indenture  to secure  its First and  Refunding
Mortgage Bonds,  Series B, 4-1/2%,  which Supplemental  Indenture,  prior to the
execution and delivery hereof,  was satisfied and discharged of record, no bonds
having been issued thereunder; and

                  WHEREAS,  as of October 1, 1939,  Water  Company  executed and
delivered to the Trustee a Second  Supplemental  Indenture  of Mortgage  (herein
called the "Second  Supplemental  Indenture")  to secure its First and Refunding
Mortgage  3-3/4%  Bonds,  Series C (herein  called the "Series C Bonds"),  which
bonds were paid at maturity by Water Company, and otherwise modifying,  amending
and supplementing the Mortgage; and

                  WHEREAS,  as of April 1,  1946,  Water  Company  executed  and
delivered  to the Trustee a Third  Supplemental  Indenture  of Mortgage  (herein
called the "Third  Supplemental  Indenture")  to secure its First and  Refunding
Mortgage 3% Bonds,  Series D (herein  called the "Series D Bonds"),  which bonds
were paid at maturity by Water Company,  and otherwise  modifying,  amending and
supplementing the Mortgage; and

                  WHEREAS,  as of April 1,  1949,  Water  Company  executed  and
delivered to the Trustee a Fourth  Supplemental  Indenture  of Mortgage  (herein
called the "Fourth Supplemental  Indenture") to secure its First Mortgage 3-1/2%
Bonds,  Series E (herein called the "Series E Bonds"),  which bonds were paid at
maturity by Water Company, and otherwise  modifying,  amending and supplementing
the Mortgage; and

             WHEREAS,  as of  February  1,  1955,  Water  Company  executed  and
delivered  to the Trustee a Fifth  Supplemental  Indenture  of Mortgage  (herein
called the "Fifth  Supplemental  Indenture") to secure its First Mortgage 3-5/8%
Bonds,  Series F (herein called the "Series F Bonds"),  which bonds were paid at
maturity by Water Company, and otherwise supplementing the Mortgage; and

                  WHEREAS,  as of December 1, 1959,  Water Company  executed and
delivered  to the Trustee a Sixth  Supplemental  Indenture  of Mortgage  (herein
called the "Sixth  Supplemental  Indenture") to secure its First Mortgage 5-3/4%
Bonds,  Series G (herein  called the  "Series G Bonds"),  which bonds have since
been redeemed by Water Company, and otherwise supplementing the Mortgage; and
<PAGE>
                  WHEREAS,  as of January 15, 1963,  Water Company  executed and
delivered to the Trustee a Seventh  Supplemental  Indenture of Mortgage  (herein
called the "Seventh Supplemental Indenture") to secure its First Mortgage 4-1/2%
Bonds,  Series H (herein called the "Series H Bonds"),  which bonds were paid at
maturity by Water Company and otherwise supplementing the Mortgage; and

                  WHEREAS,  as of July  1,  1964,  Water  Company  executed  and
delivered to the Trustee, an Eighth  Supplemental  Indenture of Mortgage (herein
called the "Eighth Supplemental  Indenture") to secure its First Mortgage 4 3/4%
Bonds,  Series I (herein  called the  "Series I Bonds"),  which bonds have since
been redeemed by Water Company, and otherwise supplementing the Mortgage; and

                  WHEREAS,  as of June  1,  1965,  Water  Company  executed  and
delivered  to the Trustee a Ninth  Supplemental  Indenture  of Mortgage  (herein
called the "Ninth  Supplemental  Indenture") to secure its First Mortgage 4-3/4%
Bonds,  Series J (herein  called the  "Series J Bonds"),  which bonds have since
been redeemed by Water Company, and otherwise supplementing the Mortgage; and

                  WHEREAS,  as of February 1, 1968,  Water Company  executed and
delivered  to the Trustee a Tenth  Supplemental  Indenture  of Mortgage  (herein
called the "Tenth  Supplemental  Indenture") to secure its First Mortgage 6-3/4%
Bonds,   Series  K  (herein   called  the  "Series  K  Bonds"),   and  otherwise
supplementing the Mortgage; and

                  WHEREAS,  as of December 1, 1968,  Water Company  executed and
delivered to the Trustee an Eleventh Supplemental  Indenture of Mortgage (herein
called the  "Eleventh  Supplemental  Indenture")  to secure  its First  Mortgage
6-7/8% Bonds,  Series L (herein  called the "Series L Bonds"),  which bonds have
since been redeemed by Water Company, and otherwise  supplementing the Mortgage;
and

                  WHEREAS,  as of December 1, 1970,  Water Company  executed and
delivered to the Trustee a Twelfth  Supplemental  Indenture of Mortgage  (herein
called the "Twelfth  Supplemental  Indenture")  to secure its First Mortgage 10%
Bonds,  Series M (herein  called the  "Series M Bonds"),  which bonds have since
been redeemed by Water Company, and otherwise supplementing the Mortgage; and

                  WHEREAS,  as of December 1, 1972,  Water Company  executed and
delivered to the Trustee a Thirteenth Supplemental Indenture of Mortgage (herein
called the  "Thirteenth  Supplemental  Indenture")  to secure its First Mortgage
8-1/8% Bonds,  Series N (herein  called the "Series N Bonds"),  which bonds have
since been redeemed by Water Company, and otherwise  supplementing the Mortgage;
and

                  WHEREAS,  as of April 1,  1979,  Water  Company  executed  and
delivered to the Trustee a Fourteenth Supplemental Indenture of Mortgage (herein
called the "Fourteenth  Supplemental Indenture") to secure its First Mortgage 7%
Bonds,  Series 0 (herein  called the  "Series 0 Bonds"),  which bonds have since
been redeemed by Water Company, and otherwise supplementing the Mortgage; and

                  WHEREAS,  as of April 1,  1983,  Water  Company  executed  and
delivered to the Trustee a Fifteenth  Supplemental Indenture of Mortgage (herein
called the  "Fifteenth  Supplemental  Indenture")  to secure its First  Mortgage
10-1/2% Bonds,  Series P (herein called the "Series P Bonds"),  which bonds have
since been redeemed by Water Company, and otherwise  supplementing the Mortgage;
and
<PAGE>
                  WHEREAS,  as of August 1, 1988,  Water  Company  executed  and
delivered to the Trustee a Sixteenth  Supplemental Indenture of Mortgage (herein
called the "Sixteenth  Supplemental  Indenture") to secure its First Mortgage 8%
Bonds,  Series Q (herein  called the  "Series Q Bonds"),  which bonds have since
been redeemed by Water Company, and otherwise supplementing the Mortgage; and

                  WHEREAS,  as of June 15,  1991,  Water  Company  executed  and
delivered  to the  Trustee a  Seventeenth  Supplemental  Indenture  of  Mortgage
(herein  called the  "Seventeenth  Supplemental  Indenture") to secure its First
Mortgage  7.25%  Bonds,  Series R (herein  called  the  "Series  R  Bonds")  and
otherwise supplementing the Mortgage; and

                  WHEREAS,  as of March 1,  1993,  Water  Company  executed  and
delivered to the Trustee a Supplementary  Indenture of Mortgage to the Fifteenth
Supplemental  Indenture of Mortgage (herein called the "Supplementary  Indenture
to the Fifteenth  Supplemental  Indenture") to secure its First Mortgage 2 7/8%,
Series P-1 (herein  called the "Series P-1 Bonds"),  which bonds have since been
redeemed by Water Company, and otherwise supplementing the Mortgage.

                  WHEREAS,  as of September 1, 1993,  Water Company executed and
delivered  to the  Trustee an  Eighteenth  Supplemental  Indenture  of  Mortgage
(herein  called the  "Eighteenth  Supplemental  Indenture")  to secure its First
Mortgage  5.20%  Bonds,  Series S (herein  called  the  "Series S  Bonds"),  and
otherwise supplementing the Mortgage; and

                  WHEREAS,  as of September 1, 1993,  Water Company executed and
delivered to the Trustee a Nineteenth Supplemental Indenture of Mortgage (herein
called the  "Nineteenth  Supplemental  Indenture")  to secure its First Mortgage
5.25%  Bonds,  Series T (herein  called  the  "Series T Bonds"),  and  otherwise
supplementing the Mortgage; and

                  WHEREAS,  as of January 1, 1994,  Water  Company  executed and
delivered  to Trustee a Twentieth  Supplemental  Indenture  of Mortgage  (herein
called the "Twentieth Supplemental Indenture") to secure its First Mortgage 6.4%
Bonds,   Series  U  (herein   called  the  "Series  U  Bonds"),   and  otherwise
supplementing the Mortgage; and

                  WHEREAS,  as of January 1, 1994,  Water  Company  executed and
delivered to Trustee a Twenty-First  Supplemental  Indenture of Mortgage (herein
called the "Twenty-First  Supplemental  Indenture") to secure its First Mortgage
5.25%  Bonds,  Series V (herein  called  the  "Series V Bonds"),  and  otherwise
supplementing the Mortgage; and

                  WHEREAS,  as of March 1,  1998,  Water  Company  executed  and
delivered to Trustee a Twenty-Second  Supplemental Indenture of Mortgage (herein
called the "Twenty-Second  Supplemental Indenture") to secure its First Mortgage
5.35%  Bonds,  Series W (herein  called  the  "Series W Bonds"),  and  otherwise
supplementing the Mortgage; and

                  WHEREAS,  as of October 15, 1998,  Water Company  executed and
delivered to Trustee a Twenty-Third  Supplemental  Indenture of Mortgage (herein
called the "Twenty-Third  Supplemental  Indenture") to secure its First Mortgage
0%  Bond,  Series  X  (herein  called  the  "Series  X  Bond"),   and  otherwise
supplementing the Mortgage; and
<PAGE>
                  WHEREAS,  as of October 15, 1998,  Water Company  executed and
delivered to Trustee a Twenty-Fourth  Supplemental Indenture of Mortgage (herein
called the "Twenty-Fourth  Supplemental Indenture") to secure its First Mortgage
Scheduled  Interest Rate Bond, Series Y (herein called the "Series Y Bond"), and
otherwise supplementing the Mortgage; and

                  WHEREAS,  as of October  15,1999,  Water Company  executed and
delivered to Trustee a Twenty-Fifth  Supplemental  Indenture of Mortgage (herein
called the "Twenty-Fifth  Supplemental  Indenture") to secure its First Mortgage
0%  Bond,  Series  Z  (herein  called  the  "Series  Z  Bond"),   and  otherwise
supplementing the Mortgage; and

                  WHEREAS,  Water Company deems it necessary to borrow money and
to  issue  its  bonds  therefor,  to be  secured  by the  Mortgage,  the  Second
Supplemental   Indenture,   the  Third   Supplemental   Indenture,   the  Fourth
Supplemental Indenture, the Fifth Supplemental Indenture, the Sixth Supplemental
Indenture,   the  Seventh  Supplemental   Indenture,   the  Eighth  Supplemental
Indenture,  the Ninth Supplemental Indenture,  the Tenth Supplemental Indenture,
the Eleventh Supplemental  Indenture,  the Twelfth Supplemental  Indenture,  the
Thirteenth  Supplemental Indenture,  the Fourteenth Supplemental Indenture,  the
Fifteenth  Supplemental  Indenture,  the Sixteenth Supplemental  Indenture,  the
Seventeenth Supplemental Indenture, the Supplementary Indenture to the Fifteenth
Supplemental Indenture and the Eighteenth,  the Nineteenth,  the Twentieth,  the
Twenty-First,  the  Twenty-Second,  the Twenty-Third,  the Twenty-Fourth and the
Twenty-Fifth  Supplemental  Indentures  and by  this  Twenty-Sixth  Supplemental
Indenture;

                  WHEREAS,  Water  Company  desires  to  authorize  and create a
series  of  bonds  under  which a single  bond  shall be  issued  limited  to an
aggregate principal amount of $2,350,000.00 designated Series AA and to be known
as its "First Mortgage Scheduled Interest Rates Bonds, Series AA" (herein called
the "Series AA Bond"),  it being the intention of the parties that the Series AA
Bond shall,  together  with all other Bonds  issued  under the  Mortgage and all
indentures  supplemental  thereto,  be  entitled  to  priority  over  all  other
obligations  of the Water  Company and shall be secured by a prior first lien on
all the  mortgaged  property,  subject  only  to the  prior  liens  specifically
permitted under the Mortgage or under any indenture supplemental thereto; and

                  WHEREAS,  Water Company  desires that the Series AA Bond shall
be issued to fund payment of the principal of  $2,350,000.00,  the amount of the
Loan  borrowed  from the New  Jersey  Environmental  Infrastructure  Trust  (the
"Trust")  under the Loan  Agreement  dated as of  November  1,  1999 (the  "Loan
Agreement")  by and  between  the Trust and the Water  Company,  or such  lesser
amount  as shall be  determined  in  accordance  with  Section  3.01 of the Loan
Agreement,  plus any other amounts due and owing under the Loan Agreement at the
time and in the amounts as provided  therein,  which  principal  amount is to be
applied  for the  cleaning  and  lining of  certain  pipes  and mains  which are
utilized by Water Company for the  furnishing of water in its New Jersey service
area; and

                  WHEREAS,  the Trust requires as a condition of making the loan
documented by the Loan Agreement,  that a single Series AA Bond be issued to the
Trust,  that such Bond  evidence the payment  obligations  of the Water  Company
under Section 3.03(a) of the Loan  Agreement,  that payments under the Series AA
Bond be made to the Loan  Servicer  (as defined in the Loan  Agreement)  for the
account of the  Trust,  that the  Series AA Bond be  subject  to  assignment  or
transfer in  accordance  with the terms of the Loan  Agreement,  that all of the

<PAGE>
terms, conditions and provisions of the Loan Agreement be expressly incorporated
by reference into the Series AA Bond,  that the obligations of the Water Company
under the  Series AA Bond  shall be  absolute  and  unconditional,  without  any
defense or right of set-off,  counterclaim or recoupment by reason of default by
the Trust  under the Loan  Agreement  or under any other  agreement  between the
Water Company and the Trust or out of any  indebtedness or liability at any time
owing to the Water Company or for any other  reason,  that the Series AA Bond be
subject to optional prepayment under the terms and conditions and in the amounts
provided in Section 3.07 of the Loan Agreement,  and that the Series AA Bond may
be subject to  acceleration  under the terms and  conditions and in the amounts,
provided in Section 5.03 of the Loan Agreement; and

                  WHEREAS,   Water   Company   represents   that  all  acts  and
proceedings required by law and by the Charter and By-Laws of Water Company, and
by the Mortgage and the Second, Third, Fourth,  Fifth, Sixth,  Seventh,  Eighth,
Ninth, Tenth, Eleventh, Twelfth, Thirteenth,  Fourteenth,  Fifteenth, Sixteenth,
Seventeenth  Supplemental   Indentures,   the  Supplementary  Indenture  to  the
Fifteenth  Supplemental  Indenture,  and the  Eighteenth,  the  Nineteenth,  the
Twentieth,   the  Twenty-First,   the  Twenty-Second,   the  Twenty-Third,   the
Twenty-Fourth  and the  Twenty-Fifth  Supplemental  Indentures  (to  the  extent
applicable)  necessary  to make the  Series  AA  Bond,  when  executed  by Water
Company, authenticated and delivered by the Trustee, and duly issued, the valid,
binding  and  legal   obligations  of  Water  Company  and  to  constitute  this
Twenty-Sixth  Supplemental  Indenture  a valid  and  binding  supplement  to the
Mortgage and the Second, Third, Fourth,  Fifth, Sixth,  Seventh,  Eighth, Ninth,
Tenth,  Eleventh,  Twelfth,  Thirteenth,   Fourteenth,   Fifteenth,   Sixteenth,
Seventeenth  Supplemental   Indentures,   the  Supplementary  Indenture  to  the
Fifteenth  Supplemental  Indenture  and  the  Eighteenth,  the  Nineteenth,  the
Twentieth, the Twenty-First, Twenty-Second,  Twenty-Third, the Twenty-Fourth and
the Twenty-Fifth Supplemental Indentures in accordance with its and their terms,
for the security of all bonds issued and which may hereafter be issued  pursuant
to the  Mortgage and all  indentures  supplemental  thereto,  have been done and
performed;  and the  execution  and delivery of this  Twenty-Sixth  Supplemental
Indenture have been in all respects duly authorized;

                  NOW  THEREFORE,  THIS  INDENTURE  WITNESSETH,  that for and in
consideration  of the  premises,  and of the sum of One Dollar  ($1.00),  lawful
money of the United States of America, by each of the parties paid to the other,
at or before the delivery  hereof,  and for other  valuable  consideration,  the
receipt  and  sufficiency  whereof is hereby  acknowledged,  Water  Company  has
executed  and  delivered  this  Twenty-Sixth  Supplemental  Indenture,  and  has
granted,  bargained,  sold, aliened,  enfeoffed,  conveyed and confirmed, and by
these presents does grant, bargain,  sell, alien,  enfeoff,  convey and confirm,
unto to the Trustee,  its successors and assigns  forever,  all real property of
Water  Company,   together  with  all  appurtenances   and  contracts,   rights,
privileges,  permits  and  franchises  used or  useful  in  connection  with the
business of the Water  Company as a water  company or as a water utility or used
directly for the purpose of supplying water, granted,  bargained, sold, aliened,
enfeoffed,  conveyed  and  confirmed  unto the Trustee by the  Mortgage  and the
Second, Third, Fourth, Fifth, Sixth,  Seventh,  Eighth, Ninth, Tenth,  Eleventh,
Twelfth, Thirteenth,  Fourteenth, Fifteenth, Sixteenth, Seventeenth Supplemental
Indentures,  and  the  Supplementary  Indenture  to the  Fifteenth  Supplemental
Indenture and the Eighteenth,  the Nineteenth,  the Twentieth, the Twenty-First,
the  Twenty-Second,   Twenty-Third,   the  Twenty-Fourth  and  the  Twenty-Fifth
Supplemental  Indentures,  or intended to be (including  without  limitation all
such property  acquired by Water  Company  since October 15, 1999,  and all such

<PAGE>
property  which Water  Company may  hereafter  acquire),  subject,  however,  to
Permissible  Encumbrances,  and excepting all Property  heretofore released from
the lien of the Mortgage and the indentures  supplemental thereto, and excepting
all property of Water Company which is not used or useful in connection with its
business  as a water  company  or as a  water  utility  as well as all  personal
property (both tangible and intangible) as to which a security  interest may not
be perfected by a filing under the Uniform  Commercial  Code as in effect in the
State of New Jersey;

                  TO  HAVE  AND TO HOLD  all  and  singular  the  above  granted
property,  unto the  Trustee,  its  successors  and assigns  forever,  IN TRUST,
nevertheless,  for the  equal  and  proportionate  use,  benefit,  security  and
protection  of those who from time to time shall hold any bonds  which have been
or may be issued  under the  Mortgage  or any  indenture  supplemental  thereto,
without  any  discrimination,  preference  or  priority of any one bond over any
other by reason of priority in the time of issue, sale or negotiation thereof or
otherwise,  except as otherwise in the Mortgage or in any indenture supplemental
thereto provided; and in trust for enforcing the payment of the principal of and
the interest on such bonds,  according  to the tenor,  purport and effect of the
bonds  and of the  Mortgage  and all  indentures  supplemental  thereto  and for
enforcing the terms,  provisions,  covenants and stipulations therein and in the
bonds set  forth;  and upon the  trust,  uses and  purposes  and  subject to the
covenants,  agreements  and conditions set forth and declared in the Mortgage as
modified, amended and supplemented by all indentures supplemental thereto;

                  AND the parties do hereby covenant and agree that the Mortgage
and the Second,  Third, Fourth,  Fifth, Sixth,  Seventh,  Eighth,  Ninth, Tenth,
Eleventh, Twelfth, Thirteenth,  Fourteenth,  Fifteenth,  Sixteenth,  Seventeenth
Supplemental   Indentures,   the   Supplementary   Indenture  to  the  Fifteenth
Supplemental Indenture and the Eighteenth,  the Nineteenth,  the Twentieth,  the
Twenty-First,   the   Twenty-Second,   Twenty-Third,   the   Twenty-Fourth   and
Twenty-Fifth   Supplemental   Indentures  be  and  hereby  are  supplemented  as
hereinafter  provided,  and that the above  granted  property  is to be held and
applied subject to the covenants,  conditions,  uses and trusts set forth in the
Mortgage, as modified,  amended and supplemented by such Supplemental Indentures
and this Twenty-Sixth  Supplemental Indenture;  and Water Company for itself and
its successors does hereby  covenant and agree to and with the Trustee,  and its
successors  in said  trust,  for the equal  benefit  of all  present  and future
holders and  registered  owners of the bonds  issued  under the Mortgage and all
indentures supplemental thereto, as follows:

                                    ARTICLE I

             First Mortgage Scheduled Interest Rates Bond, Series AA

                  Section 1. Water Company  hereby  creates a series of bonds to
be issued under and secured by the Mortgage,  the Second,  Third, Fourth, Fifth,
Sixth, Seventh, Eighth, Ninth, Tenth, Eleventh, Twelfth, Thirteenth, Fourteenth,
Fifteenth, Sixteenth, and Seventeenth Supplemental Indentures, the Supplementary
Indenture  to  the  Fifteenth  Supplemental  Indenture,   the  Eighteenth,   the
Nineteenth,   the  Twentieth,   the   Twenty-First,   the   Twenty-Second,   the
Twenty-Third,  the Twenty-Fourth and Twenty-Fifth Supplemental Indentures and by
this  Twenty-Sixth  Supplemental  Indenture,  and to be designated as, and to be
distinguished  from the bonds of all other series by the title,  "First Mortgage
Scheduled  Interest  Rates Bond,  Series AA". The Series AA Bond shall be issued

<PAGE>
only as a single  registered bond without coupons in the principal amount of the
Loan under the Loan Agreement;  shall be dated as of November 1, 1999; and shall
be issued in  non-negotiable  form to the  Trust.  The Series AA Bond shall bear
interest from the date of issuance of the Series AA Bond,  computed on the basis
of a 360-day year composed of twelve 30-day months until the  obligations of the
Water Company with respect to the payment of principal  shall be discharged,  in
the dollar amount set forth for each respective  payment period under the column
heading "Interest" in Exhibit A-2 to the Loan Agreement, shall be payable as set
forth below, shall state that, subject to certain limitations,  the Mortgage and
all indentures supplemental thereto may be modified,  amended or supplemented as
provided in the Mortgage as heretofore  supplemented;  shall mature on September
15, 2019, and shall be earlier redeemable (i) under the terms and conditions and
in the amounts  provided in Section 3.07 of the Loan  Agreement at the option of
the Water Company with, to the extent required by the July 28,1998 Order (Docket
No.  WF99050343)  of the Board of Public  Utilities  of the State of New  Jersey
("BPU")  and/or  required  by then  applicable  law and  regulations,  the prior
approval  of the BPU,  (ii) as,  when and to the  extent  mandated  pursuant  to
subsection B of Section 4 of Article VIII of the Second Supplemental  Indenture;
and shall be subject to,  entitled to the benefit of, and expressly  incorporate
by reference, all of the terms, conditions and provisions of the Loan Agreement.

         The Series AA Bond shall evidence the obligation to pay to the order of
the Trust the  principal  amount of the Loan (as defined in the Loan  Agreement)
made by the Trust under the Loan Agreement which shall be  $2,350,000.00 or such
lesser  amount  as  determined  in  accordance  with  Section  3.01 of the  Loan
Agreement,  at the times and in the amounts  determined  as provided in the Loan
Agreement,  plus any other amounts due and owing under the Loan Agreement at the
times and in the  amounts as  provided  therein.  The  obligations  of the Water
Company  to  make   payments   under  the  Series  AA  Bond  are   absolute  and
unconditional,  without  any  defense  or  right  of  set-off,  counterclaim  or
recoupment  by reason of any  default by the Trust under the Loan  Agreement  or
under any other agreement  between the Water Company and the Trust or out of any
indebtedness or liability at any time owing to the Water Company by the Trust or
for any other reason. The Series AA Bond is subject to assignment or transfer in
accordance with the terms of the Loan  Agreement.  The Series AA Bond is subject
to acceleration under the terms and conditions,  and in the amounts, provided in
Section  5.03 of the Loan  Agreement.  Payments  under the Series AA Bond shall,
except as otherwise provided in the Loan Agreement, be made directly to the Loan
Servicer (as defined in the Loan Agreement), for the account of the Trust.

         In addition to any other  default  provided  for under the Mortgage and
the  Second,  Third,  Fourth,  Fifth,  Sixth,  Seventh,  Eighth,  Ninth,  Tenth,
Eleventh, Twelfth, Thirteenth, Fourteenth, Fifteenth, Sixteenth and Seventeenth,
Supplemental  Indentures  and  the  Supplementary  Indenture  to  the  Fifteenth
Supplemental Indenture and the Eighteenth,  the Nineteenth,  the Twentieth,  the
Twenty-First,   the   Twenty-Second,   the   Twenty-Third,   Twenty-Fourth   and
Twenty-Fifth   Supplemental  Indentures,  it  shall  be  a  default  under  this
Twenty-Sixth Supplemental Indenture if payment of any of the principal or of the
Interest on the Loan constituting the Interest Portion,  the  Administrative Fee
and any late  charges  incurred  under  the Loan  Agreement  (as such  terms are
defined in the Loan  Agreement)  is not made when the same shall  become due and
payable in installments, at maturity, upon redemption or otherwise.

                  Section 2.  Disbursements of the proceeds of the loan from the
Trust under the Loan Agreement  evidenced by the Series AA Bond shall be made by
the Trust to the Water  Company upon receipt by the Trust of  requisitions  from
the Water Company executed and delivered in accordance with the requirements set
forth in Section 3.02 of the Loan Agreement.
<PAGE>
                  Section  3.  The  Series  AA  Bond  and  the   certificate  of
authentication  of the Trustee to be executed  thereon shall be substantially in
the  form  prescribed  for  registered  bonds  without  coupons  in  the  Second
Supplemental   Indenture  (except  that  there  may  be  deleted  therefrom  all
references  to the issuance of coupon bonds in exchange  therefor);  shall be in
the form attached to this Twenty-Sixth  Supplemental Indenture as Exhibit A; and
shall contain appropriate references to this Twenty-Sixth Supplemental Indenture
in addition  to the  Mortgage  and the  Second,  Third,  Fourth,  Fifth,  Sixth,
Seventh,  Eighth,  Ninth,  Tenth,  Eleventh,  Twelfth,  Thirteenth,  Fourteenth,
Fifteenth,   Sixteenth  and   Seventeenth   Supplemental   Indentures   and  the
Supplementary   Indenture  to  the  Fifteenth  Supplemental  Indenture  and  the
Eighteenth, the Nineteenth, the Twentieth, the Twenty-First,  the Twenty-Second,
the Twenty-Third, the Twenty-Fourth and Twenty-Fifth Supplemental Indentures and
appropriate  changes with respect to the aggregate  principal  amount,  interest
rate, redemption dates and provisions,  and maturity date of the Series AA Bond,
and with  appropriate  reference  to the  provision  of the Fourth  Supplemental
Indenture that, subject to certain limitations,  the Mortgage and all indentures
supplemental  thereto may be modified,  amended or supplemented only as provided
in the  Mortgage  and  except  that the  Series AA Bond  shall not  contain  any
references to a sinking fund.

                  Section 4. Subject to the  provisions  of the Mortgage and the
Second, Third, Fourth, Fifth, Sixth,  Seventh,  Eighth, Ninth, Tenth,  Eleventh,
Twelfth,   Thirteenth,   Fourteenth,   Fifteenth,   Sixteenth  and   Seventeenth
Supplemental   Indentures,   the   Supplementary   Indenture  to  the  Fifteenth
Supplemental Indenture and the Eighteenth,  the Nineteenth,  the Twentieth,  the
Twenty-First,   the  Twenty-Second,   the  Twenty-Third  and  the  Twenty-Fourth
Supplemental  Indentures,  forthwith  upon the  execution  and  delivery of this
Twenty-Sixth Supplemental Indenture, or from time to time thereafter,  Series AA
Bond in an aggregate  principal amount of $2,350,000.00 may be executed by Water
Company and delivered to the Trustee for  authentication  and shall thereupon be
authenticated  and  delivered  by the Trustee  upon the  written  order of Water
Company,  signed by its  President  or a Vice  President  and its  Treasurer  or
Assistant Treasurer,  in such denominations and registered in such name or names
as may be specified in such written order.

                  Section 5. Sections  4(A)(iii) and (iv) of Article VIII of the
Second  Supplemental  Indenture shall not be available to the Water Company with
respect to the Series AA Bond.  The Water  Company shall issue its written order
under Section  4(a)(i) or (ii), as the case may be,  reasonably  promptly  after
receipt by the Trustee of proceeds of sale,  eminent  domain or  insurance  (not
otherwise to be paid directly to the Company under the Mortgage as  supplemented
by  the  Supplemental   Indentures  including  this  Twenty-Sixth   Supplemental
Indenture).

                                   ARTICLE II

                                  Miscellaneous

                  Section 1. The provisions of the Mortgage as modified, amended
and supplemented by the Second, Third, Fourth,  Fifth, Sixth,  Seventh,  Eighth,
Ninth, Tenth, Eleventh, Twelfth, Thirteenth,  Fourteenth,  Fifteenth,  Sixteenth
and Seventeenth  Supplemental  Indentures,  the  Supplementary  Indenture to the
Fifteenth  Supplemental  Indenture  and  the  Eighteenth,  the  Nineteenth,  the
Twentieth,   the  Twenty-First,   the  Twenty-Second,   the  Twenty-Third,   the
Twenty-Fourth and the Twenty-Fifth Supplemental Indentures,  and as modified and
extended by this  Twenty-Sixth  Supplemental  Indenture  are hereby  reaffirmed.
Except  insofar  as they  are  inconsistent  with  the  provisions  hereof,  the
provisions of the Mortgage and the Second, Third, Fourth, Fifth, Sixth, Seventh,
Eighth, Ninth, Tenth,  Eleventh,  Twelfth,  Thirteenth,  Fourteenth,  Fifteenth,

<PAGE>
Sixteenth  and  Seventeenth   Supplemental   Indentures  and  the  Supplementary
Indenture  to the  Fifteenth  Supplemental  Indenture  and the  Eighteenth,  the
Nineteenth,   the  Twentieth,   the   Twenty-First,   the   Twenty-Second,   the
Twenty-Third,  the  Twenty-Fourth and the Twenty-Fifth  Supplemental  Indentures
with  respect to the Series C, Series D, Series E, Series F, Series G, Series H,
Series I,  Series J, Series K, Series L, Series M, Series N, Series O, Series P,
Series Q, Series R,  Series P-1,  Series S, Series T, Series U, Series V, Series
W,  Series X,  Series Y and Series Z Bonds  shall apply to the Series AA Bond to
the same  extent  as if they  were set forth  herein  in full.  Unless  there is
something  in the  subject  or  context  repugnant  to such  construction,  each
reference in the Mortgage and the Second,  Third, Fourth, Fifth, Sixth, Seventh,
Eighth, Ninth, Tenth,  Eleventh,  Twelfth,  Thirteenth,  Fourteenth,  Fifteenth,
Sixteenth and Seventeenth Supplemental  Indentures,  the Supplementary Indenture
to the Fifteenth Supplemental Indenture and the Eighteenth,  the Nineteenth, the
Twentieth,   the  Twenty-First,   the  Twenty-Second,   the  Twenty-Third,   the
Twenty-Fourth  and the Twenty-Fifth  Supplemental  Indentures to the Mortgage or
any of such Supplemental Indentures shall be construed as also referring to this
Twenty-Sixth   Supplemental   Indenture.   The  Mortgage   and  all   indentures
supplemental  thereto may be modified,  amended or supplemented by Water Company
with prior notice by the Water  Company to but without the consent of any of the
bondholders to accomplish any more of the following:

                  (1)      to cure any ambiguity,  supply any omission,  or cure
                           or correct any defect or  inconsistent  provision  in
                           the Mortgage or any indenture supplemental thereto;

                  (2)      to cure any ambiguity,  supply any omission,  or cure
                           or  correct  any  defect  in any  description  of the
                           Mortgaged Property,  if such action is not adverse to
                           the interests of the bondholder;

                  (3)      to  insert  such  provisions  clarifying  matters  or
                           questions arising under the Mortgage or any indenture
                           supplemental  thereto as are  necessary  or desirable
                           and are not  contrary  to or  inconsistent  with  the
                           Mortgage or any indenture  supplemental thereto as in
                           effect; or

                  (4)      to  restate  the  Mortgage  as  supplemented  by  the
                           Supplemental   Indentures  as  a  single   integrated
                           document  which may add headings,  an index and other
                           provisions aiding the convenience of use.

The terms and  provisions of the Series AA Bond shall not be amended by, and the
Series AA Bond shall not be  entitled to the  benefit of any  covenant,  term or
condition contained in any subsequent supplemental indenture without the express
written concurrence of the Water Company.

                  Section 2. The Trustee shall not be  responsible in any manner
whatsoever  for  or  in  respect  of  the  validity  and   sufficiency  of  this
Twenty-Sixth Supplemental Indenture or the due execution hereof by Water Company
or for the recitals  contained  herein,  all of which recitals are made by Water
Company solely.

                  Section  3. The  Trustee  hereby  accepts  the  trusts  hereby
declared  and  provided  and  agrees  to  perform  the same  upon the  terms and
conditions in the Mortgage,  the Second,  Third, Fourth,  Fifth, Sixth, Seventh,
Eighth, Ninth, Tenth,  Eleventh,  Twelfth,  Thirteenth,  Fourteenth,  Fifteenth,

<PAGE>
Sixteenth and Seventeenth Supplemental  Indentures,  the Supplementary Indenture
to  the  Fifteenth  Supplemental  Indenture,  the  Eighteenth,  the  Nineteenth,
Twentieth,   the  Twenty-First,   the  Twenty-Second,   the  Twenty-Third,   the
Twenty-Fourth and the Twenty-Fifth Supplemental Indentures and this Twenty-Sixth
Supplemental  Indenture set forth. The Trustee also hereby agrees to execute and
deliver the Escrow  Agreement (as defined in the Loan  Agreement) and to appoint
the Escrow Agent named therein as agent as set out therein.

                  Section 4. The Trustee hereby  authorizes the Loan Servicer to
accept payments made by Water Company of principal of the Series AA Bond for the
account of the Trust.

                  Section 5. This Twenty-Sixth  Supplemental  Indenture has been
executed  simultaneously  in several  counterparts and all of said  counterparts
executed and delivered,  each as an original,  shall constitute one and the same
instrument.

                  Section 6. Although this Twenty-Sixth  Supplemental Indenture,
for  convenience  and for the purpose of  reference,  is dated as of October 15,
1999,  the actual date of execution by Water Company and the Trustee is as shown
by their  respective  acknowledgments  hereto  annexed,  and the actual  date of
delivery  hereof by Water  Company and the Trustee is the date of the closing of
the sale of the Series AA Bonds by Water Company.

                  Section 7. In any case where the payment of  principal  of the
Series AA Bond or the date fixed for redemption of any Series AA Bond shall be a
Saturday or Sunday or a legal holiday or a day on which banking  institutions in
the City of the principal corporate trust office of the Loan Servicer is located
are  authorized  by law to close,  then  payment of  interest  or  principal  or
redemption  price  need  not be made on such  date  but may be made on the  next
proceeding business day with the same force and effect as if made on the date of
maturity or the date fixed for redemption, and no interest on such payment shall
accrue after such date.

                  THE MORTGAGOR  HEREBY  DECLARES AND  ACKNOWLEDGES  THAT IT HAS
RECEIVED, WITHOUT CHARGE, A TRUE COPY OF THIS MORTGAGE.

                  IN WITNESS  WHEREOF said  MIDDLESEX  WATER  COMPANY has caused
these  presents  to be  signed by its  President  and its  corporate  seal to be
hereunto  affixed,  and duly attested by its Secretary;  and in testimony of its
acceptance of the trusts  created,  FIRST UNION  NATIONAL  BANK, as successor to
United  Counties  Trust  Company,  has caused these presents to be signed by its
thereto duly  authorized  officer or corporate  trust  officer and its corporate
seal to be hereunto  affixed and duly  attested by its thereto  duly  authorized
officer or corporate trust officer, as of the day and year first above written.

ATTEST:                                      MIDDLESEX WATER COMPANY


_________________________               By:  _____________________________
Marion F. Reynolds                           J. Richard Tompkins
Vice President, Secretary                    Chairman of the Board and
  and Treasurer                              President


ATTEST:                                      FIRST UNION NATIONAL BANK

                                        By:  _____________________________

Thomas J. Brett                              Rick Barnes
Assistant Vice President                     Corporate Trust Officer


<PAGE>
STATE OF NEW JERSEY:
                   :  ss:
COUNTY OF ESSEX    :


                  BE IT REMEMBERED,  that on this day of , 1999,  before me, the
subscriber,  personally appeared Marion F. Reynolds, who, being by me duly sworn
according  to  law,  on  her  oath  deposes  and  says  and  makes  proof  to my
satisfaction  that  she  is the  Vice  President,  Secretary  and  Treasurer  of
Middlesex Water Company, one of the corporations named in and which executed the
foregoing Twenty-Sixth Supplemental Indenture; that she is the attesting witness
to said  Twenty-Sixth  Supplemental  Indenture;  that she well knows the seal of
said  corporation  and that the seal  thereto  affixed is the  proper  common or
corporate seal of Middlesex Water Company;  that J. Richard Tompkins is Chairman
of the Board and President of said corporation;  that this deponent saw the said
J.  Richard  Tompkins  as such  Chairman  of the Board and  President  sign said
Twenty-Sixth  Supplemental Indenture,  and affix said seal thereto and heard him
declare that he signed,  sealed and  delivered the same as the voluntary act and
deed of the said corporation,  for the uses and purposes therein  expressed,  he
being  duly  authorized  by  resolution  of the Board of  Directors  of the said
corporation.


                                                          ----------------------
                                                          Marion F. Reynolds


Sworn and subscribed to before me the day and year aforesaid.



----------------------------
<PAGE>
STATE OF NEW JERSEY:
                   :  ss:
COUNTY OF ESSEX    :


             BE IT  REMEMBERED,  that on this  day of ,  1999,  before  me,  the
subscriber,  personally  appeared  Rick  Barnes,  who,  being  by me duly  sworn
according  to  law,  on  his  oath  deposes  and  says  and  makes  proof  to my
satisfaction  that he is the Assistant  Vice  President of First Union  National
Bank,  one  of the  corporations  named  in and  which  executed  the  foregoing
Twenty-Sixth  Supplemental  Indenture;  that he is the attesting witness to said
Twenty-Sixth  Supplemental Indenture; that he well knows the seal of First Union
National  Bank and that  the  seal  thereto  affixed  is the  proper  common  or
corporate  seal of First  Union  National  Bank;  that  Thomas  J.  Brett is the
Corporate  Trust  Officer of said  corporation;  that this deponent saw the said
Thomas J. Brett, as Corporate Trust Officer sign said Twenty-Sixth  Supplemental
Indenture,  and affix said seal  thereto and heard him  declare  that he signed,
sealed  and  delivered  the  same  as the  voluntary  act and  deed of the  said
corporation,  for the  uses  and  purposes  therein  expressed,  he  being  duly
authorized by said corporation.




                                            Rick Barnes
                                            Assistant Vice President


Sworn and subscribed to before me the day and year aforesaid.