Draft of Thursday, November 14, 1996
 
===============================================================================

 
                          THE BERKSHIRE GAS COMPANY
 
 
 
 
 
                               NOTE AGREEMENT
 
 
                        Dated as of November 1, 1996
 
 
 
 
 
 
 
Re:                    $16,000,000 7.80% Senior Notes
                            Due November 15, 2021
 
 
 
 
 
===============================================================================

                              TABLE OF CONTENTS
 
                        (Not a part of the Agreement)

<TABLE>
<CAPTION>
 
SECTION          HEADING                                                          PAGE

<S>              <C>                                                              <C>
Parties ........................................................................   1

SECTION 1.       DESCRIPTION OF NOTES AND COMMITMENT. ..........................   1 

  Section 1.1.   Description of Notes ..........................................   1 
  Section 1.2.   Commitment, Closing Date ......................................   1
  Section 1.3.   Redemption of 8.4% Preferred Stock ............................   2 

SECTION 2.       PREPAYMENT OF NOTES. ..........................................   2 

  Section 2.1.   Required Prepayments ..........................................   2 
  Section 2.2.   Optional Prepayment with Premium ..............................   2 
  Section 2.3.   Notice of Optional Prepayments ................................   3 
  Section 2.4.   Application of Prepayments ....................................   3 
  Section 2.5.   Direct Payment ................................................   3 

SECTION 3.       REPRESENTATIONS. ..............................................   3 

  Section 3.1.   Representations of the Company ................................   3 
  Section 3.2.   Representations of the Purchaser ..............................   4 

SECTION 4.       CLOSING CONDITIONS ............................................   4 

  Section 4.1.   Conditions ....................................................   4 
  Section 4.2.   Waiver of Conditions ..........................................   5 

SECTION 5.       COMPANY COVENANTS .............................................   5 

  Section 5.1.   Corporate Existence, Etc ......................................   5 
  Section 5.2.   Insurance .....................................................   5 
  Section 5.3.   Taxes, Claims for Labor and Materials, Compliance with Laws ...   5 
  Section 5.4.   Maintenance, Etc ..............................................   6 
  Section 5.5.   Nature of Business ............................................   6 
  Section 5.7.   Limitations on Restricted Subsidiary Debt .....................   6 
  Section 5.8.   Fixed Charges Coverage Ratio ..................................   7 
  Section 5.9.   Limitation on Liens ...........................................   7 
  Section 5.10.  Restricted Payments ...........................................   8 
  Section 5.11.  Mergers, Consolidations and Sales of Assets ...................   9 
  Section 5.12.  Guaranties ....................................................  11 
  Section 5.13.  Repurchase of Notes ...........................................  11 
  Section 5.14.  Transactions with Affiliates ..................................  11 
  Section 5.15.  Termination of Pension Plans ..................................  12 
  Section 5.16.  Designation of Restricted Subsidiaries ........................  12 
  Section 5.17.  Reports and Rights of Inspection ..............................  12 

SECTION 6.       EVENTS OF DEFAULT AND REMEDIES THEREFOR .......................  15 

  Section 6.1.   Events of Default .............................................  15 
  Section 6.2.   Notice to Holders .............................................  16 
  Section 6.3.   Acceleration of Maturities ....................................  16 
  Section 6.4.   Rescission of Acceleration ....................................  17 

SECTION 7.       AMENDMENTS, WAIVERS AND CONSENTS ..............................  17 

  Section 7.1.   Consent Required ..............................................  17 
  Section 7.2.   Solicitation of Holders .......................................  18 
  Section 7.3.   Effect of Amendment or Waiver .................................  18 

SECTION 8.       INTERPRETATION OF AGREEMENT; DEFINITIONS ......................  18 

  Section 8.1.   Definitions ...................................................  18 
  Section 8.2.   Accounting Principles .........................................  27 
  Section 8.3.   Directly or Indirectly ........................................  27 

SECTION 9.       MISCELLANEOUS .................................................  28 

  Section 9.1.   Registered Notes ..............................................  28 
  Section 9.2.   Exchange of Notes .............................................  28 
  Section 9.3.   Loss, Theft, Etc. of Notes ....................................  28 
  Section 9.4.   Conversion of Notes to First Mortgage Bond ....................  28 
  Section 9.5.   Expenses, Stamp Tax Indemnity .................................  30 
  Section 9.6.   Powers and Rights Not Waived; Remedies Cumulative .............  30 
  Section 9.7.   Notices .......................................................  30 
  Section 9.8.   Successors and Assigns ........................................  31 
  Section 9.9.   Survival of Covenants and Representations .....................  31 
  Section 9.10.  Severability ..................................................  31 
  Section 9.11.  Governing Law .................................................  31 
  Section 9.12.  Captions ......................................................  31 

Signature Page .................................................................  32 

</TABLE>
 

ATTACHMENTS TO NOTE AGREEMENT: 
 
Schedule I  --   Name of Note Purchaser 
 
Schedule II  --  Liens Securing Debt (including Capitalized Leases) as of 
                 the Closing Date 
 
Exhibit A  --    Form of 7.80% Senior Note due November 15, 2021 
 
Exhibit B  --    Representations and Warranties of the Company 
 
Exhibit C  --    Description of Special Counsel's Closing Opinion 
 
Exhibit D  --    Description of Closing Opinion of Counsel to the Company 
 
 
 
 
                          THE BERKSHIRE GAS COMPANY
                              115 Cheshire Road
                      Pittsfield, Massachusetts  01201


                               NOTE AGREEMENT

Re:                    $16,000,000 7.80% Senior Notes
                            Due November 15, 2021



                                                                    Dated as of
                                                               November 1, 1996
First Colony Life Insurance Company 
700 Main Street, P.O. Box 1980 
Lynchburg, Virginia  24505 

      The undersigned, THE BERKSHIRE GAS COMPANY, a Massachusetts 
corporation (the "Company"), agrees with you as follows: 

SECTION 1.  DESCRIPTION OF NOTES AND COMMITMENT.

      Section 1.1.  Description of Notes.  The Company will authorize the 
issue and sale of $16,000,000 aggregate principal amount of its 7.80% Senior 
Notes (the "Notes") to be dated the date of issue, to bear interest from 
such date at the rate of 7.80% per annum, payable quarterly on the fifteenth 
day of each February, May, August and November in each year commencing 
February 15, 1997 and at maturity and to bear interest on overdue principal 
(including any overdue required prepayment of principal or any overdue 
optional prepayment of principal pursuant to [SECTION]2.2) and premium, if 
any, and (to the extent legally enforceable) on any overdue installment of 
interest at the rate of 8.80% per annum after the date due, whether by 
acceleration or otherwise, until paid, to be expressed to mature on November 
15, 2021, and to be substantially in the form attached hereto as Exhibit A.  
Interest on the Notes shall be computed on the basis of a 360-day year of 
twelve 30-day months.  The Notes are not subject to prepayment at the option 
of the Company prior to their expressed maturity dates except on the terms 
and conditions and in the amounts and with the premium, if any, set forth in 
[SECTION]2 of this Agreement.  The term "Notes" as used herein shall include 
each Note delivered pursuant to this Agreement.  You are sometimes 
hereinafter referred to as the "Purchaser".

      Section 1.2.  Commitment, Closing Date.  Subject to the terms and 
conditions hereof and on the basis of the representations and warranties 
hereinafter set forth, the Company agrees to issue and sell to you and you 
agree to purchase from the Company the entire issue of the Notes at a price 
equal to the principal amount thereof on the Closing Date hereinafter 
mentioned. 

      Delivery of the Notes will be made at the offices of Chapman and 
Cutler, 111 West Monroe Street, Chicago, Illinois 60603, against payment 
therefor in Federal Reserve or other funds current and immediately available 
at the principal office of Fleet Bank of Massachusetts, National 
Association, ABA Number 011000138, Malden, Massachusetts, to the account of 
The Berkshire Gas Company, Account Number 00112144, in the amount of the 
purchase price at 10:00 A.M. Chicago, Illinois time, on November 15, 1996 or 
such later date (not later than November 30, 1996) as shall mutually be 
agreed upon by the Company and the Purchaser (the "Closing Date").  The 
Notes delivered to you on the Closing Date will be in the form of a single 
registered Note in the form attached hereto as Exhibit A for the full amount 
of your purchase (unless different denominations are specified by you), 
registered in your name or in the name of your nominee, all as may be 
specified in Schedule I attached hereto.

      Section 1.3.  Redemption of 8.4% Preferred Stock.  Concurrently with 
the issuance of the Notes by the Company on the Closing Date, the Company 
will redeem 80,000 shares of its Class B Cumulative Preferred Stock, Series 
8.4% (the "8.4% Preferred Stock") which are held by you at a price of 
$117.00 per share plus the dividend accrued on such shares to the Closing 
Date, to be paid to you in exchange for your delivery to the Company on the 
Closing Date of the stock certificates representing such 8.4% Preferred 
Stock. 

SECTION 2.  PREPAYMENT OF NOTES.

      Section 2.1.  Required Prepayments.  The Company agrees that on 
November 15 in each year, commencing November 15, 2011 and ending November 
15, 2020, both inclusive, it will prepay and apply and there shall become 
due and payable on the principal indebtedness evidenced by the Notes an 
amount equal to the lesser of (i) $1,454,545.45 or (ii) the principal amount 
of the Notes then outstanding.  The entire remaining principal amount of the 
Notes shall become due and payable on November 15, 2021.  No premium shall 
be payable in connection with any required prepayment made pursuant to this 
[SECTION]2.1.  For purposes of this [SECTION]2.1, any prepayment of less 
than all of the outstanding Notes pursuant to [SECTION]2.2 shall be deemed 
to be applied first, to the amount of principal scheduled to be paid on 
November 15, 2021, and then to the remaining scheduled principal payments in 
inverse chronological order. 

      In the event of any purchase or other acquisition by the Company of 
less than all of the Notes, the amount of the payment required at maturity 
and each prepayment required to be made pursuant to this [SECTION]2.1 shall 
be reduced in the proportion that the principal amount of such purchase or 
other acquisition bears to the unpaid principal amount of the Notes 
immediately prior to such purchase or other acquisition (after giving effect 
to any prepayment made pursuant to this [SECTION]2.1 on the date of such 
purchase or other acquisition).

      Section 2.2.  Optional Prepayment with Premium.  In addition to the 
payments required by [SECTION]2.1, upon compliance with [SECTION]2.3 the 
Company shall have the privilege, at any time and from time to time, of 
prepaying the outstanding Notes, either in whole or in part (but if in part 
then in a minimum principal amount of $100,000) by payment of the principal 
amount of the Notes, or portion thereof to be prepaid, and accrued interest 
thereon to the date of such prepayment, together with a premium equal to the 
Make-Whole Amount, determined as of five business days prior to the date of 
such prepayment pursuant to this [SECTION]2.2.

      Section 2.3.  Notice of Optional Prepayments.  The Company will give 
notice of any prepayment of the Notes pursuant to [SECTION]2.2 to each 
Holder thereof not less than 30 days nor more than 60 days before the date 
fixed for such optional prepayment specifying (i) such date, (ii) the 
principal amount of the Holder's Notes to be prepaid on such date, (iii) 
that a premium may be payable, (iv) the date when such premium will be 
calculated, (v) the estimated premium, and (vi) the accrued interest 
applicable to the prepayment.  Such notice of prepayment shall also certify 
all facts, if any, which are conditions precedent to any such prepayment.  
Notice of prepayment having been so given, the aggregate principal amount of 
the Notes specified in such notice, together with accrued interest thereon 
and the premium, if any, payable with respect thereto shall become due and 
payable on the prepayment date specified in said notice.  Not later than two 
business days prior to the prepayment date specified in such notice, the 
Company shall provide each Holder written notice of the premium, if any, 
payable in connection with such prepayment and, whether or not any premium 
is payable, a reasonably detailed computation of the Make-Whole Amount.

      Section 2.4.  Application of Prepayments.  All partial prepayments 
pursuant to [SECTION]2.1 or [SECTION]2.2 shall be applied on all outstanding 
Notes ratably in accordance with the unpaid principal amounts thereof.

      Section 2.5.  Direct Payment.  Notwithstanding anything to the 
contrary contained in this Agreement or the Notes, in the case of any Note 
owned by any Holder that is the Purchaser or any other Institutional Holder 
which has given written notice to the Company requesting that the provisions 
of this [SECTION]2.5 shall apply, the Company will punctually pay when due 
the principal thereof, interest thereon and premium, if any, due with 
respect to said principal, without any presentment thereof, directly to such 
Holder at its address set forth in Schedule I hereto or such other address 
as such Holder may from time to time designate in writing to the Company or, 
if a bank account with a United States bank is so designated for such 
Holder, the Company will make such payments in immediately available funds 
to such bank account, marked for attention as indicated, or in such other 
manner or to such other account in any United States bank as such Holder may 
from time to time direct in writing. 

SECTION 3.  REPRESENTATIONS.

      Section 3.1.  Representations of the Company.  The Company represents 
and warrants that all representations and warranties set forth in Exhibit B 
are true and correct as of the date hereof and are incorporated herein by 
reference with the same force and effect as though herein set forth in full.

      Section 3.2.  Representations of the Purchaser.  The Purchaser 
represents, and in entering into this Agreement the Company understands, 
that the Purchaser is acquiring the Notes for the purpose of investment and 
not with a view to the distribution thereof, and that the Purchaser has no 
present intention of selling, negotiating or otherwise disposing of the 
Notes; it being understood, however, that the disposition of the Purchaser's 
property shall at all times be and remain within its control.  The Purchaser 
further represents that the source of funds to be used by it to purchase the 
Notes is an "insurance company general account" within the meaning of 
Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued 
July 12, 1995) and the purchase of the notes by the Purchaser is eligible 
for exemption under, and satisfies the requirements of, PTE 95-60. 

SECTION 4.  CLOSING CONDITIONS.

      Section 4.1.  Conditions.  Your obligation to purchase the Notes on 
the Closing Date and present the 8.4% Preferred Stock for redemption 
pursuant to [SECTION]1.3 hereof shall be subject to the performance by the 
Company of its agreements hereunder which by the terms hereof are to be 
performed at or prior to the time of delivery of the Notes and to the 
following further conditions precedent:

            (a)  Closing Certificate.  You shall have received a certificate 
      dated the Closing Date, signed by the President or the Chief Financial 
      Officer of the Company, the truth and accuracy of which shall be a 
      condition to your obligation to purchase the Notes proposed to be sold 
      to you and to the effect that (i) the representations and warranties 
      of the Company set forth in Exhibit B hereto are true and correct on 
      and with respect to the Closing Date, (ii) the Company has performed 
      all of its obligations hereunder which are to be performed on or prior 
      to the Closing Date, and (iii) no Default or Event of Default has 
      occurred and is continuing.

            (b)  Legal Opinions.  You shall have received from Chapman and 
      Cutler, who are acting as your special counsel in this transaction, 
      and from Rich, May, Bilodeau & Flaherty, P.C., counsel for the 
      Company, their respective opinions dated the Closing Date, in form and 
      substance satisfactory to you, and covering the matters set forth in 
      Exhibits C and D, respectively, hereto.

            (c)  Regulatory Approval.  You shall have obtained an order 
      issued by the Massachusetts Department of Public Utilities (the "DPU") 
      authorizing the issue and sale of the Notes, which authorization shall 
      not contain any conditions burdensome to the Company and which 
      authorization shall be final and the statutory appeal period for which 
      shall have expired.

            (d)  Private Placement Number.  A private placement number for 
      the Notes shall have been obtained from Standard and Poor's 
      Corporation.

            (e)  Rating of the Notes.  You shall have received satisfactory 
      evidence that the Notes have been accorded a current rating of "2" or 
      better from the National Association of Insurance Commissioners.

            (f)  Payment of Fees and Disbursements of Special Counsel.  The 
      Company shall have paid the reasonable fees and disbursements of 
      Chapman and Cutler, special counsel to the Purchaser.

            (g)  Satisfactory Proceedings.  All proceedings taken in 
      connection with the transactions contemplated by this Agreement, and 
      all documents necessary to the consummation thereof, shall be 
      satisfactory in form and substance to you and your special counsel, 
      and you shall have received a copy (executed or certified as may be 
      appropriate) of all legal documents or proceedings taken in connection 
      with the consummation of said transactions.

      Section 4.2.  Waiver of Conditions.  If on the Closing Date the 
Company fails to tender to you the Notes to be issued to you on such date or 
if the conditions specified in [SECTION]4.1 have not been fulfilled, you may 
thereupon elect to be relieved of all further obligations under this 
Agreement.  Without limiting the foregoing, if the conditions specified in 
[SECTION]4.1 have not been fulfilled, you may waive compliance by the 
Company with any such condition to such extent as you may in your sole 
discretion determine.  Nothing in this [SECTION]4.2 shall operate to relieve 
the Company of any of its obligations hereunder or to waive your rights 
against the Company. 

SECTION 5.  COMPANY COVENANTS. 

      From and after the Closing Date and continuing so long as any amount 
remains unpaid on any Note:

      Section 5.1.  Corporate Existence, Etc.  The Company will preserve and 
keep in full force and effect, and will cause each Restricted Subsidiary to 
preserve and keep in full force and effect, its corporate existence and all 
licenses and permits necessary to the proper conduct of its business; 
provided, however, that the foregoing shall not prevent any transaction 
permitted by [SECTION]5.11.

      Section 5.2.  Insurance.  The Company will maintain, and will cause 
each Restricted Subsidiary to maintain, insurance coverage by financially 
sound and reputable insurers in such forms and amounts and against such 
risks as are customary for corporations of established reputation engaged in 
the same or a similar business and owning and operating similar properties.

      Section 5.3.  Taxes, Claims for Labor and Materials, Compliance with 
Laws.  The Company will promptly pay and discharge, and will cause each 
Restricted Subsidiary promptly to pay and discharge, all lawful taxes, 
assessments and governmental charges or levies imposed upon the Company or 
such Restricted Subsidiary, respectively, or upon or in respect of all or 
any part of the property or business of the Company or such Restricted 
Subsidiary, all trade accounts payable in accordance with usual and 
customary business terms, and all claims for work, labor or materials, which 
if unpaid might become a Lien upon any property of the Company or such 
Restricted Subsidiary; provided, however, that the Company or such 
Restricted Subsidiary shall not be required to pay any such tax, assessment, 
charge, levy, account payable or claim if (i) the validity, applicability or 
amount thereof is being contested in good faith by appropriate actions or 
proceedings which will prevent the forfeiture or sale of any property of the 
Company or such Restricted Subsidiary or any material interference with the 
use thereof by the Company or such Restricted Subsidiary, and (ii) the 
Company or such Restricted Subsidiary shall set aside on its books, reserves 
deemed by it to be adequate with respect thereto.  The Company will promptly 
comply and will cause each Restricted Subsidiary to comply with all laws, 
ordinances or governmental rules and regulations to which it is subject 
including, without limitation, the Occupational Safety and Health Act of 
1970, as amended, ERISA and all laws, ordinances, governmental rules and 
regulations relating to environmental protection in all applicable 
jurisdictions, the violation of which could materially and adversely affect 
the properties, business, prospects, profits or condition of the Company and 
its Restricted Subsidiaries or would result in any Lien not permitted under 
[SECTION]5.9.

      Section 5.4.  Maintenance, Etc.  The Company will maintain, preserve 
and keep, and will cause each Restricted Subsidiary to maintain, preserve 
and keep, its properties which are used or useful in the conduct of its 
business (whether owned in fee or a leasehold interest) in good repair and 
working order and from time to time will make all necessary repairs, 
replacements, renewals and additions so that at all times the efficiency 
thereof shall be maintained.

      Section 5.5.  Nature of Business.  Neither the Company nor any 
Restricted Subsidiary will engage in any business if, as a result, the 
general nature of the business, taken on a consolidated basis, which would 
then be engaged in by the Company and its Restricted Subsidiaries would be 
substantially changed from the general nature of the business engaged in by 
the Company and its Restricted Subsidiaries on the Closing Date.  For 
purposes of the preceding sentence, the general nature of the business of 
the Company and its Restricted Subsidiaries shall not be deemed to be 
substantially changed from that engaged in on the Closing Date so long as 
not less than 80% of the net sales of the Company and its Restricted 
Subsidiaries for any fiscal year ending after the Closing Date shall be 
derived from energy operations and related businesses of the Company and its 
Restricted Subsidiaries.

      Section 5.6.  Limitations on Consolidated Funded Debt.  The Company 
will at all times maintain Consolidated Funded Debt in an aggregate amount 
which does not exceed 65% of Consolidated Adjusted Capitalization. 

      Section 5.7.  Limitations on Restricted Subsidiary Debt.  (a)  The 
Company will not permit any Restricted Subsidiary to create, incur or assume 
or in any manner become liable in any respect of any Debt, if at the time of 
creation, incurrence or assumption thereof or becoming liable therefor and 
after giving effect thereto and the application of the proceeds thereof the 
aggregate amount of Debt of the Company's Restricted Subsidiaries would 
exceed an amount equal to 15% of Consolidated Adjusted Total Capitalization.

      (b)  Any corporation which becomes a Restricted Subsidiary after the 
date hereof shall for all purposes of this [SECTION]5.7 be deemed to have 
created, assumed or incurred at the time it becomes a Restricted Subsidiary 
all Debt of such corporation existing immediately after it becomes a 
Restricted Subsidiary.

      Section 5.8.  Fixed Charges Coverage Ratio.  The Company will keep and 
maintain the ratio of Net Income Available for Fixed Charges to Fixed 
Charges for each period of four consecutive fiscal quarters at not less than 
1.50 to 1.00.

      Section 5.9.  Limitation on Liens.  The Company will not, and will not 
permit any Restricted Subsidiary to, create or incur, or suffer to be 
incurred or to exist, any Lien on its or their property or assets, whether 
now owned or hereafter acquired, or upon any income or profits therefrom, or 
transfer any property for the purpose of subjecting the same to the payment 
of obligations in priority to the payment of its or their general creditors, 
or acquire or agree to acquire, or permit any Restricted Subsidiary to 
acquire, any property or assets upon conditional sales agreements or other 
title retention devices, except:

            (a)  Liens for property taxes and assessments or governmental 
      charges or levies and Liens securing claims or demands of mechanics 
      and materialmen, provided payment thereof is not at the time required 
      by [SECTION]5.3;

            (b)  Liens of or resulting from any judgment or award, the time 
      for the appeal or petition for rehearing of which shall not have 
      expired, or in respect of which the Company or a Restricted Subsidiary 
      shall at any time in good faith be prosecuting an appeal or proceeding 
      for a review and in respect of which a stay of execution pending such 
      appeal or proceeding for review shall have been secured;

            (c)  Liens incidental to the conduct of business or the 
      ownership of properties and assets (including Liens in connection with 
      worker's compensation, unemployment insurance and other like laws, 
      warehousemen's and attorneys' liens and statutory landlords' liens) 
      and Liens to secure the performance of bids, tenders or trade 
      contracts, or to secure statutory obligations, surety or appeal bonds 
      or other Liens of like general nature incurred in the ordinary course 
      of business and not in connection with the borrowing of money; 
      provided in each case, the obligation secured is not overdue or, if 
      overdue, is being contested in good faith by appropriate actions or 
      proceedings;

            (d)  minor survey exceptions or minor encumbrances, easements or 
      reservations, or rights of others for rights-of-way, utilities and 
      other similar purposes, or zoning or other restrictions as to the use 
      of real properties, which are necessary for the conduct of the 
      activities of the Company and its Restricted Subsidiaries or which 
      customarily exist on properties of corporations engaged in similar 
      activities and similarly situated and which do not in any event 
      materially impair their use in the operation of the business of the 
      Company and its Restricted Subsidiaries;

            (e)  Liens securing Indebtedness of a Restricted Subsidiary to 
      the Company or to another Wholly-owned Restricted Subsidiary;

            (f)  Liens existing as of the Closing Date and reflected in 
      Schedule II hereto; 

            (g)  Liens incurred after the Closing Date given to secure the 
      payment of the purchase price incurred in connection with the 
      acquisition of fixed assets useful and intended to be used in carrying 
      on the business of the Company or a Restricted Subsidiary, including 
      Liens existing on such fixed assets at the time of acquisition thereof 
      or at the time of acquisition by the Company or a Restricted 
      Subsidiary of any business entity then owning such fixed assets, 
      whether or not such existing Liens were given to secure the payment of 
      the purchase price of the fixed assets to which they attach so long as 
      they were not incurred, extended or renewed in contemplation of such 
      acquisition, provided that (i) the Lien shall attach solely to the 
      fixed assets acquired or purchased, (ii) at the time of acquisition of 
      such fixed assets, the aggregate amount remaining unpaid on all Debt 
      secured by Liens on such fixed assets whether or not assumed by the 
      Company or a Restricted Subsidiary shall not exceed an amount equal to 
      80% (or 100% in the case of Capitalized Leases) of the lesser of the 
      total purchase price or fair market value at the time of acquisition 
      of such fixed assets (as determined in good faith by the Board of 
      Directors of the Company), (iii) all such Debt shall have been 
      incurred within the applicable limitations provided in 
      [SECTION][SECTION]5.6 and 5.7 and (iv) the aggregate Debt secured by 
      such Liens does not exceed an amount equal to 10% of Consolidated 
      Adjusted Total Assets; and

            (h)  Liens other than those described in clauses (a) through (g) 
      of this [SECTION]5.9 created or incurred after the Closing Date given 
      to secure Debt of the Company or any Restricted Subsidiary, provided 
      that after giving effect to such Debt and to the application of the 
      proceeds thereof (1) all Debt of the Company and its Restricted 
      Subsidiaries secured by Liens (other than Debt secured by Liens 
      excepted or permitted by the foregoing clauses (a) through (g) of this 
      [SECTION]5.9) shall not exceed 10% of Consolidated Adjusted Total 
      Assets, and (2) all such Debt shall have been incurred within the 
      applicable limitations provided in [SECTION][SECTION]5.6 and 5.7; 
      provided, further that no Additional First Mortgage Bonds may be 
      issued pursuant to this [SECTION]5.9(h) unless on or prior to the 
      issuance of such Additional First Mortgage Bonds, all outstanding 
      Notes shall have been converted into First Mortgage Bonds in 
      compliance with [SECTION]9.4.

      Section 5.10.  Restricted Payments.  The Company will not except as 
hereinafter provided:

            (a)  Declare or pay any dividends, either in cash or property, 
      on any shares of its capital stock of any class (except dividends or 
      other distributions payable solely in shares of capital stock of the 
      Company); 

            (b)  Directly or indirectly, or through any Subsidiary, 
      purchase, redeem or retire any shares of its capital stock of any 
      class or any warrants, rights or options to purchase or acquire any 
      shares of its capital stock (other than in exchange for or out of the 
      net cash proceeds to the Company from the substantially concurrent 
      issue or sale of other shares of capital stock of the Company or 
      warrants, rights or options to purchase or acquire any shares of its 
      capital stock); or

            (c)  Make any other payment or distribution, either directly or 
      indirectly or through any Subsidiary, in respect of its capital stock;  

(such declarations or payments of dividends, purchases, redemptions or 
retirements of capital stock and warrants, rights or options and all such 
other payments or distributions being herein collectively called "Restricted 
Payments"), if after giving effect thereto any Event of Default shall have 
occurred and be continuing or Consolidated Adjusted Tangible Net Worth shall 
be less than $23,000,000. 

      The Company will not declare any dividend which constitutes a 
Restricted Payment payable more than 60 days after the date of declaration 
thereof. 

      For the purposes of this [SECTION]5.10, the amount of any Restricted 
Payment declared, paid or distributed in property shall be deemed to be the 
greater of the book value or fair market value (as determined in good faith 
by the Board of Directors of the Company) of such property at the time of 
the making of the Restricted Payment in question.

      Section 5.11.  Mergers, Consolidations and Sales of Assets.  (a) The 
Company will not, and will not permit any Restricted Subsidiary to, (i) 
consolidate with or be a party to a merger with any other corporation or 
(ii) sell, lease or otherwise dispose of all or any substantial part (as 
defined in paragraph (d) of this [SECTION]5.11) of the assets of the Company 
and its Restricted Subsidiaries; provided, however, that:

            (1)  any Restricted Subsidiary may merge or consolidate with or 
      into the Company or any Wholly-owned Restricted Subsidiary so long as 
      in any merger or consolidation involving the Company, the Company 
      shall be the surviving or continuing corporation;

            (2)  the Company may consolidate or merge with any other 
      corporation so long as (i) if the Company shall be the surviving or 
      continuing corporation, (y) at the time of such consolidation or 
      merger and after giving effect thereto no Default or Event of Default 
      shall have occurred and be continuing, and (z) after giving effect to 
      such consolidation or merger a Restricted Subsidiary would be 
      permitted to incur at least $1.00 of additional Debt under the 
      provisions of [SECTION]5.7, and (ii) if the surviving or continuing 
      corporation is not the Company, (v) the corporation which results from 
      such merger or consolidation shall be incorporated under the laws of 
      the United States or any state thereof, have substantially all of its 
      assets and the assets of its Subsidiaries located within the United 
      States and be engaged principally in the ownership and operation of a 
      regulated public utility, (w) such resulting entity shall execute and 
      deliver to the registered Holders of the Notes an agreement 
      satisfactory in form and substance to such Holders ratifying and 
      confirming this Agreement and the Notes and expressly assuming the due 
      and punctual payment of the principal and premium, if any, and 
      interest on all of the Notes, according to their tenor, and the due 
      and punctual performance and observance of all of the covenants in the 
      Notes and this Agreement to be performed and observed by the Company, 
      (x) at the time of such consolidation or merger and after giving 
      effect thereto no Default or Event of Default shall have occurred and 
      be continuing, (y) after giving effect to such consolidation or merger 
      the subsidiaries of such surviving corporation would be permitted to 
      incur at least $1.00 of additional Debt pursuant to [SECTION]5.7, and 
      (z) the surviving corporation shall deliver to the registered Holders 
      of the Notes an opinion, satisfactory in form and substance to the 
      registered Holders of the Notes, of counsel satisfactory to the 
      registered Holders of the Notes, to the effect that all requirements 
      of this [SECTION]5.11(a)(2) have been satisfied; and

            (3)  any Restricted Subsidiary may sell, lease or otherwise 
      dispose of all or any substantial part of its assets to the Company or 
      any Wholly-owned Restricted Subsidiary.

      (b)  The Company will not permit any Restricted Subsidiary to issue or 
sell any shares of stock of any class (including as "stock" for the purposes 
of this [SECTION]5.11, any warrants, rights or options to purchase or 
otherwise acquire stock or other Securities exchangeable for or convertible 
into stock) of such Restricted Subsidiary to any Person other than the 
Company or a Wholly-owned Restricted Subsidiary, except for the purpose of 
qualifying directors, or except in satisfaction of the validly pre-existing 
preemptive rights of minority shareholders in connection with the 
simultaneous issuance of stock to the Company and/or a Restricted Subsidiary 
whereby the Company and/or such Restricted Subsidiary maintain their same 
proportionate interest in such Restricted Subsidiary.

      (c)  The Company will not sell, transfer or otherwise dispose of any 
shares of stock of any Restricted Subsidiary (except to qualify directors) 
or any Indebtedness of any Restricted Subsidiary, and will not permit any 
Restricted Subsidiary to sell, transfer or otherwise dispose of (except to 
the Company or a Wholly-owned Restricted Subsidiary) any shares of stock or 
any Indebtedness of any other Restricted Subsidiary, unless:

            (1)  simultaneously with such sale, transfer, or disposition, 
      all shares of stock and all Indebtedness of such Restricted Subsidiary 
      at the time owned by the Company and by every other Restricted 
      Subsidiary shall be sold, transferred or disposed of as an entirety;

            (2)  the Board of Directors of the Company shall have 
      determined, as evidenced by a resolution thereof, that the proposed 
      sale, transfer or disposition of said shares of stock and Indebtedness 
      is in the best interests of the Company;

            (3)  said shares of stock and Indebtedness are sold, transferred 
      or otherwise disposed of to a Person, for a cash consideration and on 
      terms reasonably deemed by the Board of Directors to be adequate and 
      satisfactory;

            (4)  the Restricted Subsidiary being disposed of shall not have 
      any continuing investment in the Company or any other Restricted 
      Subsidiary not being simultaneously disposed of; and

            (5)  such sale or other disposition does not involve a 
      substantial part (as hereinafter defined) of the assets of the Company 
      and its Restricted Subsidiaries.

      (d)  As used in this [SECTION]5.11, a sale, lease or other disposition 
of assets shall be deemed to be a "substantial part" of the assets of the 
Company and its Restricted Subsidiaries if the book value of such assets, 
when added to the book value of all other assets sold, leased or otherwise 
disposed of by the Company and its Restricted Subsidiaries (other than in 
the ordinary course of business) during the 12-month period ending with the 
date of such sale, lease or other disposition, exceeds 10% of Consolidated 
Adjusted Total Assets, determined as of the end of the immediately preceding 
fiscal year; provided, however, that assets shall not be deemed to be sold, 
leased or otherwise disposed of for purposes of the computations required by 
the preceding provisions of this paragraph to the extent that the net 
proceeds therefrom remaining after satisfying any indebtedness secured by 
such assets shall, within 180 days from the date of such sale, lease or 
disposition thereof by the Company or its Restricted Subsidiary, as the case 
may be, either (i) be used to purchase capital assets for the Company and/or 
its Restricted Subsidiaries of a nature similar to and having a value at 
least equal to, the assets sold to obtain such proceeds, or (ii) applied to 
prepay the Notes or other Funded Debt of the Company or its Restricted 
Subsidiaries which is not subordinated to the Notes in right of payment.

      Section 5.12.  Guaranties.  The Company will not, and will not permit 
any Restricted Subsidiary to, become or be liable in respect of any Guaranty 
except Guaranties by the Company which are limited in amount to a stated 
maximum dollar exposure or which constitute Guaranties of obligations 
incurred by any Restricted Subsidiary in compliance with the provisions of 
this Agreement.

      Section 5.13.  Repurchase of Notes. Neither the Company nor any 
Restricted Subsidiary or Affiliate, directly or indirectly, may repurchase 
or make any offer to repurchase any Notes unless an offer has been made to 
repurchase Notes, pro rata, from all Holders at the same time and upon the 
same terms.  In case the Company repurchases or otherwise acquires any 
Notes, such Notes shall immediately thereafter be canceled and no Notes 
shall be issued in substitution therefor.  Without limiting the foregoing, 
upon the repurchase or other acquisition of any Notes by the Company, any 
Restricted Subsidiary or any Affiliate (or upon the agreement of Company, 
any Restricted Subsidiary or any Affiliate to purchase or otherwise acquire 
any Notes), such Notes shall no longer be outstanding for purposes of any 
section of this Agreement relating to the taking by the Holders of any 
actions with respect hereto, including, without limitation, [SECTION]6.3, 
[SECTION]6.4 and [SECTION]7.1.

      Section 5.14.  Transactions with Affiliates.  The Company will not, 
and will not permit any Restricted Subsidiary to, enter into or be a party 
to any transaction or arrangement with any Affiliate (including, without 
limitation, the purchase from, sale to or exchange of property with, or the 
rendering of any service by or for, any Affiliate), except in the ordinary 
course of and pursuant to the reasonable requirements of the Company's or 
such Restricted Subsidiary's business and upon fair and reasonable terms no 
less favorable to the Company or such Restricted Subsidiary than would 
obtain in a comparable arm's-length transaction with a Person other than an 
Affiliate.

      Section 5.15.  Termination of Pension Plans.  The Company will not and 
will not permit any Subsidiary to withdraw from any Multiemployer Plan or 
permit any employee benefit plan maintained by it to be terminated if such 
withdrawal or termination could result in withdrawal liability (as described 
in Part 1 of Subtitle E of Title IV of ERISA) or the imposition of a Lien on 
any property of the Company or any Subsidiary pursuant to Section 4068 of 
ERISA.

      Section 5.16.  Designation of Restricted Subsidiaries.  The Company 
may designate any Unrestricted Subsidiary to be a Restricted Subsidiary by 
giving written notice within 30 days after such designation to each Holder 
that the Board of Directors of the Company has made such designation, 
provided, however, that no Unrestricted Subsidiary may be designated a 
Restricted Subsidiary unless, at the time of such action and after giving 
effect thereto, (i) no Default or Event of Default shall have occurred and 
be continuing, and (ii) the Restricted Subsidiaries would be permitted to 
incur at least $1.00 of additional Debt under the provisions of 
[SECTION]5.7(a).  A Restricted Subsidiary may not be designated or otherwise 
become an Unrestricted Subsidiary.

      Section 5.17.  Reports and Rights of Inspection.  The Company will 
keep, and will cause each Restricted Subsidiary to keep, proper books of 
record and account in which full and correct entries will be made of all 
dealings or transactions of, or in relation to, the business and affairs of 
the Company or such Restricted Subsidiary, in accordance with GAAP 
consistently applied (except for changes disclosed in the financial 
statements furnished to the Holders pursuant to this [SECTION]5.17 and 
concurred in by the independent public accountants referred to in 
[SECTION]5.17(b) hereof), and will furnish to each Holder (in duplicate if 
so specified below or otherwise requested):

            (a)  Quarterly Statements.  As soon as available and in any 
      event within 45 days after the end of each quarterly fiscal period 
      (except the last) of each fiscal year, copies of:

                  (1)  consolidated balance sheets of the Company and its 
            Restricted Subsidiaries as of the close of such quarterly fiscal 
            period, setting forth in comparative form the consolidated 
            figures for the fiscal year then most recently ended,

                  (2)  consolidated statements of income of the Company and 
            its Restricted Subsidiaries for such quarterly fiscal period and 
            for the portion of the fiscal year ending with such quarterly 
            fiscal period, in each case setting forth in comparative form 
            the consolidated figures for the corresponding periods of the 
            preceding fiscal year, and

                  (3)  consolidated statements of cash flows of the Company 
            and its Restricted Subsidiaries for the portion of the fiscal 
            year ending with such quarterly fiscal period, setting forth in 
            comparative form the consolidated figures for the corresponding 
            period of the preceding fiscal year, 

      all in reasonable detail and certified as complete and correct by an
      authorized financial officer of the Company; provided, however, that so
      long as the Company has no Unrestricted Subsidiaries and so long as such
      delivery is made within the time requirement set forth above in this
      paragraph (a), delivery pursuant to paragraph (d) below of copies of the
      Quarterly Report on Form 10-Q of the Company for such quarterly period 
      prepared in compliance with the requirements therefor and filed with the
      Securities and Exchange Commission shall be deemed to satisfy the
      requirements of this paragraph (a);

            (b)  Annual Statements.  As soon as available and in any event 
      within 90 days after the close of each fiscal year of the Company, 
      copies of:

                  (1)  consolidated balance sheets of the Company and its 
            Restricted Subsidiaries as of the close of such fiscal year, and

                  (2)  consolidated statements of income and retained 
            earnings and cash flows of the Company and its Restricted 
            Subsidiaries for such fiscal year, 

      in each case setting forth in comparative form the consolidated 
      figures for the preceding fiscal year, all in reasonable detail and 
      accompanied by a report thereon of Deloitte & Touche LLP or another 
      firm of independent public accountants of recognized national standing 
      selected by the Company to the effect that the consolidated financial 
      statements present fairly, in all material respects, the consolidated 
      financial position of the Company and its Restricted Subsidiaries as 
      of the end of the fiscal year being reported on and the consolidated 
      results of the operations and cash flows for said year in conformity 
      with GAAP and that the examination of such accountants in connection 
      with such financial statements has been conducted in accordance with 
      generally accepted auditing standards and included such tests of the 
      accounting records and such other auditing procedures as said 
      accountants deemed necessary in the circumstances; provided, however, 
      that so long as the Company has no Unrestricted Subsidiaries and so 
      long as such delivery is made within the time requirement set forth 
      above in this paragraph (b), delivery pursuant to paragraph (d) below 
      of copies of the Annual Report on Form 10-K of the Company for such 
      fiscal year (together with the Company's annual report to 
      shareholders, if any, prepared pursuant to Rule 14a-3 under the 
      Securities Exchange Act) prepared in accordance with the requirements 
      therefor filed with the Securities and Exchange Commission shall be 
      deemed to satisfy the requirements of this paragraph (b);

            (c)  Audit Reports.  Promptly upon receipt thereof, one copy of 
      each interim or special audit made by independent accountants of the 
      books of the Company or any Restricted Subsidiary and any management 
      letter received from such accountants in connection with such interim 
      or special audits;

            (d)  SEC and Other Reports.  Promptly upon their becoming 
      available, one copy of each financial statement, report, notice or 
      proxy statement sent by the Company to stockholders generally and of 
      each regular or periodic report, and any registration statement or 
      prospectus filed by the Company or any Subsidiary with any securities 
      exchange or the Securities and Exchange Commission or any successor 
      agency, and copies of any orders in any proceedings to which the 
      Company or any of its Subsidiaries is a party, issued by any 
      governmental agency, Federal or state, having jurisdiction over the 
      Company or any of its Subsidiaries;

            (e)  ERISA Reports.  Promptly upon the occurrence thereof, 
      written notice of (i) a Reportable Event with respect to any Plan; 
      (ii) the institution of any steps by the Company, any ERISA Affiliate, 
      the PBGC or any other person to terminate any Plan; (iii) the 
      institution of any steps by the Company or any ERISA Affiliate to 
      withdraw from any Plan; (iv) a non-exempt "prohibited transaction" 
      within the meaning of Section 406 of ERISA in connection with any 
      Plan; (v) any material increase in the contingent liability of the 
      Company or any Restricted Subsidiary with respect to any post-
      retirement welfare liability; or (vi) the taking of any action by, or 
      the threatening of the taking of any action by, the Internal Revenue 
      Service, the Department of Labor or the PBGC with respect to any of 
      the foregoing;

            (f)  Officer's Certificates.  Within the periods provided in 
      paragraphs (a) and (b) above, a certificate of an authorized financial 
      officer of the Company stating that such officer has reviewed the 
      provisions of this Agreement and setting forth:  (i) the information 
      and computations (in sufficient detail) required in order to establish 
      whether the Company was in compliance with the requirements of 
      [SECTION]5.6 through [SECTION]5.15 at the end of the period covered by 
      the financial statements then being furnished, and (ii) whether there 
      existed as of the date of such financial statements and whether, to 
      the best of such officer's knowledge, there exists on the date of the 
      certificate or existed at any time during the period covered by such 
      financial statements any Default or Event of Default and, if any such 
      condition or event exists on the date of the certificate, specifying 
      the nature and period of existence thereof and the action the Company 
      is taking and proposes to take with respect thereto;

            (g)  Accountant's Certificates.  Within the period provided in 
      paragraph (b) above, a certificate of the accountants who render an 
      opinion with respect to such financial statements, stating that they 
      have reviewed this Agreement and stating further whether, in making 
      their audit, such accountants have become aware of any Default or 
      Event of Default under any of the terms or provisions of this 
      Agreement insofar as any such terms or provisions pertain to or 
      involve accounting matters or determinations, and if any such 
      condition or event then exists, specifying the nature and period of 
      existence thereof;

            (h)  Unrestricted Subsidiaries.  Within the respective periods 
      provided in paragraphs (a) and (b) above, financial statements of the 
      character and for the dates and periods as in said paragraphs (a) and 
      (b) provided covering each Unrestricted Subsidiary (or groups of 
      Unrestricted Subsidiaries on a consolidated basis); and

            (i)  Requested Information.  With reasonable promptness, such 
      other data and information as such Institutional Holder may reasonably 
      request. 

Without limiting the foregoing, the Company will permit each Institutional 
Holder (or such Persons as such Institutional Holder may designate), to 
visit and inspect, under the Company's guidance, any of the properties of 
the Company or any Restricted Subsidiary, to examine all of their 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, employees, and independent public 
accountants (and by this provision the Company authorizes said accountants 
to discuss with any Institutional Holder the finances and affairs of the 
Company and its Restricted Subsidiaries) all at such reasonable times and as 
often as may be reasonably requested.  The Company shall not be required to 
pay or reimburse any Holder for expenses which such Holder may incur in 
connection with any such visitation or inspection, except that if such 
visitation or inspection is made during any period when a Default or an 
Event of Default shall have occurred and be continuing, the Company agrees 
to reimburse such Holder for all such expenses promptly upon demand. 

SECTION 6.  EVENTS OF DEFAULT AND REMEDIES THEREFOR.

      Section 6.1.  Events of Default.  Any one or more of the following 
shall constitute an "Event of Default" as such term is used herein:

            (a)  Default shall occur in the payment of interest on any Note 
      when the same shall have become due and such default shall continue 
      for more than five days; or

            (b)  Default shall occur in the making of any required 
      prepayment on any of the Notes as provided in [SECTION]2.1; or

            (c)  Default shall occur in the making of any other payment of 
      the principal of any Note or premium, if any, thereon at the expressed 
      or any accelerated maturity date or at any date fixed for prepayment; 
      or

            (d)  Default shall be made in the payment when due (whether by 
      lapse of time, by declaration, by call for redemption or otherwise) of 
      the principal of or interest on any Debt (other than the Notes) of the 
      Company or any Restricted Subsidiary in an aggregate amount exceeding 
      $1,000,000 and such default shall continue beyond the period of grace, 
      if any, allowed with respect thereto; or

            (e)  Default or the happening of any event shall occur under any 
      indenture, agreement or other instrument under which any Debt of the 
      Company or any Restricted Subsidiary may be issued and such default or 
      event shall continue for a period of time sufficient to permit the 
      acceleration of the maturity of such Debt of the Company or any 
      Restricted Subsidiary outstanding thereunder in an aggregate amount 
      exceeding $1,000,000; or

            (f)  Default shall occur in the observance or performance of any 
      covenant or agreement contained in [SECTION]5.6 through [SECTION]5.11; 
      or

            (g)  Default shall occur in the observance or performance of any 
      other provision of this Agreement which is not remedied within 30 days 
      after the earlier of (i) the day on which the Company first obtains 
      knowledge of such default, or (ii) the day on which written notice 
      thereof is given to the Company by any Holder; or

            (h)  Any representation or warranty made by the Company herein, 
      or made by the Company in any statement or certificate furnished by 
      the Company in connection with the consummation of the issuance and 
      delivery of the Notes or furnished by the Company pursuant hereto, is 
      untrue in any material respect as of the date of the issuance or 
      making thereof; or

            (i)  Final judgment or judgments for the payment of money 
      aggregating in excess of $100,000 is or are outstanding against the 
      Company or any Restricted Subsidiary or against any property or assets 
      of either and any one of such judgments has remained unpaid, 
      unvacated, unbonded or unstayed by appeal or otherwise for a period of 
      30 days from the date of its entry; or

            (j)  A custodian, liquidator, trustee or receiver is appointed 
      for the Company or any Restricted Subsidiary or for the major part of 
      the property of either and is not discharged within 30 days after such 
      appointment; or

            (k)  The Company or any Restricted Subsidiary becomes insolvent 
      or bankrupt, is generally not paying its debts as they become due or 
      makes an assignment for the benefit of creditors, or the Company or 
      any Restricted Subsidiary applies for or consents to the appointment 
      of a custodian, liquidator, trustee or receiver for the Company or 
      such Restricted Subsidiary or for the major part of the property of 
      either; or

            (l)  Bankruptcy, reorganization, arrangement or insolvency 
      proceedings, or other proceedings for relief under any bankruptcy or 
      similar law or laws for the relief of debtors, are instituted by or 
      against the Company or any Restricted Subsidiary and, if instituted 
      against the Company or any Restricted Subsidiary, are consented to or 
      are not dismissed within 60 days after such institution.

      Section 6.2.  Notice to Holders.  When any Event of Default described 
in the foregoing [SECTION]6.1 has occurred, or if any Holder or the holder 
of any other evidence of Funded Debt or Current Debt of the Company gives 
any notice or takes any other action with respect to a claimed default, the 
Company agrees to give notice within three business days of such event to 
all Holders.

      Section 6.3.  Acceleration of Maturities.  When any Event of Default 
described in paragraph (a), (b) or (c) of [SECTION]6.1 has happened and is 
continuing, any Holder may, and when any Event of Default described in 
paragraphs (d) through (j), inclusive, of said [SECTION]6.1 has happened and 
is continuing, any Holder or Holders holding 25% or more of the principal 
amount of Notes at the time outstanding may, by notice to the Company, 
declare the entire principal and all interest accrued on all Notes to be, 
and all Notes shall thereupon become, forthwith due and payable, without any 
presentment, demand, protest or other notice of any kind, all of which are 
hereby expressly waived.  When any Event of Default described in paragraph 
(k) or (l) of [SECTION]6.1 has occurred, then all outstanding Notes shall 
immediately become due and payable without presentment, demand or notice of 
any kind.  Upon the Notes becoming due and payable as a result of any Event 
of Default as aforesaid, the Company will forthwith pay to the Holders, the 
entire principal and interest accrued on the Notes and, to the extent not 
prohibited by applicable law, an amount as liquidated damages for the loss 
of the bargain evidenced hereby (and not as a penalty) equal to the Make-
Whole Amount, determined as of the date on which the Notes shall so become 
due and payable.  No course of dealing on the part of the Holder or Holders 
nor any delay or failure on the part of any Holder to exercise any right 
shall operate as a waiver of such right or otherwise prejudice such Holder's 
rights, powers and remedies.  The Company further agrees, to the extent 
permitted by law, to pay to the Holder or Holders all reasonable costs and 
expenses incurred by them in the collection of any Notes upon any default 
hereunder or thereon, including reasonable compensation to such Holder's or 
Holders' attorneys for all services rendered in connection therewith.

      Section 6.4.  Rescission of Acceleration.  The provisions of 
[SECTION]6.3 are subject to the condition that if the principal of and 
accrued interest on all or any outstanding Notes have been declared 
immediately due and payable by reason of the occurrence of any Event of 
Default described in paragraphs (a) through (j), inclusive, of [SECTION]6.1, 
the Holders holding 66-2/3% in aggregate principal amount of the Notes then 
outstanding may, by written instrument filed with the Company, rescind and 
annul such declaration and the consequences thereof, provided that at the 
time such declaration is annulled and rescinded:

            (a)  no judgment or decree has been entered for the payment of 
      any monies due pursuant to the Notes or this Agreement;

            (b)  all arrears of interest upon all the Notes and all other 
      sums payable under the Notes and under this Agreement (except any 
      principal, interest or premium on the Notes which has become due and 
      payable solely by reason of such declaration under [SECTION]6.3) shall 
      have been duly paid; and

            (c)  each and every other Default and Event of Default shall 
      have been made good, cured or waived pursuant to [SECTION]7.1; 

and provided further, that no such rescission and annulment shall extend to 
or affect any subsequent Default or Event of Default or impair any right 
consequent thereto. 

SECTION 7.  AMENDMENTS, WAIVERS AND CONSENTS.

      Section 7.1.  Consent Required.  Any term, covenant, agreement or 
condition of this Agreement may, with the consent of the Company, be amended 
or compliance therewith may be waived (either generally or in a particular 
instance and either retroactively or prospectively), if the Company shall 
have obtained the consent in writing of the Holders holding at least 66-2/3% 
in aggregate principal amount of outstanding Notes; provided, however, that 
without the written consent of all of the Holders, no such amendment or 
waiver shall be effective (i) which will change the time of payment 
(including any prepayment required by [SECTION]2.1) of the principal of or 
the interest on any Note or change the principal amount thereof or change 
the rate of interest thereon, or (ii) which will change any of the 
provisions with respect to optional prepayments, or (iii) which will change 
the percentage of Holders required to consent to any such amendment or 
waiver of any of the provisions of this [SECTION]7 or [SECTION]6.

      Section 7.2.  Solicitation of Holders.  So long as there are any Notes 
outstanding, the Company will not solicit, request or negotiate for or with 
respect to any proposed waiver or amendment of any of the provisions of this 
Agreement or the Notes unless each Holder (irrespective of the amount of 
Notes then owned by it) shall be informed thereof by the Company and shall 
be afforded the opportunity of considering the same and shall be supplied by 
the Company with sufficient information to enable it to make an informed 
decision with respect thereto.  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, to any Holder as 
consideration for or as an inducement to entering into by any Holder of any 
waiver or amendment of any of the terms and provisions of this Agreement or 
the Notes unless such remuneration is concurrently offered, on the same 
terms, ratably to all Holders.

      Section 7.3.  Effect of Amendment or Waiver.  Any such amendment or 
waiver shall apply equally to all of the Holders and shall be binding upon 
them, upon each future Holder and upon the Company, whether or not any Note 
shall have been marked to indicate such amendment or waiver.  No such 
amendment or waiver shall extend to or affect any obligation not expressly 
amended or waived or impair any right consequent thereon. 

SECTION 8.  INTERPRETATION OF AGREEMENT; DEFINITIONS.

      Section 8.1.  Definitions.  Unless the context otherwise requires, the 
terms hereinafter set forth when used herein shall have the following 
meanings and the following definitions shall be equally applicable to both 
the singular and plural forms of any of the terms herein defined: 

      "Additional First Mortgage Bonds" shall mean First Mortgage Bonds 
issued after the Closing Date other than (i) bonds issued in exchange for, 
in connection with a transfer of the ownership of, or as a replacement for 
lost, mutilated, stolen or destroyed, First Mortgage Bonds which are 
outstanding on the Closing Date and (ii) First Mortgage Bonds issued to the 
Holders of the Notes upon conversion of the Notes pursuant to [SECTION]9.4. 

      "Additional Funded Debt" shall mean the amount, if any, by which (i) 
the lowest average of the highest balances of Consolidated Current Debt 
outstanding on any three consecutive Current Debt Test Dates during the 12-
month period immediately preceding any date of determination exceeds (ii) 
the Current Debt Basket Amount for such date. 

      "Affiliate" shall mean any Person (other than a Restricted Subsidiary) 
(i) which directly or indirectly through one or more intermediaries 
controls, or is controlled by, or is under common control with, the Company, 
(ii) which beneficially owns or holds 5% or more of any class of the Voting 
Stock of the Company or (iii) 5% or more of the Voting Stock (or in the case 
of a Person which is not a corporation, 5% or more of the equity interest) 
of which is beneficially owned or held by the Company or a Subsidiary.  The 
term "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 Stock, by contract or otherwise. 

      "Agreement" shall mean this Note Agreement. 

      "Capitalized Lease" shall mean any lease the obligation for Rentals 
with respect to which is required to be capitalized on a consolidated 
balance sheet of the lessee and its subsidiaries in accordance with GAAP. 

      "Capitalized Rentals" of any Person shall mean as of the date of any 
determination thereof the amount at which the aggregate Rentals due and to 
become due under all Capitalized Leases under which such Person is a lessee 
would be reflected as a liability on a consolidated balance sheet of such 
Person. 

      "Code" shall mean the Internal Revenue Code of 1986, as amended. 

      "Company" shall mean The Berkshire Gas Company, a Massachusetts 
corporation, and any Person who succeeds to all, or substantially all, of 
the assets and business of The Berkshire Gas Company. 

      "Consolidated Adjusted Tangible Net Worth" shall mean Consolidated 
Tangible Net Worth less Restricted Investments. 

      "Consolidated Adjusted Total Assets" shall mean (a) total assets of 
the Company and its Restricted Subsidiaries determined on a consolidated 
basis in accordance with GAAP, less (b) Restricted Investments. 

      "Consolidated Adjusted Capitalization" shall mean (a) the sum of (i) 
Consolidated Tangible Net Worth plus (ii) Consolidated Funded Debt, less (b) 
Restricted Investments. 

      "Consolidated Adjusted Total Capitalization" shall mean (a) the sum of 
(i) Consolidated Tangible Net Worth plus (ii) Consolidated Total Debt, less 
(b) Restricted Investments. 

      "Consolidated Current Debt" shall mean Current Debt of the Company and 
its Restricted Subsidiaries determined on a consolidated basis in accordance 
with GAAP. 

      "Consolidated Funded Debt" shall mean Funded Debt of the Company and 
its Restricted Subsidiaries determined on a consolidated basis in accordance 
with GAAP plus Additional Funded Debt. 

      "Consolidated Net Income" for any period shall mean the gross revenues 
of the Company and its Restricted Subsidiaries for such period less all 
expenses and other proper charges (including taxes on income), determined on 
a consolidated basis after eliminating earnings or losses attributable to 
outstanding Minority Interests, but excluding in any event:

            (a)  any gains or losses on the sale or other disposition of 
      Investments or fixed or capital assets, and any taxes on such excluded 
      gains and any tax deductions or credits on account of any such 
      excluded losses;

            (b)  the proceeds of any life insurance policy;

            (c)  net earnings and losses of any Restricted Subsidiary 
      accrued prior to the date it became a Restricted Subsidiary;

            (d)  net earnings and losses of any corporation (other than a 
      Restricted Subsidiary), substantially all the assets of which have 
      been acquired in any manner by the Company or any Restricted 
      Subsidiary, realized by such corporation prior to the date of such 
      acquisition;

            (e)  net earnings and losses of any corporation (other than a 
      Restricted Subsidiary) with which the Company or a Restricted 
      Subsidiary shall have consolidated or which shall have merged into or 
      with the Company or a Restricted Subsidiary prior to the date of such 
      consolidation or merger;

            (f)  net earnings of any business entity (other than a 
      Restricted Subsidiary) in which the Company or any Restricted 
      Subsidiary has an ownership interest unless such net earnings shall 
      have actually been received by the Company or such Restricted 
      Subsidiary in the form of cash distributions;

            (g)  any portion of the net earnings of any Restricted 
      Subsidiary which for any reason is unavailable for payment of 
      dividends to the Company or any other Restricted Subsidiary;

            (h)  earnings resulting from any reappraisal, revaluation or 
      write-up of assets;

            (i)  any deferred or other credit representing any excess of the 
      equity in any Subsidiary at the date of acquisition thereof over the 
      amount invested in such Subsidiary;

            (j)  any gain arising from the acquisition of any Securities of 
      the Company or any Restricted Subsidiary; and

            (k)  any reversal of any contingency reserve, except to the 
      extent that provision for such contingency reserve shall have been 
      made from income arising during such period. 

      "Consolidated Tangible Net Worth" shall mean as of the date of any 
determination thereof the total amount of all Tangible Assets of the Company 
and its Restricted Subsidiaries after deducting therefrom all items which, 
in accordance with GAAP, would be included on the liability and equity side 
of a consolidated balance sheet except capital stock of any class, surplus 
and retained earnings. 

      "Consolidated Total Debt" shall mean the sum of Consolidated Funded 
Debt plus Consolidated Current Debt. 

      "Current Debt" of any Person shall mean as of the date of any 
determination thereof (i) all Indebtedness of such Person for borrowed money 
other than Funded Debt of such Person and (ii) Guaranties by such Person of 
Current Debt of others. 

      "Current Debt Basket Amount" shall mean for any date the amount 
specified as follows for the fiscal year in which such date shall occur:  
(i) for the fiscal years ending on or before June 30, 1998, $5,000,000, (ii) 
for the fiscal year ending June 30, 1999, $4,000,000, (iii) for the fiscal 
year ending June 30, 2000, $3,000,000, (iv) for the fiscal year ending June 
30, 2001, $2,000,000, (v) for the fiscal year ending June 30, 2002, 
$1,000,000, and (vi) for the fiscal year ending June 30, 2003 and each 
fiscal year occurring thereafter, $-0-. 

      "Current Debt Test Date" shall mean the first and fifteenth days of 
each month, provided that, if any such day is not a business day, then the 
Current Debt Test Date shall be the business day which shall first occur 
thereafter. 

      "Debt" of any Person shall mean all Funded Debt and all Current Debt 
of such Person. 

      "Default" shall mean any event or condition the occurrence of which 
would, with the lapse of time or the giving of notice, or both, constitute 
an Event of Default. 

      "ERISA" shall mean the Employee Retirement Income Security Act of 
1974, as amended, and any successor statute of similar import, together with 
the regulations thereunder, in each case as in effect from time to time.  
References to sections of ERISA shall be construed to also refer to any 
successor sections. 

      "ERISA Affiliate" shall mean any corporation, trade or business that 
is, along with the Company, a member of a controlled group of corporations 
or a controlled group of trades or businesses, as described in section 
414(b) and 414(c), respectively, of the Code or Section 4001 of ERISA. 

      "Event of Default" shall have the meaning set forth in [SECTION]6.1. 

      "First Mortgage Bonds" shall mean any Bonds issued under the First 
Mortgage Bond Indenture. 

      "First Mortgage Bond Indenture" shall mean that certain First Mortgage 
Indenture and Deed of Trust dated as of July 1, 1954 between the Company 
(f/k/a Pittsfield Coal Gas Company) and Chemical Bank & Trust Company, as 
Trustee, as such First Mortgage Indenture and Deed of Trust has heretofore 
been and may hereafter be amended, modified or supplemented. 

      "Fixed Charges" for any period shall mean on a consolidated basis the 
sum of (i) all Rentals (other than Rentals on Capitalized Leases) payable 
during such period by the Company and its Restricted Subsidiaries, and (ii) 
all Interest Charges on all Debt (including the interest component of 
Rentals on Capitalized Leases) of the Company and its Restricted 
Subsidiaries. 

      "Funded Debt" of any Person shall mean (i) all Indebtedness of such 
Person for borrowed money or which has been incurred in connection with the 
acquisition of assets in each case having a final maturity of one or more 
than one year from the date of origin thereof (or which is renewable or 
extendible at the option of the obligor for a period or periods more than 
one year from the date of origin), including all payments in respect thereof 
that are required to be made within one year from the date of any 
determination of Funded Debt, whether or not the obligation to make such 
payments shall constitute a current liability of the obligor under GAAP, 
(ii) all Capitalized Rentals of such Person, and (iii) all Guaranties by 
such Person of Funded Debt of others. 

      "GAAP" shall mean generally accepted accounting principles at the time 
in the United States. 

      "Guaranties" by any Person shall mean all obligations (other than 
endorsements in the ordinary course of business of negotiable instruments 
for deposit or collection) of such Person guaranteeing, or in effect 
guaranteeing, any Indebtedness, dividend or other obligation of any other 
Person (the "primary obligor") in any manner, whether directly or 
indirectly, including, without limitation, all obligations incurred through 
an agreement, contingent or otherwise, by such Person:  (i) to purchase such 
Indebtedness or obligation or any property or assets constituting security 
therefor, (ii) to advance or supply funds (x) for the purchase or payment of 
such Indebtedness or obligation, (y) to maintain working capital or other 
balance sheet condition or otherwise to advance or make available funds for 
the purchase or payment of such Indebtedness or obligation, (iii) to lease 
property or to purchase Securities or other property or services primarily 
for the purpose of assuring the owner of such Indebtedness or obligation of 
the ability of the primary obligor to make payment of the Indebtedness or 
obligation, or (iv) otherwise to assure the owner of the Indebtedness or 
obligation of the primary obligor against loss in respect thereof.  For the 
purposes of all computations made under this Agreement, a Guaranty in 
respect of any Indebtedness for borrowed money shall be deemed to be 
Indebtedness equal to the principal amount of such Indebtedness for borrowed 
money which has been guaranteed, and a Guaranty in respect of any other 
obligation or liability or any dividend shall be deemed to be Indebtedness 
equal to the maximum aggregate amount of such obligation, liability or 
dividend. 

      "Holder" shall mean any Person which is, at the time of reference, the 
registered Holder of any Note. 

      "Indebtedness" of any Person shall mean and include all obligations of 
such Person which in accordance with GAAP shall be classified upon a balance 
sheet of such Person as liabilities of such Person, and in any event shall 
include all (i) obligations of such Person for borrowed money or which has 
been incurred in connection with the acquisition of property or assets, (ii) 
obligations secured by any Lien upon property or assets owned by such 
Person, even though such Person has not assumed or become liable for the 
payment of such obligations, (iii) obligations created or arising under any 
conditional sale or other title retention agreement with respect to property 
acquired by such Person, notwithstanding the fact that the rights and 
remedies of the seller, lender or lessor under such agreement in the event 
of default are limited to repossession or sale of property, (iv) Capitalized 
Rentals and (v) Guaranties of obligations of others of the character 
referred to in this definition. 

      "Institutional Holder" shall mean any Holder which is the Purchaser or 
an insurance company, bank, savings and loan association, trust company, 
investment company, charitable foundation, employee benefit plan (as defined 
in ERISA) or other institutional investor or financial institution and, for 
purposes of the direct payment provisions of this Agreement, shall include 
any nominee of any such Holder. 

      "Interest Charges" for any period shall mean all interest and all 
amortization of debt discount and expense on any particular Indebtedness for 
which such calculations are being made.   

      "Investments" shall mean all investments, in cash or by delivery of 
property made, directly or indirectly in any Person, whether by acquisition 
of shares of capital stock, indebtedness or other obligations or Securities 
or by loan, advance, capital contribution or otherwise; provided, however, 
that "Investments" shall not mean or include routine investments in property 
to be used or consumed in the ordinary course of business. 

      "Lien" shall mean any interest in property securing an obligation owed 
to, or a claim by, a Person other than the owner of the property, whether 
such interest is based on the common law, statute or contract, and including 
but not limited to the security interest lien arising from a mortgage, 
encumbrance, pledge, conditional sale or trust receipt or a lease, 
consignment or bailment for security purposes.  The term "Lien" shall 
include reservations, exceptions, encroachments, easements, rights-of-way, 
covenants, conditions, restrictions, leases and other title exceptions and 
encumbrances (including, with respect to stock, stockholder agreements, 
voting trust agreements, buy-back agreements and all similar arrangements) 
affecting property.  For the purposes of this Agreement, the Company or a 
Subsidiary shall be deemed to be the owner of any property which it has 
acquired or holds subject to a conditional sale agreement, Capitalized Lease 
or other arrangement pursuant to which title to the property has been 
retained by or vested in some other Person for security purposes and such 
retention or vesting shall constitute a Lien. 

      "Make-Whole Amount" shall mean in connection with any prepayment or 
acceleration of the Notes the excess, if any, of (i) the aggregate present 
value as of the date of such prepayment of each dollar of principal being 
prepaid (taking into account the application of such prepayment required by 
[SECTION]2.1) and the amount of interest (exclusive of interest accrued to 
the date of prepayment) that would have been payable in respect of such 
dollar if such prepayment had not been made, determined by discounting such 
amounts at the Reinvestment Rate from the respective dates on which they 
would have been payable, over (ii) 100% of the principal amount of the 
outstanding Notes being prepaid.  If the Reinvestment Rate is equal to or 
higher than 7.80%, the Make-Whole Amount shall be zero.  For purposes of any 
determination of the Make-Whole Amount: 

            "Reinvestment Rate" shall mean 0.50%, plus the arithmetic mean 
      of the yields for the two columns under the heading "Week Ending" 
      published in the Statistical Release under the caption "Treasury 
      Constant Maturities" for the maturity (rounded to the nearest month) 
      corresponding to the Weighted Average Life to Maturity of the 
      principal being prepaid (taking into account the application of such 
      prepayment required by [SECTION]2.1).  If no maturity exactly 
      corresponds to such Weighted Average Life to Maturity, yields for the 
      published maturity next longer than the Weighted Average Life to 
      Maturity and for the published maturity next shorter than the Weighted 
      Average Life to Maturity shall be calculated pursuant to the 
      immediately preceding sentence and the Reinvestment Rate shall be 
      interpolated from such yields on a straight-line basis, rounding in 
      each of such relevant periods to the nearest month.  For the purposes 
      of calculating the Reinvestment Rate, the most recent Statistical 
      Release published prior to the date of determination of the Make-Whole 
      Amount shall be used.  "Statistical Release" shall mean the then most 
      recently published statistical release designated "H.15(519)" or any 
      successor publication which is published weekly by the Federal Reserve 
      System and which establishes yields on actively traded U.S. Government 
      Securities adjusted to constant maturities or, if such statistical 
      release is not published at the time of any determination hereunder, 
      then such other reasonably comparable index which shall be designated 
      by the Holders holding 66-2/3% in aggregate principal amount of the 
      outstanding Notes. 

            "Weighted Average Life to Maturity" of the principal amount of 
      the Notes being prepaid shall mean, as of the time of any 
      determination thereof, the number of years obtained by dividing the 
      then Remaining Dollar-Years of such principal by the aggregate amount 
      of such principal.  The term "Remaining Dollar-Years" of such 
      principal shall mean the amount obtained by (i) multiplying (x) the 
      remainder of (1) the amount of principal that would have become due on 
      each scheduled payment date if such prepayment had not been made, less 
      (2) the amount of principal on the Notes scheduled to become due on 
      such date after giving effect to such prepayment and the application 
      thereof in accordance with the provisions of [SECTION]2.1, by (y) the 
      number of years (calculated to the nearest one-twelfth) which will 
      elapse between the date of determination and such scheduled payment 
      date, and (ii) totaling the products obtained in (i). 

      "Minority Interests" shall mean any shares of stock of any class of a 
Restricted Subsidiary (other than directors' qualifying shares as required 
by law) that are not owned by the Company and/or one or more of its 
Restricted Subsidiaries.  Minority Interests shall be valued by valuing 
Minority Interests constituting preferred stock at the voluntary or 
involuntary liquidating value of such preferred stock, whichever is greater, 
and by valuing Minority Interests constituting common stock at the book 
value of capital and surplus applicable thereto adjusted, if necessary, to 
reflect any changes from the book value of such common stock required by the 
foregoing method of valuing Minority Interests in preferred stock. 

      "Multiemployer Plan" shall have the same meaning as in ERISA. 

       "Net Income Available for Fixed Charges" for any period shall mean 
the sum of (i) Consolidated Net Income during such period plus (to the 
extent deducted in determining Consolidated Net Income), (ii) all provisions 
for any Federal, state or other income taxes made by the Company and its 
Restricted Subsidiaries during such period and (iii) Fixed Charges of the 
Company and its Restricted Subsidiaries during such period. 

      "PBGC" means the Pension Benefit Guaranty Corporation and any entity 
succeeding to any or all of its functions under ERISA. 

      "Person" shall mean an individual, partnership, corporation, trust or 
unincorporated organization, and a government or agency or political 
subdivision thereof. 

      "Plan" means a "pension plan," as such term is defined in ERISA, 
established or maintained by the Company or any ERISA Affiliate or as to 
which the Company or any ERISA Affiliate contributed or is a member or 
otherwise may have any liability. 

      "Purchaser" shall have the meaning set forth in [SECTION]1.1. 

      "Rentals" shall mean and include as of the date of any determination 
thereof all fixed payments (including as such all payments which the lessee 
is obligated to make to the lessor on termination of the lease or surrender 
of the property) payable by the Company or a Restricted Subsidiary, as 
lessee or sublessee under a lease of real or personal property, but shall be 
exclusive of any amounts required to be paid by the Company or a Restricted 
Subsidiary (whether or not designated as rents or additional rents) on 
account of maintenance, repairs, insurance, taxes and similar charges.  
Fixed rents under any so-called "percentage leases" shall be computed solely 
on the basis of the minimum rents, if any, required to be paid by the lessee 
regardless of sales volume or gross revenues. 

      "Reportable Event" shall have the same meaning as in ERISA. 

      "Restricted Investments" shall mean all Investments existing on or 
made after the Closing Date other than:

            (a)  Investments of the Company and its Restricted Subsidiaries 
      in and to Restricted Subsidiaries. including any Investment in any 
      Person which, after giving effect to such Investment, will become a 
      Restricted Subsidiary;

            (b)  Investments in commercial paper maturing in 270 days or 
      less from the date of issuance which, at the time of acquisition by 
      the Company or any Restricted Subsidiary, is accorded the highest 
      rating by Standard & Poor's Ratings Group, Moody's Investors Service, 
      Inc. or other nationally recognized credit rating agency of similar 
      standing;

            (c)  Investments in direct obligations of the United States of 
      America or any agency or instrumentality of the United States of 
      America, the payment or guarantee of which constitutes a full faith 
      and credit obligation of the United States of America, in either case, 
      maturing in twelve months or less from the date of acquisition 
      thereof;

            (d)  Investments in certificates of deposit maturing within one 
      year from the date of issuance thereof, issued by a bank or trust 
      company organized under the laws of the United States or any state 
      thereof, having capital, surplus and undivided profits aggregating at 
      least $100,000,000 and whose long-term certificates of deposit are, at 
      the time of acquisition thereof by the Company or a Restricted 
      Subsidiary, rated AA or better by Standard & Poor's Ratings Group or 
      Aa or better by Moody's Investors Service, Inc.;

            (e)  loans or advances in the usual and ordinary course of 
      business to officers, directors and employees for expenses (including 
      moving expenses related to a transfer) incidental to carrying on the 
      business of the Company or any Restricted Subsidiary;

            (f)  receivables arising from the sale of goods and services in 
      the ordinary course of business of the Company and its Restricted 
      Subsidiaries; and

            (g)  Investments in addition to those described in the foregoing 
      paragraphs (a) through (f) hereof, provided that the aggregate amount 
      of all Investments made pursuant to the provisions of this paragraph 
      (g) shall not exceed an amount equal to 5% of Common Shareholders' 
      Equity. 

      As used herein, "Common Shareholders' Equity" shall mean at any time 
the sum of the common stock, surplus and retained earnings of the Company as 
of the end of the most recent fiscal quarter as determined in accordance 
with GAAP. 

      In valuing any Investments, such Investments shall be taken at the 
original cost thereof, without allowance for any subsequent write-offs or 
appreciation or depreciation therein, but less any amount repaid or 
recovered on account of capital or principal. 

      "Restricted Subsidiary" shall mean any Subsidiary (a) which is 
organized under the laws of the United States or any State thereof; (b) 
which conducts substantially all of its business and has substantially all 
of its assets within the United States; (c) of which more than 80% (by 
number of votes) of the Voting Stock is beneficially owned, directly or 
indirectly, by the Company; and (d) which has been designated by the Board 
of Directors of the Company as a Restricted Subsidiary in accordance with 
[SECTION]5.16. 

      "Security" shall have the same meaning as in Section 2(1) of the 
Securities Act of 1933, as amended. 

      The term "subsidiary" shall mean as to any particular parent 
corporation any corporation of which more than 50% (by number of votes) of 
the Voting Stock shall be beneficially owned, directly or indirectly, by 
such parent corporation.  The term "Subsidiary" shall mean a subsidiary of 
the Company. 

      "Tangible Assets" shall mean as of the date of any determination 
thereof the total amount of all assets of the Company and its Restricted 
Subsidiaries (less depreciation, depletion and other properly deductible 
valuation reserves) after deducting good will, patents, trade names, trade 
marks, copyrights, franchises, experimental expense, organization expense, 
unamortized debt discount and expense, deferred assets other than prepaid 
insurance and prepaid taxes, the excess of cost of shares acquired over book 
value of related assets and such other assets as are properly classified as 
"intangible assets" in accordance with GAAP. 

      "Unrestricted Subsidiary" shall mean any Subsidiary which is not a 
Restricted Subsidiary. 

      "Voting Stock" shall mean Securities of any class or classes, the 
holders of which are ordinarily, in the absence of contingencies, entitled 
to elect a majority of the corporate directors (or Persons performing 
similar functions). 

      "Wholly-owned" when used in connection with any Subsidiary shall mean 
a Subsidiary of which all of the issued and outstanding shares of stock 
(except shares required as directors' qualifying shares) and all Funded Debt 
and Current Debt shall be owned by the Company and/or one or more of its 
Wholly-owned Subsidiaries.

      Section 8.2.  Accounting Principles.  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 requirements of this Agreement.

      Section 8.3.  Directly or Indirectly.  Where any provision in this 
Agreement refers to action to be taken by any Person, or which such Person 
is prohibited from taking, such provision shall be applicable whether the 
action in question is taken directly or indirectly by such Person. 

SECTION 9.  MISCELLANEOUS.

      Section 9.1.  Registered Notes.  The Company shall cause to be kept at 
its principal office a register for the registration and transfer of the 
Notes (hereinafter called the "Note Register"), and the Company will 
register or transfer or cause to be registered or transferred as hereinafter 
provided any Note issued pursuant to this Agreement. 

      At any time and from time to time any Holder of a Note which has been 
duly registered as hereinabove provided may transfer such Note upon 
surrender thereof at the principal office of the Company duly endorsed or 
accompanied by a written instrument of transfer duly executed by the Holder 
or its attorney duly authorized in writing. 

      The Person in whose name any registered Note shall be registered shall 
be deemed and treated as the owner and Holder thereof and a holder for all 
purposes of this Agreement.  Payment of or on account of the principal, 
premium, if any, and interest on any registered Note shall be made to or 
upon the written order of such Holder.

      Section 9.2.  Exchange of Notes.  At any time and from time to time, 
upon not less than ten days' notice to that effect given by the Holder of 
any Note initially delivered or of any Note substituted therefor pursuant to 
[SECTION]9.1, this [SECTION]9.2 or [SECTION]9.3, and, upon surrender of such 
Note at its office, the Company will deliver in exchange therefor, without 
expense to such Holder, except as set forth below, a Note for the same 
aggregate principal amount as the then unpaid principal amount of the Note 
so surrendered, or Notes in the denomination of $100,000 or any amount in 
excess thereof as such Holder shall specify, dated as of the date to which 
interest has been paid on the Note so surrendered or, if such surrender is 
prior to the payment of any interest thereon, then dated as of the date of 
issue, registered in the name of such Person or Persons as may be designated 
by such Holder, and otherwise of the same form and tenor as the Notes so 
surrendered for exchange.  The Company may require the payment of a sum 
sufficient to cover any stamp tax or governmental charge imposed upon such 
exchange or transfer.

      Section 9.3.  Loss, Theft, Etc. of Notes.  Upon receipt of evidence 
satisfactory to the Company of the loss, theft, mutilation or destruction of 
any Note, and in the case of any such loss, theft or destruction upon 
delivery of a bond of indemnity in such form and amount as shall be 
reasonably satisfactory to the Company, or in the event of such mutilation 
upon surrender and cancellation of the Note, the Company will make and 
deliver without expense to the Holder thereof, a new Note, of like tenor, in 
lieu of such lost, stolen, destroyed or mutilated Note.  If an Institutional 
Holder is the owner of any such lost, stolen or destroyed Note, then the 
affidavit of an authorized officer of such owner, setting forth the fact of 
loss, theft or destruction and of its ownership of such Note at the time of 
such loss, theft or destruction shall be accepted as satisfactory evidence 
thereof and no further indemnity shall be required as a condition to the 
execution and delivery of a new Note other than the written agreement of 
such owner to indemnify the Company.

      Section 9.4.  Conversion of Notes to First Mortgage Bonds.  (a)  The 
Company may issue Additional First Mortgage Bonds provided that (i) the 
Additional First Mortgage Bonds are issued in compliance with the following 
provisions of this [SECTION]9.4, (ii) no Default or Event of Default shall 
then exist and (iii) after giving effect thereto the Company shall be in 
compliance with [SECTION]5.7(a).

      (b)  The Company may issue Additional First Mortgage Bonds provided 
that concurrently with or prior to the issuance thereof the Company shall 
convert all outstanding Notes by issuing First Mortgage Bonds to the Holders 
of such Notes as herein provided.  Not later than 60 days nor earlier than 
30 days prior to the date of the issuance of any Additional First Mortgage 
Bonds, the Company shall give written notice of such fact in the manner 
provided in [SECTION]9.7 hereof to the Holders of the Notes which notice 
shall (1) state the details of the proposed issuance of the Additional First 
Mortgage Bonds and the effective date thereof (the "Effective Date"), (2) 
state that pursuant to this [SECTION]9.4, the Company shall convert all 
Notes to First Mortgage Bonds and (3) specify the date upon which the 
conversion shall take place (the "Conversion Date").  On the Conversion 
Date, the Company, as provided herein, shall convert to First Mortgage Bonds 
all of the outstanding Notes.

      (c)  Any First Mortgage Bonds to be issued to the Holders of Notes 
pursuant to the foregoing provisions (i) shall be issued in a separate 
series of First Mortgage Bonds, (ii) shall be in a principal amount equal to 
the aggregate unpaid principal amount of the Notes, (iii) shall bear 
interest at the rate of 7.80% per annum from the date to which interest has 
been paid on the Notes, (iv) shall be payable with respect to interest and 
principal on the same respective payment dates of the Notes, (v) shall have 
the same optional prepayment provisions and, to the extent permitted under 
the First Mortgage Bond Indenture, the same events of default as such Notes 
or, if not so permitted for any similar event of default, provisions which 
result in a mandatory redemption upon the occurrence of such event, (vi) 
shall, in the First Mortgage Bond Indenture, receive the benefit of terms 
and provisions substantially the same as those contained in this Agreement, 
including without limitation, the covenants of the Company contained in 
[SECTION]5 (other than [SECTION]5.9) of this Agreement (allowing for 
differences in form and with appropriate adjustments to reflect the changed 
nature of the securities), and (vii) shall be issued pursuant to the First 
Mortgage Bond Indenture in a manner satisfactory in form and substance to 
such Holders and their counsel.  The Holders of the Notes may be represented 
by such special counsel as they shall select and the reasonable charges and 
disbursements of such special counsel shall be paid by the Company.

      (d)  On or prior to the Conversion Date, and as a condition to the 
effectiveness of such conversion, the supplemental indenture pursuant to 
which such First Mortgage Bonds shall be issued shall be duly recorded, and 
any necessary financing statements shall be duly filed in respect thereof, 
to the extent required by law to perfect the lien of the First Mortgage Bond 
Indenture on the mortgaged property thereunder, and the Company shall 
deliver to the trustee under the First Mortgage Bond Indenture and to each 
of the Holders of the outstanding Notes, an opinion of counsel (who shall be 
satisfactory to each of such Holders) and such other evidence as such 
Holders may request as to (A) the priority of the Lien created by the First 
Mortgage Bond Indenture in favor of the First Mortgage Bonds issued to such 
Holders, (B) the equal and ratable benefit and security provided by the 
First Mortgage Bond Indenture to such First Mortgage Bonds in favor of such 
Holders, (C) the due authorization, execution and delivery of such First 
Mortgage Bonds and the legality, validity, binding effect and enforceability 
thereof, (D) the due authentication and issuance thereof under the First 
Mortgage Bond Indenture, (E) the absence of any default or event which with 
the giving of notice or passage of time, or both, would constitute a default 
or event of default under the First Mortgage Bond Indenture or any 
Indebtedness secured thereby, (F) the due authorization, execution and 
delivery of the First Mortgage Bond Indenture and the legality, validity, 
binding effect and enforceability thereof, (G) the approval of such First 
Mortgage Bonds and such supplemental indenture by any necessary governmental 
agencies, and (H) the good title of the Company to its real properties 
(which opinion with respect to such title may be based upon an examination 
of title insurance policies and/or endorsements thereto, abstracts or 
certificates of title or similar documents) and as to such other matters as 
such Holders may request.  Upon completion of the conversion of the Notes 
into First Mortgage Bonds pursuant to the foregoing provisions of this 
[SECTION]9.4, this Agreement shall terminate except for any obligations of 
the Company arising under this Agreement prior to such termination which 
have not been satisfied.

      Section 9.5.  Expenses, Stamp Tax Indemnity.  Whether or not the 
transactions herein contemplated shall be consummated, the Company agrees to 
pay directly all of the Purchaser's reasonable out-of-pocket expenses in 
connection with the preparation, execution and delivery of this Agreement 
and the transactions contemplated hereby, including but not limited to the 
reasonable charges and disbursements of Chapman and Cutler, special counsel 
to the Purchaser, duplicating and printing costs and charges for shipping 
the Notes, adequately insured to the Purchaser's home office or at such 
other place as such Purchaser may designate, and all such expenses of the 
Holders relating to any amendment, waivers or consents pursuant to the 
provisions hereof, including, without limitation, any amendments, waivers, 
or consents resulting from any work-out, renegotiation or restructuring 
relating to the performance by the Company of its obligations under this 
Agreement and the Notes.  The Company also agrees that it will pay and save 
the Purchaser harmless against any and all liability with respect to stamp 
and other taxes, if any, which may be payable or which may be determined to 
be payable in connection with the execution and delivery of this Agreement 
or the Notes, whether or not any Notes are then outstanding.  The Company 
agrees to protect and indemnify the Purchaser against any liability for any 
and all brokerage fees and commissions payable or claimed to be payable to 
any Person in connection with the transactions contemplated by this 
Agreement.  The Purchaser represents that no placement agent, broker or 
finder has been retained or engaged by the Purchaser in connection with its 
purchase of the Notes.

      Section 9.6.  Powers and Rights Not Waived; Remedies Cumulative.  No 
delay or failure on the part of any Holder in the exercise of any power or 
right shall operate as a waiver thereof; nor shall any single or partial 
exercise of the same preclude any other or further exercise thereof, or the 
exercise of any other power or right, and the rights and remedies of each 
Holder are cumulative to, and are not exclusive of, any rights or remedies 
any such Holder would otherwise have.

      Section 9.7.  Notices.  All communications provided for hereunder 
shall be in writing and, if to a Holder, delivered or mailed prepaid by 
registered or certified mail or overnight air courier, or by facsimile 
communication, in each case addressed to such Holder at its address 
appearing on Schedule I to this Agreement or such other address as any 
Holder may designate to the Company in writing, and if to the Company, 
delivered or mailed by registered or certified mail or overnight air 
courier, or by facsimile communication, to the Company at the address 
beneath its signature at the foot of this Agreement or to such other address 
as the Company may in writing designate to the Holders; provided, however, 
that a notice to a Holder by overnight air courier shall only be effective 
if delivered to such Holder at a street address designated for such purpose 
in accordance with this [SECTION]9.7, and a notice to such Holder by 
facsimile communication shall only be effective if made by confirmed 
transmission to such Holder at a telephone number designated for such 
purpose in accordance with this [SECTION]9.7 and promptly followed by the 
delivery of such notice by registered or certified mail or overnight air 
courier, as set forth above.

      Section 9.8.  Successors and Assigns.  This Agreement shall be binding 
upon the Company and its successors and assigns and shall inure to the 
benefit of the Purchaser and its successor and assigns, including each 
successive Holder.

      Section 9.9.  Survival of Covenants and Representations.  All 
covenants, representations and warranties made by the Company herein and in 
any certificates delivered pursuant hereto, whether or not in connection 
with the Closing Date, shall survive the closing and the delivery of this 
Agreement and the Notes.

      Section 9.10.  Severability.  Should any part of this Agreement for 
any reason be declared invalid or unenforceable, such decision shall not 
affect the validity or enforceability of any remaining portion, which 
remaining portion shall remain in force and effect as if this Agreement had 
been executed with the invalid or unenforceable portion thereof eliminated 
and it is hereby declared the intention of the parties hereto that they 
would have executed the remaining portion of this Agreement without 
including therein any such part, parts or portion which may, for any reason, 
be hereafter declared invalid or unenforceable.

      Section 9.11.  Governing Law.  This Agreement and the Notes issued and 
sold hereunder shall be governed by and construed in accordance with the 
laws of the Commonwealth of Massachusetts.

      Section 9.12.  Captions.  The descriptive headings of the various 
Sections or parts of this Agreement are for convenience only and shall not 
affect the meaning or construction of any of the provisions hereof. 
 
      The execution hereof by you shall constitute a contract between the 
Company and you for the uses and purposes hereinabove set forth.  This 
Agreement may be executed in any number of counterparts, each executed 
counterpart constituting an original but all together only one agreement. 
 

                                       THE BERKSHIRE GAS COMPANY 
 
 
 
                                       By:       /s/ Scott S. Robinson
                                           ---------------------------------
                                                    Its President
 
 
 
THE BERKSHIRE GAS COMPANY 
115 Cheshire Road 
Pittsfield, Massachusetts  01201 
Attention:  Michael J. Marrone 
Telefacsimile:  (413) 443-0546 
Confirmation:  (413) 445-0259 


Accepted as of November 1, 1996: 
 
 
                                       FIRST COLONY LIFE INSURANCE COMPANY
 
 
 
                                       By:    /s/ George D. Vermilya, Jr.
                                           ---------------------------------
                                              Its Associate Vice President
 



                                 SCHEDULE I
                             (to Note Agreement)


                                                              PRINCIPAL AMOUNTS
NAME OF PURCHASER                                               OF NOTES TO BE
                                                                  PURCHASED
 
FIRST COLONY LIFE INSURANCE COMPANY                              $16,000,000 
700 Main Street 
Lynchburg, Virginia  24504 
Attention:  Mr. George D. Vermilya, Jr. 
Telecopier Number:  (804) 948-5484 

Payments 

All payments on or in respect of the Notes to be by bank wire transfer of 
Federal or other immediately available funds (identifying each payment as 
"The Berkshire Gas Company, 7.80% Senior Notes due November 15, 2021, PPN 
084653 D@ 0 principal, premium or interest") to: 
 
      Crestar Bank (ABA #0510-0002-0) 
      Richmond, Virginia 
      Credit - 2111 
      Attention:  Incoming Processing Unit Number 27955 
 
      for credit to:  First Colony Life Insurance Company 
      Account Number 10765400 

Notices 

All notices and communications, including notices with respect to payments 
and written confirmation of each such payment, to be addressed as first 
provided above. 

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

Taxpayer I.D. Number:  54-0596414 
 
 
                                 SCHEDULE II
                             (to Note Agreement)


                             LIENS SECURING DEBT
                       (INCLUDING CAPITALIZED LEASES)
                           AS OF THE CLOSING DATE
 
 
 
               The Lien of the First Mortgage Bond Indenture.
 
 
 
                                  EXHIBIT A
                             (to Note Agreement)


                          THE BERKSHIRE GAS COMPANY

                              7.80% Senior Note
                            Due November 15, 2021

                              PPN: 084653 D@ 0

No.                                                 __________________, 19____

$ 

      The Berkshire Gas Company, a Massachusetts corporation (the 
"Company"), for value received, hereby promises to pay to 
 
 
                            or registered assigns
                   on the fifteenth day of November, 2021
                           the principal amount of
 

                                                     DOLLARS ($_______________)

and to pay interest (computed on the basis of a 360-day year of twelve 30-
day months) on the principal amount from time to time remaining unpaid 
hereon at the rate of 7.80% per annum from the date hereof until maturity, 
payable quarterly on the fifteenth day of each February, May, August and 
November in each year (commencing on the first of such dates after the date 
hereof) and at maturity.  The Company agrees to pay interest on overdue 
principal (including any overdue required or optional prepayment of 
principal) and premium, if any, and (to the extent legally enforceable) on 
any overdue installment of interest, at the rate of 8.80% per annum after 
the due date, whether by acceleration or otherwise, until paid.  Both the 
principal hereof and interest hereon are payable at the principal office of 
the Company in Pittsfield, Massachusetts in coin or currency of the United 
States of America which at the time of payment shall be legal tender for the 
payment of public and private debts. 

      This Note is one of the 7.80% Senior Notes due November 15, 2021 (the 
"Notes") of the Company in the aggregate principal amount of $16,000,000 
issued or to be issued under and pursuant to the terms and provisions of the 
Note Agreement dated as of November 1, 1996 (the "Note Agreement"), entered 
into by the Company with the original Purchaser therein referred to, and 
this Note and the holder hereof are entitled equally and ratably with the 
holders of all other Notes outstanding under the Note Agreement to all the 
benefits provided for thereby or referred to therein.  Reference is hereby 
made to the Note Agreement for a statement of such rights and benefits. 
This Note and the other Notes outstanding under the Note Agreement may be 
declared due prior to their expressed maturity dates and certain prepayments 
are required to be made thereon, all in the events, on the terms and in the 
manner and amounts as provided in the Note Agreement. 

      The Notes are not subject to prepayment or redemption at the option of 
the Company prior to their expressed maturity dates except on the terms and 
conditions and in the amounts and with the premium, if any, set forth in the 
Note Agreement. 

      This Note is registered on the books of the Company and is 
transferable only by surrender thereof at the principal office of the 
Company duly endorsed or accompanied by a written instrument of transfer 
duly executed by the registered holder of this Note or its attorney duly 
authorized in writing.  Payment of or on account of principal, premium, if 
any, and interest on this Note shall be made only to or upon the order in 
writing of the registered holder. 
 

                                       THE BERKSHIRE GAS COMPANY
 
 
 
                                       By
                                          --------------------------------
                                          Its
 
 
                                  EXHIBIT B
                             (to Note Agreement)

                       REPRESENTATIONS AND WARRANTIES

      The Company represents and warrants to the Purchaser as follows:

      1.  Subsidiaries.  The Company has no Subsidiaries.

      2.  Corporate Organization and Authority.  The Company

            (a)  is a corporation duly organized, validly existing and in 
      good standing under the laws of its jurisdiction of incorporation;

            (b)  has all requisite power and authority and all material 
      licenses and permits to own and operate its properties and to carry on 
      its business as now conducted and as presently proposed to be 
      conducted; and

            (c)  is duly licensed or qualified and is in good standing as a 
      foreign corporation in each jurisdiction wherein the nature of the 
      business transacted by it or the nature of the property owned or 
      leased by it makes such licensing or qualification necessary.

      3.  Financial Statements.  (a) The balance sheets of the Company as of 
June 30 in each of the years 1992 to 1996, both inclusive, and the 
statements of income and retained earnings and changes in financial position 
or cash flows for the fiscal years ended on said dates, each accompanied by 
a report thereon containing an opinion unqualified as to scope limitations 
imposed by the Company and otherwise without qualification except as therein 
noted, by Deloitte & Touche LLP, have been prepared in accordance with GAAP 
consistently applied except as therein noted, are correct and complete and 
present fairly the financial position of the Company as of such dates and 
the results of its operations and changes in its financial position or cash 
flows for such periods.

      (b)  Since June 30, 1996, there has been no change in the condition, 
financial or otherwise, of the Company as shown on the balance sheet as of 
such date except changes in the ordinary course of business, none of which 
individually or in the aggregate has been materially adverse.

      4.  Indebtedness.  Annex A attached hereto correctly describes all 
Current Debt and Funded Debt of the Company outstanding on the Closing Date.

      5.  Full Disclosure.  Neither the financial statements referred to in 
paragraph 4 hereof nor any other written statement furnished by the Company 
to the Purchaser in connection with the negotiation of the sale of the 
Notes, contains any untrue statement of a material fact or omits a material 
fact necessary to make the statements contained therein or herein not 
misleading.  There is no fact peculiar to the Company which the Company has 
not disclosed to the Purchaser in writing which materially affects adversely 
nor, so far as the Company can now foresee, will materially affect adversely 
the properties, business, prospects, profits or condition (financial or 
otherwise) of the Company.

      6.  Pending Litigation.  Except for the matters described in the 
letter from the Company to the Purchaser dated November 1, 1996 (the 
"Litigation Disclosure Letter"), there are no proceedings pending or, to the 
knowledge of the Company, threatened against or affecting the Company in any 
court or before any governmental authority or arbitration board or tribunal 
which involve the possibility of materially and adversely affecting the 
properties, business, prospects, profits or condition (financial or 
otherwise) of the Company and its Subsidiaries.

      7.  Title to Properties.  The Company has good and marketable title in 
fee simple (or its equivalent under applicable law) to all material parcels 
of real property and has good title to all the other material items of 
property it purports to own, including that reflected in the most recent 
balance sheet referred to in paragraph 3 hereof, except as sold or otherwise 
disposed of in the ordinary course of business and except for Liens 
permitted by the Agreement.

      8.  Patents and Trademarks.  The Company owns or possesses all the 
patents, trademarks, trade names, service marks, copyright, licenses and 
rights with respect to the foregoing necessary for the present and planned 
future conduct of its business, without any known conflict with the rights 
of others.

      9.  Sale is Legal and Authorized.  The sale of the Notes and 
compliance by the Company with all of the provisions of the Agreement and 
the Notes --

            (a)  are within the corporate powers of the Company;

            (b)  will not violate any provisions of any law or any order of 
      any court or governmental authority or agency and will not conflict 
      with or result in any breach of any of the terms, conditions or 
      provisions of, or constitute a default under the Articles of 
      Incorporation or By-laws of the Company or any indenture or other 
      agreement or instrument to which the Company is a party or by which it 
      may be bound or result in the imposition of any Liens or encumbrances 
      on any property of the Company; and

            (c)  have been duly authorized by proper corporate action on the 
      part of the Company (no action by the stockholders of the Company 
      being required by law, by the Articles of Incorporation or By-laws of 
      the Company or otherwise), executed and delivered by the Company and 
      the Agreement and the Notes constitute the legal, valid and binding 
      obligations, contracts and agreements of the Company enforceable in 
      accordance with their respective terms.

      10.  No Defaults.  No Default or Event of Default has occurred and is 
continuing.  The Company is not in default in the payment of principal or 
interest on any Funded Debt or Current Debt or is in default under any 
instrument or instruments or agreements under and subject to which any 
Funded Debt or Current Debt has been issued, and no event has occurred and 
is continuing under the provisions of any such instrument or agreement which 
with the lapse of time or the giving of notice, or both, would constitute an 
event of default thereunder.

      11.  Governmental Consent. Except for the order of the Massachusetts 
Department of Public Utilities approving the issuance and sale of the Notes, 
which order has been obtained, is in full force and effect and is not 
subject to any appeal, no approval, consent or withholding of objection on 
the part of any regulatory body, state, Federal or local, is necessary in 
connection with the execution and delivery by the Company of the Agreement 
or the Notes or compliance by the Company with any of the provisions of the 
Agreement or the Notes.

      12.  Taxes.  All tax returns required to be filed by the Company in 
any jurisdiction have, in fact, been filed, and all taxes, assessments, fees 
and other governmental charges upon the Company or upon any of its 
properties, income or franchises, which are shown to be due and payable in 
such returns have been paid.  For all taxable years ending on or before June 
30, 1993, the Federal income tax liability of the Company has been satisfied 
and either the period of limitations on assessment of additional Federal 
income tax has expired or the Company has entered into an agreement with the 
Internal Revenue Service closing conclusively the total tax liability for 
the taxable year.  The Company does not know of any proposed additional tax 
assessment against it for which adequate provision has not been made on its 
accounts, and no material controversy in respect of additional Federal or 
state income taxes due since said date is pending or to the knowledge of the 
Company threatened.  The provisions for taxes on the books of the Company 
are adequate for all open years, and for its current fiscal period.

      13.  Use of Proceeds.  The net proceeds from the sale of the Notes 
will be used to retire Company's short-term bank debt and the 8.40% 
Preferred Stock.  None of the transactions contemplated in the Agreement 
(including, without limitation thereof, the use of proceeds from the 
issuance of the Notes) will violate or result in a violation of Section 7 of 
the Securities Exchange Act of 1934, as amended, or any regulation issued 
pursuant thereto, including, without limitation, Regulations G, T and X of 
the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II.  
Neither the Company nor any Subsidiary owns or intends to carry or purchase 
any "margin stock" within the meaning of said Regulation G.  None of the 
proceeds from the sale of the Notes will be used to purchase, or refinance 
any borrowing the proceeds of which were used to purchase, any "security" 
within the meaning of the Securities Exchange Act of 1934, as amended.

      14.  Private Offering.  Neither the Company, directly or indirectly, 
nor any agent on its behalf has offered or will offer the Notes or any 
similar Security or has solicited or will solicit an offer to acquire the 
Notes or any similar Security from or has otherwise approached or negotiated 
or will approach or negotiate in respect of the Notes or any similar 
Security with any Person other than the Purchaser.  Neither the Company, 
directly or indirectly, nor any agent on its behalf has offered or will 
offer the Notes or any similar Security or has solicited or will solicit an 
offer to acquire the Notes or any similar Security from any Person so as to 
bring the issuance and sale of the Notes within the provisions of Section 5 
of the Securities Act of 1933, as amended.

      15.  ERISA.  The consummation of the transactions provided for in the 
Agreement and compliance by the Company with the provisions thereof and the 
Notes issued thereunder will not involve any prohibited transaction within 
the meaning of ERISA or Section 4975 of the Internal Revenue Code of 1986, 
as amended.  Each Plan complies in all material respects with all applicable 
statutes and governmental rules and regulations, and (a) no Reportable Event 
has occurred and is continuing with respect to any Plan, (b) neither the 
Company nor any ERISA Affiliate has withdrawn from any Plan or Multiemployer 
Plan or instituted steps to do so, and (c) no steps have been instituted to 
terminate any Plan.  No condition exists or event or transaction has 
occurred in connection with any Plan which could result in the incurrence by 
the Company or any ERISA Affiliate of any material liability, fine or 
penalty.  No Plan maintained by the Company or any ERISA Affiliate, nor any 
trust created thereunder, has incurred any "accumulated funding deficiency" 
as defined in Section 302 of ERISA nor does the present value of all 
benefits vested under all Plans exceed, as of the last annual valuation 
date, the value of the assets of the Plans allocable to such vested 
benefits.  Neither the Company nor any ERISA Affiliate has any contingent 
liability with respect to any post-retirement "welfare benefit plan" (as 
such term is defined in ERISA) except as has been disclosed to the 
Purchaser.

      16.  Compliance with Law.  The Company (a) is not in violation of any 
law, ordinance, franchise, governmental rule or regulation to which it is 
subject or (b) has not failed to obtain any license, permit, franchise or 
other governmental authorization necessary to the ownership of its property 
or to the conduct of its business, which violation or failure to obtain 
would materially adversely affect the business, prospects, profits, 
properties or condition (financial or otherwise) of the Company, or impair 
the ability of the Company to perform its obligations contained in the 
Agreement or the Notes.  The Company is not in default with respect to any 
order of any court or governmental authority or arbitration board or 
tribunal.

      17.  Compliance with Environmental Laws.  Except for matters described 
in the Litigation Disclosure Letter, the Company is not in violation of any 
applicable Federal, state, or local laws, statutes, rules, regulations or 
ordinances relating to public health, safety or the environment which 
violation could have a material adverse effect on the business, prospects, 
profits, properties or condition (financial or otherwise) of the Company.  
The Company does not know of any liability or class of liability of the 
Company or any Subsidiary under the Comprehensive Environmental Response, 
Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601 
et seq.), or the Resource Conservation and Recovery Act of 1976, as amended 
(42 U.S.C. Section 6901 et seq.).

      18.  Holding Company Act Status.  The Company is not a "registered 
holding company" or a "subsidiary company" of a "registered holding company" 
or an "affiliate" of a "registered holding company" or a "subsidiary 
company" of a "registered holding company," as such terms are defined in the 
Public Utility Holding Company Act of 1935, as amended. 
 
 
                                   ANNEX A
                               (to Exhibit B)

                             DESCRIPTION OF DEBT

1.  Current Debt of the Company outstanding on the Closing Date is as 
    follows: 

                 CREDITOR               AMOUNT

                 Fleet Bank             $ 6,800,000
                 State Street Bank        5,000,000
                 Bank of Boston           1,500,000
                 Core States Bank         2,000,000
                 Bay Bank                 4,000,000
                                        -----------
                       Total            $19,000,000

 
2.  Funded Debt (other than Capitalized Rentals) of the Company outstanding 
    on the Closing Date is as follows: 

          $10,000,000 Series P First Mortgage Bonds 10.06% due 2019,
          $6,000,000 Senior Note 9.6% due 2020, and
          $6,000,000 Medium Term Note (Variable Interest) due April, 1999. 
 
 
3.  Capitalized Leases of the Company outstanding on the Closing Date are as 
    follows: 
 
                                    None.
 

 

                                  EXHIBIT C
                             (to Note Agreement)
 
              DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION

      The closing opinion of Chapman and Cutler, special counsel to the 
Purchaser, called for by [SECTION]4.1 of the Note Agreement, shall be dated 
the Closing Date and addressed to the Purchaser, shall be satisfactory in 
form and substance to the Purchaser and shall be to the effect that:

            1.  The Company is a corporation, duly organized and validly 
      existing under the laws of the Commonwealth of Massachusetts and has 
      the corporate power and the corporate authority to execute and deliver 
      the Note Agreement and to issue the Notes.

            2.  The Note 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 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. 

      The opinion of Chapman and Cutler shall also state that the opinion of 
Rich, May, Bilodeau & Flaherty, P.C. is satisfactory in scope and form to 
Chapman and Cutler and that, in their opinion, the Purchaser is justified in 
relying thereon.  

      It is understood that in giving the above opinion, Chapman and Cutler 
may rely upon the opinion of Rich, May, Bilodeau & Flaherty, P.C. as to all 
matters relating to the laws of the Commonwealth of Massachusetts. 

      In rendering the opinion set forth in paragraph 1 above, Chapman and 
Cutler may rely, as to matters referred to in paragraph 1, solely upon an 
examination of the Articles of Incorporation certified by, and a certificate 
of good standing of the Company from, the Secretary of State of the 
Commonwealth of Massachusetts, the By-laws of the Company and the general 
business corporation law of the Commonwealth of Massachusetts.  The opinion 
of Chapman and Cutler is limited to the general business corporation law of 
the Commonwealth of Massachusetts and the Federal laws of the United States. 

      With respect to matters of fact upon which such opinion is based, 
Chapman and Cutler may rely on appropriate certificates of public officials 
and officers of the Company and upon representations of the Company and the 
Purchaser delivered in connection with the issuance and sale of the Notes. 
 
 

                                  EXHIBIT D
                             (to Note Agreement)

                       DESCRIPTION OF CLOSING OPINION
                          OF COUNSEL TO THE COMPANY

      The closing opinion of Rich, May, Bilodeau & Flaherty, P.C., counsel 
for the Company, which is called for by [SECTION]4.1 of the Note Agreement, 
shall be dated the Closing Date and addressed to the Purchaser, shall be 
satisfactory in scope and form to the Purchaser and  shall be to the effect 
that:

            1.  The Company is a corporation, duly organized and validly 
      existing under the laws of the Commonwealth of Massachusetts, has the 
      corporate power and the corporate authority to execute and perform the 
      Note 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 the character 
      of the properties owned or leased by it or the nature of the business 
      transacted by it makes such licensing or qualification necessary.

            2.  The Note 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, 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 issue and sale of the Notes have, to the extent required 
      by law, been duly authorized by an order issued by the Massachusetts 
      Department of Public Utilities, which authorization is final and not 
      subject to any appeal which could affect the validity or terms of the 
      Notes and no other approval, consent or authorization on the part of, 
      or filing, registration or qualification with, any governmental body, 
      Federal or state, is necessary in connection with the execution and 
      delivery of the Note Agreement or the Notes.

            5.  The Company is not a "registered holding company" or a 
      "subsidiary company" of a "registered holding company" or an 
      "affiliate" of a "registered holding company" or a "subsidiary 
      company" of a "registered holding company," as such terms are defined 
      in the Public Utility Holding Company Act of 1935, as amended.

            6.  The issuance and sale of the Notes and the execution, 
      delivery and performance by the Company of the Note Agreement do not 
      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 
      provisions of the Articles 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.  The issuance, sale and delivery of the Notes under the 
      circumstances contemplated by the Note 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. 

      The opinion of Rich, May, Bilodeau & Flaherty, P.C., shall cover such 
other matters relating to the sale of the Notes as the Purchaser 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.