<PAGE>
                                                               EXHIBIT 2(b)(iii)

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THIS AGREEMENT is made on 22nd November, 2001

BETWEEN:

(1)      NEW NATIONAL GRID PLC (a company incorporated in England and Wales with
         registered number 4031152) ("NEW NG") as a guarantor and as a borrower;

(2)      NATIONAL GRID GROUP PLC (a company incorporated in England and Wales
         with registered number 2367004) ("EXISTING NGG") as a guarantor and as
         a borrower;

(3)      NGG FINANCE PLC (a company incorporated in England and Wales with
         registered number 4220381) ("NGGF") as a borrower;

(4)      ABN AMRO BANK N.V., BANC OF AMERICA SECURITIES LIMITED, THE BANK OF
         TOKYO-MITSUBISHI, LTD., BARCLAYS CAPITAL, BAYERISCHE LANDESBANK
         GIROZENTRALE, LONDON BRANCH, CITIBANK, N.A., DRESDNER KLEINWORT
         WASSERSTEIN LIMITED, HSBC INVESTMENT BANK PLC, J. P. MORGAN PLC and TD
         BANK EUROPE LIMITED as joint arrangers (the "ARRANGERS");

(5)      HSBC INVESTMENT BANK PLC as facility agent (the "FACILITY AGENT");

(6)      HSBC BANK (USA) INC as swingline agent (the "SWINGLINE AGENT"); and

(7)      THE BANKS AND FINANCIAL INSTITUTIONS listed in Schedule 1 (The Banks)
         as Banks.

IT IS AGREED as follows:

1.       INTERPRETATION

1.1      DEFINITIONS

         In this Agreement:

         "1999 FACILITY AGREEMENT"

         means the syndicated revolving credit and term loan facility agreement
         dated 5th March, 1999 between (amongst others) Existing NGG, the NG
         Company and HSBC Investment Bank plc as Agent;

         "ACQUISITION"

         means the acquisition by New NG (or one of its wholly-owned
         Subsidiaries) of all the issued shares of common stock in Niagara
         Mohawk as contemplated in the Niagara Mohawk Merger Agreement;

         "ACQUISITION ADVANCE"

         means an Advance in Dollars or Sterling drawn under Facility A on or
         before the 3rd Business Day after the Registration Date for the purpose
         of the acquisition by New NG (or



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                                       2
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         one of its wholly-owned Subsidiaries) of all the issued shares of
         common stock in Niagara Mohawk as contemplated in the Niagara Mohawk
         Merger Agreement.

         "ADDITIONAL BORROWER"

         means:

         (i)      a wholly owned Subsidiary of New NG (other than NG Company)
                  incorporated in the United Kingdom; or

         (ii)     any other Subsidiary of New NG approved in writing by all of
                  the Banks,

         which, in each case, becomes a Borrower in accordance with Clause 28.4
         (Additional Borrowers);

         "ADVANCE"

         means a Facility A Advance or a Facility B Advance;

         "AFFILIATE"

         means a Subsidiary or a Holding Company (as defined in Section 736 of
         the Companies Act 1985) of a person and any other Subsidiary of that
         Holding Company;

         "AFFILIATED BANK"

         means a Bank which is an Affiliate of another Bank.

         "AGENT"

         means the Facility Agent or the Swingline Agent and the term "RELEVANT
         AGENT" shall be construed accordingly.

         "AGREED PERCENTAGE"

         means in relation to a Revolving Facility Bank and a Swingline Advance,
         the amount of its Facility B Commitment expressed as a percentage of
         the Facility B Total Commitments.

         "ANNIVERSARY"

         means an anniversary of the Signing Date.

         "APPLICABLE MARGIN"

         means the percentage rate per annum determined from time to time to be
         the Applicable Margin in accordance with Clause 9.6 (Applicable
         Margin).

         "ASSET DISPOSAL"

         means any single disposal of any assets (including but not limited to a
         disposal of any Subsidiary or Affiliate, any disposal to facilitate or
         as part of a securitisation and any issue by


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                                        3
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         a member of the Group of any debt instrument convertible into all or
         any part of the equity share capital owned by it in another member of
         the Group) by any member of the Group after the Signing Date other than
         a disposal of assets permitted under paragraphs (i) to (ix) of Clause
         19.9(b) (Disposals).

         "AUTHORITY"

         means:

         (i)      until both section 1(1) and section 3(1) of the Utilities Act
                  are brought into force, the Director General of Electricity
                  Supply; and

         (ii)     thereafter, the Gas and Electricity Markets Authority
                  established by section 1(1) of the Utilities Act.

         "BALANCE SHEET"

         means, at any time, the latest published audited consolidated balance
         sheet of the Group;

         "BALANCING AND SETTLEMENT CODE" or "BSC"

         means the balancing and settlement code required to be adopted by NG
         Company under the terms of its Transmission Licence.

         "BANKS"

         means the Revolving Facility Banks and the Swingline Banks.

         "BONDS"

         means:

         (i)      the mandatorily exchangeable bonds due 2003, exchangeable into
                  ordinary shares of Energis and issued by NGG;

         (ii)     the exchangeable bonds due 2008, exchangeable into ordinary
                  shares of NGG and issued by NG Company; and

         (iii)    other similar debt instruments issued or to be issued by NGG
                  or any company in the Group and exchangeable into share
                  capital.

         "BORROWER"

         means each of:

         (i)      Existing NGG and NGGF; and

         (ii)     on or after the Registration Date, New NG and any Additional
                  Borrower;



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                                       4
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         "BORROWER ACCESSION AGREEMENT"

         means an agreement substantially in the form set out in Schedule 6
         (Borrower Accession Agreement) with such amendments as the Facility
         Agent may approve or reasonably require;

         "BUSINESS DAY"

         means:

         (a)      a day (other than a Saturday or a Sunday) on which banks are
                  open for general interbank business in:

                  (i)      London and, in relation to a transaction involving
                           Dollars, New York; and

                  (ii)     in relation to a transaction involving an Optional
                           Currency (other than Euros), the principal financial
                           centre of the country of that Optional Currency; and

         (b)      in relation to a rate fixing for, or payment in, Euros, a
                  TARGET Day;

         "COMMITMENT"

         means, in relation to a Revolving Facility Bank, its Facility A
         Commitment, its Facility B Commitment or, as the context requires, the
         aggregate of such Commitments;

         "COMPANIES ACT SUBSIDIARY"

         means a subsidiary within the meaning of Section 736 of the Companies
         Act 1985, as amended by Section 144 of the Companies Act 1989;

         "CONTROLLED GROUP"

         means all members of a controlled group of corporations and all trades
         or businesses (whether or not incorporated) under common control which,
         together with any Obligor, are treated as a single employer under
         Section 414 of the U.S. Code;

         "CUSC"

         means the connecting and use of system code required to be adopted by
         NG Company under the terms of its Transmission Licence.

         "DANGEROUS SUBSTANCE"

         means any radioactive emissions and any natural or artificial substance
         (whether in solid or liquid form or in the form of a gas or vapour)
         which (whether alone or in conjunction with any other substance) gives
         rise to a risk of causing harm to man or any other living organism or
         causing damage to the Environment or public health or welfare and
         includes but is not limited to any controlled, special, hazardous,
         toxic, radioactive or dangerous waste;



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                                       5
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         "DEFAULT"

         means an Event of Default or any event which, with the giving of
         notice, expiry of any applicable grace period, determination of
         materiality or fulfilment of any other applicable condition (or any
         combination of the foregoing) in each case as specified in Clause 20
         (Default), would constitute an Event of Default;

         "DISPOSAL PROCEEDS"

         means in relation to any Asset Disposal, the value of all the
         consideration received or receivable by members of the Group in
         relation to that Asset Disposal whether at the time of the Asset
         Disposal or on a deferred basis and for this purpose:

         (a)      counting as part of the consideration the aggregate principal
                  amount of any Financial Indebtedness in the entity disposed of
                  and which remains in that entity immediately after the Asset
                  Disposal;

         (b)      taking the value of any deferred consideration as an amount
                  determined by the auditors of NGG to represent its net present
                  value as at the time the Asset Disposal is substantially
                  completed; and

         (c)      taking non-cash proceeds at their fair value as at the time
                  the Asset Disposal is substantially completed;

         "DOUBLE TAXATION TREATY"

         means any convention between the government of the United Kingdom or
         the United States of America, as applicable, and any other government
         for the avoidance of double taxation and the prevention of fiscal
         evasion with respect to taxes on income and capital gains.

         "ELECTRICITY ACT"

         means the UK Electricity Act 1989 as amended from time to time and all
         subordinate legislation made under it;

         "EMU"

         means Economic and Monetary Union as contemplated by the Treaty
         establishing the European Community;

         "EMU LEGISLATION"

         means legislative measures of the European Union in relation to EMU;

         "ENERGIS"

         means Energis plc;



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                                       6
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         "ENERGY AND NETWORK BUSINESS"

         means the business of generation, operation, maintenance, development
         and exploitation of a transmission or distribution network, metering,
         trading or supply of electricity or other sources of energy, the
         undertaking of an energy and telecoms business generally and any
         businesses ancillary or incidental to any of those businesses;

         "ENERGY LAWS"

         means the Electricity Act and all other laws, regulations or
         requirements of any relevant authority (in so far as such regulations
         or requirements have the force of law) relating to the generation,
         operation, maintenance, development and exploitation of a transmission
         or distribution network, metering, trading or supply of electricity or
         other sources of energy in each jurisdiction in which NGG or any of its
         Subsidiaries carries on business at any time;

         "ENVIRONMENT"

         means the media of air, water and land (wherever occurring) and in
         relation to the media of air and water includes, without limitation,
         the air and water within buildings and the air and water within other
         natural or man-made structures above or below ground and any water
         contained in any underground strata;

         "ENVIRONMENTAL APPROVALS"

         means all authorisations of any kind required under Environmental Laws
         to which any member of the Group is subject at any time;

         "ENVIRONMENTAL LAW"

         means all legislation, regulations or orders (insofar as such
         regulations or orders have the force of law) to the extent that they
         relate to the protection or impairment of the Environment or the
         control of Dangerous Substances to which any member of the Group is
         subject at any relevant time;

         "ERISA"

         means the U.S. Employee Retirement Income Security Act of 1974 and any
         rule or regulation issued thereunder from time to time in effect;

         "EURIBOR"

         means in relation to any Advance in Euros:

         (a)      the applicable Screen Rate; or

         (b)      (if no Screen Rate is available for the period of that
                  Advance) the arithmetic mean of the rates (rounded upwards to
                  four decimal places) as supplied to the Facility Agent at its
                  request, quoted by the Reference Banks to leading banks in the
                  European interbank market



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                                        7
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         at or about 11.00 a.m. Brussels time on the applicable Rate Fixing Day
         for the offering of deposits in Euros for the applicable Interest
         Period for a Term-out Advance or the Term of a Facility A Advance
         (other than a Term-out Advance) or of a Facility B Advance;

         "EURO, EUROS, E"

         means the single currency of the Participating Member States and
         excludes all Euro Sub-Denominations;

         "EURO SUB-DENOMINATION"

         means the national currency (other than the Euro) of any Participating
         Member State;

         "EURO UNIT"

         means a unit of the Euro as defined in EMU legislation;

         "EVENT OF DEFAULT"

         means an event specified as such in Clause 20.1 (Events of Default);

         "FACILITIES"

         means Facility A and Facility B;

         "FACILITY A"

         means the facility referred to in Clause 2.1(a) (The Facilities);

         "FACILITY A ADVANCE"

         means a Revolving Facility Advance or a Term-out Advance made or to be
         made by a Revolving Facility Bank under Facility A;

         "FACILITY A AVAILABILITY PERIOD"

         means the period from the Signing Date to the date which is 364 days
         after the Signing Date or, in relation to any Bank, such later date as
         that Bank may have agreed under Clause 5.7 (Extension of Facility A
         Availability Period);

         "FACILITY A COMMITMENT"

         means in relation to a Bank:

         (a)      the amount in Dollars set opposite its name in Part I of
                  Schedule 1 (The Banks); or

         (b)      the amount of that Commitment acquired by such Bank pursuant
                  to Clause 28.2 (New Banks) and/or Clause 28.3 (Procedure for
                  transfers),

         less in each case the amount of that Commitment cancelled, reduced or
         transferred by that Bank pursuant to this Agreement;



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                                       8
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         "FACILITY A TOTAL COMMITMENTS"

         means the aggregate for the time being of the Facility A Commitments,
         being US$1,700,000,000 at the date of this Agreement;

         "FACILITY AGENT'S SPOT RATE OF EXCHANGE"

         means the spot rate of exchange as determined by the Facility Agent for
         the purchase of the relevant Optional Currency in the London foreign
         exchange market with Dollars at or about 11.00 a.m. on a particular
         day;

         "FACILITY B"

         means the facility referred to in Clause 2.1(b) (The Facilities);

         "FACILITY B ADVANCE"

         means a Revolving Facility Advance made or to be made by a Revolving
         Facility Bank (or a Swingline Advance made or to be made by a Swingline
         Bank) under Facility B;

         "FACILITY B AVAILABILITY PERIOD"

         means the period from and including the Signing Date to and including
         the date one month before the Final Maturity Date;

         "FACILITY B COMMITMENT"

         means in relation to a Bank:

         (a)      the amount in Dollars set opposite its name in Part II of
                  Schedule 1; or

         (b)      the amount of that Commitment acquired by such Bank pursuant
                  to Clause 28.2 (New Banks) and/or Clause 28.3 (Procedure for
                  transfers),

         less in each case the amount of that Commitment cancelled, reduced or
         transferred by that Bank pursuant to this Agreement;

         "FACILITY B TOTAL COMMITMENTS"

         means the aggregate for the time being of the Facility B Commitments,
         being US$600,000,000 at the date of this Agreement;

         "FACILITY OFFICE"

         means, in relation to any Bank, the office(s) through which it will
         perform all or any of its obligations under this Agreement being those
         office(s) identified with its signature below (or, in the case of any
         New Bank, the office(s) specified in the relevant Transfer Certificate)
         or such other office(s) as it may from time to time select by not less
         than five Business Days' notice to the relevant Agent;



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                                        9
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         "FEDERAL FUNDS RATE"

         means, in relation to any day, the rate per annum equal to:

         (a)      the weighted average of the rates on overnight Federal funds
                  transactions with members of the US Federal Reserve System
                  arranged by Federal funds brokers, as published for that day
                  (or, if that day is not a New York Business Day, for the
                  immediately preceding New York Business Day) by the Federal
                  Reserve Bank of New York; or

         (b)      if a rate is not published for that day or preceding day, the
                  average of the quotations for that day on those transactions
                  received by the Swingline Agent from three Federal funds
                  brokers of recognised standing selected by the Swingline
                  Agent.

         "FEE LETTER"

         means each of:

         (i)      the Underwriting and Mandate Letter from the Arrangers to the
                  Borrowers dated 10th October, 2001 setting out the amount of
                  fees referred to in Clause 22.1 (Front-end fees); and

         (ii)     the Agency Fee Letter from the Facility Agent to Existing NGG,
                  New NG and NGGF dated on or around the Signing Date setting
                  out the amount of fees referred to in Clause 22.4 (Agency
                  fee).

         "FINAL MATURITY DATE"

         means, subject to Clause 8 (Prepayment and Cancellation):

         (a)      in relation to Facility A:

                  (i)      the date falling 364 days after the Signing Date; or

                  (ii)     where any Revolving Facility Banks agree to extend
                           the Facility A Availability Period pursuant to Clause
                           5.7 (Extension of Facility A Availability Period)
                           then, with respect to Revolving Facility Advances
                           made under Facility A by those Revolving Facility
                           Banks only, the date that is 364 days after the date
                           in paragraph (a)(i) above; or

                  (iii)    in the case of a Term-out Advance, the date specified
                           as such in the Utilisation request for that Term-out
                           Advance,

         (b)      in relation to Facility B, the fifth Anniversary;

         "FINANCE DOCUMENT"

         means this Agreement, a Fee Letter, a Transfer Certificate, a Borrower
         Accession Agreement and any other document designated in writing as
         such by an Agent and NGG;



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                                       10
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         "FINANCE PARTY"

         means each of the Arrangers, the Banks and the Agents (as the context
         requires);

         "FINANCIAL INDEBTEDNESS"

         means (without double counting) any indebtedness in respect of:

         (a)      moneys borrowed or debit balances at banks and other financial
                  institutions;

         (b)      any debenture, bond, note, commercial paper, loan stock or
                  other debt instrument;

         (c)      any acceptance or documentary credit facilities, bill
                  discounting or factoring facilities;

         (d)      receivables sold or discounted (otherwise than on a
                  non-recourse basis);

         (e)      the acquisition cost of any asset to the extent payable before
                  or after the time of acquisition or possession by the party
                  liable where the advance or deferred payment is arranged
                  primarily as a method of raising finance or financing the
                  acquisition of that asset;

         (f)      leases (whether in respect of land, machinery, equipment or
                  otherwise) entered into primarily as a method of raising
                  finance or financing the acquisition of the asset leased;

         (g)      currency or interest swap, cap or collar arrangements or any
                  other derivative instrument;

         (h)      amounts raised under any other transaction having the
                  commercial effect of a borrowing or raising of money; and

         (i)      any guarantee, indemnity or similar assurance in respect of
                  indebtedness of any person falling within any of paragraphs
                  (a) to (h) (both inclusive) above;

         "FINANCIAL INDEBTEDNESS LIMIT"

         means each of the limits placed on the amount of permitted Financial
         Indebtedness of Subsidiaries set out in paragraph (a)(iii) of Clause
         19.15 (Restriction on Subsidiary Financial Indebtedness);

         "GRID CODE"

         means the Grid Code drawn up pursuant to the Transmission Licence(s),
         as from time to time revised in accordance with the Transmission
         Licence(s);

         "GROUP"

         means NGG and its Subsidiaries from time to time and including, after
         the Niagara Mohawk Acquisition Completion Date, the Niagara Mohawk
         Group, but if at any time a Project


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                                       11
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         Finance Company is a Subsidiary Undertaking but not a Companies Act
         Subsidiary, then, for so long as it shall be a Subsidiary Undertaking
         but not a Companies Act Subsidiary, it shall be deemed for the purposes
         of the Finance Documents (unless the contrary is specified) not to be a
         member of the Group;

         "GUARANTOR"

         means NGG.

         "INFORMATION MEMORANDUM"

         means the Information Memorandum to be prepared and delivered to
         potential lenders in connection with primary syndication of the
         Facilities (including any supplements);

         "INTEREST DATE"

         means the last day of an Interest Period;

         "INTEREST PERIOD"

         means, in relation to a Term-out Advance, each period determined in
         accordance with Clause 9.1 (Selection of Interest Periods for Term-out
         Advances) or, in relation to overdue amounts, Clause 9.4 (Default
         interest);

         "INTEREST PERIOD SELECTION NOTICE"

         means a notice substantially in the form set out in Schedule 4 (Form of
         Utilisation Request/Interest Period Selection Notice);

         "LIBOR"

         means in relation to any Advance (other than a Swingline Advance):

         (a)      the applicable Screen Rate; or

         (b)      (if no Screen Rate is available for the currency or period of
                  that Advance) the arithmetic mean of the rates (rounded
                  upwards to four decimal places) as supplied to the Facility
                  Agent at its request, quoted by the Reference Banks to leading
                  banks in the London interbank market

         at or about 11.00 a.m. London time on the applicable Rate Fixing Day
         for the offering of deposits in the currency of the relevant Advance
         for the applicable Interest Period for a Term-out Advance or the Term
         of a Facility A Advance (other than a Term-out Advance) or of a
         Facility B Advance;

         "LICENCE"

         means each of:

         (a)      the Transmission Licences granted by the Secretary of State to
                  a member of the Group under section 6(1)(b) of the Electricity
                  Act; and



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                                       12
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         (b)      each other licence or other similar authorisation granted by
                  any relevant authority in any applicable jurisdiction to a
                  member of the Group pursuant to an Energy Law or otherwise to
                  permit it to carry out generation, transmission, distribution
                  or supply of electricity;

         "MCUSA"

         means the master connection and use of systems agreement, as defined in
         the BSC.

         "MAJORITY BANKS"

         means, at any time, Revolving Facility Banks the sum of the aggregate
         Original Dollar Amount of whose Utilisations and undrawn Commitments at
         that time aggregate at least 66 2/3 per cent. of the sum of the
         aggregate Original Dollar Amount of all Utilisations then outstanding
         and the then undrawn Total Commitments (or if the Total Commitments
         have been reduced to zero and there are no Utilisations then
         outstanding, whose Commitments aggregate at least 66 2/3 per cent. of
         the Total Commitments immediately before the reduction);

         "MANDATORY COST"

         means:

         (a)      the cash ratio and special deposit requirements of the Bank of
                  England and/or the banking supervision or other costs imposed
                  by the Financial Services Authority, as determined in
                  accordance with Schedule 3 (Calculation of the Mandatory
                  Cost);

         (b)      in relation to an Advance denominated in dollars to a US
                  Subsidiary made available by a US incorporated Bank or a US
                  branch of a non-US incorporated Bank, the cost (if any)
                  certified by that Bank as being the cost to it of complying
                  with Regulation D of the Board of Governors of the Federal
                  Reserve System of the United States (or any successor)
                  attributable to such Advance; and

         (c)      in relation to an Advance denominated in any other currency,
                  the cost (if any) certified by any relevant Bank as being the
                  cost to it of complying with any applicable regulatory or
                  central bank requirement relating to Advances in that currency
                  made through a branch in the jurisdiction of the relevant
                  currency (including, for the avoidance of doubt, any reserve
                  asset requirements of the European Central Bank);

         "MATURITY DATE"

         means the last day of the Term of a Facility A Advance (other than a
         Term-out Advance) or a Facility B Advance;

         "MOODY'S"

         means Moody's Investors Services, Inc.;



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                                       13
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         "MULTI EMPLOYER PLAN"

         means a "multi employer plan" as defined in Section 4001(a)(3) of ERISA
         to which any Obligor or any member of the Controlled Group has an
         obligation to contribute;

         "NEW YORK BUSINESS DAY"

         means a day (other than a Saturday or a Sunday) on which banks are open
         for business in New York.

         "NGG"

         means:

         (a)      prior to, but not after, the Registration Date, Existing NGG;
                  and

         (b)      on or after the Registration Date, New NG.

         "NG COMPANY"

         means The National Grid Company plc;

         "NIAGARA MOHAWK"

         means Niagara Mohawk Holdings, Inc.

         "NIAGARA MOHAWK ACQUISITION COMPLETION DATE"

         means the date specified as such in the certificate in relation to the
         Acquisition delivered to the Facility Agent as referred to in paragraph
         (e) of Part II of Schedule 2 (Conditions Precedent Documents);

         "NIAGARA MOHAWK GROUP"

         means Niagara Mohawk and its Subsidiaries;

         "NIAGARA MOHAWK MERGER AGREEMENT"

         means the Agreement and Plan of Merger and Scheme of Arrangement dated
         as of 4th September, 2000 by and among Existing NGG and Niagara Mohawk,
         amongst others;

         "OFFEROR"

         means NGG or a wholly owned subsidiary of NGG;

         "OBLIGOR"

         means each of the Borrowers and/or the Guarantor as the context
         requires;



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                                       14
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         "OPTIONAL CURRENCY"

         means Sterling, Euros and any other currency (excluding any Euro
         Sub-Denominations) which is for the time being freely transferable and
         convertible into Dollars and deposits of which are readily available in
         the London interbank market;

         "ORIGINAL DOLLAR AMOUNT"

         means in relation to Utilisations under Facility A or Facility B or the
         aggregate of all Utilisations under both Facilities:

         (a)      if a Utilisation is denominated in Dollars, the principal
                  amount of that Utilisation; or

         (b)      if a Utilisation is denominated in any other currency, the
                  principal amount of that Utilisation notionally converted into
                  Dollars on the basis of the Facility Agent's Spot Rate of
                  Exchange on the date of receipt by the Facility Agent of the
                  Utilisation Request for, or Interest Period Selection Notice
                  in relation to, that Utilisation;

         "ORIGINAL GROUP ACCOUNTS"

         means the audited consolidated accounts of the Group for the year ended
         31st March, 2001 prepared in accordance with the historic cost
         convention;

         "PARTICIPATING MEMBER STATE"

         means a member state of the European Union that, at the relevant time,
         has adopted the Euro as its currency in accordance with EMU
         legislation;

         "PARTY"

         means a party to this Agreement;

         "PBGC"

         means the Pension Benefit Guaranty Corporation;

         "PLAN"

         means an "employee benefit plan" (as defined in Section 3(3) of ERISA);

         "PUHCA"

         means the United States of America Public Utility Holding Company Act
         of 1935, as amended;

         "PRIMARY SYNDICATION PERIOD"

         means the period ending on the earlier of the date the Facility Agent
         notifies NGG that primary syndication of the Facilities is completed
         and 31st March, 2002 (or such other date as NGG and the Arrangers may
         agree);



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                                       15
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         "PRIME RATE"

         means, on any day, the prime commercial lending rate from time to time
         publicly announced by the Swingline Agent, which rate may not be the
         lowest rate charged to its borrowers. Each change in the interest rate
         on a Swingline Advance which results from a change in the Prime Rate
         becomes effective on the day on which the change in the Prime Rate
         becomes effective.

         "PRINCIPAL SUBSIDIARY"

         means:

         (i)      an Obligor (other than NGG); or

         (ii)     any other member of the Group whose tangible net worth or net
                  pre-taxation profits at any time equal or exceed five per
                  cent. (5%) of the Tangible Consolidated Net Worth or net
                  pre-taxation profits of the Group at that time, and for the
                  purposes of the above:

                  (a)      the net pre-taxation profits of the Subsidiary shall
                           be ascertained by reference to:

                           (i)      the accounts (consolidated in the case of a
                                    company which itself has Subsidiaries and
                                    which, in the normal course, prepares
                                    consolidated accounts) of the Subsidiary
                                    based upon which the latest audited
                                    consolidated accounts of the Group have been
                                    made up; or

                           (ii)     if the company becomes a Subsidiary of NGG
                                    after the end of the financial period to
                                    which the latest audited consolidated
                                    accounts of the Group relate, the latest
                                    accounts (consolidated in the case of a
                                    company which itself has Subsidiaries and
                                    which, in the normal course, prepares
                                    consolidated accounts) of the Subsidiary;
                                    and

                  (b)      tangible net worth of the Subsidiary shall be
                           ascertained by reference to the Tangible Consolidated
                           Net Worth definition contained in this Clause,
                           changed where necessary and as if references therein
                           to NGG were references to such Subsidiary, and
                           references therein to the relevant period were
                           references to the financial year of such Subsidiary
                           and on the basis that all intra-Group items and
                           investments shall be excluded; and

                  (c)      the net pre-taxation profits of the Group shall be
                           ascertained by reference to the latest audited
                           consolidated accounts of the Group, adjusted (where
                           appropriate) to reflect the net pre-taxation profits
                           of any company subsequently acquired or disposed of,

         PROVIDED ALWAYS that if the whole or substantially the whole of the
         assets of a Principal Subsidiary is transferred by that Principal
         Subsidiary (the "DISPOSING SUBSIDIARY") to another Subsidiary of NGG
         (the "RECEIVING SUBSIDIARY") or a number of Subsidiaries of NGG, the
         disposing Subsidiary shall forthwith upon the transfer cease to be a
         Principal Subsidiary and the receiving Subsidiary shall forthwith upon
         the transfer become a Principal Subsidiary;



<PAGE>


                                       16
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         "PROJECT FINANCE BORROWING"

         means any Financial Indebtedness to finance a project:

         (a)      which is borrowed by a single purpose company, partnership or
                  other legal person (whether or not a member of the Group)
                  where its or one or more of its subsidiaries, principal assets
                  and business are constituted by that project and whose
                  liabilities in respect of the Financial Indebtedness concerned
                  are not directly or indirectly the subject of a guarantee,
                  indemnity or other form of assurance, undertaking or support
                  from any member of the Group (except as expressly referred to
                  in paragraph (b)(iii) below or as a result of the making of
                  acceptances or endorsements of bills in the ordinary course of
                  trading or payment netting arrangements and other usual course
                  of business banking arrangements); or

         (b)      in respect of which the person or persons making that
                  Financial Indebtedness available to the relevant borrower
                  (whether or not a member of the Group) have no recourse
                  whatsoever to any member of the Group for the repayment of or
                  payment of any sum relating to that Financial Indebtedness
                  other than:

                  (i)      recourse to the borrower or one or more of its
                           subsidiaries, for amounts limited to the aggregate
                           cash flow or net cash flow (other than historic cash
                           flow or historic net cash flow) from the project;
                           and/or

                  (ii)     recourse to the borrower, or one or more of its
                           subsidiaries or any shareholder of the borrower for
                           the purpose only of enabling amounts to be claimed in
                           respect of that Financial Indebtedness in an
                           enforcement of any Security Interest permitted
                           pursuant to Clause 19.8 (Negative pledge) given by
                           the borrower or one or more of its subsidiaries over
                           the assets comprised in the project (or given by any
                           shareholder of the borrower over its shares in the
                           borrower together with, in the case of a UK
                           incorporated shareholder whose only material assets
                           are those shares in the borrower, a supporting
                           floating charge over all or substantially all of its
                           assets, to secure that Financial Indebtedness or any
                           recourse referred to in (iii) below or as a result of
                           the making of acceptances or endorsements of bills in
                           the ordinary course of trading or payment netting
                           arrangements and other usual course of business
                           banking arrangements, provided that (A) the extent of
                           the recourse to the borrower or one or more of its
                           subsidiaries or shareholder is limited solely to the
                           amount of any recoveries made on any such
                           enforcement, and (B) the person or persons are not
                           entitled, by virtue of any right to claim arising out
                           of or in connection with the Financial Indebtedness,
                           to commence proceedings for the winding up or
                           dissolution of the borrower or shareholder or to
                           appoint or procure the appointment of any receiver,
                           trustee or similar person or official in respect of
                           the borrower or shareholder or any of its assets
                           (save for the assets the subject of the relevant
                           Security Interest); and/or

                  (iii)    recourse to such borrower generally, or directly or
                           indirectly to a member of the Group under any form of
                           assurance or undertaking, which recourse is limited
                           to a claim for damages (other than liquidated damages
                           and damages required to be calculated in a specified
                           way) for breach of an obligation (not


<PAGE>


                                       17
--------------------------------------------------------------------------------
                           being a payment obligation or an obligation to
                           procure payment by another or an obligation to comply
                           or to procure compliance by another with any
                           financial ratios or other tests of financial
                           condition) by the person against whom such recourse
                           is available; or

         (c)      which the Majority Banks shall have agreed in writing to treat
                  as Project Finance Borrowing for the purposes of the Finance
                  Documents.

         If at any time any Financial Indebtedness is made to finance a project
         and that Financial Indebtedness does not qualify as a Project Finance
         Borrowing pursuant to the above paragraphs (b)(i), (ii) or (iii) but
         would so qualify if there were not recourse to a member of the Group
         which is either (i) limited as to the period during which it is in
         force (for example, during the period up to completion of the project)
         or (ii) limited as to the obligations of the borrower to which it
         applies, then, in any such case, the Financial Indebtedness shall be
         regarded as a Project Finance Borrowing for the purposes of this
         definition to the extent that, and during the period that, there is no
         such recourse to a member of the Group;

         "PROJECT FINANCE COMPANY"

         means any company, partnership or other legal person falling within the
         scope of paragraph (a) of the definition of Project Finance Borrowing
         or which the Majority Banks have agreed shall be treated as a Project
         Finance Company for the purposes of the Finance Documents;

         "QUALIFYING BANK"

         means a Bank which is:

         (a)      for an Advance to a Borrower incorporated in the United
                  Kingdom, either:

                  (i)      a UK Bank; or

                  (ii)     a Treaty Bank; or

         (b)      for an Advance to a U.S. Borrower, either:

                  (i)      not a foreign person for U.S. federal income tax
                           purposes or a person whose payments of principal,
                           interest, fees and other amounts under the Finance
                           Documents are effectively connected with the conduct
                           of a trade or business in the United States of
                           America; or

                  (ii)     a Treaty Bank.

         "RATE FIXING DAY"

         means:

         (a)      in relation to any Advance (other than a Swingline Advance or
                  an Acquisition Advance):



<PAGE>

                                       18
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                  (i)      the second Business Day before the first day of an
                           Interest Period or the Term of an Advance (other than
                           an Advance in Sterling or Euros); or

                  (ii)     in the case of an Advance in Sterling, the first day
                           of the Term of that Advance; or

                  (iii)    in the case of an Advance in Euros, the second TARGET
                           Day before the first day of an Interest Period or the
                           Term of that Advance,

                  or such other day on which it is market practice in the
                  relevant interbank market for leading banks to give quotations
                  for deposits in the relevant currency for delivery on the
                  first day of the relevant Interest Period or Term, as
                  determined by the Facility Agent; and

         (b)      in relation to an Acquisition Advance:

                  (i)      the Business Day before the first day of an Interest
                           Period or the Term of an Advance in Dollars; or

                  (ii)     in the case of an Advance in Sterling, the first day
                           of the Term of that Advance.

         "REFERENCE BANKS"

         means, subject to Clause 28.5 (Reference Banks), the principal London
         offices of Dresdner Bank AG London Branch, The Chase Manhattan Bank and
         HSBC Bank plc;

         "REGISTRATION DATE"

         means the date upon which an office copy of the order of the High Court
         of Justice sanctioning the Scheme of Arrangement under Section 425 of
         the Companies Act 1985 is registered with the Registrar of Companies
         pursuant to sub-section 3 of Section 425 of the Companies Act 1985.

         "REGULATED HOLDING COMPANY"

         means, in respect of any Bank, any person which is a Holding Company
         (as defined in section 736 of the Companies Act 1985) of that Bank and
         is regulated as a bank or other financial institution;

         "REGULATED UK SUBSIDIARY"

         means, at any time, any member of the Group (other than NG Company)
         which operates any part of the Transmission Business carried on, as at
         the date of this Agreement, by NG Company pursuant to its Transmission
         Licence;

         "REGULATED U.S. SUBSIDIARY"

         means any Subsidiary of NGG including, after the Niagara Mohawk
         Acquisition Completion Date, Niagara Mohawk, and any Subsidiary of
         Niagara Mohawk which operates any electricity generation, transmission,
         distribution or supply business pursuant to any Energy


<PAGE>

                                       19
--------------------------------------------------------------------------------

         Laws of the United States or of any State of the United States or
         pursuant to a Licence issued pursuant to such Energy Laws;

         "REGULATIONS T, U AND X"

         means, respectively, regulations T, U and X of the Board of Governors
         of the Federal Reserve System of the United States (or any successor);

         "RELEVANT TIME"

         means the applicable time set opposite a Clause number in Schedule 7
         (Timetables);

         "REPORTABLE EVENT"

         means a reportable event as defined in Section 4043 of ERISA and the
         regulations issued under such section with respect to a Plan,
         excluding, however, such events as to which the PBGC by regulation
         waived the requirement of Section 4043(a) of ERISA that it be notified
         within 30 days of the occurrence of such event, provided, however, that
         a failure to meet the minimum funding standard of Section 412 of the
         U.S. Code and of Section 302 of ERISA shall be a Reportable Event
         regardless of the issuance of any such waiver of the notice requirement
         in accordance with either Section 4043(a) of ERISA or Section 412(d) of
         the U.S. Code;

         "REQUESTED AMOUNT"

         means the requested amount of a Utilisation as set out in a Utilisation
         Request;

         "REVOLVING FACILITY ADVANCES"

         means any Advances under the Facilities except Term-out Advances and
         Swingline Advances;

         "REVOLVING FACILITY BANKS"

         means each of the banks and financial institutions listed in Parts I
         and II of Schedule 1 (The Banks), their respective successors in title
         and any other bank or financial institution which becomes a Party
         pursuant to Clause 28.3 (Procedure for transfers);



<PAGE>

                                       20
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         "SCHEME OF ARRANGEMENT"

         means the scheme of arrangement to be implemented under Section 425 of
         the Companies Act 1985 prior to the Acquisition pursuant to which New
         NG shall become the listed Group holding company and shall own (i) 100%
         of the ordinary shares in Existing NGG and (ii) by virtue of its
         ownership of National Grid (US) Holdings Limited, 100% of Niagara
         Mohawk;

         "SCREEN RATE" means:

         (a)      in relation to LIBOR, the British Bankers Association Interest
                  Settlement Rate for the relevant currency and period; and

         (b)      in relation to EURIBOR, the percentage rate per annum
                  determined by the Banking Federation of the European Union for
                  the relevant period

         displayed on the appropriate page of the Telerate screen. If the agreed
         page is replaced or service ceases to be available, the Facility Agent
         may specify another page or service displaying the appropriate rate
         after consultation with NGG and the Banks.

         "SECURITY INTEREST"

         means any mortgage, pledge, lien, charge, assignment, hypothecation or
         security interest or any other agreement or arrangement having the
         effect of conferring security;

         "SIGNING DATE"

         means the date of this Agreement;

         "S&P"

         means Standard & Poor's Corporation;

         "SUBSIDIARIES"

         means Companies Act Subsidiaries and Subsidiary Undertakings (and
         "SUBSIDIARY" shall be construed accordingly);

         "SUBSIDIARY UNDERTAKING"

         means a subsidiary undertaking within the meaning of Section 258 of the
         Companies Act 1985 (as inserted by Section 21 of the Companies Act
         1989);

         "SWINGLINE ADVANCE"

         means a Facility B Advance made or to be made by a Swingline Bank under
         the Swingline Advance Facility and drawn under Clause 6.1 (Receipt of
         Utilisation Requests);

         "SWINGLINE ADVANCE FACILITY"

         means the facility referred to in Clause 2.1(b)(ii) (The Facilities),
         which comprises a subset of Facility B;



<PAGE>

                                       21
--------------------------------------------------------------------------------

         "SWINGLINE BANKS"

         means each of the banks and financial institutions (being, in each
         case, a Revolving Facility Bank or a Revolving Facility Bank's
         Affiliated Bank) listed in Part III of Schedule 1 (The Banks), their
         respective successors in title and any other bank or financial
         institution which becomes a Party pursuant to Clause 28.3 (Procedure
         for transfers);

         "SWINGLINE COMMITMENT"

         means in relation to a Swingline Bank:

         (a)      the amount in Dollars set opposite its name in Part III of
                  Schedule 1 (The Banks); or

         (b)      the amount of that Commitment acquired by such Bank pursuant
                  to Clause 28.2 (New Banks) and/or Clause 28.3 (Procedure for
                  transfers),

         less in each case the amount of that Commitment cancelled, reduced or
         transferred by that Bank pursuant to this Agreement;

         "SWINGLINE RATE"

         means, on any day, the higher of:

         (a)      the US Dollar Prime Rate, and

         (b)      the aggregate of the Federal Funds Rate plus 0.50 per cent.
                  per annum

         on that day;

         "TANGIBLE CONSOLIDATED NET WORTH"

         means at any time the aggregate of:

         (i)      the amount paid up or credited as paid up on the issued share
                  capital of NGG; and

         (ii)     the amount standing to the credit of the consolidated capital
                  and revenue reserves of the Group,

         based on the Balance Sheet but adjusted by (without double counting):

         (A)      adding any amount standing to the credit of the profit and
                  loss account for the Group for the period ending on the date
                  of the Balance Sheet, to the extent not included in paragraph
                  (ii) above and to the extent the amount is not attributable to
                  any dividend or other distribution declared, recommended or
                  made by NGG or any other member of the Group to the extent of
                  any minority interests therein;

         (B)      deducting any amount standing to the debit of the profit and
                  loss account for the Group for the period ending on the date
                  of the Balance Sheet;



<PAGE>


                                       22
--------------------------------------------------------------------------------

         (C)      reflecting any variation in the amount of the issued share
                  capital of NGG and the consolidated capital and revenue
                  reserves of the Group after the date of the Balance Sheet;

         (D)      reflecting any variation in the interest of NGG in any other
                  member of the Group since the date of the Balance Sheet;

         (E)      excluding any amount attributable to deferred taxation to the
                  extent included in paragraphs (i) and (ii) above; and

         (F)      excluding any amount attributable to minority interests to the
                  extent included in paragraphs (i) and (ii) above;

         "TARGET DAY"

         means a day on which the Trans-European Automated Real-Time Gross
         Settlement Express Transfer (TARGET) System is open;

         "TERM"

         means, in relation to any Advance (other than a Term-out Advance) the
         period selected by a Borrower for which the relevant Advance is to be
         outstanding, as specified in the Utilisation Request;

         "TERM-OUT ADVANCE"

         means a Facility A Advance drawn under paragraph (b) of Clause 7.1
         (Repayment of Facility A Advances);

         "TOTAL COMMITMENTS"

         means, on any day and from time to time, the aggregate of the Facility
         A Total Commitments and the Facility B Total Commitments;

         "TOTAL SWINGLINE COMMITMENTS"

         means, on any day and from time to time, the aggregate of the Swingline
         Commitments;

         "TRANSFER CERTIFICATE"

         has the meaning given to it in Clause 28.3 (Procedure for transfers);

         "TRANSMISSION BUSINESS"

         has the meaning given to it in the relevant Transmission Licence;

         "TRANSMISSION LICENCE"

         means a licence granted under Section 6(l)(b) of the Electricity Act;



<PAGE>

                                       23
--------------------------------------------------------------------------------

         "TREATY BANK"

         means an institution which is resident (as such term is defined in the
         appropriate Double Taxation Treaty) in a country with which the United
         Kingdom or the United States of America, as appropriate, has an
         appropriate Double Taxation Treaty giving residents of that country
         exemption from UK or U.S., as applicable, taxation on interest and does
         not carry on business in the United Kingdom or the United States of
         America, as appropriate, through a permanent establishment with which
         the Facilities are effectively connected.

         "UK BANK"

         means a Bank which is within the charge to UK corporation tax in
         respect of, and is beneficially entitled to, a payment of interest on a
         Facility made by a person that was a bank for the purposes of Section
         349 of the Income and Corporation Taxes Act 1988 (as currently defined
         in Section 840A of the Income and Corporation Taxes Act 1988) at the
         time a Facility was made available.


         "UNITED KINGDOM"

         means the United Kingdom of Great Britain and Northern Ireland;

         "UNITED STATES"

         means the United States of America;

         "U.S. BORROWER"

         means a Borrower incorporated in the United States;

         "U.S. CODE"

         means the United States Internal Revenue Code of 1986, as amended and
         any rule or regulation issued thereunder from time to time in effect;

         "UTILISATION"

         means a utilisation of any of the Facilities pursuant to the terms of
         this Agreement and includes all the Advances made or to be made
         therein;

         "UTILISATION DATE"

         means in the case of any Utilisation, the date for the making of the
         relevant Advances;

         "UTILISATION REQUEST"

         means a notice substantially in the form set out in Schedule 4 (Form of
         Utilisation Request/Interest Period Selection Notice);

         "UTILITIES ACT"



<PAGE>

                                       24
--------------------------------------------------------------------------------

         means the Utilities Act 2000 as amended from time to time and all
         subordinate legislation made under it;

1.2      CONSTRUCTION

(a)      In this Agreement, unless the contrary intention appears, any reference
         to:

         (i)      an "AMENDMENT" includes a supplement, variation, novation,
                  re-enactment or a waiver;

                  "ASSETS" includes present and future properties, revenues and
                  rights of every description;

                  an "AUTHORISATION" includes an authorisation, consent,
                  approval, resolution, licence, exemption, filing, registration
                  and notarisation;

                  "BARCLAYS CAPITAL" is a reference to Barclays Capital, the
                  investment banking division of Barclays Bank PLC;

                  "INDEBTEDNESS" shall be construed so as to include any
                  obligation for the payment or repayment of money, whether
                  present or future, actual or contingent and whether incurred
                  as principal or surety;

                  a "MONTH" is a reference to a period starting on one day in a
                  calendar month and ending on the numerically corresponding day
                  in the next calendar month, except that:

                  (1)      if the numerically corresponding day is not a
                           Business Day, that period shall end on the next
                           Business Day in that calendar month (if there is one)
                           or the preceding Business Day (if there is not); or

                  (2)      if there is no numerically corresponding day in the
                           month in which that period ends, that period shall
                           end on the last Business Day in that calendar month;

                  a "PERSON" includes any individual, company, unincorporated
                  association or body or persons (including a partnership, joint
                  venture or consortium), government, state, agency,
                  international organisation or other entity;

                  a "REGULATION" includes any regulation, rule, official
                  directive, request or guideline (whether or not having the
                  force of law, but, if not having the force of law, being one
                  with which the relevant Party is accustomed to comply) of any
                  governmental body, agency, department or regulatory,
                  self-regulatory or other authority or organisation;

         (ii)     a provision of a law is a reference to that provision as
                  amended or re-enacted;

         (iii)    the term "SECRETARY OF STATE" shall be construed as a
                  reference to that term as used in the Electricity Act;

         (iv)     a Clause or a Schedule is a reference to a clause of or a
                  schedule to this Agreement;

         (v)      a person includes its successors, transferees and assigns;



<PAGE>

                                       25
--------------------------------------------------------------------------------

         (vi)     a Finance Document or another document is a reference to that
                  Finance Document or that other document as amended;

         (vii)    a time of day is a reference to London time; and

         (viii)   "STERLING" and "(POUND)" and "DOLLARS" and "US$" denote the
                  lawful currencies for the time being of the United Kingdom of
                  Great Britain and Northern Ireland and the United States of
                  America respectively.

(b)      Unless the contrary intention appears, a term used in any other Finance
         Document or in any notice given under or in connection with any Finance
         Document has the same meaning in that Finance Document or notice as in
         this Agreement.

(c)      The index and headings in this Agreement are for convenience only and
         are to be ignored in construing this Agreement.

2.       THE FACILITIES

2.1      THE FACILITIES

         Subject to the terms and conditions hereof, the Banks grant to the
         Borrowers the following facilities:

         (a)      a committed 364 day Dollar denominated multi-currency
                  revolving credit facility, with an option to draw Term-out
                  Advances, to be designated as Facility A, under which the
                  Revolving Facility Banks shall, when requested by any
                  Borrower, make cash advances in Dollars or in Optional
                  Currencies to that Borrower on a revolving basis during the
                  Facility A Availability Period; and

         (b)      a committed 5 year Dollar denominated multi-currency revolving
                  credit facility under which

                  (i)      the Revolving Facility Banks will, when requested by
                           any Borrower, make cash advances in Dollars or
                           Optional Currencies to that Borrower on a revolving
                           basis during the Facility B Availability Period, and

                  (ii)     the Swingline Banks shall, when requested by any
                           Borrower, make to that Borrower Swingline Advances in
                           Dollars to that Borrower on a revolving basis during
                           the Facility B Availability Period.

2.2      OVERALL FACILITIES LIMIT AND SUB-LIMIT

(a)      No Utilisation shall be made if it would cause the aggregate Original
         Dollar Amount of all outstanding Advances:

         (i)      under Facility A, to exceed the Facility A Total Commitments;
                  or

         (ii)     under Facility B, to exceed the Facility B Total Commitments.


<PAGE>


                                       26
--------------------------------------------------------------------------------



(b)      No Utilisation shall be made if it would cause the aggregate Original
         Dollar Amount of all outstanding Utilisations under the Swingline
         Advance Facility to exceed the Total Swingline Commitments.

2.3      BANK LIMITS

(a)      No Facility A Advance shall be made by any Revolving Facility Bank if
         the operation of Clause 5.3 (Amount of each Revolving Facility Bank's
         Advance) would cause the total amount outstanding and owing to that
         Bank (the "AFFECTED BANK") to exceed its Facility A Commitment.

(b)      No Facility B Advance shall be made by any Revolving Facility Bank if
         the operation of Clause 5.3 (Amount of each Revolving Facility Bank's
         Advance) would cause the total amount outstanding and owing to the
         affected Bank to exceed its Facility B Commitment.

(c)      No Swingline Advance shall be made by any Swingline Bank if the
         operation of Clause 6.3 (Amount of each Swingline Bank's Advance) would
         cause the total amount outstanding and owing to the affected Bank to
         exceed its Swingline Commitment or its Facility B Commitment.

(d)      No Facility B Advance shall be made by any Revolving Facility Bank or
         its Affiliated Bank if it would cause the aggregate amount outstanding
         and owing to both the Revolving Facility Bank and its Affiliated Bank
         under Facility B to exceed the aggregate of that Revolving Facility
         Bank's and its Affiliated Bank's Facility B Commitment.

(e)      For the purposes of this Clause 2.3, the "TOTAL AMOUNT OUTSTANDING" of
         a Bank under any Facility on any Utilisation Date is the aggregate
         Original Dollar Amount of all Advances made by that Bank under that
         Facility which would be outstanding on that Utilisation Date if:

         (i)      all outstanding Utilisations having Maturity Dates or Final
                  Maturity Dates which fall on or before that Utilisation Date
                  are repaid; and

         (ii)     all Utilisations to be made on or before that Utilisation Date
                  and in respect of which a Utilisation Request has been
                  received by the relevant Agent are made.


2.4      AVAILABILITY, NUMBER OF UTILISATION REQUESTS AND UTILISATIONS

(a)      No Utilisation may be made at any time after the date one month prior
         to the applicable Final Maturity Date.

(b)      No Utilisation Request may specify a Utilisation Date which is within
         three Business Days of another Utilisation Date (unless the Utilisation
         the subject of that Utilisation Request is to refinance an existing
         Utilisation).

(c)      No more than one Utilisation Request may be delivered on any one day
         but that Utilisation Request may subject to Clause 5 (Availability of
         Revolving Facility Advances and Term-out Advances) and Clause 6 (The
         Swingline Advance Facility) specify any number and type of Utilisations
         from Facility A or Facility B or both of them.


<PAGE>

                                       27
--------------------------------------------------------------------------------


(d)      Unless the Facility Agent agrees otherwise, no more than 20
         Utilisations may be outstanding at any one time (taking all Facilities
         together for this purpose) save that no Utilisations under the
         Swingline Advance Facility are to be counted for the purposes of this
         provision.

2.5      PRIMARY SYNDICATION PERIOD

(a)      Subject to paragraph (b) below, but otherwise notwithstanding any
         provision of this Agreement, no Borrower will deliver a Utilisation
         Request or Interest Period Selection Notice during the Primary
         Syndication Period specifying a Term or an Interest Period other than
         one, two or three weeks or one month.

(b)      Except as the Facility Agent (after consultation with the Arrangers)
         and NGG may otherwise agree, each Interest Period Selection Notice or
         Utilisation Request delivered during the Primary Syndication Period
         shall specify an Interest Period or Term ending on the same date as
         each other Advance to be drawn or rolled over on the same date and, if
         there are Advances then outstanding, ending on the same date as such
         other Advances.

2.6      NATURE OF EACH FINANCE PARTY'S RIGHTS AND OBLIGATIONS

(a)      The obligations of each Finance Party under the Finance Documents are
         several.

(b)      The failure of a Finance Party to carry out those obligations does not
         relieve any other Party of its obligations under the Finance Documents
         and no Finance Party is responsible for the obligations of any other
         Finance Party under the Finance Documents.

(c)      The rights of a Finance Party under the Finance Documents are divided
         rights and a Finance Party may, except as otherwise stated in the
         Finance Documents, separately enforce those rights.

2.7      BORROWERS' AGENT

         Each Obligor irrevocably authorises and instructs NGG as the Borrowers'
         agent to give and receive as agent on its behalf all notices (including
         Utilisation Requests) and sign all documents in connection with the
         Finance Documents on its behalf and take such other action as may be
         necessary or desirable under or in connection with the Finance
         Documents and confirms that it will be bound by any action taken by NGG
         as the Borrowers' agent under or in connection with the Finance
         Documents.

2.8      ACTIONS OF BORROWERS' AGENT

         The respective liabilities of each of the Obligors under the Finance
         Documents shall not be in any way affected by:

         (a)      any irregularity (or purported irregularity) in any act done
                  by or any failure (or purported failure) by NGG;

         (b)      NGG acting (or purporting to act) in any respect outside any
                  authority conferred upon it by any Obligor; or

         (c)      the failure (or purported failure) by or inability (or
                  purported inability) of NGG to inform any Obligor of receipt
                  by it of any notification under this Agreement.


<PAGE>

                                       28
--------------------------------------------------------------------------------


3.       PURPOSE

3.1      USE OF PROCEEDS

         Each Borrower shall apply each Utilisation made by it:

         (a)      under Facility A, in or towards financing or refinancing the
                  Acquisition (plus related fees, costs and expenses) and/or
                  refinancing existing borrowings of Niagara Mohawk and its
                  Subsidiaries and/or financing any working capital requirements
                  of the Borrowers consequent upon the Acquisition or any
                  interest payable on funds used to finance the Acquisition;
                  and/or

         (b)      under Facility B, to meet the general corporate purposes of
                  the Group,

         but no Borrower shall apply the proceeds of a Swingline Advance towards
         the repayment of an outstanding Swingline Advance.

3.2      NO ENQUIRY

         Without affecting the obligations of any Obligor in any way no Finance
         Party is bound to monitor or verify the application of the proceeds of
         any Utilisation.

4.       CONDITIONS PRECEDENT

4.1      DOCUMENTARY CONDITIONS PRECEDENT

         The obligations of each Finance Party to any Obligor under this
         Agreement are subject to the condition precedent that the Facility
         Agent has notified NGG and the Banks that it has received all of the
         documents set out in Part I of Schedule 2 (Conditions Precedent
         Documents) in form and substance satisfactory to that Agent.

4.2      FURTHER CONDITIONS PRECEDENT

         The obligations of each Finance Party to participate in any Utilisation
         of Facility A are subject to the further condition precedent that the
         Facility Agent has notified NGG and the Revolving Facility Banks that
         it has received all of the documents set out in Part II to Schedule 2
         (Conditions Precedent Documents) in form and substance satisfactory to
         the Facility Agent.


4.3      FURTHER CONDITIONS PRECEDENT GENERALLY

         The obligations of each Bank to participate in a Utilisation are
         subject to the further conditions precedent that on both the relevant
         date of the Utilisation Request and the Utilisation Date:

         (a)      the representations and warranties in Clause 18
                  (Representations and Warranties) to be repeated on those dates
                  are correct and will be correct in all material respects
                  immediately after the Utilisation; and

         (b)      no Default is outstanding or would result from the Utilisation
                  (provided that where no notice has been given pursuant to
                  Clause 20.18 (Acceleration) but where a Default


<PAGE>

                                       29
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                  is outstanding each Bank shall be obliged to participate in a
                  Utilisation, to the extent required by the terms hereof, where
                  such Utilisation is in the same currency as and is in an
                  amount equal to or less than an outstanding Utilisation which
                  is to mature on the Utilisation Date for the proposed
                  Utilisation and is to be applied on such Utilisation Date in
                  repaying such outstanding Utilisation).

5.       AVAILABILITY OF REVOLVING FACILITY ADVANCES AND TERM-OUT ADVANCES

5.1      RECEIPT OF UTILISATION REQUESTS

         The Borrowers may borrow Revolving Facility Advances and Term-out
         Advances if the Facility Agent receives, not later than the Relevant
         Time, a duly completed Utilisation Request. Each such Utilisation
         Request shall be copied to the Swingline Agent.

5.2      FORM OF UTILISATION REQUEST

         A Utilisation Request for a Revolving Facility Advance or a Term-out
         Advance will not be regarded as having been duly completed unless:

         (a)      the proposed Utilisation Date is a Business Day during the
                  applicable Facility A Availability Period or Facility B
                  Availability Period;

         (b)      in the case of a Term-out Advance under Facility A, the
                  Utilisation Request requests Advances from all those Revolving
                  Facility Banks (but not some only) with a Facility A
                  Availability Period expiring on the same day;

         (c)      the Requested Amount for each separate Utilisation comprising
                  a Revolving Facility Advance or a Term-out Advance is in a
                  minimum Original Dollar Amount of US$50,000,000 and an
                  integral multiple of US$10,000,000, (or such other amount as
                  the relevant Borrower and the Facility Agent may agree before
                  the delivery of that Utilisation Request) or an integral
                  multiple of the amounts in the relevant Optional Currency
                  agreed between the relevant Borrower and the Facility Agent
                  before the delivery of the relevant Utilisation Request;

         (d)      only one Term or, in the case of Term-out Advances under
                  Facility A, one Interest Period and Final Maturity Date, for
                  each separate Utilisation is specified which:

                  (i)      in the case of a Utilisation under Facility A, does
                           not extend beyond the then applicable Facility A
                           Availability Period (other than in the case of
                           Term-out Advances); and

                  (ii)     in the case of a Utilisation under Facility B, does
                           not extend beyond the Final Maturity Date; and

                  (iii)    subject to Clause 2.5 (Primary Syndication Period),
                           is a period of

                           (A)      1, 2, 3 or 6 months for any Advance which is
                                    not an Acquisition Advance (or, in any case,
                                    such other period as all the Revolving
                                    Facility Banks may previously have agreed
                                    for the purposes of such Advances); or



<PAGE>

                                       30
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                           (B)      1, 2, 3, or 4 weeks, or 2, 3 or 6 months for
                                    any Acquisition Advance;

         (e)      the payment instructions comply with Clause 11 (Payments); and

         (f)      in the case of a Term-out Advance under Facility A, the
                  proposed Final Maturity Date (which must be the same date for
                  all Term-out Advances drawn on the same date) is a date after
                  the applicable Facility A Availability Period but no later
                  than the third Anniversary.

         Each Utilisation Request, once delivered, shall be irrevocable.

5.3      AMOUNT OF EACH REVOLVING FACILITY BANK'S ADVANCE

         The amount of each Revolving Facility Bank's Advance will be the
         proportion of the Requested Amount which its Commitment in respect of
         the relevant Facility bears to the aggregate Commitments of all
         Revolving Facility Banks in respect of that Facility on the date of
         receipt of the relevant Utilisation Request, adjusted, if necessary, to
         reflect the operation of Clause 2.3 (Bank limits).

5.4      NOTIFICATION TO REVOLVING FACILITY BANKS

         The Facility Agent shall, not later than the Relevant Time, notify each
         Revolving Facility Bank of the details of the requested Advances and
         the aggregate amount of those Advances to be made by that Revolving
         Facility Bank.

5.5      SELECTION OF AN OPTIONAL DURATION

(a)      If a Borrower requests an Interest Period or a Term in a Utilisation
         Request other than 1, 2, 3 or 6 months, it may also select in the
         relevant Utilisation Request an alternative Interest Period or Term of
         1, 2, 3 or 6 months to apply and paragraph (b) below shall apply.

(b)      If:

         (i)      a Borrower requests an Interest Period or a Term other than 1,
                  2, 3 or 6 months; and

         (ii)     the Facility Agent receives notice from a Revolving Facility
                  Bank not later than the Relevant Time stating that it does not
                  agree to such request,

         then the Interest Period or Term for the proposed Utilisation shall
         instead be the alternative period specified in the relevant Utilisation
         Request or, in the absence of any alternative selection, 3 months.

(c)      If the Facility Agent receives a notice from a Revolving Facility Bank
         under paragraph (b)(ii) above it shall notify the relevant Borrower and
         the Revolving Facility Banks of the revised Interest Period or Term for
         the proposed Advances not later than the Relevant Time.

(d)      A Borrower may not request a Term or Interest Period other than 1, 2,
         3, or 4 weeks, or 2, 3 or 6 months in respect of an Acquisition
         Advance.



<PAGE>

                                       31
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5.6      PAYMENT OF PROCEEDS

         Subject to the terms of this Agreement, each Revolving Facility Bank
         shall make its Advance available to the Facility Agent for the relevant
         Borrower for value on the relevant Utilisation Date.

5.7      EXTENSION OF FACILITY A AVAILABILITY PERIOD

         NGG may, not earlier than 60 days nor later than 30 days prior to the
         original expiry date of the Facility A Availability Period, request by
         notice to the Facility Agent (who will promptly notify the Revolving
         Facility Banks) that the Facility A Availability Period be extended to
         a date which is not later than 364 days after the original expiry date
         (the "EXTENDED DATE"). If any Revolving Facility Bank notifies the
         Facility Agent that it agrees to extend the Facility A Availability
         Period, then the Facility A Availability Period will be extended in
         relation to that Revolving Facility Bank accordingly, whether or not
         any other Revolving Facility Bank extends. No Revolving Facility Bank
         is under any obligation of any kind to agree to NGG's request to extend
         and any Revolving Facility Bank which fails to respond or reply within
         the required period will be deemed to have declined to extend.

6.       THE SWINGLINE ADVANCE FACILITY

6.1      RECEIPT OF UTILISATION REQUESTS

         The Borrowers may borrow Swingline Advances if the Swingline Agent
         receives, not later than the Relevant Time, a duly completed
         Utilisation Request. Each such Utilisation Request shall be copied at
         the same time to the Facility Agent.

6.2      FORM OF UTILISATION REQUESTS

         A Utilisation Request for a Swingline Advance will not be regarded as
         having been duly completed unless:

         (a)      the proposed Utilisation Date is a Business Day during the
                  Facility B Availability Period;

         (b)      the Requested Amount for each separate Utilisation is in a
                  minimum Original Dollar Amount of US$25,000,000 and an
                  integral multiple of US$5,000,000 or such other amount as the
                  relevant Borrower and the Swingline Agent may agree before the
                  delivery of that Utilisation Request;

         (c)      only one Utilisation is specified, the Term of which:

                  (i)      does not extend beyond the then applicable Facility B
                           Availability Period; and

                  (ii)     is a period not exceeding 5 Business Days;

         (d)      it specifies that it is a utilisation of the Swingline Advance
                  Facility and designates the Utilisation as a Facility B
                  Utilisation; and

         (e)      the payment instructions comply with Clause 11 (Payments).



<PAGE>

                                       32
--------------------------------------------------------------------------------

         Each Utilisation Request, once delivered, shall be irrevocable.

6.3      AMOUNT OF EACH SWINGLINE BANK'S ADVANCE

         The amount of each Swingline Bank's Advance will be the proportion of
         the Requested Amount which its Swingline Commitment bears to the
         aggregate Swingline Commitments of all Swingline Banks on the date of
         receipt of the relevant Utilisation Request, adjusted, if necessary, to
         reflect the operation of Clause 2.3 (Bank limits).

6.4      NOTIFICATION TO SWINGLINE BANKS

         The Swingline Agent shall promptly notify each Swingline Bank of the
         details of the requested Swingline Advances and the aggregate amount of
         those Swingline Advances to be made by that Swingline Bank.

6.5      PAYMENT OF PROCEEDS

         Subject to the terms of this Agreement, each Swingline Bank shall make
         its Swingline Advance available to the Swingline Agent for the relevant
         Borrower for value on the relevant Utilisation Date.

7.       REPAYMENT

7.1      REPAYMENT OF FACILITY A ADVANCES

(a)      Each Borrower will repay each Facility A Advance made to it in full on
         its Maturity Date or, in the case of a Term-out Advance, its Final
         Maturity Date, by payment to the Facility Agent for the relevant
         Revolving Facility Bank. As Facility A is available on a revolving
         basis during the Facility A Availability Period, amounts repaid to a
         Revolving Facility Bank may be reborrowed from that Revolving Facility
         Bank during the Facility A Availability Period applicable to that
         Revolving Facility Bank subject to the terms of this Agreement.

(b)      At any time prior to the expiry of the Facility A Availability Period
         applicable to any Revolving Facility Bank, any Borrower under Facility
         A may, by delivery of a duly completed Utilisation Request to the
         Facility Agent (who shall send a copy to the Revolving Facility Banks)
         elect to draw Term-out Advances under Facility A from all those
         Revolving Facility Banks (but not some only) with a Facility A
         Availability Period expiring on the same date (pro rata to their
         Facility A Commitments) with a Final Maturity Date after the applicable
         Facility A Availability Period but no later than the third Anniversary,
         provided that if, following a request from NGG under Clause 5.7
         (Extension of Facility A Availability Period), a Revolving Facility
         Bank does not agree to extend its Facility A Availability Period, that
         Borrower may not elect to draw a Term-out Advance from that Revolving
         Facility Bank unless it simultaneously elects to draw Term-out Advances
         from every Revolving Facility Bank. No Term-out Advance, once repaid or
         prepaid, may be reborrowed. Only one Term-out Advance can be borrowed
         from each Revolving Facility Bank and, upon drawdown, the undrawn
         Facility A Commitment for that Revolving Facility Bank (if any) will
         automatically be cancelled.

(c)      No Facility A Advance, other than a Term-out Advance, may be
         outstanding to a Revolving Facility Bank after expiry of the Facility A
         Availability Period then applicable to that Revolving Facility Bank. No
         Term-out Advance may be outstanding after the third Anniversary.


<PAGE>


                                       33
--------------------------------------------------------------------------------

7.2      REPAYMENT OF FACILITY B ADVANCE

(a)      Each relevant Borrower will repay each Facility B Advance made to it in
         full on its Maturity Date by payment to the Facility Agent for the
         relevant Revolving Facility Bank or to the Swingline Agent for the
         relevant Swingline Bank. As Facility B is available on a revolving
         basis, amounts repaid may be reborrowed subject to the terms of this
         Agreement. No Facility B Advance may be outstanding after the Final
         Maturity Date.

(b)      In the event that a Swingline Advance is not repaid in accordance with
         the provisions of paragraph (a) above each Revolving Facility Bank will
         within four Business Days of a request to that effect from the Facility
         Agent, pursuant to a demand from the Swingline Agent, pay to the
         Swingline Agent for the Swingline Banks an amount equal to its Agreed
         Percentage of the principal of such Swingline Advance, less the amount
         of its participation in such Swingline Advance, and accrued interest
         (including default interest) thereon to the date of actual payment by
         such Revolving Facility Bank. If this produces a negative figure for a
         Bank, no amount need be paid by that Bank.

(c)      Each Revolving Facility Bank which makes a payment under paragraph (b)
         above will be subrogated to the rights of the Swingline Banks which
         share in the payment received.

(d)      If and to the extent that any Revolving Facility Bank is not able to
         rely on its rights under paragraph (c) above, any Borrower whose
         default has resulted in a payment being made under paragraph (b) above
         will be liable to each Revolving Facility Bank which makes such a
         payment for a debt equal to that payment made by that Revolving
         Facility Bank.

(e)      Any payment under paragraph (b) above does not reduce the obligations
         in aggregate of any Obligor.

(f)      Any Revolving Facility Bank which makes a claim against a Borrower
         under either paragraph (c) or paragraph (d) above shall be entitled
         also to claim from that Borrower, and that Borrower shall be liable to
         pay to it, interest on the sum paid by it to the Swingline Agent under
         paragraph (b) above, from the date on which it paid that sum until the
         date on which the relevant Borrower reimburses that sum (together with
         such interest), at the rate set out for Advances (other than Swingline
         Advances) in Clause 9.4(a) (Default Interest).

8.       PREPAYMENT AND CANCELLATION

8.1      AUTOMATIC CANCELLATION OF COMMITMENTS AND SWINGLINE COMMITMENTS

(a)      The Facility A Commitment of each Revolving Facility Bank shall be
         automatically cancelled on the last day of the Facility A Availability
         Period then applicable to that Bank.

(b)      The Facility B Commitment of each Revolving Facility Bank shall be
         automatically cancelled at close of business on the last day of the
         Facility B Availability Period then applicable to that Bank.

(c)      The Swingline Commitment of each Swingline Bank shall be automatically
         cancelled at close of business on the last day of the Facility B
         Availability Period then applicable to that Swingline Bank.



<PAGE>

                                       34
--------------------------------------------------------------------------------

8.2      VOLUNTARY CANCELLATION

(a)      NGG may, by giving not less than five Business Days' prior notice to
         the Facility Agent, cancel the unutilised portion of either Facility A
         or Facility B in whole or in part (but, if in part, in a minimum amount
         of US$50,000,000 and an integral multiple of US$10,000,000). Any
         cancellation in part of Facility A shall be applied against the
         Facility A Commitment of each Revolving Facility Bank pro rata and any
         cancellation in part of Facility B shall be applied against the
         Facility B Commitment of each Revolving Facility Bank pro rata.

(b)      NGG may, by giving not less than five Business Days' prior notice to
         the Swingline Agent, cancel the unutilised portion of the Swingline
         Total Commitments in whole or in part (but, if in part, in a minimum
         amount of US$50,000,000 and an integral multiple of US$10,000,000). Any
         cancellation in part shall be applied against the Swingline Commitment
         of each Swingline Bank pro rata.

(c)      NGG may not cancel any part of the Facility B Total Commitment if it
         would result in the Total Swingline Commitments exceeding the Facility
         B Total Commitment at that time.

8.3      PREPAYMENT OF ADVANCES

(a)      Subject to Clause 25.2 (Other Indemnities), a Borrower may, by giving
         not less than five Business Days' notice to the relevant Agent, prepay
         at any time the Advances comprised in any Utilisation made to it under
         either Facility in whole or in part (but, if in part, in a minimum
         Original Dollar Amount of US$50,000,000 and an integral multiple of
         US$10,000,000 (or such other amount as the relevant Borrower and the
         Facility Agent, or Swingline Agent, where relevant, may agree before
         the delivery of the relevant notice of prepayment).

(b)      Any voluntary prepayment made under paragraph (a) above will be applied
         against all the Advances comprised in the relevant Utilisation(s).

8.4      ADDITIONAL RIGHT OF PREPAYMENT AND CANCELLATION

         Subject to Clause 25.2 (Other Indemnities), if any Obligor (the
         "AFFECTED OBLIGOR") is required to pay any amount to a Bank under
         Clause 12 (Taxes) or Clause 14 (Increased Costs), NGG may, whilst the
         circumstances giving rise to the requirement continue, serve a notice
         of prepayment and cancellation on that Bank through the relevant Agent.
         On the date falling five Business Days after the date of service of the
         notice:

         (a)      the affected Obligor shall prepay any Advances made to it by
                  that Bank (together with all other amounts payable by it to
                  that Bank under this Agreement); and

         (b)      if NGG has so elected in the notice delivered pursuant to this
                  Clause 8.4, that Bank's Commitment or Swingline Commitment,
                  where relevant, shall be cancelled in full on the date of
                  service of the notice.

8.5      MANDATORY PREPAYMENT AND CANCELLATION ON CHANGE OF CONTROL

         If any single person, or group of persons acting in concert (as defined
         in the City Code on Take-Overs and Mergers) acquires control (as
         defined in Section 416 of the Income and Corporation Taxes Act 1988) of
         New NG or Existing NGG (and in the latter case prior to, and save for
         that resulting from, the implementation of the Scheme of Arrangement),
         then the


<PAGE>



                                       35
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         Facility Agent may, and shall if so directed by the Majority Banks,
         within 90 days after the occurrence of such event by notice in writing
         to New NG or Existing NGG, where relevant:

         (a)      reduce the Total Commitments and Total Swingline Commitments
                  to the aggregate Original Dollar Amount of all outstanding
                  Utilisations under those Facilities at the date of such
                  notice; and/or

         (b)      declare that:

                  (i)      the Final Maturity Date for all Facilities shall be
                           brought forward to the date falling 30 days after the
                           date of such notice whereupon each reference in this
                           Agreement to the Final Maturity Date (and each such
                           period) shall be amended and construed accordingly;

                  (ii)     each Borrower's obligations under Clause 7
                           (Repayment) in respect of Advances outstanding on the
                           date of such notice with Maturity Dates falling after
                           the Final Maturity Date (as amended) shall be due and
                           payable on the Final Maturity Date (as amended); and

                  (iii)    on the Final Maturity Date (as amended) the Total
                           Commitments and Total Swingline Commitments shall be
                           cancelled and all other amounts accrued or otherwise
                           outstanding under this Agreement shall be due and
                           payable.

8.6      MANDATORY CANCELLATION AND PREPAYMENT ON TERMINATION OF NIAGARA MOHAWK
         MERGER AGREEMENT

         If the Niagara Mohawk Merger Agreement is terminated for any reason
         prior to the Niagara Mohawk Acquisition Completion Date Facility A will
         be deemed to be cancelled in full and permanently on the date of
         termination of the Niagara Mohawk Merger Agreement and any Borrower
         which has drawn any Advances under Facility A shall prepay any and all
         such Facility A Advances within 30 days of that date.

8.7      MANDATORY PREPAYMENT AND CANCELLATION FOR SUBSIDIARY FINANCIAL
         INDEBTEDNESS

         If, at any time after the date falling six months after the Niagara
         Mohawk Acquisition Completion Date the level of Financial Indebtedness
         to which paragraph (a)(iii) of Clause 19.15 (Restriction on Subsidiary
         Financial Indebtedness) applies incurred by any Subsidiaries to which
         sub-paragraph (ii) of that Clause applies, exceeds the Financial
         Indebtedness Limit applicable from time to time to those Subsidiaries
         then the Facility Agent may, and will if so directed by the Majority
         Banks, by notice in writing to NGG:

         (a)      permanently cancel and reduce the Total Commitments by an
                  amount equal to the amount by which the Financial Indebtedness
                  of those Subsidiaries exceeds the then applicable Financial
                  Indebtedness Limit; and

         (b)      to the extent necessary to ensure that outstandings do not
                  exceed the relevant Commitments as so reduced, require the
                  relevant Borrower to prepay Advances made under Facility A
                  within 90 days of the date of that notice.



<PAGE>


                                       36
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8.8      MISCELLANEOUS PROVISIONS

(a)      Any notice of cancellation and/or prepayment under this Agreement shall
         be irrevocable and an Agent shall notify the Banks promptly of receipt
         of any such notice.

(b)      All prepayments under this Agreement shall be made together with
         accrued interest up to and including the date of prepayment on the
         amount prepaid and any other amounts due under this Agreement in
         respect of that prepayment (including, but not limited to, any amounts
         payable under Clause 25.2 (Other Indemnities) if not made on an
         Interest Date or Maturity Date (as appropriate) in respect of the
         relevant Advance(s).

(c)      No cancellation or prepayment is permitted except in accordance with
         the express terms of this Agreement.

(d)      Amounts prepaid under this Agreement in respect of Term-out Advances
         may not subsequently be re-borrowed. Subject thereto and to the terms
         of this Agreement, any amount prepaid under Clause 8.3 (Prepayment of
         Advances) but not under any other provision of this Agreement may be
         reborrowed under any other provision of this Agreement. Any Commitment
         or Swingline Commitment cancelled may not subsequently be reinstated.

9.       INTEREST

9.1      SELECTION OF INTEREST PERIODS FOR TERM-OUT ADVANCES

         The life of each Term-out Advance is divided into successive periods
         (each an "INTEREST PERIOD") for the calculation of interest. The first
         Interest Period of each such Advance will be the period selected in the
         Utilisation Request for that Advance. Each subsequent Interest Period
         will be the period selected by the relevant Borrower in an Interest
         Period Selection Notice received by the Facility Agent not later than
         4.30 p.m. on the third Business Day before the end of the then current
         Interest Period being, subject to Clause 2.5 (Primary Syndication
         Period), 1, 2, 3, or 6 months or, in any case, such other period as the
         relevant Borrower and all the Revolving Facility Banks may agree from
         time to time or, if no notice from the relevant Borrower (or NGG) is
         received by the Facility Agent, one month.

9.2      INTEREST RATES

(a)      The rate of interest applicable to each Term-out Advance for each of
         their Interest Periods and to each Facility A Advance (other than a
         Term-out Advance) and Facility B Advance (other than a Swingline
         Advance) for each of their Terms is the rate per annum determined by
         the Facility Agent to be the aggregate of:

         (i)      the Applicable Margin;

         (ii)     LIBOR (or EURIBOR in the case of Advances made in Euros); and

         (iii)    the Mandatory Costs.

(b)      The rate of interest applicable to each Swingline Advance for its Term
         is the rate per annum calculated by the Swingline Agent to be the
         Swingline Rate for each day during its Term save that, if any day
         during a Term is not a New York Business Day, the rate of interest on
         that day shall be the rate applicable on the immediately preceding New
         York Business Day.


<PAGE>


                                       37
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9.3      DUE DATES

         Except as otherwise provided in this Agreement, accrued interest on
         each Advance is payable by the relevant Borrower:

         (a)      in the case of a Term-out Advance, on each Interest Date
                  applicable to that Advance; and

         (b)      in the case of an Advance (other than a Term-out Advance) on
                  its Maturity Date,

         and also, in the case of an Advance with an Interest Period or a Term
         longer than 6 months, at 6 monthly intervals after its Utilisation Date
         (or the start of the relevant Interest Period or Term) for so long as
         the Interest Period or Term is outstanding.

9.4      DEFAULT INTEREST

(a)      If an Obligor fails to pay any amount payable by it under this
         Agreement (an "OVERDUE AMOUNT"), it shall forthwith on demand by an
         Agent pay default interest on the overdue amount from the due date
         until the date of actual payment, as well after as before judgment, at
         a rate (the "DEFAULT RATE") determined by that Agent to be 1 per cent.
         per annum above

         (i)      if the overdue amount relates to a Swingline Advance, the
                  Swingline Rate; or

         (ii)     in all other cases, the rate which would have been payable if
                  the overdue amount had, during the period of non-payment,
                  constituted an Advance (other than a Swingline Advance)

         in the currency of the overdue amount for such successive Interest
         Periods or Terms of such duration as that Agent may determine (each a
         "DEFAULT TERM").

(b)      The default rate will be determined:

         (i)      if calculated by reference to the Swingline Rate, on each day;
                  or

         (ii)     on the first day of, or two Business Days before the first day
                  of, the relevant Default Term, as appropriate.

(c)      If an Agent determines that deposits in the currency of the overdue
         amount are not at the relevant time being made available by the
         Reference Banks to leading banks in the London interbank market, the
         default rate will be determined by reference to the cost of funds to
         that Agent from such sources as it reasonably may select.

(d)      Default interest will be compounded monthly (if calculated by reference
         to the Swingline Rate) or at the end of each Default Term (if
         calculated by reference to the rate which would have been payable if
         the overdue amount had, during the period of non-payment, constituted
         an Advance (other than a Swingline Advance)).



<PAGE>



                                       38
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9.5      NOTIFICATION OF RATES OF INTEREST

(a)      The Facility Agent shall promptly notify each relevant Party of the
         determination by it of a rate of interest under this Agreement.

(b)      The Swingline Agent shall notify each relevant Party of the
         determination of a rate of interest by it on a Swingline Advance on the
         first and last days of its Term. In the notification on the last day of
         that Term, the Swingline Agent shall include details of the applicable
         rate of interest for each day of that Term.

9.6      APPLICABLE MARGIN

(a)      The Applicable Margin for a Facility A Advance will be 0.375 per cent.
         per annum, unless adjusted in accordance with this Clause 9.6.

(b)      The Applicable Margin for a Facility B Advance (other than a Swingline
         Advance) will be 0.425 per cent. per annum, unless adjusted in
         accordance with this Clause 9.6.

(c)      If at close of business on the first day of an Interest Period or Term
         the uncancelled Total Commitments fall within the thresholds in Column
         1 of the table below, then the Applicable Margins for each relevant
         Facility will be those listed in Columns 2 and 3.

<TABLE>
<CAPTION>
                      COLUMN 1                             COLUMN 2                      COLUMN 3
                  UNCANCELLED TOTAL                        FACILITY A              FACILITY B (OTHER
                     COMMITMENTS                                                   THAN THE SWINGLINE
                                                                                   ADVANCE FACILITY)
                                                      APPLICABLE MARGIN              APPLICABLE MARGIN
        <S>                                            <C>                            <C>
        Less than or equal to                          0.375 per cent.                0.425 per cent.
        US$2,300,000,000 (but greater than
        US$1,500,000,000)

        Less than or equal to                          0.375 per cent.                 0.40 per cent.
        US$1,500,000,000 (but more than
        US$750,000,000)

        Less than or equal to US$750,000,000            0.35 per cent.                0.375 per cent.
</TABLE>

(d)      In addition to the provisions of (c) above, if at close of business on
         the first day of an Interest Period or Term the aggregate Original
         Dollar Amount of all Advances under the Facilities exceeds 50 per cent.
         of the uncancelled Total Commitments, the Applicable Margin for that
         Interest Period or Term shall be increased by 0.05 per cent. per annum.




<PAGE>



                                       39
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10.      OPTIONAL CURRENCIES

10.1     SELECTION

(a)      A Borrower shall select the currency of an Advance (other than a
         Swingline Advance):

         (i)      (in the case of a Revolving Facility Advance) in a Utilisation
                  Request; and

         (ii)     (in relation to a Term-out Advance) in an Interest Period
                  Selection Notice.

(b)      No Borrower may request an Advance denominated in an Optional Currency
         (other than Sterling or Euros) unless the Facility Agent has confirmed
         to the Borrower that the Optional Currency is readily available and
         freely transferable in the London foreign exchange market.

(c)      If a Borrower fails to issue an Interest Period Selection Notice in
         relation to a Term-out Advance, that Advance will remain denominated
         for its next Interest Period in the same currency in which it is then
         outstanding.

(d)      If a Borrower issues an Interest Period Selection Notice in relation to
         a Term-out Advance requesting a change of currency and the first day of
         the requested Interest Period is not a Business Day for the new
         currency, the Facility Agent shall promptly notify the relevant
         Borrower and the Revolving Facility Banks and that Advance will remain
         in the existing currency (with Interest Periods running from one
         Business Day until the next Business Day) until the next day which is a
         Business Day for both currencies, on which day the requested Interest
         Period will begin.

10.2     NON-AVAILABILITY OF CURRENCY

         If:

         (a)      before 9.00 a.m. on any Rate Fixing Day for any Advance to be
                  denominated in an Optional Currency, the Facility Agent
                  receives notice from a Revolving Facility Bank that it is
                  impracticable for that Revolving Facility Bank to fund its
                  required Advance in that Optional Currency for its requested
                  Term or Interest Period in the ordinary course of business in
                  the relevant interbank market; or

         (b)      the use of the proposed Optional Currency would or might
                  contravene any law or regulation,

         then:

         (i)      the Facility Agent shall promptly (and in any event before
                  10.00 a.m. on that Rate Fixing Day) notify the relevant
                  Borrower and the Revolving Facility Banks; and

         (ii)     unless NGG and the Facility Agent otherwise agree, the Advance
                  requested from the Revolving Facility Bank referred to in (a)
                  above will be denominated instead in Dollars, in an amount
                  equal to the Original Dollar Amount of the requested Advance
                  in the Optional Currency.



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10.3     CHANGE OF CURRENCY

(a)      If a Term-out Advance is to be denominated in different currencies
         during two successive Interest Periods:

         (i)      if the currency for the second Interest Period is an Optional
                  Currency the amount of the Advance in that Optional Currency
                  will be calculated by the Facility Agent as the Original
                  Dollar Amount of that Term-out Advance;

         (ii)     if the currency for the second Interest Period is Dollars, the
                  amount of the Advance will be equal to the Original Dollar
                  Amount;

         (iii)    (unless the Facility Agent and the relevant Borrower agree
                  otherwise in accordance with paragraph (b) below) the Borrower
                  that has borrowed the Advance shall repay it on the last day
                  of the first Interest Period in the currency in which it was
                  denominated for that Interest Period; and

         (iv)     (subject to Clause 4.2 (Further conditions precedent) the
                  Revolving Facility Banks shall re-advance the Advance in the
                  new currency in accordance with Clause 10.5(d) and (e), below.

(b)      If the Facility Agent and the Borrower that has borrowed the Term-out
         Advance agree, the Facility Agent shall:

         (i)      apply the amount paid to it by the Revolving Facility Banks
                  pursuant to paragraph (a)(iv) above (or so much of that amount
                  as is necessary) in or towards purchase of an amount in the
                  currency in which the Term-out Advance is outstanding for the
                  first Interest Period; and

         (ii)     use the amount it purchases in or towards the satisfaction of
                  the relevant Borrower's obligations under paragraph (a)(iii)
                  above.

(c)      If the amount purchased by the Facility Agent pursuant to paragraph
         (b)(i) above is less than the amount required to be repaid by the
         relevant Borrower, the Facility Agent shall promptly notify that
         Borrower and that Borrower shall, on the last day of the first Interest
         Period, pay an amount to the Facility Agent (in the currency of the
         outstanding Term-out Advance for the first Interest Period) equal to
         the difference.

(d)      If any part of the amount paid to the Facility Agent by the Revolving
         Facility Banks pursuant to paragraph (a)(iv) above is not needed to
         purchase the amount required to be repaid by the relevant Borrower, the
         Facility Agent shall promptly notify that Borrower and pay that
         Borrower, on the last day of the first Interest Period, that part of
         that amount (in the new currency).

10.4.    SAME OPTIONAL CURRENCY DURING SUCCESSIVE INTEREST PERIODS

(a)      If a Term-out Advance is to be denominated in the same Optional
         Currency during two successive Interest Periods, the Facility Agent
         shall calculate the amount of the Term-out Advance in the Optional
         Currency for the second of those Interest Periods (by calculating the
         amount of Optional Currency equal to the Original Dollar Amount of that
         Term-out Advance) and (subject to paragraph (b) below):



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         (i)      if the amount calculated is less than the existing amount of
                  that Term-out Advance in the Optional Currency during the
                  first Interest Period, promptly notify the Borrower that has
                  borrowed that Term-out Advance and that Borrower shall pay, on
                  the last day of the first Interest Period, an amount equal to
                  the difference; or

         (ii)     if the amount calculated is more than the existing amount of
                  that Term-out Advance in the Optional Currency during the
                  first Interest Period, promptly notify each Revolving Facility
                  Bank which participated in the Advance and, if no Event of
                  Default is continuing, each such Revolving Facility Bank
                  shall, on the last day of the first Interest Period, pay its
                  participation in amount equal to the difference.

(b)      If the calculation made by the Facility Agent pursuant to paragraph (a)
         above shows that the amount of the Term-out Advance in the Optional
         Currency has increased or decreased by less than the lower of
         US$40,000,000 and 5 per cent. compared to its Original Dollar Amount,
         no notification shall be made by the Facility Agent and no payment
         shall be required under paragraph (a) above.

10.5     NOTIFICATION OF RATES AND AMOUNTS

(a)      If an Advance is to be drawn down in an Optional Currency, the amount
         thereof shall be determined by converting the Original Dollar Amount
         thereof into that Optional Currency on the basis of the Facility
         Agent's Spot Rate of Exchange on the date of receipt by the Facility
         Agent of the Utilisation Request for that Advance.

(b)      If any Advance (save for any Term-out Advance) is to be repaid or
         prepaid by reference to an Original Dollar Amount, the amount of
         Optional Currency to be repaid or prepaid shall be determined by
         reference to the Facility Agent's Spot Rate of Exchange last used for
         determining the Optional Currency amount of that Advance under
         paragraph (a) above.

(c)      If any Term-out Advance is to be repaid or prepaid by reference to an
         Original Dollar Amount, the amount of Optional Currency to be repaid or
         prepaid shall be determined by reference to the Facility Agent's Spot
         Rate of Exchange used for determining the Optional Currency amount of
         that Term-out Advance when first drawn down or, if applicable, by
         reference to the Facility Agent's Spot Rate of Exchange by reference to
         which the most recent adjusted payment has been made under Clause
         10.4(a) (Same Optional Currency during successive Interest Periods) in
         respect of that Term-out Advance.

(d)      The Facility Agent shall notify each relevant Party of any applicable
         Facility Agent's Spot Rate of Exchange or Original Dollar Amount, as
         applicable, promptly after it has ascertained the same.

(e)      All calculations made by the Facility Agent pursuant to this Clause 10
         will take into account any repayment, prepayment, consolidation or
         division of Term-out Advances to be made on the last day of the first
         Interest Period.

(f)      Each Bank's participation in a Term-out Advance will, subject to
         paragraph (a) above, be determined in accordance with paragraph (b) of
         Clause 7.1 (Repayment of Facility A Advances).


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11.      PAYMENTS

11.1     PLACE

         Except where expressly provided to the contrary, all payments by an
         Obligor or a Bank under this Agreement shall be made to the relevant
         Agent to its account at such office or bank in the principal financial
         centre of the country of the relevant currency (or, in the case of
         Euros, the principal financial centre of a Participating Member State
         or London) as it may notify to that Obligor or Bank for this purpose.

11.2     FUNDS

         Payments under this Agreement to an Agent shall be made for value on
         the due date at such times and in such funds as that Agent may specify
         to the Party concerned as being customary at the time for the
         settlement of transactions in the relevant currency in the place for
         payment.

11.3     DISTRIBUTION

(a)      Each payment received by an Agent under this Agreement for another
         Party shall, subject to paragraphs (b) and (c) below, be made available
         by that Agent to that Party by payment (on the date and in the currency
         and funds of receipt) to its account with such bank in the principal
         financial centre of the country of the relevant currency (or, in the
         case of Euros, the principal financial centre of a Participating Member
         State or London) as it may notify to that Agent for this purpose by not
         less than 5 Business Days' prior notice or, in the case of a Borrower,
         in the relevant Utilisation Request.

(b)      An Agent may apply any amount received by it for an Obligor in or
         towards payment (on the date and in the currency and funds of receipt)
         of any amount due from an Obligor under this Agreement or in or towards
         the purchase of any amount of any currency to be so applied.

(c)      Where a sum is to be paid under this Agreement to an Agent for the
         account of another Party, that Agent is not obliged to pay that sum to
         that Party until it has established that it has actually received that
         sum. Unless an Agent receives not less than one Business Day's written
         notice that a sum to be paid under this Agreement will not be paid, it
         may assume that the sum has been paid to it in accordance with this
         Agreement and, in reliance on that assumption, make available to that
         Party a corresponding amount. If the sum has not been made available,
         but an Agent has paid a corresponding amount to another Party, that
         Party shall forthwith on demand refund the corresponding amount to that
         Agent together with interest on that amount from the date of payment to
         the date of receipt, calculated at a rate determined by that Agent to
         reflect its cost of funds.

(d)      If on any Utilisation Date:

         (i)      a Revolving Facility Bank is required to participate in an
                  Advance pursuant to Clause 5 (Availability of Revolving
                  Facility Advances and Term-out Advances); and

         (ii)     a payment is due to that Revolving Facility Bank pursuant to
                  Clause 8 (Repayment),

         then the Facility Agent shall (without prejudice to the obligations of
         the relevant Borrower under Clause 7 (Repayment)) apply the amount
         payable by such Revolving Facility Bank to the Facility Agent for the
         account of the relevant Borrower on that Utilisation Date in or towards
         satisfaction of the amount payable by the relevant Borrower to such
         Bank on such


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                                       43
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         Utilisation Date pursuant to Clause 7 (Repayment). The Facility Agent
         shall advise NGG, the relevant Borrower and each such Revolving
         Facility Bank of the net amount, if any, due from one party to the
         other after the application of funds as aforesaid and such net amount
         due shall be paid by the relevant Borrower or the relevant Revolving
         Facility Bank(s), as the case may be, on such date.

11.4     CURRENCY

(a)      (i)      A repayment or prepayment of an Advance is payable in the
                  currency in which the Advance is denominated.

         (ii)     Interest is payable in the currency in which the relevant
                  amount in respect of which it is payable is denominated.

         (iii)    Amounts payable in respect of costs, expenses, taxes and the
                  like are payable in the currency in which they are incurred.

         (iv)     Any other amount payable under this Agreement is, except as
                  otherwise provided in this Agreement, payable in Sterling.

         (v)      Any amount payable under this Agreement in the currency of a
                  Participating Member State will be paid in Euros.

(b)      If a change in any currency of a country occurs in a manner different
         to that expressly contemplated in this Agreement, this Agreement will
         be amended to the extent the Agents and NGG agree (such agreement not
         to be unreasonably withheld) to be necessary to reflect the change in
         currency and to put the Banks and the Obligors in the same position, as
         far as possible, that they would have been in if no change in currency
         had occurred.

11.5     SET-OFF AND COUNTERCLAIM

         All payments made by an Obligor under this Agreement shall be made
         without set-off or counterclaim.

11.6     NON-BUSINESS DAYS

(a)      If a payment under this Agreement is due on a day which is not a
         Business Day, the due date for that payment shall instead be the next
         Business Day in the same calendar month (if there is one) or the
         preceding Business Day (if there is not).

(b)      During any extension of the due date for payment of any principal under
         this Agreement interest is payable on the principal at the rate payable
         on the original due date.

11.7     PARTIAL PAYMENTS

(a)      If an Agent receives a payment insufficient to discharge all the
         amounts then due and payable by the Obligors under the Finance
         Documents that Agent shall apply that payment towards the obligations
         of the Obligors under the Finance Documents in the following order:

         (i)      FIRST, in or towards payment pro rata of any unpaid costs,
                  fees and expenses of the relevant Agent or the Agents under
                  this Agreement;


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                                       44
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         (ii)     SECONDLY, in or towards payment pro rata of any accrued fees
                  due but unpaid under Clauses 22.1 (Front-end fees), 22.2
                  (Commitment fee), and 22.3 (Term-out Fee and Facility A
                  Availability Extension Fee);

         (iii)    THIRDLY, in or towards payment pro rata of any accrued
                  interest due but unpaid under this Agreement;

         (iv)     FOURTHLY, in or towards payment pro rata of any principal due
                  but unpaid under this Agreement; and

         (v)      FIFTHLY, in or towards payment pro rata of any other sum due
                  but unpaid under this Agreement.

(b)      The Agents shall, if so directed by all the Banks, vary the order set
         out in paragraphs (a)(ii) to (v) inclusive above.

(c)      Paragraphs (a) and (b) above shall override any appropriation made by
         an Obligor.

12.      TAXES

12.1     GROSS-UP

(a)      For the purposes of this Clause 12, "TAX" and "TAXES" in relation to
         any payment to be made by an Obligor under the Finance Documents means
         any present or future taxes of any nature now or subsequently imposed
         by the laws of:

         (i)      the United Kingdom;

         (ii)     any other jurisdiction from which, or through which, such
                  payment is made or to the taxation laws of which the relevant
                  Obligor is at the time of such payment subject;

         (iii)    any political sub-division of the United Kingdom or any such
                  other jurisdiction; or

         (iv)     any federation or association of states of which the United
                  Kingdom or any such other jurisdiction is, at the time of such
                  payment, a member.

(b)      All payments by an Obligor under the Finance Documents to a Finance
         Party shall be made without any deduction, and free and clear of and
         without deduction or withholding for or on account of any taxes, except
         to the extent that the Obligor is required by law to deduct or withhold
         taxes from any amounts payable or paid or to make payment subject to
         any taxes. If any tax or amounts in respect of tax must be deducted, or
         any other deductions must be made, from any amounts payable or paid by
         an Obligor, or paid or payable by an Agent to a Bank, under the Finance
         Documents, the Obligor shall pay such additional amounts as may be
         necessary to ensure that the relevant Bank receives a net amount equal
         to the full amount which it would have received had payment not been
         made subject to tax or other deduction.

12.2     TAX RECEIPTS

         All taxes required by law to be deducted or withheld by an Obligor from
         any amounts paid or payable under the Finance Documents shall be paid
         by the relevant Obligor when due (unless the obligation to pay any such
         tax is being disputed in good faith) and the Obligor shall,


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                                       45
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         within 15 days of the payment being made, deliver to the relevant Agent
         for the relevant Bank evidence satisfactory to that Bank (including all
         relevant tax receipts) that the payment has been duly remitted to the
         appropriate authority.

12.3     QUALIFYING BANK

(a)      In respect of amounts payable by an Obligor, if otherwise than as a
         result of the introduction of, change in, or change in the
         interpretation, administration or application of, any law or regulation
         or any practice or concession of the United Kingdom Inland Revenue
         occurring after the date of this Agreement, a Bank is not or ceases to
         be a Qualifying Bank, no Obligor is liable to pay to that Bank under
         Clause 12.1 (Gross-up) any amount in respect of taxes levied or imposed
         by the United Kingdom or any taxing authority of or in the United
         Kingdom in excess of the amount it would have been obliged to pay if
         that Bank was or had not ceased to be a Qualifying Bank.

(b)      If for whatever reason a Bank ceases to be a Qualifying Bank it shall
         immediately notify the relevant Agent and NGG in writing.

(c)      Each Bank undertakes, as soon as reasonably practicable after the
         Signing Date or, as applicable, the date upon which it becomes a Party
         to this Agreement, where requested in writing by an Obligor to do so,
         to complete and file, or to provide such information as NGG reasonably
         requests in order to complete and file, any declaration, claim,
         exemption or other form, which it is able to complete and file or, in
         the case of information, to provide, as may be required to ensure that
         an Obligor is not required to pay any additional amount pursuant to
         paragraph (b) of Clause 12.1 (Gross-up).

12.4     TAX CREDITS

(a)      If an Obligor pays any additional amount (a "Tax Payment") under Clause
         12.1 (Gross-up) and a Bank effectively obtains a refund of tax, or
         relief or credit against tax, by reason of that Tax Payment (a "Tax
         Credit") and is able to identify the Tax Credit as being attributable
         to the Tax Payment, then it shall reimburse to the relevant Obligor
         such amount as the Bank reasonably determines (in its absolute
         discretion) to be the proportion of the Tax Credit as will leave it,
         after that reimbursement, in no better or worse position than it would
         have been in if the Tax Payment had not been required. Each Bank shall
         have an absolute discretion as to whether to claim any Tax Credit and,
         if it does so claim, the extent, order and manner in which it does so.
         No Bank shall be obliged to disclose any information regarding its tax
         affairs or computations to any Obligor in respect of any provision of
         this Agreement or otherwise.

(b)      If any Bank makes any payment to an Obligor pursuant to paragraph (a)
         above and that Bank subsequently determines that the credit, relief,
         remission or repayment in respect of which such payment was made was
         not available to it or has been withdrawn from it or that it was unable
         to use such credit, relief, remission or repayment in full, the Obligor
         shall reimburse that Bank to the extent (but not exceeding the relevant
         payment by that Bank under paragraph (a) above) that it determines to
         have been required to place it in the same after-tax position as it
         would have been in if such credit, relief, remission or repayment had
         been obtained and fully used and retained by that Bank.


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                                       46
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12.5     U.S. TAXES

(a)      No U.S. Borrower shall be required to pay any additional amount
         pursuant to Clause 12.1 (Gross-up) in respect of United States taxes
         (including, without limitation, federal, state, local or other income
         taxes), branch profits or franchise taxes with respect to a sum payable
         by it pursuant to this Agreement to a Finance Party if:

         (i)      on the date such Bank becomes a Party to this Agreement or has
                  designated a new Facility Office:

                  (1)      in the case of a Bank which is not a United States
                           person (as such term is defined in Section
                           7701(a)(30) of the U.S. Code), such Bank is not
                           entitled to submit a United States Internal Revenue
                           Service Form W-8BEN (relating to such Bank and
                           entitling it to a complete exemption from withholding
                           on all interest payable to it pursuant to this
                           Agreement) or a Form W-8ECI (relating to interest
                           payable to such Bank pursuant to this Agreement) (or
                           any successor forms) with respect to interest payable
                           pursuant to this Agreement; or

                  (2)      in the case of a Bank which is a United States person
                           (as such term is defined in Section 7701(a)(30) of
                           the U.S. Code), Clause 12.1 (Gross-up) would apply
                           (other than as a result of the introduction of,
                           suspension, withdrawal or cancellation of, or change
                           in the official interpretation, administration or
                           official application of, any law, regulation having
                           the force of law, tax treaty or any published
                           practice or published concession of the United States
                           Internal Revenue Service or any other relevant taxing
                           or fiscal authority in any jurisdiction with which
                           the relevant Bank has a connection, occurring after
                           the date the Bank becomes a Party to this Agreement
                           or has designated a new Facility Office); or

         (ii)     such Bank has failed to provide the Borrower with the
                  appropriate form, certificate or other information with
                  respect to such sum payable that it was required to provide
                  pursuant to paragraph (b) or (c) below and is entitled to file
                  under applicable law; or

         (iii)    such Bank is subject to such tax by reason of any connection
                  between the jurisdiction imposing such tax and the Bank or its
                  Facility Office other than a connection arising solely from
                  this Agreement or any transaction contemplated hereby.

(b)      If a Bank is not a United States person (as such term is defined in
         Section 7701(a)(30) of the U.S. Code) it shall (if and to the extent
         that it is entitled to do so under applicable law) submit, as soon as
         reasonably practicable after a U.S. Borrower becomes a Party to this
         Agreement or designated a new Facility Office, in duplicate to each
         U.S. Borrower duly completed and signed copies of either United States
         Internal Revenue Service Form W-8BEN (or, such successor forms as shall
         be adopted from time to time by the relevant United States taxing
         authorities) (relating to such Bank and entitling it to a complete
         exemption from withholding on all amounts (to which such withholding
         would otherwise apply) to be received by such Bank, including fees,
         pursuant to this Agreement in connection with any borrowing by such
         U.S. Borrower) as a result of a tax treaty concluded with the United
         States or United States Internal Revenue Service Form W-8ECI (relating
         to all amounts (to which such withholding would otherwise apply) to be
         received by such Bank, including fees, pursuant to this Agreement in
         connection with any borrowing by such U.S. Borrower).


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                                       47
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         Thereafter and from time to time upon the reasonable request of a U.S.
         Borrower, such Bank shall (if and to the extent that it is entitled to
         do so under applicable law) submit to such U.S. Borrower such
         additional duly completed and signed copies of such forms (or such
         successor forms as shall be adopted from time to time by the relevant
         United States taxation authorities) or any additional information, in
         each case as may be required under then current United States law or
         regulations to claim the inapplicability of or exemption from United
         States withholding taxes on payments in respect of all amounts (to
         which such withholding would otherwise apply) to be received by such
         Bank, including fees, pursuant to this Agreement in connection with any
         borrowing by such U.S. Borrower.

(c)      If a Bank is a United States person (as such term is defined in Section
         7701(a)(30) of the U.S. Code) it shall, as soon as reasonably
         practicable after a U.S. Borrower becomes a Party to this Agreement or
         designates a new Facility Office, and thereafter upon the reasonable
         request of a U.S. Borrower, submit in duplicate to such U.S. Borrower a
         certificate to the effect that it is such a United States person and
         shall (if and to the extent that it is entitled to do so under
         applicable law) upon the reasonable request of a U.S. Borrower submit
         any additional information that may be necessary to avoid United States
         withholding taxes on all payments, including fees, (to which such
         withholding would otherwise apply) to be received pursuant to this
         Agreement in connection with any borrowing by such U.S. Borrower.

13.      MARKET DISRUPTION

(a)      If LIBOR or EURIBOR is to be determined by reference to Reference Banks
         but a Reference Bank does not supply an offered rate by 12 noon on a
         Rate Fixing Day, the applicable LIBOR or EURIBOR, where relevant,
         shall, subject to paragraph (b) below, be determined on the basis of
         the quotations of the remaining Reference Banks.

(b)      If, in relation to any proposed Utilisation (save for Utilisations
         comprising Swingline Advances):

         (i)      LIBOR or EURIBOR are to be determined by reference to
                  Reference Banks but no, or only one, Reference Bank supplies a
                  rate for the purposes of determining the applicable LIBOR or
                  EURIBOR or the Facility Agent otherwise determines that
                  adequate and fair means do not exist for ascertaining the
                  applicable LIBOR or EURIBOR; or

         (ii)     the Facility Agent receives notification from Revolving
                  Facility Banks participating in more than 50 per cent. in
                  value of the proposed Revolving Facility Advances that, in
                  their opinion:

                  (A)      matching deposits may not be available to them in the
                           London interbank market in the ordinary course of
                           business to fund their Revolving Facility Advances
                           for the relevant Interest Period or Term; or

                  (B)      the cost to them of matching deposits in the London
                           interbank market would be in excess of LIBOR or
                           EURIBOR, where relevant, for the relevant Interest
                           Period or Term,

         then the Facility Agent shall promptly notify NGG, any other relevant
         Borrower and the relevant Revolving Facility Banks of the fact and that
         this Clause 13.1 is in operation.



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(c)      After any notification under paragraph (b) above:

         (i)      the relevant Borrower and the Revolving Facility Banks may
                  (through the Facility Agent) agree that the relevant Advances
                  comprised in the Utilisation shall not be made; or

         (ii)     in the absence of such agreement:

                  (A)      the relevant Advances shall still be made;

                  (B)      the Interest Period or Term of each relevant Advance
                           shall be one week during the Primary Syndication
                           Period and thereafter one month;

                  (C)      during the Interest Period or Term of each relevant
                           Advance the rate of interest applicable to that
                           Advance shall be the Applicable Margin plus the
                           applicable Mandatory Costs plus the rate per annum
                           notified by the relevant Revolving Facility Bank to
                           the Facility Agent before the last day of that
                           Interest Period or Term to be that which expresses as
                           a percentage rate per annum the cost to the Revolving
                           Facility Bank of funding its relevant Advance from
                           whatever sources it may reasonably select;

                  (D)      during the relevant Interest Period or Term of each
                           relevant Advance, NGG, any other relevant Borrower
                           and the Facility Agent shall enter into negotiations
                           for a period of not more than 30 days with a view to
                           agreeing a substitute basis for determining the rate
                           of interest and/or funding applicable to any such
                           future Advances to be denominated in the currency of
                           the affected Advances for the duration agreed at the
                           time of determining the substitute basis; and

                  (E)      any substitute basis agreed under paragraph (D) above
                           shall be, with the prior consent of all the Revolving
                           Facility Banks, binding on all the Parties.

14.      INCREASED COSTS

14.1     INCREASED COSTS

(a)      Subject to Clause 14.2 (Exceptions), NGG shall forthwith on demand by a
         Finance Party pay that Finance Party the amount of any increased cost
         incurred by it as a result of:

         (i)      the introduction of, or any change in, or any change in the
                  interpretation or application of, any law or regulation after
                  the date of this Agreement;

         (ii)     compliance with any regulation made after the date of this
                  Agreement,

         (including any law or regulation relating to taxation or reserve asset,
         special deposit, cash ratio, liquidity or capital adequacy requirements
         or any other form of banking or monetary control).



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(b)      In this Agreement, "INCREASED COST" means:

         (i)      an additional cost incurred by a Finance Party or its
                  Regulated Holding Company as a result of that Finance Party
                  having entered into, or performing, maintaining or funding its
                  obligations under, any Finance Document; or

         (ii)     that portion of an additional cost incurred by a Finance Party
                  or its Regulated Holding Company in making, funding or
                  maintaining all or any advances comprised in a class of
                  advances formed by or including the Advances made or to be
                  made by it under this Agreement as is attributable to it
                  making, funding or maintaining its Advances; or

         (iii)    a reduction in any amount payable to a Finance Party or its
                  Regulated Holding Company or the effective return to a Finance
                  Party under this Agreement or on its capital; or

         (iv)     the amount of any payment made by a Finance Party or its
                  Regulated Holding Company, or the amount of interest or other
                  return foregone by a Finance Party or its Regulated Holding
                  Company, calculated by reference to any amount received or
                  receivable by a Finance Party or any of its Regulated Holding
                  Company from any other Party under this Agreement.

14.2     EXCEPTIONS

         Clause 14.1 (Increased costs) does not apply to any increased cost:

         (a)      compensated for by the payment of the Mandatory Costs; or

         (b)      compensated for by the operation of Clause 12 (Taxes); or

         (c)      attributable to any change in the rate of tax on the overall
                  net income of a Finance Party or its Regulated Holding Company
                  (or the overall net income of a division or branch of the
                  Finance Party on its Regulated Holding Company) imposed in the
                  jurisdiction in which its principal office or Facility Office
                  is situated; or

         (d)      incurred as a consequence of the implementation in whole or in
                  part of the International Convergence of Capital Measurement
                  and Capital Standards dated July 1988 and published by The
                  Basle Committee on Banking Regulations and Supervisory
                  Practices in the United Kingdom by notices issued by the Bank
                  of England on or before the date of this Agreement; or

         (e)      attributable to any implementation by any authority having
                  jurisdiction over any of the Revolving Facility Banks of the
                  proposals contained in the matters set out in the EC Directive
                  93/6/EEC of 15th March, 1993, on the capital adequacy of
                  investment firms and credit institutions.

15.      MITIGATION

         If any circumstances arise in relation to any Bank which would, or
         would upon the giving of notice, result in:



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         (a)      a demand for payment pursuant to Clause 14.1 (Increased costs)
                  or the provisions of Clause 13 (Market Disruption) applying;

         (b)      a cancellation of its Commitment or Swingline Commitment,
                  where relevant, pursuant to paragraph (b)(ii) of Clause 16
                  (Illegality); or

         (c)      an increase in the amount of any payment to be made to it or
                  for its account pursuant to Clause 12.1 (Gross-up),

         then, without in any way limiting, reducing or otherwise qualifying any
         relevant Obligor's obligations under any of the provisions referred to
         in paragraphs (a) to (c) above, the Bank will promptly upon becoming
         aware of the same notify the relevant Agent thereof and, in
         consultation with that Agent, NGG and any other relevant Obligor, use
         reasonable endeavours to transfer its participation in the Facilities
         and its rights and obligations under this Agreement to another
         financial institution or Facility Office acceptable to that Agent, NGG
         and any other relevant Obligor and willing to participate as a Bank
         under this Agreement and otherwise take such steps as it considers
         reasonably open to it for a period not exceeding 30 days to mitigate
         the effects of those circumstances, unless, in the reasonable opinion
         of that Bank, such steps might have a material adverse effect upon the
         tax position, business, operations or financial condition, or be
         contrary to the banking policy, of that Bank. Nothing in this provision
         shall require a Bank to disclose any information as to its banking
         policy or any other matters which it regards as confidential or
         commercially sensitive.

16.      ILLEGALITY

         If it is or becomes unlawful in any jurisdiction for a Bank to give
         effect to any of its obligations as contemplated by this Agreement or
         to fund or maintain any Advance, then:

         (a)      the Bank may notify NGG (through the relevant Agent)
                  accordingly; and

         (b)      (i)      each Borrower shall forthwith prepay or repay any
                           Advances made to it by that Bank together with all
                           other amounts payable by it to that Bank under this
                           Agreement on or before the last day permitted by the
                           relevant law being, if possible, the Maturity Date
                           for any Facility A Advance (other than a Term-out
                           Advance) or Facility B Advance or the next Interest
                           Date for a Term-out Advance;

                  (ii)     that Bank's Commitment or Swingline Commitment (or
                           both of them, where the Bank is both a Revolving
                           Facility Bank and a Swingline Bank) shall be
                           cancelled in full with effect from the date of the
                           notification made under paragraph (a) above.

17.      GUARANTEE

17.1     GUARANTEE

         The Guarantor irrevocably and unconditionally:

         (i)      as principal obligor, guarantees to each Finance Party prompt
                  performance by each Borrower (other than itself) (each such
                  Borrower, a "GUARANTEED PARTY") of all its respective
                  obligations under the Finance Documents;



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         (ii)     undertakes with each Finance Party that whenever a guaranteed
                  party does not pay an amount when due under or in connection
                  with any Finance Document, it shall forthwith on demand by the
                  relevant Agent pay that amount as if it instead of the
                  relevant guaranteed party were expressed to be the principal
                  obligor; and

         (iii)    indemnifies each Finance Party on demand against any loss or
                  liability suffered by it if any obligation guaranteed by it is
                  or becomes unenforceable, invalid or illegal.

17.2     CONTINUING GUARANTEE

         This guarantee is a continuing guarantee and will extend to the
         ultimate balance of all sums payable by each guaranteed party under the
         Finance Documents, regardless of any intermediate payment or discharge
         in whole or in part.

17.3     REINSTATEMENT

(a)      Where any discharge (whether in respect of the obligations of any
         guaranteed party or any security for those obligations or otherwise) is
         made in whole or in part or any arrangement is made on the faith of any
         payment, security or other disposition which is avoided or must be
         restored on insolvency, liquidation or otherwise without limitation,
         the liability of the Guarantor under this Clause 17 shall continue as
         if the discharge or arrangement had not occurred.

(b)      An Agent may, on behalf of each other Finance Party, concede or
         compromise any claim that any payment, security or other disposition is
         liable to avoidance or restoration.

17.4     WAIVER OF DEFENCES

         The obligations of the Guarantor under this Clause 17 will not be
         affected by any act, omission, matter or thing which, but for this
         provision, would reduce, release or prejudice any of its obligations
         under this Clause 17 or prejudice or diminish those obligations in
         whole or in part, including (whether or not known to it or any Finance
         Party):

         (a)      any time or waiver granted to, or composition with, any
                  Obligor or other person;

         (b)      the taking, variation, compromise, exchange, renewal or
                  release of, or refusal or neglect to perfect, take up or
                  enforce, any rights against, or security over assets of, any
                  Obligor or other person or any non-presentation or
                  non-observance of any formality or other requirement in
                  respect of any instrument or any failure to realise the full
                  value of any security;

         (c)      any incapacity or lack of powers, authority or legal
                  personality of or dissolution or change in the members or
                  status of an Obligor or any other person;

         (d)      any variation (however fundamental) or replacement of a
                  Finance Document or any other document or security so that
                  references to that Finance Document in this Clause 17 shall
                  include each variation or replacement;

         (e)      any unenforceability, illegality or invalidity of any
                  obligation of any person under any Finance Document or any
                  other document or security, to the intent that the


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                  Guarantor's obligations under this Clause 17 shall remain in
                  full force and its guarantee be construed accordingly, as if
                  there were no unenforceability, illegality or invalidity; or

         (f)      any postponement, discharge, reduction, non-provability or
                  other similar circumstance affecting any obligation of any
                  Obligor under a Finance Document resulting from any
                  insolvency, liquidation or dissolution proceedings or from any
                  law, regulation or order so that each such obligation shall
                  for the purposes of the Guarantor's obligations under this
                  Clause 17 shall be construed as if there were no such
                  circumstance.

17.5     IMMEDIATE RECOURSE

         The Guarantor waives any right it may have of first requiring any
         Finance Party (or any trustee or agent on its behalf) to proceed
         against or enforce any other rights or security or claim payment from
         any person before claiming from it under this Clause 17.

17.6     APPROPRIATIONS

          Until all amounts which may be or become payable by the Obligors under
          or in connection with the Finance Documents have been irrevocably paid
          in full, each Finance Party (or any trustee or agent on its behalf)
          may:

          (a)     refrain from applying or enforcing any other moneys, security
                  or rights held or received by that Finance Party (or any
                  trustee or agent on its behalf) in respect of those amounts,
                  or apply and enforce the same in such manner and order as it
                  sees fit (whether against those amounts or otherwise) and the
                  Guarantor shall not be entitled to the benefit of the same;
                  and

          (b)     hold in a suspense account (bearing interest at a normal
                  commercial rate as determined by the relevant Agent) any
                  moneys received from the Guarantor or on account of the
                  Guarantor's liability under this Clause 17.

17.7     NON-COMPETITION

          Until all amounts which may be or become payable by the Obligors under
          or in connection with the Finance Documents have been irrevocably paid
          in full, the Guarantor shall not, after a claim has been made under
          this Clause 17 or by virtue of any payment or performance by it under
          this Clause 17:

         (a)      be subrogated to any rights, security or moneys held, received
                  or receivable by any Finance Party (or any trustee or agent on
                  its behalf) or be entitled to any right of contribution or
                  indemnity in respect of any payment made or moneys received on
                  account of the Guarantor's liability under this Clause 17;

         (b)      claim, rank, prove or vote as a creditor of any guaranteed
                  party or its estate in competition with any Finance Party (or
                  any trustee or agent on its behalf); or

         (c)      receive, claim or have the benefit of any payment,
                  distribution or security from or on account of any guaranteed
                  party, or exercise any right of set-off as against any
                  guaranteed party.



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         Unless the relevant Agent otherwise directs, the Guarantor shall hold
         in trust for and forthwith pay or transfer to that Agent for the
         Finance Parties any payment or distribution or benefit of security
         received by it contrary to this Clause 17.7.

17.8     ADDITIONAL SECURITY

          This guarantee is in addition to and is not in any way prejudiced by
          any other security now or hereafter held by any Finance Party.

17.9     ACKNOWLEDGMENT

(a)      Both New NG and Existing NGG acknowledge that on and from the
         Registration Date New NG shall be subject to the obligations under this
         Clause 17 and that on and from the Registration Date Existing NGG shall
         be released from its obligations under this Clause 17.

(b)      All of the parties hereto acknowledge that the transfer and release of
         obligations under this Clause 17 referred to in (a) above shall take
         place automatically and shall require no action either by any of the
         parties hereto or by any third parties.

18.      REPRESENTATIONS AND WARRANTIES

18.1     REPRESENTATIONS AND WARRANTIES

          Subject to Clause 18.17 (Times for making representations and
          warranties), each Obligor makes the representations and warranties set
          out in this Clause 18 to each Finance Party.

18.2     STATUS

(a)      It is a limited liability company, duly incorporated and validly
         existing under the laws of the jurisdiction of its incorporation; and

(b)      each member of the Group has the power to own its assets and carry on
         its business as it is being conducted.

18.3     POWER AND AUTHORITY

         It has the power to enter into and perform, and has taken all necessary

         action to authorise the entry into, performance and delivery of, the
         Finance Documents to which it is or will be a party and the
         transactions contemplated by those Finance Documents.

18.4     LEGAL VALIDITY

          Each Finance Document to which it is or will be a party constitutes,
          or when executed in accordance with its terms will constitute, its
          legal, valid and binding obligation in accordance with its terms.

18.5     NON-CONFLICT

         The entry into and performance by it of, and the transactions
         contemplated by, the Finance Documents do not and will not:



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         (a)      conflict with any applicable law or regulation or judicial or
                  official orders;

         (b)      conflict with its constitutional documents;

         (c)      conflict with any document which is binding upon it or any of
                  its assets; or

         (d)      result in the creation or imposition of any Security Interest
                  on the assets of any member of the Group.

18.6     NO DEFAULT

(a)      No Event of Default is outstanding or would result from any
         Utilisation.

(b)      No other event is outstanding which constitutes (or, with the giving of
         notice, expiry of any applicable grace period, lapse of time,
         determination of materiality or the fulfilment of any other applicable
         condition or any combination of the foregoing, is reasonably likely to
         constitute) a default under any document which is binding on any member
         of the Group or any asset of any member of the Group to an extent or in
         a manner which is reasonably likely to have a material adverse effect
         on the financial condition of the Obligors (taken as a whole) or on the
         ability of the Obligors (taken as a whole) to perform their obligations
         under the Finance Documents (including, without limitation, the
         obligations under Clause 19.18 (Group Financial covenants) and the
         obligations of the Guarantor under Clause 17 (Guarantee)).

18.7     LICENCES

         Each Obligor, NG Company and each Principal Subsidiary is duly licensed
         by:

         (a)      the Secretary of State under Section 6(1)(b) of the
                  Electricity Act; or

         (b)      the relevant authorities under any other applicable Energy
                  Laws,

         to the extent that such licences are required for that Group member's
         business at the time.

18.8     COMPLIANCE WITH LICENCES AND REGULATIONS

         Each Obligor, NG Company and each Principal Subsidiary has complied
         with and is not in breach of any of its obligations (if any) under its
         Licences, the Electricity Act (save with the consent of the Authority),
         the Grid Code, the BSC, MCUSA, CUSC, the Utilities Act, any regulation
         or other requirement of the Authority or any other Energy Law in any
         such case applicable to it to an extent or in a manner which is
         reasonably likely materially and adversely to affect the ability of the
         Obligors (taken as a whole) to perform their obligations under the
         Finance Documents (including, without limitation, the obligations under
         Clause 19.18 (Group Financial covenants) and the obligations of the
         Guarantor under Clause 17 (Guarantee)).

18.9     ENVIRONMENTAL MATTERS

         Each Obligor, NG Company and each Principal Subsidiary has or will at
         the relevant times have obtained all Environmental Approvals required
         in connection with its business and has at all times complied in all
         material respects with the terms of those Environmental Approvals and
         all other applicable Environmental Laws in each case where failure to
         do so is


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                                       55
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         reasonably likely materially and adversely to affect the ability of the
         Obligors (taken as a whole) to perform their obligations under the
         Finance Documents (including, without limitation, the obligations)
         under Clause 19.18 (Group Financial covenants) and the obligations of
         the Guarantor under Clause 17 (Guarantee)).

18.10    AUTHORISATIONS

         All authorisations required in connection with the entry into,
         performance and validity of, and the transactions contemplated by the
         Finance Documents have been obtained or effected (as appropriate) and
         are in full force and effect.

18.11    ACCOUNTS

(a)      In the case of NGG, the audited consolidated accounts of the Group most
         recently delivered to the Agents (which, at the date of this Agreement,
         are the Original Group Accounts):

         (i)      save as specified therein, have been prepared in accordance
                  with accounting principles and practices generally accepted in
                  the United Kingdom consistently applied; and

         (ii)     give a true and fair view of the consolidated financial
                  condition of the Group as at the date to which they were drawn
                  up,

         and there has been no material adverse change in the consolidated
         financial condition of the Group since the date to which those accounts
         were drawn up.

(b)      In the case of each Obligor (other than NGG), its audited accounts most
         recently delivered to the Agents:

         (i)      save as specified therein, have been prepared in accordance
                  with accounting principles and practices generally accepted in
                  the jurisdiction in which it is incorporated consistently
                  applied; and

         (ii)     give a true and fair view of its financial condition as at the
                  date to which they were drawn up,

         and there has been no material adverse change in the financial
         condition of that Obligor since the date to which those accounts were
         drawn up.

18.12    LITIGATION

         No litigation, arbitration or administrative proceedings are current
         or, to its knowledge, pending or threatened, which are reasonably
         likely, if adversely determined, to have a material adverse effect on
         the financial condition of the Group or the ability of the Obligors
         (taken as a whole) to perform their obligations under the Finance
         Documents (including, without limitation, the obligations under Clause
         19.18 (Group Financial covenants) and the obligations of the Guarantor
         under Clause 17 (Guarantee)).

18.13    INFORMATION PACKAGE

(a)      The factual information contained in the Information Package is to the
         best of NGG's knowledge and belief true and accurate in all material
         respects as at its date, opinions


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                                       56
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         expressed about the Group in the Information Package were honestly held
         and all projections in the Information Package were based on
         assumptions considered to be reasonable in each case as at the date of
         which the Information Package speaks and all such information, opinions
         and assumptions were provided in good faith.

(b)      The Information Package did not omit at its date any information which
         made misleading in any material respect any factual information in the
         Information Package.

(c)      Nothing has occurred since the date of the Information Memorandum which
         renders the information contained in it untrue, or misleading in any
         material respect and which, if disclosed, could reasonably be expected
         to adversely affect the decision of a person considering whether to
         enter into this Agreement.

(d)      In this Clause 18.13 "INFORMATION PACKAGE" means:

         (i)      the Information Memorandum; and

         (ii)     the financial model in relation to the Group and the Niagara
                  Mohawk Group prepared by NGG (and including the assumptions on
                  which such model was based).

18.14    BORROWING LIMITS

         The borrowing of Advances under this Agreement up to and including the
         maximum amount available to it under this Agreement will not, when
         borrowed, cause any limit on borrowings or, as the case may be, on the
         giving of guarantees (whether imposed by statute, regulation or
         agreement) or on the powers of its board of directors, applicable to
         it, to be exceeded.

18.15    ERISA

(a)      Each member of the Controlled Group has fulfilled its obligations under
         the minimum funding standards of ERISA and the U.S. Code with respect
         to each Plan maintained by such member or any member of the Controlled
         Group to which such minimum funding standards apply.

(b)      Each member of the Controlled Group is in compliance with the material
         applicable provisions of ERISA, the U.S. Code and any other applicable
         United States Federal or State law with respect to each Plan.

(c)      No Reportable Event has occurred with respect to any Plan maintained by
         the Obligors or any member of the Controlled Group, and no steps have
         been taken to reorganise or terminate any such Plan or by the Obligors
         or any member of the Controlled Group to effect a complete or partial
         withdrawal from any Multi-Employer Plan.

(d)      No member of the Controlled Group has:

         (i)      sought a waiver of the minimum funding standard under Section
                  412 of the U.S. Code in respect of any Plan;

         (ii)     failed to make any contribution or payment to any Plan, or
                  made any amendment to any Plan, and no other event,
                  transaction or condition has occurred which has


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                                       57
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                  resulted or could result in the imposition of a lien or the
                  posting of a bond or other security under ERISA or the U.S.
                  Code; or

         (iii)    incurred any material, actual liability under Title I or Title
                  IV of ERISA other than a liability to the PBGC for premiums
                  under Section 4007 of ERISA.

18.16    CERTAIN U.S. REGULATIONS

(a)      Each U.S. Borrower is not an investment company required to be
         registered, and not a company controlled by an investment company
         required to be registered, under the United States Investment Company
         Act of 1940, as amended.

(b)      None of the proceeds of any Advance will be used, directly or
         indirectly, and whether immediately, ultimately or incidentally, for
         any purpose which results in a violation of the provisions of
         Regulations T, U or X.

(c)      None of the Obligors nor any of their respective Subsidiaries are
         engaged principally, or as one of its important activities, in the
         business of extending credit for the purpose of buying or carrying
         "margin stock" within the meaning of such Regulation U.

(d)      None of New NG nor any of its Subsidiaries is at the date of this
         Agreement subject to regulation as a "holding company", or an
         "affiliate" of a "holding company" or a "subsidiary company" of a
         "holding company", within the meaning of PUHCA. Existing NGG is and,
         following the Niagara Mohawk Acquisition Completion Date, NGG will be a
         "holding company" and each of its Subsidiaries will be "subsidiary
         companies" within the meaning of PUHCA. Without limiting Clause 18.10
         (Authorisations), NGG and each of its Subsidiaries will be at all
         relevant times in compliance in all material respects with all
         applicable provisions of PUHCA and the rules, regulations and orders
         issued thereunder, all requisite declarations and applications to be
         made under PUHCA in respect of each Utilisation shall have been made
         and all notices, approvals and orders issued or given pursuant to PUHCA
         shall have been obtained and remain in effect, and no Utilisation will
         result in any breach or failure to comply with the applicable
         provisions of PUHCA and any applicable rules, regulations and orders
         issued thereunder.

(e)      No Finance Party will by reason of (i) the ownership or operation by
         any Obligor of any Energy and Network Business or any Transmission
         Business, (ii) any Advance, (iii) any Security Interest which may be
         given under or in respect of the Facilities or (iv) any other
         transaction or relationship contemplated by any Finance Document, be
         deemed by any governmental or quasi-governmental authority,
         instrumentality or regulatory body, to be, or to be subject to
         regulation as, an "electric utility", "electric utility company",
         "electric corporation", "electrical company", "public utility",
         "natural gas company" (transporting gas in interstate commerce), "gas
         utility", "public service company", "public utility holding company",
         "electric utility holding company", "holding company" or "subsidiary
         company" of a holding company, or other similar entity, or a subsidiary
         or affiliate of any of the foregoing, under any applicable law.

18.17    TIMES FOR MAKING REPRESENTATIONS AND WARRANTIES

         The representations and warranties set out in this Clause 18
         (Representations and Warranties):



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         (a)      in the case of an Obligor:

                  (i)      which is a Party on the date of this Agreement, are
                           made by that Obligor on that date and, in the case of
                           Clause 18.13 (Information Package), on the last day
                           of the Primary Syndication Period; and

                  (ii)     which becomes a Party after the date of this
                           Agreement, will, except in the case of Clause 18.13
                           (Information Package) be deemed to be made by that
                           Obligor on the date it executes a Borrower Accession
                           Agreement; and

         (b)      (except in the case of Clause 18.13 (Information Package)) are
                  deemed to be repeated by the relevant Borrower and the
                  Guarantor on the date of each Utilisation Request, on each
                  Utilisation Date and on the first day of each Interest Period
                  or Term, as the case may be, with reference to the facts and
                  circumstances then existing.

19.      COVENANTS

19.1     DURATION AND SCOPE

         The undertakings in this Clause 19 remain in force from the date of
         this Agreement for so long as any amount is or may be outstanding under
         this Agreement or any Commitment or Swingline Commitment is in force.

19.2     FINANCIAL INFORMATION

         NGG shall supply to the Agents in sufficient copies for all the Banks:

         (a)      as soon as the same are available (and in any event within 180
                  days of the end of each of its financial years):

                  (i)      the audited consolidated accounts of the Group for
                           that financial year; and

                  (ii)     the audited accounts of each Obligor (other than NGG)
                           for that financial year;

         (b)      as soon as the same are available (and in any event within 120
                  days of the end of the first half-year of each of its
                  financial years), the unaudited consolidated profit and loss
                  account or the interim statement of the Group for that
                  half-year;

         (c)      together with the accounts specified in paragraphs (a)(i),
                  (a)(ii) and (b) above, a certificate signed by one of its
                  directors and one of its senior officers (and if reasonably
                  requested by an Agent in the case of those accounts specified
                  in paragraph (a) above only, confirmed by NGG's Company
                  auditors) setting out in reasonable detail:

                  (i)      computations establishing compliance or
                           non-compliance (as the case may be) with Clauses
                           19.15 (Restriction on Subsidiary Financial
                           Indebtedness) and 19.18 (Group Financial covenants);
                           and

                  (ii)     at any time on request by an Agent, a list of the
                           then current Principal Subsidiaries; and



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                  (iii)    on request by an Agent, the annual published audited
                           accounts of any other member of the Group.

19.3     INFORMATION - MISCELLANEOUS

         Each Obligor shall supply to the Agents:

         (a)      promptly upon becoming aware of them, details of any
                  litigation, arbitration or administrative proceedings which
                  are current, threatened or pending (and which in the
                  reasonable opinion of the Obligor, after taking any
                  appropriate legal advice, there is a reasonable prospect of a
                  determination adverse to the interests of the relevant member
                  of the Group) which are reasonably likely to have a material
                  adverse effect on the financial condition of the Group or on
                  the ability of the Obligors (taken as a whole) to perform
                  their obligations under the Finance Documents (including,
                  without limitation, the obligations under Clause 19.18 (Group
                  Financial covenants) and the obligations of the Guarantor
                  under Clause 17 (Guarantee));

          (b)     promptly, details of all amendments to each Licence (if any)
                  held by an Obligor, NG Company or a Principal Subsidiary and
                  all material notices received by an Obligor, NG Company or a
                  Principal Subsidiary from the Authority or any other relevant
                  authority in any applicable jurisdiction in relation to its
                  Licence;

          (c)     in the case of NGG only, at the same time as they are
                  despatched, all documents despatched by NGG to its
                  shareholders generally (or any class of them) or its creditors
                  generally in their respective capacities as such;

         (d)      as soon as reasonably practicable, such further information in
                  the possession or control of any member of the Group regarding
                  its financial condition as any Finance Party through either
                  Agent may reasonably request and which such member of the
                  Group may reasonably provide having regard to its existing
                  legal obligations from time to time;

         (e)      within 10 days of the date on which they are filed with the
                  Securities and Exchange Commission, the Group's quarterly
                  return (if any) with the Securities and Exchange Commission;
                  and

         (f)      promptly, details of all declarations and applications made by
                  it and all relevant notices, approvals and orders issued to it
                  or received by it under PUHCA in relation to this Agreement or
                  any Utilisation hereunder;

         each in sufficient copies for all of the Banks, if an Agent so
         requests.

19.4     NOTIFICATION OF DEFAULT OR MANDATORY PREPAYMENT OR CANCELLATION EVENT

(a)      Each Obligor shall notify the Agents of any Default (and the steps, if
         any, being taken to remedy it) or any event specified in Clause 8.5
         (Mandatory Prepayment and Cancellation on Change of Control) promptly
         upon its becoming aware of the same; and


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(b)      each Obligor shall notify the Agents immediately it receives an
         enforcement order made in relation to it under Section 25 of the
         Electricity Act or under any similar provisions of any applicable
         Energy Laws.

19.5     COMPLIANCE CERTIFICATES

         NGG shall supply to an Agent promptly upon request by that Agent at any
         time, if that Agent reasonably believes a Default may have occurred, a
         certificate signed by two of its senior officers on its behalf
         certifying that no Default is outstanding or, if a Default is
         outstanding, specifying the Default and the steps, if any, being taken
         to remedy it.

19.6     AUTHORISATIONS

         Each Obligor shall at all relevant times promptly:

         (a)      obtain, maintain and comply with the terms of; and

         (b)      on reasonable request by an Agent, supply certified copies to
                  that Agent of,

         any authorisation, approval or order required under any law or
         regulation including, without limitation, under any law (including, for
         the avoidance of doubt, the Electricity Act, the Utilities Act and
         PUHCA) to enable it to perform its obligations under, or for the
         validity of, any Finance Document.

19.7     PARI PASSU RANKING

         Each Obligor shall procure that its obligations under the Finance
         Documents do and will rank at least pari passu with all its other
         present and future unsecured obligations (subject to the preference of
         certain obligations in the liquidation, bankruptcy or other analogous
         proceedings in respect of it by operation of applicable law).

19.8     NEGATIVE PLEDGE

(a)      No Obligor shall, and NGG shall procure that no other member of the
         Group will, create or permit to subsist any Security Interest on any of
         its assets.

(b)      Paragraph (a) above does not apply to:

         (i)      any Security Interest created with the prior written consent
                  of the Majority Banks;

         (ii)     any Security Interest granted prior to the date of this
                  Agreement and disclosed to an Agent in writing but only if the
                  maximum principal amount secured thereby is not subsequently
                  increased;

         (iii)    any Security Interest by way of title retention entered into
                  in the ordinary course of business;

         (iv)     any lien arising by operation of law in the ordinary course of
                  business;

         (v)      any banker's lien or right of set-off arising by operation of
                  law in the ordinary course of commercial banking transactions
                  or any contractual set-off arrangements in the ordinary course
                  of commercial banking transactions;


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         (vi)     any Security Interest existing over assets acquired after the
                  date of this Agreement and existing on the date of
                  acquisition, provided that:

                  (A)      the Security Interest is not created in contemplation
                           of the acquisition of the same; and

                  (B)      the maximum principal amount secured thereby or the
                           maturity of those obligations is not thereafter
                           increased;

         (vii)    any Security Interest over the assets of any company which
                  becomes a Subsidiary of NGG after the date of this Agreement
                  and which exist at the date on which it becomes a Subsidiary
                  of NGG, but only:

                  (A)      to the extent of the principal amount secured by the
                           Security Interest at the date it becomes a Subsidiary
                           of NGG; and

                  (B)      if the Security Interest is not created in
                           contemplation of it becoming a Subsidiary of NGG;

         (viii)   any Security Interest over goods and/or documents of title, or
                  insurance policies and sale contracts in relation to such
                  goods, arising in the ordinary course of trading in connection
                  with letters of credit and similar transactions where such
                  Security Interest secures only so much of the acquisition cost
                  of such goods which is required to be paid within 180 days
                  after the date upon which the same was first incurred;

         (ix)     any Security Interest created in substitution for any Security
                  Interest permitted pursuant to this Clause 19.8 provided that
                  the substituted Security Interest is over the same asset and
                  the principal amount secured does not exceed the principal
                  amount secured on such asset prior to the substitution;

         (x)      any Security Interest created or granted from time to time in
                  respect of any Project Finance Borrowing including, for the
                  avoidance of doubt, any Security Interest created or granted
                  by a member of the Group in its capacity as a shareholder of a
                  company making a Project Finance Borrowing over its
                  shareholding in that company (including, in the case of a
                  member of the Group whose only material assets are shares in
                  the company incurring the Project Finance Borrowing, a
                  supporting floating charge over all or substantially all of
                  that member's assets) as security for such Project Finance
                  Borrowing, provided that the right of recourse against such
                  shareholder is limited to the realisation of the shareholding
                  in that company;

         (xi)     any Security Interest created by a Project Finance Company;

         (xii)    any Security Interest created or granted from time to time by
                  a member of the Group in its capacity as a shareholder of a
                  Project Finance Company over its shareholding in that Project
                  Finance Company as security for the obligations of such
                  Project Finance Company;

         (xiii)   any Security Interest, whether granted prior to or after the
                  date of this Agreement, which is granted by a Subsidiary of
                  NGG incorporated in, or which has its principal


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                  place of business in, the United States to secure Financial
                  Indebtedness of up to US$4,200,000,000 in aggregate
                  outstanding at any time;

         (xiv)    any Security Interest created by a special purpose
                  securitisation vehicle over its assets where substantially all
                  of those assets were acquired by that vehicle from a member of
                  the Group as part of or to facilitate a securitisation and
                  where the disposal of those assets to the securitisation
                  vehicle constitutes a disposal of assets on arm's length
                  terms, the consideration for which is substantially all cash
                  or cash equivalent consideration, after the Signing Date, so
                  long as the aggregate outstanding principal amount of
                  Financial Indebtedness secured by all the Security Interests
                  permitted under this paragraph (xiv) by all members of the
                  Group (including NG Company) does not exceed US$1,000,000,000
                  or its equivalent in other currencies at any time; and

         (xv)     in addition to each of the Security Interests permitted under
                  paragraphs (i) through (xiv) above any other Security Interest
                  whether granted prior to or after the date of this Agreement
                  so long as the aggregate outstanding principal amount of
                  Financial Indebtedness secured by all the Security Interests
                  permitted under this paragraph (xv) by all members of the
                  Group (including NG Company) does not exceed (pound)80,000,000
                  or its equivalent in other currencies.

19.9     DISPOSALS

(a)      No Obligor shall and NGG shall procure that no other member of the
         Group will, either in a single transaction or in a series of
         transactions, whether related or not and whether voluntarily or
         involuntarily sell, transfer, grant or lease or otherwise dispose (each
         a "DISPOSAL") of all of any part of its assets.

(b)      Paragraph (a) above does not apply to:

         (i)      disposals to a wholly owned member of the Group not being a
                  Project Finance Company or from a member of the Group to an
                  Obligor;

         (ii)     disposals made in the ordinary course of trading of the
                  disposing entity; or

         (iii)    disposals of assets in exchange for other assets to the extent
                  that the assets acquired are comparable or superior as to
                  value, type and quality or earnings generation; or

         (iv)     disposals of obsolete assets; or

         (v)      the payment of cash dividends or distributions of any kind to
                  NGG shareholders in accordance with the Companies Act 1985 or
                  any other relevant law; or

         (vi)     disposals to which the Majority Banks have agreed in writing;
                  or

         (vii)    disposals by way of factoring or discounting of receivables to
                  the extent such factoring or discounting is carried out in the
                  ordinary course of business or for administrative purposes
                  and, in either case, the primary purpose is not the raising of
                  finance; or

         (viii)   disposals of assets on arm's length terms; or


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         (ix)     any other disposals not otherwise permitted under paragraphs
                  (b)(i) to (viii) above, including disposals to non-Group
                  companies for the purposes of securitisations, where the
                  aggregate Disposal Proceeds received or receivable by the
                  Group (including NG Company) for all such disposals in
                  aggregate over the life of the Facilities does not exceed
                  US$2,000,000,000 or its equivalent.

19.10    INSURANCE

(a)      Each Obligor shall ensure and shall procure that NG Company ensures
         that all its property and assets of an insurable nature are kept
         insured against loss or damage by fire and other risks normally insured
         in a sum or sums which that Obligor, or NG Company, where relevant,
         considers prudent having regard to the nature and extent of the assets
         to be insured.

(b)      Each Obligor shall promptly pay all premiums and do all other things
         and shall procure that NG Company promptly pays and does all other
         things necessary to maintain in place the insurance required to be
         taken out by it pursuant to paragraph (a) above.

19.11    COMPLIANCE WITH LAW

         Each Obligor will and will procure that each of its Subsidiaries will
         comply with, or take all reasonable practical and available steps to
         comply with, the requirements of all rules, regulations and orders for
         the time being of the Secretary of State and the Authority and any
         relevant authority in any applicable jurisdiction relating to the
         Energy and Network Business, applicable to that Obligor or its
         Subsidiaries.

19.12    LICENCE

(a)      NGG shall procure that NG Company, each Regulated UK Subsidiary and
         each Regulated U.S. Subsidiary shall comply, or shall take all
         reasonable practicable and available steps to comply (or, as the case
         may be, take all reasonable practicable and available steps to procure
         compliance) in all material respects with the terms of its Licence (if
         any) provided that, in the case of a Regulated U.S. Subsidiary, such
         Licence is material in the context of that entity's business taken as a
         whole. NGG shall procure that neither NG Company, nor any Regulated UK
         Subsidiary, nor any Regulated U.S. Subsidiary shall act outside the
         scope of its authority thereunder (if any) or consent, without the
         prior written consent of the Majority Banks, to any revocation of its
         Licence (if any).

(b)      No Obligor shall, and NGG shall procure that neither NG Company, nor
         any Regulated UK Subsidiary, nor any Regulated U.S. Subsidiary shall,
         consent to any material modification of the terms of its Licence (if
         any) if such modification would have (whether immediately or in the
         course of time) a material adverse effect on the ability of the
         Obligors (taken as a whole) to perform their obligations under this
         Agreement following such modification.

19.13    CHANGE OF BUSINESS

         Except with the prior consent of the Majority Banks, NGG shall procure
         that no substantial change is made to the general nature of the
         businesses of the Group (taken as a whole) from that carried on at the
         date of this Agreement outside the Energy and Network Businesses and
         other infrastructure network businesses of the Group from time to time.


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19.14    MAINTENANCE OF STATUS

         Each Obligor shall, except as otherwise permitted in this Agreement, in
         all material respects do all such things as are necessary to maintain
         its corporate existence.

19.15    RESTRICTION ON SUBSIDIARY FINANCIAL INDEBTEDNESS

(a)      NGG shall procure that no other member of the Group shall create,
         assume, incur, guarantee or otherwise be liable in respect of or have
         outstanding any Financial Indebtedness other than:

         (i)      any Financial Indebtedness under this Agreement;

         (ii)     any Financial Indebtedness owing by one member of the Group to
                  another member of the Group, or any guarantee, indemnity or
                  similar assurance issued by any Subsidiary in connection with
                  the Financial Indebtedness of another Subsidiary that is
                  permitted under this Clause 19.15;

         (iii)    any other Financial Indebtedness (whether or not secured under
                  sub-paragraph (b) of Clause 19.8 (Negative Pledge)) incurred
                  by any Subsidiary provided that the aggregate outstanding
                  principal amount of such Financial Indebtedness (but less Cash
                  or Cash Equivalents (as defined in Clause 19.18 (Group
                  Financial Covenants)) held by the relevant Subsidiary):

                  (A)      of all Subsidiaries (including NG Company) other than
                           Subsidiaries incorporated or whose principal place of
                           business is in the United States does not exceed
                           (pound)4,000,000,000 in aggregate; and

                  (B)      of all Subsidiaries incorporated or whose principal
                           place of business is in the United States, does not
                           exceed US$7,000,000,000 in aggregate,

                  or, in each case, its equivalent in other currencies converted
                  into Dollars or Sterling as applicable at the time of
                  calculation at the Facility Agent's Spot Rate of Exchange.

(b)      For the purposes of paragraph (iii) above, the amount of any Financial
         Indebtedness which is constituted by currency or interest swaps, cap or
         collar arrangements or any other derivative instruments shall be
         calculated by aggregating the mark-to-market values of any such
         currency or interest swaps, cap or collar arrangements or other
         derivative instruments, and the determination of such amount shall
         (within the bounds of ordinary market practice) be in the Facility
         Agent's sole discretion and shall, in the absence of manifest error, be
         conclusive and shall not be open to dispute by any party to this
         Agreement or any third party.

19.16    ENVIRONMENTAL UNDERTAKINGS

         Each Obligor will, and NGG will procure that each other member of the
         Group will, comply in all respects with:

         (a)      all applicable Environmental Laws; and

         (b)      the terms and conditions of all Environmental Approvals
                  applicable to it,


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         where failure to do so could reasonably be expected to have a material
         adverse effect on the ability of the Obligors taken together to perform
         their obligations under the Finance Documents and for this purpose will
         implement procedures to monitor compliance and contain liability under
         Environmental Laws.

19.17    REPAYMENT OF 1999 FACILITY AGREEMENT

         NGG shall ensure that:

(a)      the proceeds of any Utilisation are first applied in repayment or
         prepayment of any amounts outstanding under the 1999 Facility Agreement
         to the extent not otherwise repaid;

(b)      from the first Utilisation Date under this Agreement no further
         drawings are made under the 1999 Facility Agreement; and

(c)      all undrawn commitments thereunder are cancelled with effect from a
         date no later than the first Utilisation Date under this Agreement.

19.18    GROUP FINANCIAL COVENANTS

(a)      In this Clause:

         "CASH AND CASH EQUIVALENTS"

         means:

         (i)      cash in hand and deposits with any bank or other financial
                  institution (including cash in hand and deposits denominated
                  in freely convertible foreign currencies);

         (ii)     securities issued or guaranteed by the UK government or the
                  United States Government;

         (iii)    participations in open-ended mutual funds which invest in
                  commercial paper, banker's acceptances, repurchase agreements,
                  government securities, certificates of deposit, and other
                  highly liquid and safe securities, and pay money market rates
                  of interest, which are rated at least AA by S&P and which are
                  immediately convertible into cash;

         (iv)     (A)      debt securities rated at least A1 by Moody's or A+ by
                           S & P; and

                  (B)      commercial paper rated at least A-1 by Moody's and
                           P-1 by S & P; and

         (v)      any other instrument, security or investment approved in
                  writing by the Majority Banks,

         to the extent beneficially owned by a member of the Group free of
         restrictions (other than exchange control requirements) on withdrawal
         or transfer (in the case of cash) and (in all cases) unencumbered by
         any Security Interests other than Security Interests permitted under
         paragraph (b) of Clause 19.8 (Negative Pledge);



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         "CONSOLIDATED EBITDA"

         means in respect of any period, Consolidated Profits Before Interest
         and Tax for that period after adding back depreciation and amortisation
         of goodwill;

         "CONSOLIDATED PROFITS BEFORE INTEREST AND TAX"

         means, in respect of any period, the consolidated net pre-taxation
         profits on operating activities (after adding back Net Interest Payable
         and excluding any Exceptional Items and after adding back restructuring
         costs incurred as a result of the Acquisition) of the Group for that
         period based on the latest accounts supplied to the Agents under
         paragraphs (a) or (b) of Clause 19.2 (Financial Information), as the
         case may be;

         "CONSOLIDATED TOTAL NET DEBT"

         means the aggregate principal amount (or amounts equivalent to
         principal, howsoever described) comprised in the Financial Indebtedness
         of the Group (excluding amounts referred to in paragraph (g) and
         paragraph (i) (insofar as those amounts in paragraph (i) relate to
         amounts referred to in paragraph (g)) of the definition of Financial
         Indebtedness) at the time calculated on a consolidated basis LESS Cash
         and Cash Equivalents held by any member of the Group;

         "EXCEPTIONAL ITEMS"

         has the meaning given to it in FRS3 issued by the Accounting Standards
         Board; and

         "NET INTEREST PAYABLE"

         means, in relation to any period, all interest and all other
         continuing, regular or periodic costs, charges and expenses in the
         nature of interest (whether paid, payable or capitalised) incurred by
         the Group in effecting, servicing or maintaining all Financial
         Indebtedness of the Group EXCLUDING any premia payable which arise on
         and solely as a result of the redemption of any Bonds or the purchase
         of any Bonds with a view to cancellation where such premia are defined
         by formulae and/or market price mechanisms so that their quanta cannot
         be determined prior to the time at which they are to be calculated LESS
         all interest and other similar income receivable by members of the
         Group during that period (but only to the extent the same accrue and
         are receivable by the Group in a freely convertible and transferable
         currency) in each case as determined from the consolidated financial
         statements relating to that period delivered under Clause 19.2
         (Financial Information);

         and for the purposes of this Clause 20.19 only, the definition of
         "GROUP" shall include all Subsidiaries of NGG (whose accounts are
         ordinarily consolidated with the accounts of NGG in accordance with
         accounting principles generally accepted and applied in the United
         Kingdom which are Subsidiaries of NGG on the last day of each period of
         12 months ending on an End Date provided that if any Subsidiary has
         joined the Group during such 12 month period Consolidated Profits
         Before Interest and Tax and Net Interest Payable shall be adjusted as
         appropriate to include the Profits Before Interest and Tax and Net
         Interest Payable for such Subsidiary for the full 12 month period and
         if any other Subsidiary has left the Group during such 12 month period
         Consolidated Profits Before Interest and Tax and Net Interest Payable
         shall be adjusted to exclude the Profits Before Interest and Tax and
         Net Interest Payable for such Subsidiary) and shall exclude any
         associated companies.


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(b)      NGG shall procure that:

         (i)      the ratio of Consolidated EBITDA to Net Interest Payable is
                  not, for each period of 12 months ending on the last day of
                  each financial year and each financial half year of the Group
                  (an "END DATE") less than 3:1;

         (ii)     the ratio of the Consolidated Total Net Debt on each End Date
                  to Consolidated EBITDA for each period of 12 months ending on
                  that End Date does not exceed 5:1;

(c)      In the event of any material change in law or in generally accepted
         United Kingdom accounting principles, standards and practices as
         applied to the Original Group Accounts, NGG and the Agents shall, at
         the request of the Agents, negotiate in good faith in order to arrive
         at such amendments to this Clause as are necessary to give the Banks
         equivalent but no greater protection to that contained in this Clause
         prior to the relevant change.

(d)      If NGG and the Agents are unable to agree in writing on those
         amendments, then such amendments shall be made as a firm of chartered
         accountants acceptable to, and instructed by (after consultation with
         NGG ) the Agents shall certify as being necessary to give the Banks
         equivalent but no greater protection to that contained in this Clause
         prior to the relevant change. Any such firm of chartered accountants
         shall act in this capacity as an expert, not an arbitrator, and its
         decision shall be binding on all the Parties.

19.19    USE OF WEBSITES

(a)      Except as provided below, a Borrower may deliver any information under
         Clause 19 (Covenants) of this Agreement by any electronic means, or on
         an electronic website if, in respect of the latter:

         (i)      the Borrower and the Facility Agent designate an electronic
                  website for this purpose;

         (ii)     the Borrower notifies the Facility Agent of the address of and
                  password for the website; and

         (iii)    the information posted is in a format agreed between the
                  Borrower and the Facility Agent.

         The Facility Agent must supply each relevant Bank with the address of
         and password for the website.

(b)      Notwithstanding the above, the Borrower must supply to the Facility
         Agent in paper form a copy of any information posted on a website
         together with sufficient copies for:

         (i)      any Bank not agreeing to receive information via the website;
                  and

         (ii)     any other Bank, if that Bank so requests, within ten Business
                  Days of such request.

(c)      The Borrower must promptly upon becoming aware of its occurrence,
         notify the Facility Agent if:

         (i)      a designated website cannot be accessed;



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         (ii)     the website or any information on the website is infected by
                  any electronic virus or similar software;

         (iii)    the password for the website is changed; or

         (iv)     any information to be supplied under this Agreement is posted
                  on the website or amended after being posted.

         If the circumstances in paragraphs (i) or (ii) above occur, the
         Borrower must supply any information required under this Agreement in
         paper form.

20.      DEFAULT

20.1     EVENTS OF DEFAULT

         Each of the events set out in Clauses 20.2 (Non-payment) to 20.17
         (Material Adverse Change) (both inclusive) is an Event of Default
         (whether or not caused by any reason whatsoever outside the control of
         any Obligor or any other person).

20.2     NON-PAYMENT

         An Obligor does not pay within three Business Days of the due date any
         amount payable by it under the Finance Documents at the place at and in
         the currency in which it is expressed to be payable.

20.3     BREACH OF OTHER OBLIGATIONS

(a)      An Obligor does not comply with Clause 19.18 (Group Financial
         covenants).

(b)      An Obligor does not comply with any provision of the Finance Documents
         applicable to it (other than those referred to in paragraph (a) above
         or in Clause 20.2 (Non-payment)) and such failure (if capable of remedy
         before the expiry of such period) continues unremedied for a period of
         thirty (30) days from the date on which the relevant Agent gives notice
         to NGG requiring the same to be remedied.

20.4     MISREPRESENTATION

         A representation, warranty or statement made or repeated by any Obligor
         in or in connection with any Finance Document or in any document
         delivered by or on behalf of any Obligor under or in connection with
         any Finance Document is incorrect in any material respect when made or
         deemed to be made or repeated.

20.5     CROSS-DEFAULT

(a)      Subject to paragraph (b) below:

         (i)      any Financial Indebtedness of a member of the Group is not
                  paid when due or within any originally applicable grace
                  period;

         (ii)     an event of default howsoever described occurs under any
                  document relating to Financial Indebtedness of a member of the
                  Group;



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         (iii)    any Financial Indebtedness of a member of the Group becomes
                  prematurely due and payable or is placed on demand as a result
                  of an event of default (howsoever described);

         (iv)     any commitment for, or underwriting of, any Financial
                  Indebtedness of a member of the Group is cancelled or
                  suspended as a result of an event of default howsoever
                  described) under the document relating to that Financial
                  Indebtedness; or

         (v)      any Security Interest securing Financial Indebtedness over any
                  asset of a member of the Group becomes enforceable by reason
                  of an event of default howsoever described,

         so long as the principal amount of any single instance of such
         Financial Indebtedness equals or exceeds (pound)50,000,000 or the
         aggregate principal amount of any such Financial Indebtedness incurred
         by any member of the Group (including NG Company) is equal to or
         exceeds (pound)100,000,000 or its equivalent in other currencies.

(b)      For the purposes of this Clause 20.5 the definition of Financial
         Indebtedness shall exclude:

         (i)      Project Finance Borrowings; and

         (ii)     Until the date falling six months after the Niagara Mohawk
                  Acquisition Completion Date, Financial Indebtedness of any
                  member of the Niagara Mohawk Group outstanding as at the date
                  it became a member of the Group.

(c)      For the purposes of paragraph (a) above, the amount of any Financial
         Indebtedness which is constituted by currency or interest swaps, cap or
         collar arrangements or any other derivative instruments shall be
         calculated by aggregating the mark-to-market values of any such
         currency or interest swaps, cap or collar arrangements or other
         derivative instruments, and the determination of such amount shall
         (within the bounds of ordinary market practice) be in the Facility
         Agent's sole discretion and shall, in the absence of manifest error, be
         conclusive and shall not be open to dispute by any party to this
         Agreement or any third party.

20.6     INSOLVENCY

(a)      NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary
         (other than a Project Finance Company) is, or is deemed for the
         purposes of any law to be unable to pay its debts as they fall due or
         to be insolvent, or admits inability to pay its debts as they fall due;
         or

(b)      NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary
         (other than a Project Finance Company) suspends making payments on all
         or any class of its debts or announces an intention to do so or a
         moratorium is declared in respect of any of its indebtedness; or

(c)      NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary
         (other than a Project Finance Company) by reason of financial
         difficulties generally begins negotiations with one or more of its
         creditors with a view to the readjustment or rescheduling of any of its
         indebtedness.


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20.7     INSOLVENCY PROCEEDINGS

(a)      Any step (including petition, proposal or convening a meeting) is
         taken, by reason of financial difficulties, with a view to a
         composition, assignment or scheme of arrangement with any creditors of
         NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary;
         or

(b)      a meeting of NGG, NG Company, a Principal Subsidiary or a Regulated UK
         Subsidiary is convened for the purpose of considering any resolution
         for (or to petition for) its winding-up or its administration or any
         such resolution is passed; or

(c)      any person presents a petition for the winding-up or for the
         administration of NGG, NG Company, a Principal Subsidiary or a
         Regulated UK Subsidiary other than a petition which is frivolous and
         vexatious and which is not struck out within 14 days of its
         presentation; or

(d)      any order for the winding-up or administration of NGG, NG Company, a
         Principal Subsidiary or a Regulated UK Subsidiary is made; or

(e)      any other step (including petition, proposal or convening a meeting) is
         taken with a view to the rehabilitation, administration, custodianship,
         liquidation, winding-up or dissolution of or any other insolvency
         proceedings involving NGG, NG Company, a Principal Subsidiary or a
         Regulated UK Subsidiary.

20.8     APPOINTMENT OF RECEIVERS AND MANAGERS

(a)      Any liquidator, trustee in bankruptcy, judicial custodian, compulsory
         manager, receiver, administrative receiver, administrator or the like
         is appointed in respect of NGG, NG Company, a Principal Subsidiary or a
         Regulated UK Subsidiary or any part of its assets; or

(b)      the directors of NGG, NG Company, a Principal Subsidiary or a Regulated
         UK Subsidiary requests the appointment of a liquidator, trustee in
         bankruptcy, judicial custodian, compulsory manager, receiver,
         administrative receiver, administrator or the like; or

(c)      any other steps are taken to enforce any Security Interest over any
         part of the assets of NGG, NG Company, a Principal Subsidiary or a
         Regulated UK Subsidiary.

20.9     CREDITORS' PROCESS

         Any attachment, sequestration, distress or execution affects any asset
         of NGG, NG Company, a Principal Subsidiary or a Regulated UK Subsidiary
         and is not discharged within 21 days.

20.10    ANALOGOUS PROCEEDINGS

         There occurs, in relation to NGG, NG Company, a Principal Subsidiary or
         a Regulated UK Subsidiary, any event anywhere which, in the opinion of
         the Majority Banks, is analogous to any of those mentioned in Clauses
         20.6 (Insolvency) to 20.9 (Creditors' process) (both inclusive).



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20.11    CESSATION OF BUSINESS

         NG Company (or a Regulated UK Subsidiary) ceases to carry on its
         Transmission Business pursuant to its Transmission Licence (if any),
         unless its Transmission Licence (or the relevant part thereof) is
         granted or transferred to another member of the Group.

20.12    UNLAWFULNESS

         It is or becomes unlawful for any Obligor to perform any of its
         obligations under the Finance Documents.

20.13    GUARANTEE

         The guarantee under Clause 17 (Guarantee) is not effective or is
         alleged by an Obligor to be ineffective for any reason.

20.14    OWNERSHIP OF THE OBLIGORS

         Any Obligor (other than NGG) is not or ceases to be a Subsidiary of
         NGG, or NG Company or, after the Niagara Mohawk Acquisition Completion
         Date, Niagara Mohawk, is not or ceases to be a wholly-owned Subsidiary
         of NGG.

20.15    COMPLIANCE WITH LAWS AND REGULATIONS

         An Obligor, NG Company or a Regulated U.S. Subsidiary fails to comply
         in all material respects with all applicable provisions of any Energy
         Law applicable to it or with its Licence (if any) and such failure to
         comply is reasonably likely to have a material adverse effect on the
         ability of the Obligors (as a whole) to perform their obligations under
         the Finance Documents (including, without limitation, the obligations
         under Clause 19.18 (Group Financial covenants) and the obligations of
         the Guarantor under Clause 17 (Guarantee)).

20.16    REVOCATION AND MODIFICATION OF LICENCES

         NG Company's Licence or the Licence of a Regulated U.S. Subsidiary is:

         (a)      revoked or surrendered other than where the revocation or
                  surrender is effected in relation to a transfer to another
                  member of the Group (or any notice of revocation is issued by
                  the Secretary of State or other relevant authority under the
                  applicable Energy Laws) and, in the case of a Regulated U.S.
                  Subsidiary such revocation or surrender (or notice of
                  revocation) is reasonably likely to have a material adverse
                  effect on the ability of the Obligors (taken as a whole) to
                  perform their obligations under the Finance Documents
                  (including, without limitation, the obligations of NGG under
                  Clause 19.18 (Group Financial covenants) and the obligations
                  of the Guarantor under Clause 17 (Guarantee)); or

         (b)      modified, other than where the modification is effected in
                  relation to a transfer to another member of the Group, in any
                  manner which is reasonably likely to have a material adverse
                  effect on the ability of the Obligors (taken as a whole) to
                  perform their obligations under the Finance Documents
                  (including, without limitation, the obligations of NGG under
                  Clause 19.18 (Group Financial covenants) and the obligations
                  of the Guarantor under Clause 17 (Guarantee)).



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20.17    MATERIAL ADVERSE CHANGE

         Any event occurs in relation to the Group (taken as a whole) which is
         likely to have a material adverse effect on the ability of the Obligors
         (taken as a whole), to comply with their obligations under the Finance
         Documents.

20.18    ACCELERATION

         On and at any time after the occurrence of an Event of Default an Agent
         may, and will if so directed by the Majority Banks, by notice to NGG:

         (i)      cancel the Total Commitments and Total Swingline Commitments;
                  and/or

         (ii)     demand that all the Advances, together with accrued interest,
                  and all other amounts accrued under this Agreement be
                  immediately due and payable, whereupon they will become
                  immediately due and payable; and/or

         (iii)    demand that all the Advances be payable on demand, whereupon
                  they will immediately become payable on demand.

21.      THE AGENTS AND THE ARRANGERS

21.1     APPOINTMENT AND DUTIES OF THE AGENTS

(a)      Subject to paragraph (f) of Clause 21.15 (Resignation of an Agent),
         each Finance Party (other than the Facility Agent) irrevocably appoints
         the Facility Agent to act as its agent under and in connection with the
         Finance Documents; and

(b)      each Swingline Bank irrevocably appoints the Swingline Agent to act as
         its agent under and in relation to the Swingline Advance Facility,

         and in each case authorises that Agent on its behalf to:

         (i)      perform the duties and to exercise the rights, powers and
                  discretions that are specifically delegated to it under or in
                  connection with the Finance Documents, together with all other
                  incidental rights, powers and discretions; and

         (ii)     execute as agent for that Finance Party each Finance Document
                  to which that Agent is a party.

(c)      An Agent shall have only those duties which are expressly specified in
         this Agreement. Those duties are solely of a mechanical and
         administrative nature.

21.2     ROLE OF THE ARRANGER

         Except as otherwise specifically provided in this Agreement, no
         Arranger has any obligations of any kind to any other Party under or in
         connection with any Finance Document.

21.3     RELATIONSHIP

         The relationship between an Agent and the other Finance Parties is that
         of agent and principal only. Nothing in this Agreement constitutes an
         Agent as trustee or fiduciary for any


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         other Party or any other person and an Agent need not hold in trust any
         moneys paid to it for a Party or be liable to account for interest on
         those moneys.

21.4     MAJORITY BANKS' DIRECTIONS

         An Agent will be fully protected if it acts in accordance with the
         instructions of the Majority Banks in connection with the exercise of
         any right, power or discretion or any matter not expressly provided for
         in the Finance Documents. Any such instructions given by the Majority
         Banks will be binding on all the Banks. In the absence of such
         instructions an Agent may act as it considers to be in the best
         interests of all the Banks.

21.5     DELEGATION

         An Agent may act under the Finance Documents through its personnel and
         agents.

21.6     RESPONSIBILITY FOR DOCUMENTATION

         Neither an Agent nor any Arranger is responsible to any other Party
         for:

         (a)      the execution, genuineness, validity, enforceability or
                  sufficiency of any Finance Document or any other document;

         (b)      the collectability of amounts payable under any Finance
                  Document; or

         (c)      the accuracy of any statements (whether written or oral) made
                  in or in connection with any Finance Document.

21.7     DEFAULT

(a)      An Agent is not obliged to monitor or enquire as to whether or not a
         Default has occurred and an Agent will not be deemed to have knowledge
         of the occurrence of a Default. However, if an Agent receives notice
         from a Party referring to this Agreement, describing the alleged
         Default and stating that it believes the event is a Default, that Agent
         shall promptly notify the Banks.

(b)      An Agent may require the receipt of security satisfactory to it,
         whether by way of payment in advance or otherwise, against any
         liability or loss which it will or may incur in taking any proceedings
         or action arising out of or in connection with any Finance Document
         before it commences those proceedings or takes that action.

21.8     EXONERATION

(a)      Without limiting paragraph (b) below, an Agent will not be liable to
         any other Party for any action taken or not taken by it under or in
         connection with any Finance Document, unless directly caused by that
         Agent's gross negligence or wilful misconduct.

(b)      No Party may take any proceedings against any officer, employee or
         agent of an Agent in respect of any claim it might have against that
         Agent or in respect of any act or omission of any kind (including
         negligence or wilful misconduct) by that officer, employee or agent in
         relation to any Finance Document.



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21.9     RELIANCE

         An Agent may:

         (a)      rely on any notice or document believed by it to be genuine
                  and correct and to have been signed by, or with the authority
                  of, the proper person;

         (b)      rely on any statement made by a director or employee of any
                  person regarding any matters which may reasonably be assumed
                  to be within his knowledge or within his power to verify; and

         (c)      engage, pay for and rely on legal or other professional
                  advisers selected by it (including those in that Agent's
                  employment and those representing a Party other than that
                  Agent.

21.10    CREDIT APPROVAL AND APPRAISAL

         Without affecting the responsibility of any Obligor for information
         supplied by it or on its behalf in connection with any Finance
         Document, each Bank confirms that it:

         (a)      has made its own independent investigation and assessment of
                  the financial condition and affairs of each Obligor and its
                  related entities in connection with its participation in this
                  Agreement and has not relied exclusively on any information
                  provided to it by an Agent or an Arranger in connection with
                  any Finance Document; and

         (b)      will continue to make its own independent appraisal of the
                  creditworthiness of each Obligor and its related entities
                  while any amount is or may be outstanding under the Finance
                  Documents or any Commitment or Swingline Commitment is in
                  force.

21.11    INFORMATION

(a)      Each Agent shall promptly forward to the person concerned the original
         or a copy of any document which is delivered to that Agent by a Party
         for that person.

(b)      Each Agent shall promptly supply a Bank with a copy of each document
         received by that Agent under Clauses 4 (Conditions Precedent), 28.4
         (Additional Borrowers) upon the request of that Bank.

(c)      Except where this Agreement specifically provides otherwise, an Agent
         is not obliged to review or check the accuracy or completeness of any
         document it forwards to another Party.

(d)      Except as provided above, an Agent has no duty:

         (i)      either initially or on a continuing basis to provide any Bank
                  with any credit or other information concerning the financial
                  condition or affairs of any Obligor or any related entity of
                  any Obligor, whether coming into its possession or that of any
                  of its related entities before, on or after the date of this
                  Agreement; or

         (ii)     unless specifically requested to do so by a Bank in accordance
                  with this Agreement, to request any certificates or other
                  documents from any Obligor.



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21.12    THE AGENT AND THE ARRANGERS INDIVIDUALLY

(a)      If it is a Bank, each of the Agents and any Arranger has the same
         rights and powers under this Agreement as any other Bank and may
         exercise those rights and powers as though it were not an Agent or an
         Arranger.

(b)      Each of the Agents, and any Arranger may:

         (i)      carry on any business with an Obligor or its related entities;

         (ii)     act as agent or trustee for, or in relation to any financing
                  involving, an Obligor or its related entities; and

         (iii)    retain any profits or remuneration in connection with its
                  activities under this Agreement or in relation to any of the
                  foregoing.

(c)      Each Obligor irrevocably authorises each of the Agents to disclose to
         the other Finance Parties any information which, in the reasonable
         opinion of that Agent, is received by it in its capacity as Agent.

21.13    INDEMNITIES

(a)      Without limiting the liability of any Obligor under the Finance
         Documents, each Revolving Facility Bank or (in the case of the
         Swingline Agent) each Swingline Bank shall forthwith on demand
         indemnify each Agent for its proportion of any liability or loss
         incurred by that Agent in any way relating to or arising out of it
         acting as an agent, except to the extent that the liability or loss
         arises directly from that Agent's gross negligence or wilful
         misconduct.

(b)      A Revolving Facility Bank's proportion of the liability or loss set out
         in paragraph (a) above is the proportion which the Original Dollar
         Amount of its Advances bears to the Original Dollar Amount, as the case
         may be, of all Advances (other than Swingline Advances) outstanding on
         the date of the demand. If, however, no such Advances are outstanding
         on the date of demand, then the proportion will be that which each
         Revolving Facility Bank's Commitment bears to the Total Commitments at
         the date of demand or, if the Total Commitments have been cancelled,
         bore to the Total Commitments immediately before being cancelled.

(c)      A Swingline Bank's proportion of the liability or loss set out in
         paragraph (a) above is the proportion which the Original Dollar Amount
         of its Swingline Advances bears to the Original Dollar Amount, as the
         case may be, of all Swingline Advances outstanding on the date of the
         demand. If, however, no Swingline Advances are outstanding on the date
         of demand, then the proportion will be that which each Swingline Bank's
         Commitment bears to the Total Swingline Commitments at the date of
         demand or, if the Total Swingline Commitments have been cancelled, bore
         to the Total Swingline Commitments immediately before being cancelled.

(d)      NGG shall forthwith on demand reimburse each Bank for any payment made
         by it under paragraphs (b) and (c) above.



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21.14    COMPLIANCE

(a)      An Agent may refrain from doing anything which might, in its opinion,
         constitute a breach of any law or regulation or be otherwise actionable
         at the suit of any person, and may do anything which, in its opinion,
         is necessary or desirable to comply with any law or regulation of any
         jurisdiction.

(b)      Without limiting paragraph (a) above, an Agent need not disclose any
         information relating to any Obligor or any of its related entities if
         the disclosure might, in the opinion of that Agent constitute a breach
         of any law or regulation or any duty of secrecy or confidentiality or
         be otherwise actionable at the suit of any person.

21.15    RESIGNATION OF AN AGENT

(a)      Notwithstanding its irrevocable appointment, an Agent may resign by
         giving notice to the Banks and NGG, in which case that Agent may
         forthwith appoint one of its Affiliates as successor Agent or, failing
         that, the Majority Banks may appoint a successor Agent.

(b)      If the appointment of a successor Agent is to be made by the Majority
         Banks but they have not, within 30 days after notice of resignation,
         appointed a successor Agent which accepts the appointment, a retiring
         Agent may, after prior consultation with NGG, appoint a successor
         Agent.

(c)      The resignation of a retiring Agent and the appointment of any
         successor Agent will both become effective only upon the successor
         Agent notifying all the Parties that it accepts the appointment. On
         giving the notification, the successor Agent will succeed to the
         position of the retiring Agent and the term "FACILITY AGENT" or
         "SWINGLINE AGENT" will mean the successor Agent, where appropriate.

(d)      The retiring Agent shall, at its own cost, make available to the
         successor Agent such documents and records and provide such assistance
         as the successor Agent may reasonably request for the purposes of
         performing its functions as the relevant Agent under this Agreement.

(e)      Upon its resignation becoming effective, this Clause 21 shall continue
         to benefit the retiring Agent in respect of any action taken or not
         taken by it under or in connection with the Finance Documents while it
         was an Agent and, subject to paragraph (d) above, it shall have no
         further obligation under any Finance Document.

(f)      An Agent shall, forthwith upon being requested to do so by the Majority
         Banks, resign in accordance with paragraph (a) above. However, in this
         event, an Agent may not appoint one of its Affiliates as successor
         Agent as contemplated by paragraph (a) above and the Majority Banks
         shall appoint a successor Agent.

21.16    BANKS

(a)      An Agent may treat each Bank as a Bank and entitled to payments under
         this Agreement and as acting through its Facility Office(s) until it
         has received notice from the Bank to the contrary not less than five
         Business Days prior to any relevant payment.



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(b)      An Agent may at any time, and shall if requested to do so by the
         Majority Banks, convene a meeting of the Banks.

21.17    CHINESE WALL

         In acting as an Agent or as an Arranger, the agency and syndications
         division of each of an Agent and the Arrangers shall be treated as a
         separate entity from its other divisions and departments. Any
         information acquired at any time by an Agent, or any Arranger otherwise
         than in the capacity of Agent or Arranger through its agency and
         syndications division (whether as financial advisor to any member of
         the Group or otherwise) may be treated as confidential by that Agent or
         Arranger and shall not be deemed to be information possessed by that
         Agent or Arranger in their capacity as such. Each Finance Party
         acknowledges that an Agent and the Arrangers may, now or in the future,
         be in possession of, or provided with, information relating to the
         Group which has not or will not be provided to the other Finance
         Parties. Each Finance Party agrees that, except as expressly provided
         in this Agreement, neither any Agent nor any Arranger will be under any
         obligation to provide, or under any liability for failure to provide,
         any such information.

22.      FEES

22.1     FRONT-END FEES

         NGG shall pay to the Agents on behalf of the Arrangers fees with
         respect to each Facility on their final allocation in accordance with
         the Fee Letter between the Arrangers and NGG.

22.2     COMMITMENT FEE

(a)      NGG shall pay to the Facility Agent for each Bank commitment fees in
         the following amounts:

         (i)      with respect to Facility A:

                  (A)      during the period prior to the Niagara Mohawk
                           Acquisition Completion Date 0.125 per cent. per
                           annum; and

                  (B)      thereafter, the amount per annum that is the lesser
                           of 0.15 per cent. per annum and 40 per cent. of the
                           lowest Applicable Margin then in effect for Facility
                           A Advances as calculated in accordance with Clause
                           9.6 (Applicable Margin);

         (ii)     with respect to Facility B:

                  (A)      during the period prior to the Niagara Mohawk
                           Acquisition Completion Date 0.20 per cent. per annum;

                  (B)      thereafter, 0.20 per cent. per annum when the
                           uncancelled amount of the Facilities is more than
                           US$1,500,000,000, otherwise 45 per cent. of the
                           Applicable Margin as calculated in accordance with
                           Clause 9.6 (Applicable Margin);

(b)      Accrued commitment fees are payable quarterly in arrears on the daily
         undrawn, uncancelled amount of the relevant Facility A Commitment and
         Facility B Commitment on each day from


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         the Signing Date until the Final Maturity Date of the relevant Facility
         A Availability Period and Facility B Availability Period (inclusive)
         with the first payment due three months after the Signing Date. Accrued
         commitment fee is also payable to the Facility Agent for the relevant
         Bank(s) on the cancelled amount of its Facility A Commitment or
         Facility B Commitment as the case may be at the time the cancellation
         takes effect. Accrued commitment fees are payable in Dollars.

22.3     TERM-OUT FEE AND FACILITY A AVAILABILITY EXTENSION FEE

         On the day on which a Term-out Advance is made pursuant to paragraph
         (b) of Clause 7.1 (Repayment of Facility A Advances) and on the first
         day of any extended Facility A Availability Period under Clause 5.10
         (Extension of Facility A Availability Period) (as applicable), NGG
         shall pay the Facility Agent for distribution pro rata to the Revolving
         Facility Banks which participate in the relevant Term-out Advance or
         which consent to the extension of the Facility A Availability Period
         (as applicable) a fee or fees calculated as follows:

         (a)      (i)      in the case of Term-out Advances with a term equal to
                           or less than one year, a fee of 0.05 per cent. flat
                           on the aggregate Original Dollar Amount of all
                           Term-out Advances made on that date; or

                  (ii)     in the case of Term-out Advances with a term greater
                           than one year, a fee of 0.10 per cent. flat on the
                           aggregate Original Dollar Amount of all Term-out
                           Advances made on that date; and

         (b)      in the case of an extension of the Facility A Availability
                  Period, a fee of 0.05 per cent. flat on the aggregate Original
                  Dollar Amount of the Facility A Commitments of those Banks
                  which have agreed to extend the Facility A Availability
                  Period.

22.4     AGENCY FEE

         NGG shall pay to the Facility Agent for its own and for the Swingline
         Agent's account agency fees in the amounts agreed in the Agency Fee
         Letter between Existing NGG, New NG, NGGF and the Facility Agent.

22.5     VAT

         Any fee referred to in this Clause 22 is exclusive of any value added
         tax or any other tax which might be chargeable in connection with that
         fee. If any value added tax or other tax is so chargeable, it shall be
         paid by NGG at the same time as it pays the relevant fee.

23.      EXPENSES

23.1     INITIAL AND SPECIAL COSTS

         NGG shall forthwith on demand pay the Facility Agent and the Arrangers
         the amount of all reasonable costs and expenses (including legal fees)
         incurred by any of them in connection with:

         (a)      the arranging, underwriting and primary syndication of the
                  Facilities;

         (b)      the negotiation, preparation, printing and execution of:



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                  (i)      this Agreement and any other documents referred to in
                           this Agreement;

                  (ii)     any other Finance Document (other than a Transfer
                           Certificate) executed after the date of this
                           Agreement; and

         (c)      any amendment, waiver, consent or suspension of rights (or any
                  proposal for any of the foregoing) requested by or on behalf
                  of an Obligor and relating to a Finance Document or a document
                  referred to in any Finance Document.

23.2     ENFORCEMENT COSTS

         NGG shall forthwith on demand pay to each Agent the amount of all
         reasonable costs and expenses (including legal fees) incurred by it in
         connection with the enforcement of, or the preservation of any rights
         under, any Finance Document.

24.      STAMP DUTIES

         NGG shall pay and forthwith on demand indemnify each Finance Party
         against any liability it incurs in respect of any stamp, registration
         and similar tax which is or becomes payable in connection with the
         entry into, performance or enforcement of any Finance Document.

25.      INDEMNITIES

25.1     CURRENCY INDEMNITY

(a)      If a Finance Party receives an amount in respect of an Obligor's
         liability under the Finance Documents or if that liability is converted
         into a claim, proof, judgement or order in a currency other than the
         currency (the "CONTRACTUAL CURRENCY") in which the amount is expressed
         to be payable under the relevant Finance Document:

         (i)      that Obligor shall indemnify that Finance Party as an
                  independent obligation against any loss or liability arising
                  out of or as a result of the conversion;

         (ii)     if the amount received by the Finance Party, when converted
                  into the contractual currency at a market rate in the usual
                  course of its business, is less than the amount owed in the
                  contractual currency, the Obligor concerned shall forthwith on
                  demand pay to that Finance Party an amount in the contractual
                  currency equal to the deficit; and

         (iii)    the Obligor shall pay to the Finance Party concerned on demand
                  any exchange costs and taxes payable in connection with any
                  such conversion.

(b)      Each Obligor waives any right it may have in any jurisdiction to pay
         any amount under the Finance Documents in a currency other than that in
         which it is expressed to be payable.

25.2     OTHER INDEMNITIES

         The Obligors shall forthwith on demand indemnify each Finance Party
         against any loss or liability which that Finance Party incurs as a
         consequence of:

         (a)      the occurrence of any Default;


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         (b)      the operation of Clause 20.18 (Acceleration) or Clause 31
                  (Redistributions);

         (c)      any payment of principal or an overdue amount being received
                  from any source otherwise than on its Maturity Date or the
                  last day of its Interest Period and, for the purposes of this
                  paragraph (c), the Maturity Date of an overdue amount is the
                  last day of each Default Term (as defined in Clause 9.4
                  (Default interest)); or

         (d)      (other than by reason of negligence or default by a Finance
                  Party) a Utilisation not being effected after a Borrower has
                  delivered a Utilisation Request for that Utilisation.

         The Obligors' liability in each case includes any loss of margin or
         other loss or expense on account of funds borrowed, contracted for or
         utilised to fund any amount payable under any Finance Document, any
         amount repaid or prepaid or any Advance.

25.3     ACQUISITION INDEMNITY

         NGG will indemnify each Finance Party and each of their respective
         Affiliates and directors, officers, agents and employees (each, an
         "INDEMNIFIED PERSON") against all losses, claims, damages, liabilities,
         charges and related expenses which such Indemnified Person may incur or
         may be or may become subject to as a result of or in any way related to
         the making available of credit facilities under this Agreement or
         making Advances hereunder in connection with the implementation of the
         Acquisition or the making of the related offer for the stock of Niagara
         Mohawk (whether or not such acquisition is completed) except to the
         extent that the same results from the Indemnified Person's negligence
         or wilful default.

         If for any reason the foregoing indemnification provisions are
         unavailable to or insufficient to hold harmless an Indemnified Person
         in respect of any such losses, claims, damages, liabilities, charges or
         related expenses (or actions in respect thereof), then NGG shall
         contribute to the amount paid or payable by such Indemnified Person as
         a result of such losses, claims, damages, liabilities, charges or
         related expenses (or actions in respect thereof) in such proportion as
         is appropriate to reflect the relative fault of NGG and its Affiliates,
         on the one hand, and the Indemnified Person, on the other hand, in
         connection with the implementation of the Acquisition or the making of
         the related offer for the stock of Niagara Mohawk, as well as any other
         relevant equitable considerations. The amount paid or payable by an
         Indemnified Person as a result of the losses, claims, damages,
         liabilities, charges or related expenses (or actions in respect
         thereof) referred to above shall be deemed to include any legal or
         other fees or expenses incurred by such Indemnified Person in
         connection with investigating or defending any such action or claim.
         Notwithstanding the provisions of this paragraph, no Indemnified Person
         shall be required to contribute any amount in excess of the fees, if
         any, received by such Indemnified Person under or pursuant to this
         Agreement.

25.4     INDEMNITY TO THE AGENT

         NGG shall promptly indemnify any Agent against any cost, loss or
         liability incurred by that Agent (acting reasonably) as a result of:

         (a)      entering into or performing any foreign exchange contract for
                  the purposes of Clause 10 (Optional Currencies); or



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         (b)      acting or relying on any notice, request or instruction from
                  any of the Obligors which it reasonably believes to be
                  genuine, correct and appropriately authorised.

26.      CALCULATIONS AND EVIDENCE OF DEBT

26.1     ACCOUNTS

         Accounts maintained by a Finance Party in connection with this
         Agreement are prima facie evidence of the matters to which they relate.

26.2     CERTIFICATES AND DETERMINATION

(a)      Any certification or determination by a Finance Party of a rate or
         amount under this Agreement shall be supported (other than in relation
         to any calculation of interest) by reasonable evidence of how the
         calculation has been made and, if so supported, shall be, in the
         absence of manifest error, conclusive evidence of the matters to which
         it relates.

(b)      Any determination by an Agent of a rate of interest shall be, in the
         absence of manifest error, conclusive.

(c)      Nothing in this Clause obliges any Finance Party to disclose any
         confidential information.

26.3     CALCULATIONS

         (a)      Interest payable on an amount denominated in Sterling or
                  payable in respect of the Swingline Advance Facility and any
                  applicable Mandatory Cost) accrue from day to day and are
                  calculated on the basis of the actual number of days elapsed
                  and a year of 365 days; and

         (b)      interest payable on an amount denominated in Dollars or an
                  Optional Currency (other than a Swingline Advance or where
                  market practice otherwise dictates) and the fees payable under
                  Clause 22 (Fees) accrue from day to day and are calculated on
                  the basis of the actual number of days elapsed and a year of
                  360 days,

         (or, in either case, as otherwise agreed between the Facility Agent and
         NGG in accordance with usual market practice).

27.      AMENDMENTS AND WAIVERS

27.1     PROCEDURE

(a)      Subject to Clause 27.2 (Exceptions), any term of the Finance Documents
         may be amended or waived with the agreement of NGG and the Majority
         Banks and (in so far as its position as an Agent is affected) an Agent.
         The Facility Agent may effect, on behalf of the Majority Banks, an
         amendment to which they have agreed.

(b)      The Facility Agent shall promptly notify the other Parties of any
         amendment or waiver effected under paragraph (a) above, and any such
         amendment or waiver shall be binding on all the Parties.


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27.2     EXCEPTIONS

(a)      An amendment or waiver which relates to:

         (i)      the definition of "Majority Banks" in Clause 1.1
                  (Definitions);

         (ii)     an extension of the date for, or a decrease in an amount
                  (including any fees payable or the Applicable Margin) or a
                  change in the currency of, any payment under the Finance
                  Documents;

         (iii)    an increase in a Bank's Commitment or Swingline Commitment,
                  where relevant;

         (iv)     a term of a Finance Document which expressly requires the
                  consent of each Bank;

         (v)      the incorporation of Additional Borrowers otherwise than in
                  accordance with Clause 28.4 (Additional Borrowers); or

         (vi)     Clause 17 (Guarantee), Clause 31 (Redistributions) or this
                  Clause 27,

         may not be effected without the consent of each Bank.

(b)      An amendment or waiver which relates to an Agent may not be effected
         without the consent of that Agent, not to be unreasonably withheld or
         delayed.

27.3     WAIVER AND REMEDIES CUMULATIVE

         The rights of each Finance Party under the Finance Documents:

         (a)      may be exercised as often as necessary;

         (b)      are cumulative and not exclusive of its rights under the
                  general law; and

         (c)      may be waived only in writing and specifically.

         Delay in exercising or non-exercise of any such right is not a waiver
         of that right.

28.      CHANGES TO THE PARTIES

28.1     TRANSFERS BY OBLIGORS

         No Obligor may assign, transfer, novate or dispose of any of, or any
         interest in, its rights and/or obligations under the Finance Documents.

28.2     NEW BANKS

(a)      A Bank (the "EXISTING BANK") may, at any time, assign, transfer or
         novate any of its rights and/or obligations under this Agreement to
         another person (the "NEW BANK") without the prior consent of or notice
         to any Obligor except that:

         (i)      prior to completion of the Primary Syndication Period, the
                  Existing Bank may only assign, transfer or novate (or seek to
                  assign, transfer or novate) its rights and/or


<PAGE>


                                       83
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                  obligations in accordance with the syndication strategy agreed
                  between the Arrangers and NGG;

         (ii)     the prior written consent of NGG (such consent not to be
                  unreasonably withheld or delayed) is required for any such
                  assignment, transfer or novation after completion of the
                  Primary Syndication Period and prior to the Niagara Mohawk
                  Acquisition Completion Date and such consent will be deemed to
                  have been given if, within fourteen days of receipt by NGG of
                  an application for consent, it has not been expressly refused;

         (iii)    after completion of the Primary Syndication Period (but
                  subject to (ii), above) without restriction, save that in the
                  case of a partial assignment, transfer or novation of its
                  rights and/or obligations under any Facility a minimum amount
                  of US$10,000,000 (or its equivalent) in aggregate and a
                  minimum of US$1,000,000 (or its equivalent) per Facility
                  (unless to an Affiliate of a Bank or to another Bank or the
                  relevant Agent agrees otherwise) must be assigned, transferred
                  or novated; and

         (iv)     no assignment, novation or transfer of all or any part of a
                  Swingline Commitment or Facility B Commitment shall be made by
                  that Existing Bank unless simultaneously therewith a pro rata
                  amount of the Facility B Commitment or Swingline Commitment of
                  that Existing Bank (or its Affiliated Bank) and a pro rata
                  amount of each of that Existing Bank's (or its Affiliated
                  Bank's) outstanding Swingline Advances or, as the case may be,
                  Facility B Advances (which are not Swingline Advances) are
                  also assigned, novated or transferred (where relevant) to the
                  New Bank (or its Affiliated Bank), provided that no such pro
                  rata assignment, novation or transfer of a Facility B
                  Commitment or outstanding Facility B Advances (which are not
                  Swingline Advances) shall be required to be made by a
                  Revolving Facility Bank which is also a Swingline Bank if it
                  assigns, novates or transfers a Swingline Commitment to its
                  Affiliated Bank.

(b)      A transfer of obligations will be effective only if either:

         (i)      the obligations are transferred by way of novation in
                  accordance with Clause 28.3 (Procedure for transfers); or

         (ii)     the New Bank confirms to the relevant Agent and NGG that it
                  undertakes to be bound by the terms of this Agreement as a
                  Bank in form and substance satisfactory to that Agent. On the
                  transfer becoming effective in this manner the Existing Bank
                  shall be relieved of its obligations under this Agreement to
                  the extent that they are transferred to the New Bank.

(c)      Nothing in this Agreement restricts the ability of a Bank to
         sub-contract an obligation if that Bank remains liable under this
         Agreement for that obligation.

(d)      On each occasion that an Existing Bank assigns, transfers or novates
         any of its rights and/or obligations under this Agreement after
         completion of the Primary Syndication Period (other than to an
         Affiliate), the New Bank shall, on the date the assignment, transfer
         and/or novation takes effect, pay to the relevant Agent for its own
         account a fee of US$1,500.

(e)      An Existing Bank is not responsible to a New Bank for:



<PAGE>

                                       84
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         (i)      the execution, genuineness, validity, enforceability or
                  sufficiency of any Finance Document or any other document;

         (ii)     the collectability of amounts payable under any Finance
                  Document; or

         (iii)    the accuracy of any statements (whether written or oral) made
                  in or in connection with any Finance Document.

(f)      Each New Bank confirms to the Existing Bank and the other Finance
         Parties that it:

         (i)      has made its own independent investigation and assessment of
                  the financial condition and affairs of each Obligor and its
                  related entities in connection with its participation in this
                  Agreement and has not relied exclusively on any information
                  provided to it by the Existing Bank in connection with any
                  Finance Document; and

         (ii)     will continue to make its own independent appraisal of the
                  creditworthiness of each Obligor and its related entities
                  while any amount is or may be outstanding under this Agreement
                  or any Commitment or Swingline Commitment, where relevant, is
                  in force.

(i)      Nothing in any Finance Document obliges an Existing Bank to:

         (i)      accept a re-transfer from a New Bank of any of the rights
                  and/or obligations assigned or transferred or novated under
                  this Clause; or

         (ii)     support any losses incurred by the New Bank by reason of the
                  non-performance by any Obligor of its obligations under this
                  Agreement or otherwise.

(j)      Any reference in this Agreement to a Bank includes a New Bank but
         excludes a Bank if no amount is or may be owed to or by that Bank under
         this Agreement and its Commitment has been cancelled or reduced to nil.

28.3     PROCEDURE FOR TRANSFERS

(a)      A transfer by way of novation is effected if:

         (i)      the Existing Bank and the New Bank deliver to the relevant
                  Agent a duly completed certificate substantially in the form
                  set out in Schedule 5 (a "TRANSFER CERTIFICATE") with such
                  changes as that Agent approves to achieve a substantially
                  similar effect (which may be delivered by fax and confirmed by
                  delivery of a hard copy original but the fax will be effective
                  irrespective of whether confirmation is received; and

         (ii)     the Facility Agent executes it.

(b)      Each Party (other than the Existing Bank and the New Bank) irrevocably
         authorises the relevant Agent to execute any duly completed Transfer
         Certificate on its behalf and that Agent agrees promptly to provide a
         copy of the Transfer Certificate to NGG after it has executed it.


<PAGE>

                                       85
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(c)      To the extent that they are expressed to be the subject of the transfer
         in the Transfer Certificate) on the date of execution of the Transfer
         Certificate by the Facility Agent (or the date specified in the
         Transfer Certificate if later):

         (i)      the Existing Bank and the other Parties (the "EXISTING
                  PARTIES") will be released from their obligations to each
                  other (the "DISCHARGED OBLIGATIONS");

         (ii)     the New Bank and the existing Parties will assume obligations
                  towards each other which differ from the discharged
                  obligations only in so far as they are owed to or assumed by
                  the New Bank instead of the Existing Bank;

         (iii)    the rights of the Existing Bank against the existing Parties
                  and vice versa (the "DISCHARGED RIGHTS") will be cancelled;
                  and

         (iv)     the New Bank and the existing Parties will acquire rights
                  against each other which differ from the discharged rights
                  only in so far as they are exercisable by or against the New
                  Bank instead of the Existing Bank,

         all on the date of execution of the Transfer Certificate by the
         relevant Agent or, if later, the date specified in the Transfer
         Certificate.

(d)      If the effective date of a novation is after the date a Utilisation
         Request is received by an Agent but before the date a requested Advance
         is disbursed to for the relevant Borrower, the Existing Bank shall be
         obliged to participate in that Advance in respect of its discharged
         obligations notwithstanding that novation and the New Bank shall
         reimburse the Existing Bank for its participation in that Advance and
         all interest and fees thereon up to the date of reimbursement (in each
         case to the extent attributable to the discharged obligations) within
         three Business Days of the Utilisation Date of that Advance.

28.4     ADDITIONAL BORROWERS

(a)      If New NG wishes one of its wholly-owned Subsidiaries to become an
         Additional Borrower, then it may (after prior consultation with the
         Agents and, if it is incorporated outside of the United Kingdom, with
         the prior consent of all the Banks not to be unreasonably withheld or
         delayed) deliver to the Agents, the documents listed in Part III of
         Schedule 2 (Conditions Precedent Documents).

(b)      On delivery of a Borrower Accession Agreement, executed by the relevant
         Subsidiary and New NG, the Subsidiary will, subject to the restrictions
         set out in Clause 5.1 (Receipt of Utilisation Requests), become an
         Additional Borrower (provided that, where that Subsidiary is not
         incorporated in the United Kingdom, the prior written consent of all
         Banks shall be required not to be unreasonably withheld or delayed).
         However, it may not utilise any of the Facilities until the Agents
         confirm to the other Finance Parties and New NG that it has received
         all the documents referred to in paragraph (a) above in form and
         substance satisfactory to it.

(c)      Delivery of a Borrower Accession Agreement, executed by the Subsidiary
         and New NG, constitutes confirmation by that Subsidiary and New NG that
         the representations and warranties set out in Clause 18
         (Representations and Warranties) and to be made by them on the date of
         the Borrower Accession Agreement are correct, as if made with reference
         to the facts and circumstances then existing.



<PAGE>


                                       86
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28.5     REFERENCE BANKS

         If a Reference Bank (or, if a Reference Bank is not a Bank, the Bank of
         which it is an Affiliate) ceases to be one of the Banks, the Facility
         Agent shall (in consultation with NGG) appoint another Bank to replace
         the Reference Bank.

28.6     ADDITIONAL PAYMENTS

         If following:

         (a)      any assignment, transfer or novation of all or any part of the
                  rights or obligations of a Bank to a New Bank under Clause
                  28.2 (New Banks); or

         (b)      any change in a Bank's Facility Office,

         any additional amount is required to be paid to the New Bank or that
         Bank (as the case may be) by any Obligor under Clause 12 (Taxes) or
         Clause 14 (Increased Costs) of this Agreement as a result of laws,
         regulations or requirements of any central bank or other fiscal
         monetary or competent authority (whether or not having the force of
         law) or other circumstances in each case in force at the time of that
         assignment, transfer, novation or change, then the New Bank or Bank
         (acting through its new Facility Office) will be entitled to receive
         any such amount only to the extent that the Existing Bank or Bank
         (acting through its old Facility Office) would have been so entitled
         had there been no assignment, transfer, novation or change in Facility
         Office (as the case may be).

28.7     REGISTER

         Each Agent shall keep a register of all the Parties and shall supply
         any other Party (at that Party's expense) with a copy of the register
         on request.

28.8     RELEASE OF BORROWERS

         Any Borrower (other than Existing NGG, New NG and NGGF) may cease to be
         a Borrower if at any time, whilst there are no sums which are or may be
         outstanding from that Borrower under the Finance Documents and there is
         no outstanding Utilisation Request in relation to that Borrower, it
         delivers a notice to that effect to the Agents. Upon delivery of any
         such notice the relevant Borrower shall cease to be a Borrower and
         shall, subject as provided in this Clause, cease to have any
         obligations under the Finance Documents in its capacity (only) as a
         Borrower but without affecting any obligations it may have as Guarantor
         or in any other capacity.

29.      DISCLOSURE OF INFORMATION

         A Bank may disclose to its professional advisers, to any of its
         Affiliates or any other person with whom it is proposing to enter, or
         has entered into, any kind of transfer, participation or other
         agreement in relation to this Agreement:

         (a)      a copy of any Finance Document;

         (b)      a copy of the Information Memorandum; and



<PAGE>



                                       87
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         (c)      any information which that Bank has acquired under or in
                  connection with any Finance Document,

         provided that a Bank shall not disclose any such information to a
         person other than one of its Affiliates unless that person has provided
         to that Bank a confidentiality undertaking addressed to that Bank and
         NGG, substantially in the form set out in Schedule 8 (Form of
         Confidentiality Undertakings) or such other form as NGG may approve.

30.      SET-OFF

         A Finance Party may set off any matured obligation owed by an Obligor
         under this Agreement (to the extent beneficially owned by that Finance
         Party) against any obligation (whether or not matured) owed by that
         Finance Party to that Obligor, regardless of the place of payment,
         booking branch or currency of either obligation. If the obligations are
         in different currencies, the Finance Party may convert either
         obligation at a market rate of exchange in its usual course of business
         for the purpose of the set-off. If either obligation is unliquidated or
         unascertained, the Finance Party may set off in an amount estimated by
         it in good faith to be the amount of that obligation.

31.      REDISTRIBUTIONS

31.1     REDISTRIBUTION

         If any amount owing by an Obligor under this Agreement to a Finance
         Party (the "RECOVERING FINANCE PARTY") is discharged by payment,
         set-off or any other manner other than through the Facility Agent or
         the Swingline Agent in accordance with Clause 11 (Payments) (a
         "RECOVERY"), then:

         (a)      the recovering Finance Party shall, within 3 Business Days,
                  notify details of the recovery to the relevant Agent;

         (b)      that Agent shall determine whether the recovery is in excess
                  of the amount which the recovering Finance Party would have
                  received had the recovery been received by that Agent and
                  distributed in accordance with Clause 11 (Payments);

         (c)      subject to Clause 31.3 (Exceptions), the recovering Finance
                  Party shall, within 3 Business Days of demand by the relevant
                  Agent, pay to that Agent an amount (the "REDISTRIBUTION")
                  equal to the excess;

         (d)      the relevant Agent shall treat the redistribution as if it
                  were a payment by the Obligor concerned under Clause 11
                  (Payments) and shall pay the redistribution to the Finance
                  Parties (other than the recovering Finance Party) in
                  accordance with Clause 11.7 (Partial payments); and

         (e)      after payment of the full redistribution, the recovering
                  Finance Party will be subrogated to the portion of the claims
                  paid under paragraph (d) above, and that Obligor will owe the
                  recovering Finance Party a debt which is equal to the
                  redistribution, immediately payable and of the type originally
                  discharged.


<PAGE>


                                       88
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31.2     REVERSAL OF REDISTRIBUTION

         If under Clause 31.1 (Redistribution):

         (a)      a recovering Finance Party must subsequently return a
                  recovery, or an amount measured by reference to a recovery, to
                  an Obligor; and

         (b)      the recovering Finance Party has paid a redistribution in
                  relation to that recovery,

         each Finance Party shall, within 3 Business Days of demand by the
         recovering Finance Party through the relevant Agent, reimburse the
         recovering Finance Party all or the appropriate portion of the
         redistribution paid to that Finance Party. Thereupon the subrogation in
         paragraph (e) of Clause 31.1 (Redistribution) will operate in reverse
         to the extent of the reimbursement.

31.3     EXCEPTIONS

(a)      A recovering Finance Party need not pay a redistribution to the extent
         that it would not, after the payment, have a valid claim against the
         Obligor concerned in the amount of the redistribution pursuant to
         paragraph (e) of Clause 31.1 (Redistribution).

(b)      Where a recovering Finance Party has received a recovery as a
         consequence of the satisfaction or enforcement of a judgment obtained
         in any legal action or proceedings to which it is a party it need not
         pay a redistribution to any Finance Party which (being entitled to do
         so) did not join in with the recovering Finance Party in the legal
         action or proceedings, unless the recovering Finance Party did not give
         prior notice of its involvement in the legal action or proceedings to
         the relevant Agent for disclosure to all the Banks.

32.      SEVERABILITY

         If a provision of any Finance Document is or becomes illegal, invalid
         or unenforceable in any jurisdiction, that shall not affect:

         (a)      the legality, validity or enforceability in that jurisdiction
                  of any other provision of the Finance Documents; or

         (b)      the legality, validity or enforceability in other
                  jurisdictions of that or any other provision of the Finance
                  Documents.

33.      COUNTERPARTS

         This Agreement may be executed in any number of counterparts, and this
         has the same effect as if the signatures on the counterparts were on a
         single copy of this Agreement

34.      NOTICES

34.1     GIVING OF NOTICES

         All notices or other communications under or in connection with this
         Agreement shall be given in writing or facsimile. Any such notice will
         be deemed to be given as follows:

         (a)      if in writing, when delivered;



<PAGE>

                                       89
--------------------------------------------------------------------------------

         (b)      if by facsimile, when received.

         However, a notice given in accordance with the above but received other
         than on a Business Day or after business hours in the place of receipt
         will only be deemed to be given on the next Business Day in that place.
         Facsimile notices to the relevant Agent must be confirmed in writing
         (but non-receipt of that confirmation will not affect the validity of
         the original facsimile notice).

34.2     NOTICES

         The address, facsimile and telephone numbers and contact details of
         each Party for all notices and other matters under or in connection
         with this Agreement are:

         (i)      identified with its signature below (or, in the case of any
                  Bank that becomes a Party pursuant to a Transfer Certificate,
                  set out in the relevant Transfer Certificate); or

         (ii)     as otherwise notified by that Party for this purpose to the
                  relevant Agent by not less than five Business Days' notice.

35.      GOVERNING LAW AND JURISDICTION

35.1     GOVERNING LAW

         This Agreement is governed by English law.

35.2     SUBMISSION TO JURISDICTION

(a)      The Obligors irrevocably agree for the benefit of each of the Finance
         Parties that the Courts of England shall have exclusive jurisdiction in
         relation to any claim, dispute or difference concerning a Finance
         Document and in relation to, or in relation to the enforcement of, any
         judgment relating to any such claim, dispute or difference and
         accordingly submits to the jurisdiction of the English Courts.

(b)      Each Obligor irrevocably waives any right that it may have to object to
         an action being brought in the Courts of England, to claim that the
         action has been brought in an inconvenient forum or to claim that the
         Courts of England do not have jurisdiction.

(c)      Nothing in this Clause shall (or be construed so as to) limit the right
         of any Finance Party to bring legal proceedings in any other court of
         competent jurisdiction (including, without limitation the courts have
         jurisdiction by reason of an Obligor's place of incorporation) or
         concurrently on more than one jurisdiction), whether by way of
         substantive action, ancillary relief, enforcement or otherwise.

35.3     SERVICE OF PROCESS

         Without prejudice to any other mode of service, each Obligor:

         (a)      irrevocably appoints NGG as its agent for service of process
                  in relation to any proceedings before the English courts in
                  connection with any Finance Document;



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                                       90
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         (b)      agrees that failure by a process agent to notify the relevant
                  Obligor of the process will not invalidate the proceedings
                  concerned;

         (c)      consents to the service of process relating to any such
                  proceedings by prepaid posting of a copy of the process to its
                  address for the time being applying under Clause 34.2
                  (Notices); and

         (d)      agrees that if the appointment of any person mentioned in
                  paragraph (a) above ceases to be effective, the relevant
                  Obligor shall immediately appoint a further person in England
                  to accept service of process on its behalf in England and,
                  failing such appointment within 15 days, the Facility Agent is
                  entitled to appoint such a person by notice to the Obligors.

35.4     FORUM CONVENIENCE AND ENFORCEMENT ABROAD

         Each Obligor agrees that a judgment or order of a court of England in
         connection with a Finance Document is conclusive and binding on it and
         may be enforced against it in the courts of any other jurisdiction.

35.5     NO THIRD PARTY RELIANCE

         A person who is not a party to this Agreement may not enforce its terms
         under the Contracts (Rights of Third Parties) Act 1999.

IN WITNESS whereof this Agreement has been entered into on the date set out
above.


<PAGE>
                                       91
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                                   SCHEDULE 1

                                    THE BANKS

                                     PART I

                        FACILITY A BANKS AND COMMITMENTS

<TABLE>
<CAPTION>

BANKS                                                                                         COMMITMENTS
                                                                                                  US$
-----                                                                                        -------------
<S>                                                                                          <C>
ABN AMRO Bank N.V.                                                                           85,000,000.00
Bank of America, N.A.                                                                        85,000,000.00
The Bank of Tokyo-Mitsubishi, Ltd.                                                           85,000,000.00
Barclays Bank PLC                                                                            85,000,000.00
Bayerische Landesbank Girozentrale, London Branch                                            85,000,000.00
Citibank, N.A.                                                                               85,000,000.00
Dresdner Bank AG London Branch                                                               85,000,000.00
HSBC Bank plc                                                                                85,000,000.00
JPMorgan Chase Bank                                                                          85,000,000.00
TD Bank Europe Limited                                                                       85,000,000.00
BBVA Ireland Plc                                                                             49,373,913.04
The Bank of New York                                                                         49,373,913.04
Commerzbank Aktiengesellschaft, London Branch                                                49,373,913.04
Deutsche Bank AG London                                                                      49,373,913.04
Fleet National Bank                                                                          49,373,913.04
Landesbank Hessen-Thuringen Girozentrale, Irish Branch                                       49,373,913.04
ING Bank N.V., London Branch                                                                 49,373,913.04
Landesbank Baden-Wurttemberg, London Branch                                                  49,373,913.04
National Australia Bank Limited (ABN 12 004 044 937)                                         49,373,913.04
Royal Bank of Canada Europe Limited                                                          49,373,913.04
The Royal Bank of Scotland plc                                                               49,373,913.04
Scotiabank Europe plc                                                                        49,373,913.04
Societe Generale                                                                             49,373,913.04
Westdeutsche Landesbank Girozentrale                                                         49,373,913.04
Australia and New Zealand Banking Group Limited                                              27,347,826.09
Banco Santander Central Hispano, S.A.                                                        27,347,826.09
Mellon Bank, N.A.                                                                            27,347,826.09
Sumitomo Mitsui Banking Corporation (SMBC)                                                   27,347,826.09
The Dai-Ichi Kangyo Bank, Limited                                                            24,686,956.54
The Fuji Bank, Limited                                                                       24,686,956.54
                                                                                          ================
                                                         Facility A Total Commitments     1,700,000,000.00
                                                                                          ================
</TABLE>




<PAGE>


                                       92
--------------------------------------------------------------------------------


                                     PART II

                        FACILITY B BANKS AND COMMITMENTS

<TABLE>
<CAPTION>

BANKS                                                                                         COMMITMENTS
                                                                                                  US$
-----                                                                                        -------------
<S>                                                                                          <C>
ABN AMRO Bank N.V.                                                                           30,000,000.00
Bank of America, N.A.                                                                        30,000,000.00
The Bank of Tokyo-Mitsubishi, Ltd.                                                           30,000,000.00
Barclays Bank PLC                                                                            30,000,000.00
Bayerische Landesbank Girozentrale, London Branch                                            30,000,000.00
Citibank, N.A.                                                                               30,000,000.00
Dresdner Bank AG London Branch                                                               30,000,000.00
HSBC Bank plc                                                                                30,000,000.00
JPMorgan Chase Bank                                                                          30,000,000.00
TD Bank Europe Limited                                                                       30,000,000.00
BBVA Ireland Plc                                                                             17,426,086.96
The Bank of New York                                                                         17,426,086.96
Commerzbank Aktiengesellschaft, London Branch                                                17,426,086.96
Deutsche Bank International Limited                                                          17,426,086.96
Fleet National Bank                                                                          17,426,086.96
Landesbank Hessen-Thuringen Girozentrale, Irish Branch                                       17,426,086.96
ING Bank N.V., London Branch                                                                 17,426,086.96
Landesbank Baden-Wurttemberg, London Branch                                                  17,426,086.96
National Australia Bank Limited (ABN 12 004 044 937)                                         17,426,086.96
Royal Bank of Canada Europe Limited                                                          17,426,086.96
The Royal Bank of Scotland plc                                                               17,426,086.96
Scotiabank Europe plc                                                                        17,426,086.96
Societe Generale                                                                             17,426,086.96
Westdeutsche Landesbank Girozentrale                                                         17,426,086.96
Australia and New Zealand Banking Group Limited                                               9,652,173.90
Banco Santander Central Hispano, S.A.                                                         9,652,173.90
Mellon Bank, N.A.                                                                             9,652,173.90
Sumitomo Mitsui Banking Corporation (SMBC)                                                    9,652,173.90
The Dai-Ichi Kangyo Bank, Limited                                                             8,713,043.48
The Fuji Bank, Limited                                                                        8,713,043.48
                                                                                            ==============
                                                         Facility B Total Commitments       600,000,000.00
                                                                                            ==============
</TABLE>



<PAGE>
                                       93
--------------------------------------------------------------------------------

                                    PART III

                    SWINGLINE BANKS AND SWINGLINE COMMITMENTS

<TABLE>
<CAPTION>

BANKS                                                                                         COMMITMENTS
                                                                                                  US$
-----                                                                                        -------------
<S>                                                                                          <C>
ABN AMRO Bank N.V.                                                                            30,000,000
Bank of America, N.A.                                                                         30,000,000
The Bank of Tokyo-Mitsubishi, Ltd.                                                            30,000,000
Barclays Bank PLC                                                                             30,000,000
Bayerische Landesbank New York Branch                                                         30,000,000
Citibank, N.A.                                                                                30,000,000
Dresdner Bank AG London Branch                                                                30,000,000
HSBC Bank plc                                                                                 30,000,000
JPMorgan Chase Bank                                                                           30,000,000
Toronto Dominion (Texas) Inc.                                                                 30,000,000
                                                                                             ===========
                                                 Swingline Total Commitments                 300,000,000
                                                                                             ===========
</TABLE>





<PAGE>

                                       94
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                                   SCHEDULE 2

                         CONDITIONS PRECEDENT DOCUMENTS

                                     PART I


                  TO BE DELIVERED BEFORE THE FIRST UTILISATION


(a)  A copy of the memorandum and articles of association and certificate of
     incorporation of the Borrowers;

(b)  a copy of a resolution of the board of directors (or a duly constituted
     committee of the board of directors and of the board of directors
     establishing such committee) of each Borrower:

     (i)    approving the terms of, and the transactions contemplated by, the
            Finance Documents and resolving that it execute the Finance
            Documents;

     (ii)   authorising a specified person or persons to execute and, where
            applicable, deliver the Finance Documents to which it is a party on
            its behalf; and

     (iii)  authorising a specified person or persons, on its behalf, to
            sign and/or despatch all other documents and notices
            (including but not limited to Utilisation Requests) to be
            signed and/or despatched by it under or in connection with the
            Finance Documents;

(c)  specimens of the signatures of each person authorised by the resolutions
     referred to in paragraph (b) above;

(d)  a copy of NG Company's Transmission Licence and the Licences (if any) of
     each Borrower;

(e)  a certificate of a director of each of the Borrowers on its behalf
     confirming that utilisation of the Facilities in full would not, when
     utilised, cause any borrowing limit binding on it to be exceeded;

(f)  a certificate of an authorised signatory of each of the Borrowers
     certifying that each copy document specified in Part I of this Schedule 2
     is correct, complete and in full force and effect as at a date no earlier
     than the date of this Agreement;

(g)  a legal opinion of Allen & Overy addressed to the Finance Parties; and

(h)  a notice of cancellation of the undrawn commitment (if any) under the 1999
     Facility Agreement such cancellation to be effective no later than the
     first Utilisation Date.



<PAGE>

                                       95
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                                     PART II

            TO BE DELIVERED BEFORE THE FIRST ADVANCE UNDER FACILITY A

(a)  a certified copy of the Niagara Mohawk Merger Agreement;

(b)  a certified copy of the circular to the shareholders of Existing NGG to be
     distributed in connection with the Acquisition;

(c)  a certified copy of the resolution passed by the shareholders of Existing
     NGG approving the Acquisition;

(d)  a certified copy of a resolution passed by the shareholders of Niagara
     Mohawk approving the Acquisition;

(e)  a certificate from two directors of New NG dated no earlier than five
     Business Days before the Niagara Mohawk Acquisition Completion Date (and no
     later than the date of the first Utilisation Request under Facility A) to
     the effect that:

     (i)    the Offeror is to complete such acquisition on a specified date
            (being a date on or prior to the first Advance under Facility A);
            and

     (ii)   the Acquisition is being completed substantially in accordance with
            the terms contemplated in the Niagara Mohawk Merger Agreement and
            upon completion the Offeror will have acquired 100 per cent. of
            Niagara Mohawk; and

     (iii)  completion of the Acquisition (taking into account any governmental
            or other conditions affecting the Acquisition after completion and
            the aggregate cash receivable by Niagara Mohawk shareholders in
            connection with the Acquisition) will not, in the opinion of the
            directors of New NG, materially and adversely impact on the ability
            of the enlarged Group to comply with the financial covenants set out
            in Clause 19.18 (Group Financial Covenants) or otherwise on the
            operation of the business of the enlarged Group (taken as a whole);

(f)  evidence in form and substance satisfactory to the Facility Agent that all
     other existing credit agreements (if any) of any Obligor or of NG Company
     have been cancelled and prepaid in full or where necessary have been
     renegotiated so as to ensure that neither the Acquisition nor any
     Utilisation under this Agreement will constitute an event of default
     (however defined) under any such credit agreement (such cancellation or
     renegotiation to be effective prior to the first Utilisation Date under
     Facility A);

(g)  evidence in form and substance satisfactory to the Facility Agent that NGG
     and each other relevant member of the Group will as at the Niagara Mohawk
     Acquisition Completion Date, be in compliance with all applicable
     provisions of PUHCA and will have made all necessary applications and
     declarations under, and obtained all necessary orders, approvals and
     consents under, PUHCA in relation to this Agreement and each Advance
     hereunder;

(h)  a copy of the memorandum and articles of association and certificate of
     incorporation of Existing NGG and New NG;



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(i)      a certificate of an authorised signatory of Existing NGG and New NG
         certifying that each of the copy documents specified in sub-paragraph
         (h) of this Part II are correct, complete and in full force and effect
         as at the Registration Date;

(j)      a certificate of a director of each of Existing NGG and New NG on its
         behalf confirming that utilisation of the Facilities in full would not,
         when utilised, cause any borrowing limit binding on it to be exceeded;
         and

(k)      a certified copy of the order of the High Court of Justice sanctioning
         the Scheme of Arrangement under Section 425 of the Companies Act 1985
         which was registered with the Registrar of Companies pursuant to
         sub-section 3 of Section 425 of the Companies Act 1985 on the
         Registration Date.


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                                    PART III

                    TO BE DELIVERED BY AN ADDITIONAL BORROWER

(a)  A Borrower Accession Agreement, duly executed by the Additional Borrower
     and NGG;

(b)  a copy of the memorandum and articles of association and certificate of
     incorporation or equivalent constitutional documents of the Additional
     Borrower;

(c)  a copy of a resolution of the board of directors or equivalent of the
     Additional Borrower:

     (i)    approving the terms of, and the transactions contemplated by, the
            Borrower Accession Agreement and resolving that it execute the
            Borrower Accession Agreement;

     (ii)   authorising a specified person or persons to execute the Borrower
            Accession Agreement on its behalf; and

     (iii)  authorising a specified person or persons, on its behalf, to sign
            and/or despatch all other documents and notices including but not
            limited to Utilisation Requests to be signed and/or despatched by it
            under or in connection with this Agreement;

(d)  a certificate of a director of the Additional Borrower on its behalf
     confirming that utilisation of the Facilities in full would not, when
     utilised, cause any borrowing limit binding on it to be exceeded;

(e)  a copy of any other authorisation or other document, opinion or assurance
     which the relevant Agent considers to be necessary in connection with the
     entry into and performance of, and the transactions contemplated by, the
     Borrower Accession Agreement or for the validity of any Finance Document;

(f)  specimens of the signatures of each person authorised by the resolution
     referred to in paragraph (c) above;

(g)  the latest audited accounts of the Additional Borrower;

(h)  a certificate of an authorised signatory of the Additional Borrower
     certifying that each copy document specified in this Part III of Schedule 2
     is correct, complete and in full force and effect as at a date no earlier
     than the date of the Borrower Accession Agreement; and

(i)  a legal opinion from the relevant jurisdiction addressed to the Finance
     Parties.



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                                   SCHEDULE 3

                        CALCULATION OF THE MANDATORY COST

(a)  The Mandatory Cost for an Advance for its Term or Interest Period is the
     rate determined by the Facility Agent to be equal to the arithmetic mean
     (rounded upward, if necessary, to four decimal places) of the respective
     rates notified by each of the Reference Banks to the Facility Agent and
     calculated in accordance with the following formulae:

     in relation to an Advance denominated in Sterling:

     BY + S(Y-Z) + F x 0.01 % per annum
     ----------------------
     100-(B+S)

     in relation to any other Advance:

     F x 0.01 % per annum
     --------
     300

     where on the day of application of a formula:

     B      is the percentage of the Reference Bank's eligible liabilities (in
            excess of any stated minimum) which the Bank of England requires the
            Reference Bank to hold on a non-interest-bearing deposit account in
            accordance with its cash ratio requirements;

     Y      is LIBOR at or about 11.00 a.m. on that day for the Term or Interest
            Period;

     S      is the percentage of the Reference Bank's eligible liabilities which
            the Bank of England requires the Reference Bank to place as a
            special deposit;

     Z      is the interest rate per annum allowed by the Bank of England on
            special deposits; and

     F      is the charge payable by the Reference Bank to the Financial
            Services Authority under paragraph 2.02 or 2.03 (as appropriate) of
            the Fees Regulations (but where for this purpose, the figure in
            paragraph 2.02b and 2.03b will be deemed to be zero) expressed in
            pounds per (pound)1,000,000 of the fee base of the Bank.

(b)  For the purposes of this Schedule 3:

     (i)    "ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" have the meanings
            given to them at the time of application of the formula by the Bank
            of England; and

     (ii)   "FEE BASE" has the meaning given to it in the Fees Regulations;

     (iii)  "FEES REGULATIONS" means the Banking Supervision (Fees) Regulations
            2001, and/or any other regulations governing the payment of fees for
            banking supervision.

(c)  In the application of the formula, B, Y, S and Z are included in the
     formula as figures and not as percentages, e.g. if B = 0.5% and Y =
     15%, BY is calculated as 0.5 x 15.


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(d)  If a Reference Bank does not supply a rate to the Facility Agent, the
     applicable Mandatory Cost will be determined on the basis of the rate(s)
     supplied by the remaining Reference Banks.

(e)  (i)  The formula is applied on the first day of the Term or Interest Period
          of the relevant Advance.

     (ii) Each rate calculated in accordance with the formula is, if
          necessary, rounded upward to four decimal places.

(f)  If the Facility Agent determines that a change in circumstances has
     rendered, or will render, the formula inappropriate, the Facility Agent
     (after consultation with the Banks) shall notify NGG of the manner in which
     the Mandatory Cost will subsequently be calculated. The manner of
     calculation so notified by the Facility Agent shall, in the absence of
     manifest error, be binding on all the Parties.