EXHIBIT 10.10

                                                EXECUTION VERSION


     THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR ANY APPLICABLE
STATE SECURITIES LAWS COVERING SUCH SECURITIES OR THE SALE IS
MADE IN ACCORDANCE WITH AN EXEMPTION UNDER THE ACT AND ANY
APPLICABLE STATE SECURITIES LAWS, AND HOLDINGS RECEIVES AN
OPINION OF COUNSEL FOR HOLDER OF THIS SECURITY REASONABLY
SATISFACTORY TO HOLDINGS STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.


                        CONVERTIBLE NOTE

$10,250,000.00                     Date:  March 15, 2005


     FOR VALUE RECEIVED, BAYCORP HOLDINGS, LTD., a Delaware
corporation ("Holdings"), GREAT BAY POWER MARKETING, INC., a
Maine corporation ("GB Power"), GREAT BAY HYDRO CORPORATION, a
New Hampshire corporation ("GB Hydro"), BAYCORP VENTURES, LLC, a
Delaware limited liability company ("BayCorp Ventures"),
NACOGDOCHES POWER, LLC, a New Hampshire limited liability company
("NAC Power"), NACOGDOCHES GAS, LLC, a New Hampshire limited
liability company ("NAC Gas"), GREAT BAY HYDRO MAINE, LLC, a
Maine limited liability company ("GB Maine") and GREAT BAY HYDRO
BENTON, LLC, a Maine limited liability company ("GB Benton";
together with Holdings, GB Power, GB Hydro, BayCorp Ventures, NAC
Power, NAC Gas, GB Maine and GB Benton, the "Borrowers"), hereby
unconditionally promise to pay to SLOAN GROUP LTD., a Bahamas
corporation, at its offices located at Cay House, Box N-7776,
E.P. Taylor Drive, Lyford Cay, New Providence, Bahamas, Attn:
Suzanne Karsten (hereafter, together with any holder hereof,
called "Holder"), or at such other place as the Holder may
designate in writing to Holdings, in lawful money of the United
States of America, and in immediately available funds, the
principal sum of TEN MILLION TWO HUNDRED FIFTY AND NO/100 Dollars
($10,250,000.00), or such lesser amount as may be the aggregate
principal amount outstanding hereunder, together with interest on
the principal balance from time to time outstanding hereunder, as
provided below.

1.   General

     1.1  Interest on the outstanding principal balance hereof shall
accrue (computed on the basis of a 360-day year and actual number
of days elapsed) at a per annum rate equal to eight percent
(8.0%).  Accrued interest shall be due and payable on any date on
which the principal balance hereof is due (whether by
acceleration, maturity or otherwise).  Interest shall accrue on
any amount


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past due hereunder at a rate equal to two percent (2.0%) per
annum in excess of the interest rate otherwise payable hereunder
(the "Post Default Rate").

     1.2  Unless this Note is fully converted into Shares (as defined
below) at the option of the Holder pursuant to Section 2, the
entire principal balance of this Note shall be due and payable in
full on December 15, 2005 (the "Maturity Date") or such earlier
date as the principal amount is due hereunder as a result of
acceleration or otherwise.  The outstanding principal balance of
this Note and accrued interest thereon may not be prepaid in
whole or in part at any time.  The Borrowers may not reborrow the
principal amount hereunder after such principal amount has been
repaid.

     1.3  Each Borrower acknowledges and agrees that, on the date
hereof, the Holder has advanced to the Borrowers a principal
amount in the aggregate equal to $10,250,000.00, which amount is
evidenced by this Note.

     1.4  (a)  EACH BORROWER, AND THE HOLDER BY ACCEPTING THIS NOTE,
AGREES AND STIPULATES THAT THE ONLY CHARGE IMPOSED UPON THE
BORROWERS FOR THE USE OF MONEY IN CONNECTION WITH THIS NOTE IS
AND SHALL BE THE INTEREST DESCRIBED IN THE SECOND PARAGRAPH
HEREOF, AND FURTHER AGREES AND STIPULATES THAT ALL OTHER CHARGES
IMPOSED BY THE HOLDER ON THE BORROWERS IN CONNECTION WITH THIS
NOTE, ALL DEFAULT CHARGES, LATE CHARGES, AND ATTORNEYS' FEES, ARE
CHARGES MADE TO COMPENSATE THE HOLDER FOR UNDERWRITING OR
ADMINISTRATIVE SERVICES AND COSTS OR LOSSES PERFORMED OR
INCURRED, AND TO BE PERFORMED OR INCURRED, BY THE HOLDER IN
CONNECTION WITH THIS NOTE AND SHALL UNDER NO CIRCUMSTANCES BE
DEEMED TO BE CHARGES FOR THE USE OF MONEY. ALL CHARGES OTHER THAN
CHARGES FOR THE USE OF MONEY SHALL BE FULLY EARNED AND
NONREFUNDABLE WHEN DUE.

(b)  Notwithstanding any terms or provisions contained herein or
elsewhere, in no event shall the aggregate amount of Interest (as
defined below) contracted for, reserved, charged, collected,
taken or received by the Holder pursuant to this Note exceed the
maximum amount permissible (the "Maximum Rate") under the Usury
Laws (as defined below).  Neither the exercise by the Holder of
its rights to accelerate the payment or the maturity of any
indebtedness evidenced by this Note, nor the occurrence of any
other event or contingency whatsoever, shall entitle the Holder
to charge, collect or receive Interest in excess of the Maximum
Rate and in no event shall the Borrowers be obligated to pay
Interest exceeding the Maximum Rate.  All agreements, conditions
or stipulations, if any, which may in any event or contingency
operate to bind, obligate or compel the Borrowers to pay Interest
exceeding the Maximum Rate shall be without binding force or
effect, at law or in equity, but only to the extent of the excess
of Interest over such Maximum Rate.  If any Interest is
contracted for, charged, collected, taken or received in excess
of the Maximum Rate ("Excess"), each Borrower acknowledges and
agrees that any such obligation, charge, collection or receipt
shall be the result of a bona fide error, and such Excess, to the
extent received, shall be applied first to reduce the principal
hereof and the balance of such Excess, if any, shall be returned
to the Borrowers; it being the express

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intent of each Borrower and the Holder that the Borrowers not pay
and the Holder not receive, charge or collect, directly or
indirectly, interest in excess of the Maximum Rate.  By the
execution of this Note, each Borrower covenants and agrees that
(i) the credit or return of any Excess shall constitute the
acceptance by the Borrowers of such Excess, and (ii) no Borrower
shall seek or pursue (and hereby waives to the fullest extent
permitted by law) any other remedy, legal or equitable, against
the Holder, based in whole or in part upon contracting for,
charging, collecting or receiving any Interest in excess of the
Maximum Rate.  For the purpose of determining whether or not any
Excess has been contracted for, charged, collected or received by
the Holder, all Interest at any time contracted for, charged,
collected or received from any Borrower in connection with the
indebtedness evidenced by this Note shall, to the extent
permitted by the Usury Laws, be amortized, prorated, allocated
and spread in equal parts throughout the full term of this Note.
Each Borrower and the Holder agree, to the maximum extent
permitted under the Usury Laws, to (i) characterize any non-
principal payment as an expense rather than as Interest and
(ii) exclude voluntary prepayments and the effects thereof.  For
purposes hereof, the term "Interest" shall mean any and all
interest, fees, premiums and other charges for the use of money
or the extension of credit and shall include any "interest" (or
any amount or sum deemed to be "interest") under and as defined
in the Usury Laws; and the term "Usury Laws" shall mean any
applicable laws, statutes, rules, regulations or ordinances
limiting, governing or otherwise regulating the rate or amount of
Interest or the manner which Interest may be calculated, charged,
collected, paid, contracted for or disclosed.

     1.5  The Borrowers' indebtedness evidenced by this Note is
secured by that certain Pledge Agreement executed by each
Borrower in favor of the Holder.

2.   Conversion

     2.1  Subject to and upon compliance with the provisions of this
Section 2, the Holder shall have the right to convert, in lieu of
accepting payment for principal and interest, all, or any part,
of the outstanding principal balance of, this Note together with
all accrued but unpaid interest on such principal then to be
converted at any time between November 15, 2005 and December 15,
2005 (provided, however, that the Holder shall have the right to
convert pursuant to this Section 2 at any time after the
occurrence and during the continuance of a material Event of
Default), in whole, or in part, into that number of shares of
Holdings' Common Stock, $0.01 par value (the "Common Stock")
equal to, the product obtained by dividing (a) the outstanding
principal and accrued but unpaid interest then being converted by
(b) $14.04 (such amounts to be adjusted for stock splits,
dividends, recapitalizations and similar transactions) (the
shares of the Common Stock issuable upon conversion being
referred to herein as the "Shares").  Once Holder provides
Holdings written notice of its election to convert this Note into
equity, the Borrowers shall not be entitled to prevent the
conversion by repaying the principal and interest due under this
Note.

     2.2  Before the Holder converts this Note into Shares, the Holder
(i) shall give five (5) days written notice to Holdings of the
election to convert this Note pursuant to this Section 2; (ii)
shall state therein the amount of principal and accrued interest
so being converted and the name or names in which the certificate
or certificates for the number of shares of Shares are

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to be issued; and (iii) shall surrender this Note at the office
of Holdings.  Holdings shall, as promptly as practicable after
each surrender, but in no event later than ten (10) days after
the later of such surrender or approval of any required stock
exchange supplemental listings, and at its expense, issue and
deliver to or upon the written order of the Holder a certificate
or certificates for the full number of Shares to which the Holder
is entitled and a check or cash with respect to any fractional
interest in Shares as provided in Section 2.3.  Such conversion
shall be deemed to have been made immediately prior to the close
of business on the date of the surrender of this Note, and the
person or persons entitled to receive shares of Shares issuable
upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Shares as of such
date.  Upon any partial conversion of this Note, Holdings shall,
and shall cause each of the other Borrowers, in addition to, and
concurrently with, the certificate evidencing such Shares issued
upon such partial conversion, deliver to the Holder a new Note,
substantially in the form hereof, in a principal amount equal to
the outstanding (whether principal, interest or any other
amounts) amount under this Note not so converted.

     2.3  No fractional shares shall be issued upon any conversion of
this Note.  In lieu of any fractional shares to which the Holder
would otherwise be entitled, Holdings shall pay cash equal to the
product of such fraction multiplied by the price used to
determine the number of Shares into which this Note is converted
(such amounts to be adjusted for stock splits, dividends,
recapitalizations and similar transactions).

     2.4  Holdings shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock for the
purpose of effecting the conversion of this Note such number of
Common Stock as shall from time to time be sufficient to effect
the conversion of this Note; and if at any time the number of
authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of the entire principal and
interest amount of this Note, in addition to such other remedies
as shall be available to the Holder, Holdings will use its best
efforts to take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be
sufficient for such purposes.

     2.5  In the event there is any United States withholding tax
applicable to the interest on this Note for Holder, the Borrowers
shall reimburse Holder for all such withholding tax paid by
Holder with respect to this Note.

3.   Registration of the Shares; Compliance with the Securities
     Act.

     3.1  (a)  Demand Registration.

          (i)  Holder may request Holdings to register under the
     Securities Act all or any portion of the Shares held by
     Holder in the manner specified in such request.  Holdings
     will use its best efforts to expeditiously effect the
     registration of all Shares under the Securities Act, but
     only to the extent provided for in the following provisions
     of this Note; provided, however, that Holdings shall not be
     required to effect registration pursuant to a request under
     this Section 3 more than
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     one (1) time for Holder, and may register the Shares on Form
     S-3 under the Securities Act if available.  Notwithstanding
     anything to the contrary contained herein, no request may be
     made under this Section 3(a)(i) within 180 days after the
     effective date of a registration statement filed by Holdings
     covering a firm commitment underwritten public offering in
     which the holders of Shares shall have been entitled to join
     and in which there shall have been effectively registered
     all Shares as to which registration shall have been
     requested.

          (ii) Whenever a requested registration pursuant to
     Section 3(a)(i) above is for an underwritten offering, only
     Shares which are to be included in the underwriting may be
     included in the registration, and, if the managing
     underwriter of such offering determines in good faith that
     the number of Shares so included which are to be sold by the
     holders of the Shares should be limited due to market
     conditions and/or the necessity of including in such
     underwriting or registration securities to be sold for the
     account of Holdings, then Holdings may reduce the number of
     securities to be included in such offering to a number
     deemed satisfactory by the managing underwriter on a pro
     rata basis.  Notwithstanding the foregoing, in the event
     that the underwriter or underwriters cut back the number of
     Shares required to be included by the Holder in such demand
     registration by more than 20%, then such registration will
     not be deemed to be a demand registration for purposes of
     this Section 3.  Holdings may not cause any other
     registration of securities for sale for its own account
     (other than a registration effected solely to implement an
     employee benefit plan or a transaction to which Rule 145 of
     the Commission is applicable) to become effective less than
     ninety (90) days after the effective date of any
     registration required pursuant to this Section 3.

          (b)  Piggyback Registrations.

          If Holdings, at any time proposes to register any of
     its securities under the Securities Act (including pursuant
     to a demand of any stockholder of Holdings exercising
     registration rights) for sale to the public (except with
     respect to registration statements on Forms S-4 or S-8 or
     another form not available for registering the Shares for
     sale to the public), each such time it will give written
     notice to the Holder of its intention to do so.  Upon the
     written request of Holder given within twenty days after
     receipt by Holder of such notice, Holdings will, subject to
     the limits contained in this Section 3, use its best efforts
     to cause all such Shares of the Holder to be registered
     under the Securities Act and qualified for sale under any
     state blue sky law, all to the extent requisite to permit
     such sale or other disposition by such holder of the Shares
     so registered; provided, however, that if Holdings is
     advised in writing in good faith by any managing underwriter
     of Holdings' securities being offered in a public offering
     pursuant to such registration statement that the amount to
     be sold by persons other than Holdings (collectively,
     "Selling Stockholders") is greater than the amount which can
     be offered without adversely affecting the offering, then
     Holdings may reduce the amount offered for the accounts of
     Selling Stockholders (including holders of Shares) to a
     number deemed satisfactory by such managing underwriter.

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          Notwithstanding the foregoing provisions, Holdings may
     withdraw any registration statement referred to in
     Section 3(c) without thereby incurring any liability to
     Holder.

          (c)  Registration Procedures.

               (i)  Holdings shall use its best efforts to
     prepare and file with the SEC such amendments and
     supplements to its registration statements and prospectuses
     pursuant to which Shares are registered (the "Registration
     Statements") as may be necessary to keep such registration
     statements current and effective for a period ending on the
     earlier of (i) the date on which Holder may sell Shares
     pursuant to paragraph (k) of Rule 144 under the Securities
     Act or any successor rule ("Rule 144") or (ii) such time as
     all Shares converted hereunder have been sold pursuant to a
     registration statement or Rule 144, and to notify Holder
     promptly upon the registration statement, and each post-
     effective amendment thereto, being declared effective by the
     SEC;

               (ii) Holdings shall furnish to Holder such number
     of copies of the Registration Statements (including
     supplemental prospectuses) as Holder may reasonably request
     in order to facilitate the public sale or other disposition
     of all or any of the Shares by Holder;

               (iii)     Holdings shall file documents required
     of Holdings for normal blue sky clearance in states
     specified in writing by Holder; provided, however, that
     Holdings shall not be required to qualify to do business or
     consent to service of process in any jurisdiction in which
     it is not now so qualified or has not so consented;

               (iv) Holdings shall bear all expenses (other than
     underwriting discounts and commissions, if any) in
     connection with the procedures in paragraph (a) through
     (c)(iii) of this Section 3 and the registration of the
     Shares;

               (v)  Holdings shall advise Holder, promptly after
     it shall receive notice or obtain knowledge of the issuance
     of any stop order by the SEC delaying or suspending the
     effectiveness of any of the Registration Statements or of
     the initiation of any proceeding for that purpose; and it
     will promptly use its commercially reasonable efforts to
     prevent the issuance of any stop order or to obtain its
     withdrawal at the earliest possible moment if such stop
     order should be issued; and

               (vi) With a view to making available to Holder the
     benefits of Rule 144 and any other rule or regulation of the
     SEC that may at any time permit Holder to sell Shares to the
     public without registration, Holdings covenants and agrees
     to use its best efforts to: (i) make and keep public
     information available, as those terms are understood and
     defined in Rule 144, until the earlier of (A) such date as
     all of Holder's Shares may be resold pursuant to Rule 144(k)
     or any other rule of similar effect or (B) such date as all
     of Holder's Shares shall have been resold; (ii) file with
     the SEC in a timely manner all reports and other documents
     required of Holdings under the Securities Act; and (iii)

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     furnish to Holder upon request, as long as Holder owns any
     Shares, (A) a written statement by Holdings that it has
     complied with the reporting requirements of the Securities
     Act and the Securities Act, (B) a copy of Holdings' most
     recent Annual Report on Form 10-K or Quarterly Report on
     Form 10-Q, and (C) such other information as may be
     reasonably requested in order to avail Holder of any rule or
     regulation of the SEC that permits the selling of any such
     Shares without registration.

          It shall be a condition precedent to the obligations of
     Holdings to take any action pursuant to this Section 3 that
     Holder shall furnish to Holdings such information regarding
     itself, the Shares to be sold by Holder, and the intended
     method of disposition of such securities as shall be
     required to effect the registration of the Shares.

          Holdings understands that Holder disclaims being an
     underwriter, but acknowledges that a determination by the
     SEC that Holder is deemed an underwriter shall not relieve
     Holdings of any obligations it has hereunder.

     3.2  Transfer of Shares After Registration; Suspension.

          (a)  Holder agrees that it will not effect any
     disposition of the Shares or its right to purchase the
     Shares that would constitute a sale within the meaning of
     the Securities Act other than transactions exempt from the
     registration requirements of the Securities Act, as
     contemplated in the registration statement and as described
     below, and that it will promptly notify Holdings of any
     material changes in the information set forth in the
     registration statement regarding Holder or its plan of
     distribution.

          (b)  Except in the event that paragraph (c) below
     applies, Holdings shall: (i) if deemed necessary by
     Holdings, prepare and file from time to time with the SEC a
     post-effective amendment to the registration statement or a
     supplement to the related prospectus or a supplement or
     amendment to any document incorporated therein by reference
     or file any other required document so that such
     registration statement will not contain an untrue statement
     of a material fact or omit to state a material fact required
     to be stated therein or necessary to make the statements
     therein not misleading, and so that, as thereafter delivered
     to purchasers of the Shares being sold thereunder, such
     prospectus will not contain an untrue statement of a
     material fact or omit to state a material fact required to
     be stated therein or necessary to make the statements
     therein, in light of the circumstances under which they were
     made, not misleading; (ii) provide Holder copies of any
     documents filed pursuant to Section 3.2(b)(i); and
     (iii) upon request, inform Holder that Holdings has complied
     with its obligations in Section 3.2(b)(i) (or that, if
     Holdings has filed a post-effective amendment to the
     registration statement which has not yet been declared
     effective, Holdings will notify Holder to that effect, will
     use its best efforts to secure the effectiveness of such
     post-effective amendment as promptly as possible and will
     promptly notify Holder pursuant to Section 3.2(b)(i) hereof
     when the amendment has become effective).

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          (c)  Subject to paragraph (d) below, in the event: (i)
     of any request by the SEC or any  other federal or state
     governmental authority during the period of effectiveness of
     the registration statement for amendments or supplements to
     the registration statement or related prospectus or for
     additional information; (ii) of the issuance by the SEC or
     any other federal or state governmental authority of any
     stop order suspending the effectiveness of the registration
     statement or the initiation of any proceedings for that
     purpose; (iii) of the receipt by Holdings of any
     notification with respect to the suspension of the
     qualification or exemption from qualification of any of the
     Shares for sale in any jurisdiction or the initiation of any
     proceeding for such purpose; or (iv) of any event or
     circumstance which necessitates the making of any changes in
     the registration statement or prospectus, or any document
     incorporated or deemed to be incorporated therein by
     reference, so that, in the case of the registration
     statement, it will not contain any untrue statement of a
     material fact or omit to state a material fact required to
     be stated therein or necessary to make the statements
     therein not misleading, and that in the case of the
     prospectus, it will not contain any untrue statement of a
     material fact or omit to state a material fact required to
     be stated therein or necessary to make the statements
     therein, in the light of the circumstances under which they
     were made, not misleading, then Holdings shall promptly
     deliver a certificate in writing to Holder (the "Suspension
     Notice") to the effect of the foregoing and, upon receipt of
     such Suspension Notice, Holder will refrain from selling any
     Shares pursuant to the registration statement (a
     "Suspension") until Holder is advised in writing by Holdings
     that the current prospectus may be used, and has received
     copies of any additional or supplemental filings that are
     incorporated or deemed incorporated by reference in any such
     prospectus. In the event of any Suspension, Holdings will
     use its reasonable best efforts to cause the use of the
     prospectus so suspended to be resumed as soon as reasonably
     practicable after delivery of a Suspension Notice to Holder.
     In addition to and without limiting any other remedies
     (including, without limitation, at law or at equity)
     available to Holder, Holder shall be entitled to specific
     performance in the event that Holdings fails to comply with
     the provisions of this Section 3.

          (d)  Notwithstanding the foregoing paragraphs of this
     Section 3, Holdings shall use its best efforts to ensure
     that Holder shall not be prohibited from selling Shares
     under the registration statement as a result of Suspensions
     on more than two occasions, such occasions not to occur
     within two weeks of one another, of not more than thirty
     (30) days in any twelve month period, unless, in the good
     faith judgment of Holdings' Board of Directors, upon advice
     of counsel, the sale of Shares under the registration
     statement would be reasonably likely to cause a violation of
     the Securities Act or the Exchange Act and result in
     potential liability to Holdings.

          (e)  If a Suspension is not then in effect, Holder may
     sell Shares under the registration statement, provided that
     it complies with any applicable prospectus delivery
     requirements.  Upon receipt of a request therefor, Holdings
     will provide an adequate number of current prospectuses to
     Holder and to any other parties requiring such prospectuses.

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          (f)  In the event of a sale of Shares by Holder, unless
     such requirement is waived by Holdings in writing, Holder
     must also deliver to Holdings' transfer agent, with a copy
     to Holdings, a Certificate of Subsequent Sale substantially
     in the form attached hereto as Exhibit A, so that the Shares
     may be properly transferred.

          (g)  Holdings agrees that it shall, immediately prior
     to the registration statement being declared effective,
     deliver to its transfer agent an opinion letter of counsel,
     opining that at any time the registration statement is
     effective, the transfer agent shall issue, in connection
     with the sale of the Shares, certificates representing such
     Shares without restrictive legend, provided the Shares are
     to be sold pursuant to the prospectus contained in the
     registration statement and the transfer agent receives a
     Certificate of Subsequent Sale in the form attached hereto
     as Exhibit A.  Upon receipt of such opinion, Holdings shall
     cause the transfer agent to confirm, for the benefit of
     Holder, that no further opinion of counsel is required at
     the time of transfer in order to issue such Shares without
     restrictive legend.

     Holdings shall cause its transfer agent to issue a
     certificate without any restrictive legend to a purchaser of
     any such Shares from Holder, if (a) the sale of such Shares
     is registered under the registration statement (including
     registration pursuant to Rule 415 under the Securities Act)
     and Holder has delivered a Certificate of Subsequent Sale to
     the transfer agent; (b) the Holder has provided Holdings
     with an opinion of counsel, in form, substance and scope
     customary for opinions of counsel in comparable
     transactions, to the effect that a public sale or transfer
     of such Shares may be made without registration under the
     Securities Act; or (c) such Shares are sold in compliance
     with Rule 144 under the Securities Act.

     3.3  Indemnification.

          For the purpose of this Section 3:

          (a)  the term "Selling Shareholder" shall mean Holder
     and each person, if any, who controls Holder within the
     meaning of Section 15 of the Securities Act or Section 20 of
     the Exchange Act;

          (b)  the term "Registration Statement" shall include
     any final prospectus, exhibit, supplement or amendment
     included in or relating to, and any document incorporated by
     reference in, the Registration Statement (or deemed to be a
     part thereof) referred to in Section 3.1; and

          (c)  the term "Untrue Statement" shall mean any untrue
     statement or alleged untrue statement, or any omission or
     alleged omission to state in the Registration Statement a
     material fact required to be stated therein or necessary to
     make the statements therein, in the light of the
     circumstances under which they were made, not misleading.

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          (d)  (i)  Holdings agrees to indemnify and hold
     harmless each Selling Shareholder from and against any
     losses, claims, damages or liabilities to which such Selling
     Shareholder may become subject (under the Securities Act or
     otherwise) insofar as such losses, claims, damages or
     liabilities (or actions or proceedings in respect thereof)
     arise out of, or are based upon (i) any untrue statement or
     omission of a material fact contained in the Registration
     Statement or the prospectus or in any amendment or
     supplement thereto, (ii) any inaccuracy in the
     representations and warranties of Holdings contained in the
     Agreement or the failure of Holdings to perform its
     obligations hereunder or (iii) any failure by Holdings to
     fulfill any undertaking included in the Registration
     Statement, and Holdings will reimburse such Selling
     Shareholder for any reasonable legal expense or other actual
     accountable out of pocket expenses reasonably incurred in
     investigating, defending or preparing to defend any such
     action, proceeding or claim; provided, however, that
     Holdings shall not be liable in any such case to the extent
     that such loss, claim, damage or liability arises out of, or
     is based upon, an untrue statement made in the Registration
     Statements in reliance upon and in conformity with written
     information furnished to Holdings by or on behalf of such
     Selling Shareholder specifically for use in preparation of
     the Registration Statements, or any inaccuracy in
     representations made by such Selling Shareholder in this
     Note or the failure of such Selling Shareholder to comply
     with its representations, warranties, covenants and
     agreements contained in Sections 3.2 and 5 (except 5.2)
     hereof or any statement or omission in any prospectus that
     is corrected in any subsequent prospectus that was delivered
     to the Selling Shareholder prior to the pertinent sale or
     sales by the Selling Shareholder.

               (ii) Holder agrees to indemnify and hold harmless
     Holdings (and each person, if any, who controls Holdings
     within the meaning of Section 15 of the Securities Act, each
     officer of Holdings who signs the Registration Statement and
     each director of Holdings) from and against any losses,
     claims, damages or liabilities to which Holdings (or any
     such officer, director or controlling person) may become
     subject (under the Securities Act or otherwise), insofar as
     such losses, claims, damages or liabilities (or actions or
     proceedings in respect thereof) arise out of, or are based
     upon, (i) any failure to comply with the representations,
     warranties, covenants and agreements contained in Section
     3.2 and 5 (except 5.2) hereof or elsewhere in the Loan
     Documents or any inaccuracies of Holder in the Loan
     Documents, or (ii) any untrue statement of a material fact
     contained in the Registration Statement if, and only if,
     such untrue statement was made in reliance upon and in
     conformity with written information furnished by or on
     behalf of Holder specifically for use in preparation of the
     Registration Statement, and Holder will reimburse Holdings
     (or such officer, director or controlling person), as the
     case may be, for any reasonable legal expense or other
     actual accountable out of pocket expenses reasonably
     incurred in investigating, defending or preparing to defend
     any such action, proceeding or claim.  The obligation to
     indemnify shall be limited to the net amount of the proceeds
     received by Holder from the sale of the Shares pursuant to
     the Registration Statement.

                              -10-

<Page>

               (iii)     Promptly after receipt by any
     indemnified person of a notice of a claim or the beginning
     of any action in respect of which indemnity is to be sought
     against an indemnifying person pursuant to this Section 3.3,
     such indemnified person shall notify the indemnifying person
     in writing of such claim or of the commencement of such
     action, but the omission to so notify the indemnifying party
     will not relieve it from any liability which it may have to
     any indemnified party under this Section 3.3 (except to the
     extent that such omission materially and adversely affects
     the indemnifying party's ability to defend such action) or
     from any liability otherwise than under this Section 3.3.
     Subject to the provisions hereinafter stated, in case any
     such action shall be brought against an indemnified person,
     the indemnifying person shall be entitled to participate
     therein, and, to the extent that it shall elect by written
     notice delivered to the indemnified party promptly after
     receiving the aforesaid notice from such indemnified party,
     shall be entitled to assume the defense thereof, with
     counsel reasonably satisfactory to such indemnified person.
     After notice from the indemnifying person to such
     indemnified person of its election to assume the defense
     thereof (unless it has failed to assume the defense thereof
     and appoint counsel reasonably satisfactory to the
     indemnified party), such indemnifying person shall not be
     liable to such indemnified person for any legal expenses
     subsequently incurred by such indemnified person in
     connection with the defense thereof; provided, however, that
     if there exists or shall exist a conflict of interest that
     would make it inappropriate, in the reasonable opinion of
     counsel to the indemnified person, for the same counsel to
     represent both the indemnified person and such indemnifying
     person or any affiliate or associate thereof, the
     indemnified person shall be entitled to retain its own
     counsel at the expense of such indemnifying person;
     provided, however, that no indemnifying person shall be
     responsible for the fees and expenses of more than one
     separate counsel (together with appropriate local counsel)
     for all indemnified parties.  In no event shall any
     indemnifying person be liable in respect of any amounts paid
     in settlement of any action unless the indemnifying person
     shall have approved the terms of such settlement; provided
     that such consent shall not be unreasonably withheld.  No
     indemnifying person shall, without the prior written consent
     of the indemnified person, effect any settlement of any
     pending or threatened proceeding in respect of which any
     indemnified person is or could reasonably have been a party
     and indemnification could have been sought hereunder by such
     indemnified person, unless such settlement includes an
     unconditional release of such indemnified person from all
     liability on claims that are the subject matter of such
     proceeding.

               (iv) If the indemnification provided for in this
     Section 3.3 is unavailable to or insufficient to hold
     harmless an indemnified party under subsection (d)(i) or
     (d)(ii) above in respect of any losses, claims, damages or
     liabilities (or actions or proceedings in respect thereof)
     referred to therein, then each indemnifying party shall
     contribute to the amount paid or payable by such indemnified
     party as a result of such losses, claims, damages or
     liabilities (or actions in respect thereof) in such
     proportion as is appropriate to reflect the relative fault
     of Holdings on the one hand and Holder on the other in
     connection with the statements or omissions or other matters
     which resulted in such losses, claims, damages or
     liabilities (or actions in respect thereof), as well as any
     other relevant equitable considerations.  The relative fault
     shall be determined by reference to,

                              -11-

<Page>

     among other things, in the case of an untrue statement,
     whether the untrue statement relates to information supplied
     by Holdings on the one hand or Holder on the other and the
     parties' relative intent, knowledge, access to information
     and opportunity to correct or prevent such untrue statement.
     Holdings and Holder agree that it would not be just and
     equitable if contribution pursuant to this subsection (d)
     were determined by pro rata allocation (even if Holder were
     treated as one entity for such purpose) or by any other
     method of allocation which does not take into account the
     equitable considerations referred to above in this
     subsection (d).  The amount paid or payable by an
     indemnified party as a result of the losses, claims, damages
     or liabilities (or actions in respect thereof) referred to
     above in this subsection (d) shall be deemed to include any
     legal or other expenses reasonably incurred by such
     indemnified party in connection with investigating or
     defending any such action or claim.  Notwithstanding the
     provisions of this subsection (d), Holder shall not be
     required to contribute any amount in excess of the amount by
     which the gross amount received by Holder from the sale of
     the Shares to which such loss relates exceeds the amount of
     any damages which Holder has otherwise been required to pay
     by reason of such untrue statement.  No person guilty of
     fraudulent misrepresentation (within the meaning of Section
     11(f) of the Securities Act) shall be entitled to
     contribution from any person who was not guilty of such
     fraudulent misrepresentation.

     The parties to this Note hereby acknowledge that they are
     sophisticated business persons who were represented by
     counsel during the negotiations regarding the provisions
     hereof including, without limitation, the provisions of this
     Section 3, and are fully informed regarding said provisions.
     They further acknowledge that the provisions of this Section
     3 fairly allocate the risks in light of the ability of the
     parties to investigate Holdings and its business in order to
     assure that adequate disclosure is made in the Registration
     Statement as required by the Securities Act and the Exchange
     Act.

     3.4  Termination of Conditions. The conditions precedent
imposed by this Section 3 upon the transferability of the Shares
shall cease and terminate as to any particular number of the
Shares when such Shares (i) shall have been effectively
registered under the Securities Act and sold or otherwise
disposed of in accordance with the intended method of disposition
set forth in the registration statement covering such Shares,
(ii) are eligible for sale under Rule 144 or (iii) at such time
as an opinion of counsel satisfactory to Holdings shall have been
rendered to the effect that such conditions are not necessary in
order to comply with the Securities Act.

     3.5  Information Available. So long as the registration
statement is effective covering the resale of Shares owned by
Holder, Holdings will furnish (or, to the extent such information
is available electronically through Holdings' filings with the
SEC, Holdings will make available) to Holder:

          (a)  as soon as practicable after it is available, one
     copy of (i) its Annual Report to Shareholders (which Annual
     Report shall contain financial statements audited in
     accordance with generally accepted accounting principles)
     and (ii) if not included in substance in the Annual Report
     to Shareholders, its Annual Report on Form 10-K (the
     foregoing, in each case, excluding exhibits);

                              -12-

<Page>

          (b)  upon the reasonable request of Holder, all
     exhibits excluded by the parenthetical to subparagraph
     (a)(ii) of this Section 3.5 as filed with the SEC and all
     other information that is made available to shareholders;
     and

          (c)  upon the reasonable request of Holder, an adequate
     number of copies of the prospectuses to supply to any other
     party requiring such prospectuses; and Holdings, upon the
     reasonable request of Holder, will meet with Holder or a
     representative thereof at Holdings' headquarters during
     Holdings' normal business hours to discuss all information
     relevant for disclosure in the registration statement
     covering the Shares and will otherwise reasonably cooperate
     with Holder conducting an investigation for the purpose of
     reducing or eliminating Holder's exposure to liability under
     the Securities Act, including the reasonable production of
     information at Holdings' headquarters; provided, that
     Holdings shall not be required to disclose any confidential
     information to or meet at its headquarters with Holder until
     and unless Holder shall have entered into a confidentiality
     agreement in form and substance reasonably satisfactory to
     Holdings with Holdings with respect thereto.

     3.6  Limits on Additional Issuances.  Except for the
issuance of stock options under Holdings' stock option plans, the
issuance of common stock upon exercise of outstanding options,
and the conversion contemplated hereby, Holdings will not, for a
period of six months following the Effective Date, offer for sale
or sell any securities unless, in the opinion of Holdings'
counsel, such offer or sale does not jeopardize the availability
of exemptions from the registration and qualification
requirements under applicable securities laws.  The foregoing
shall not apply to securities issued in connection with any
acquisition, including by way of merger, or purchase of stock or
all or substantially all of the assets of any third party.
Except for the issuance of stock options under Holdings' stock
option plans, the issuance of common stock under Holdings'
employee stock purchase plan or upon exercise of outstanding
options and warrants, the issuance of common stock purchase
warrants, and the transactions contemplated hereby, Holdings has
not engaged in any offering of its equity securities during the
six months prior to the date of this Note. The foregoing
provisions shall not prevent Holdings from filing a "shelf"
registration statement pursuant to Rule 415 under the Securities
Act, but the foregoing provisions shall apply to any sale of
securities thereunder.

4.   Representations and Warranties of the Borrowers

     4.1  Holdings is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.  GB
Power is a corporation duly organized, validly existing and in
good standing under the laws of the State of Maine.  GB Hydro is
a corporation duly organized, validly existing and in good
standing under the laws of the State of New Hampshire.  BayCorp
Ventures is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of
Delaware.  Each of GB Maine and GB Benton is a limited liability
company duly organized, validly existing and in good standing
under the laws of the State of Maine.

                              -13-

<Page>

Each of NAC Power and NAC Gas is a limited liability company duly
organized, validly existing and in good standing under the laws
of the State of New Hampshire.

     4.2  Each Borrower has all requisite corporate or limited
liability company power and authority to own and operate its
properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted.  Each Borrower is duly
qualified and authorized to transact business and is in good
standing as a foreign corporation or limited liability company in
each jurisdiction in which the failure so to qualify would have a
material adverse effect on the business, properties, prospects,
or financial condition of the Borrowers taken as a whole.

     4.3   Each Borrower has all requisite legal and corporate or
limited liability company power and authority to execute, deliver
and perform its obligations under this Note, and the issuance and
sale of this Note (and, with respect to Holdings, the Shares) by
each Borrower has been duly and validly authorized by all
requisite corporate or limited liability company proceedings on
the part of such Borrower.  This Note when executed and delivered
by each Borrower is a valid and binding obligation of each
Borrower, enforceable against such Borrower in accordance with
its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law
governing specific performance, injunctive relief or other
equitable remedies.  The execution and delivery of this Note and
the transactions contemplated hereby and thereby, including but
not limited to the Borrowers' incurrence of the obligations under
this Note and the granting of security interests to secure the
Borrowers' obligations under this Note, will not result in or
constitute:

          (a)  a default, breach or violation of or under the
     certificate of incorporation, certificate of formation,
     bylaws or operating agreement of any Borrower,

          (b)  a default, breach or violation of or under any
     mortgage, deed of trust, indenture, note, bond, license,
     lease agreement or other agreement, instrument or obligation
     to which any Borrower is a party or by which any of the
     properties or assets of such Borrower are bound,

          (c)  a violation of any statute, rule, regulation,
     order, judgment or decree of any court, public body or
     authority by which any Borrower or any of its properties or
     assets are bound,

          (d)  an event which (with the notice or lapse of time
     or both) would permit any Person (as defined below) to
     terminate, accelerate the performance required by or
     accelerate the maturity of any indebtedness or obligation of
     any Borrower is bound or by which any of its properties or
     assets are bound,

          (e)  except as contemplated by the Loan Documents, the
     creation or imposition of any lien, charge or encumbrance on
     any property of any Borrower under any agreement or
     commitment to which such Borrower is a party or by which
     such Borrower is bound or by which any of its respective
     properties or assets are bound, or

                              -14-

<Page>

          (f)  an event which would require any consent under any
     agreement to which any Borrower is a party or by which such
     Borrower is bound or by which any of its respective
     properties or assets are bound.

     4.4  Immediately prior to any conversion of this Note pursuant to
Section 2 hereof, the Shares will be duly authorized by all
necessary corporate action on the part of Holdings and will have
been duly reserved for issuance.  When the Shares are issued such
shares will be validly issued and outstanding, fully paid and
nonassessable and the issuance of such Shares will not be subject
to preemptive or other similar contractual rights of any other
stockholder of Holdings.

     4.5  Holdings has complied and will comply with all applicable
federal and state securities laws in connection with the issuance
of this Note and the Shares hereunder.  Neither Holdings nor
anyone acting on its behalf has or will sell, offer to sell or
solicit offers to buy the Notes or similar securities to, or
solicit offers with respect thereto, from or enter into any
preliminary conversations or negotiations relating thereto with,
any Person, so as to bring the issuance and sale of the Notes
under the registration provisions of the Securities Act and
applicable state securities laws, Holdings has timely filed with
all relevant Governmental Authorities and listing agencies all
reports required under all applicable laws and regulation, except
where the failure to so file could not reasonably be expected to
have a Material Adverse Effect.

     4.6  None of the Borrowers or any of their Subsidiaries: (i) is a
Person named on the list of Specially Designated Nationals or
Blocked Persons maintained by the U.S. Department of the
Treasury's Office of Foreign Assets Control (the "OFAC") as
published from time to time; or (ii) is (A) an agency of the
government of a country, (B) an organization controlled by a
country, or (C) a Person resident in a country that is subject to
a sanctions program identified on the list maintained by the OFAC
and published from time to time, as such program may be
applicable to such agency, organization or Person; or
(iii) derives more than 15% of its assets or operating income
from investments in or transactions with any such country,
agency, organization or Person.

     4.7  The outstanding capital stock of Holdings as of December 31,
2003 is as described in Holdings' Quarterly Report on Form 10-Q
for the quarter ended September 30, 2004.  Holdings has not
issued any capital stock since September 30, 2004 other than
pursuant to the purchase of shares under Holdings' employee stock
purchase plan and the exercise of outstanding warrants or stock
options, in each case as disclosed in the SEC Reports.  The
Shares to be sold pursuant to the Agreements have been duly
authorized, and when issued and paid for in accordance with the
terms of the Agreements, will be duly and validly issued, fully
paid and nonassessable, subject to no lien, claim or encumbrance
(except for any such lien, claim or encumbrance created, directly
or indirectly, by Holder).  The outstanding shares of capital
stock of Holdings have been duly and validly issued and are fully
paid and nonassessable, have been issued in compliance with the
registration requirements of federal and state securities laws,
and were not issued in violation of any preemptive rights or
similar rights to subscribe for or purchase securities.  There
are no outstanding rights (including, without limitation,
preemptive rights), warrants or options to acquire, or
instruments

                              -15-

<Page>

convertible into or exchangeable for, any unissued shares of
capital stock or other equity interest in Holdings or its
Subsidiaries, other than this Note and options under Holdings
stock incentive plans, or any contract, commitment, agreement,
understanding or arrangement of any kind to which Holdings or any
of its Subsidiaries is a party and providing for the issuance or
sale of any capital stock of Holdings or of any of its
Subsidiaries, any such convertible or exchangeable securities or
any such rights, warrants or options.  Without limiting the
foregoing, except as provided in this Note and the Pledge
Agreement, no preemptive right, co-sale right, registration
right, right of first refusal or other similar right exists with
respect to the issuance and sale of the Shares.  There are no
shareholders' agreements, voting agreements or other similar
agreements with respect to the Common Stock to which Holdings is
a party.

     4.8  There is no material legal or governmental proceeding
pending, or to the knowledge of Holdings, threatened, to which
Holdings or any of its Subsidiaries is a party or of which the
business or property of Holdings or any of its Subsidiaries is
subject that is required to be disclosed and that is not so
disclosed in the SEC Reports.  Neither Holdings nor any of its
Subsidiaries is subject to any injunction, judgment, decree or
order of any court, regulatory body, administrative agency or
other government body.

     4.9  Neither Holdings nor any of its Subsidiaries is in violation
of its Certificate of Incorporation, bylaws or other
organizational documents, as amended, or in violation of any law,
administrative regulation, ordinance or order of any court or
governmental agency, arbitration panel or authority applicable to
Holdings, which violation, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect, and neither
Holdings nor its Subsidiaries is in default (and there exists no
condition which, with the passage of time or otherwise, would
constitute a default) in the performance of any bond, debenture,
note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust or any other material agreement or
instrument to which Holdings or any of its Subsidiaries is a
party or by which Holdings or its Subsidiaries or their
respective properties are bound, which default is reasonably
likely to have a Material Adverse Effect.

     4.10 Holdings and its Subsidiaries have good and marketable title
to all the properties and assets reflected as owned by them in
the consolidated financial statements included in the SEC
Reports, subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except (i) those, if any, reflected in
such consolidated financial statements or (ii) those which are
not material in amount and do not have a Material Adverse Effect
on the use made and intended to be made of such property by
Holdings or its Subsidiaries.  Holdings or its Subsidiaries hold
their respective leased properties under valid and binding
leases, with such exceptions as are not materially significant in
relation to the business of Holdings and its Subsidiaries, taken
as a whole. Except as disclosed in the SEC Reports, Holdings and
its Subsidiaries own or lease all such properties as are
necessary to its operations as now conducted.

     4.11 Each of Holdings and its Subsidiaries has all necessary
franchises, licenses, certificates and other authorizations from
any foreign, federal, state or local government or governmental
agency, department or body that are currently necessary for the
operation of the business of Holdings and

                              -16-

<Page>

its Subsidiaries as currently conducted, except where the failure
to currently possess such franchises, licenses, certificates and
other authorizations is not reasonably likely to have a Material
Adverse Effect.

     4.12 The financial statements of Holdings and the related notes
contained in the SEC Reports present fairly and accurately in all
material respects the financial position of Holdings as of the
dates therein indicated, and the results of its operations, cash
flows and the changes in shareholders' equity for the periods
therein specified, subject, in the case of unaudited financial
statements for interim periods, to normal year-end audit
adjustments.  Such financial statements (including the related
notes) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis at the times
and throughout the periods therein specified, except that
unaudited financial statements may not contain all footnotes
required by generally accepted accounting principles.

     4.13 Except as disclosed in the SEC Reports or in any press
release issued by Holdings at least two (2) Business Days prior
to the date of this Note, since December 31, 2003, there has not
been (i) an event, circumstance or change that has had or is
reasonably likely to have a Material Adverse Effect, (ii) any
obligation incurred by Holdings or any of its Subsidiaries,
direct or contingent, that is material to Holdings, (iii) any
dividend or distribution of any kind declared, paid or made on
the capital stock of Holdings, or (iv) any loss or damage
(whether or not insured) to the physical property of Holdings or
any of its Subsidiaries which has had a Material Adverse Effect.

     4.14 Holdings' Common Stock is registered pursuant to Section
12(b) of the Securities Act of 1933, as amended (the "Act"), and
is listed on the American Stock Exchange ("AMEX"), and, except as
disclosed in the SEC Reports, Holdings has taken no action
intended to, or which to its knowledge is likely to have the
effect of, terminating the registration of the Common Stock under
the Securities Act or delisting the Common Stock from the Amex
Stock Market.  The issuance of the Shares does not require
shareholder approval, including, without limitation, pursuant to
Section 713 of the Listing Standards, Policies and Requirements
of AMEX.

     4.15 Holdings has timely made all filings required under the
Securities Act during the twelve (12) months preceding the date
of this Note, and all of those documents complied in all material
respects with the SEC's requirements as of their respective
filing dates, and the information contained therein as of the
respective dates thereof did not contain an untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein in
light of the circumstances under which they were made not
misleading.

     4.16 Holdings has not taken and will not take any action designed
to or that might reasonably be expected to cause or result in an
unlawful manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.  Other than with
respect to the information related to the transactions
contemplated by this Note, Holdings has not disclosed any
material non-public information to the Holder.

                              -17-

<Page>

     4.17 Vitale, Caturano & Company P.C., who expressed their opinion
with respect to the consolidated financial statements in
Holdings' Annual Report on Form 10-K for the year ended December
31, 2003, have advised Holdings that they are, and to the
knowledge of Holdings they are, independent accountants as
required by the Securities Act and the rules and regulations
promulgated thereunder.

     4.18 Except for matters which are not reasonably likely to have a
Material Adverse Effect and those contracts that are
substantially or fully performed or expired by their terms, the
contracts listed as exhibits to or described in the SEC Reports
that are material to Holdings and all amendments thereto, are in
full force and effect on the date hereof, and neither Holdings
nor, to Holdings' knowledge, any other party to such contracts is
in breach of or default under any of such contracts.

     4.19 Except for matters which are described in the SEC Reports or
are not reasonably likely to have a Material Adverse Effect, each
of Holdings and its Subsidiaries has filed all necessary federal,
state and foreign income and franchise tax returns and has paid
or accrued all taxes shown as due thereon, and Holdings has no
knowledge of a tax deficiency which has been asserted or
threatened against Holdings or the Subsidiaries that has not been
resolved.

     4.20 Holdings is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for an
investment company, within the meaning of the Investment Company
Act of 1940, as amended, and will not be deemed an "investment
company" as a result of the transactions contemplated by this
Note.

     4.21 Each of Holdings and its Subsidiaries maintains insurance of
the types and in the amounts that Holdings reasonably believes is
adequate for its businesses, including, but not limited to,
insurance covering real and personal property owned or leased by
Holdings or the Subsidiaries against theft, damage, destruction,
acts of vandalism and all other risks customarily insured against
by similarly situated companies, all of which insurance is in
full force and effect.

     4.22 Neither Holdings nor any person acting on its behalf or at
its direction has in the past or will in the future take any
action to sell, offer for sale or solicit offers to buy any
securities of Holdings that would (i) bring the offer or sale of
the Shares as contemplated by this Note within the provisions of
Section 5 of the Securities Act or (ii) cause the offer or sale
of the Shares as contemplated by this Note to be integrated with
prior offerings by Holdings for purposes of any applicable
stockholder approval provisions, including, without limitation,
the rules and regulations of any exchange or automated quotation
system on which any of the securities of Holdings are listed or
designated.

     4.23 Prior to the conversion pursuant to Section 2, Holdings
shall comply with the requirements of the American Stock Exchange
with respect to the issuance of the Shares and, at such time as
the Shares may be registered under the Securities Act, the
listing thereof on the American Stock Exchange.

                              -18-

<Page>

     4.24 No transaction has occurred between or among Holdings or any
of its affiliates, officers or directors or, to the knowledge of
Holdings, any affiliate or affiliates of any such officer or
director that with the passage of time will be required to be
disclosed pursuant to Sections 13, 14 or 15(d) of the Securities
Act.

     4.25 No person or entity will be entitled to receive any
brokerage commission, finder's fee, fee for financial advisory
services or similar compensation in connection with the
transactions contemplated by this Note based on any contract made
by or on behalf of Holdings.

     4.26 The books, records and accounts of Holdings accurately and
fairly reflect, in reasonable detail, the transactions in, and
dispositions of, the assets of, and the operations of, Holdings.
Holdings maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions
are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in accordance with
generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization
and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.  Holdings
maintains disclosure controls and procedures (as such term is
defined in Rule 13a-14 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) that are effective in ensuring
that information required to be disclosed by Holdings in the
reports that it files or submits under the Securities Act is
recorded, processed, summarized and reported, within the time
periods specified in the rules and forms of the Securities and
Exchange Commission ("SEC"), including, without limitation,
controls and procedures designed to ensure that information
required to be disclosed by Holdings in the reports that it files
or submits under the Securities Act is accumulated and
communicated to Holdings' management, including its principal
executive officer or officers and its principal financial officer
or officers, as appropriate to allow timely decisions regarding
required disclosure.

     4.27 Subject to the accuracy of the Holder's representations and
warranties in Section 5 of this Note, the offer, sale and
issuance of the Shares in conformity with the terms of this Note
constitute transactions exempt from the registration requirements
of Section 5 of the Securities Act and from the registration or
qualification requirements of the laws of any applicable state or
United States jurisdiction.

5.   Representations and Warranties of the Holder

     5.1  The Holder acknowledges and understands that (i) the
issuance of the Common Stock has not been and will not be
registered under the Securities Act of 1933, as amended (the
"Securities Act"); and (ii) the issuance of the Common Stock is
intended to be exempt from registration under the Securities Act
by virtue of certain exemptions thereunder, including Section
4(2) of the Securities Act and the provisions of Regulation D
promulgated thereunder, and, therefore, the Shares cannot be
resold unless registered under the Securities Act or unless an
exemption from registration is available.

                              -19-

<Page>

     5.2  The Holder acknowledges that Holdings and its advisors will
rely on the representations and warranties of Holder contained in
this Section 5 for purposes of determining whether the issuance
of the Shares is exempt from registration under the Securities
Act.

     5.3  The Holder understands that the Note and the Shares will be
characterized as "restricted securities" under the Securities
Act.  In this connection, the Holder represents that it is
familiar with Rule 144 promulgated under the Securities Act.

     5.4  The Holder is acquiring the Note and will be acquiring the
Shares solely for its own account for investment purposes and not
with a view toward any distribution.

     5.5  The Holder has had an opportunity to review all forms, proxy
statements, registration statements, reports, schedules, and
other documents filed or furnished by Holdings since insert date
with the Securities and Exchange Commission.

     5.6  The Holder (i) has the financial ability to bear the
economic risk of the investment in the Note and the Shares, (ii)
has adequate means for providing for its current needs and
contingencies, (iii) has no need for liquidity with respect to
the investment in the Shares, and (iv) can afford a complete loss
of the investment in the Shares at this time and in the
foreseeable future.

     5.7  The Holder is capable of evaluating the merits and risks of
an investment in the Note and the Shares and of making an
informed investment decision with respect thereto.

     5.8  The Holder is an "accredited investor" as that term is
defined in Rule 501(a) of Regulation D promulgated under the
Securities Act.  Without in any way limiting the representations
set forth above, the Holder further agrees not to make any
disposition of all or any portion of the Shares unless and until
there is then in effect a registration statement under the
Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration
statement.

     5.9  The Holder acknowledges and agrees that any Shares shall
bear substantially the following legend:

     THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
     REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
     "SECURITIES ACT") AND ANY APPLICABLE STATE SECURITIES LAWS,
     AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED
     UNLESS (1) THERE IS AN EFFECTIVE REGISTRATION
     UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES
     LAWS COVERING SUCH SECURITIES OR (2) HOLDINGS RECEIVES AN
     OPINION OF COUNSEL,

                              -20-

<Page>


     REASONABLY SATISFACTORY TO HOLDINGS, STATING THAT SUCH SALE,
     TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
     REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY
     APPLICABLE STATE SECURITIES LAWS.

6.   Affirmative Covenants

     6.1  Each Borrower shall, and shall cause its Subsidiaries to,
preserve and maintain its respective existence, rights,
franchises, licenses and privileges in the jurisdiction of its
incorporation or formation and qualify and remain qualified and
authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business
requires such qualification and authorization and where the
failure to be so authorized and qualified could reasonably be
expected to have a Material Adverse Effect.

     6.2  Each Borrower shall, and shall cause its Subsidiaries to,
comply with (a) all Applicable Laws, including the obtaining of
all Governmental Approvals, the failure with which to comply
could reasonably be expected to have a Material Adverse Effect,
and (b) all terms and conditions of all Material Contracts to
which such Borrower is a party.

     6.3  Each Borrower shall, and shall cause its Subsidiaries to,
(a) protect and preserve all of its respective material
properties, including, but not limited to, all intellectual
property, and maintain in good repair, working order and
condition all tangible properties, ordinary wear and tear
excepted, and (b)  make or cause to be made all needed and
appropriate repairs, renewals, replacements and additions to such
properties, so that the business carried on in connection
therewith may be properly and advantageously conducted at all
times.

     Each Borrower shall, and shall cause its Subsidiaries to,
     maintain insurance (on a replacement cost basis) with
     financially sound and reputable insurance companies against
     such risks and in such amounts as is customarily maintained
     by Persons engaged in similar businesses or as may be
     required by Applicable Law, and from time to time deliver to
     the Holder upon its request a detailed list, together with
     copies of all policies of the insurance then in effect,
     stating the names of the insurance companies, the amounts
     and rates of the insurance, the dates of the expiration
     thereof and the properties and risks covered thereby.

     6.4  Each Borrower shall, and shall cause its Subsidiaries to,
pay and discharge when due (a) all taxes, assessments and
governmental charges or levies imposed upon such Borrower or upon
its income or profits or upon any properties belonging to it, and
(b) all lawful claims of materialmen, mechanics, carriers,
warehousemen and landlords for labor, materials, supplies and
rentals which, if unpaid, might become a Lien on any properties
of such Person; provided, however, that this Section shall not
require the payment or discharge of any such tax, assessment,
charge, levy or claim which is being contested in good faith by
appropriate proceedings which operate to suspend the collection
thereof and for which adequate reserves have been established on
the books of such Borrower or such Subsidiary, as applicable, in
accordance with GAAP.

                              -21-

<Page>

     6.5  Each Borrower shall, and shall cause its Subsidiaries to,
permit representatives or agents of the Holder, from time to time
after reasonable prior notice if no Event of Default shall be in
existence, as often as may be reasonably requested, but only
during normal business hours and at the expense of Holder (unless
a Default or Event of Default shall exist, in which case the
exercise by Holder of its rights under this Section shall be at
the expense of the Borrowers), as the case may be, to: (a) visit
and inspect all properties of such Borrower or such Subsidiary to
the extent any such right to visit or inspect is within the
control of such Person; (b) inspect and make extracts from their
respective books and records, including but not limited to
management letters prepared by independent accountants; and
(c) discuss with its officers and employees, and its independent
accountants, its business, properties, condition (financial or
otherwise), results of operations and performance.  If requested
by the Holder, each Borrower shall execute an authorization
letter addressed to its accountants authorizing Holder to discuss
the financial affairs of such Borrower and any of its
Subsidiaries with its accountants.

     6.6  Each Borrower shall, and shall cause its Subsidiaries to,
comply with all environmental laws the failure with which to
comply could reasonably be expected to have a Material Adverse
Effect.  If any Borrower or any of its Subsidiaries shall
(a) receive notice that any violation of any environmental law
may have been committed or is about to be committed by such
Person, (b) receive notice that any administrative or judicial
complaint or order has been filed or is about to be filed against
such Borrower or any of its Subsidiaries alleging violations of
any environmental law or requiring such Borrower or any of its
Subsidiaries to take any action in connection with the release of
hazardous materials or (c) receive any notice from a Governmental
Authority or private party alleging that such Borrower or any of
its Subsidiaries may be liable or responsible for costs
associated with a response to or cleanup of a release of
hazardous materials or any damages caused thereby, and the
matters referred to in such notices, individually or in the
aggregate, could reasonably be expected to have a Material
Adverse Effect, such Borrower or any of its Subsidiaries shall
provide the Holder with a copy of such notice promptly, and in
any event within 10 Business Days, after the receipt thereof by
such Borrower or any of its Subsidiaries.  Each Borrower shall,
and shall cause its Subsidiaries to, take promptly all actions
necessary to prevent the imposition of any Liens on any of their
respective properties arising out of or related to any
environmental laws.

     6.7  Each Borrower shall, and shall cause its Subsidiaries to,
maintain books and records pertaining to its respective business
operations in such detail, form and scope as is consistent with
good business practice and in accordance with GAAP.

     6.8  Each Borrower shall, at its sole cost and expense and upon
request of the Holder, execute and deliver or cause to be
executed and delivered, to the Holder such further instruments,
documents and certificates, and do and cause to be done such
further acts that may be reasonably necessary or advisable in the
reasonable opinion of the Holder to carry out more effectively
the provisions and purposes of this Note and the other Loan

                              -22-

<Page>

Documents or to perfect more fully or to renew the rights of
Holder with respect to the Collateral (or with respect to any
additions thereto or replacements or proceeds thereof or with
respect to any other property or assets hereafter acquired by any
Borrower or any of its Subsidiaries which may be deemed to be
part of the Collateral) pursuant to any of the Loan Documents.

     6.9  Within 15 days of any Borrower or any of its Subsidiaries
acquiring any Equity Interest in a Partnership after the
Effective Date, such Borrower shall cause to be delivered to the
Holder each of the following in form and substance satisfactory
to Holder a supplement to the Pledge Agreement subjecting the
Equity Interests issued by such Partnership to the Lien of the
Pledge Agreement and executed by such Borrower and each of its
Subsidiaries that owns any Equity Interests in such Partnership,
together with such other documents and opinions as requested by
the Holder.

7.   Information

     7.1  As soon as available and in any event within 45 days after
the end of each fiscal quarter of Holdings, the unaudited
consolidated balance sheet of Holdings and its Subsidiaries as at
the end of such period and the related unaudited consolidated
statements of income, shareholders' equity and cash flows of
Holdings and its Subsidiaries for such period, setting forth in
each case in comparative form the figures as of the end of and
for the corresponding periods of the previous fiscal year (if
any), all of which shall be certified by the chief executive
officer or chief financial officer of Holdings, in his or her
opinion, to present fairly, in accordance with GAAP and in all
material respects, the consolidated financial position of
Holdings and its Subsidiaries as at the date thereof and the
results of operations for such period (subject to normal year-end
audit adjustments).

     7.2  Promptly upon receipt thereof, copies of all management
reports, if any, submitted to Holdings or its shareholders by its
independent public accountants.

     7.3  Promptly upon the mailing thereof to the shareholders of
Holdings generally, copies of all financial statements, reports
and proxy statements so mailed and promptly upon the issuance
thereof copies of all press releases issued by Holdings or any of
its Subsidiaries.

     7.4  To the extent any Borrower is aware of the same, prompt
notice of the commencement of any proceeding or investigation by
or before any Governmental Authority and any action or proceeding
in any court or other tribunal or before any arbitrator against
or in any other way relating adversely to, or adversely
affecting, such Borrower or any of its Subsidiaries or any of
their respective properties, assets or businesses which could
reasonably be expected to have a Material Adverse Effect, and
prompt notice of the receipt of notice that any United States
income tax returns of any Borrower or any of its Subsidiaries are
being audited.

                              -23-

<Page>

     7.5  A copy of any amendment to the certificate of incorporation,
bylaws, operating agreement or other similar organizational
documents of any Borrower or any of its Subsidiaries promptly
upon the Holder's request therefore.

     7.6  Prompt notice of any change in the senior management of
Holdings and any change in the business, assets, liabilities,
financial condition, results of operations or business prospects
of any Borrower or any of its Subsidiaries which has had or could
reasonably be expected to have a Material Adverse Effect.
<Page>

     7.7  Notice of the occurrence of any of the following promptly
upon a responsible officer of Holdings obtaining knowledge
thereof: (i) any Default or Event of Default or (ii) any default
under the Pledge Agreement.

     7.8  Prompt notice of any order, judgment or decree in excess of
$100,000 having been entered against any Borrower or any of its
Subsidiaries or any of their respective properties or assets.

     7.9  Prompt notice if any Borrower or any of its Subsidiaries
shall receive any notification from any Governmental Authority
alleging a violation of any Applicable Law or any inquiry which,
in either case, could reasonably be expected to have a Material
Adverse Effect.

     7.10 From time to time and promptly upon each request, such data,
certificates, reports, statements, opinions of counsel, documents
or further information regarding the business, assets,
liabilities, financial condition, results of operations or
business prospects of any Borrower or any of its Subsidiaries as
the Holder may reasonably request.

8.   Negative Covenants

     For so long as this Note is in effect, unless the Holder
shall otherwise consent in writing, each Borrower shall comply
with the following covenants:

     8.1  No Borrower shall use the proceeds of the Note for any
purpose other than: (a) funding the purchase of (i) the jointly
or commonly-held interests in oil, gas and mineral-related assets
and operations as described in or contemplated by the Project
Development Agreement dated January 7, 2005 by and between NAC
Gas and Sonerra Resources Corporation, a Texas corporation with a
place of business in Nacogdoches, Texas and (ii) the Partnership;
and (b) working capital needs of Borrower in the ordinary course
of its business.  No part of the proceeds of this Note will be
used (i) for the purpose of buying or carrying "margin stock"
within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System or to extend credit to others for the
purpose of purchasing or carrying any such margin stock or
(ii) to finance any operations, investments or activities in, or
make any payments to, any country, agency, organization, or
Person described in clause (ii) of Section 4.6.

                              -24-

<Page>

     8.2  No Borrower shall, nor shall it permit any of its
Subsidiaries to, declare or make any Restricted Payment except
for:

          (a)  Restricted Payments made by a Borrower to a
     Borrower; and

          (b)  Restricted Payments from a Partnership to a
     Borrower.

     8.3  No Borrower shall, nor shall it permit any Subsidiary to,
create, incur, assume, or permit or suffer to exist any
Indebtedness, except the following:

          (a)  Indebtedness under the Loan Documents;

          (b)  Indebtedness existing on the Effective Date and
     described on Schedule 8.3(b); and

          (c)  Indebtedness incurred after the Effective Date in
     an aggregate amount not to exceed $4,400,000.

     8.4  (a)  No Borrower shall, nor shall it permit any Subsidiary
to, create, assume, or incur any Lien (other than Permitted
Liens) upon any of its properties, assets, income or profits of
any character whether now owned or hereafter acquired.

          (b)  No Borrower shall, nor shall it permit any
     Subsidiary to, enter into, assume or otherwise be bound by
     any Negative Pledge except for a Negative Pledge contained
     in any agreement (i)(x) evidencing Indebtedness which such
     Borrower or such Subsidiary may create, incur, assume, or
     permit or suffer to exist under Section 8.3; (y) which
     Indebtedness is secured by a Lien permitted to exist under
     this Note; and (z) which prohibits the creation of any other
     Lien on only the property securing such Indebtedness as of
     the date such agreement was entered into; or (ii) relating
     to the sale of a Subsidiary or assets pending such sale,
     provided that in any such case the Negative Pledge applies
     only to the Subsidiary or the assets that are the subject of
     such sale.

          (c)  No Borrower shall, nor shall it permit any
     Subsidiary to, create or otherwise cause or suffer to exist
     or become effective any consensual encumbrance or
     restriction of any kind on the ability of such Borrower or
     such Subsidiary to: (i) pay dividends or make any other
     distribution on any of such Borrower or such Subsidiary's
     capital stock or other equity interests owned by such
     Borrower or any of its Subsidiaries; (ii) pay any
     Indebtedness owed to such Borrower or any of its
     Subsidiaries; (iii) make loans or advances to the Borrower
     or any Subsidiary; or (iv) transfer any of its property or
     assets to the Borrower or any Subsidiary.

     8.5  No Borrower shall, nor shall it permit any Subsidiary to:
(a) enter into any transaction of merger or consolidation;
(b) liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution); or

                              -25-

<Page>

(c) convey, sell, lease, sublease, transfer or otherwise dispose
of, in one transaction or a series of transactions, all or
substantially all of its business or assets, whether now owned or
hereafter acquired; provided, however, that: (i) any Subsidiary
may merge with and into a Borrower so long as (x) a Borrower is
the survivor of such merger (and in the case of a merger with
Holdings, Holdings is the survivor of such merger) and
(y) immediately prior to such merger, and immediately thereafter
and after giving effect thereto, no Default or Event of Default
is or would be in existence; and (ii) the Borrower and its
Subsidiaries may lease and sublease their respective assets, as
lessor or sublessor (as the case may be), in the ordinary course
of their business.

     8.6  No Borrower shall change its fiscal year from that in effect
as of the Effective Date.

     8.7  No Borrower shall, nor shall it permit any of its
Subsidiaries to, permit to exist or enter into, any transaction
(including the purchase, sale, lease or exchange of any property
or the rendering of any service) with any Affiliate, except
transactions in the ordinary course of and pursuant to the
reasonable requirements of the business of the Borrowers or any
of their Subsidiaries and upon fair and reasonable terms which
are no less favorable to the Borrowers or such Subsidiary than
would be obtained in a comparable arm's length transaction with a
Person that is not an Affiliate.

     8.8  No Borrower shall, nor shall it permit any Subsidiary to,
permit any of its respective assets to become or be deemed to be
"plan assets" within the meaning of ERISA, the Internal Revenue
Code and the respective regulations promulgated thereunder.

9.   Events of Default

     Each of the following conditions or events, shall constitute
an event of default ("Event of Default"):

     (a)  if Borrowers shall default in the payment of any
principal or interest on this Note when the same becomes due and
payable, whether at maturity or on demand or otherwise; or

     (b)  if any representation or warranty made by or on behalf
of Borrowers herein or in any instrument furnished in compliance
with or in reference hereto or otherwise in connection with the
transactions contemplated hereby shall prove to have been false
or incorrect in any material respect on the date as of which
made; or

     (c)  any Borrower or any Pledgor shall fail to perform or
observe any term, covenant, condition or agreement contained in
this Note or the Pledge Agreement; or

     (d)  (i) a court or governmental agency having jurisdiction
in the premises shall enter a decree or order for relief in
respect of any Borrower in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appoint a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of any
Borrower

                              -26-

<Page>

or for any substantial part of its property or ordering the
winding up or liquidation of its affairs, (ii) an involuntary
case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect is commenced against any Borrower
and such petition remains unstayed and in effect for a period of
60 consecutive days, (iii) any Borrower shall commence a
voluntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or consent to the
entry of an order for relief in an involuntary case under any
such law, or consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator
or similar official of any Borrower or any substantial part of
its property or make any general assignment for the benefit of
creditors or (iv) any Borrower shall admit in writing its
inability to pay its debts generally as they become due or any
action shall be taken by any Borrower in furtherance of any of
the aforesaid purposes; or

     (e)  a default or event of default shall have occurred under
any document, instrument, contract or agreement (i) evidencing or
securing indebtedness of any Borrower with an outstanding
principal balance of at least $1,000,000, (ii) material to the
financial condition of any Borrower, or (iii) between any
Borrower and Holder; or

     (f)  any Borrower or any Pledgor shall disavow, revoke or
terminate (or attempt to terminate) any Loan Document to which it
is a party or shall otherwise challenge or contest in any action,
suit or proceeding in any court or before any Governmental
Authority the validity or enforceability of this Note, the Pledge
Agreement or any other Loan Document or this Note, the Pledge
Agreement or any other Loan Document shall cease to be in full
force and effect (except as a result of the express terms
thereof); or

     (g)  a final judgment or order for the payment of money or
for an injunction shall be entered against any Borrower or any of
their respective Subsidiaries, by any court or other tribunal and
(i) such judgment or order shall continue for a period of 30 days
without being paid, stayed or dismissed through appropriate
appellate proceedings and (ii) either (A) the amount of such
judgment or order for which insurance has not been acknowledged
in writing by the applicable insurance carrier (or the amount as
to which the insurer has denied liability) exceeds, individually
or together with all other such outstanding judgments or orders
entered against any Borrower or any of its Subsidiaries, $500,000
or (B) in the case of an injunction or other non-monetary
judgment, such judgment could reasonably be expected to have a
Material Adverse Effect; or

     (h)  a warrant, writ of attachment, execution or similar
process shall be issued against any material property of any
Borrower or any Subsidiary which exceeds, individually or
together with all other such warrants, writs, executions and
processes, $500,000 in amount and such warrant, writ, execution
or process shall not be discharged, vacated, stayed or bonded for
a period of 30 days; provided, however, that if a bond has been
issued in favor of the claimant or other Person obtaining such
warrant, writ, execution or process, the issuer of such bond
shall execute a waiver or subordination agreement in form and
substance satisfactory to the Holder pursuant to which the issuer
of such bond subordinates its right of reimbursement,
contribution or subrogation to the Obligations and waives or
subordinates any Lien it may have on the assets of any Borrower;
or

                              -27-

<Page>

     (i)  the Holder shall cease to have a valid and perfected
first priority Lien in any material portion of the Collateral, in
each case, for any reason other than the failure of the Holder to
take any action within its control.

10.  Remedies Upon Default

     10.1 Upon the occurrence of any Event of Default, the Holder of
this Note may proceed to protect and enforce its rights by suit
in equity, action at law and/or other appropriate proceeding
either for specific performance of any covenant, provision or
condition contained in this Note or in aid of the exercise of any
power granted in this Note, and (unless there shall have occurred
an Event of Default under Section 9(d), in which case the unpaid
balance of this Note shall automatically become due and payable)
may at its option by notice to any Borrower declare all or any
part of the unpaid principal amount of this Note then outstanding
to be forthwith due and payable, and thereupon such unpaid
principal amount or part thereof, together with interest accrued
thereon and all other sums, if any, payable under this Note,
shall become so due and payable without presentation,
presentment, protest or further demand or notice of any kind, all
of which are hereby expressly waived, and such holder or holders
may proceed to enforce payment of such amount or part thereof in
such manner as it or they may elect.

     10.2 An Event of Default shall not be deemed to be in existence
or to have occurred for any purpose of this Note until the
expiration of any grace period under this Note or if Holder of
this Note shall have waived such event in writing or stated in
writing that the same has been cured to its reasonable
satisfaction. No waiver or statement of satisfactory cure
pursuant to this Section 10.2 shall extend to or affect any
subsequent or other Event of Default not specifically identified
in such waiver or statement of satisfactory cure pursuant to this
Section 10.2 shall extend to or affect any subsequent or other
Event of Default not specifically identified in such waiver or
statement of satisfactory cure or impair any of rights of Holder
of any Note or Shares upon the occurrence thereof.

     10.3 Each Borrower hereby waives (a) all presentments, demands
for performance, notice of nonperformance (except to the extent
specifically required by the provisions hereof), (b) any
requirement of diligence or promptness on the part of any Holder
in the enforcement of its rights under this Note, (c) except to
the extent required by other provisions of this Note, any and all
notices of every kind and description which may be required to be
given by any statute or rule of law, and (d) any defense of any
kind  which it may now or hereafter have with respect to its
liability under this Note.

     10.4 The Holder may exercise any and all of its rights under any
and all of the other Loan Documents.

     10.5 The Holder may exercise all other rights and remedies it may
have under any Applicable Law.

                              -28-

<Page>

     10.6 To the extent permitted by Applicable Law, the Holder shall
be entitled to the appointment of a receiver for the assets and
properties of the Borrowers and their Subsidiaries, without
notice of any kind whatsoever and without regard to the adequacy
of any security for the Obligations or the solvency of any party
bound for its payment, to take possession of all or any portion
of the business operations of the Borrowers and their
Subsidiaries and to exercise such power as the court shall confer
upon such receiver.

11.  Conditions Precedent.

     The obligation of the Holder to make the loan to the
Borrowers is subject to the following conditions precedent:

          (a)  The Holder shall have received each of the
     following, in form and substance satisfactory to the Holder:

               (i)  Counterparts of this Note executed by all of
          the parties hereto;

               (ii) The Pledge Agreement executed by each Pledgor
          existing as of the Effective Date;

               (iii)     All certificates representing any shares
          of Equity Interests pledged pursuant to the Pledge
          Agreement, together with an undated stock power for
          each such certificate executed in blank by a duly
          authorized officer of the Pledgor thereof, together
          with an Acknowledgment and Consent, substantially in
          the form of Schedule 2 to the Pledge Agreement, duly
          executed by any issuer of any Equity Interest pledged
          pursuant to the Pledge Agreement that is not itself a
          party to the Pledge Agreement;

               (iv) An opinion of counsel to the Borrowers and
          the Pledgors, addressed to the Holder, reasonably
          satisfactory to the Holder and its counsel; and

               (v)  Such other documents, agreements and
          instruments as the Holder may reasonably request; and

          (b)  In the good faith judgment of the Holder:

               (i)  There shall not have occurred or become known
          to the Holder a material adverse change in the
          business, condition (financial or otherwise),
          operations, performance, and properties, taken as a
          whole, of the Borrowers and their subsidiaries taken as
          a whole since December 31, 2003;

               (ii) No litigation, action, suit, investigation or
          other arbitral, administrative or judicial proceeding
          shall be pending or threatened which could reasonably
          be expected to (1) result in a Material Adverse Effect
          or (2) restrain or enjoin, impose

                              -29-

<Page>

          materially burdensome conditions on, or otherwise
          materially and adversely affect the ability of any
          Borrowers or any Pledgor to fulfill its obligations
          under the Loan Documents to which it is a party; and

               (iii)     The Borrowers and their respective
          Subsidiaries shall have received all approvals,
          consents and waivers, and shall have made or given all
          necessary filings and notices as shall be required to
          consummate the transactions contemplated hereby without
          the occurrence of any default under, conflict with or
          violation of (1) any Applicable Law or (2) any
          agreement, document or instrument to which any Borrower
          or any Pledgor is a party or by which any of them or
          their respective properties is bound, except for such
          approvals, consents, waivers, filings and notices the
          receipt, making or giving of which would not reasonably
          be likely to (A) have a Material Adverse Effect, or (B)
          restrain or enjoin, impose materially burdensome
          conditions on, or otherwise materially and adversely
          affect the ability of any Borrower or any Pledgor to
          fulfill its obligations under the Loan Documents to
          which it is a party.

12.  Transfer and Substitution of this Note

     12.1 Upon receipt of evidence reasonably satisfactory to the
Borrowers of the loss, theft, destruction or mutilation of any
Note and, in the case of any such loss, theft or destruction,
upon delivery of an indemnity bond in such reasonable amount as
the Borrowers may determine (or, in the case of any Note held by
Holder or any institutional investor, of any indemnity agreement
from Holder or such other holder reasonably satisfactory to the
Borrowers), or in the case of any such mutilation, upon the
surrender of such Note for cancellation to the Borrowers at its
principal office, the Borrowers at their expense will execute and
deliver, in lieu thereof, a new Note of the same class and of
like tenor, dated so that there will be no loss of interest on
such Note. Any Note in lieu of which any such new Note has been
executed and delivered by the Borrowers shall not be deemed to be
an outstanding Note for any purpose hereof.

     12.2 Upon any assignment in whole of this Note by Holder in
accordance with Section 16.10 hereof, upon notice to the
Borrowers by Holder of such assignment and surrender of this Note
to the Borrowers, the Borrowers shall at their expense cause to
be executed and delivered a new Note in the name of such
assignee, substantially in the form hereof, dated so that there
will be no loss of interest on such Note. Any Note in lieu of
which any such new Note has been executed and delivered by each
Borrower shall not be deemed to be an outstanding Note for any
purpose hereof.

     12.3 Upon any partial assignment of this Note by Holder in
accordance with Section 16.10 hereof, upon notice to the
Borrowers by Holder of such assignment and the amount thereof and
surrender of this Note to the Borrowers, the Borrowers shall at
their expense cause to be executed and delivered a new Note in
the name of such assignee in a principal amount equal to the
principal amount so assigned and a new Note in favor of Holder in
a principal amount equal to the principal amount retained by such
Holder, in each case, otherwise

                              -30-

<Page>

in substantially in the form hereof and dated so that there will
be no loss of interest on such Note. Any Note in lieu of which
any such new Note has been executed and delivered by each
Borrower shall not be deemed to be an outstanding Note for any
purpose hereof.

13.  Joint and Several Liability.

     (a)  The obligations of the Borrowers hereunder and under
the other Loan Documents to which any Borrower is a party shall
be joint and several, and accordingly, each Borrower confirms
that it is liable for the full amount of the "Obligations,"
regardless of whether incurred by such Borrower or any other
Borrower, and all of the other obligations and liabilities of the
other Borrowers hereunder and under the other Loan Documents.

     (b)  Each of the Borrowers represents and warrants to the
Holder that the Borrowers, though separate legal entities, are
mutually dependent on each other in the conduct of their
respective businesses as an integrated operation and have
determined it to be in their mutual best interests to obtain
financing from the Holder through their collective efforts.

     (c)  The Holder shall not be obligated or required before
enforcing any Loan Document against a Borrower: (a)  to pursue
any right or remedy any of them may have against any other
Borrower, any Pledgor or any other Person or commence any suit or
other proceeding against any other Borrower, any Pledgor or any
other Person in any court or other tribunal; (b) to make any
claim in a liquidation or bankruptcy of any other Borrower, any
Pledgor or any other Person; or (c) to make demand of any other
Borrower, any Pledgor or any other Person or to enforce or seek
to enforce or realize upon any collateral security held by the
Holder which may secure any of the Obligations.

     (d)  The Holder may, at any time and from time to time,
without the consent of, or notice to, a Borrower, and without
discharging such Borrower from its obligations hereunder, take
any of the following actions: (i) amend, modify, alter or
supplement the terms of any of the Obligations of any other
Borrower, including, but not limited to, extending or shortening
the time of payment of any such Obligations or changing the
interest rate that may accrue on any of such Obligations;
(ii) following an Event of Default, sell, exchange, release or
otherwise deal with all, or any part, of any collateral securing
any of the Obligations and in which any other Borrower has
rights; (iii) release any other Borrower, any Pledgor or any
other Person liable in any manner for the payment or collection
of the Obligations; (iv) exercise, or refrain from exercising,
any rights against any other Borrower, any Pledgor or any other
Person; and (v) apply any sum, by whomsoever paid or however
realized, to the Obligations in such order as the Holder shall
elect.

     (e)  It is the intent of each Borrower and the Holder that
in any proceeding of the types described in Section 9(d), a
Borrower's maximum obligation hereunder shall equal, but not
exceed, the maximum amount which would not otherwise cause the
obligations of such Borrower hereunder (or any other obligations
of such Borrower to the Holder) to be avoidable or unenforceable
against such Borrower in such proceeding as a result of
Applicable Law, including without limitation, (i) Section 548 of
the

                              -31-

<Page>

Bankruptcy Code and (ii) any state fraudulent transfer or
fraudulent conveyance act or statute applied in such proceeding,
whether by virtue of Section 544 of the Bankruptcy Code or
otherwise.  The Applicable Laws under which the possible
avoidance or unenforceability of the obligations of such Borrower
hereunder (or any other obligations of such Borrower to the
Holder) shall be determined in any such proceeding are referred
to as the "Avoidance Provisions".  Accordingly, to the extent
that the obligations of any Borrower hereunder would otherwise be
subject to avoidance under the Avoidance Provisions, the maximum
Obligations for which such Borrower shall be liable hereunder
shall be reduced to that amount which, as of the time any of the
Obligations are deemed to have been incurred under the Avoidance
Provisions, would not cause the obligations of such Borrower
hereunder (or any other obligations of such Borrower to the
Holder), to be subject to avoidance under the Avoidance
Provisions.  This subsection is intended solely to preserve the
rights of the Holder hereunder to the maximum extent that would
not cause the obligations of any Borrower hereunder to be subject
to avoidance under the Avoidance Provisions, and no Borrower or
any other Person shall have any right or claim under this Section
as against the Holder that would not otherwise be available to
such Person under the Avoidance Provisions.

     (f)  Each Borrower assumes all responsibility for being and
keeping itself informed of the financial condition of the other
Borrowers and the Pledgors, and of all other circumstances
bearing upon the risk of nonpayment of any of the Obligations and
the nature, scope and extent of the risks that such Borrower
assumes and incurs hereunder, and agrees that the Holder shall
not have any duty whatsoever to advise any Borrower of
information regarding such circumstances or risks.

14.  Indemnification

     (a)  Each Borrower shall and hereby agrees to indemnify,
defend and hold harmless the Holder, any affiliate of the Holder,
and its directors, officers, shareholders, agents, employees and
counsel (each referred to herein as an "Indemnified Party") from
and against any and all of the following (collectively, the
"Indemnified Costs"):  losses, costs, claims, damages,
liabilities, deficiencies, judgments or reasonable expenses of
every kind and nature (including, without limitation, amounts
paid in settlement, court costs and the reasonable fees and
disbursements of counsel incurred in connection with any
litigation, investigation, claim or proceeding or any advice
rendered in connection therewith) incurred by an Indemnified
Party in connection with, arising out of, or by reason of, any
suit, cause of action, claim, arbitration, investigation or
settlement, consent decree or other proceeding (the foregoing
referred to herein as an "Indemnity Proceeding") which is in any
way related directly or indirectly to: (i) this Note or any other
Loan Document or the transactions contemplated thereby; (ii) the
making of any loans hereunder; (iii) any actual or proposed use
by the Borrowers of the proceeds of such loans; (iv) the Holder's
entering into this Note; (v) the fact that the Holder has
established the credit facility evidenced hereby in favor of the
Borrowers; (vi) the fact that the Holder is a creditor of the
Borrowers and has or is alleged to have information regarding the
financial

                              -32-

<Page>

condition, strategic plans or business operations of the
Borrowers and their Subsidiaries; (vii) the fact that the Holder
is a material creditor of the Borrowers and is alleged to
influence directly or indirectly the business decisions or
affairs of the Borrowers and their Subsidiaries or their
financial condition; (viii) the exercise of any right or remedy
the Holder may have under this Note or the other Loan Documents;
or (ix) any violation or non-compliance by the Borrowers or any
of their Subsidiaries of any Applicable Law (including any
environmental law) including, but not limited to, any Indemnity
Proceeding commenced by (A) the Internal Revenue Service or state
taxing authority or (B) any Governmental Authority or other
Person under any environmental law, including any Indemnity
Proceeding commenced by a Governmental Authority or other Person
seeking remedial or other action to cause any Borrower or its
Subsidiaries (or its respective properties) (or the Holder as
successor to such Borrower) to be in compliance with such
environmental laws; provided, however, that the Borrowers shall
not be obligated to indemnify any Indemnified Party for (A) any
acts or omissions of such Indemnified Party in connection with
matters described in this subsection to the extent arising from
the gross negligence or willful misconduct of such Indemnified
Party, as determined by a court of competent jurisdiction in a
final, non-appealable judgment or (B) Indemnified Costs to the
extent arising directly out of or resulting directly from claims
of one or more Indemnified Parties against another Indemnified
Party.

     (b)  The Borrowers' indemnification obligations under this
Section shall apply to all Indemnity Proceedings arising out of,
or related to, the foregoing whether or not an Indemnified Party
is a named party in such Indemnity Proceeding.  In this regard,
this indemnification shall cover all Indemnified Costs of any
Indemnified Party in connection with any deposition of any
Indemnified Party or compliance with any subpoena (including any
subpoena requesting the production of documents).  This
indemnification shall, among other things, apply to any Indemnity
Proceeding commenced by other creditors of any Borrower or any of
their Subsidiaries, any shareholder of any Borrower or any of
their Subsidiaries (whether such shareholder(s) are prosecuting
such Indemnity Proceeding in their individual capacity or
derivatively on behalf of such Borrower), any account debtor of
any Borrower or any of their Subsidiaries or by any Governmental
Authority. If indemnification is to be sought hereunder by an
Indemnified Party, then such Indemnified Party shall notify such
Borrower of the commencement of any Indemnity Proceeding;
provided, however, that the failure to so notify such Borrower
shall not relieve such Borrower from any liability that it may
have to such Indemnified Party pursuant to this Section.

     (c)  This indemnification shall apply to any Indemnity
Proceeding arising during the pendency of any bankruptcy
proceeding filed by or against any Borrower and/or any of its
Subsidiaries.

     (d)  An Indemnified Party may conduct at its own expense its
own investigation and defense of, and may formulate its own
strategy with respect to, any Indemnity Proceeding covered by
this Section.  No action taken by legal counsel chosen by an
Indemnified Party in investigating or defending against any such
Indemnity Proceeding shall vitiate or in any way impair the
obligations and duties of the Borrowers hereunder to indemnify
and hold harmless each such Indemnified Party; provided, however,
that if (i) any Borrower is required to indemnify an Indemnified
Party pursuant hereto and (ii) such Borrower has provided
evidence reasonably satisfactory to such

                              -33-

<Page>

Indemnified Party that such Borrower has the financial
wherewithal to reimburse such Indemnified Party for any amount
paid by such Indemnified Party with respect to such Indemnity
Proceeding, such Indemnified Party shall not settle or compromise
any such Indemnity Proceeding without the prior written consent
of such Borrower (which consent shall not be unreasonably
withheld or delayed). Notwithstanding the foregoing, an
Indemnified Party may settle or compromise any such Indemnity
Proceeding without the prior written consent of the Borrowers
where (x) no monetary relief is sought against such Indemnified
Party in such Indemnity Proceeding or (y) there is an allegation
of a violation of law by such Indemnified Party.

     (e)  If and to the extent that the obligations of the
Borrowers under this Section are unenforceable for any reason,
each Borrower hereby agrees to make the maximum contribution to
the payment and satisfaction of such obligations which is
permissible under Applicable Law.

     (f)  The Borrowers' obligations under this Section shall
survive any termination of this Note and the other Loan Documents
and the payment in full in cash of the Obligations, and are in
addition to, and not in substitution of, any other of their
obligations set forth in this Note or any other Loan Document to
which it is a party.

15.  Definitions

     As used in this Note, the following terms have the following
meanings:

     "Affiliate" means any Person (other than Holder):
(a) directly or indirectly controlling, controlled by, or under
common control with, any Borrower; (b) directly or indirectly
owning or holding five percent (5.0%) or more of any Equity
Interest in any Borrower; or (c) five percent (5.0%) or more of
whose voting stock or other Equity Interest is directly or
indirectly owned or held by any Borrower.  For purposes of this
definition, "control" (including with correlative meanings, the
terms "controlling", "controlled by" and "under common control
with") means the possession directly or indirectly of the power
to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities
or by contract or otherwise.  The Affiliates of a Person shall
include any officer or director of such Person.  For purposes of
this Note, in no event shall Holder be deemed to be an Affiliate
of the Borrower.

     "Applicable Law" means all applicable provisions of
constitutions, statutes, laws, rules, regulations and orders of
all governmental bodies and all orders, rulings and decrees of
all courts and arbitrators.

     "Business Day" means any day other than a Saturday, Sunday
or other day on which banks in New York, New York are authorized
or required to close.

     "Collateral" has the meaning given that term in the Pledge
Agreement.

                              -34-

<Page>

     "Default" means any of the events specified in Section 9,
whether or not there has been satisfied any requirement for the
giving of notice, the lapse of time, or both.

     "Effective Date"  means the later of: (a) the date hereof;
and (b) the date on which all of the conditions precedent set
forth in Section 11 shall have been fulfilled or waived in
writing by the Holder.

     "Equity Interest" means, with respect to any Person, any
share of capital stock of (or other ownership or profit interests
in) such Person, any warrant, option or other right for the
purchase or other acquisition from such Person of any share of
capital stock of (or other ownership or profit interests in) such
Person, any security convertible into or exchangeable for any
share of capital stock of (or other ownership or profit interests
in) such Person or warrant, right or option for the purchase or
other acquisition from such Person of such shares (or such other
interests), and any other ownership or profit interest in such
Person (including, without limitation, partnership, member or
trust interests therein), whether voting or nonvoting, and
whether or not such share, warrant, option, right or other
interest is authorized or otherwise existing on any date of
determination.

     "Event of Default" has the meaning given that term in
Section 9.

     "Governmental Approval" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings
with, and reports to, all Governmental Authorities.

     "Governmental Authority" means any national, state or local
government (whether domestic or foreign), any political
subdivision thereof or any other governmental,
quasi-governmental, judicial, public or statutory
instrumentality, authority, body, agency, bureau, commission,
board, department or other entity or any arbitrator with
authority to bind a party at law.

     "Indebtedness" means, without duplication, with respect to
any Person (i) obligations of such Person in respect of money
borrowed; (ii) obligations of such Person (other than trade debt
incurred in the ordinary course of business), whether or not for
money borrowed (A) represented by notes payable, or drafts
accepted, in each case representing extensions of credit,
(B) evidenced by bonds, debentures, notes or similar instruments,
or (C) constituting purchase money indebtedness, conditional
sales contracts, title retention debt instruments or other
similar instruments, upon which interest charges are customarily
paid or that are issued or assumed as full or partial payment for
property; (iii) capitalized lease obligations of such Person;
(iv) all reimbursement obligations of such Person under any
letters of credit or acceptances (whether or not the same have
been presented for payment); and (v) all indebtedness and
obligations of other Persons which (A) such Person has guaranteed
or is otherwise recourse to it or (B) is secured by a lien on any
property of such Person.

     "Lien" means any security interest, lien, encumbrance,
mortgage, deed to secure debt, deed of trust, pledge, charge,
conditional sale or other title retention agreement, or other
encumbrance of any kind covering any property of a Person.

                              -35-

<Page>

     "Loan Documents" means this Note, the Pledge Agreement and
each other document or instrument now or hereafter executed and
delivered by a Borrower or any of its Subsidiaries in connection
with, pursuant to or relating to this Note.

     "Material Adverse Effect" means a material adverse effect
upon (i) the business or financial condition of Holdings and its
Subsidiaries taken as a whole or (ii) the ability of Holdings or
any Borrower to perform its obligations under the Loan Documents
in any material respect.

     "Material Contracts" means any contract or other arrangement
(other than Loan Documents) to which any Borrower is a party as
to which the breach, nonperformance, cancellation or failure to
renew by any party thereto could reasonably be expected to have a
Material Adverse Effect.

     "Negative Pledge" means, with respect to a given asset, any
provision of a document, instrument or agreement (other than any
Loan Document) which prohibits or purports to prohibit the
creation or assumption of any Lien on such asset as security for
Indebtedness of the Person owning such asset or any other Person.

     "Obligations" means, individually and collectively, the
aggregate principal balance of, and all accrued and unpaid
interest on all Indebtedness, liabilities and obligations of the
Borrowers and their Subsidiaries owing to the Holder of every
kind, nature and description, under or in respect of this Note or
any of the other Loan Documents, including, without limitation,
indemnification obligations, whether direct or indirect, absolute
or contingent, due or not due, contractual or tortuous,
liquidated or unliquidated, and whether or not evidenced by any
promissory note.

     "Permitted Liens" means (i) Liens for taxes, assessments, or
similar charges either not yet due or being contested in good
faith, (ii) Liens of materialmen, mechanics, warehousemen, or
carriers, or other like Liens arising in the ordinary course of
business and securing obligations which are not yet delinquent,
(iii) purchase money liens or purchase money security interests
upon or in any property acquired or held by any Borrower in the
ordinary course of business to secure indebtedness incurred after
the date hereof to the extent not prohibited hereunder, (iv)
Liens consented to by the Holder in writing, and (v) those Liens
which in the aggregate constitute an immaterial and insignificant
monetary amount with respect to the net value of the Borrowers'
assets.

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

     "Pledge Agreement" the Pledge Agreement dated as of the date
hereof made by the Pledgors and the Holder.

                              -36-

<Page>

     "Pledgor" means each of Holdings, NAC Gas, GB Maine and GB
Benton.

     "Partnership" means Benton Falls Associates, L.P.

     "Restricted Payment" means any payment, transfer or other
distribution to any holder of equity interests of any Borrower or
any Affiliate of any Borrower including, without limitation, (1)
any dividend or other distribution, direct or indirect, on
account of, or in respect of, any equity interest of such
Borrower now or hereafter outstanding, (2) any redemption,
conversion, exchange, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or
indirect, of any equity interest of such Borrower now or
hereafter outstanding, and (3) any payment of management fees,
transaction fees, consulting fees or similar fees to any holder
of its equity interests or any Affiliate thereof.

     "SEC Reports" means, except as otherwise described,
Holdings' Annual Report on Form 10-K for the year ended December
31, 2003 (and any amendments thereto filed at least two (2)
Business Days prior to the date hereof), Holdings' Quarterly
Report on Form 10-Q for the quarter ended September 30, 2004 (and
any amendments thereto filed at least two (2) Business Days prior
to the date hereof), Holdings' Proxy Statement for its 2004
Annual Meeting of Shareholders, or any of Holdings' Current
Reports on Form 8-K filed since January 1, 2004 and at least two
(2) Business Days prior to the date hereof.

     "Subsidiary" means, for any Person, any corporation,
partnership or other entity of which at least a majority of the
Equity Interests having by the terms thereof ordinary voting
power to elect a majority of the board of directors or other
individuals performing similar functions of such corporation,
partnership or other entity (without regard to the occurrence of
any contingency) is at the time directly or indirectly owned or
controlled by such Person or one or more Subsidiaries of such
Person or by such Person and one or more Subsidiaries of such
Person, and shall include all Persons the accounts of which are
consolidated with those of such Person pursuant to GAAP.

16.  Miscellaneous

     16.1 Any notice, demand, request, waiver or other communication
required by any provision of this Note shall be in writing and
may be delivered by personal service, sent by facsimile with
confirmation of receipt, sent by a nationally recognized
overnight delivery services or sent by registered or certified
mail, return receipt requested, with postage thereon fully
repaid.  All such communications shall be addressed as follows:

     To the Borrowers:   BayCorp Holdings, Ltd.
                         1 New Hampshire Avenue, Suite 125
                         Portsmouth, New Hampshire 03801
                         Attn:


                                -37-

     <Page>


     To the Holder:      Sloan Group Ltd.
                         Cay House, Box N-7776
                         E.P. Taylor Drive
                         Lyford Cay
                         New Providence, Bahamas
                         Attn:   Suzanne Karsten


                         With a copy to:

                         Alston & Bird LLP
                         1201 West Peachtree Street
                         Atlanta, Georgia 30309-3424
                         Attn:   Christopher D. Mangum, Esq.

     16.2 This Note, as such, shall not entitle any Holder to any
rights as a shareholder of Holdings, except as otherwise
specified herein.

     16.3 No failure or delay on the part of any party to this Note in
exercising any right, power or remedy hereunder shall operate as
a waiver thereof; nor shall any single or partial exercise of any
such right, power or remedy preclude any other right, power or
remedy hereunder.  The remedies herein provided are cumulative
and not exclusive of any remedies provided under law.

     16.4 Any terms of this Note (including, without limitation, the
Maturity Date, the rate of interest and the conversion features)
may be waived or modified only in writing, signed by the
Borrowers and Holder.

     16.5 The Borrowers shall pay all expenses incurred by Holder in
the collection of this Note, including, without limitation, the
fees and disbursements of counsel to Holder, if this Note is
collected by or through an attorney-at-law.  Any such amounts
shall be deemed to be outstanding under this Note, shall accrue
interest at the Post Default Rate and shall be payable on demand.

     16.6 Time is of the essence of this Note.

     16.7 BORROWERS, AND HOLDER BY ACCEPTING THIS NOTE, HEREBY WAIVE
PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS
OR PAPERS ISSUED THEREIN, AND AGREEING THAT SERVICE OF SUCH
SUMMONS AND COMPLAINT, OR OTHER PROCESS OR PAPERS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED ADDRESSED
TO SUCH BORROWER AT THE ADDRESS OF SUCH BORROWER FOR NOTICES SET
FORTH HEREIN.

                              -38-


     EACH BORROWER AGREES THAT ALL OF ITS PAYMENT OBLIGATIONS
HEREUNDER SHALL BE ABSOLUTE, UNCONDITIONAL AND, FOR THE PURPOSES
OF MAKING PAYMENTS HEREUNDER, EACH BORROWER HEREBY WAIVES ANY
RIGHT TO ASSERT ANY SETOFF, COUNTERCLAIM OR CROSS-CLAIM.

     THE FOREGOING WAIVERS HAVE BEEN MADE WITH THE ADVICE OF
COUNSEL AND WITH A FULL UNDERSTANDING OF THE LEGAL CONSEQUENCES
THEREOF.

     16.8 THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.

     16.9 All amendments to this Note, and any waiver or consent of
Holder, must be in writing and signed by Holder and the
Borrowers.

     16.10     This Note shall be binding upon the successors and
permitted assigns of the Borrowers.  The Borrowers may not assign
any of their obligations hereunder to any person or entity.  A
Holder of this Note, subject to the terms and conditions
contained herein, may assign or transfer this Note, in whole or
in part, to any person or entity at any time without the consent
of the Borrowers.  Nothing contained herein shall require any
notice to the Borrowers of any participation in this Note granted
by Holder or consent by the Borrowers thereto.




                 [Signatures on Following Page]

                              -39-

<Page>

     IN WITNESS WHEREOF, each Borrower has executed and delivered
this Convertible Note under seal as of the date and year first
written above.

                         BAYCORP HOLDINGS, LTD.


                         By:   /s/ Frank W. Getman Jr.
                            ---------------------------
                            Name:  Frank W. Getman Jr.
                            Title: President


                         GREAT BAY POWER MARKETING, INC.


                         By:   /s/ Frank W. Getman Jr.
                            ---------------------------
                            Name:  Frank W. Getman Jr.
                            Title: President


                         GREAT BAY HYDRO CORPORATION


                         By:   /s/ Frank W. Getman Jr.
                            ---------------------------
                            Name:  Frank W. Getman Jr.
                            Title: President


                         BAYCORP VENTURES, LLC

                         By: BAYCORP HOLDINGS, LTD.,
                             its sole member


                         By:   /s/ Frank W. Getman Jr.
                            ---------------------------
                            Name:  Frank W. Getman Jr.
                            Title: President


                         NACOGDOCHES POWER, LLC


                         By:   /s/ Frank W. Getman Jr.
                            ---------------------------
                            Name:  Frank W. Getman Jr.
                            Title: Manager


              [Signature Pages to Convertible Note]

<Page>

                         NACOGDOCHES GAS, LLC


                         By:   /s/ Frank W. Getman Jr.
                            ---------------------------
                            Name:  Frank W. Getman Jr.
                            Title: Manager


                         GREAT BAY HYDRO MAINE, LLC

                         By: BAYCORP HOLDINGS, LTD.,
                             its sole member


                         By:   /s/ Frank W. Getman Jr.
                            ---------------------------
                            Name:  Frank W. Getman Jr.
                            Title: President



                         GREAT BAY HYDRO BENTON, LLC

                         By: BAYCORP HOLDINGS, LTD.,
                             its sole member

                         By:  /s/ Frank W. Getman Jr.
                            ---------------------------
                            Name:  Frank W. Getman Jr.
                            Title: President


              [Signature Pages to Convertible Note]



<Page>

Accepted:

SLOAN GROUP LTD.


By:  /s/ Joseph C. Lewis
     ---------------------------
     Name:  Joseph C. Lewis
     Title: Director


              [Signature Pages to Convertible Note]


<Page>



                         Schedule 8.3(b)


 1.    Great Bay Power Marketing, Inc. ("GB Power") has a
      $2,500,000 letter of credit with Citizens bank.  The letter of
      credit is secured by a cash account GB Power has at Citizens in
      the approximate amount of $2,500,000.  There are no guaranties
      related to the letter of credit.


<Page>


                            EXHIBIT A


                 CERTIFICATE OF SUBSEQUENT SALE

[Transfer Agent]

______________________

______________________

   Re: Sale of Shares of Common Stock of BayCorp Holdings, Ltd.
   (the           "Company") pursuant to the Company's
   prospectus dated     _______________, 2005 (the "Prospectus")

Dear Sir/Madam:

      The undersigned hereby certifies, in connection with the
sale of shares of Common Stock of the Company included in the
Prospectus, that the undersigned has sold the Shares pursuant to
the Prospectus and in a manner described in the Prospectus and
that such sale complies with all applicable securities laws,
including without limitation, the Prospectus delivery
requirements of the Securities Act of 1933, as amended.

  Selling Shareholder (the beneficial owner):

  Record Holder (e.g., if held in name of nominee):

  Restricted Stock Certificate No.(s):

  Number of Shares Sold:

  Date of Sale:

      In the event that you receive a stock certificate(s)
representing more shares of Common Stock than have been sold by
the undersigned, then you should return to the undersigned a
newly issued certificate for such excess shares in the name of
the Record Holder and BEARING A RESTRICTIVE LEGEND.  Further, you
should place a stop transfer on your records with regard to such
certificate.


Dated:  _____________          Very truly yours,


                         By: _________________________
                              Name:
                              Title: