ex10_98.htm


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    


    


    EXHIBIT 10.98


    


    


    AMENDED
AND RESTATED

    


    CREDIT
AGREEMENT

    


    


    dated as
of

    


    


    November
3, 2008

    


    


    between

    


    


    CENTRAL
VERMONT PUBLIC SERVICE CORPORATION,

    as
Borrower

    


    


    and

    


    


    KEYBANK
NATIONAL ASSOCIATION,

    as
Lender

    


    


    


    


    


    


    


    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    

      
        	
                TABLE
      OF CONTENTS

                 

              
	
                ARTICLE
      I - Definitions

              	
                1

              
	
                SECTION
      1.01.

              	
                Defined
      Terms.

              	
                1

              
	
                SECTION
      1.02.

              	
                Classification
      of Loans and Borrowings.

              	
                13

              
	
                SECTION
      1.03.

              	
                Terms
      Generally.

              	
                13

              
	
                SECTION
      1.04.

              	
                Accounting
      Terms; GAAP.

              	
                13

              
	
                ARTICLE
      II - The Credits

              	
                14

              
	
                SECTION
      2.01.

              	
                Revolving
      Credit Commitments.

              	
                14

              
	
                SECTION
      2.02.

              	
                Revolving
      Loans and Borrowings.

              	
                14

              
	
                SECTION
      2.03.

              	
                Requests
      for Revolving Loans.

              	
                14

              
	
                SECTION
      2.04.

              	
                Letters
      of Credit.

              	
                15

              
	
                SECTION
      2.05.

              	
                Interest
      Elections.

              	
                17

              
	
                SECTION
      2.06.

              	
                Termination
      and Reduction of Commitments.

              	
                18

              
	
                SECTION
      2.07.

              	
                Repayment
      of Loans; Evidence of Debt.

              	
                19

              
	
                SECTION
      2.08.

              	
                Prepayment
      of Loans.

              	
                19

              
	
                SECTION
      2.09.

              	
                Fees.

              	
                20

              
	
                SECTION
      2.10.

              	
                Interest.

              	
                20

              
	
                SECTION
      2.11.

              	
                Alternate
      Rate of Interest.

              	
                21

              
	
                SECTION
      2.12.

              	
                Increased
      Costs.

              	
                21

              
	
                SECTION
      2.13.

              	
                Break
      Funding Payments.

              	
                22

              
	
                SECTION
      2.14.

              	
                Taxes.

              	
                23

              
	
                SECTION
      2.15.

              	
                Payments
      Generally.

              	
                24

              
	
                SECTION
      2.16.

              	
                Mitigation
      Obligations.

              	
                24

              
	
                ARTICLE
      III - Representations and Warranties

              	
                24

              
	
                SECTION
      3.01.

              	
                Organization;
      Powers.

              	
                24

              
	
                SECTION
      3.02.

              	
                Authorization;
      Enforceability.

              	
                25

              
	
                SECTION
      3.03.

              	
                Governmental
      Approvals; No Conflicts.

              	
                25

              
	
                SECTION
      3.04.

              	
                Financial
      Condition; No Material Adverse Effect.

              	
                25

              
	
                SECTION
      3.05.

              	
                Properties.

              	
                26

              
	
                SECTION
      3.06.

              	
                Litigation
      and Environmental Matters.

              	
                26

              
	
                SECTION
      3.07.

              	
                Compliance
      with Laws and Agreements.

              	
                26

              
	
                SECTION
      3.08.

              	
                Investment
      and Holding Company Status.

              	
                27

              
	
                SECTION
      3.09.

              	
                Taxes.

              	
                27

              
	
                SECTION
      3.10.

              	
                ERISA.

              	
                27

              
	
                SECTION
      3.11.

              	
                Disclosure.

              	
                27

              
	
                SECTION
      3.12.

              	
                Bonding
      Capacity.

              	
                28

              
	
                ARTICLE
      IV - Conditions

              	
                28

              
	
                SECTION
      4.01.

              	
                Effective
      Date.

              	
                28

              
	
                SECTION
      4.02.

              	
                Each
      Credit Event.

              	
                29

              
	
                ARTICLE
      V - Affirmative Covenants

              	
                30

              
	
                SECTION
      5.01.

              	
                Financial
      Statements; Ratings Change and Other Information.

              	
                30

              
	
                SECTION
      5.02.

              	
                Notices
      of Material Events.

              	
                32

              
	
                SECTION
      5.03.

              	
                Existence;
      Conduct of Business.

              	
                32

              
	
                SECTION
      5.04.

              	
                Payment
      of Obligations.

              	
                33

              
	
                SECTION
      5.05.

              	
                Maintenance
      of Properties; Insurance.

              	
                33

              
	
                SECTION
      5.06.

              	
                Books
      and Records; Inspection Rights.

              	
                33

              
	
                SECTION
      5.07.

              	
                Compliance
      with Laws.

              	
                33

              
	
                SECTION
      5.08.

              	
                Use
      of Proceeds and Letters of Credit.

              	
                33

              
	
                SECTION
      5.09.

              	
                Guaranty
      by Certain Regulated Subsidiaries.

              	
                33

              
	
                ARTICLE
      VI - Negative Covenants

              	
                34

              
	
                SECTION
      6.01.

              	
                Indebtedness.

              	
                34

              
	
                SECTION
      6.02.

              	
                Liens.

              	
                34

              
	
                SECTION
      6.03.

              	
                Fundamental
      Changes.

              	
                35

              
	
                SECTION
      6.04.

              	
                Investments,
      Loans, Advances, Guarantees and Acquisitions.

              	
                36

              
	
                SECTION
      6.05.

              	
                Swap
      Agreements.

              	
                36

              
	
                SECTION
      6.06.

              	
                Restricted
      Payments.

              	
                37

              
	
                SECTION
      6.07.

              	
                Transactions
      with Affiliates.

              	
                37

              
	
                SECTION
      6.08.

              	
                Restrictive
      Agreements.

              	
                37

              
	
                SECTION
      6.09.

              	
                Total
      Debt to Total Capitalization Ratio.

              	
                37

              
	
                SECTION
      6.10.

              	
                Interest
      Coverage Ratio.

              	
                37

              
	
                ARTICLE
      VII - Events of Default

              	
                38

              
	
                ARTICLE
      VIII - Miscellaneous

              	
                40

              
	
                SECTION
      8.01.

              	
                Notices.

              	
                40

              
	
                SECTION
      8.02.

              	
                Waivers;
      Amendments.

              	
                40

              
	
                SECTION
      8.03.

              	
                Expenses;
      Indemnity; Damage Waiver.

              	
                41

              
	
                SECTION
      8.04.

              	
                Successors
      and Assigns.

              	
                42

              
	
                SECTION
      8.05.

              	
                Survival.

              	
                43

              
	
                SECTION
      8.06.

              	
                Counterparts;
      Integration; Effectiveness.

              	
                44

              
	
                SECTION
      8.07.

              	
                Severability.

              	
                44

              
	
                SECTION
      8.08.

              	
                Right
      of Setoff.

              	
                44

              
	
                SECTION
      8.09.

              	
                Governing
      Law; Jurisdiction; Consent to Service of Process.

              	
                45

              
	
                SECTION
      8.10.

              	
                WAIVER
      OF JURY TRIAL.

              	
                45

              
	
                SECTION
      8.11.

              	
                Headings.

              	
                45

              
	
                SECTION
      8.12.

              	
                Confidentiality.

              	
                46

              
	
                SECTION
      8.13.

              	
                Interest
      Rate Limitation.

              	
                46

              
	
                SECTION
      8.14.

              	
                USA
      Patriot Act.

              	
                46

              
	
                SCHEDULE
      3.04(d)

              	 
      	 
      
	
                Guaranteed
      Indebtedness

              	 
      	 
      
	
                SCHEDULE
      3.06

              	 
      	 
      
	
                Disclosed
      Matters

              	 
      	 
      
	
                SCHEDULE
      6.01(b)

              	 
      	 
      
	
                Existing
      Indebtedness

              	 
      	 
      
	
                SCHEDULE
      6.02

              	 
      	 
      
	
                Existing
      Liens

              	 
      	 
      
	
                SCHEDULE
      6.08

              	 
      	 
      
	
                Existing
      Restrictions

              	 
      	 
      
	
                EXHIBIT
      A

              	 
      	
                1

              
	
                Form
      of Promissory Notes

              	 
      	
                1

              
	
                EXHIBIT
      C

              	 
      	
                1

              
	
                Borrower’s
      Investment Policy

              	
                1

              


      

       


      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

     

    This AMENDED AND RESTATED CREDIT
AGREEMENT, dated as of November 3, 2008, is made by and between CENTRAL VERMONT
PUBLIC SERVICE CORPORATION, as Borrower, and KEYBANK NATIONAL ASSOCIATION, as
Lender.

    


    WHEREAS, the Borrower and the
Lender previously entered into a Credit Agreement dated as of December 28, 2008
(the “Original Credit Agreement”), pursuant to which the Lender agreed to
extend, a revolving line of credit in the principal amount of up to Twenty-Five
Million Dollars ($25,000,000) for short term borrowings and a short-term
transaction loan (the “Term Loan”) in the principal amount of up to Fifty Three
Million Dollars ($53,000,000) for the purchase by the Borrower of Equity
Interests in Vermont Transco LLC;

    


    WHEREAS, the Term Loan has
been paid in full;

    


    WHEREAS, the Borrower has
requested, and the Lender has agreed, to extend the Maturity Date and, effective
on and after December 15, 2008, to increase the revolving line of credit from
the current principal amount of Twenty-Five Million Dollars ($25,000,000) to
Forty Million Dollars ($40,000,000), all subject to the terms and conditions set
forth herein;

    


    WHEREAS, the Borrower and the
Lender have agreed to amend and restate the Original Credit Agreement;
and

    


    NOW, THEREFORE, in
consideration of the foregoing premises and the mutual covenants and agreements
hereinafter contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

    


    ARTICLE
I - Definitions

    


    SECTION
1.01. Defined
Terms.

    


    As used in this Agreement, the
following terms have the meanings specified below:

    


    “ABR”, when used in
reference to any Loan or Borrowing, refers to whether such Loan, or the Loans
comprising such Borrowing, are bearing interest at a rate determined by
reference to the Alternate Base Rate.

    


    “ABR Revolving Loan”
means, when used in reference to any Revolving Loan or Borrowing, a Revolving
Loan or Borrowing bearing interest at a rate determined by reference to the
Alternate Base Rate.

    


    “Act” has the meaning
assigned to such term in Section 8.14.

    


    “Adjusted LIBO Rate”
means, with respect to any Eurodollar Borrowing for any Interest Period, an
interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%)
equal to (a) the LIBO Rate for such Interest Period multiplied by
(b) the Statutory Reserve Rate.

    


    “Affiliate” means,
with respect to a specified Person, another Person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by or is under
common Control with the Person specified.

    


    “Agreement” means this Amended and Restated
Credit Agreement as the same may be further amended, restated, supplemented or
renewed.

    


    “Alternate Base Rate”
means, for any day, a rate per annum equal to the greater of (a) the Prime
Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1⁄2 of 1%.  Any change in the Alternate
Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate
shall be effective from and including the effective date of such change in the
Prime Rate or the Federal Funds Effective Rate, respectively.

    


    “Applicable Rate”
means, for any day, with respect to any ABR Revolving Loan or Eurodollar
Revolving Loan, or with respect to the facility fees payable hereunder, as the
case may be, the applicable rate per annum set forth below under the caption
“ABR Revolving Loan Spread”, “Eurodollar Revolving Loan Spread”, or “Facility
Fee Rate”, as the case may be, based upon the ratings by Moody’s or S&P,
respectively, or if both are available, Moody’s and S&P, applicable on such
date to the Index Debt:

    


    
      	
              Index
      Debt Rating by Moody’s or S&P

            	
              Eurodollar
      Revolving Loan Spread*

            	
              ABR
      Revolving Loan Spread*

            	
              Facility
      Fee Rate

            
	
              > A- or
      A3

            	
              0.300%

            	
              0%

            	
              0.090%

            
	
              BBB+
      or Baa1

            	
              0.375%

            	
              0%

            	
              0.100%

            
	
              BBB
      or Baa2

            	
              0.500%

            	
              0%

            	
              0.125%

            
	
              BBB-
      or Baa3

            	
              0.700%

            	
              0%

            	
              0.150%

            
	
              BB+
      or Ba1

            	
              0.900%

            	
              0%

            	
              0.225%

            
	
              BB
      or Ba2

            	
              1.200%

            	
              0%

            	
              0.325%

            
	
              <BB
      or Ba2

            	
              1.500%

            	
              0%

            	
              0.450%

            


    

    


    *Plus
12.5 basis points for >50% utilization by Borrower of the Revolving Credit
Commitment.

    


    For purposes of the foregoing, (i) if
either Moody’s or S&P shall not have in effect a  rating for the
Index Debt (other than by reason of the circumstances referred to in the last
sentence of this definition) or in the absence of such, the corporate credit
rating, then such rating agency shall be deemed to have established a rating of
Ba3 or BB- respectively; (ii) if the ratings established or deemed to have been
established by Moody’s and S&P for the Index Debt shall fall within
different Categories, the Applicable Rate shall be based on the higher of the
two ratings unless one of the two ratings is two or more Categories lower than
the other, in which case the Applicable Rate shall be determined by reference to
the Category next below that of the higher of the two ratings; and (iii) if the
ratings established or deemed to have been established by Moody’s and S&P
for the Index Debt shall be changed (other than as a result of a change in the
rating system of Moody’s or S&P), such change shall be effective as of the
date on which it is first announced by the applicable rating agency,
irrespective of when notice of such change shall have been furnished by the
Borrower to the Lender pursuant to Section 5.01 or otherwise.  Each
change in the Applicable Rate shall apply during the period commencing on the
effective date of such change and ending on the date immediately preceding the
effective date of the next such change.  If the rating system of
Moody’s or S&P shall change, or if either such rating agency shall cease to
be in the business of rating corporate debt obligations, the Borrower and the
Lender shall negotiate in good faith to amend this definition to reflect such
changed rating system or the unavailability of ratings from such rating agency
and, pending the effectiveness of any such amendment, the Applicable Rate shall
be determined by reference to the rating most recently in effect prior to such
change or cessation.

    


    “Approved Fund” has
the meaning assigned to such term in Section 8.04.

    


    “Assessment Rate”
means, for any day, the annual assessment rate in effect on such day that is
payable by a member of the Bank Insurance Fund classified as “well-capitalized”
and within supervisory subgroup “B” (or a comparable successor risk
classification) within the meaning of 12 C.F.R. Part 327 (or any successor
provision) to the Federal Deposit Insurance Corporation for insurance by such
Corporation of time deposits made in dollars at the offices of such member in
the United States; provided that if, as
a result of any change in any law, rule or regulation, it is no longer possible
to determine the Assessment Rate as aforesaid, then the Assessment Rate shall be
such annual rate as shall be determined by the Lender to be representative of
the cost of such insurance to the Lender.

    


    “Availability Period”
means with respect to Revolving Loans, the period from and including the
Effective Date to but excluding the earlier of the Maturity Date and the date of
termination of the Commitment.

    


    “Board” means the
Board of Governors of the Federal Reserve System of the United States of
America.

    


    “Bonding Capacity”
means the incremental amount of first mortgage bonds permitted to be issued
under the Indenture, without violating the terms and conditions
thereof.

    


    “Borrower” means
Central Vermont Public Service Corporation, a Vermont corporation.

    


    “Borrowing” means
Revolving Loans of the same Type, made, converted or continued on the same date
and, in the case of Revolving Eurodollar Loans, as to which a single Interest
Period is in effect.

    


    “Borrowing Request”
means in the case of Revolving Loans, a request by the Borrower for a Revolving
Borrowing in accordance with Section 2.03(a).

    


    “Business Day” means
any day that is not a Saturday, Sunday or other day on which commercial banks in
New York City are authorized or required by law to remain closed; provided that, when
used in connection with a Eurodollar Loan, the term “Business Day” shall
also exclude any day on which banks are not open for dealings in dollar deposits
in the London interbank market.

    


    “Capital Lease
Obligations” of any Person means the obligations of such Person to pay
rent or other amounts under any lease of (or other arrangement conveying the
right to use) real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as capital leases on
a balance sheet of such Person under GAAP, and the amount of such obligations
shall be the capitalized amount thereof determined in accordance with
GAAP.

    


    “Change in Control”
means (a) the acquisition of ownership, directly or indirectly, beneficially or
of record, by any Person or group (within the meaning of the Securities Exchange
Act of 1934 and the rules of the Securities and Exchange Commission thereunder
as in effect on the date hereof), of Equity Interests representing more than 50%
of the aggregate ordinary voting power represented by the issued and outstanding
Equity Interests of the Borrower; (b) occupation of a majority of the seats
(other than vacant seats) on the board of directors of the Borrower by Persons
who were neither (i) nominated by the board of directors of the Borrower nor
(ii) appointed by directors so nominated; or (c) the acquisition of direct or
indirect Control of the Borrower by any Person or group. 

    


    “Change in Law” means
(a) the adoption of any law, rule or regulation after the date of this
Agreement, (b) any change in any law, rule or regulation or in the
interpretation or application thereof by any Governmental Authority after the
date of this Agreement or (c) compliance by the Lender (or, for purposes of
Section 2.12(b), by any lending office of the Lender or by the Lender’s holding
company, if any) with any request, guideline or directive (whether or not having
the force of law) of any Governmental Authority made or issued after the date of
this Agreement.

    


    “Charges” has the
meaning assigned to such term in Section 8.13.

    


    “Class”, when used in
reference to any Loan or Borrowing, refers to whether such Loan, or the Loans
comprising such Borrowing, are Revolving Loans.

    


    “Closing Date” means
November 3, 2008.

    


    “Code” means the
Internal Revenue Code of 1986, as amended from time to time.

    


    “Commitment” means the
Revolving Credit Commitment.

    


    “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise.  “Controlling” and
“Controlled”
have meanings correlative thereto.

    


    “Default” means any
event or condition which constitutes an Event of Default or which upon notice,
lapse of time or both would, unless cured or waived, become an Event of
Default.

    


    “Disclosed Matters”
means the actions, suits and proceedings and the environmental matters disclosed
in Schedule 3.06.

    


    “Dollars” or “$” refers to lawful
money of the United States of America.

    


    “Effective Date” means
the date on which the conditions specified in Section 4.01 are satisfied
(or waived in accordance with Section 8.02).

    


    “Environmental Laws”
means all laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources, the management,
release or threatened release of any Hazardous Material or to health and safety
matters.

    


    “Environmental
Liability” means any liability, contingent or otherwise (including any
liability for damages, costs of environmental remediation, fines, penalties or
indemnities), of the Borrower or any Subsidiary directly or indirectly resulting
from or based upon (a) violation of any Environmental Law, (b) the
generation, use, handling, transportation, storage, treatment or disposal of any
Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the
release or threatened release of any Hazardous Materials into the environment or
(e) any contract, agreement or other consensual arrangement pursuant to which
liability is assumed or imposed with respect to any of the
foregoing.

    


    “Equity Interests”
means shares of capital stock, partnership interests, membership interests in a
limited liability company, beneficial interests in a trust or other equity
ownership interests in a Person, and any warrants, options or other rights
entitling the holder thereof to purchase or acquire any such equity
interest.

    


    “ERISA” means the
Employee Retirement Income Security Act of 1974, as amended from time to
time.

    


    “ERISA Affiliate”
means any trade or business (whether or not incorporated) that, together with
the Borrower, is treated as a single employer under Section 414(b) or (c)
of the Code or, solely for purposes of Section 302 of ERISA and
Section 412 of the Code, is treated as a single employer under Section 414
of the Code.

    


    “ERISA Event” means
(a) any “reportable event”, as defined in Section 4043 of ERISA or the
regulations issued thereunder with respect to a Plan (other than an event for
which the 30-day notice period is waived); (b) the existence with respect
to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not
waived; (c) the filing pursuant to Section 412(d) of the Code or
Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Plan; (d) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability under Title IV of
ERISA with respect to the termination of any Plan; (e) the receipt by the
Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any
notice relating to an intention to terminate any Plan or Plans or to appoint a
trustee to administer any Plan; (f) the incurrence by the Borrower or any of its
ERISA Affiliates of any liability with respect to the withdrawal or partial
withdrawal from any Plan or Multi-employer Plan; or (g) the receipt by the
Borrower or any ERISA Affiliate of any notice, or the receipt by any
Multi-employer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multi-employer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.

    


    “Eurodollar”, when
used in reference to any Loan or Borrowing, refers to whether such Loan, or the
Loans comprising such Borrowing, are bearing interest at a rate determined by
reference to the Adjusted LIBO Rate.

    


    “Event of Default” has
the meaning assigned to such term in Article VII.

    


    “Excluded Taxes”
means, with respect to the Lender or any other recipient of any payment to be
made by or on account of any obligation of the Borrower hereunder, (a) income or
franchise taxes imposed on (or measured by) its net income by the United States
of America, or by the jurisdiction under the laws of which such recipient is
organized or in which its principal office is located or in which its applicable
lending office is located and (b) any branch profits taxes imposed by the United
States of America or any similar tax imposed by any other jurisdiction in which
the Borrower is located.

    


    “Federal Funds Effective
Rate” means, for any day, the weighted average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
that is a Business Day, the average (rounded upwards, if necessary, to the next
1/100 of 1%) of the quotations for such day for such transactions received by
the Lender from three Federal funds brokers of recognized standing selected by
it.

    


    “Financial Officer”
means the chief financial officer, principal accounting officer, treasurer,
assistant treasurer or controller of the Borrower.

    


    “GAAP” means generally
accepted accounting principles in the United States of America.

    


    “Governmental
Authority” means the government of the United States of America, any
other nation or any political subdivision thereof, whether state or local, and
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.

    


    “Guarantee” of or by
any Person (the “guarantor”) means any
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the “primary obligor”) in
any manner, whether directly or indirectly, and including any obligation of the
guarantor, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or other obligation or
to purchase (or to advance or supply funds for the purchase of) any security for
the payment thereof, (b) to purchase or lease property, securities or
services for the purpose of assuring the owner of such Indebtedness or other
obligation of the payment thereof, (c) to maintain working capital, equity
capital or any other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Indebtedness or other
obligation or (d) as an account party in respect of any letter of credit or
letter of guaranty issued to support such Indebtedness or obligation, including,
without limitation, pledge agreements; provided, that the
term Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.

    


    “Guarantor” means
Catamount Resources Corporation, a Vermont corporation and C.V.
Realty, Inc., a Vermont corporation and, if applicable, any Subsidiary
corporations executing a guaranty agreement pursuant to Section
5.09.

    


    “Hazardous Materials”
means all explosive or radioactive substances or wastes and all hazardous or
toxic substances, wastes or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes and all other substances or
wastes of any nature regulated pursuant to any Environmental Law.

    


    “Income Tax Expense”
means, for any period, all provisions for taxes based on net income of the
Borrower (including, without limitation, any additions to such taxes, and any
penalties and interest with respect thereto), all as determined for the Borrower
on standalone basis in accordance with GAAP.

    


    “Indebtedness” of any
Person means, without duplication, (a) all obligations of such Person for
borrowed money or with respect to deposits or advances of any kind, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person upon which interest charges
are customarily paid, (d) all obligations of such Person under conditional
sale or other title retention agreements relating to property acquired by such
Person, (e) all obligations of such Person in respect of the deferred
purchase price of property or services (excluding current accounts payable
incurred in the ordinary course of business), (f) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on property owned or
acquired by such Person, whether or not the Indebtedness secured thereby has
been assumed, (g) all Guarantees by such Person of Indebtedness of others,
(h) all Capital Lease Obligations of such Person, (i) all obligations,
contingent or otherwise, of such Person as an account party in respect of
letters of credit and letters of guaranty and (j) all obligations, contingent or
otherwise, of such Person in respect of bankers’ acceptances.  The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person’s ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable
therefor.

    


    “Indemnified Taxes”
means Taxes other than Excluded Taxes.

    


    “Indemnitee” has the
meaning assigned to such term in Section 8.03.

    


    “Indenture” means the
Indenture of Mortgage dated as of October 1, 1929, between the Borrower and
the trustee named therein, as supplemented and amended by forty-five indentures
supplemental thereto and amendatory thereof, including the Forty-Fourth
Supplemental Indenture dated as of June 15, 2004, entered into by the
Borrower and U.S. Bank National Association, a national banking association, as
trustee, which amended, supplemented and restated the Indenture and the prior
supplemental indentures, and the Forty-Fifth Supplemental Indenture dated as of
July 15, 2004.

    


    “Index Debt” means
senior, unsecured, long-term indebtedness for borrowed money of the Borrower
that is not guaranteed by any other Person or subject to any other credit
enhancement.

    


    “Information” has the
meaning assigned to such term in Section 8.12.

    


    “Interest Election
Request” means a request by the Borrower to convert or continue a
Borrowing in accordance with Section 2.05.

    


    “Interest Expense”
means, for any period, total interest expense (including, without limitation,
that which is capitalized, that which is attributable to capital leases or
synthetic leases and the pre-tax equivalent of dividends payable on redeemable
stock) however, excluding interest on existing capital leases totaling
$6,108,000 as of September 30, 2008 classified as an operating expense, of the
Borrower on a standalone basis with respect to all outstanding Indebtedness of
the Borrower including, without limitation, all commissions, discounts and other
fees and charges owed with respect to letters of credit and net costs under Swap
Agreements.

    


    “Interest Payment
Date” means (a) with respect to any ABR Loan, and any Eurodollar
Loan for an Overnight LIBOR Interest Period, the first day of each month, and
(b) with respect to any Eurodollar Loan for Interest periods of one, two or
three months, the first day of each month and on the last day of the Interest
Period applicable to the Borrowing of which such Loan is a part.

    


    “Interest Period”
means with respect to any Eurodollar Borrowing, the period commencing on the
date of such Borrowing and ending on the numerically corresponding day in the
calendar month that is one, two or three months thereafter, as the Borrower may
elect, and provided, that (a) if
any Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the case
of a Eurodollar Borrowing only, such next succeeding Business Day would fall in
the next calendar month, in which case such Interest Period shall end on the
next preceding Business Day and (b) any Interest Period pertaining to a
Eurodollar Borrowing that commences on the last Business Day of a calendar month
(or on a day for which there is no numerically corresponding day in the last
calendar month of such Interest Period) shall end on the last Business Day of
the last calendar month of such Interest Period; and provided further that
in the case of Overnight LIBOR, the Interest Period shall be the period
commencing on the date a Eurodollar Borrowing is made, continued, or converted
and continuing overnight, with successive periods commencing daily
thereafter.  For purposes hereof, the date of a Borrowing initially
shall be the date on which such Borrowing is made and  thereafter
shall be the effective date of the most recent conversion or continuation of
such Borrowing.

    


    “LC Disbursement”
means a payment made by the Lender pursuant to a Letter of Credit.

     

    “LC Exposure” means,
at any time, the sum of (a) the aggregate undrawn amount of all outstanding
Letters of Credit at such time plus (b) the aggregate amount of all LC
Disbursements that have not yet been reimbursed by or on behalf of the Borrower
at such time.

    


    “Lender” means KeyBank
National Association and any other Person that shall have become a party hereto
pursuant to an assignment and assumption, other than any such Person that ceases
to be a party hereto pursuant to an assignment and assumption.

    


    “Letter of Credit”
means any letter of credit issued pursuant to this Agreement.

    


    “LIBO Rate” means (a)
with respect to any Eurodollar Borrowing for any Interest Period of one, two or
three months,  the per annum rate of interest, determined by the
Lender in accordance with its usual procedures (which determination shall be
conclusive and binding absent manifest error) as  appearing on the
Telerate Service Page 3750 of the Dow Jones Market Service (or on any successor
or substitute page of such Service, or any successor to or substitute for such
Service, providing rate quotations comparable to those currently provided on
such page of such Service, as determined by the Lender from time to time for
purposes of providing quotations of interest rates applicable to dollar deposits
in the London interbank market) at approximately 11:00 a.m., London time, two
Business Days prior to the commencement of such Interest Period, as the rate for
dollar deposits with a maturity comparable to such Interest Period, and (b) with
respect to any Eurodollar Borrowing for Overnight LIBOR Interest Periods, the
rate per annum calculated by the Lender in good faith, which the Lender
determines with reference to the rate per annum at which deposits in United
States dollars are offered by prime banks in the London interbank eurodollar
market on the day of determination for the applicable Overnight LIBOR Interest
Period.  In the event that such rate is not available at such time for
any reason, then the “LIBO Rate” with
respect to such Eurodollar Borrowing for such Interest Period shall be the rate
at which dollar deposits of $5,000,000 and for a maturity comparable to such
Interest Period are offered in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of
such Interest Period as  determined by the Lender.

    


    “Lien” means, with
respect to any asset, (a) any mortgage, deed of trust, lien, pledge,
hypothecation, encumbrance, charge or security interest in, on or of such asset,
(b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement (or any financing lease
having substantially the same economic effect as any of the foregoing) relating
to such asset and (c) in the case of securities, any purchase option, call
or similar right of a third party with respect to such securities.

    


    “Loans” means the
loans made by the Lender to the Borrower pursuant to this
Agreement.

    


    “Material Adverse
Effect” means a material adverse effect on (a) the business, assets,
operations, prospects or condition, financial or otherwise, of the Borrower, the
Regulated Subsidiaries, and the Subsidiaries taken as a whole, (b) the
ability of the Borrower to perform any of its obligations under this Agreement
or (c) the rights of or benefits available to the Lender under this
Agreement.

    


    “Material
Indebtedness” means Indebtedness (other than the Loans and Letters of
Credit), or obligations in respect of one or more Swap Agreements, of any one or
more of the Borrower and its Subsidiaries in an aggregate principal amount
exceeding $2,000,000.  For purposes of determining Material
Indebtedness, the “principal amount” of the obligations of the Borrower or any
Subsidiary in respect of any Swap Agreement at any time shall be the maximum
aggregate amount (giving effect to any netting agreements) that the Borrower or
such Subsidiary would be required to pay if such Swap Agreement were terminated
at such time.  Notwithstanding the foregoing, Material Indebtedness
does not include Indebtedness or Swap Agreements of any Subsidiary that is not a
Guarantor that are non-recourse to the Borrower, any Guarantor or any Regulated
Subsidiary.

    


    “Maturity Date” means
November 2, 2011.

    


    “Maximum Rate” has the
meaning assigned to such term in Section 8.13.

    


    “Moody’s” means
Moody’s Investors Service, Inc.

    


    “Multi-employer Plan”
means a multi-employer plan as defined in Section 4001(a)(3) of
ERISA.

    


    “Net Income” means,
for any period, the net income (or loss), including Borrower’s proportionate
shares of the earnings of its non-wholly owned Subsidiaries, of the
Borrower on a standalone basis for such period taken as a single accounting
period determined in conformity with GAAP.

    


    “Net Worth” means, at
any time, all amounts that, in conformity with GAAP, would be included under the
caption “total stockholders’ equity” (or any like caption) on a standalone
balance sheet of the Borrower as of such date provided that, in no event shall
Net Worth include any amounts in respect of mandatorily redeemable
stock.

    


    “Other Taxes” means
any and all present or future stamp or documentary taxes or any other excise or
property taxes, charges or similar levies arising from any payment made
hereunder or from the execution, delivery or enforcement of, or otherwise with
respect to, this Agreement.

    


    “Overnight LIBOR”
means with respect to any Eurodollar Borrowing, the period commencing on the
date such Borrowing bearing interest based on the LIBO Rate is made, continued,
or converted and continuing overnight, with successive periods commencing daily
thereafter.

    


    “Participant” has the
meaning set forth in Section 8.04.

    


    “PBGC” means the
Pension Benefit Guaranty Corporation referred to and defined in ERISA and any
successor entity performing similar functions.

    


    “Permitted
Encumbrances” means:

    


    (a) Liens
imposed by law for taxes that are not yet due or are being contested in
compliance with Section 5.04;

    


    (b) carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens
imposed by law, arising in the ordinary course of business and securing
obligations that are not overdue by more than 30 days or are being contested in
compliance with Section 5.04;

    


    (c) pledges
and deposits made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or
regulations;

    


    (d) deposits
to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature, in each case in the ordinary course of business;

    


    (e) judgment
liens in respect of judgments that do not constitute an Event of Default under
clause (k) of Article VII; and

    


    (f) easements,
zoning restrictions, rights-of-way and similar encumbrances on real property
imposed by law or arising in the ordinary course of business that do not secure
any monetary obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of the
Borrower or any Subsidiary;

    


    provided that the
term “Permitted Encumbrances” shall not include any other Lien securing
Indebtedness.

    


    “Permitted
Investments” means:

    


    (a)           direct
obligations of, or obligations the principal of and interest on which are
unconditionally guaranteed by, the United States of America (or by any agency
thereof to the extent such obligations are backed by the full faith and credit
of the United States of America), in each case maturing within one year from the
date of acquisition thereof;

    


    (b)           investments
in commercial paper maturing within 270 days from the date of acquisition
thereof and having, at such date of acquisition, the highest credit rating
obtainable from S&P or from Moody’s;

    


    (c)           investments
in certificates of deposit, banker’s acceptances and time deposits maturing
within 180 days from the date of acquisition thereof issued or guaranteed by or
placed with, and money market deposit accounts issued or offered by, any
domestic office of any commercial bank organized under the laws of the United
States of America or any state thereof which has a combined capital and surplus
and undivided profits of not less than $500,000,000;

    


    (d)           fully
collateralized repurchase agreements with a term of not more than 30 days for
securities described in clause (a) above and entered into with a financial
institution satisfying the criteria described in clause (c)
above;

    


    (e)           money
market funds that (i) comply with the criteria set forth in Securities and
Exchange Commission Rule 2a-7 under the Investment Company Act of 1940, (ii) are
rated AA by S&P and Aa by Moody’s and (iii) have portfolio assets of at
least $5,000,000,000;

    


    (f)           investments
in accordance with the Borrower’s investment policy, attached hereto as Exhibit C and made a
part hereof;

    


    (g)           instruments
of federal agencies not guaranteed by the U.S. Government maturing within 270
days rated AA or AAA by S&P;

    


    (h)           Tax-Exempt
Floating Rate Notes and Bonds maturing within 270 days of a corporation or a
company carrying Aa or Aaa long-term debt rating and/or P-1 commercial paper
rating from Moody’s or equivalent, or carrying a letter of credit from a bank
meeting the same criteria; and

    


    (i)           Municipal
Bonds, Taxable or Tax-Exempt, maturing within 270 days issued by Municipal or
tax-exempt institution rated Aa or Aaa long-term debt rating and/or P-1
commercial paper rating and/or MIG-1 rating from Moody’s or equivalent, or
carrying a letter of credit from a bank meeting the same criteria.

    


    “Person” means any
natural person, corporation, limited liability company, trust, joint venture,
association, company, partnership, Governmental Authority or other
entity.

    


    “Plan” means any
employee pension benefit plan (other than a Multi-employer Plan) subject to the
provisions of Title IV of ERISA or Section 412 of the Code or
Section 302 of ERISA, and in respect of which the Borrower or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an “employer” as defined in Section 3(5) of
ERISA.

    


    “Power Transactions”
means transactions relating to the purchase, sale, swap, hedge, trade, option,
replacement, scheduling, offset, claim, settlement or other agreement for the
acquisition or disposition of electric capacity or energy or other products or
services related thereto, including, without limitation, the transporting,
delivery or transmission thereof and any collateral, credit support, margin
agreements or similar arrangements.

    


    “Prime Rate” means
that interest rate established by KeyBank National Association as KeyBank’s
Prime Rate.  The Prime Rate may not necessarily be the lowest interest
rate charged by the Lender for commercial or other extensions of
credit.  Each change in the Prime Rate shall be effective from and
including the date such change is publicly announced as being
effective.

    


    “Regulated
Subsidiary” means (a) a
subsidiary of the Borrower which is regulated by the Vermont Public Service
Board or any successor regulatory commission or agency to either and any other
subsidiary that is subject to federal or state regulation as a public utility
company and (b) Custom Investment Corporation and C.V. Realty,
Inc.  

    


    “Regulators” means the
Vermont Public Service Board, the U.S. Federal Energy Regulatory Commission, or
any successor regulatory commission or agency to either.

    


    “Related Parties”
means, with respect to any specified Person, such Person’s Affiliates and the
respective directors, officers, employees, agents and advisors of such Person
and such Person’s Affiliates.

    


    “Restricted Payment”
means any dividend or other distribution (whether in cash, securities or other
property) with respect to any Equity Interests in the Borrower or any Regulated
Subsidiary, or any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any such
Equity Interests in the Borrower or any Regulated Subsidiary (unless paid to the
Borrower) or any option, warrant or other right to acquire any such Equity
Interests in the Borrower or any Regulated Subsidiary (unless paid to the
Borrower).

    


    “Revolving Credit
Commitment” means the commitment of the Lender to make Revolving Loans
and to acquire participations in Letters of Credit hereunder, expressed as an
amount representing the maximum aggregate amount of the Lender’s Revolving
Credit Exposure hereunder, as such commitment may be (a) reduced from time to
time pursuant to Section 2.06 and (b) reduced or increased from time to time
pursuant to assignments by Lender pursuant to Section 8.04.  From the
Closing Date through December 14, 2008, the initial aggregate amount of the
Lender’s Revolving Credit Commitment is Twenty-Five Million Dollars
($25,000,000).  On and effective as of December 15, 2008, the
aggregate amount of the Lender’s Revolving Credit Commitment shall be Forty
Million Dollars ($40,000,000).

    


    “Revolving Credit
Exposure” means the sum of the outstanding principal amount of the
Lender’s Revolving Loans and its LC Exposure at such time.

    


    “Revolving Loan” means
a Loan made pursuant to Section 2.03(a).

     

    “Significant
Subsidiary” means any Regulated Subsidiary, Catamount Resources
Corporation on a standalone basis, and Eversant Corporation.

    


    “S&P”  means
Standard & Poor’s.

    


    “Statutory Reserve
Rate” means a fraction (expressed as a decimal), the numerator of which
is the number one and the denominator of which is the number one minus the
aggregate of the maximum reserve percentages (including any marginal, special,
emergency or supplemental reserves) expressed as a decimal established by the
Board to which the Lender is subject with respect to the Adjusted LIBO Rate, for
eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in
Regulation D of the Board).  Such reserve percentages shall
include those imposed pursuant to such Regulation D.  Eurodollar
Loans shall be deemed to constitute eurocurrency funding and to be subject to
such reserve requirements without benefit of or credit for proration, exemptions
or offsets that may be available from time to time to any Lender under such
Regulation D or any comparable regulation.  The Statutory Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.

    


    “Subsidiary” means,
with respect to any Person (the “parent”) at any date,
any corporation, limited liability company, partnership, association or other
entity the accounts of which would be consolidated with those of the parent in
the parent’s consolidated financial statements if such financial statements were
prepared in accordance with GAAP as of such date, (i) as well as any other
corporation, limited liability company, partnership, association or other entity
(a) of which securities or other ownership interests representing more than
50% of the equity or more than 50% of the ordinary voting power or, in the case
of a partnership, more than 50% of the general partnership interests are, as of
such date, owned, Controlled or held, and (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent or (ii) that is, as of
such date, controlled by the parent or one or more subsidiaries of the parent,
or by the parent and one or more subsidiaries of the parent.

    


    “Subsidiary” means any
subsidiary of the Borrower.

    


    “Swap Agreement” means
any agreement with respect to any swap, hedge, forward, future or derivative
transaction or option or similar agreement involving, or settled by reference
to, one or more rates, currencies, commodities, equity or debt instruments or
securities, or economic, financial or pricing indices or measures of economic,
financial or pricing risk or value or any similar transaction or any combination
of these transactions; provided that no
phantom stock or similar plan providing for payments only on account of services
provided by current or former directors, officers, employees or consultants of
the Borrower or the Subsidiaries shall be a Swap Agreement.

    


    “Taxes” means any and
all present or future taxes, levies, imposts, duties, deductions, charges or
withholdings imposed by any Governmental Authority.

    


    “Total Capitalization”
means the sum of the Total Debt of Borrower plus the Borrower’s Net
Worth.

    


    “Total Debt” means
Indebtedness of the Borrower plus mandatorily redeemable stock and, without
limitation, all contingent obligations with respect to any of the foregoing, to
the extent (i) such Indebtedness matures one year or more from issuance or (ii)
such Indebtedness remains outstanding one year or more from issuance under any
credit facility or combination thereof.

    


    “Transactions” means
the execution, delivery and performance by the Borrower of this Agreement, the
borrowing of Loans, the use of the proceeds thereof and the issuance of Letters
of Credit hereunder.

    


    “Type”, when used in
reference to any Loan or Borrowing, refers to whether the rate of interest on
such Loan, or on the Loans comprising such Borrowing, is determined by reference
to the Adjusted LIBO Rate or the Alternate Base Rate.

    


    “Withdrawal Liability”
means liability to a Multi-employer Plan as a result of a complete or partial
withdrawal from such Multi-employer Plan, as such terms are defined in
Part I of Subtitle E of Title IV of ERISA.

    


    SECTION
1.02. Classification of Loans and
Borrowings.

    


    For purposes of this Agreement, Loans
may be classified and referred to by Class (e.g.,
a “Revolving Loan”) or by Type (e.g.,
a “Eurodollar Loan”) or by Class and Type (e.g.,
a “Eurodollar Revolving Loan”).  Borrowings may also be classified and
referred to by Class (e.g.,
a “Revolving Borrowing”) or by Type (e.g.,
a “Eurodollar Borrowing”) or by Class and Type (e.g.,
a “Eurodollar Revolving Borrowing”).

    


    SECTION
1.03. Terms
Generally.

    


    The definitions of terms herein shall
apply equally to the singular and plural forms of the terms
defined.  Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms.  The words
“include”, “includes” and “including” shall be deemed to be followed by the
phrase “without limitation”.  The word “will” shall be construed to
have the same meaning and effect as the word “shall”.  Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles, Section,
Exhibits and Schedules shall be construed to refer to Articles and
Section of, and Exhibits and Schedules to, this Agreement and (e) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts and contract rights.

    


    SECTION
1.04. Accounting Terms;
GAAP.

    


    Except as otherwise expressly provided
herein, all terms of an accounting or financial nature shall be construed in
accordance with GAAP, as in effect from time to time; provided that, if the
Borrower notifies the Lender that the Borrower requests an amendment to any
provision hereof to eliminate the effect of any change occurring after the date
hereof in GAAP or in the application thereof on the operation of such provision
(or if the Lender notifies the Borrower that the Lender requests an amendment to
any provision hereof for such purpose), regardless of whether any such notice is
given before or after such change in GAAP or in the application thereof, then
such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until such
notice shall have been withdrawn or such provision amended in accordance
herewith.

    


    


    ARTICLE
II - The
Credits

    


    SECTION
2.01. Revolving Credit
Commitments.

    


    Subject to the terms and conditions set
forth herein, the Lender agrees to make Revolving Loans to the Borrower and to
issue Letters of Credit at the request of the Borrower from time to time during
the Availability Period in an aggregate principal amount that will not result in
the Lender’s Revolving Credit Exposure exceeding the Lender’s Revolving Credit
Commitment.  Within the foregoing limits and subject to the terms and
conditions set forth herein, the Borrower may borrow, prepay and reborrow
Revolving Loans and request to issue, amend, renew and extend Letters of
Credit.

    


    SECTION
2.02. Revolving Loans and
Borrowings.

    


    (i) Subject
to Section 2.11, each Revolving Loan shall be comprised entirely of ABR
Revolving Loans or Eurodollar Revolving Loans as the Borrower may request in
accordance herewith.

    


    (ii) At the
commencement of each Interest Period for any Eurodollar Revolving Borrowing,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$100,000 and not less than Five Hundred Thousand Dollars
($500,000).  At the time that each ABR Revolving Borrowing is made,
such Borrowing shall be in an aggregate amount that is an integral multiple of
$100,000 and not less than $100,000; provided that an ABR
Revolving Borrowing may be in an aggregate amount that is equal to the entire
unused balance of the total Commitment or that is required to finance the
reimbursement of an LC Disbursement as contemplated by Section
2.04(d).  Borrowings of more than one Type and Class may be
outstanding at the same time; provided that there
shall not at any time be more than a total of $25,000,000 Eurodollar Revolving
Borrowings outstanding.

    


    General  Notwithstanding
any other provision of this Agreement, the Borrower shall not be entitled to
request, or to elect to convert or continue, any Borrowing if the Interest
Period requested with respect thereto would end after the Maturity
Date.

    


    


    SECTION
2.03. Requests for Revolving
Loans.

    


    To request a Revolving Loan, the
Borrower shall notify the Lender of such request by telephone (a) in the case of
a Eurodollar Borrowing, not later than 11:00 a.m., New York City time,
three Business Days before the date of the proposed Borrowing or (b) in the
case of an ABR Borrowing, not later than 11:00 a.m., New York City time,
one Business Day before the date of the proposed Borrowing; provided that any
such notice of an ABR Revolving Borrowing to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.04(d) may be given not later than
10:00 a.m., New York City time, on the date of the proposed
Borrowing.  Each such telephonic Borrowing Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Lender of a written Borrowing Request in a form approved by the Lender and
signed by the Borrower.  Each such telephonic and written Borrowing
Request shall specify the following information in compliance with
Section 2.02:

    


    (i) the
aggregate amount of the requested Borrowing;

    


    (ii) the date
of such Borrowing, which shall be a Business Day;

    


    (iii) whether
such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

    


    (iv) in the
case of a Eurodollar Borrowing, the initial Interest Period to be applicable
thereto, which shall be a period contemplated by the definition of the term
“Interest Period”; and

    


    (v) the
location and number of the Borrower’s account to which funds are to be
disbursed.

    


    If no
election as to the Type of Revolving Borrowing is specified, then the requested
Revolving Borrowing shall be an ABR Borrowing.  If no Interest Period
is specified with respect to any requested Eurodollar Revolving Borrowing, then
the Borrower shall be deemed to have selected an Interest Period of one month’s
duration.

    


    SECTION
2.04. Letters of
Credit.

    


    (a) General.  Subject
to the terms and conditions set forth herein, the Borrower may request the
issuance of Letters of Credit for its own account, in a form reasonably
acceptable to the Lender, at any time and from time to time during the
Availability Period.  In the event of any inconsistency between the
terms and conditions of this Agreement and the terms and conditions of any form
of letter of credit application or other agreement submitted by the Borrower to,
or entered into by the Borrower with, the Lender relating to any Letter of
Credit, the terms and conditions of this Agreement shall control.  The
Lender may, in its discretion, arrange for one or more Letters of Credit to be
issued by Affiliates of the Lender, in which case the term “Lender” shall
include any such Affiliate with respect to Letters of Credit issued by such
Affiliate; provided, however, such Affiliate must have a minimum corporate
credit rating of “A-” from S&P or “A3” from Moody’s.

    


    (b) Notice of Issuance,
Amendment, Renewal, Extension; Certain Conditions.  To request
the issuance of a Letter of Credit (or the amendment, renewal or extension of an
outstanding Letter of Credit), the Borrower shall hand deliver or telecopy (or
transmit by electronic communication, if arrangements for doing so have been
approved by the Lender) to the Lender (two business days in advance of the
requested date of issuance, amendment, renewal or extension) a notice requesting
the issuance of a Letter of Credit, or identifying the Letter of Credit to be
amended, renewed or extended, and specifying the date of issuance, amendment,
renewal or extension (which shall be a Business Day), the date on which such
Letter of Credit is to expire (which shall comply with paragraph (c) of
this Section), the amount of such Letter of Credit, the name and address of the
beneficiary thereof and such other information as shall be necessary to prepare,
amend, renew or extend such Letter of Credit.  If requested by the
Lender, the Borrower also shall submit a letter of credit application on the
Lender’s standard form in connection with any request for a Letter of
Credit.  A Letter of Credit shall be issued, amended, renewed or
extended only if (and upon issuance, amendment, renewal or extension of each
Letter of Credit the Borrower shall be deemed to represent and warrant that),
after giving effect to such issuance, amendment, renewal or extension
(i) the LC Exposure shall not exceed Ten Million Dollars ($10,000,000) and
(ii) the sum of the total Revolving Credit Exposures shall not exceed the
Lender’s Revolving Credit Commitment.

    


    (c) Expiration
Date.  Each Letter of Credit shall expire at or prior to the
close of business on the earlier of (i) the date one year after the date of
the issuance of such Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (ii) the
date that is five Business Days prior to the Maturity Date.

    


    (d) Reimbursement.  If
the Lender shall make any LC Disbursement in respect of a Letter of Credit, the
Borrower shall reimburse such LC Disbursement by paying to the Lender an amount
equal to such LC Disbursement not later than 12:00 noon, New York City time, on
the date that such LC Disbursement is made, if the Borrower shall have received
notice of such LC Disbursement prior to 10:00 a.m., New York City time, on such
date, or, if such notice has not been received by the Borrower prior to such
time on such date, then not later than 12:00 noon, New York City time, on (i)
the Business Day that the Borrower receives such notice, if such notice is
received prior to 10:00 a.m., New York City time, on the day of receipt, or (ii)
the Business Day immediately following the day that the Borrower receives such
notice, if such notice is not received prior to such time on the day of receipt;
provided that,
if such LC Disbursement is not less than $100,000, the Borrower may, subject to
the conditions to borrowing set forth herein, request in accordance with Section
2.03 that such payment be financed with an ABR Revolving Borrowing in an
equivalent amount and, to the extent so financed, the Borrower’s obligation to
make such payment shall be discharged and replaced by the resulting ABR
Revolving Borrowing.

    


    (e) Obligations
Absolute.  The Borrower’s obligation to reimburse LC
Disbursements as provided in paragraph (d) of this Section shall be
absolute, unconditional and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability of any
Letter of Credit or this Agreement, or any term or provision therein, (ii) any
draft or other document presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein being untrue or
inaccurate in any respect, (iii) payment by the Lender under a Letter of Credit
against presentation of a draft or other document that does not comply with the
terms of such Letter of Credit, or (iv) any other event or circumstance
whatsoever, whether or not similar to any of the foregoing, that might, but for
the provisions of this Section, constitute a legal or equitable discharge of, or
provide a right of setoff against, the Borrower’s obligations
hereunder.  Neither the Lender, nor any of their Related Parties,
shall have any liability or responsibility by reason of or in connection with
the issuance or transfer of any Letter of Credit or any payment or failure to
make any payment thereunder (irrespective of any of the circumstances referred
to in the preceding sentence), or any error, omission, interruption, loss or
delay in transmission or delivery of any draft, notice or other communication
under or relating to any Letter of Credit (including any document required to
make a drawing thereunder), any error in interpretation of technical terms or
any consequence arising from causes beyond the control of the Lender; provided that the
foregoing shall not be construed to excuse the Lender from liability to the
Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
the Lender’s failure to exercise care when determining whether drafts and other
documents presented under a Letter of Credit comply with the terms
thereof.  The parties hereto expressly agree that, in the absence of
gross negligence or willful misconduct on the part of the Lender (as finally
determined by a court of competent jurisdiction), the Lender shall be deemed to
have exercised care in each such determination.  In furtherance of the
foregoing and without limiting the generality thereof, the parties agree that,
with respect to documents presented which appear on their face to be in
substantial compliance with the terms of a Letter of Credit, the Lender may, in
its sole discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

    


    (f) Disbursement
Procedures.  The Lender shall, promptly following its receipt
thereof, examine all documents purporting to represent a demand for payment
under a Letter of Credit.  The Lender shall promptly notify the
Borrower by telephone (confirmed by telecopy) of such demand for payment and
whether the Lender has made or will make an LC Disbursement thereunder; provided that any
failure to give or delay in giving such notice shall not relieve the Borrower of
its obligation to reimburse the Lender and the Lender with respect to any such
LC Disbursement.

    


    (g) Interim
Interest.  If the Lender shall make any LC Disbursement, then,
unless the Borrower shall reimburse such LC Disbursement in full on the date
such LC Disbursement is made, the unpaid amount thereof shall bear interest, for
each day from and including the date such LC Disbursement is made to but
excluding the date that the Borrower reimburses such LC Disbursement, at the
rate per annum then applicable to ABR Revolving Loans; provided that, if the
Borrower fails to reimburse such LC Disbursement when due pursuant to
paragraph (d) of this Section, then Section 2.10(c) shall
apply.

    


    (h) Cash
Collateralization.  Provided that Lender has requested that
Borrower obtain, and Borrower has obtained, necessary Vermont Public Service
Board approval for Borrower’s granting of the security interest, if any Event of
Default shall occur and be continuing, on the Business Day, that the Borrower
receives notice from the Lender (or, if the maturity of the Loans has been
accelerated), demanding the deposit of cash collateral pursuant to this
paragraph, the Borrower shall deposit in an account with the Lender, an amount
in cash equal to the LC Exposure as of such date plus any accrued and unpaid
interest thereon; provided that the
obligation to deposit such cash collateral shall become effective immediately,
and such deposit shall become immediately due and payable, without demand or
other notice of any kind, upon the occurrence of any Event of Default with
respect to the Borrower described in clause (h) or (i) of
Article VII.  Such deposit shall be held by the Lender as
collateral for the payment and performance of the obligations of the Borrower
under this Agreement.  The Lender shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such
account.  Other than any interest earned on the investment of such
deposits, which investments shall be made at the option and sole discretion of
the Lender and at the Borrower’s risk and expense, such deposits shall not bear
interest.  Interest or profits, if any, on such investments shall
accumulate in such account.  Moneys in such account shall be applied
by the Lender to reimburse the Lender for LC Disbursements for which it has not
been reimbursed and, to the extent not so applied, shall be held for the
satisfaction of the reimbursement obligations of the Borrower for the LC
Exposure at such time or, if the maturity of the Loans has been accelerated, be
applied to satisfy other obligations of the Borrower under this
Agreement.  If the Borrower is required to provide an amount of cash
collateral hereunder as a result of the occurrence of an Event of Default, such
amount (to the extent not applied as aforesaid) shall be returned to the
Borrower within three Business Days after all Events of Default have been cured
or waived.

    


    


    SECTION
2.05. Interest
Elections.

    


    (a) Each
Revolving Borrowing initially shall be of the Type specified in the applicable
Borrowing Request and, in the case of a Eurodollar Revolving Borrowing, shall
have an initial Interest Period as specified in such Borrowing
Request.

    


    (b) Thereafter,
the Borrower may elect to convert such Borrowing to a different Type or to
continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect
Interest Periods therefor, all as provided in this Section.  The
Borrower may elect different options with respect to different portions of the
affected Borrowing.

    


    (c) To make
an election pursuant to this Section, the Borrower shall notify the Lender of
such election by telephone by the time that a Borrowing Request would be
required under Section 2.03 if the Borrower were requesting a Borrowing of the
Type resulting from such election to be made on the effective date of such
election.  Each such telephonic Interest Election Request shall be
irrevocable and shall be confirmed promptly by hand delivery or telecopy to the
Lender of a written Interest Election Request in a form approved by the Lender
and signed by the Borrower.

    


    (d) Each
telephonic and written Interest Election Request shall specify the following
information in compliance with Section 2.02:

    


    (i) the
Borrowing to which such Interest Election Request applies and, if different
options are being elected with respect to different portions thereof, the
portions thereof to be allocated to each resulting Borrowing (in which case the
information to be specified pursuant to clauses (iii) and (iv) below shall be
specified for each resulting Borrowing);

    


    (ii) the
effective date of the election made pursuant to such Interest Election Request,
which shall be a Business Day;

    


    (iii) whether
the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
and

    


    (iv) if the
resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be
applicable thereto after giving effect to such election, which shall be a period
contemplated by the definition of the term “Interest Period”.

    


    If any
such Interest Election Request requests a Eurodollar Borrowing but does not
specify an Interest Period, then the Borrower shall be deemed to have selected
an Interest Period of one month’s duration.

    


    (e) If the
Borrower fails to deliver a timely Interest Election Request with respect to a
Eurodollar Revolving Borrowing that has an Interest period of one, two or three
months prior to the end of such Interest Period applicable thereto, then, unless
such Borrowing is repaid as provided herein, at the end of such Interest Period
such Borrowing shall be converted to an ABR Borrowing. If the Borrower fails to
deliver a timely Interest Election Request with respect to a Eurodollar
Borrowing that has an Interest period of one day, then, unless such Borrowing is
repaid as provided herein, at the end of such one day Interest Period such
Borrowing shall continue at the Adjusted LIBO Rate for one day Interest
Periods.  Notwithstanding any contrary provision hereof, if an Event
of Default has occurred and is continuing and the Lender so notifies the
Borrower, then, so long as an Event of Default is continuing (i) no outstanding
Revolving Borrowing may be converted to or continued as a Eurodollar Borrowing
and

    


    (ii)
unless repaid, each Eurodollar Revolving Borrowing shall be converted to an ABR
Borrowing at the end of the Interest Period applicable thereto.

    


    SECTION
2.06. Termination and Reduction of
Commitments.

    


    (a) Unless
previously terminated, the Commitments shall termi­nate on the Maturity
Date.

    


    (b) The
Borrower may at any time terminate, or from time to time reduce, the Revolving
Credit Commitments; provided that (i)
each reduction of the Revolving Credit Commitments shall be in an amount that is
an integral multiple of $1,000,000 and not less than $5,000,000 and (ii) the
Borrower shall not terminate or reduce the Revolving Commitments if, after
giving effect to any concurrent prepayment of the Loans in accordance with
Section 2.08, the sum of the Revolving Credit Exposures would exceed the total
Revolving Commitments.

    


    (c) The
Borrower shall notify the Lender of any election to terminate or reduce the
Revolving Credit Commitments under paragraph (b) of this Section at least
three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date
thereof.  Each notice delivered by the Borrower pursuant to this
Section shall be irrevocable; provided that a
notice of termination of the Commitments delivered by the Borrower may state
that such notice is conditioned upon the effectiveness of other credit
facilities, in which case such notice may be revoked by the Borrower (by notice
to the Lender on or prior to the specified effective date) if such condition is
not satisfied.  Any termination or reduction of the Commitments shall
be permanent.

    


    SECTION
2.07. Repayment of Loans;
Evidence of Debt.

    


    (a) The
Borrower hereby unconditionally promises to pay to the Lender the then unpaid
principal amount of each Revolving Loan on the Maturity Date.

    


    (b) The
Lender shall maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Borrower to the Lender resulting
from each Loan made by the Lender, including the amounts of principal and
interest payable and paid to the Lender from time to time
hereunder.

    


    (c) The
Lender shall maintain accounts in which it shall record (i) the amount of
each Loan made hereunder, the Class and Type thereof and the Interest Period
applicable thereto, (ii) the amount of any principal or interest due and
payable or to become due and payable from the Borrower to the Lender hereunder
and (iii) the amount of any sum received by the Lender.

    


    (d) The
entries made in the accounts maintained pursuant to paragraph (b)
or (c) of this Section shall be prima facie evidence of the
existence and amounts of the obligations recorded therein; provided that the
failure of the Lender to maintain such accounts or any error therein shall not
in any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.

    


    (e) The
Lender may request that Loans be evidenced by a promissory note.  In
such event, the Borrower shall prepare, execute and deliver to the Lender a
promissory note payable to the order of the Lender (or, if requested by the
Lender, to Lender and its registered assigns) and in the form of Exhibit A or
any other form approved by the Lender.  Thereafter, the Loans
evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 8.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).

    


    SECTION
2.08. Prepayment of
Loans.

    


    (a) The
Borrower shall have the right at any time and from time to time to prepay any
Borrowing, in whole or in part, subject to prior notice in accordance with
paragraph (b) of this Section.

    


    (b) The
Borrower shall notify the Lender by telephone (confirmed by telecopy) of any
prepayment hereunder (i) in the case of prepayment of a Eurodollar Revolving
Borrowing that is for an Interest period of one, two or three months, not later
than 11:00 a.m., New York City time, three Business Days before the date of
prepayment, or (ii) in the case of prepayment of an ABR Revolving Borrowing or a
Eurodollar Revolving Borrowing that is for an Interest Period of one day, not
later than 11:00 a.m., New York City time, one Business Day before the date of
prepayment.  Each such notice shall be irrevocable and shall specify
the prepayment date and the principal amount of each Borrowing or portion
thereof to be prepaid; provided that, if a
notice of prepayment is given in connection with a conditional notice of
termination of the Revolving Commitments as contemplated by Section 2.06,
then such notice of prepayment may be revoked if such notice of termination is
revoked in accordance with Section 2.06.  Each partial prepayment
of any Revolving Borrowing shall be in an amount that would be permitted in the
case of an advance of a Revolving Borrowing of the same Type as provided in
Section 2.02.  Each prepayment of a Revolving Borrowing shall be
applied ratably to the Loans included in the prepaid
Borrowing.  Prepayments shall be accompanied by accrued interest to
the extent required by Section 2.10.

    


    SECTION
2.09. Fees.

    


    (a) The
Borrower agrees to pay to the Lender a facility fee, which shall accrue at the
Applicable Rate on the daily amount of the unused portion of the Revolving
Commitment of the Lender during the period from and including the Effective Date
to but excluding the date on which such Commitment terminates; provided that, if the
Lender continues to have any Revolving Credit Exposure after its Commitment
terminates, then such facility fee shall continue to accrue on the daily amount
of the Lender’s Revolving Credit Exposure from and including the date on which
its Commitment terminates to but excluding the date on which the Lender ceases
to have any Revolving Credit Exposure.  Accrued facility fees shall be
payable in arrears on the last day of March, June, September and December of
each year and on the date on which the Commitments terminate, commencing on the
first such date to occur after the date hereof; provided that any
facility fees accruing after the date on which the Commitment terminate shall be
payable on demand.  All facility fees shall be computed on the basis
of a year of 360 days and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day).

    


    (b) The
Borrower agrees to pay (i) to the Lender a commission with respect to its
participation in Letters of Credit, which shall accrue at the same Applicable
Rate used to determine the interest rate applicable to Eurodollar Revolving
Loans on the average daily amount of the Lender’s LC Exposure (excluding any
portion thereof attributable to unreimbursed LC Disbursements) during the period
from and including the Effective Date to but excluding the later of the date on
which the Lender’s Commitment terminates and the date on which the Lender ceases
to have any LC Exposure, and (ii) the Lender’s standard fees with respect to the
issuance, amendment, renewal or extension of any Letter of Credit or processing
of drawings thereunder.  Such commissions accrued through and
including the last day of March, June, September and December of each year shall
be payable on the third Business Day following such last day, commencing on the
first such date to occur after the Effective Date; provided that all
such commissions shall be payable on the date on which the Commitment terminate
and any such commissions accruing after the date on which the Commitment
terminates shall be payable on demand.  Any other fees and/or
commissions payable to the Lender pursuant to this paragraph shall be payable
within 10 days after demand.  All commissions shall be computed on the
basis of a year of 360 days and shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).

    


    (c) The
Borrower agrees to pay to the Lender usual and customary fees payable in the
amount and at the times separately agreed upon by the Borrower and the
Lender.

    


    (d) All fees
and commissions payable hereunder shall be paid on the dates due, in immediately
available funds, to the Lender.  Fees and commissions paid shall not
be refundable under any circumstances.

    


    SECTION
2.10. Interest.

    


    (a) The Loans
comprising each ABR Borrowing shall bear interest at the Alternate Base
Rate plus the Applicable Rate.

    


    (b) The Loans
comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO
Rate for the Interest Period in effect for such Borrowing plus the Applicable
Rate.

    


    (c) Notwithstanding
the foregoing, if any principal of or interest on any Loan or any fee or other
amount payable by the Borrower hereunder is not paid when due, whether at stated
maturity, upon acceleration or otherwise, such overdue amount shall bear
interest, after as well as before judgment, at a rate per annum equal to (i) in
the case of overdue principal of any Loan, 2% plus the rate otherwise applicable
to such Loan as provided in the preceding paragraphs of this Section or
(ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans
as provided in paragraph (a) of this Section.

    


    (d) Accrued
interest on each Loan shall be payable in arrears on each Interest Payment Date
for such Loan, upon the Maturity Date, and, in the case of Revolving Loans, upon
termination of the Commitment; provided that (i)
interest accrued pursuant to paragraph (c) of this Section shall be payable
on demand, (ii) in the event of any repayment or prepayment of any Loan (other
than a prepayment of an ABR Revolving Loan prior to the end of the Availability
Period), accrued interest on the principal amount repaid or prepaid shall be
payable on the date of such repayment or prepayment and (iii) in the event of
any conversion of any Eurodollar Revolving Loan prior to the end of the current
Interest Period therefor, accrued interest on such Loan shall be payable on the
effective date of such conversion.

    


    (e) All
interest hereunder shall be computed on the basis of a year of 360 days, and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day).  The applicable Alternate Base
Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Lender, and
such determination shall be conclusive absent manifest error.

    


    SECTION
2.11. Alternate Rate of
Interest.

    


    If prior to the commencement of any
Interest Period for a Eurodollar Borrowing:

    


    (a) the
Lender determines (which determination shall be conclusive absent manifest
error) that adequate and reasonable means do not exist for ascertaining the
Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period;
or

    


    (b) the
Lender determines that the Adjusted LIBO Rate or the LIBO Rate, as applicable,
for such Interest Period will not adequately and fairly reflect the cost to the
Lender of making or maintaining its Loans included in such Borrowing for such
Interest Period;

    


    then the
Lender shall give notice thereof to the Borrower by telephone or telecopy as
promptly as practicable thereafter and, until the Lender notifies the Borrower
that the circumstances giving rise to such notice no longer exist, (i) any
Interest Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing; provided that if the
circumstances giving rise to such notice affect only one Type or Class of
Borrowings, then the other Type or Class of Borrowings shall be permitted, as
the case may be.

    


    SECTION
2.12. Increased
Costs.

    


    (a) If any
Change in Law shall:

    


    (i) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by,
the Lender (except any such reserve requirement reflected in the Adjusted LIBO
Rate); or

    


    (ii) impose on
the Lender or the London interbank market any other condition affecting this
Agreement or Eurodollar Loans made by the Lender or any Letter of Credit or
participation therein;

    


    and the
result of any of the foregoing shall be to increase the cost to the Lender of
making or main­taining any Eurodollar Loan (or of maintaining its obligation
to make any such Loan) or to increase the cost to the Lender of issuing or
maintaining any Letter of Credit or to reduce the amount of any sum received or
receiv­able by the Lender (whether of principal, interest or otherwise),
then the Borrower will pay to the Lender, such additional amount or amounts as
will compensate the Lender for such additional costs incurred or reduction
suffered.

    


    (b) If the
Lender determines that any Change in Law regarding capital requirements has or
would have the effect of reducing the rate of return on the Lender’s capital or
on the capital of the Lender’s holding company, if any, as a consequence of this
Agreement or the Loans made by, or participations in Letters of Credit held by,
the Lender, or the Letters of Credit issued by the Lender, to a level below that
which the Lender or the Lender’s holding company could have achieved but for
such Change in Law (taking into consideration the Lender’s policies and the
policies of the Lender’s holding company with respect to capital adequacy), then
from time to time the Borrower will pay to the Lender, as the case may be, such
additional amount or amounts as will compensate the Lender or the Lender’s
holding company for any such reduction suffered.

    


    (c) A
certificate of a Lender setting forth the amount or amounts necessary to
compensate the Lender or its holding company, as the case may be, as specified
in paragraph (a) or (b) of this Section shall be delivered to the
Borrower and shall be conclusive absent manifest error.  The Borrower
shall pay the Lender the amount shown as due on any such certificate within
10 days after receipt thereof.

    


    (d) Failure
or delay on the part of the Lender to demand compensation pursuant to this
Section shall not constitute a waiver of the Lender’s right to demand such
compensation; provided that the
Borrower shall not be required to compensate the Lender pursuant to this
Section for any increased costs or reductions incurred more than 270 days
prior to the date that the Lender notifies the Borrower of the Change in Law
giving rise to such increased costs or reductions and of the Lender’s intention
to claim compensation therefor; provided further that, if the
Change in Law giving rise to such increased costs or reductions is retroactive,
then the 270-day period referred to above shall be extended to include the
period of retroactive effect thereof.

    


    SECTION
2.13. Break Funding
Payments.

    


    In the event of (a) the payment of any
principal of any Eurodollar Loan other than on the last day of an Interest
Period applicable thereto (including as a result of an Event of Default), (b)
the conversion of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto, (c) the failure to borrow, convert, continue or
prepay any Eurodollar Loan on the date specified in any notice delivered
pursuant hereto (regardless of whether such notice may be revoked under Section
2.08(b) and is revoked in accordance therewith), or (d) the assignment of
any Eurodollar Loan other than on the last day of the Interest Period applicable
thereto as a result of a request by the Borrower pursuant to Section 2.16,
then, in any such event, the Borrower shall compensate the Lender for the loss,
cost and expense attributable to such event.  In the case of a
Eurodollar Loan, such loss, cost or expense to the Lender shall be deemed to
include an amount determined by the Lender to be the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount of such Loan
had such event not occurred, at the Adjusted LIBO Rate that would have been
applicable to such Loan, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of a failure
to borrow, convert or continue, for the period that would have been the Interest
Period for such Loan), over (ii) the amount of interest which would accrue on
such principal amount for such period at the interest rate which the Lender
would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the Eurodollar
market.  A certifi­cate of the Lender setting forth any amount or
amounts that the Lender is entitled to receive pursuant to this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error.  The Borrower shall pay the Lender the amount shown as
due on any such certificate within 10 days after receipt thereof.

    


    SECTION
2.14. Taxes.

    


    (a) Any and
all payments by or on account of any obligation of the Borrower hereunder shall
be made free and clear of and without deduction for any Indemnified Taxes or
Other Taxes; provided that if the
Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from
such payments, then (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section ) the Lender receives an amount
equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower
shall pay the full amount deducted to the relevant Governmental Authority in
accordance with applicable law.

    


    (b) In
addition, the Borrower shall pay any Other Taxes to the relevant Governmental
Authority in accordance with applicable law.

    


    (c) The
Borrower shall indemnify the Lender within 10 days after written demand
therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by
the Lender on or with respect to any payment by or on account of any obligation
of the Borrower hereunder (including Indemnified Taxes or Other Taxes imposed or
asserted on or attributable to amounts payable under this Section ) and any
penalties, interest and reasonable expenses arising therefrom or with respect
thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or
legally imposed or asserted by the relevant Governmental Authority.  A
certificate as to the amount of such payment or liability delivered to the
Borrower by the Lender shall be conclusive absent manifest error.

    


    (d) As soon
as practicable after any payment of Indemnified Taxes or Other Taxes by the
Borrower to a Governmental Authority, the Borrower shall deliver to the Lender
the original or a certified copy of a receipt issued by such Governmental
Authority evidencing such payment, a copy of the return reporting such payment
or other evidence of such payment reasonably satisfactory to the
Lender.

    


    (e) If the
Lender determines, in its sole discretion, that it has received a refund of any
Taxes or Other Taxes as to which it has been indemnified by the Borrower or with
respect to which the Borrower has paid additional amounts pursuant to this
Section 2.14, it shall pay over such refund to the Borrower (but only to the
extent of indemnity payments made, or additional amounts paid, by the Borrower
under this Section 2.14 with respect to the Taxes or Other Taxes giving rise to
such refund), net of all out-of-pocket expenses of the Lender and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund); provided, that the Borrower, upon the request of
the Lender, agrees to repay the amount paid over to the Borrower (plus any
penalties, interest or other charges imposed by the relevant Governmental
Authority) to the Lender in the event the Lender is required to repay such
refund to such Governmental Authority. This Section shall not be construed
to require the Lender to make available its tax returns (or any other
information relating to its taxes which it deems confidential) to the Borrower
or any other Person.

    


    SECTION
2.15. Payments
Generally.

    


    (a) The
Borrower shall make each payment required to be made by it hereunder (whether of
principal, interest, fees or reimbursement of LC Disbursements, or of amounts
payable under Section 2.12, 2.13 or 2.14, or otherwise) prior to 2:00 p.m., New
York City time, on the date when due, in immediately available funds, without
set-off or counterclaim.  Any amounts received after such time on any
date may, in the discretion of the Lender, be deemed to have been received on
the next succeeding Business Day for purposes of calculating interest
thereon.  All such payments shall be made to the Lender at its offices
at 149 Bank Street, Burlington, Vermont 05401, or such other office as the
Lender may designate in writing.  If any payment hereunder shall be
due on a day that is not a Business Day, the date for payment shall be extended
to the next succeeding Business Day, and, in the case of any payment accruing
interest, interest thereon shall be payable for the period of such
extension.  All payments hereunder shall be made in U.S.
dollars.

    


    (b) If at any
time insufficient funds are received by and available to the Lender to pay fully
all amounts of principal, unreimbursed LC Disbursements, interest and fees then
due hereunder, such funds shall be applied (i) first, towards payment of
interest and fees then due hereunder, and (ii) second, towards payment of
principal and unreimbursed LC Disbursements then due hereunder.

    


    SECTION
2.16. Mitigation
Obligations.

    


    If the Lender requests compensation
under Section 2.12, or if the Borrower is required to pay any
additional amount to the Lender or any Governmental Authority for the account of
the Lender pursuant to Section 2.14, then the Lender shall use reasonable
efforts to designate a different lending office for funding or booking its Loans
hereunder or to assign its rights and obligations hereunder to another of its
offices, branches or affiliates, if, in the judgment of the Lender, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 2.12 or 2.14, as the case may be, in the future and (ii) would not
subject the Lender to any unreimbursed cost or expense and would not otherwise
be disadvantageous to the Lender.  The Borrower hereby agrees to pay
all reasonable costs and expenses incurred by the Lender in connection with any
such designation or assignment.

    


    


    ARTICLE
III - Representations
and Warranties

    


    The Borrower represents and warrants to
the Lender that:

    


    SECTION
3.01. Organization;
Powers.

    


    Each of the Borrower and its Regulated
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority to carry on its business as now conducted and, except where the
failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect, is qualified to do business in,
and is in good standing in, every juris­diction where such qualification is
required.

    


    SECTION
3.02. Authorization;
Enforceability.

    


    The Transactions are within the
Borrower’s corporate powers and have been duly authorized by all necessary
corporate and, if required, stockholder action.  This Agreement has
been duly executed and delivered by the Borrower and constitutes a legal, valid
and binding obligation of the Borrower, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting creditors’ rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.

    


    SECTION
3.03. Governmental Approvals; No
Conflicts.

    


    The Transactions (a) do not require any
consent or approval of, registration or filing with, or any other action by, any
Governmental Authority, except such as have been obtained or made and are in
full force and effect, (b) will not violate any applicable law or regulation or
the charter, by-laws or other organizational documents of the Borrower or any of
its Regulated Subsidiaries (and, to the best of Borrower’s knowledge, all of its
other Subsidiaries, except where any such violation would not result in a
Material Adverse Effect) or any order of any Governmental Authority, (c) will
not violate or result in a default under any indenture, agreement or other
instrument binding upon the Borrower or any of its Regulated Subsidiaries (and,
to the best of Borrower’s knowledge, all of its other Subsidiaries, except where
any such violation or breach would not result in a Material Adverse Effect) or
its assets, or give rise to a right thereunder to require any payment to be made
by the Borrower or any of its Regulated Subsidiaries (and, to the best of
Borrower’s knowledge, all of its other Subsidiaries, except where any such right
would not result in a Material Adverse Effect) and (d) will not result in the
creation or imposition of any Lien on any asset of the Borrower or any of its
Regulated Subsidiaries.

    


    SECTION
3.04. Financial Condition; No
Material Adverse Effect.

    


    (a) The
Borrower has heretofore furnished to the Lender its consolidated balance sheet
and statements of income, stockholders equity and cash flows (i) as of and for
the fiscal year ended December 31, 2007, reported on by Deloitte & Touche,
LLP, independent public accountants, and (ii) as of and for the fiscal quarter
and the portion of the fiscal year ended June 30, 2008, certi­fied by its
Chief Financial Officer.  Such financial state­ments present
fairly, in all material respects, the financial position and results of
operations and cash flows of the Borrower and its consolidated Subsidiaries as
of such dates and for such periods in accordance with GAAP, subject to year-end
audit adjustments and the absence of footnotes in the case of the statements
referred to in clause (ii) above.

    


    (b) The
Borrower has heretofore furnished to the Lender its unaudited balance sheet,
statements of income, and stockholders equity of the Borrower on a standalone
basis (i) as of and for the fiscal year ended December 31, 2007, and (ii) as of
and for the portion of the fiscal year ended June 30, 2008, all being
certi­fied by its Chief Financial Officer.  Such financial
state­ments present fairly, in all material respects, the financial position
and results of operations and cash flows of the Borrower on a standalone basis
as of such dates and for such periods in accordance with GAAP, subject to
year-end audit adjustments and the absence of footnotes.

    


    (c) Since
June 30, 2008, there has been no change in the business, assets, operations,
prospects or condition, financial or otherwise, of the Borrower and its
Regulated Subsidiaries, taken as a whole, as of the Closing Date, or
subsequently that has not been publicly disclosed, except changes that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.

    


    (d) Each of
the Borrower and Guarantor are not liable for any Indebtedness of their
respective subsidiaries except as set forth on Schedule 3.04(d) hereof, and
except as allowed by Article VI hereof.

    


    SECTION
3.05. Properties.

    


    (a) Each of
the Borrower and its Regulated Subsidiaries (and, to the best of Borrower’s
knowledge, all of its other Subsidiaries, except where any such failure would
not result in a Material Adverse Effect) has good title to, or valid leasehold
interests in, all its real and personal property material to its business,
except for Permitted Encumbrances and minor defects in title that do not
interfere with its ability to conduct its business as currently conducted or to
utilize such properties for their intended purposes.

    


    (b) Each of
the Borrower and its Regulated Subsidiaries and, to the best of Borrower’s
knowledge, all of its other Subsidiaries, owns, or is licensed to use, all
trademarks, tradenames, copyrights, patents and other intellectual property
material to its business, and the use thereof by the Borrower and its Regulated
Subsidiaries and, to the best of Borrower’s knowledge, all of its other
Subsidiaries, does not infringe upon the rights of any other Person, except for
any such infringements that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

    


    SECTION
3.06. Litigation and Environmental
Matters.

    


    Other
than as disclosed in the Company’s most recent Form 10-K, Form 10-Q
and Forms 8-K published since the most recent Form 10-K and Form
10-Q:

    


    (a) There are
no actions, suits or proceedings by or before any arbitrator or Governmental
Authority pending against or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Regulated Subsidiaries and, to
the best of Borrower’s knowledge, all of its other Subsidiaries, (i) as to
which there is a reasonable possi­bility of an adverse determination and
that, if adversely deter­mined, could reasonably be expected, individually
or in the aggregate, to result in a Material Adverse Effect (other than Schedule
3.06, Disclosed Matters) or (ii) that involve this Agreement or the
Transactions.

    


    (b) Except
for the Disclosed Matters and except with respect to any other matters that,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect, neither the Borrower nor any of its Regulated
Subsidiaries and, to the best of Borrower’s knowledge, all of its other
Subsidiaries, (i) has failed to comply with any Environmental Law or to
obtain, maintain or comply with any permit, license or other approval required
under any Environmental Law, (ii) has become subject to any Environmental
Liability, (iii) has received notice of any claim with respect to any
Environmental Liability or (iv) knows of any basis for any Environmental
Liability.

    


    (c) Since the
date of this Agreement, there has been no change in the status of the Disclosed
Matters that, individually or in the aggregate, has resulted in, or materially
increased the likelihood of, a Material Adverse Effect.

    


    SECTION
3.07. Compliance with Laws and
Agreements.

    


    Each of the Borrower and its Regulated
Subsidiaries and, to the best of Borrower’s knowledge, all its other
Subsidiaries is in compliance with all laws, regulations and orders of any
Governmental Authority applicable to it or its property and all indentures,
agreements and other instruments binding upon it or its property, except where
the failure to do so, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect.  No Default has
occurred and is continuing.

    


    SECTION
3.08. Investment and Holding
Company Status.

    


              (a) Neither the Borrower nor
any of its Regulated Subsidiaries is an “investment company” as defined in, or
subject to regulation under, the Investment Company Act of 1940; (b) no
Regulated Subsidiary is a “holding company” as defined in, or subject to
regulation under, the Public Utility Holding Company Act of 1935 (the “Holding Company
Act”);  (c) the Borrower is a holding company as defined in the
Public Utility Holding Company Act  of 2005 (the “Holding Company Act”) which
is exempt from all the provisions of the Holding Company Act and the General
Rules and Regulations under the Holding Company Act (the “Holding Company Rules”); and
(d) the Borrower has not taken any action and will not take any action unless
required by law which could cause Lender to become, solely by reason of the
Transactions, subject to regulation under the Holding Company Act.

    


    SECTION
3.09. Taxes.

    


    Each of the Borrower and its Regulated
Subsidiaries and, to the best of Borrower’s knowledge, all its other
Subsidiaries, has timely filed or caused to be filed all Tax returns and reports
required to have been filed and has paid or caused to be paid all Taxes required
to have been paid by it, except (a) Taxes that are being contested in good
faith by appropriate proceedings and for which the Borrower or such Regulated
Subsidiary, as applicable, has set aside on its books adequate reserves, in
accordance with GAAP, or (b) to the extent that the failure to do so could
not reasonably be expected to result in a Material Adverse Effect.

    


    SECTION
3.10. ERISA.

    


    As of the Closing Date, and
subsequently, other than as disclosed in the Company’s most recent
Form 10-K, Form 10-Q and Forms 8-K published since the most recent
Form 10-K and Form 10-Q, no ERISA Event has occurred or is reasonably expected
to occur that, when taken together with all other such ERISA Events for which
liability is reasonably expected to occur, could reasonably be expected to
result in a Material Adverse Effect.  As of the Closing Date, the
present value of all accumulated benefit obligations under each Plan (based on
the assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the date of the September 30, 2007 actuarial
valuation date reflecting such amounts, exceed by more than $1,700,000 the fair
market value of the assets of such Plan, and the present value of all
accumulated benefit obligations of all underfunded Plans (based on the
assumptions used for purposes of Statement of Financial Accounting Standards
No. 87) did not, as of the September 30, 2007 actuarial valuation date
reflecting such amounts, exceed by more than $1,700,000 the fair market value of
the assets of all such underfunded Plans.

    


    SECTION
3.11. Disclosure.

    


    The Borrower has disclosed to the
Lender all agreements, instruments and corporate or other restrictions to which
it or any of its Regulated Subsidiaries and, to the best of Borrower’s
knowledge, all of its other Subsidiaries, is subject, and all other matters
known to it, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect.  No reports,
financial statements, certificates or other information furnished by or on
behalf of the Borrower to the Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; provided that, with
respect to projected financial information, the Borrower represents only that
such information was prepared in good faith based upon assumptions believed to
be reasonable at the time.

    


    SECTION
3.12. Bonding
Capacity.

    


    The Borrower has Bonding Capacity under
the Indenture in excess of $15,000,000 as of the Closing Date.

    


    


    ARTICLE
IV - Conditions

    


    SECTION
4.01. Effective
Date.

    


    The obligations of the Lender to make
Loans and to issue Letters of Credit hereunder shall not become effective until
the date on which each of the following conditions is satisfied (or waived in
accordance with Section 8.02):

    


    (a) The
Lender (or its counsel) shall have received from the Borrower either (i) a
counterpart of this Agreement signed on behalf of such party or (ii) written
evidence satisfactory to the Lender (which may include telecopy transmission of
a signed signature page of this Agreement) that the Borrower has signed a
counterpart of this Agreement.

    


    (b) The
Lender shall have received all promissory notes required by Lender fully
executed, all in form and substance satisfactory to the Lender and its
counsel.

    


    (c) The
Lender shall have received a favorable written opinion (addressed to the Lender
and dated the Effective Date) of Kenneth C. Picton, Assistant General Counsel
for the Borrower, substantially in the form of Exhibit B, and covering such
other matters relating to the Borrower and this Agreement or the Transactions as
the Lender shall reasonably request.  The Borrower hereby requests
such counsel to deliver such opinion.

    


    (d) The
Lender’s review of and satisfaction with the projections and pro-forma financial
statements of Borrower.

    


    (e) The
Lender’s satisfaction with the condition (financial and otherwise), operations,
assets, nature of assets, liabilities and prospects of the
Borrower.

    


    (f) The
Lender has received satisfactory evidence of compliance with all applicable U.S.
federal, state and local laws and regulations, including all applicable
Environmental Laws and regulations and that all necessary regulatory approvals
have been obtained, including but not limited to the Vermont Public Service
Board.  Without limiting the foregoing, the Borrower shall have
provided evidence, satisfactory to the lender, that the Regulators have approved
the incurrence of indebtedness pursuant to 30 V.S.A. §108 and the posting of
cash collateral for purposes of Section 2.04(h) of this Agreement.

    


    (g) No
litigation by any person or entity (private or governmental) shall be pending or
threatened (i) with respect to the Transactions, the Agreement, or any other
documentation executed in connection herewith or therewith or the transaction
contemplated hereby or (ii) which in the Lender’s sole judgment, individually or
in the aggregate, could have a Materially Adverse Effect on the business,
property, assets, liabilities, condition (financial or otherwise), operations,
results of operations or prospects of the Borrower after giving effect to the
Transactions.

    


    (h) Since the
date of the last financial statements for the Borrower delivered to the Lender
prior to the date hereof, nothing shall have occurred which in the Lender’s sole
judgment could, individual or in the aggregate, have a Material Adverse Effect
on (i) the rights and remedies of the Lender under the definitive documentation
for the Transaction, (ii) the ability of the Borrower to perform its respective
obligations or (iii) the business, property, assets, liabilities, condition
(financial or otherwise), operations, results of operations or prospects of the
Borrower after giving effect to the Transactions.

    


    (i) The
Lender shall have received such documents and certificates as the Lender or its
counsel may reasonably request relating to the organization, existence and good
standing of the Borrower, the Guarantors, the authorization of the Transactions
and any other legal matters relating to the Borrower, this Agreement or the
Transactions, all in form and substance satisfactory to the Lender and its
counsel.

    


    (j) The
Lender shall have received a certificate, dated the Effective Date and signed by
the President, a Vice President or a Financial Officer of the Borrower,
confirming compliance with the conditions set forth in paragraphs (a)
through (i) of Section 4.02.

    


    (k) The
Lender shall have received an executed subsidiary guaranty agreement from the
Guarantor, in form and substance satisfactory to the Lender and its
counsel.

    


    (l) The
Lender shall have received all fees and other amounts due and payable on or
prior to the Effective Date, including, to the extent invoiced, reimbursement or
payment of all out-of-pocket expenses required to be reimbursed or paid by the
Borrower hereunder.

    


    


    The Lender shall notify the Borrower of
the Effective Date, and such notice shall be conclusive and
binding.  Upon the Effective Date, the Lender shall be authorized to
insert the date of the Effective Date in the promissory note for the
Loans.  Notwithstanding the foregoing, the obligations of the Lender
to make Revolving Loans and to issue Letters of Credit hereunder shall not
become effective unless each of the foregoing conditions is satisfied (or waived
pursuant to Section 8.02) at or prior to 1:00 p.m., New York City time, on or
before November 24, 2008 (and, in the event such conditions are not so satisfied
or waived, the Revolving Credit Commitment shall terminate at such
time).

    


    SECTION
4.02. Each Credit
Event.

    


    The obligation of the Lender to make a
Loan on the occasion of any Borrowing, and to issue, amend, renew or extend any
Letter of Credit, is subject to the satisfaction of the following
conditions:

    


    (a) The
representations and warranties of the Borrower set forth in this Agreement,
shall be true and correct on and as of the date of such Borrowing or the date of
issuance, amendment, renewal or extension of such Letter of Credit, as
applicable.

    


    (b) At the
time of and immediately after giving effect to such Borrowing or the issuance,
amendment, renewal or extension of such Letter of Credit, as applicable, no
Default shall have occurred and be continuing.

    


    (c) Borrower’s
unsecured long term debt has a rating of “BBB”  or higher from S&P
or “Baa3” or higher from Moody’s; provided, if the
Borrower does not have such rating, there has been no change in the business,
assets, operations, prospects or condition, financial or otherwise, the Borrower
and its Regulated Subsidiaries, and, to the best of Borrower’s Knowledge, all of
its other Subsidiaries taken as a whole, that individually, or in the aggregate,
could not be expected to have a Material Adverse Effect.

    


    (d) Prior to
the issuance, amendment, renewal or extension of any Letter of Credit, the
Borrower shall have confirmed in writing to Lender that it has received all
necessary regulatory approvals permitting Borrower to provide the cash
collateral, as set forth in Section 2.04 (h).

    


    Each
Borrowing and each issuance, amendment, renewal or extension of a Letter of
Credit shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in paragraphs (a), (b)
and (c) of this Section.

    


    ARTICLE
V - Affirmative
Covenants

    


    Until the Commitments have expired or
been terminated and the principal of and interest on each Loan and all fees
payable hereunder shall have been paid in full and all Letters of Credit shall
have expired or terminated and all LC Disbursements shall have been reimbursed,
the Borrower covenants and agrees with the Lender that:

    


    SECTION
5.01. Financial Statements;
Ratings Change and Other Information.

    


    The Borrower will furnish to the
Lender:

    


    (a) within
120 days after the end of each fiscal year of the Borrower:

     

    (i) its
audited consolidated balance sheet and related statements of operations,
stockholders’ equity and cash flows as of the end of and for such year, setting
forth in each case in comparative form the figures for the previous fiscal year,
all reported on by Deloitte & Touche, LLP or other independent public
accountants of recognized national standing (without a “going concern” or like
qualification or exception and without any qualification or exception as to the
scope of such audit) to the effect that such consolidated financial statements
present fairly in all material respects the financial condition and results of
operations of the Borrower and its consolidated Subsidiaries on a consolidated
basis in accordance with GAAP consistently applied; provided that the delivery
within the time period specified above of the Borrower’s Annual Report on Form
10-K for such fiscal year prepared in accordance with the requirements therefor
and filed with the Securities and Exchange Commission, shall be deemed to
satisfy the requirements of  Section 5.01(a)(i);

    


    (ii) its
unaudited balance sheet and related statements of operations, and stockholders’
equity as of the end of and for such year, setting forth in each case in
comparative form the figures for the previous fiscal year, all certified by its
Chief Financial Officer to the effect that such financial statements present
fairly in all material respects the financial condition and results of
operations of the Borrower on a standalone basis in accordance with GAAP
consistently applied; and

    


    (iii) the
unaudited balance sheet and related statements of operations of the Borrower’s
wholly-owned Subsidiary, Central Vermont Public Service Corporation – East
Barnet Hydroelectric, Inc. as of the end of and for such year, setting forth in
each case in comparative form the figures for the previous year, all certified
by its Chief Financial Officer to the effect that such balance sheet and related
statements of operations present fairly in all material respects the financial
conditions and results of operations income of Central Vermont Public Service
Corporation – East Barnet Hydroelectric, Inc. for the previous fiscal year
period on a standalone basis in accordance with GAAP consistently
applied.;

    


    (b) within
60 days after the end of each of the first three fiscal quarters of each
fiscal year of the Borrower:

    


    (i) its
consolidated balance sheet and related statements of operations, stockholders’
equity and cash flows as of the end of and for such fiscal quarter and the then
elapsed portion of the fiscal year, setting forth in each case in comparative
form the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all certified by
its Chief Finan­cial Officer as presenting fairly in all material respects
the financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consis­tently applied, subject to normal year-end audit adjustments and the
absence of footnotes;  provided that delivery within
the time period specified above of copies of the Borrower’s Quarterly Report on
Form 10-Q prepared in compliance with the requirements therefor and filed with
the Securities and Exchange Commission shall be deemed to satisfy the
requirements of this Section 5.01(b)(i); and

    


    (ii) its
unaudited balance sheet and related statements of operations and stockholders’
equity as of the end of and for such fiscal quarter and the then elapsed portion
of the fiscal year, setting forth in each case in comparative form the figures
for the corresponding period or periods of (or, in the case of the balance
sheet, as of the end of) the previous fiscal year, all certified by its Chief
Finan­cial Officer as presenting fairly in all material respects the
financial condition and results of operations of the Borrower on a standalone
basis in accordance with GAAP consis­tently applied, subject to normal
year-end audit adjustments and the absence of footnotes; and

    


    (iii) the
unaudited balance sheet and related statements of operations of the Borrower’s
wholly-owned Subsidiary, Central Vermont Public Service Corporation – East
Barnet Hydroelectric, Inc. as of the end of and for such fiscal quarter and the
then elapsed portion of the fiscal year, setting forth in each case in
comparative form the figures for corresponding period or periods the previous
fiscal year, all certified by its Chief Financial Officers to the effect that
such balance sheet and related statements of operations present fairly in all
material respects the financial conditions and results of operations of Central
Vermont Public Service Corporation – East Barnet Hydroelectric, Inc. for the
previous fiscal year period on a standalone basis in accordance with GAAP
consistently applied.

    


    (c) concurrently
with any delivery of financial statements under clause (a) or
(b) above, a certificate of a Financial Officer of the Borrower
(i) certifying as to whether a Default has occurred and, if a Default has
occurred, specifying the details thereof and any action taken or proposed to be
taken with respect thereto, (ii) setting forth reasonably detailed
calculations demonstrating compliance with Sections 6.09 and 6.10 and
(iii) stating whether any change in GAAP or in the application thereof has
occurred since the date of the audited financial statements referred to in
Section 3.04 and, if any such change has occurred, specifying the effect of
such change on the financial statements accompanying such certificate unless
otherwise disclosed in the Borrower’s Forms 10-K or 10-Q delivered under Section
5.01(a) or (b);

    


    (d) promptly
after the same become publicly available, copies of all periodic and other
reports, proxy statements and other materials filed by the Borrower or any
Subsidiary with the Securities and Exchange Commission, or any Govern­mental
Authority succeeding to any or all of the functions of said Commission, or with
any national securities exchange, or distributed by the Borrower to its
share­holders generally, as the case may be;

    


    (e) promptly
after Moody’s or S&P shall have announced a change in the rating established
or deemed to have been established for the Index Debt (i) written notice of such
rating change and (ii) if the Index Debt is rated less than BBB- (stable) by
Standard & Poor or Baa3 (stable) by Moody’s, the notice shall be accompanied
by a written statement of a Financial Officer or other executive officer of the
Borrower whether or not there has been a change in the business, assets,
operations, prospects or conditions, financial or otherwise, having a Material
Adverse Effect on the Borrower and its Subsidiaries, taken as a whole;
and

    


    (f) promptly
following any request therefor, such other information regarding the operations,
business affairs and financial condition of the Borrower or any Subsidi­ary,
or compliance with the terms of this Agreement, as the Lender may reasonably
request.

    


    SECTION
5.02. Notices of Material
Events.

    


    The Borrower will furnish to the Lender
prompt written notice of the following:

    


    (a) the
occurrence of any Default;

    


    (b) the
filing or commencement of any action, suit or proceeding by or before any
arbitrator or Governmental Authority against or affecting the Borrower or any
Affiliate thereof that, if adversely determined, could reasonably be expected to
result in a Material Adverse Effect;

    


    (c) the
occurrence of any ERISA Event that, alone or together with any other ERISA
Events that have occurred, could reasonably be expected to result in liability
of the Borrower and its Regulated Subsidiaries in an aggregate amount exceeding
$500,000; and

    


    (d) any other
development that results in, or could reasonably be expected to result in, a
Material Adverse Effect.

    


    Each
notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.

    


    SECTION
5.03. Existence; Conduct of
Business.

    


    The Borrower will, and will cause each
of its Regulated Subsidiaries to, do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its legal existence and the
rights, licenses, permits, privileges and franchises material to the conduct of
its business; provided that the
foregoing shall not prohibit any merger, consolidation, liquidation or
dissolution permitted under Section 6.03.

    


    SECTION
5.04. Payment of
Obligations.

    


    The Borrower will, and will cause each
of its Regulated  Subsidiaries to, pay its obliga­tions, including
Tax liabilities, that, if not paid, could result in a Material Adverse Effect
before the same shall become delinquent or in default, except where (a) the
validity or amount thereof is being contested in good faith by appropri­ate
proceedings, (b) the Borrower or such Subsidiary has set aside on its books
adequate reserves with respect thereto as necessary in accordance with GAAP and
(c) the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect.

    


    SECTION
5.05. Maintenance of Properties;
Insurance.

    


    The Borrower will, and will cause each
of its Regulated Subsidiaries to, (a) keep and maintain all property
material to the conduct of its business in good working order and condition,
ordinary wear and tear excepted, and (b) maintain, with financially sound
and reputable insurance companies, insurance in such amounts and against such
risks as are customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations.

    


    SECTION
5.06. Books and Records;
Inspection Rights.

    


    The Borrower will, and will cause each
of its Regulated Subsidiaries to, keep proper books of record and account in
which full, true and correct entries are made of all dealings and transactions
in relation to its business and activities.  The Borrower will, and
will cause each of its Regulated Subsidiaries to, permit any representatives
designated by the Lender, upon reasonable prior notice, to visit and inspect its
properties, to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition with its officers and independent
accountants, all at such reasonable times and as often as reasonably
requested.

    


    SECTION
5.07. Compliance with
Laws.

    


    The Borrower will, and will cause each
of its Regulated Subsidiaries to, comply with all laws, rules, regulations and
orders of any Governmental Authority applicable to it or its property
(including, without limitation, ERISA and the Public Utility Holding Company
Act), except where the failure to do so, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse Effect.

    


    SECTION
5.08. Use of Proceeds and Letters
of Credit.

    


    The proceeds of the Revolving Loans
will be used only for general corporate purposes of Borrower in the ordinary
course of business.  No part of the proceeds of any Loan will be used,
whether directly or indirectly, for any purpose that entails a violation of any
of the Regulations of the Board, including Regulations T, U and
X.  Letters of Credit will be issued only to support general corporate
purposes of Borrower in the ordinary course of business.

    


    SECTION
5.09. Guaranty by Certain
Regulated Subsidiaries.

    


    If requested by the Lender, the
Borrower will seek regulatory approval for its Regulated Subsidiaries, Custom
Investment Corporation and Central Vermont Public Service Corporation – East
Barnet Hydroelectric, Inc., to  be guarantors of the obligations of
the Borrower to the Lender, pursuant to guaranty agreements substantially
similar to the guaranty agreements executed by the Guarantors.

    


    


    ARTICLE
VI - Negative
Covenants

    


    Until the Commitments have expired or
terminated and the principal of and interest on each Loan and all fees payable
hereunder have been paid in full and all Letters of Credit have expired or
terminated and all LC Disbursements shall have been reimbursed, the Borrower
covenants and agrees with the Lender that:

    


    SECTION
6.01. Indebtedness.

    


    The Borrower will not, and will not
permit any Regulated Subsidiary to, create, incur, assume or permit to exist any
Indebtedness, except:

    


    (a) Indebtedness
created hereunder, including the Guaranty by the Guarantors;

    


    (b) Indebtedness
existing on the date hereof and set forth in Schedule 6.01(b), and
extensions, renewals and replacements of any such Indebtedness that do not
increase the outstanding principal amount thereof;

    


    (c) Indebtedness
of the Borrower to or from Guarantor, or to or from any Significant Subsidiary
provided such Indebtedness to or from a non-Regulated Subsidiary does not exceed
$17,500,000 plus twenty percent (20%) of Borrower’s cumulative net income since
January, 2004 or an amount permitted by the Indenture, whichever is
less;

    


    (d) Guarantees
by the Borrower of Indebtedness of any Guarantor or any Regulated Subsidiary and
by any Significant Subsidiary of Indebtedness of the Borrower or any other
Regulated Subsidiary existing on the date hereof and set forth on Schedule
6.01(d), and extensions, renewals and replacements of any such Indebtedness that
do not increase the outstanding principal amount thereof;

    


    (e) Indebtedness
of the Borrower or any Subsidiary incurred to finance the acquisition,
construction or improvement of any fixed or capital assets, including Capital
Lease Obligations and any Indebtedness assumed in connection with the
acquisition of any such assets or secured by a Lien on any such assets prior to
the acquisition thereof, and extensions, renewals and replacements of any such
Indebtedness;

    


    (f) Indebtedness
of Catamount Resources Corporation and its subsidiaries provided it is not
guaranteed by the Borrower and/or any other Guarantor;

    


    (g) other
unsecured Indebtedness in an aggregate principal amount not
exceeding  the Borrower’s statutory short-term borrowing limit, if the
Borrower carries an investment grade rating, and not exceeding $35,000,000 if
the Borrower does not carry an investment grade rating; and

    


    (h) additional
mortgage bonds issued under the Borrower’s Indenture.

    


    SECTION
6.02. Liens.

    


    The Borrower will not, and will not
permit any Subsidiary to, create, incur, assume or permit to exist any Lien on
any property or asset now owned or hereafter acquired by it, or assign or sell
any income or revenues (including accounts receivable) or rights in respect of
any thereof, except:

    


    (a) Permitted
Encumbrances;

    


    (b) any Lien
on any property or asset of the Borrower or any Subsidiary existing on the date
hereof and set forth in Schedule 6.02; provided that (i)
such Lien shall not apply to any other property or asset of the Borrower or any
Subsidiary and (ii) such Lien shall secure only those obligations which it
secures on the date hereof and extensions, renewals and replacements thereof
that do not increase the outstanding principal amount thereof;

    


    (c) any Lien
existing on any property or asset prior to the acquisition thereof by the
Borrower or any Subsidiary or existing on any property or asset of any Person
that becomes a  Subsidiary after the date hereof prior to the time
such Person becomes a Subsidiary; provided that
(i) such Lien is not created in contemplation of or in connection with such
acquisi­tion or such Person becoming a Subsidiary, as the case may be,
(ii) such Lien shall not apply to any other property or assets of the
Borrower or any  Subsidiary and (iii) such Lien shall secure only
those obligations which it secures on the date of such acquisition or the date
such Person becomes a Subsidiary, as the case may be and extensions, renewals
and replacements thereof that do not increase the outstanding principal amount
thereof;

    


    (d) Liens on
fixed or capital assets acquired, constructed or improved by the Borrower or any
Subsidiary; provided that
(i) such security interests secure Indebtedness permitted by
clause (e) of Section 6.01, (ii) such security interests and the
Indebtedness secured thereby are incurred prior to or within 90 days after
such acquisition or the completion of such construction or improvement,
(iii) the Indebtedness secured thereby does not exceed 100% of the cost of
acquiring, constructing or improving such fixed or capital assets and
(iv) such security interests shall not apply to any other property or
assets of the Borrower or any Subsidiary;

    


    (e) Liens on
property or assets of the Borrower to secure Power Transactions in the ordinary
course of business;

    


    (f) The Lien
of the Indenture;

    


    (g) Pledge
agreements identified on Schedule 6.08; and

    


    (h) Liens on
property or assets of the Borrower under or pursuant to any Swap
Agreement.

    


    SECTION
6.03. Fundamental
Changes.

    


    (a) The
Borrower will not, and will not permit any Regulated Subsidiary to, merge into
or consolidate with any other Person, or permit any other Person to merge into
or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one
transaction or in a series of transactions) all or any substantial part of its
assets, or all or substantially all of the stock of any of its Regulated
Subsidiaries (in each case, whether now owned or here­after acquired), or
liquidate or dissolve, except that, if at the time thereof and immediately after
giving effect thereto no Default shall have occurred and be continuing
(i) any Subsidiary may merge into the Borrower in a transaction in which
the Borrower is the surviving corporation, (ii) any Subsidiary may merge
into any Subsidiary in a transaction in which the surviving entity is a
Subsidiary, (iii) any Subsidiary may sell, transfer, lease or otherwise dispose
of its assets in the ordinary course of business or to the Borrower or to
another Subsidiary and (iv) any Subsidiary may liquidate or dissolve if the
Borrower determines in good faith that such liquidation or dissolution is in the
best interests of the Borrower and is not materially disadvantageous to the
Lender; provided that any
such merger involving a Person that is not a wholly owned Subsidiary immediately
prior to such merger shall not be permitted unless also permitted by
Section 6.04; and provided further,
Eversant Corporation, Catamount Resources Corporation or Catamount Energy
Corporation may sell any or all of their capital stock to an investor, if the
Borrower determines in good faith that such is in the best interests of the
Borrower and is not materially disadvantageous to the Lender.

    


    (b) The
Borrower will not, and will not permit any of its Regulated Subsidiaries to,
engage to any material extent in any business other than businesses of the type
conducted by the Borrower and its Regulated Subsidiaries on the date of
execution of this Agreement and businesses reasonably related
thereto.

    


    SECTION
6.04. Investments, Loans,
Advances, Guarantees and Acquisitions.

    


    The Borrower will not, and will not
permit any of its Regulated Subsidiaries to, purchase, hold or acquire
(including pursuant to any merger with any Person that was not a wholly owned
Subsidiary prior to such merger) any capital stock, evidences of indebtedness or
other securities (including any option, warrant or other right to acquire any of
the foregoing) of, make or permit to exist any loans or advances to, Guarantee
any obligations of, or make or permit to exist any investment or any other
interest in, any other Person, or purchase or otherwise acquire (in one
transaction or a series of transactions) any assets of any other Person
constituting a business unit, except:

    


    (a) Permitted
Investments;

    


    (b) investments
by the Borrower existing on the date hereof in the capital stock of its
Subsidiaries;

    


    (c) loans or
advances made by the Borrower to the Guarantor and made by the Guarantor to the
Borrower;

    


    (d) Guarantees
constituting Indebtedness permitted by Section 6.01;

    


    (e) transactions
by and among the Borrower and Significant Subsidiaries provided, however, that
there is no Event of Default and investments, advances or loans to a
non-Regulated Subsidiaries will not exceed $17,500,000 plus twenty percent (20%)
of Borrower’s cumulative net income since January 1, 2004 or an amount permitted
under the Indenture, whichever is less; and

    


    (f) investments
in Vermont Transco LLC, provided, however, that the Borrower has provided Notice
to the Lender of Borrower’s intent to make any such investment at least thirty
(30) days prior to the anticipated investment date.

    


    SECTION
6.05. Swap
Agreements.

    


    The Borrower will not, and will not
permit any of its Regulated Subsidiaries to, enter into any Swap Agreement,
except (a) Swap Agreements entered into to hedge or mitigate risks to which the
Borrower or any Subsidiary has actual exposure (other than those in respect of
Equity Interests of the Borrower or any of its Subsidiaries), (b) Swap
Agreements entered into in the ordinary course of business, and (c) Swap
Agreements entered into in order to effectively cap, collar or exchange interest
rates (from fixed to floating rates, from one floating rate to another floating
rate or otherwise) with respect to any interest-bearing liability or investment
of the Borrower or any Subsidiary.

    


    SECTION
6.06. Restricted
Payments.

    


    The Borrower will not, and will not
permit any of its Regulated Subsidiaries to, declare or make, or agree to pay or
make, directly or indirectly, any Restricted Payment, except (provided there is
no Default by the Borrower or Guarantor) (a) the Borrower may declare and pay
dividends ratably with respect to its Equity Interests, (b) the Borrower may
make all mandatory sinking funds, (c) Subsidiaries may declare and pay dividends
ratably with respect to their Equity Interests, and (d) the Borrower may make
Restricted Payments pursuant to and in accordance with stock option plans or
other benefit plans for management or employees of the Borrower and its
Subsidiaries.

    


    SECTION
6.07. Transactions with
Affiliates.

    


    The Borrower will not, and will not
permit any of its Regulated Subsidiaries to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrower or such Regulated Subsidiary
than could be obtained on an arm’s-length basis from unrelated third parties,
(b) transactions between or among the Borrower and its wholly-owned Regulated
Subsidiaries not involving any other Affiliate and (c) any Restricted Payment
permitted by Section 6.06.

    


    SECTION
6.08. Restrictive
Agreements.

    


    The Borrower will not, and will not
permit any of its Regulated Subsidiaries to, directly or indirectly, enter into,
incur or permit to exist any agreement or other arrangement that prohibits,
restricts or imposes any condition upon (a) the ability of the Borrower or any
Regulated Subsidiary to create, incur or permit to exist any Lien upon any of
its property or assets, or (b) the ability of any Regulated Subsidiary to pay
dividends or other distributions with respect to any shares of its capital stock
or to make or repay loans or advances to the Borrower or any other Subsidiary or
to Guarantee Indebtedness of the Borrower or any other Subsidiary; provided that (i) the
foregoing shall not apply to restrictions and conditions imposed by law or by
this Agreement, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 6.08 (but shall
apply to any extension or renewal of, or any amendment or modification which
materially expands the scope of, any such restriction or condition), (iii) the
foregoing shall not apply to customary restrictions and conditions contained in
agreements relating to the sale of a Subsidiary pending such sale, provided such
restrictions and conditions apply only to the Subsidiary that is to be sold and
such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not
apply to restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (v) clause
(a) of the foregoing shall not apply to customary provisions in leases and other
contracts restricting the assignment thereof.

    


    SECTION
6.09. Total Debt to Total
Capitalization Ratio.

    


    The Borrower, on a standalone basis,
shall not permit its ratio of Total Debt to Total Capitalization to exceed .65
to 1.00, at any time.

    


    SECTION
6.10. Interest Coverage
Ratio.

    


    The Borrower, on a standalone basis,
shall not permit a ratio of the sum of Net Income plus Interest Expense and
Income Tax Expense, to Interest Expense to be less than 1.75 to 1.00, in each
case tested for the four fiscal quarters of the Borrower ended on or immediately
prior to such date.

    


    


    ARTICLE
VII - Events of
Default

    


    If any of the following events (“Events of Default”)
shall occur:

    


    (a) the
Borrower shall fail to pay any principal of any Loan or any reimbursement
obligation in respect of any LC Disbursement when and as the same shall become
due and payable, whether at the due date thereof or at a date fixed for
prepay­ment thereof or otherwise;

    


    (b) the
Borrower shall fail to pay any interest on any Loan or any fee or any other
amount (other than an amount referred to in clause (a) of this Article)
payable under this Agreement, when and as the same shall become due and payable,
and such failure shall continue unremedied for a period of three Business
Days;

    


    (c) any
representation or warranty made or deemed made by or on behalf of the Borrower
or any Subsidiary in or in connection with this Agreement or any amendment or
modification hereof or waiver hereunder, or in any report, certificate,
financial statement or other document furnished pursuant to or in connection
with this Agreement or any amendment or modification hereof or waiver hereunder,
shall prove to have been incorrect when made or deemed made;

    


    (d) the
Borrower shall fail to observe or perform any covenant, condition or agreement
contained in Section 5.02, 5.03 (with respect to the Borrower’s existence)
or 5.08 or in Article VI;

    


    (e) the
Borrower shall fail to observe or perform any covenant, condition or
agree­ment contained in this Agreement (other than those specified in clause
(a), (b) or (d) of this Article), and such failure shall continue unremedied for
a period of 30 days after notice thereof from the Lender to the
Borrower;

    


    (f) the
Borrower or any Subsidiary shall fail to make any payment (whether of
principal or interest and regardless of amount) in respect of any Material
Indebtedness, when and as the same shall become due and payable;

    


    (g) any event
or condition occurs that results in any Material Indebtedness becoming due prior
to its scheduled maturity or that enables or permits (with or without the giving
of notice, the lapse of time or both) the holder or holders of any Material
Indebtedness or any trustee or agent on its or their behalf to cause any
Material Indebtedness to become due, or to require the prepayment, repurchase,
redemption or defeasance thereof, prior to its scheduled maturity; provided that this
clause (g) shall not apply to secured Indebtedness that becomes due as a
result of the voluntary sale or transfer of the property or assets securing such
Indebtedness or the prepayment, repurchase, redemption or defeasance of a hedge
agreement or Swap Agreement in the ordinary course of business;

    


    (h) an
involuntary proceeding shall be commenced or an involuntary petition shall be
filed seeking (i) liquidation, reorganization or other relief in respect of
the Borrower or any Regulated Subsidiary or its debts, or of a substantial part
of its assets, under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect or (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Regulated Subsidiary or for a
substantial part of its assets, and, in any such case, such proceeding or
petition shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;

    


    (i) the
Borrower or any Regulated Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization or other
relief under any Federal, state or foreign bankruptcy, insolvency, receivership
or similar law now or hereafter in effect, (ii) consent to the institution
of, or fail to contest in a timely and appropriate manner, any proceeding or
petition described in clause (h) of this Article, (iii) apply for or
consent to the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar offi­cial for the Borrower or any Regulated
Subsidiary or for a substan­tial part of its assets, (iv) file an
answer admit­ting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of
creditors or (vi) take any action for the purpose of effecting any of the
fore­going;

    


    (j) the
Borrower or any Regulated Subsidiary shall become unable or admit in writing its
inability or fail generally to pay its debts as they become due;

    


    (k) one or
more judgments for the payment of money in an aggregate amount in excess of
$2,000,000 shall be rendered against the Borrower, any Regulated Subsidiary or
any combination thereof and the same shall remain undischarged for a period of
30 consecutive days during which execution shall not be effectively stayed,
or any action shall be legally taken by a judgment creditor to attach or levy
upon any assets of the Borrower or any Regulated Subsidiary to enforce any such
judgment;

    


    (l) An ERISA
Event shall have occurred that, in the opinion of the Lender, when taken
together with all other ERISA Events that have occurred, could reasonably be
expected to result in a Material Adverse Effect; or

    


    (m) a Change in Control shall occur without the prior written consent
of the Lender; or

    


    (n) any
material default shall have occurred under the Indenture pursuant to which the
trustee thereunder would have the right to accelerate the Material
Indebtedness;

    


    then, and
in every such event (other than an event with respect to the Borrower described
in clause (h) or (i) of this Article), and at any time thereafter during the
continuance of such event, the Lender may, by notice to the Borrower, take
either or both of the following actions, at the same or different
times:  (i) terminate the Commitments, and thereupon the
Commitments shall terminate immediately, and (ii) declare the Loans then
out­standing to be due and payable in whole (or in part, in which case any
principal not so declared to be due and payable may thereafter be declared to be
due and payable), and thereupon the principal of the Loans so declared to be due
and payable, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall become due and payable
immediately, without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; and in case of any event with
respect to the Borrower described in clause (h) or (i) of this Article, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and all fees and other
obligations of the Borrower accrued hereunder, shall automatically become due
and payable, without present­ment, demand, protest or other notice of any
kind, all of which are hereby waived by the Borrower.

    


    ARTICLE
VIII - Miscellaneous

    


    SECTION
8.01. Notices.

    


    (a) Except in
the case of notices and other communications expressly permitted to be given by
telephone or telecopy (and subject to paragraph (b) below), all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand, overnight courier service, or mailed by certified or
registered mail or sent by telecopy, as follows:

    


    
      	
              if
      to the Borrower:

            	
              Central
      Vermont Public Service Corporation

            


    

    
      	
               
      

            	
              77
      Grove Street

            


    

    
      	
               
      

            	
              Rutland,
      Vermont  05701

            


    

    
      	
               
      

            	
              Attn:  Director
      of Treasury and Corporate Planning

            


    

    
      	
               
      

            	
              Fax:  (802)
      747-2129

            


    

    


    
      	
              with
      a copy to:

            	
              Central
      Vermont Public Service Corporation

            


    

    
      	
               
      

            	
              77
      Grove Street

            


    

    
      	
               
      

            	
              Rutland,
      Vermont  05701

            


    

    
      	
               
      

            	
              Attn:  Assistant
      General Counsel

            


    

    
      	
               
      

            	
              Fax:  (802)
      747-1913

            


    

    


    
      	
              if
      to the Lender:

            	
              KeyBank
      National Association

            


    

    
      	
               
      

            	
              149
      Bank Street

            


    

    
      	
               
      

            	
              Burlington,
      VT 05401

            


    

    
      	
               
      

            	
              Attn:
      Tony Martin, Senior Vice President

            


    

    
      	
               
      

            	
              Fax:
      (802) 864-6908

            


    

    


    
      	
              with
      a copy to:

            	
              Burak
      Anderson & Melloni, PLC

            


    

    
      	
               
      

            	
              30
      Main Street, PO Box 787

            


    

    
      	
               
      

            	
              Burlington,
      VT 05401-0787

            


    

    
      	
               
      

            	
              Attn:  Thomas
      Melloni, Esq.

            


    

    
      	
               
      

            	
              Fax:  (802)
      862-8176

            


    

    


    (b) Notices
and other communications to the Lender hereunder may be delivered or furnished
by electronic communications pursuant to procedures approved by the Lender;
provided that the foregoing shall not apply to notices pursuant to Article II
unless otherwise agreed by the Lender.  The Lender or the Borrower
may, in its discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures approved by it;
provided that approval of such procedures may be limited to particular notices
or communications.

    


    (c) Any party
hereto may change its address, contact person(s) or telecopy number for notices
and other communications hereunder by notice to the other parties
hereto.  All notices and other communications given to any party
hereto in accordance with the provisions of this Agreement shall be deemed to
have been given on the date of receipt.

    


    SECTION
8.02. Waivers;
Amendments.

    


    (a) No
failure or delay by the Lender in exercising any right or power hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise thereof or the
exercise of any other right or power.  The rights and remedies of the
Lender hereunder are cumulative and are not exclusive of any rights or remedies
that it would otherwise have.  No waiver of any provision of this
Agree­ment or consent to any departure by the Borrower therefrom shall in
any event be effective unless the same shall be permitted by paragraph (b)
of this Section, and then such waiver or consent shall be effec­tive only in
the specific instance and for the purpose for which given.  Without
limiting the generality of the foregoing, the making of a Loan or issuance of a
Letter of Credit shall not be construed as a waiver of any Default, regardless
of whether the Lender may have had notice or knowledge of such Default at the
time.

    


    (b) Neither
this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to an agreement or agreements in writing entered into by the
Borrower and the Lender.

    


    SECTION
8.03. Expenses; Indemnity; Damage
Waiver.

    


    (a) The
Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the
Lender, including the reasonable fees, charges and disbursements of counsel for
the Lender, in connection with the credit facilities provided for herein, the
preparation and administration of this Agreement or any amendments,
modifications or waivers of the provi­sions hereof (whether or not the
transactions contemplated hereby or thereby shall be consummated), (ii) all
reasonable out-of-pocket expenses incurred by the Lender in connection with the
issuance, amendment, renewal or extension of any Letter of Credit or any demand
for payment thereunder and (iii) all reasonable out-of-pocket expenses incurred
by the Lender, including the fees, charges and disbursements of any counsel for
the Lender in connection with the enforcement or protection of its rights in
connection with this Agreement, including its rights under this Section, or in
connection with the Loans made or Letters of Credit issued hereunder, including
all such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans or Letters of Credit.

    


    (b) The
Borrower shall indemnify the Lender, and each Related Party of the Lender (each
such Person being called an “Indemnitee”) against,
and hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the reasonable fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted against
any Indemnitee arising out of, in connection with, or as a result of
(i) the execution or delivery of this Agreement or any agreement or
instrument contemplated hereby, the performance by the parties hereto of their
respective obligations hereunder or the consummation of the Transactions or any
other transactions contemplated hereby, (ii) any Loan or Letter of Credit
or the use of the proceeds therefrom (including any refusal by the Lender to
honor a demand for payment under a Letter of Credit if the documents presented
in connection with such demand do not strictly comply with the terms of such
Letter of Credit), (iii) any actual or alleged presence or release of
Hazardous Materials on or from any property owned or operated by the Borrower or
any of its Subsidiaries, or any Environmental Liability related in any way to
the Borrower or any of its Subsidiaries, or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are deter­mined by
a court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such
Indemnitee.

    


    (c) To the
extent permitted by applicable law, the Borrower shall not assert, and hereby
waives, any claim against any Indemnitee, on any theory of liability, for
special, indirect, consequential or punitive damages (as opposed to direct or
actual damages) arising out of, in connection with, or as a result of, this
Agreement or any agreement or instrument contemplated hereby, the Transactions,
any Loan or Letter of Credit or the use of the proceeds thereof.

    


    (d) All
amounts due under this Section shall be payable promptly after written demand
therefor.

    


    SECTION
8.04. Successors and
Assigns.

    


    (a) The
provisions of this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns permitted hereby
(including any Affiliate of the Lender that issues any Letter of Credit), except
that (i) the Borrower may not assign or otherwise transfer any of its rights or
obligations hereunder without the prior written consent of the Lender (and any
attempted assignment or transfer by the Borrower without such consent shall be
null and void) and (ii) the Lender may assign or otherwise transfer its rights
or obligations hereunder except in accordance with this
Section.  Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby (including any Affiliate of
the Lender that issues any Letter of Credit), Participants (to the extent
provided in paragraph (c) of this Section ) and, to the extent expressly
contemplated hereby, the Related Parties of the Lender) any legal or equitable
right, remedy or claim under or by reason of this Agreement.

    


    (b) (i)  Subject
to the conditions set forth in paragraph (b)(ii) below, the Lender may assign to
one or more assignees all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the Loans at the
time owing to it) with the prior written consent (such consent not to be
unreasonably withheld) of the Borrower, provided that no
consent of the Borrower shall be required for an assignment to the Lender, an
Affiliate of the Lender, an Approved Fund or, if an Event of Default has
occurred and is continuing, any other assignee;

    


    (ii)           Assignments
shall be subject to the following additional conditions:

    


    (A)  except
in the case of an assignment to the Lender or an Affiliate of the Lender or an
assignment of the entire remaining amount of the assigning Lender’s Commitment
or Loans of any Class, the amount of the Commitment or Loans of the Lender
subject to each such assignment shall not be less than $5,000,000 unless each of
the Borrower and the Lender otherwise consent, provided that no such
consent of the Borrower shall be required if an Event of Default has occurred
and is continuing; and

    


    (B)  each
partial assignment shall be made as an assignment of a proportionate part of all
the assigning Lender’s rights and obligations under this Agreement, provided that this
clause shall not be construed to prohibit the assignment of a proportionate part
of all the assigning Lender’s rights and obligations in respect of one Class of
Commitments or Loans;

    


    For the purposes of this Section
8.04(b), the term “Approved Fund” has
the following meaning:

    


    “Approved Fund” means
any Person (other than a natural person) that is engaged in making, purchasing,
holding or investing in bank loans and similar extensions of credit in the
ordinary course of its business and that is administered or managed by (a) the
Lender, (b) an Affiliate of the Lender or (c) an entity or an Affiliate of an
entity that administers or manages the Lender.

    


    (iii)           From
and after the effective date specified in each Assignment and Assumption the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Assumption, have the rights and obligations of
the Lender under this Agreement, and the assigning Lender thereunder shall, to
the extent of the interest assigned by such Assignment and Assumption, be
released from its obliga­tions under this Agreement (and, in the case of an
Assignment and Assumption covering all of the assigning Lender’s rights and
obligations under this Agreement, the Lender shall cease to be a party hereto
but shall continue to be entitled to the benefits of Sections 2.12, 2.13,
2.14 and 8.03).  Any assignment or transfer by the Lender of rights or
obligations under this Agreement that does not comply with this Section 8.04
shall be treated for purposes of this Agreement as a sale by the Lender of a
participation in such rights and obligations in accordance with paragraph (c) of
this Section.

    


    (c) (i)  The
Lender may, without the consent of the Borrower, sell participations to one or
more banks or other entities (a “Participant”) in all
or a portion of the Lender’s rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it); provided that
(A) the Lender’s obligations under this Agreement shall remain unchanged,
(B) the Lender shall remain solely responsible to the Borrower for the
performance of such obligations and (C) the Borrower shall continue to deal
solely and directly with the Lender in connection with the Lender’s rights and
obligations under this Agreement.  Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that the
Lender shall retain the sole right to enforce this Agreement and to approve any
amendment, modification or waiver of any provision of this Agreement; provided that such
agreement or instrument may provide that the Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
described in the first proviso to Section 8.02(b) that affects such
Participant.  Subject to paragraph (c)(ii) of this Section, the
Borrower agrees that each Participant shall be entitled to the benefits of
Sections 2.12, 2.13 and 2.14 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this
Section.  To the extent permitted by law, each Participant also shall
be entitled to the benefits of Section 8.08 as though it were a
Lender.

    


    (ii)           A
Participant shall not be entitled to receive any greater payment under Section
2.12 or 2.14 than the applicable Lender would have been entitled to receive with
respect to the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the Borrower’s prior written
consent.  A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 2.14 unless the
Borrower is notified of the participation sold to such Participant.

    


    (d) The
Lender may at any time pledge or assign a security interest in all or any
portion of its rights under this Agreement to secure obligations of the Lender,
including without limitation any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge
or assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release the Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for the
Lender as a party hereto.

    


    SECTION
8.05. Survival.

    


    All covenants, agreements,
representations and warranties made by the Borrower herein and in the
certificates or other instru­ments delivered in connection with or pursuant
to this Agreement shall be considered to have been relied upon by the Lender and
shall survive the execution and delivery of this Agreement and the making of any
Loans and issuance of any Letters of Credit, regardless of any investigation
made by any such other party or on its behalf and notwithstanding that the
Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder (except
to the extent provided pursuant to Sections 5.01 and 5.02 hereof or such notice
was provided in writing to the Lender and, if applicable, clearly states that it
is a notice of Default), and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any fee or any other
amount payable under this Agreement is outstand­ing and unpaid or any Letter
of Credit is outstanding and so long as the Commitments have not expired or
terminated.  The provisions of Sections 2.12, 2.13, 2.14 and 8.03
shall survive and remain in full force and effect regardless of the consummation
of the transactions contemplated hereby, the repayment of the Loans, the
expiration or termination of the Letters of Credit and the Commitments or the
termination of this Agreement or any provision hereof.

    


    SECTION
8.06. Counterparts; Integration;
Effectiveness.

    


    This Agreement may be executed in
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute a single contract.  This Agreement and
any separate letter agreements with respect to fees payable to the Lender
constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or
written, relating to the subject matter hereof.  Except as provided in
Section 4.01, this Agreement shall become effective when it shall have been
executed by the Lender and when the Lender shall have received counterparts
hereof which, when taken together, bear the signature of the Borrower and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.

    


    SECTION
8.07. Severability.

    


    Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

    


    SECTION
8.08. Right of
Setoff.

    


    If an Event of Default shall have
occurred and be continuing, the Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off (a “Right of Setoff”) and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
obligations at any time owing by the Lender or Affiliate to or for the credit or
the account of the Borrower against any of and all the obligations of the
Borrower now or hereafter existing under this Agreement held by the Lender,
irrespective of whether or not the Lender shall have made any demand under this
Agreement and although such obligations may be unmatured; provided, however,
that the Right of Setoff contained herein shall not apply to any deposits,
collateral, or other amounts at any time held by, and other obligations at any
time owing by the Borrower to or for the credit or the account of, the Lender or
any of its Affiliates relating to any Power Transaction by, between or through
the Borrower and the Lender and any of its Affiliates.  The rights of
the Lender under this Section are in addition to other rights and remedies
(including other rights of setoff) which the Lender may have.

    


    SECTION
8.09. Governing Law; Jurisdiction;
Consent to Service of Process.

    


    (a) This
Agreement shall be construed in accordance with and governed by the law of the
State of Vermont.

    


    (b) The
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of the courts of the State of Vermont
sitting in Chittenden County and of the United States District
Court  sitting in the State of Vermont, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
Vermont state court or, to the extent permitted by law, in such Federal
court.  Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law.  Nothing in this Agreement shall affect any right that the Lender
may otherwise have to bring any action or proceeding relating to this Agreement
against the Borrower or its proper­ties in the courts of any
jurisdiction.

    


    (c) The
Borrower hereby irrevocably and unconditionally waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or
here­after have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement in any court referred to in
paragraph (b) of this Section.  Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.

    


    (d) Each
party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 8.01.  Nothing in this Agreement
will affect the right of any party to this Agreement to serve process in any
other manner permitted by law.

    


    SECTION
8.10. WAIVER OF JURY
TRIAL.

    


    EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO
(A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREE­MENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.

    


    SECTION
8.11. Headings.

    


    Article and Section headings and
the Table of Contents used herein are for convenience of reference only, are not
part of this Agreement and shall not affect the construction of, or be taken
into consideration in interpreting, this Agreement.

    


    SECTION
8.12. Confidentiality.

    


    The Lender agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates’ directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent requested by any
regulatory authority, (c) to the extent required by applicable laws or
regulations or by any subpoena or similar legal process, (d) to any other party
to this Agreement, (e) in connection with the exercise of any remedies hereunder
or any suit, action or proceeding relating to this Agreement or the enforcement
of rights hereunder, (f) subject to an agreement containing provisions
substantially the same as those of this Section, to (i) any assignee of or
Participant in, or any prospective assignee of or Participant in, any of its
rights or obligations under this Agreement or (ii) any actual or prospective
counterparty (or its advisors) to any swap or derivative transaction relating to
the Borrower and its obligations, (g) with the consent of the Borrower or
(h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section or (ii) becomes
available to the Lender on a nonconfidential basis from a source other than the
Borrower.  For the purposes of this Section, “Information” means
all information received from the Borrower relating to the Borrower or its
business, other than any such information that is available to the Lender on a
nonconfidential basis prior to disclosure by the Borrower; provided that, in the
case of information received from the Borrower after the date hereof, such
information is clearly identified at the time of delivery as
confidential.  Any Person required to maintain the confidentiality of
Information as provided in this Section shall be considered to have
complied with its obligation to do so if such Person has exercised the same
degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.

    


    SECTION
8.13. Interest Rate
Limitation.

    


    Notwithstanding anything herein to the
contrary, if at any time the interest rate applicable to any Loan, together with
all fees, charges and other amounts which are treated as interest on such Loan
under appli­cable law (collectively the “Charges”), shall
exceed the maximum lawful rate (the “Maximum Rate”) which
may be contracted for, charged, taken, received or reserved by the Lender in
accordance with applicable law, the rate of interest payable in respect of such
Loan hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such Loan but were not payable as a
result of the operation of this Section shall be cumulated and the interest
and Charges payable to the Lender in respect of other Loans or periods shall be
increased (but not above the Maximum Rate therefor) until such cumulated amount,
together with interest thereon at the Federal Funds Effective Rate to the date
of repayment, shall have been received by the Lender.

    


    SECTION
8.14. USA Patriot
Act.

    


    The Lender hereby notifies the Borrower
that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L.
107-56 (signed into law October 26, 2001)) (the “Act”), it is required to
obtain, verify and record information that identifies the Borrower, which
information includes the name and address of the Borrower and other information
that will allow the Lender to identify the Borrower in accordance with the
Act.

    


    [Signature
Page Follows]


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above
written.

    


    


    Central
Vermont Public Service Corporation

    


    


    By:          /s/                                                                

    Name:  Pamela J.
Keefe

    Title:    Vice
President, Chief Financial Officer and Treasurer

    


    


    


    Keybank
National Association

    


    


    By:          /s/                                                                

    Name:  Tony F.
Martin

    Title:    Senior
Vice President

    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
3.04(d)

    


    Guaranteed
Indebtedness

    


    


    Indebtedness Guaranteed by
the Borrower:

    


    
      	
              1.  

            	
              Guaranty dated March
      1, 2002 between CV & Citizens Bank of
    Massachusetts

            


    

    CV
guarantees all of East Barnet's obligations due under the Letter of Credit and
Reimbursement Agreement also dated March 1, 2002.  CVPS issued First
Mortgage Bonds ("Pledge Bonds") as further security for these same obligations
due (see Pledge and Security Agreement dated March 1, 2002 between East Barnet
and Citizens Bank of Massachusetts).

    


    
      	
              2.  

            	
              Loan Agreement dated
      December 1, 1983 among VIDA, East Barnet &
  CV

            


    

    CV
guarantees all of East Barnet's obligations due under this Loan Agreement,
primarily payment of interest & principal on the East Barnet Revenue Bonds,
as well as remarketing, Trustee, paying agent, indexing agent and registrar
fees.

    


    Indebtedness Guaranteed by
Catamount Resources Corporation:

    


    
      	
              3.  

            	
              Credit Agreement dated
      as of December 28, 2007 between Central Vermont Public Service Corporation
      as Borrower and Keybank National Association as
    Lender

            


    

    Catamount
Resources guarantees all of Central Vermont Public Service Corporation’s
obligations due under the Credit Agreement.

    


    Indebtedness Guaranteed by
C.V. Realty, Inc.:

    


    
      	
              4.  

            	
              Credit Agreement dated
      as of December 28, 2007 between Central Vermont Public Service Corporation
      as Borrower and Keybank National Association as
    Lender

            


    

    C.V.
Realty guarantees all of Central Vermont Public Service Corporation’s
obligations due under the Credit Agreement.

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
3.06

    


    Disclosed
Matters

    


    


    None.

    


    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
6.01(b)

    


    Existing
Indebtedness

    


    Borrower, as of September
30, 2008:

     

    
      	First Mortgage
      Bonds, Series JJ	 	$	15,000,000	 
	First Mortgage
      Bonds, Series NN	 	 	3,000,000	 
	First Mortgage
      Bonds, Series OO 	 	 	17,500,000	 
	First Mortgage
      Bonds, Series PP (1) 	 	 	5,133,562	 
	First Mortgage
      Bonds, Series QQ (1)	 	 	5,788,750	 
	First Mortgage
      Bonds, Series RR (1)	 	 	6,015,275	 
	First Mortgage
      Bonds, Series SS 	 	 	20,000,000	 
	First Mortgage
      Bonds, Series TT 	 	 	55,000,000	 
	First
      Mortgage Bonds, Series UU	 	 	60,000,000	 
	 	 	$	187,437,587	 


    

     

    
      	
              New
      Hampshire Industrial Development Authority (NHIDA) Revenue Bonds

            	 	 	5,450,000	 
	Connecticut
      Development Authority (CDA) Revenue Bonds  	 	 	5,000,000	 
	 	 	
               $

            	10,450,000	 
	Capital lease
      Obligations (includes current portion)	 	 	 	 
	 	 	 $	6,107,879 	 
	 	 	 	 	 
	Letter of Credit in
      support of NHIDA Revenue Bonds
      (2)	 	 $	5,736,125 	 
	Letter of Credit in
      support of CDA Revenue Bonds
      (2)	 	 $	 5,133,562	 


    

     

    (1) Issued
as security for Letters of Credit, which support revenue bonds.  As
such, not reflected as debt on Borrower's financial statements, in accordance
with GAAP.

    (2) Issued
as security for revenue bonds.  As such, not reflected as debt on
Borrower's financial statements, in accordance with GAAP.

    


    Regulated Subsidiaries, as
of October 21, 2005:

    


    
       

      
        	Vermont Industrial
      Development Authority (VIDA) Revenue Bonds	 	$	3,400,000	 
	Loan under Letter of
      Credit in support of VIDA Revenue Bonds	 	$	2,400,000	 
	 	 	 	 	 
	Letter of Credit in
      support of VIDA Revenue Bonds
      (3)	 	$	3,615,275	 


      

       

    

    (3) Issued
as security for revenue bonds, and guaranteed by CVPS.  As such, not
reflected as debt on Borrower's financial statements, in accordance with
GAAP.

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
6.02

    


    Existing
Liens

    


    
      	
              1.  

            	
              Pledge
      Agreement between VIDA & East Barnet - provides for the pledge
      of East Barnet's rights to rental and other payment, under the Lease
      Agreement, to VIDA

            


    

    


    
      	
              2.  

            	
              Pledge and Security
      Agreement securing payment of obligations due under the LOC and
      Reimbursement Agreements with Citizens Bank of Massachusetts, and assigns
      to Citizens Bank rights to receive tendered
  bonds:

            


    

    (a) between East Barnet & Citizens
Bank for VIDA Bonds;

    (b) between CVPS & Citizens Bank
for NHIDA Bonds; and

    (c) between CVPS & Citizens Bank
for CDA Bonds.

    


    
      	
               
      

            	
              3.

            	
              Liens
      on property or assets of the Borrower to secure Power Transactions in the
      ordinary course of business.

            


    

    


    
      	
               
      

            	
              4.

            	
              Capital
      Leases as defined in “Liens”:

            


    

    


    
      	
               
      

            	
              Support
      Agreements for Phase I/II Hydro-Quebec transmission interconnection
      facilities: relates to CVPS participation in the facilities; CVPS is
      obligated to pay s 4.55 percent share of Phase I Hydro-Quebec capital
      costs over a 20-year recovery period ending in 2006 and is obligated to
      pay its 5.132 percent share of Phase II Hydro-Quebec capital costs over a
      25-year recovery period ending in 2015.  These agreements meet
      the capital lease accounting requirements under SFAS No. 13, Accounting for
      Leases.

            


    

    


    
      	
               
      

            	
              Capital
      Lease for General Office building at 77 Grove St., Rutland,
    VT

            


    

    


    


    5.  Attachments:

    


    Summary
of Rutland City, Vermont, Land Records Lien Search (2 pages)

    


    First
Mortgage Indenture as recorded in Rutland City, Vermont, Land Records (3
pages)

    


    Summary
of Vermont Secretary of State UCC Search (1 page)

    


    First
Mortgage Indenture Schedule of Towns in which Indenture is recorded (3
pages)

    


    


    


    


    


    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    SCHEDULE
6.08

    


    Existing
Restrictions

    


    


    Vermont Statutes - 30 V.S.A. Section
108 (restricts short-term financing, long-term financing and any security
interest absent regulatory approval)

    


    Connecticut Statutes – C.G.S. §
16-43 (restricts short-term financing, long-term financing and any
security interest absent regulatory approval)

    


    Central Vermont Public Service
Corporation First Mortgage Indenture dated October 1, 1929, amended and
restated June 15, 2004 in 44th
Supplemental Indenture - see Section 5.10 and 5.11 below:

     

    Section 5.10.      Unregulated
Subsidiary Investments; Guaranty of Obligations. (a) The Company
will not, and will not permit any Regulated Subsidiary to, make any Investment
in Unregulated Subsidiaries (any such Investment being an "Unregulated Subsidiary
Investment") unless after giving effect thereto, the following conditions
are satisfied:

     

     

                  (1)      the
aggregate amount of Unregulated Subsidiary Investments made during the period
commencing on January 1, 2004 and ending on and including the date such
Unregulated Subsidiary Investment is made, will not exceed the sum of (A)
$17,500,000 (the "Fixed
Basket") plus (B) 20% of the Net Income of the Company for the period
commencing on January 1, 2004 up to and including the end of the month next
preceding the month in which such Unregulated Subsidiary Investment is made (the
"Net Income Basket"),
with any such Unregulated Subsidiary Investment being applied first to any
availability in the Fixed Basket and thereafter to availability in the Net
Income Basket (any Unregulated Subsidiary Investment which is permitted pursuant
to the foregoing to be applied to availability under the Net Income Basket being
herein referred to as a "Restricted
Investment");

     

     

                  (2)      if
all or any part of such Unregulated Subsidiary Investment constitutes a
Restricted Investment, such Restricted Investment is permitted under Section
5.09; and

     

     

                  
(3)      immediately after giving effect to such
Unregulated Subsidiary Investment, there will not have occurred or be continuing
a Default or Event of Default under this Indenture.

     

     

                  In
valuing any Unregulated Subsidiary Investments for purposes of applying the
limitations set forth in clause (1) above of this Section 5.10, such Unregulated
Subsidiary Investments shall be taken at the original cost thereof, without
allowance for any subsequent write-offs or appreciation or depreciation therein,
but less any amount repaid or recovered on account of capital or principal. For
purposes of clause (1) above of this Section 5.10, the amount of any Unregulated
Subsidiary Investment which is payable or distributable in property other than
cash or shares of capital stock of the Company shall be deemed to be the greater
of the book value or fair market value (as determined in good faith by the Board
of Directors of the Company) of such property as of the date of the making of
such Unregulated Subsidiary Investment.

     

     

                  (b)      The
Company will not, and will not permit any Regulated Subsidiary to, make any
Guaranty of any Unregulated Subsidiary Obligation.

     

     

                  Section 5.11.      Restrictions
on Encumbrances. The Company will not create or suffer to exist any
mortgage, lien, security interest or encumbrance on any Mortgaged Property
(other than the lien of the Indenture), except:

     

     

                  (a)      Any
purchase money mortgage or security interest created to secure part of the
purchase price of any property, or other Debt secured by any mortgage on, or
security interest in, any property existing at the time of acquisition thereof,
whether or not assumed by the Company and secured by a lien on such property
prior to the lien of the Indenture (the Debt secured thereby being sometimes
referred to herein as "Prior
Lien Debt"), provided that:

     

     

                  (1)      such
purchase money mortgage, mortgage or security interest shall extend only to the
property so acquired and fixed improvements thereto; and

     

     

                  (2)      at
the time of acquisition thereof and after giving effect to the Debt secured by
such outstanding purchase money mortgage, mortgage or security
interest

     

     

                  (i)      such
Debt could then be incurred pursuant to Section 5.07, and

     

     

                  (ii)      the
aggregate principal amount of Debt secured by all such outstanding purchase
money mortgages, mortgages and security interests shall not exceed 15% of the
sum of (A) the aggregate principal amount of all Outstanding Bonds and
(B) the aggregate principal amount of Additional Bonds which could then be
issued under Section 4.01; and

     

     

                  (3)      the
principal amount of the Debt secured by any such purchase money mortgage,
mortgage or security interest, together with all other Debt secured by a lien on
such property, if in excess of $1,000,000, shall not exceed 60% of the cost or
fair value, whichever is less, of the property so acquired on the date of
acquisition thereof; provided,
however, if the principal amount of such Debt, if in excess of
$1,000,000, shall exceed 60% of the cost or fair value, whichever is less, of
such property, then the Company may acquire such property provided further that the Company
shall at least 10 days but not more than 30 days prior to such acquisition
furnish to the Trustee the following:

     

     

                  (i)      a
Net Utility Plant Certificate showing that after giving effect thereto the sum
of the principal amount of all Bonds and Prior Lien Debt then outstanding will
not exceed Net Plant Bondable Capacity;

     

     

                  (ii)      a
Capitalization Certificate in the form prescribed by Subsection (e) of Section
4.01 showing that after giving effect thereto, Long Term Debt then outstanding
will not exceed 65% of Total Capitalization;

     

     

                  (iii)      an
Available Earnings Certificate showing that Earnings Available for Interest
Charges of the Company (or its predecessors), for a period of twelve consecutive
calendar months during the ninety days immediately preceding the date of
acquisition of such property, shall have been at least two (2) times Pro Forma
Interest Charges for the twelve month period immediately succeeding the date of
issuance of the Prior Lien Debt; and

     

     

                  (iv)      an
Officer's Certificate in the form prescribed by Subsection (b) of Section 4.01,
provided, however, that for clause (iii) of such Officer's Certificate reference
shall be made to the conditions precedent for this 5.11(a) and that the Net
Utility Plant Certificate, the Capitalization Certificate, the Available
Earnings Certificate, and the Officer's Certificate shall refer to the date of
acquisition of such property rather than the date of authentication and delivery
of Bonds.

     

     

                  (b)      Any
other Permitted Encumbrances.

     

    CVPSC
- East Barnet Hydroelectric, Inc. VIDA Revenue Bonds

    Pledge Agreement
between VIDA & East Barnet - provides for the pledge of East Barnet's rights
to rental and other payment, under the Lease Agreement, to VIDA

    LOC and Reimbursement
Agreement between East Barnet & Citizens Bank of Massachusetts - see
Section 6(d) below:

    Liens,
Etc.  Create or suffer to exist, or permit any of
its  Subsidiaries to create or suffer to exist, any lien, security
interest or other charge or encumbrance, or any other type of preferential
arrangement, upon or with respect to any of its properties, whether now owned or
hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any
right to receive income, in each case to secure any debt of any person or
entity, other than (i) purchase money liens or purchase money security interests
upon or in any property acquired or held by the Company or any Subsidiary in the
ordinary course of business to secure the purchase price of such property or to
secure indebtedness incurred solely  for the purpose of financing the
acquisition of such property, or (ii) liens or security interests existing on
such property at the time of its acquisition, or (iii) security interests
granted in, or sale of, the Company’s accounts receivable, provided that such
security interests  secure only new debt incurred at substantially the
same time as the creation of such security interests and provided, further, that any
such sale is made only for new consideration given at substantially the same
time as the making of such sale, or (iv) sales or transfers of property by the
Company and the subsequent renting or leasing of such property; provided that the
book value of all such property in the aggregate does not exceed fifteen percent
(15%) of the book value of the Company’s total assets or (v) liens imposed by
law, such materialmen’s, mechanics’, carriers’, workmen’s, and repairmen’s liens
and other similar liens arising in the ordinary course of business securing
obligations which are not overdue for a period of more than thirty (30) days or
which are being contested in good faith in an appropriate forum the aggregate
amount of which do not exceed $250,000, or (vi) liens, security interests,
charges or encumbrances on all or any part of any Subsidiary’s assets or
undertakings related to an obligation of a Subsidiary of the Company that is
non-recourse to the Company.

    Pledge and Security
Agreement between East Barnet & Citizens Bank of Massachusetts - East
Barnet pledges and assigns to Citizens Bank its rights to receive tendered
bonds.  Secures payment of obligations due under the LOC and
Reimbursement Agreement.

    


    Central
Vermont Public Service Corporation CDA Revenue Bonds

    Indenture of Trust
between Connecticut Development Authority ("CDA") & Trustee - see Section
7.8 below:

    Creation of Liens,
Indebtedness.  The Authority shall not create or suffer to be
created any lien or charge upon or pledge of the revenues and other income from
or in connection with the Project, except the lien, charge and pledge created by
this Indenture and the Bonds.  The Authority shall not incur any
indebtedness or issue any evidence of indebtedness, other than the Bonds herein
authorized, secured by a lien on or pledge of such revenues and
income.

    Loan Agreement
between CDA & CV - see Section 4.9 below:

    Disposition of Project by
Borrower.  (A) The Borrower shall not sell, assign, encumber
(other than Permitted Encumbrances), convey or otherwise dispose of its interest
in the Project or any part thereof during the Term without the prior written
consent of the Authority, except as permitted hereby.

    LOC and Reimbursement
Agreement between CV & Citizens Bank of Massachusetts - see Section
6(d) below:

    Liens,
Etc.  Create or suffer to exist, or permit any of
its  Subsidiaries to create or suffer to exist, any lien, security
interest or other charge or encumbrance, or any other type of preferential
arrangement, upon or with respect to any of its properties, whether now owned or
hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any
right to receive income, in each case to secure any debt of any person or
entity, other than (i) purchase money liens or purchase money security interests
upon or in any property acquired or held by the Company or any Subsidiary in the
ordinary course of business to secure the purchase price of such property or to
secure indebtedness incurred solely for the purpose of financing the acquisition
of such property, or (ii) liens or security interests existing on such property
at the time of its acquisition, or (iii) the First Mortgage Bonds or (iv) liens,
security interests, charges or encumbrances on or over the company’s joint
ownership interests in the Millstone #3 nuclear generating facility, the Joseph
C. McNeil Plant and the Highgate Interconnection Facility or any portion
thereof, or any facilities or properties associated with such generating and
transmission facilities or nuclear fuel or other fuel, in any stage, for use in
or with such facilities or (v) security interests granted in, or sale of, the
Company’s accounts receivable, provided that such
security interests  secure only new debt incurred at substantially the
same time as the creation of such security interests and provided, further, that any
such sale is made only for new consideration given at substantially the same
time as the making of such sale, or (vi) a second mortgage granted on the
property subject to the First Mortgage Bonds or (vii) sales or transfers of
property by the Company and the subsequent renting or leasing of such property;
provided that
the book value of all such property in the aggregate does not exceed fifteen
percent (15%) of the book value of the Company’s total assets or (viii) liens,
security interests, charges or encumbrances on all or any part of the Company’s
or its Subsidiaries’ assets or undertakings employed wholly or primarily in, or
arising directly from, any individual energy-related investment or project to
secure (A) an obligation of the Company or (B) an obligation of a Subsidiary of
the Company which is non-recourse to the Company, as the case may be, incurred
for the purpose of financing all or any part of such energy-related investment
or project, or (ix) liens imposed by law, such materialmen’s, mechanics’,
carriers’, workmen’s, and repairmen’s liens and other similar liens arising in
the ordinary course of business securing obligations which are not overdue for a
period of more than thirty (30) days or which are being contested in good faith
in an appropriate forum the aggregate amount of which do not exceed $250,000, or
(x) liens, security interests, charges or encumbrances on all or any part of any
Subsidiary’s assets or undertakings related to an obligation of a Subsidiary of
the Company that is non-recourse to the Company.

    Pledge and Security
Agreement between CV & Citizens Bank of Massachusetts - CV pledges
and assigns to Citizens Bank its rights to receive tendered
bonds.  Secures payment of obligations due under the Reimbursement
Agreement.

    


    Central
Vermont Public Service Corporation NHIDA Revenue Bonds

    LOC and Reimbursement
Agreement between CV & Citizens Bank of Massachusetts - see Section
6(d) below:

    Liens,
Etc.  Create or suffer to exist, or permit any of
its  Subsidiaries to create or suffer to exist, any lien, security
interest or other charge or encumbrance, or any other type of preferential
arrangement, upon or with respect to any of its properties, whether now owned or
hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any
right to receive income, in each case to secure any debt of any person or
entity, other than (i) purchase money liens or purchase money security interests
upon or in any property acquired or held by the Company or any Subsidiary in the
ordinary course of business to secure the purchase price of such property or to
secure indebtedness incurred solely for the purpose of financing the acquisition
of such property, or (ii) liens or security interests existing on such property
at the time of its acquisition, or (iii) the First Mortgage Bonds or (iv) liens,
security interests, charges or encumbrances on or over the company’s joint
ownership interests in the Millstone #3 nuclear generating facility, the Joseph
C. McNeil Plant and the Highgate Interconnection Facility or any portion
thereof, or any facilities or properties associated with such generating and
transmission facilities or nuclear fuel or other fuel, in any stage, for use in
or with such facilities or (v) security interests granted in, or sale of, the
Company’s accounts receivable, provided that such
security interests  secure only new debt incurred at substantially the
same time as the creation of such security interests and provided, further, that any
such sale is made only for new consideration given at substantially the same
time as the making of such sale, or (vi) a second mortgage granted on the
property subject to the First Mortgage Bonds or (vii) sales or transfers of
property by the Company and the subsequent renting or leasing of such property;
provided that
the book value of all such property in the aggregate does not exceed fifteen
percent (15%) of the book value of the Company’s total assets or (viii) liens,
security interests, charges or encumbrances on all or any part of the Company’s
or its Subsidiaries’ assets or undertakings employed wholly or primarily in, or
arising directly from, any individual energy-related investment or project to
secure (A) an obligation of the Company or (B) an obligation of a Subsidiary of
the Company which is non-recourse to the Company, as the case may be, incurred
for the purpose of financing all or any part of such energy-related investment
or project, or (ix) liens imposed by law, such materialmen’s, mechanics’,
carriers’, workmen’s, and repairmen’s liens and other similar liens arising in
the ordinary course of business securing obligations which are not overdue for a
period of more than thirty (30) days or which are being contested in good faith
in an appropriate forum the aggregate amount of which do not exceed $250,000, or
(x) liens, security interests, charges or encumbrances on all or any part of any
Subsidiary’s assets or undertakings related to an obligation of a Subsidiary of
the Company that is non-recourse to the Company.

    Pledge and Security
Agreement between CV & Citizens Bank of Massachusetts - CV pledges
and assigns to Citizens Bank its rights to receive tendered
bonds.  Secures payment of obligations due under the Reimbursement
Agreement.

    


    Vermont Public Service Board Rate
Order in Docket #6460 (requires sharing of any profit above book value if
CVPS sells some or all of its assets or merges with another company, up to a
maximum sharing of $16 million)

    


    Vermont Electric Power Company
("VELCO") Stock Ownership Agreements - restricts lien on or transfer of
CV's stock in VELCO

    


    Vermont Yankee Nuclear Power
Corporation ("VYNPC") Stock Ownership Agreements - restricts lien on or
transfer of CV's stock in VYNPC

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
A

    Form of
Promissory Note

    


    PROMISSORY
NOTE

    (Revolving
Loans)

    


    
      	
              $40,000,000.00

            	
              Burlington,
      Vermont

            
	 
      	
              November
      7, 2008

            


    

    
 

    FOR VALUE RECEIVED, CENTRAL VERMONT PUBLIC SERVICE
CORPORATION, a Vermont corporation, with its principal place of business
in Rutland, Vermont (the “Borrower”), promises to pay to the order of KEYBANK NATIONAL ASSOCIATION
(together with any successors or assigns, the “Bank”) at the office of the Bank,
149 Bank Street, P.O. Box 949, Burlington, Vermont 05402-0949, the principal
amount of FORTY MILLION DOLLARS ($40,000,000) or such amount thereof as may have
been advanced to the Borrower as Revolving Loans under the Credit Agreement
(defined below), together with interest on the unpaid balance and all other
charges, as provided below.  This Note evidences the Revolving Loans
made under and pursuant to the Amended and Restated Credit Agreement, dated as
of November 3, 2008, by and between the Borrower and the Bank (as the same may
from time to time be amended, modified or restated, the “Credit
Agreement”).  Capitalized terms used herein and not otherwise defined
shall have the respective meanings given in the Credit Agreement.

    


     Commencing on the date hereof,
interest shall accrue on the outstanding principal balance of this Note at the
rate and in the manner forth in the Credit Agreement.  Accrued
interest shall be due and payable on each Interest Payment Date and on the date
the entire amount of this Note becomes due and payable in full (whether by
acceleration or otherwise).

    


    If not sooner paid, the principal
balance hereof, plus accrued interest and all other charges, shall be due and
payable on the Maturity Date, or at any other time that the entire amount of
this Note becomes due and payable in full (whether by acceleration or
otherwise).

    


    Section 1.                      Payment Terms.

    


    1.1           Payments;
Prepayments.  All payments hereunder shall be made by the
Borrower to the Bank in United States cur­rency at the Bank’s address
specified above (or at such other ad­dress as the Bank may specify), in
immediately available funds, on or before 2:00 p.m. (New York City time) on the
due date thereof.  Payments received by the Bank prior to the
occurrence of an Event of Default (as defined in Section 2.1 below) will be
applied first
to fees, expenses and other amounts due hereunder (excluding principal and
interest); second, to accrued
interest; and third to outstanding
principal; after the occurrence of an Event of Default payments will be applied
to the amounts outstanding under this Note as the Bank determines in its sole
discretion.

    


    1.2           Prepayment.  The
Borrower may make prepayments of principal at any time without premium or
penalty, subject however, to any requirements or provisions of any agreement, if
any, for a derivative or interest rate swap, now or hereafter executed by and
between Borrower and the Bank, with respect to this Note and subject to Section
2.13 of the Credit Agreement.

    


    1.3           Default
Rate.  Principal and interest that is not paid when due shall
bear interest at the rate set forth in Section 2.10(c) of the Credit
Agreement.

    


    1.4           Late Payment
Charge.  If a payment of principal or interest hereunder is not
made within ten (10) days of its due date, the undersigned will pay on demand a
late payment charge equal to 5% of the amount of such payment or $50.00,
whichever is greater.  Nothing in the preceding sentence shall affect
the Bank’s right to accelerate the maturity of this Note in the event of any
default in the payment of this Note.

    


    1.5           Deposit
Account.  The Borrower shall maintain with the Bank a
commercial demand deposit account and maintain sufficient collected balances in
the account to pay any amounts as they become due.

    


    Section
2.                      Defaults
and Remedies.

    


    2.1           Default.  The
occurrence of any Event of Default under and as defined in the Credit Agreement
shall constitute an “Event of Default” hereunder.

    


    2.2           Remedies.  Upon
an Event of Default, or at any time thereafter, at the option of the Bank, all
amounts outstanding hereunder shall become immediately due and payable without
notice or demand.  All rights and remedies of the Bank are cumulative
and are not ex­clusive of any rights or remedies provided by laws or any
other agreement, and may be exercised separately or concurrently.

    


    Section
3.                      Miscellaneous.

    


    3.1           Waiver;
Amendment.  No delay or omission on the part of the Bank in
exercising any right hereunder shall operate as a waiver of such right or of any
other right under this Note.  No waiver of any right or amendment to
this Note shall be effective unless in writing and signed by the Bank nor shall
a waiver on one occasion be construed as a bar to a waiver of any such right on
any future occasion.  Without limiting the generality of the
foregoing, the acceptance by the Bank of any late payment shall not be deemed to
be a waiver of the Event of Default aris­ing as a consequence
thereof.  The Borrower waives presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance, default or enforcement of this Note, and assents to any extensions
or postponements of the time of payment or any and all other indulgences under
this Note, or to any and all substitutions, exchanges or releases of any
collateral securing this Note, or to any and all additions or releases of any
other parties or persons primarily or secondarily liable under this Note, which
from time to time be granted by the Bank in connection herewith regardless of
the number or period of any extensions.

    


    3.2           Bank
Records.  The entries on the records of the Bank (including any
appearing on this Note) shall be prima facie evidence of the aggregate principal
amount outstanding under this Note and interest accrued thereon.

    


    3.3           Governing Law; Consent to
Jurisdiction.  This Note shall be governed by, and construed in
accordance with, the laws of the State of Vermont.  The Borrower
agrees that any suit for the enforcement of this Note may be brought in the
courts of the State of Vermont or any federal court sitting in such state and
consents to the non-exclusive jurisdiction of each such court and to service of
process in any such suit being made upon the Borrower by mail at the address
specified below.  The Borrower hereby waives any objection that it may
now or hereafter have to the venue of any such suit or any such court or that
such suit was brought in an inconvenient court.

    


    3.4           WAIVER OF JURY
TRIAL.  THE BORROWER AND THE BANK, BY ITS ACCEPTANCE OF THIS
NOTE, HEREBY WAIVE TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO,
IN CONNECTION WITH, OR ARISING OUT OF: (A) THIS NOTE, CREDIT AGREEMENT OR
ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED IN CONNECTION HEREWITH OR THEREWITH;
(B) THE VALIDITY, INTERPRETATION, COLLECTION OR ENFORCEMENT THEREOF; OR (C)
ANY OTHER CLAIM OR DISPUTE HOWEVER ARISING BETWEEN THE BORROWER AND THE
BANK.

    


    3.5           Severability; Authorization
to Complete; Paragraph Headings. If any provision of this Note shall be
invalid, illegal or unenforceable, such provision shall be severable from the
remainder of this Note and the validity, legality and enfor­ceability of the
remaining provisions shall not in any way be af­fected or impaired
thereby.  The Bank is hereby authorized, without further notice, to
fill in any blank spaces on this Note, and to date this Note as of the date
funds are first advanced hereunder.  Paragraph headings are for the
convenience of reference only and are not a part of this Note and shall not
af­fect its interpretation.

    


    3.6           Certain References.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the person,
persons, entity or entities may require.  The terms “herein”, “hereof”
or “hereunder” or similar terms used in this Note refer to this entire Note and
not only to the particular provision in which the term is used.

    


    


    
      	 
      	
              BORROWER:

               

            
	 
      	
              Central
      Vermont Public Service Corporation

            
	 
      	 
      
	 
      	 
      
	
              ___________________________________

              Witness

            	
              By:____________________________________

              Name:  Pamela
      J. Keefe

              Title:    Vice
      President, Chief Financial Officer and
  Treasurer

            


    

    


    


    


    


    


    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
B

    


    Form of Opinion of
Borrower’s Counsel

    


    Central
Vermont Public Service Corporation

    Legal
Department

    77
Grove Street

    Rutland,
Vermont  05701

    


    


    Kenneth
C. Picton,
Esq.                                                                                                                                          
 Phone: (802) 747-5372

    Assistant
General
Counsel                                                                                                                                          Fax:  (802)
747-2189

     kpicton@cvps.com

    


    


    November
3, 2008

    


    KeyBank
National Association

    149 Bank
Street

    PO Box
949

    Burlington,
VT 05402-0949

    


    
      	
               
      

            	
              Re:

            	
              Amended
      and Restated Credit Agreement, dated as of November 3, 2008, by and
      between Central Vermont Public Service Corporation and KeyBank National
      Association

            


    

    


    Ladies
and Gentlemen:

    


    I am Assistant General Counsel to
Central Vermont Public Service Corporation, a corporation organized and existing
under the laws of the State of Vermont (the “Company” or the
“Borrower”).  For all purposes relating to the transactions discussed
herein, I am also Assistant General Counsel to C.V. Realty, Inc. (“CVR”), and
Catamount Resources Corporation (“CRC”), each a corporation organized and
existing under the laws of the State of Vermont, and each a wholly-owned
subsidiary of the Company (CVR and CRC, each a “Guarantor” and, collectively,
the “Guarantors”).

    


    In those capacities I am familiar with
the matters relating to the preparation, execution and delivery of: (a) an
Amended and Restated Credit Agreement, dated as of November 3, 2008 (as such
Agreement may be supplemented or amended, the “Credit Agreement”), by and
between the Borrower and KeyBank National Association (the “Lender”); (b) the
$40,000,000 Revolving Line of Credit Note, to be dated the Effective Date (as
defined in the Credit Agreement), executed by the Borrower in favor of the
Lender (the “Revolving Note”); (c) the Subsidiary Guaranty, dated November 3,
2008 by and between CVR and the Lender; (d) the Subsidiary Guaranty, dated
November 3, 2008, by and between CRC and the Lender; and (e) the Escrow
Agreement, dated November 3, 2008 by and between the Borrower and the Lender
(the documents described in (a) through (e) above, collectively, the “Loan
Documents”).

    


    I have examined copies of the following
instruments and documents: (i) the Articles of Association and By-laws of the
Company and the Guarantors, respectively; (ii) the Loan Documents; and (iii) the
Resolutions, dated October 21, 2008, of the Company's Board of Directors and the
Unanimous Consents, each dated October 29, 2008, of each of the Guarantor’s
Board of Directors.  I have also reviewed, and to the extent I have
deemed appropriate relied upon, certificates of officers of the Company and the
Guarantors or of government officials as to certain factual
matters.  In addition, I have reviewed such other instruments and
documents as I have deemed necessary or appropriate as the basis for the
opinions hereinafter expressed, and I have conducted such other investigations
of fact and law as I have considered appropriate.

    


    Upon issuance of the Order of the
Vermont Public Service Board in Docket No. 7482, I will provide a supplemental
opinion confirming unqualified compliance with Paragraph (D) below.

    


    I am providing this opinion pursuant to
and in accordance with Section 4.01(c) of the Credit Agreement.

    


    Based upon the foregoing I am of the
opinion that:

    


    
      	
               
      

            	
              A.

            	
              Each
      Borrower and Guarantor is a duly organized corporation, validly existing
      and in good standing under the laws of the State of Vermont and in each
      jurisdiction in which the conduct of its business requires
      registration.

            


    

    


    
      	
               
      

            	
              B.

            	
              The
      execution, delivery and performance of the Credit Agreement and the
      Revolving Note have been duly authorized by all necessary corporate action
      on the part of the Borrower.

            


    

    


    
      	
               
      

            	
              C.

            	
              The
      execution, delivery and performance of the Credit Agreement and Revolving
      Note are within the Borrower’s powers and do not contravene or constitute
      a breach or default of (i) any provision of the Borrower’s Articles of
      Incorporation or By-laws, or (ii) any contract, indenture, instrument or
      document to which the Borrower is a party or to which it or any of its
      properties, both personal and real, are bound, or (iii) any law, rule,
      regulation, court order or order of any governmental
      agency.  The execution, delivery and performance of the
      Subsidiary Guaranty by each of the Guarantors are within each Guarantor’s
      powers and do not contravene or constitute a breach or default of (i) any
      provision of such Guarantor’s Articles of Incorporation or By-laws, or
      (ii) any contract, indenture, instrument or document to which such
      Guarantor is a party or to which it or any of its properties, both
      personal and real, are bound, or (iii) any law, rule, regulation, court
      order or order of any governmental
agency.

            


    

    


    
      	
               
      

            	
              D.

            	
              Upon
      issuance of the Order of the Vermont Public Service Board in Docket No.
      7482, no consent, approval, authorization or order of, or filing,
      registration or qualification with, any governmental or regulatory
      authority, which has not been obtained, taken or made is required under
      any applicable law or under any judgment, order or decree of any court,
      arbitrator or governmental or regulatory authority for the execution and
      delivery of the Loan Documents or the performance of the Borrower’s or the
      Guarantors’ obligations thereunder.

            


    

    


    
      	
               
      

            	
              E.

            	
              The
      Borrower has made and will make all necessary filings, and has received
      and will receive all necessary approvals, to collect the rates it charges
      under the tariffs currently in effect and to be in effect during the term
      of the Credit Agreement, and to make all payments under the Loan Documents
      with revenues collected pursuant to such filed rate
    tariffs.

            


    

    


    
      	
               
      

            	
              F.

            	
              Each
      of the Credit Agreement and Revolving Note has been duly authorized,
      executed and delivered by the Borrower, and constitutes the legal, valid
      and binding obligations of the Borrower, enforceable in accordance with
      its respective terms, except as enforceability may be limited by any
      applicable bankruptcy, insolvency, reorganization, moratorium or similar
      law affecting creditors' rights generally, or general principles of
      equity.  Each Subsidiary Guaranty has been duly authorized,
      executed and delivered by the respective Guarantor, and constitutes the
      legal, valid and binding obligations of such Guarantor, enforceable in
      accordance with its respective terms, except as enforceability may be
      limited by any applicable bankruptcy, insolvency, reorganization,
      moratorium or similar law affecting creditors' rights generally, or
      general principles of equity.

            


    

    


    
      	
               
      

            	
              G.

            	
              There
      is no pending or, to the best of my knowledge, threatened action or
      proceeding before any court, governmental agency or arbitrator against or
      affecting the Borrower or either Guarantor which, if determined adversely
      to such Borrower or Guarantor, would materially and adversely affect its
      financial condition or its ability to perform its covenants and agreements
      under the Loan Documents.

            


    

    


    I express no opinion as to any question
of law other than the law of the State of Vermont and the law of the United
States of America.

    


    Sincerely,

    


    


    


    Kenneth
C. Picton

    KCP/k

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    EXHIBIT
C

    Borrower’s
Investment Policy

    


    


    


    


    


    CENTRAL
VERMONT PUBLIC SERVICE CORPORATION

    AND
SUBSIDIARIES

    


    


    


    


    


    INVESTMENT
POLICY

    GUIDELINES

    


    


    Revised
February, 2004

    


    


    


     

    


    


    


    


    


    


    


    


    


    


    


    


    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    
      
        	
                TABLE OF
      CONTENTS

                 

              
	 
      	
                PAGE

              
	
                 

                Goal

                 

              	
                 

                3

              
	
                General
      Investment Guidelines

                 

              	
                3

              
	
                In-House
      Investment Guidelines

                 

              	
                4 -
      5

              
	
                Professional
      Investment Management Guidelines

                 

              	
                6

              
	
                Detail
      Sections:

              	 
      	 
      
	 
      	
                I.

              	
                Approved
      Short-Term Investment Options

              	
                 
      7

              
	 
      	
                II.

              	
                Issuer
      Criteria

              	 
      8
	 
      	
                III.

              	
                Investment
      Dealer Criteria

              	 
      9-10
	 
      	
                IV.

              	
                Money
      Market Fund Criteria

                 

              	 
      11
	
                Appendix:

              	 
      	 
      
	 
      	
                A.

              	
                Market
      Background & Definitions

              	
                12 -
      13

              
	 
      	
                B.

              	
                Security
      Descriptions

              	
                14
      - 30

              
	 
      	 
      	
                U.S.
      Gov't and Gov't-backed Agency Securities

                U.S.
      Gov't and Agency Repurchase Agreements

                Agency/Gov't
      Securities (not backed by the U.S. Gov't)

                Bankers
      Acceptances

                Taxable
      Commercial Paper

                Tax-Exempt
      Commercial Paper

                Domestic
      Certificates of Deposit

                Tax-Exempt
      Floating Rate Notes & Bonds

                Municipal
      Bonds

                Auction
      Rate Securities

                Remarketed
      Preferred Stock

                Money
      Market Funds

                Corporate
      Bonds

                Mortgage-Backed
      Securities

                Collateralized
      Mortgage Obligations

                Asset-Backed
      Securities

                 

              	 
      
	 
      	
                C.

              	
                Government
      & Agency Securities Guarantees

              	
                31

              


      

    

     

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    GOAL

    


    The goal
of the Central Vermont Public Service Corporation ("Company", "CVPS") and
Subsidiaries Investment Policy is to guide the investment of temporary excess
funds which the Company and its subsidiaries may have from time to time in a way
that will permit the Company and its subsidiaries to earn the maximum return on
these funds consistent with the primary objectives of preservation of and
liquidity of invested funds.

    


    


    


    


    GENERAL INVESTMENT
GUIDELINES

    


    Funds required for short-term, working
capital needs of CVPS and its subsidiaries will remain at CVPS and its
subsidiaries and be invested in-house by CVPS personnel in accordance with
In-House Investment Guidelines on pages 4 - 5.

    


    CVPS funds in excess of those needed
for short-term, working capital needs will be sent to Custom Investment
Corporation ("Custom") and invested by a professional investment manager in
accordance with Professional Investment Management Guidelines on page
6.  (NOTE: Custom may, at any time, have minimal excess cash awaiting
transfer to the professional investment manager.  This cash at Custom
will also be invested in-house by CVPS personnel)

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    IN-HOUSE INVESTMENT
GUIDELINES

    


    


    
      	
              1.  

            	
              CVPS
      short-term, working capital needs currently consist of the
      following:

            


    

    
      	
              ·  

            	
              $10
      million intra-month working capital swing (most typically $6 to $7
      million)

            


    

    
      	
              ·  

            	
              $5
      million potential ISO financial assurance
needs

            


    

    
      	
              ·  

            	
              $5
      million to allow for forecast
variability

            


    

    CVPS
short-term, working capital needs will be updated annually to assure appropriate
levels are maintained.

    


    Subsidiary
working capital is that excess cash which has not been returned to the parent as
a dividend or return of capital, or placed under professional
management.

    


    
      	
              2.  

            	
              Diversify
      maturities within a maximum maturity of three months, for those securities
      with specific maturity dates.

            


    

    


    
      	
              3.  

            	
              Invest
      in individual securities as identified in Section I - Approved Short-Term
      Investment Options.

            


    

    


    
      	
              4.  

            	
              Diversify
      issuers within approved investment criteria as identified in Section II -
      Issuer Criteria.

            


    

    


    
      	
              5.  

            	
              Investments
      must be placed with approved investment dealers or banks meeting the
      criteria in Section III - Investment Dealer
  Criteria.

            


    

    


    
      	
              6.  

            	
              Maximum
      investment of $2 million in any one security and/or issuer with the
      exception

            


    

    of direct
investments in Government and Government-backed Agency securities and
investments in money market funds as outlined in #7 below.  If the
Company's total excess cash, including investments under professional
management, exceeds $25 million, then the maximum investment limit in any one
security and/or issuer is raised to $5 million.

    


    
      	
              7.  

            	
              Maintain
      a liquid money market fund, with or without collateral backing, to allow
      for day-to-day liquidity. This fund must meet the criteria in Section IV -
      Money Market Fund Criteria and be placed with an approved dealer or bank
      meeting the criteria in Section III - Investment Dealer
      Criteria.  This account will generally not exceed $5 million,
      with the option to go to $10 million if there is a need for additional
      liquidity (i.e. reaching ISO Financial Assurance
  limits).

            


    

    


    
      	
              8.  

            	
              All
      investments will be in taxable securities, except for the CVPS money
      market fund which may be invested in tax exempt
  securities.

            


    

    


    [Investing in tax-exempt funds
while debt is outstanding could cause disallowance of interest expense deduction
under Section 265(2) of the Internal Revenue Code.

    


    IRS
deductions for interest expense in full is only allowed when the Company’s
temporary cash investments in tax exempt funds do not exceed an amount needed to
meet the business needs of the Company (working capital needs for CV is
approximately $4 - $10 million per month.).

    


    Investment
in tax-exempt obligations shall be presumed insubstantial only where during a
taxable year the average amount of tax-exempt obligations (valued at their
adjusted  basis) does not exceed 2% of the average adjusted tax basis
of the portfolio investments and any assets held in the active conduct of trade
or business. (2% of CV’s total adjusted assets at the end of September, 2003:
$160 million = $3.2 million)]


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    PROFESSIONAL INVESTMENT
MANAGEMENT GUIDELINES

    


    


    
      	
              1.  

            	
              Professional
      investment management must be placed with a firm meeting the criteria in
      Section III - Investment Dealer Criteria and with an investment philosophy
      consistent with the goal of this investment
  policy.

            


    

    


    
      	
              2.  

            	
              Duration
      of the portfolio and maturities of the individual securities will be up to
      the discretion of the professional manager as long as the portfolio meets
      the liquidity needs of Custom.  CVPS will provide, at least
      quarterly and more often if necessary, a forecast of liquidity needs for
      use by the professional manager.

            


    

    


    
      	
              3.  

            	
              Invest
      in individual securities as identified in Section I - Approved Short-Term
      Investment Options, or money market funds meeting the criteria in Section
      IV - Money Market Fund Criteria.  In no event are equity or
      derivative investments allowed.

            


    

    


    
      	
              4.  

            	
              Employ
      diversification strategies in accordance with reasonable investment
      practices for size of portfolio.

            


    

    


    
      	
              5.  

            	
              Individual
      securities must carry a bond or comparable credit rating of A or
      better.

            


    

    


    
      	
              6.  

            	
              Overall
      portfolio must carry a weighted
      average bond or comparable credit rating of AA or
      better.

            


    

    


    
      	
              7.  

            	
              All
      investments will be in taxable
securities.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Section
I.  APPROVED SHORT-TERM INVESTMENT OPTIONS

    


    


    


    U.S.
Government and Government-backed Agency Securities

    U.S.
Government and Agency Repurchase Agreements

    Agency/Government
Securities – not backed by the U.S. Government

    Bankers
Acceptances

    Commercial
Paper, Taxable or Tax-Exempt

    Domestic
Certificates of Deposit

    Tax-Exempt
Floating Rate Notes & Bonds

    Municipal
Bonds, Taxable or Tax-Exempt

    Auction
Rate Securities

    Remarketed
Preferred Stock

    Money
Market Funds

    


    


    Additional Investments
Allowable for Funds under Professional Management:

    Corporate
Bonds

    Mortgage-Backed
Securities

    Collateralized
Mortgage Obligations

    Asset-Backed
Securities

    


    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Section
II.  ISSUER CRITERIA

    


    


    
      	
              ·  

            	
              U.S.
      Government or Federal Agency with full Government
  backing.

            


    

    


    
      	
              ·  

            	
              Other
      Federal Agencies with a rating of AA or
AAA.

            


    

    


    
      	
              ·  

            	
              U.S.
      banks or U.S. banks that are subsidiaries of a foreign bank provided the
      bank is incorporated under U.S. law, registered with the SEC, and subject
      to all U.S. banking rules and regulations and is, thereby, protected
      against problems of the parent
company/country.

            


    

    


    
      	
              ·  

            	
              Corporation
      carrying Aa or Aaa long-term debt rating and/or P-1 commercial paper
      rating from Moody’s or equivalent, or carries a letter of credit from a
      bank meeting same criteria.

            


    

    


    
      	
              ·  

            	
              Municipal
      or tax-exempt institution carrying Aa or Aaa long-term debt rating and/or
      P-1 commercial  paper rating and/or MIG-1 rating from Moody’s or
      equivalent, or carries a letter of credit from a bank meeting same
      criteria.

            


    

    


    
      	
              ·  

            	
              No
      known, anticipated or potential
problems.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Section
III.  INVESTMENT DEALER CRITERIA

    


    Must be a
primary or reporting dealer, investment/portfolio/money manager or advisor,
broker-dealer or bank.

    


    Primary
or reporting dealers, investment/portfolio/money managers or advisors,
broker-dealers, and banks must all be registered with the Securities and
Exchange Commission.  In addition, primary or reporting dealers must
hold the designation given by the Federal Reserve Bank of New York (FRBNY) on
behalf of the Federal Reserve Bank.  Any bank must be regulated by
federal and state banking authorities.

    


    See lists
of Approved Primary Dealers and Approved Investment Banks below.

    


    


    APPROVED PRIMARY
DEALERS

    


    
      	
              ·  

            	
              ABN
      AMBRO Bank, N.V., New York Branch

            


    

    
      	
              ·  

            	
              BNP
      Paribas Securities Corp

            


    

    
      	
              ·  

            	
              Banc
      of America Securities LLC

            


    

    
      	
              ·  

            	
              Banc
      One Capital Markets, Inc.

            


    

    
      	
              ·  

            	
              Barclays
      Capital Inc

            


    

    
      	
              ·  

            	
              Bear,
      Stearns & Co., Inc.

            


    

    
      	
              ·  

            	
              CIBC
      World Markets, Inc.

            


    

    
      	
              ·  

            	
              Citigroup
      Global Markets, Inc.

            


    

    
      	
              ·  

            	
              Credit
      Suisse First Boston LLC

            


    

    
      	
              ·  

            	
              Daiwa
      Securities America Inc.

            


    

    
      	
              ·  

            	
              Deutsche
      Bank Securities Inc.

            


    

    
      	
              ·  

            	
              Dresdner
      Kleinwort Wasserstein Securities
LLC.

            


    

    
      	
              ·  

            	
              Goldman,
      Sachs & Co.

            


    

    
      	
              ·  

            	
              Greenwich
      Capital Markets, Inc.

            


    

    
      	
              ·  

            	
              HSBC
      Securities (USA) Inc.

            


    

    
      	
              ·  

            	
              J.P.
      Morgan Securities, Inc.

            


    

    
      	
              ·  

            	
              Lehman
      Brothers Inc.

            


    

    
      	
              ·  

            	
              Merrill
      Lynch Government Securities Inc.

            


    

    
      	
              ·  

            	
              Mizuho
      Securities USA Inc.

            


    

    
      	
              ·  

            	
              Morgan
      Stanley & Co. Incorporated

            


    

    
      	
              ·  

            	
              Nomura
      Securities International, inc.

            


    

    
      	
              ·  

            	
              UBS
      Securities LLC.

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    APPROVED INVESTMENT
BANKS

    (not a
complete list)

    


    


    
      	
              ·  

            	
              Alex
      Brown

            


    

    
      	
              ·  

            	
              Bankers
      Trust

            


    

    
      	
              ·  

            	
              Bank
      of Montreal

            


    

    
      	
              ·  

            	
              Brown,
      Brothers Harriman & C.

            


    

    
      	
              ·  

            	
              Burgan
      Bank (Kuwait)

            


    

    
      	
              ·  

            	
              BZW
      Investment Management Hong Kong
Limited

            


    

    
      	
              ·  

            	
              CCF
      ( France)

            


    

    
      	
              ·  

            	
              CIBC
      Woody Gubdy

            


    

    
      	
              ·  

            	
              CS
      First Boston

            


    

    
      	
              ·  

            	
              First
      Chicago Capital Markets

            


    

    
      	
              ·  

            	
              Goldman
      Sachs

            


    

    
      	
              ·  

            	
              Gruntal
      & Co.

            


    

    
      	
              ·  

            	
              Hambrecht
      & Quist

            


    

    
      	
              ·  

            	
              IBP
      ( Sweden)

            


    

    
      	
              ·  

            	
              ING
      International

            


    

    
      	
              ·  

            	
              JP
      Morgan

            


    

    
      	
              ·  

            	
              Merrill
      Lynch

            


    

    
      	
              ·  

            	
              Montgomery
      Securities

            


    

    
      	
              ·  

            	
              Morgan
      Stanley

            


    

    
      	
              ·  

            	
              Nesbitt
      Burns ( Canada)

            


    

    
      	
              ·  

            	
              Nikko
      Securities

            


    

    
      	
              ·  

            	
              NRI
      ( Indonesia)

            


    

    
      	
              ·  

            	
              OCBC
      ( Thailand )

            


    

    
      	
              ·  

            	
              Paine
      Webber

            


    

    
      	
              ·  

            	
              Pipper
      Jaffray

            


    

    
      	
              ·  

            	
              Robertson
      Stephens

            


    

    
      	
              ·  

            	
              Royal
      Bank of Canada

            


    

    
      	
              ·  

            	
              Salomon
      Brothers

            


    

    
      	
              ·  

            	
              Scotia
      Mcleod ( Canada )

            


    

    
      	
              ·  

            	
              Toronto
      Dominion

            


    

    
      	
              ·  

            	
              Wertheim
      Schroder

            


    

    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    


    Section IV.  MONEY
MARKET FUND CRITERIA

    


    


    1.           Filed
with Securities and Exchange Commission.

    


    2.           Meet
this Company’s goal of liquidity and preservation of principal.

    


    3.           Daily
liquidity unit value must always be at $1.00.

     

    4.           Portfolio
must have high quality instruments with a weighted average rating of AA
equivalent or better.

    


    
    

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
A

     

    
MARKET BACKGROUND &
DEFINITIONS

    


    
      FEDERAL
RESERVE SYSTEM

    

     

    
      12
Federal Reserve Banks 

      Conduct
Monetary Operations 

      through
FRBNY NFRBNY

    

     

    
      FEDERAL
RESERVE BANK OF NEW YORK

      Serves as
Agent for Federal Open Market Committee

    

     

    FEDERAL
OPEN MARKET COMMITTEE

    
      7 Federal
Reserve Governors

      President
of FEDERAL BANK OF NEW YORK

      4
Rotating President from 11 Federal Reserve Banks

    

    


    The
Federal Reserve banks conduct domestic and foreign monetary operations through
the Federal Reserve Bank of New York as agent for the Federal Open Market
Committee.

     

    Defined
Terms:

    Dealer – An institution that
owns and offers securities.

    


    Broker – Does not own
securities but simply acts to bring buyer and seller together on behalf of
investment dealers for the payment of commission.

    


    Broker-Dealer – Any person or
institution, other than a bank, engaged in business of buying or selling
securities on it own behalf or for others.

    


    Investment Manager -
Individual who manages a portfolio investment.

    


    Money Market Fund - an
open-ended Mutual Fund that invests in short-term securities such as commercial
paper, bankers acceptances, repurchase agreements, government securities,
certificates of deposit, and other highly liquid and safe securities that pay
money market rates of interest.  The fund's net asset value stays
constant at $1.00 per share, only the interest changes.

     

    Mutual Fund - a type of
regulated investment company that raises money from shareholders and invests in
a diversified portfolio such as stocks, bonds, options, futures, currencies, or
money market securities. Mutual funds raise money by selling shares of the
fund.  The price of a share will fluctuate daily depending on the
performance of the securities held by the fund.

    


    Portfolio Manager - Person
responsible for the investment of a mutual fund's assets, implementing its
investment strategy, and managing the day-to-day portfolio trading.

    


    Primary or Reporting Dealer –
Banks and securities brokerages that trade in U.S. Government Securities
with the Federal Reserve System or report to the Securities and Exchange
Commission.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
B

    


    U.S. GOVERNMENT AND
GOVERNMENT-BACKED AGENCY SECURITIES

    


    


    
      	
              1.  

            	
              Treasury
      bills (T-bills) are issued in book-form by the Federal Government for a
      price less that their par (face) value, and when they mature are paid at
      their par values.  Treasury notes and bonds are government
      securities that pay a fixed interest rate every six months until the
      securities mature, which is when you will be paid their par
      value.  T-bills, notes and bonds may be purchased directly from
      the US Government, a Federal Reserve Bank, a financial institution, or a
      government securities broker or
dealer.

            


    

    


    
      	
              2.  

            	
              T-bills,
      notes and bonds are securities guaranteed directly by the US Government.
      The only government backed agency issuing securities is the Government
      National Mortgage Association
(GNMA).

            


    

    


    
      	
              3.  

            	
              Generally,
      trade in multiples of $5,000, although multiples of $1,000 is
      possible.

            


    

    


    
      	
              4.  

            	
              T-bills
      are issued with a maturity of one year or less.  Notes are
      issued for up to 10 years and bonds are generally issued with maturities
      of over 10 years.  Agency security maturities also range from
      short-term to long-term.

            


    

    


    
      	
              5.  

            	
              T-bills
      are issued at a discount, and interest is paid at
      maturity.  Notes, bonds and agency securities are issued in
      interest bearing form.  Interest on notes, bonds and agency
      securities is generally paid
semi-annually.

            


    

    


    
      	
              6.  

            	
              A
      very active secondary market exists for sales prior to
      maturity.

            


    

    


    
      	
              7.  

            	
              Exempt
      from state and local income taxes.

            


    

    


    
      	
              8.  

            	
              Safest
      investments available in the short-term market due to government
      backing.

            


    

     

    See
Appendix C:   Government & Agency Securities
Guarantees

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
B

    


    U.S. GOVERNMENT AND AGENCY
REPURCHASE AGREEMENTS (REPOS)

    


    


    
      	
              1.  

            	
              The
      purchase of U.S. Treasury and Federal Agency securities from a bank’s or
      dealer’s portfolio with the agreement by the bank or dealer to repurchase
      the same securities at the same price, plus a stipulated rate of interest,
      on a specific future date.

            


    

    


    
      	
              2.  

            	
              Backed
      by the credit-worthiness of the issuing bank or dealer and, ultimately,
      the guarantee of the U.S. Government and/or issuing
  agency.

            


    

    


    
      	
              3.

            	
              Minimum
      denomination varies.

            


    

    


    
      	
              4.  

            	
              Issued
      for both short-term (including overnight) and long-term maturities, and
      interest is paid at maturity.  Open repos are available whereby
      the bank or dealer has the right of collateral substitution and the
      maturity date is at the discretion of the
  investor.

            


    

    


    
      	
              5.  

            	
              Generally
      issued in interest-bearing form.

            


    

    


    
      	
              6.  

            	
              Generally
      cannot be redeemed prior to
maturity.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
B

    AGENCY/GOVERNMENT
SECURITIES

    (not government
backed)

    


    


    Agency
securities are issued by U.S. Government-Sponsored Entities (GSEs) and federally
related institutions. GSEs currently issuing securities comprise of privately
owned, publicly chartered entities created to reduce borrowing costs for certain
sectors of the economy, such as farmers, homeowners, and students.

    


    
      	
              1.  

            	
              These
      instruments are available from 5 to 360
days.

            


    

    


    
      	
              2.  

            	
              Available
      as new issues and in the secondary market through securities dealers and
      banks.

            


    

    


    
      	
              3.  

            	
              Can
      be purchased in quantities of $25,000, at original issue and in additional
      increments of $5,000 thereafter.

            


    

    


    
      	
              4.  

            	
              High
      credit quality.

            


    

     

    See
Appendix C:    Government & Agency Securities
Guarantees

     

    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
B

    BANKERS’ ACCEPTANCE
("BA")

    


    


    
      	
              1.  

            	
              A
      time draft used in both domestic and international trade issued at a
      specified rate for a defined period of time.  Usually results
      from a short-term contractual obligation of a business to pay for
      merchandise received on a specific
date.

            


    

    


    
      	
              2.  

            	
              Backed
      by credit worthiness of “accepting” bank, and further secured by
      collateral of goods shipped.  In the event of default by the
      drawer or endorser, the bank would honor the BA at its
      maturity.

            


    

    


    
      	
              3.

            	
              Minimum
      denomination varies with bank.

            


    

    


    
      	
              4.

            	
              Generally
      issued for 270 days or less.

            


    

    


    
      	
              5.

            	
              Generally
      issued at a discount.  Interest paid at
  maturity.

            


    

    


    
      	
              6.

            	
              Limited
      secondary market exists for sales prior to
  maturity.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
B

    TAXABLE COMMERCIAL
PAPER

    


    


    
      	
              1.  

            	
              Unsecured
      short-term promissory notes of major corporations issued at a specified
      rate for a defined period of time.

            


    

    


    
      	
              2.

            	
              Backed
      only by credit worthiness of
issuer.

            


    

    


    
      	
              3.

            	
              Minimum
      denomination varies.

            


    

    


    
      	
              4.

            	
              Generally
      issued for 1 to 270 days.

            


    

    


    
      	
              5.

            	
              Generally
      issued at a discount.  Interest paid at
  maturity.

            


    

    


    
      	
              6.

            	
              Cannot
      be redeemed prior to maturity.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
B

    TAX-EXEMPT COMMERCIAL
PAPER

    


    


    
      	
              1.  

            	
              Promissory
      notes issued by states, cities, towns, counties or other political or
      organizational sub-division having a tax-exempt status.  They
      are issued at a specified rate for a defined period of
    time.

            


    

    


    
      	
              2.

            	
              Backed
      by the credit worthiness of issuer, although this paper often carries a
      letter of credit.

            


    

    


    
      	
              3.

            	
              Generally
      trades in multiples of $50,000.

            


    

    


    
      	
              4.

            	
              Generally
      issued for 1 to 120 days, with a maximum maturity of 365
    days.

            


    

    


    
      	
              5.

            	
              Generally
      issued in interest bearing form.  Interest is paid at
      maturity.

            


    

    


    
      	
              6.

            	
              Cannot
      be sold prior to maturity.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              Appendix
      B

            


    

    
      	
               
      

            	
              DOMESTIC CERTIFICATES
      OF DEPOSIT ("CD")

            


    

    


    


    
      	
              1.  

            	
              Certificates
      issued by banks against funds deposited earning a specified rate of
      interest for a defined period of
time.

            


    

    


    
      	
              2.

            	
              Backed
      by the credit worthiness of the issuing
bank.

            


    

    


    
      	
              3.

            	
              Generally
      requires minimum denominations of
$100,000.

            


    

    


    
      	
              4.

            	
              Generally
      issued for 14 days to several
years.

            


    

    


    
      	
              5.

            	
              Issued
      in interest-bearing form.  Interest paid at
      maturity.

            


    

    


    
      	
              6.

            	
              Limited
      secondary market exists for sales prior to
  maturity.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
B

    


    TAX-EXEMPT, FLOATING RATE
NOTES & PUT BONDS

    


    


    
      	
              1.  

            	
              Securities
      issued by states, cities, towns, counties or other political or
      organizational subdivision having a tax-exempt status.  They are
      issued at specified rates of interest, sometimes subject to change on a
      periodic basis to reflect current market conditions.  They also
      have specified maturity dates, although some can be redeemed on demand of
      the investor or at periodic intervals with prior notice (usually 7 days to
      one month).

            


    

    


    
      	
              2.  

            	
              Backed
      by the credit worthiness of the obligor organization, although these
      securities often carry irrevocable letters of
  credit.

            


    

    


    
      	
              3.  

            	
              Issued
      in interest bearing form.  Interest may be paid at maturity or
      on a periodic basis.

            


    

    


    
      	
              4.  

            	
              Existence
      of letters of credit or floating rate characteristic limits risk of loss
      of principal.

            


    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
B

    MUNICIPAL
BONDS

    


    


    
      	
              1.  

            	
              Securities
      issued by state or local governments as Private Purpose Bonds used for
      such projects as sports, trade, and convention facilities and large issue
      (over $1 million) Industrial Development
Bonds.

            


    

    


    
      	
              2.  

            	
              Backed
      by credit worthiness of obligator organization, often are insured by AMBAC
      Financial or other insurance companies whose primary business is issuing
      Municipal Bonds.

            


    

    


    
      	
              3.  

            	
              Issued
      in interest bearing form. Interest may be paid at maturity or on a
      periodic basis.

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


     Appendix
B

    AUCTION RATE
SECURITIES

    


    


    Securities
issued by corporations through a Dutch Auction*.  Following are three
types of auction-rate securities:

    


    


    TAX FREE PREFERRED
STOCK

    


    
      	
              1.  

            	
              Tax
      free preferred stock, issued at
par.

            


    

    


    
      	
              2.  

            	
              Alternative
      to short-term municipal securities

            


    

    


    
      	
              3.  

            	
              Tax
      free due to the funds' underlying municipal
  investments

            


    

    


    
      	
              4.  

            	
              Market
      sets the dividend rate which resets every 7 or 28 days through a Dutch
      Auction and is paid at end of each holding
  period.

            


    

    


    
      	
              5.  

            	
              To
      maintain AAA rating, the fund must have asset coverage of at least 200% as
      of the last business day of each month.  These guidelines are
      established by Moody's and Standard &
  Poor's.

            


    

    


    
      	
              6.  

            	
              Issued
      in minimum denominations of $50,000, $100,000 or
  $500,000.

            


    

     

    SELECT AUCTION VARIABLE RATE
SECURITIES ("SAVRS")

    


    
      	
              1.  

            	
              Tax
      exempt variable rate municipal notes and
bonds

            


    

    


    
      	
              2.  

            	
              Market
      sets the dividend rate which resets every 35 days through a Dutch Auction
      and is paid at end of each holding
period.

            


    

    


    
      	
              3.  

            	
              SAVRS
      issuers normally obtain credit enhancement in the form of a Surety Bond
      provided by one of the primary municipal credit insurance providers
      (AMBAC, CGIC, FGIC, FSA, MBIA). As a result, the insurance provider is
      able to transfer its AAA/Aaa credit rating to the insured
      issue.

            


    

    


    
      	
              4.  

            	
              Issued
      in denominations of $100,000 per
bond.

            


    

    


    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    MONEY MARKET NOTES
("MMNs")

    


    
      	
              1.  

            	
              Taxable
      debt securities with a variable interest
rate.

            


    

    


    
      	
              2.  

            	
              Reset
      typically every 35 days through the Dutch Auction process.  If
      all the outstanding MMNs are subject to Hold Orders, the interest rate for
      the next period will be 100% of the applicable Composite Commercial Paper
      Rate.  If insufficient bids are received at Auction, the rate
      will be set at the Maximum Rate which varies between 110% and 200% of one
      month LIBOR, depending on the credit rating of the issuer on the day
      before each Auction.

            


    

    


    
      	
              3.  

            	
              Compares
      well with commercial paper in terms of safety and liquidity while offering
      investors the additional benefit of a yield premium over commercial
      paper.

            


    

    


    
      	
              4.  

            	
              Issued
      in minimum denominations of $100,000 or $500,000 per
  bond.

            


    

     

    *Dutch
Auction - Potential buyers submit bids specifying the number of shares desired
and the yield the investor is willing to accept.  A buyer will not
receive shares at a lower yield than the submitted bid, but may receive a higher
yield than the bid, since the entire issue is reset at the same rate in the
auction process.  Current holders of stock have the following
alternatives in a re-auction:

    


    Alternative                Result

    Hold                           Hold
regardless of new rate

    Bid                             
Hold if rate is at least equal to a specified rate

    Sell                             Sell
regardless of new rate.

    


    The
lowest bid level submitted by existing and potential investors which satisfies
the number of shares available becomes the rate for the next period for all
investors.  In the event of an incomplete auction (more sellers than
buyers) the rate is automatically set at the issue’s maximum applicable rate, a
designated percentage of either the “AA” Composite Commercial Paper Rate or the
30 day London Interbank Offering Rate (LIBOR).


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
B

    REMARKETED PREFERRED (“RP”)
STOCK

    


    


    
      	
              1.  

            	
              Preferred
      stock issued with a floating dividend
rate.

            


    

    


    
      	
              2.  

            	
              Depending
      on the type, the credit ratings can be based on the following issuer’s
      credit worthiness and reflect the
issuers:

            


    

    


    Stand Alone RP has
credit ratings which are based on the issuer’s credit worthiness and reflect the
issuer’s outstanding preferred stock ratings.

    


    Credit Supported RP
offers additional support of a letter of credit from a highly rated major
financial institution which investors can look to in the event the issuer is
unable to fund dividend or redemption payments on the shares.  Ratings
on Credit Supported
RP reflect the stronger ability of the supporting financial institution
to meet all payments.

    


    Structured RP is
issued by a special purpose subsidiary created solely to hold and manage the
collateral, or income producing assets, that enable payment of dividends and the
redemption value of the preferred.  The RP issuer is capitalized with
high quality assets including cash, U.S. government and agency
securities.  Since the assets will typically have a market value equal
to nearly 150% of the aggregate liquidation preference of the issue, and the
issuer is effectively insulated from any adverse developments to its parent
company, Structured
RP normally receives an AAA rating.

    


    
      	
              3.  

            	
              Can
      be tax-exempt, taxable or qualify for the dividends-received deduction
      (70%) if held for a minimum of 46 days
  initially.

            


    

    


    
      	
              4.  

            	
              Offered
      in shares or minimum denominations of
$100,000.

            


    

    


    
      	
              5.  

            	
              Dividend
      rates determined through a remarketing process*.  Dividends are
      paid at the end of each holding
period.

            


    

     

    *The
remarketing process differs from a Dutch Auction in several ways.  The
remarketing agent, typically the lead manager, notifies current holders on the
tender date, (i.e. the business day prior to the trade date) of the estimated
range of yields for the next 7- and 28-day holding periods.  Investors
have the option to bid, hold, or sell, as they do in Dutch
Auctions.  Existing holders must indicate if they will be sellers on
the tender date.  The remarketing agent will then solicit prospective
purchases for indications of the lowest yield required to distribute the shares
at par.  The remarketing agent must set the new dividend rate by 4:00
p.m. on trade date for both the 7- and 28-day holding periods.


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
B

    MONEY MARKET
FUNDS

    


    


    Money
Market Fund is an open-ended Mutual Fund that invests in short-term securities
such as commercial paper, bankers acceptances, repurchase agreements, government
securities, certificates of deposit, and other highly liquid and safe securities
that pay money market rates of interest. The money market operates through
dealers, money center banks, and the Open Market Trading desk at the New York
Federal Reserve Bank of New York.

    


    
      	
              1.  

            	
              The
      fund’s net asset value stays constant at $1.00 per share - only the
      interest goes up and down (i.e. no risk of loss of
    principal).

            


    

    


    
      	
              2.  

            	
              Interest
      is paid monthly.

            


    

    


    
      	
              3.  

            	
              Most
      funds are not federally insured.

            


    

    


    
      	
              4.  

            	
              Funds
      provide daily liquidity.

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix B

    CORPORATE
BONDS

    


    


    Generally
these bonds pay higher rates than government or municipal bonds since the risk
is higher. Corporate bonds have a wide range of ratings and yields because the
financial health of the issuers can vary widely. Corporate Bonds typically have
the following distinctive features.

    


    
      	
              1.  

            	
              A
      debt instrument issued by a private
corporation.

            


    

    


    
      	
              2.  

            	
              They
      are taxable.

            


    

    


    
      	
              3.  

            	
              They
      usually have a par value of $1,000.

               

            


    

    
      	
              4.  

            	
              They
      have term maturity – which means they come due all at once- and may be
      paid out of sinking funds accumulated for that
  purpose.

            


    

    


    
      	
              5.  

            	
              They
      are traded on major exchanges, with prices published in the
      newspaper.  Price of bonds fluctuate with changes in interest
      rates unless held to maturity.

            


    

    


    
      	
              6.  

            	
              Backed
      only by credit worthiness of
issuer.

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
B

    MORTGAGE-BACKED SECURITIES
("MBS")

    


    


    
      	
              1.  

            	
              A
      debt security that is backed by a pool of underlying mortgages, usually
      guaranteed by a government agency for payment of principal and a guarantee
      of timely payment.

            


    

    


    
      	
              2.  

            	
              Usually
      carry a pass-through feature -- investors have an undivided interest in
      the pool.  Investors
      receive payments out of the interest and principal on the underlying
      mortgages.

            


    

    


    
      	
              3.  

            	
              Traded
      in a secondary market.

               

            


    

    
      	
              4.  

            	
              Essentially
      no credit risk.

            


    

    


    
      	
              5.  

            	
              Prepayment
      risk is inherent with "prepayable" or "open" MBS.  Prepayment is
      passed through to the investor and forces the investor to find other uses
      for the prepaid investment.

            


    

    


    
      	
              6.  

            	
              Ginnie
      Mae's (guaranteed by the U.S. gov't) are the most popular type of this
      security and comprised of VA guaranteed loans or FHA insured
      mortgages.

            


    

    


    
      	
              7.  

            	
              Freddie
      Mac's & Fannie Mae's are other types of pass through
      MBS.  These are both "Participation Certificates" or "PC's" and
      not guaranteed by the U.S. gov't.

            


    

    
      	
              a.  

            	
              Freddie
      Mac's are comprised of FHOMC conventional mortgages on single family
      homes

            


    

    
      	
              b.  

            	
              Fannie
      Mae's are comprised of conventional mortgages and FHA insured
      mortgages.

            


    

    


    
      	
              8.  

            	
              Very
      liquid secondary market for MBS's.

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
B

    


    COLLATERALIZED MORTGAGE
OBLIGATIONS ("CMO")

    


    


    
      	
              1.  

            	
              Bonds
      that are collateralized by mortgages or mortgage-backed
      securities.

            


    

    


    
      	
              2.  

            	
              CMO's
      have stated maturities (vs. pass through features).  Principal
      and interest payments are separated into different payment streams to
      create bonds that repay capital over differing periods of
      time.

            


    

    


    
      	
              3.  

            	
              There
      are short-term, intermediate-term and long-term
  CMO's

            


    

    
      	
              4.  

            	
              Most
      of the mortgages are traditional mortgages (vs. VA or FHA
      mortgages).

            


    

    


    
      	
              5.  

            	
              Not
      a liquid secondary market for
CMO's.

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
B

    ASSET-BACKED SECURITIES
("ABS")

    


    


    
      	
              1.  

            	
              Bonds
      that are collateralized by pools of loans of similar types, duration and
      interest rates.

            


    

    


    
      	
              2.  

            	
              May
      be insured by bond insurers.

            


    

    


    
      	
              3.  

            	
              May
      be backed by such assets as mortgages, agency securities, consumer loans,
      student loans, business loans, or trade
  receivables.

            


    

    


    
      	
              4.  

            	
              Generally,
      the term "asset-backed security" is used to refer to all asset-backed
      securities except mortgage-backed securities (see description on page 28)
      or collateralized mortgage obligations (see description on page
      29).

            


    

    



    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Appendix
C

    


    GOVERNMENT & AGENCY
SECURITIES GUARANTEES

     

    
      
        	
                INSTRUMENT

              	
                GUARANTEE

                 

              
	
                U.S.
      Treasury Bills

              	
                U.S.
      Government

                 

              
	
                U.S.
      Treasury Notes

              	
                U.S.
      Government

                 

              
	
                U.
      S. Treasury Bonds

              	
                U.S.
      Government

                 

              
	
                Federal
      Home Loan Bank

                   Discount
      Notes

              	
                Issuing
      Agency

                 

                 

              
	
                Federal
      National Mortgage

                   Association
      Discount Notes

              	
                Issuing
      Agency

                 

                 

              
	
                Federal
      Home Loan Mortgage

                   Corporation
      Discount Notes

              	
                Issuing
      Agency

                 

                 

              
	
                Farm
      Credit Bank

                   Discount
      Notes

              	
                Issuing
      Agency

                 

                 

              
	
                Student
      Loan Marketing

                   Association
      Discount Notes

              	
                Issuing
      Agency

                 

                 

              
	
                Government
      National Mortgage

                   Association

              	
                U.S.
      Government

                 

                 

              
	
                Municipal
      Bonds

              	
                Varies
      by Issue

                 

              
	
                Municipal
      Notes

              	
                Varies
      by Issue