CONFORMED COPY




                              FACILITIES AGREEMENT

                 (dated 2 March  1998 and as  amended  on 3 March  1998,  
               21 April 1998, 19 May 1998, 28 May 1998 and 16 July 1998)

                                       for

                     (pound)3,625,000,000 Credit Facilities



                         TU Finance (No. 1) Limited                          (1)


                         TU Finance (No. 2) Limited                          (2)
                               TU Acquisitions PLC

                             Chase Manhattan plc                             (3)
                     Lehman Brothers International (Europe)
                        Merrill Lynch Capital Corporation
                             as Joint Lead Arrangers

                          The Chase Manhattan Bank                           (4)
                          Lehman Commercial Paper Inc.
                        Merrill Lynch Capital Corporation
                                 as Underwriters

                          The Chase Manhattan Bank                           (5)
                                 as Issuing Bank

                    Chase Manhattan International Limited                    (6)
                                as Facility Agent

                    Chase Manhattan International Limited                    (7)
                                as Security Agent








 For the Primary Borrower                      For the Facility Agent
      Norton Rose                               Lovell White Durrant
        London                                        London


<PAGE>


                                    CONTENTS


1.       PURPOSE AND DEFINITIONS...............................................1

2.       THE COMMITMENTS......................................................28

3.       THE CONDITIONS.......................................................29

4.       ADVANCES UNDER THE FACILITIES........................................30

5.       INTEREST AND INTEREST PERIODS........................................37

6.       REPAYMENT, PREPAYMENT, CANCELLATION AND REDUCTIONS...................40

7.       FEES AND EXPENSES....................................................43

8.       PAYMENTS AND TAXES; ACCOUNTS AND CALCULATIONS........................45

9.       REPRESENTATIONS AND WARRANTIES.......................................50

10.      POSITIVE UNDERTAKINGS................................................55

11.      NEGATIVE UNDERTAKINGS................................................62

12.      EVENTS OF DEFAULT....................................................71

13.      INDEMNITIES..........................................................76

14.      UNLAWFULNESS, INCREASED COSTS, ALTERNATIVE INTEREST RATES............78

15.      SET-OFF AND PRO-RATA PAYMENTS........................................81

16.      ASSIGNMENT, SUBSTITUTION AND LENDING OFFICES.........................83

17.      FACILITY AGENT AND SECURITY AGENT....................................87

18.      POWERS ..............................................................90

19.      DUTIES ..............................................................94

20.      EXONERATION..........................................................96

21.      ENFORCEMENT AND RECOVERIES..........................................102

22.      DETERMINATION OF MATTERS............................................103

23.      BASIS OF DECISIONS..................................................105

24.      MATTERS CONCERNING THE BORROWERS....................................107

25.      NOTICES AND OTHER MATTERS...........................................109

26.      GOVERNING LAW AND JURISDICTION......................................112


<PAGE>


Schedule 1

The Banks and their Commitments..............................................113

Schedule 2

Forms of Drawdown Notice.....................................................114

Schedule 3

Conditions Precedent.........................................................117

Schedule 4

Calculation of Additional Cost...............................................121

Schedule 5

Form of Substitution Certificate.............................................123

Schedule 6

Form of Accession Certificate................................................127

Schedule 7

Terms of Borrowers' Indemnity................................................129

Schedule 8

Terms of Interbank Guarantee and Indemnity...................................132

Schedule 9...................................................................134

Projects which may be financed under clause 11.1(g)(iii).....................134


<PAGE>


THIS AGREEMENT is made the 2nd day of March 1998

BETWEEN:

(1)  TU Finance (No. 1) Limited (a company  registered in England and Wales with
     company  number  3505836) as Primary  Borrower  and the  initial  Permitted
     Borrower;

(2)  TU Finance (No. 2) Limited a company  registered  in England and Wales with
     company  number  3514100  ("Finco  2") and TU  Acquisitions  PLC, a company
     registered in England and Wales with company number 3455523 ("Bidco");

(3)  Chase  Manhattan plc, Lehman  Brothers  International  (Europe) and Merrill
     Lynch Capital Corporation as joint lead arrangers (the "Arrangers");

(4)  The Chase Manhattan Bank,  Lehman  Commercial  Paper Inc. and Merrill Lynch
     Capital Corporation as the original Banks (the "Underwriters");

(5)  The Chase Manhattan Bank as the initial Issuing Bank;

(6)  Chase Manhattan International Limited as the initial Facility Agent; and

(7)  Chase Manhattan International Limited as the initial Security Agent.


IT IS AGREED as follows:


1.   PURPOSE AND DEFINITIONS

1.1  Purpose

     This Agreement sets out the terms and conditions  upon and subject to which
     the Banks agree, according to their several obligations, to make available:

(a)  Acquisition Facility and Interim Facility

     to the  Primary  Borrower,  an  Acquisition  Facility  in Sterling of up to
     (pound)1,775,000,000   and  an  Interim  Facility  in  Sterling  of  up  to
     (pound)1,150,000,000,  each to be used for the  purposes of  on-lending  to
     Finco 2 by way of debt bearing  interest at a rate at least  equivalent  to
     the Facilities,  to be, in turn,  on-lent to Bidco in order to assist Bidco
     in the financing or  refinancing of the following (but only after the Offer
     is declared or becomes  unconditional  in all respects as permitted by this
     Agreement):

     (i)    any consideration  payable by Bidco to shareholders of the Target in
            respect of open market purchases of Target Shares;

     (ii)   the acquisition of Target Shares by Bidco pursuant to the Offer;

     (iii)  fees and  expenses of the Primary  Borrower and Bidco in relation to
            the  Offer,  and/or out of pocket  expenses  of the Parent (up to an
            amount reasonably satisfactory to the Arrangers), in relation to the
            Offer;


<PAGE>


     (iv)   the consideration  payable pursuant to the operation by Bidco of the
            procedures  contained  in sections  428 - 430 of the  Companies  Act
            1985;

     (v)    the  consideration  payable  to share  option  holders in the Target
            pursuant  to any  relevant  offer to them by Bidco  to  purchase  or
            cancel such share options; and

     (vi)   in payment to the Parent of the Excess Equity Funding (if any);

     (vii)  paying  amounts due to Loan Note  Holders if the Loan Note  Facility
            comes into existence or in funding the Loan Note Collateral  Account
            with the  principal  amount of the Loan Note  Obligation if the Loan
            Note Facility does not come into existence;

(b)  Revolving Credit Facility

     to the Primary  Borrower and (subject to accession to this Agreement  under
     clause 24) the Permitted Borrowers, a Revolving Credit Facility in Sterling
     (and in the  case of  Letters  of  Credit,  such  other  currencies  as are
     permitted by this Agreement) of up to (pound)700,000,000 to be used for the
     purpose of refinancing  certain of the Target Group's  Borrowed Money,  for
     the Target Group's general corporate purposes,  to the Primary Borrower for
     payment of interest on the Advances drawn by the Primary  Borrower  falling
     due not more than 6 months after the  Unconditional  Date, for the issue of
     Letters of Credit by the Issuing Bank and, in part,  for the REC's  general
     corporate  purposes as provided in clause 24.5. For the avoidance of doubt,
     the  Revolving  Credit  Facility will not be available for the financing or
     refinancing of the Acquisition.

No  amounts  borrowed  under  any of the  Facilities  may be used,  directly  or
indirectly, to repay or refinance the minimum equity contribution referred to in
paragraph  (c) of Part B of Schedule 3 or otherwise  make payments to the Parent
or any of its  Affiliates  (except the Primary  Borrower and its  Subsidiaries),
other than (i) to pay certain out of pocket expenses of the Parent in accordance
with clause  1.1(a)(iii)  above and (ii) as  contemplated  in clause  1.1(a)(vi)
above.

1.2  Definitions

     In this Agreement, unless the context otherwise requires:

     "Accession  Certificate" means an accession certificate (by way of deed) in
     the form or substantially  the form of schedule 6 and entered into or to be
     entered  into by a  Permitted  Borrower  as an  acceding  Borrower  and the
     Facility Agent;

     "Acquisition"  means the  acquisition by Bidco of the Target Shares whether
     pursuant to the Offer or pursuant to the procedures contained in Part XIIIA
     of the Act or by way of open  market  purchases  (and  includes  where  the
     context  admits  payments by Bidco to the Target's  share option holders to
     purchase or cancel the benefit of such options);

     "Acquisition  Advance" means each borrowing under the Acquisition  Facility
     (and all advances made under the Loan Note  Facility  shall be deemed to be
     Acquisition  Advances) or (as the context requires) the principal amount of
     that borrowing outstanding at any relevant time;

     "Acquisition Facility" means the facility granted by the Banks under clause
     2.1(a);


<PAGE>


     "Acquisition Facility Repayment Date" means each of the scheduled repayment
     dates for the Acquisition Facility referred to in clause 6.1;

     "Act" means the Companies Act 1985;

     "acting in concert" has the meaning given to that term in the Code;

     "Additional Cost" means, in relation to any period, a percentage calculated
     for such period at an annual rate determined in accordance with schedule 4;

     "Adjusted  Share Capital and Reserves" means the aggregate of the following
     items namely:

     (a)  the nominal  amount of the share capital of Finco 2 for the time being
          issued and paid up or credited as paid up;

     (b)  the amounts standing to the credit of the consolidated reserves of the
          Group  (including  any share  premium  account and capital  redemption
          reserve),

     but adjusted,  to the extent that the following items have not already been
     added,  deducted or excluded in arriving at the figures  referred to in (a)
     or (b) above:

     (c)  by  deducting  the amounts  standing to the debit of the  consolidated
          reserves of the Group;

     (d)  by  deducting  any amounts  attributable  to  interests  of  non-Group
          members in Group Subsidiaries;

     (e)  by deducting any reserves set aside for deferred taxation;

     (f)  by deducting the amount by which the net book value of any fixed asset
          has been written up after the date of this  Agreement (or, in the case
          of a person  becoming a member of the Group after that date,  the date
          on which it becomes a member of the Group) by way of revaluation or on
          its  transfer  from one  member of the Group to  another  (but no such
          deduction shall be made if the amount of this write up is supported by
          and  does not  exceed  the  amount  shown  by an  independent  written
          valuation);

     (g)  by deducting  any amounts  attributable  to the  consolidation  of the
          assets and  liabilities  of Project  Finance  Subsidiaries  or, if the
          value  of  such  Project   Finance   Subsidiaries  is  represented  by
          `investment in  subsidiaries'  (or other  investments) in the books of
          their  relevant  holding  companies,  deducting  the  amount  of  such
          investment;

     (h)  by  deducting  the  amount of any  outstanding  loan or  guarantee  to
          Project  Finance  Subsidiaries  (to  the  extent  not  deducted  under
          paragraph (g) above);

     (i)  by adding  back (aa) to  capital  reserves,  goodwill  written  off by
          reason of the Acquisition and (bb) to cumulative revenue reserves, any
          goodwill arising on the Acquisition and subsequently amortised through
          the profit and loss account;

     but so that no amount to be added,  deducted or excluded as a result of any
     of the foregoing shall be added, deducted or excluded more than once in the
     same  calculation and, where the calculation is being made as at the end of
     a Test Period, each such amount shall be determined


<PAGE>


     by  reference  to the  most  recent  financial  statements  and  compliance
     certificates  delivered hereunder as adjusted pursuant to the provisions of
     clause 10.3(c);

     "Advance"  means any  Acquisition  Advance,  Interim  Advance or  Revolving
     Advance  and, as the context  requires,  includes  the making of any of the
     same or the amount of the same which is outstanding at any relevant time;

     "Affected Bank" has the meaning given to it in clause 14.4;

     "Affiliate"  means, in relation to any person, any Subsidiary or subsidiary
     undertaking  (as  defined in section  258 of the Act) of that  person,  any
     holding  company of that  person  and any other  Subsidiary  or  subsidiary
     undertaking of that holding company;

     "Agreed Projections" means the projections for the Group dated 2 March 1998
     as amended by the  supplemental  projections  of 3 March 1998,  both in the
     agreed  form as  further  amended  by  projections  dated 31 March 1998 and
     revised projections issued on 8 April 1998;

     "Applicable Fees Rate" means at any time in respect of:

     (a)  the Acquisition  Facility and the Interim  Facility,  0.5 per cent per
          annum at all  times and on the Loan  Note  Facility,  0.5 per cent per
          annum at all times;

     (b)  the Revolving Credit Facility, 0.375 per cent. per annum;

     (c)  if the  Stand-alone  facility  referred to in Clause 24.5 is executed,
          the  figures for the  Applicable  Fees Rate for the  Revolving  Credit
          Facility shall be 0.5 per cent per annum.

     "Applicable  Margin"  means,  at any  time,  1.25% per annum or if the most
     recent determination of the Leverage Ratio under clause 10.3 shows that the
     Leverage Ratio is less than 65%, the rate per annum determined as follows:

          Leverage Ratio           and not less than:      Applicable Margin is:
          is less than:

          65%                            60%                       1%
          60%                             -                     0.75%

     (a)  any  reduction  in the  Applicable  Margin shall have effect 5 Banking
          Days  following  the  date  of  delivery  of  any  set of  audited  or
          management  accounts for a Quarter under clause  10.1(b)(i)  and (ii),
          together with the financial  covenant  compliance  certificate  by the
          Primary  Borrower  referred  to in  clause  10.1(b)(iii),  until  (but
          excluding)  the  effective  date  for  any  subsequent  change  in the
          Applicable Margin in accordance with this definition;

     (b)  during the continuance of any Default, any margin reduction under this
          definition will not apply, and the Applicable Margin shall be 1.25%;

     (c)  until  Target has  become a  wholly-owned  Subsidiary  of Bidco and no
          amount is outstanding  under the Interim  Facility,  there shall be no
          reduction in the Applicable Margin below 1.25%;


<PAGE>


     "Appropriate  Accounting  Principles" means (i) the accounting  principles,
     policies,  standards,  practices and bases (being generally accepted in the
     United Kingdom),  as adopted in the last audited  consolidated  accounts of
     Target published prior to 1 February 1998 or (ii) where any change has been
     agreed  under  clause  10.3(c),  such  accounting  principles,   standards,
     practices and bases as have been so agreed;

     "Arrangers"  means  Chase  Manhattan  plc,  Lehman  Brothers  International
     (Europe) and Merrill Lynch Capital Corporation;

     "Auditors"  means  Deloitte & Touche L.L.P.  or such other  internationally
     recognised  firm of chartered  accountants  as may be auditors to the Group
     for the time being;

     "Available  Commitment"  means, in relation to a Bank and save as otherwise
     provided herein:

     (a)  in respect of the Acquisition  Facility at any time, its Commitment in
          respect of such  Facility  at such time less its  Contribution  to all
          outstanding Acquisition Advances at such time;

     (b)  in respect of the Interim  Facility  at any time,  its  Commitment  in
          respect of such  Facility  at such time less its  Contribution  to all
          outstanding Interim Advances at such time;

     (c)  in  respect  of  the  Revolving  Credit  Facility  at  any  time,  its
          Commitment in respect of such Facility at such time less:

          (i)    its Contribution to all outstanding  Revolving Advances at such
                 time;

          (ii)   its  Proportion  of the  Sterling  Amount  at that  time of the
                 Outstanding  Contingent Liabilities under all Letters of Credit
                 then outstanding; and

          (iii)  its proportion of any amount paid out by the Issuing Bank under
                 a Letter of Credit and not yet reimbursed;

     "Available  Commitment  Termination Date" means save as otherwise  provided
     herein:

     (a)  in relation to the  Revolving  Credit  Facility,  the Final  Repayment
          Date;

     (b)  in relation to the Loan Note Facility, the Final Repayment Date; and

     (c)  in relation to the balance of the Acquisition Facility and the Interim
          Facility,  the  date  falling  ten  months  after  the  date  of  this
          Agreement;

     "Available  Facility  Amount"  means,  at any  time and in  respect  of any
     Facility,  the aggregate of the Available  Commitments  of all the Banks in
     respect of such Facility at such time;

     "Banking  Day" means a day (other  than  Saturday or Sunday) on which banks
     are open for business in London and in New York;

     "Banks"  means the original  banks listed in schedule 1 and includes  their
     successors in title, assignees and Substitutes;

     "Bidco" means TU Acquisitions PLC (company no. 3455523);


<PAGE>


     "Borrowed  Money"  includes  any  Indebtedness  of a person in  respect  of
     (without double counting):

     (a)  borrowed money of that person; or

     (b)  the principal amount  outstanding in respect of any debentures (within
          the meaning of Section 744 of the Act) of that person (notwithstanding
          that  the  same  are  or  were  issued  in  whole  or  in  part  for a
          consideration  other than cash)  which are not  beneficially  owned by
          another member of the Group; or

     (c)  the principal  amount raised by that person by acceptances  (not being
          an  acceptance  in  relation  to the  purchase or sale of goods in the
          ordinary  course of trading) or under any acceptance  credit opened by
          any bank or accepting house on behalf of that person; or

     (d)  receivables  sold or  discounted  to the  extent of any  potential  or
          contingent recourse save for recourse for disputed or ineligible debts
          or similar rights of recourse typical in a securitisation transaction;
          or

     (e)  the acquisition cost of any asset to the extent payable after the time
          of  acquisition  or  possession by the party liable where the deferred
          payment is not normal trade  credit,  is deferred for a period of more
          than 90 days or is arranged  primarily as a method of raising  finance
          or financing the  acquisition  of that asset from or through a bank or
          financial  institution,  except  that,  if  the  deferred  payment  is
          amortising,  only the amount  which  remains to be paid shall be taken
          into account; or

     (f)  the nominal  amount of any share capital and the  principal  amount of
          any  debentures  or  other  indebtedness  of  any  other  person,  the
          redemption or repayment of which is guaranteed or secured by or is the
          subject of an indemnity given by that person; or

     (g)  any fixed or minimum premium payable on final  redemption or repayment
          of any debenture, share capital or other borrowed moneys falling to be
          taken into account under the other paragraphs of this definition; or

     (h)  any net liability under any Derivative Transactions; or

     (i)  the capital element of any Finance Leases; or

     (j)  any amount raised under any other  transaction  having the  commercial
          effect of a borrowing or entered into  primarily as a means of raising
          finance;

     but does not include:

     (i)  items of the type described in paragraphs (a) to (j) (inclusive) above
          which are owed by one  wholly-owned  member  of the  Group to  another
          wholly-owned member of the Group; or

     (ii) Project Finance Borrowings of Project Finance Subsidiaries;

     "Borrowers"  means the Primary  Borrower as the borrower of the Acquisition
     Facility  and the  Interim  Facility,  and the  Revolving  Credit  Facility
     Borrowers, and "Borrower" means any one of them;


<PAGE>


     "Cancellation Date" means the earliest of:

     (a)  the date on which the Offer lapses or is withdrawn,  or is referred as
          provided for in paragraph c of Appendix 1 of the Press Release;

     (b)  the date falling six months after the Posting  Date,  if the Offer has
          not become or been  declared  unconditional  in all  respects  at that
          date; and

     (c)  the seventh day after the date of this Agreement, if the Offer has not
          by then been announced;

     "Capitalisation"  means at any time the aggregate of Adjusted Share Capital
     and Reserves and Consolidated Net Borrowings:

     "Certain Funds Period" means, in respect of the Acquisition  Facility,  the
     period from the date of this Agreement and ending on the earliest of:

     (a)  the Cancellation Date;

     (b)  the date falling  fifteen days after the Closing  Date, or if prior to
          such  fifteenth day the procedures  under sections  428-430 of the Act
          have been  implemented,  the date  which  they are  completed  and all
          payments thereunder have been made; and

     (c)  the date falling seven months after the date of this Agreement;

     "Change in Control" shall be deemed to have occurred if:

     (a)  any person or group of related  persons  (other than the  Parent,  any
          Subsidiary of the Parent,  or any pension,  savings or other  employee
          benefit  plan for the benefit of  employees  of the Parent  and/or any
          Subsidiary of the Parent) shall have acquired beneficial  ownership of
          more than 30% of the  outstanding  Voting Shares of the Parent (within
          the meaning of section 13(d) or 14(d) of the  Securities  Exchange Act
          of  1934  of the  United  States  of  America,  as  amended,  and  the
          applicable rules and regulations  thereunder);  provided that a Change
          in Control  shall not be deemed to have  occurred if such  acquisition
          has been approved,  prior to the Parent  Acquisition Date and the date
          on which  any  tender  offer  for  Voting  Shares  of the  Parent  was
          commenced, by a majority of the Disinterested Directors of the Parent;
          or

     (b)  during any period of 12 consecutive months, commencing before or after
          the date of this  Agreement,  individuals who on the first day of such
          period were directors of the Parent  (together with any replacement or
          additional  directors  who were  nominated or elected by a majority of
          directors  then in office) cease to constitute a majority of the board
          of directors of the Parent;

     "Charged  Assets"  means any  property,  assets  and/or  rights  over which
     security is granted and/or created under any of the Security Documents;

     "Closing  Date"  means the  effective  date on which  the Offer is  finally
     closed in accordance with the Code;


<PAGE>


     "Coalco"  means,  collectively,  Citizens  Power LLC,  a limited  liability
     company organised in the State of Delaware, Gold Fields Mining Corporation,
     a  Delaware   corporation,   Peabody   Holding  Company  Inc,  a  New  York
     corporation,  Darex Capital Inc, a company  incorporated in the Republic of
     Panama and Peabody Australia Ltd, a private limited company incorporated in
     England and Wales;

     "Coalco  Disposal  Agreement"  means the  agreement  for the sale of Coalco
     dated 2 March 1998 entered  into  between the Target and P&L Coal  Holdings
     Corporation, a Delaware corporation, in the agreed form;

     "Coal Proceeds" means (pound)1,313,950,000;

     "Code" means the City Code on Takeovers and Mergers;

     "Commitment" means, in relation to a Bank and in respect of any Facility at
     any  relevant  time,  the amount set  opposite  its name in relation to the
     relevant  Facility in schedule 1 and/or,  in the case of a Substitute,  the
     amount  novated in relation to the  relevant  Facility as  specified in the
     relevant  Substitution  Certificate,  as  reduced,  in  each  case,  by any
     relevant term of this Agreement;

     "Consolidated Net Borrowings"  means, at any time, in respect of the Group,
     the  aggregate  of the  Borrowed  Money of the Group,  as shown in the then
     latest  audited or  unaudited  consolidated  balance  sheet of the  Primary
     Borrower then most  recently  delivered to the Facility  Agent  pursuant to
     clause 10.1 (the "relevant  balance sheet"),  less the aggregate book value
     (as included in the relevant balance sheet) of:

     (a)  all Liquid Assets which are freely  transferable to the United Kingdom
          and which are owned by  wholly-owned  members  of the Group or (in the
          case  of the  Liquid  Assets  of a  member  of the  Group  which  is a
          partly-owned  Subsidiary)  the  proportion of the total amount for the
          time being of Liquid Assets owned by such member which  corresponds to
          the  proportion of the total nominal amount of the issued equity share
          capital  of  such  Subsidiary  or  subsidiary   undertaking  which  is
          beneficially  owned  directly or  indirectly  by the Primary  Borrower
          (exclusive of Liquid Assets  constituting or representing  obligations
          of any member or members of the Group); and

     (b)  in  the  case  of a  member  of  the  Group  which  is a  partly-owned
          Subsidiary,  the  proportion  of  total  amounts  for the  time  being
          outstanding of Borrowed Money owing by such Subsidiary  otherwise than
          to  the  Primary  Borrower  or  another  member  of  the  Group  which
          corresponds  to the  proportion  of the  total  nominal  amount of the
          issued equity share capital of such Subsidiary not beneficially  owned
          directly  or  indirectly  by  the  Primary   Borrower  (the  "Minority
          Proportion");

     but adding the  aggregate  book value (as included in the relevant  balance
     sheet) of the Minority Proportion of the total amount, if any, for the time
     being  outstanding of Borrowed Money owing to a partly-owned  Subsidiary by
     any other member of the Group,  and excluding  Borrowed  Money arising from
     the Derivatives Transactions provided for in clause 11.1(b)(x);

     "Contribution" means, in relation to a Bank, the principal amount of any or
     all (as the context  requires)  of the  Acquisition  Advances,  the Interim
     Advances  and/or the Revolving  Advances owing to such Bank at any relevant
     time;


<PAGE>


     "Debenture"  means a composite  guarantee  and debenture in the agreed form
     creating first fixed and floating charges over all its assets to be entered
     into by the Primary  Borrower,  Finco 2 and Bidco in favour of the Security
     Agent;

     "Default" means any Event of Default or any event or circumstance  which in
     the reasonable  opinion of the Majority Banks would reasonably be expected,
     upon the giving of a notice by the Facility  Agent and/or the expiry of the
     relevant  period and/or the fulfilment of any other condition (in each case
     as specified in clause 12.1), to constitute an Event of Default;

     "Derivatives Transaction" means a contract,  agreement or transaction which
     is:

     (a)  a rate swap, basis swap,  forward rate transaction,  equity (or equity
          or other  index) swap or option,  bond option,  interest  rate option,
          foreign  exchange  transaction,  cap, collar or floor,  currency swap,
          currency option or any other similar transaction; and/or

     (b)  any combination of such transactions,

     in each case, whether on-exchange or otherwise;

     "Director  General"  means the  person  appointed  from time to time by the
     Secretary  of State to hold office as the Director  General of  Electricity
     Supply for the purposes of the Electricity Act;

     "Director  General of Gas Supply" means the person  appointed  from time to
     time by the  Secretary of State to hold office as the  Director  General of
     Gas Supply for the purposes of the Gas Acts 1986 and 1995;

     "Disinterested Director" shall mean any member of the Board of Directors of
     the Parent who:

     (a)  is not  affiliated,  directly or indirectly,  with, or appointed by, a
          person  or group of  related  persons  (other  than  the  Parent,  any
          Subsidiary of the Parent,  or any pension,  savings or other  employee
          benefit  plan for the benefit of  employees  of the Parent  and/or any
          Subsidiary of the Parent)  acquiring the beneficial  ownership of more
          than 30% of the  outstanding  Voting Shares of the Parent  (within the
          meaning of section  13(d) or 14(d) of the  Securities  Exchange Act of
          1934 of the United States of America,  as amended,  and the applicable
          rules and regulations thereunder); and

     (b)  either was a member of the board of  directors  of the Parent prior to
          the Parent  Acquisition  Date or was  recommended  for  election  by a
          majority of the Disinterested  Directors in office prior to the Parent
          Acquisition Date;

     "Distribution  Business"  means  the  business  of  REC,  or any  successor
     undertaking  to that  business  within the Group,  in or  ancillary  to the
     distribution  (whether  for its own account or that of any other  party) of
     electricity  through  the  Group's  distribution  system and  includes  any
     business of providing connections to the Group's distribution system;

     "double  taxation  treaty" means any  convention  or agreement  between the
     government of the United Kingdom and any other government for the avoidance
     of double  taxation and the  prevention  of fiscal  evasion with respect to
     taxes on income and capital gains;

     "Drawdown Date" means the date on which an Advance is, or is to be, made;


<PAGE>


     "Drawdown Notice" means, in respect of a Facility,  a notice  substantially
     in the terms of the relevant Part of schedule 2;

     "EBITDA" means, in respect of any Test Period,  the total operating  profit
     of the Group for  continuing  operations,  acquisitions  (as a component of
     continuing  operations)  and  discontinued  operations  before  taking into
     account (a)  interest  payable  and  interest  receivable,  (b) all amounts
     provided  for   depreciation,   and   amortisation   of  goodwill  (c)  all
     extraordinary items, (d) all Taxes, (e) the deduction of any Offer costs in
     each case,  and (f) any share of  consolidated  profits or losses  which is
     attributable  to  Project  Finance  Subsidiaries,   for  that  Test  Period
     (calculated on a consolidated  basis  disregarding  any portion of any item
     taken  into  account  in that  calculation  which  is  attributable  to any
     minority  interests in  Subsidiaries,  other than the minority  interest in
     Finco  2) all as  determined  by  reference  to the most  recent  financial
     statements and compliance  certificates  delivered under clause 10.1(b), as
     adjusted pursuant to clause 10.3(c);

     "Electricity Act" means the Electricity Act 1989;

     "Enforcement  Date"  means  the date of the first  declaration  made by the
     Facility Agent pursuant to clause 12.2;

     "Environmental  Claim"  means  any  claim,  prosecution,   demand,  action,
     official  warning,  abatement,  penalty  or  other  order  (conditional  or
     otherwise)  arising as a result of or in connection with any  Environmental
     Matter  against  any  member  or former  member of the Group or  associated
     company and including any formal written  notification  or order  requiring
     compliance  with the terms of any  Environmental  Licence or  Environmental
     Law;

     "Environmental Laws" means all or any laws, statutes,  rules,  regulations,
     treaties,  directives,  by-laws,  statutory codes of practices,  circulars,
     guidance  notes,  orders,  notices and demands,  decisions of the courts or
     anything  like any of the foregoing of any  Government  Entity or any other
     body  whatsoever  in any  jurisdiction  or the European  Union  relating to
     Environmental  Matters and includes the  Environmental  Protection Act 1990
     and the Environment Act 1995;

     "Environmental Licence" means any permit, licence,  authorisation,  consent
     or other approval required at any time by any Environmental Law;

     "Environmental Matters" means:

     (a)  the  generation,   deposit,  disposal,  escape,  keeping,   treatment,
          transportation,   transmission,  handling,  importation,  exportation,
          processing,  collection,  sorting,  presence  or  manufacture  of  any
          "waste" (as defined in the Environmental Protection Act 1990 or in any
          other Environmental  Laws), or any Relevant Substance which gives rise
          to a  risk  of  causing  harm  to man or  any  other  living  organism
          supported by the  environment,  or damaging the  environment or public
          health or welfare;

     (b)  nuisance, noise, health and safety at work or elsewhere; and

     (c)  the pollution,  conservation  or protection of the  environment  (both
          natural and built) or of man or any living organisms  supported by the
          environment or any other matter  whatsoever  affecting the environment
          or any part of it;


<PAGE>


     "Escrow  Agreement"  means the escrow agreement made between the parties to
     the Coalco Disposal Agreement, in the agreed form;

     "Euro"  means the  single  currency  of  participating  member  states  (so
     described  in any  legislative  measures  of the  European  Council for the
     introduction of, changeover to or operation of a single or unified European
     currency);

     "Event of Default"  means any of the events or  circumstances  described in
     clause 12.1;

     "Excess Equity  Funding" means an amount (which shall not exceed the amount
     required to be subscribed in cash under paragraph (c) of Part B of Schedule
     3),  which shall be equal to the  aggregate  price  (which  would have been
     payable by Bidco to persons  accepting  the Offer in cash) of Target Shares
     acquired by Bidco pursuant to the Share  Alternative and in accordance with
     clause 6 of the Investment Agreement;

     "Expiry  Date" means the date stated in a Letter of Credit to be its expiry
     date or (if later) the latest date on which demand may be made under it;

     "Facilities"  means all or any (as the context requires) of the Acquisition
     Facility,  Interim  Facility,  Loan Note Facility and the Revolving  Credit
     Facility and (as the context requires) "Facility" means any of them;

     "Facility Agent" means Chase Manhattan  International Limited of 125 London
     Wall,  London EC2Y 5AJ or such other  person as may be  appointed  Facility
     Agent for the Banks pursuant to clause 17;

     "Facility Office" means, in relation to the Facility Agent,  Security Agent
     or any Bank,  the office  identified  in  Schedule 1 (or,  in the case of a
     Substitute,  at the end of the  Substitution  Certificate  to which it is a
     party as a  Substitute)  or such  other  office as it may from time to time
     select  provided  written  notice  thereof  has been given by the  Facility
     Agent, Security Agent or such Bank to the Primary Borrower;

     "Fee  Letters"  means the fee  letters  referred  to in clause  7.1, in the
     agreed form, and "Fee Letter" shall mean any one of them;

     "Fee  Payment  Date"  means  each of the  dates  falling  at three  monthly
     intervals after the date of this Agreement;

     "Final  Repayment  Date"  means the fifth  anniversary  of the date of this
     Agreement;

     "Finance Documents" means this Agreement,  any L/C-Related  Document,  each
     Drawdown  Notice,  each  Accession   Certificate,   the  Fee  Letters,  the
     Syndication Letter and the Security Documents;

     "Finance  Lease"  means any lease  under which a member of the Group is the
     lessee  which is or should be treated as a finance or capital  lease  under
     the  Appropriate  Accounting  Principles  (and  includes any hire  purchase
     contract or other arrangement which is or should be similarly treated);

     "Finance   Parties"  means  the  Facility  Agent,  the  Issuing  Bank,  the
     Arrangers,  the Banks, and the Security Agent and (as the context requires)
     "Finance Party" means any one of them;


<PAGE>


     "Finance Period" means the period from the date of this Agreement until the
     date on which the Facility Agent confirms that none of the Finance  Parties
     and none of the  Obligors  has any  actual  or  contingent  liabilities  or
     obligations under any of the Finance Documents;

     "Financial  Covenants" means the financial  undertakings in clauses 10.3(a)
     and (b);

     "Financial Definitions" means the definitions of Adjusted Share Capital and
     Reserves,  Capitalisation,  Consolidated Net Borrowings,  EBITDA,  Leverage
     Ratio, Net Interest Costs and Test Period;

     "Gas Framework  Agreement" means the agreement dated 1st March 1996 between
     British Gas Transco and Eastern Natural Gas (Retail) Limited;

     "Generation  Business"  means the  business of the Group in or ancillary to
     the generation of  electricity  (whether for its own account or that of any
     other party);

     "Government  Entity" means and includes  (whether  having a distinct  legal
     personality  or not)  any  supra-national,  national  or  local  government
     authority,  regulatory body, central bank, board,  commission,  department,
     division,  organ,  instrumentality,  court or agency  and any  association,
     organisation or institution of which any of the foregoing is a member of or
     whose  jurisdiction  any of the foregoing is subject or in whose activities
     any of the foregoing is a participant and (if the context  requires) which,
     in relation to  Environmental  Matters,  has  regulatory or  administrative
     authority under Environmental Laws;

     "Group" means the Primary  Borrower and all its  Subsidiaries  for the time
     being (except Project Finance  Subsidiaries)  save that where the reference
     to  "Group"  is  used  in  respect  of the  Financial  Definitions  used in
     calculating  the  Leverage  Ratio,  "Group"  shall mean Finco 2 and all its
     Subsidiaries for the time being (except Project Finance Subsidiaries);

     "Guarantees"  means any  guarantees  issued by members of the Target  Group
     under clause 10.6 or Part B of Schedule 3;

     "Indebtedness"  means  any  obligation  of a  person  for  the  payment  or
     repayment of money,  whether as principal or as surety and whether  present
     or future, actual or contingent;

     "Interest Payment Date" means the last day of an Interest Period;

     "Interest Period" means in relation to any Acquisition Advance, each period
     for the  calculation of interest in respect of such Advance  ascertained in
     accordance with clause 5.2 (or otherwise in this Agreement);

     "Interim  Advance" means each borrowing  under the Interim  Facility or (as
     the context requires) the principal amount of that borrowing outstanding at
     any relevant time;

     "Interim Facility" means the facility granted by the Banks under 2.1(b);

     "Investment  Agreement"  means the Investment  Agreement in the agreed form
     dated on or about  the  date of this  Agreement  between  the  Parent,  the
     Minority Shareholder, the Primary Borrower, Finco 2 and Bidco as amended by
     a Supplemental Agreement between the same parties dated 21 April 1998 and a
     further  supplemental  agreement between the same parties dated on or about
     18 May 1998;


<PAGE>


     "Issue" means with respect to any Letter of Credit,  to issue or extend the
     expiry of, or to renew or  increase  the amount of,  such Letter of Credit;
     and  the  terms  "Issued",  "Issuing"  and  "Issuance"  have  corresponding
     meanings;

     "Issue  Date" means in  relation  to a Letter of Credit,  the date on which
     that Letter of Credit was Issued,  or, as the  context  requires,  is to be
     Issued under clause 4.3 (Issue of Letters of Credit);

     "Issuing Bank" means The Chase Manhattan Bank or any alternative Bank which
     has been  notified to the Primary  Borrower  by the  Facility  Agent as the
     issuer  of any  Letter  of  Credit  in  accordance  with the  terms of this
     Agreement;

     "L/C-Related Documents" means each Letter of Credit, any Drawdown Notice or
     other application for a Letter of Credit and any other document relating to
     any Letter of Credit;

     "Letter of  Credit"  means a letter of credit or a bank  guarantee  (as the
     case may be)  Issued or to be Issued  by the  Issuing  Bank on the terms of
     this Agreement;

     "Leverage   Ratio"  means,  at  any  relevant  date,  the  percentage  that
     Consolidated Net Borrowings is of Capitalisation of the Group;

     "LIBOR" means, in relation to any Advance or unpaid sum, the rate per annum
     determined by the Facility Agent to be equal to:

     (a)  the  offered  rate (if any)  appearing  on page  3750 of the  Telerate
          screen,  or such other pages as may replace  such page of the Telerate
          screen,  which  displays  "BBA LIBOR" for deposits in Sterling and for
          the  specified  period  (where  "specified  period" means the Interest
          Period or Maturity  Period of such Advance or, as the case may be, the
          period for which  LIBOR  falls to be  determined  in  relation to such
          unpaid sum); or

     (b)  if the Telerate  screen is generally  inaccessible  or if the relevant
          rate does not appear on page 3750 or such  other  page as may  replace
          such  page  of the  Telerate  screen,  the  arithmetic  mean  (rounded
          upwards,  if not already such a multiple,  to four decimal  places) of
          the rates (as  notified  to the  Facility  Agent) at which each of the
          Reference Banks was offering to leading banks in the London inter-bank
          market deposits in Sterling and for the specified period,

     in each case at or about 11.00 am on the Quotation Date for such period;

     "Licence  Undertaking" means any and each undertaking or assurance given in
     connection  with the Offer by any one or more of the  Parent,  the  Primary
     Borrower,  Finco 2, Bidco or the Target or any  Affiliate of any of them to
     the Director  General,  the Director General of Gas Supply or the Secretary
     of State concerning the management and/or ownership of and/or other matters
     concerning  the  Licensee  once the Target has become a  Subsidiary  of the
     Primary Borrower;

     "Licences" means those licences granted by the Secretary of State:

     (a)  under  section  6 of the  Electricity  Act  authorising  the  relevant
          Licensee  to  carry  on  the  Distribution   Business  and  supply  of
          electricity and the Generation  Business and any activities  ancillary
          thereto;


<PAGE>


     (b)  under section 7 of the Gas Act 1986; or

     (c)  being replacement Licence or Licences granted from time to time to REC
          or any member of the Group (or, if more than one, the most recent such
          replacement), as amended and/or extended from time to time;

     "Licensee"  means REC or such other member of the Group which, at any time,
     is the licensee under a Licence;

     "Liquid  Assets"  means as at any  date,  the  aggregate  (calculated  on a
     consolidated basis) of:

     (a)  cash at bank and in hand in a  jurisdiction  where  such  amounts  are
          transferable out of that  jurisdiction and convertible into currencies
          dealt in on the London foreign exchange market;

     (b)  short term deposits and money at call;

     (c)  certificates  of deposit  the term of which has twelve  months or less
          remaining to maturity;

     (d)  gilts  the  term of which  has  twelve  months  or less  remaining  to
          maturity;

     (e)  deposits made with the  Commissioners  of Inland Revenue in respect of
          which  certificates  of tax deposit have been issued by Her  Majesty's
          Treasury;

     (f)  Sterling  bills of exchange  eligible  for  rediscount  at the Bank of
          England;

     (g)  any other negotiable  money market  instrument with a maximum maturity
          of 12 months or less excluding  commercial  paper issued by any person
          other than a state entity;

     provided that:

     (i)  where Liquid Assets are  deposited  subject to  restrictions  in order
          that  they are  held as  security  for a  liability  or can be  offset
          against a  liability,  such Liquid  Assets shall be taken into account
          only to the extent that such  liability  is taken into  account  under
          Consolidated Net Borrowings; and

     (ii) when the aggregate  amount of Liquid Assets  required to be taken into
          account for the purposes of this  definition on any  particular day is
          being ascertained,  any such Liquid Assets denominated or repayable or
          in respect  of which  monies  are  payable  in a  currency  other than
          Sterling  shall be  converted  for the  purposes  of  calculating  the
          Sterling  equivalent at the rate of exchange prevailing on that day in
          London by taking the  Facility  Agent's spot rates as of 11.00 a.m. on
          such date for the purchase of such currency with Sterling;

     "Loan Note  Alternative"  means the  option  made  available  to holders of
     Target Shares in the Offer Document to elect to receive Loan Notes in place
     of the cash consideration otherwise payable;

     "Loan Note  Collateral  Account"  means an account with the Security  Agent
     into which amounts drawn down under the Loan Note Facility which, by reason
     of the requirements for


<PAGE>


     Advances  to  be  of  a  minimum  amount,  are  greater  than  the  amounts
     immediately required to satisfy Loan Note Obligations, are to be paid;

     "Loan Note Facility" means a sub-limit of the Acquisition Facility equal to
     the  nominal  amount  of  Loan  Notes  issued  pursuant  to the  Loan  Note
     Alternative;

     "Loan Note Holders" means the holders from time to time of the Loan Notes;

     "Loan  Note   Instrument"   means  the  agreed  form  deed  or   instrument
     constituting  the Loan Notes  dated on or about the date of this  Agreement
     and any certificates evidencing issued Loan Notes;

     "Loan Note Obligations" means the obligations of Bidco (or any other person
     who Bidco may  substitute as principal  debtor in respect of the Loan Notes
     pursuant  to clause 7 of the Loan  Note  Instrument)  to make the  payments
     required to be made from time to time to the Loan Note Holders;

     "Loan  Notes"  means the loan  notes  issued  or to be issued to  accepting
     shareholders in the Target under the Loan Note Alternative;

     "Majority Banks" means subject to clause 23.2 at any relevant time Banks:

      (a)   the aggregate of whose  Contributions to all the Facilities  exceeds
            66 2/3 per cent.  of the Total  Contributions  in respect of all the
            Facilities; or

      (b)   (if no principal  amounts are outstanding  under this Agreement) the
            aggregate  of whose  Commitments  in respect  of all the  Facilities
            exceeds 66 2/3 per cent. of the Total  Commitments in respect of all
            the Facilities but so that if at such time the Total  Commitments in
            respect of any Facility  have been reduced to zero  references  to a
            Bank's Commitment in relation to such Facility shall be construed as
            amongst the Finance Parties (and not so as to give any rights to any
            other  person) as a reference to that Bank's  Commitment in relation
            to such Facility immediately prior to such reduction to zero;

     "Major Default" means, any one or more of the events set out below (whether
     or not caused by any reason  outside  the control of any  Relevant  Offeror
     Company):

     (a)  any Relevant  Offeror  Company is deemed  pursuant to  applicable  law
          unable  to pay its debts as they  fall due or  commences  negotiations
          with  its  creditors  with  a  view  to  a  general  re-scheduling  of
          indebtedness;

     (b)  any  administrative or other receiver or any manager is appointed over
          any  Relevant  Offeror  Company or any  material  part of the  assets,
          business and/or undertaking of any such company;

     (c)  a winding-up order or an  administration  order is made in relation to
          any Relevant Offeror Company;

     (d)  any Relevant Offeror Company  threatens to pass or passes a resolution
          for (or petitions for) its winding-up or administration;


<PAGE>


     (e)  any event occurs in any jurisdiction which corresponds with, or has an
          effect  equivalent  to,  any of (a) to (d)  above  in any  country  or
          territory in relation to a Relevant Offeror Company;

     (f)  an event falling within clause 12.1(w) occurs;

     (g)  a breach of any of clauses  10.4(a)(iii),  (iv), (v) or (vi), 10.4(b),
          10.4(c) or 10.4(d) occurs;

     (h)  any of the  representations  and  warranties  in clauses 9.1 or 9.2(a)
          being  incorrect  in any  material  respect in  relation to a Relevant
          Offeror Company; or

     (i)  any  other  Default  occurs  which is within  the power of a  Relevant
          Offeror  Company to remedy  within 7 days of  receiving  notice of the
          Default, but which it chooses not to remedy having been given at least
          7 days' prior written notice by the Facility Agent requesting it to do
          so;

     (j)  so far only as concerns an Offer Advance falling within paragraph (ii)
          of that definition,  any of the matters referred to in paragraphs (a),
          (b), (c), or (d) of this definition  occurs in relation to the Target,
          one of its Principal Subsidiaries or any Licensee;

     "Material Adverse Effect" is a reference to:

     (a)  something  having a  material  adverse  effect on the  ability  of any
          Borrower  to perform  its payment or  Financial  Covenant  obligations
          under any of the Finance Documents; or

     (b)  something  (other than the  Reservations)  which results in any of the
          Finance   Documents  not  being  legal,   valid  and  binding  on,  or
          enforceable  in  accordance  with  their  terms  against,  any  of the
          Obligors  in a manner and to an extent  reasonably  considered  by the
          Majority Banks to be materially adverse to the interests of the Banks;

     "Maturity Date" means, in relation to any Revolving  Advance,  the last day
     of the period for which that Revolving Advance is drawn down;

     "Maturity Period" means, in relation to any Revolving  Advance,  the period
     beginning on its Drawdown Date and ending on its Maturity Date;

     "Minority Shareholder" means TU Finance (No. 2) Holdings, Inc.;

     "month" or "months"  means a period  beginning  in one  calendar  month and
     ending  in  the  relevant  later  calendar  month  on the  day  numerically
     corresponding  to the  day of the  calendar  month  in  which  it  started,
     provided  that  (a) if the  period  started  on the last  Banking  Day in a
     calendar  month or if there is no such  numerically  corresponding  day, it
     shall end on the last Banking Day in such later  calendar  month and (b) if
     such numerically  corresponding  day is not a Banking Day, the period shall
     end on the next  following  Banking Day in such later calendar month but if
     there is no such Banking Day it shall end on the preceding  Banking Day and
     "monthly" shall be construed accordingly;

     "Net  Interest  Costs"  means,  in respect  of any  period,  the  aggregate
     accruing  during  such period  (whether or not paid or payable  within such
     period) of:


<PAGE>


     (a)  interest,  guarantee  and other  ancillary  facility  fees,  letter of
          credit  commission and fronting fees and  commitment  fees incurred by
          the Group  (disregarding  any  portion  attributable  to any  minority
          interests in Subsidiaries,  other than the minority  interest in Finco
          2)  (including  any agency  fees or  arrangement  fees or other  costs
          associated with the  Acquisition or the financing  thereof charged and
          amortised  under FRS4,  and including the interest  element of Finance
          Leases); and

     (b)  net amounts payable (or reduced by net amounts  receivable) in respect
          of interest rate hedging for the Facilities;

     and:

     (i)  deducting  credit  interest  receivable (on an accruals basis) in cash
          during such period which would be shown as interest  receivable in the
          relevant  accounts  delivered  under clause  10.1(b)(i)  and (ii),  as
          adjusted pursuant to clause 10.3(c); and

     (ii) excluding any nominal  imputed  interest  charge that arises only as a
          result of an accounting procedure;

     "Non Cash  Shares"  means  Target  Shares  acquired  pursuant  to the Share
     Alternative or the Loan Note Alternative;

     "Obligor" means a member of the Group party to a Finance Document;

     "Offer" means the offer  proposed to be made by and on behalf of Bidco,  in
     the agreed form and on terms and  conditions  set out in the Press Release,
     to acquire the whole of the  ordinary  share  capital  (whether in issue or
     falling to be allotted) of the Target not already  owned by Bidco,  as such
     offer  may from time to time be  amended,  added to,  revised,  renewed  or
     waived in accordance with clause 10.4;

     "Offer  Advance" means an Advance made or to be made under the  Acquisition
     Facility  or the  Interim  Facility  (i) for the  purpose  of  meeting  the
     obligations of Bidco in respect of the Offer or (ii) for financing payments
     by Bidco required under the procedures in sections 428- 430 of the Act;

     "Offer  Documents" means each of the documents  issued, or to be issued, by
     Bidco to the  shareholders of the Target in respect of the Offer (including
     the forms of acceptance), in the agreed form;

     "Outstanding  Contingent  Liabilities" at any time under a Letter of Credit
     means the face  value of that  Letter of Credit at that time in  accordance
     with its express provisions less:

     (a)  the aggregate  amount of any cash cover (not  including any cash cover
          lodged by any Bank) held in  relation to that Letter of Credit at that
          time; and

     (b)  (save to the  extent  that this is taken into  account in the  express
          provisions  of that Letter of Credit or unless the  context  otherwise
          requires)  the  aggregate  of all payments  made by the Issuing  Bank,
          pursuant  to demands  made under that  Letter of Credit on or prior to
          such time, for which it has been reimbursed by the relevant Borrower;


<PAGE>


     or such lesser amount as the Facility  Agent and the Issuing Bank may agree
     in good faith  represents  the maximum  liability  of the  Issuing  Bank in
     respect thereof;

     "Parent" means Texas Utilities Company whose principal place of business is
     at 1601 Bryan Street, Dallas, Texas, 15201;

     "Parent Acquisition Date" shall mean the date as of which a person or group
     of related persons first acquires more than 30% of the  outstanding  Voting
     Shares of the Parent  (within the meaning of section  13(d) or 14(d) of the
     Securities  Exchange  Act of 1934  of the  United  States  of  America,  as
     amended, and the applicable rules and regulations thereunder);

     "Permitted  Borrower"  means any of the Target and the other members of the
     Target Group, except the REC and any other member of the REC Group which is
     a Borrower under the stand-alone facility referred to in clause 24.5;

     "Permitted  Capital Market  Instrument"  means a capital market  instrument
     which is for a term  expiring  after  the Final  Repayment  Date and has no
     option on the part of the  holders of such  instrument  to request  earlier
     repayment  other  than on the  occurrence  of events of  default  which are
     reasonably standard for capital market instruments;

     "Permitted  Security  Interest"  means a Security  Interest  created by any
     member of the Target Group being any of the following, namely:

     (a)  any lien arising solely by operation of law in the ordinary  course of
          business and  securing  amounts not more than 90 days overdue or which
          are being  contested  with due diligence and in good faith,  and other
          liens agreed to in writing by the Majority Banks;

     (b)  any Security  Interest existing on or over the assets of any member of
          the  Target  Group as at the  Unconditional  Date (or  which  any such
          member is obliged to create  under a contract  existing at such date),
          but only if:

          (i)    the Security Interest was not created in contemplation of such
                 member becoming a member of the Group;

          (ii)   the maximum principal amount of the indebtedness secured by the
                 Security  Interest  is not  increased  after the  Unconditional
                 Date; and

          (iii)  any such Security Interest which is created between the date of
                 this Agreement and the Unconditional  Date is discharged within
                 180 days after the  Unconditional  Date  (unless  the  Security
                 Interest was created  pursuant to an obligation  existing as at
                 the date of this Agreement);

     (c)  any Security Interest existing on or over the assets of such member at
          the time it  becomes a member of the Target  Group  after the date the
          Target becomes a member of the Group, but only if:

          (i)    the Security  Interest was not created in  contemplation of the
                 company becoming a member of the Target Group; and

          (ii)   the maximum principal amount of the indebtedness secured by the
                 Security Interest is not subsequently increased;


<PAGE>

          (iii)  such Security  Interest is discharged within 180 days after the
                 date such member became a member of the Group;

     (d)  any  Security  Interest  existing  on or over an asset  acquired  by a
          member of the Target Group after the date of this Agreement,  but only
          if:

          (i)    the Security  Interest was not created in  contemplation of the
                 acquisition; and

          (ii)   the maximum principal amount of the indebtedness secured by the
                 Security Interest is not subsequently increased;

          (iii)  such Security  Interest is discharged within 180 days after the
                 date such member became a member of the Group;

     (e)  any  Security  Interest  over any  asset  acquired  by a member of the
          Target  Group  after  the  date  of this  Agreement  as  security  for
          Indebtedness  incurred to finance or refinance (within 6 months of the
          acquisition) all or part of the  consideration  for the acquisition of
          that  asset,  provided  that  the  Indebtedness  secured  by  Security
          Interests  under this subclause (e) shall not exceed  (pound)1,000,000
          in aggregate at any time;

     (f)  any Security Interest arising over

          (i)    accounts with any bank or financial  institution as a result of
                 netting and set-off  arrangements  existing with such person to
                 the  extent  that  such  arrangements  are  in  support  of net
                 overdraft facilities extended by such person or

          (ii)   documents of title to goods and insurances  under trade finance
                 facilities  provided to any member of the Target  Group as part
                 of the Target Group's normal day to day banking business;

     (g)  any Security  Interest over goods  purchased in the ordinary course of
          business arising by virtue of the supplier's retention of title clause
          in its standard conditions of supply to secure only the purchase price
          of the goods;

     (h)  any  Security  Interest  created by a Project  Finance  Subsidiary  to
          secure  Project  Finance  Borrowings,  or over  the  shares  or  other
          investment  in a  Project  Finance  Subsidiary  provided  that  it  is
          entirely   without   recourse  to  any  member  of  the  Group  beyond
          enforcement of such Security Interest;

     (i)  so far as they relate to netting,  settlement or pooling  arrangements
          or as required by the regulatory  framework or  arrangements  in which
          the relevant  business  operates,  any Security Interest arising under
          the Relevant Arrangements;

     (j)  any  Security   Interest   arising  under  the  terms  of  Derivatives
          Transactions  or as a result of trading of shares or other  securities
          where such  Security  Interest  arises under the rules of the relevant
          exchange or clearing system;

     (k)  (i)  any  Security  Interest  constituted  by a  Finance  Lease if the
               capital value of such Finance Lease would be permitted under this
               Agreement as Borrowed Money under clause 11.1(b)


<PAGE>


          (ii) any Security  Interest  constituted by the grant to any person or
               persons of any lease or leases  with  respect to the King's  Lynn
               generating  facility owned by a member of the Group Provided that
               none of the parties to any such lease or related  transaction  is
               the Parent or an Affiliate of the Parent  (other than a member of
               the Group); and

     (l)  any Security  Interests (other than any Security Interest permitted by
          sub-paragraphs  (a) to (k) above) securing  indebtedness not exceeding
          in  aggregate  (pound)100,000,000,   or  in  respect  of  indebtedness
          incurred  at a  time  when  the  Leverage  Ratio  is  less  than  60%,
          (pound)150,000,000, or its equivalent in other currencies at any time;

     "Pooling  and  Settlement  Agreement"  means  the  pooling  and  settlement
     agreement  dated 30 March  1990  made  between  REC and the  National  Grid
     Company  Plc and  others  setting  out the  rules  and  procedures  for the
     operation of an  electricity  trading  pool and of a  settlement  system in
     England and Wales;

     "Posting Date" means the date on which the Offer is posted;

     "Press Release" means the press announcement in the agreed form proposed to
     be released in connection with the Offer;

     "Principal Subsidiary" means:

     (a)  any  member of the Group  whose  unconsolidated  net assets or pre-tax
          profit,  at any time  after  the  date of this  Agreement,  equals  or
          exceeds 10 per cent of the net  assets or pre-tax  profit of the Group
          at that time, and for the purpose of the above:

          (i)  the  net  assets  or  pre-tax   profit  of  the  Group  shall  be
               ascertained  by  reference  to the  latest  audited  consolidated
               accounts of the Group or the latest management accounts delivered
               to the Facility Agent in accordance with clause 10.1(b)(ii); and

          (ii) the net  assets or  pre-tax  profit of any such  member  shall be
               ascertained by reference to the latest  audited  accounts of that
               Subsidiary  or the latest  management  accounts  delivered to the
               Facility Agent in accordance with clause 10.1(b)(ii),

          for the purposes of the above, "net assets" in respect of the Group or
          any such member means the fixed assets and current assets of the Group
          or that member (as the case may be) but excluding  investments  in any
          Subsidiary and any loan to another member of the Group; or

     (b)  a member of the Group to which has been  transferred  (whether  by one
          transaction or a series of transactions,  related or not) the whole or
          a material part of the business, undertaking or assets of a Subsidiary
          which  immediately  prior  to  those   transactions  was  a  Principal
          Subsidiary;

     (c)  any  member  of the  Group  which is a holding  company,  directly  or
          indirectly, of a Principal Subsidiary;


<PAGE>


     Provided  that if at any time members of the Group which are not  Principal
     Subsidiaries have in aggregate unconsolidated net assets or pre-tax profits
     at any time equal to or exceeding 20% of the net assets or pre-tax  profits
     of the Group at that time,  one or more of such other  members of the Group
     (beginning  with the  companies  with the  greatest  net  assets or pre-tax
     profits as the case may be) shall also be treated as Principal Subsidiaries
     until the 20%  threshold  for members of the Group which are not  Principal
     Subsidiaries is no longer exceeded;

     "Project Finance  Borrowings"  means any Indebtedness of a type referred to
     in any of paragraphs (a) to (j) of the definition of "Borrowed Money" which
     is  owed  otherwise  than  to a  member  of  the  Group  and  finances  the
     acquisition,  construction,  development,  ownership and/or operation of an
     asset:

     (a)  which is incurred by a Project Finance Subsidiary; and

     (b)  in respect of which the person or persons to whom such Borrowed  Money
          is or may be owed by the relevant  Project  Finance  Subsidiary has or
          have  no  recourse  whatsoever  to any  member  of the  Group  for the
          repayment  thereof  (save  for  enforcement  of a  Permitted  Security
          Interest under (h) of the definition thereof);

     "Project Finance Subsidiary" means any Subsidiary of the Target:

     (a)  which is a company  that is either (i) not an existing  Subsidiary  of
          the  Target  as  at  the  date  of  this  Agreement  or  (ii)  has  no
          Subsidiaries  of its own (other  than  Subsidiaries  which are Project
          Finance  Subsidiaries),  and whose  principal  assets and business are
          constituted  by  the  ownership,   acquisition,   development   and/or
          operation of an asset or assets whether directly or indirectly;

     (b)  none of  whose  Borrowed  Money  or  Indebtedness  in  respect  of the
          financing of the ownership, acquisition,  development and/or operation
          of such  assets,  or other  arrangements,  benefits  from any recourse
          whatsoever to any other member of the Group  (including as shareholder
          in an unlimited  company) in respect of the repayment thereof (save as
          permitted by clause 11.1(g)),  and none of whose activities,  business
          or undertaking  will under any applicable law or regulation  result in
          any member of the Group having any material risk of a liability  which
          might reasonably be expected to have a Material Adverse Effect; and

     (c)  which has been  designated  as such by the  Facility  Agent  after the
          Primary  Borrower  has  given  written  notice to the  Facility  Agent
          requiring such designation to be made;

     or any Subsidiary of a company falling within (a), (b) and (c) above;

     "Proportion"  means,  in relation to a Bank,  the  proportion  borne by its
     Commitment to the Total  Commitments (or, if the Total Commitments are then
     zero, by its Commitment to the Total Commitments immediately prior to their
     reduction to zero);

     "Qualifying Bank" means:

     (a)  a person which:

          (i)    is a bank within the meaning of Section  840A of the Income and
                 Corporation Taxes Act 1988;


<PAGE>


          (ii)   will be beneficially  entitled to any interest to be paid to it
                 (as a Bank) under this Agreement; and

          (iii)  is  within  the  charge to United  Kingdom  corporation  tax as
                 respects such interest,

          except  that,  if  Section  349 or  Section  840A  of the  Income  and
          Corporation  Taxes  Act  1988  is  repealed,   modified,  extended  or
          re-enacted,  the Facility  Agent may at any time and from time to time
          (after  consultation  with the Primary  Borrower  and the Banks) amend
          this  paragraph  (a)  in  such  manner  as  it  may  determine  acting
          reasonably to be appropriate by giving notice of the amended paragraph
          (a) to the Primary  Borrower and the Banks and, so far as  practicable
          to put the Banks in the same  position  as they would  otherwise  have
          been in; or

     (b)  a Treaty Lender;

     "Quarter" means each  three-month  period ending on the last Banking Day in
     March, June, September and December in each year;

     "Quarter Date" means 31 March, 30 June, 30 September and 31 December;

     "Quotation Date" means, in relation to an Interest Period,  Maturity Period
     or other  period  for which  LIBOR is to be  determined,  the date on which
     quotations  would  customarily  be provided by leading  banks in the London
     Interbank  Market for deposits in Sterling for delivery on the first day of
     that Interest Period, Maturity Period or other period;

     "REC" means Eastern Electricity plc (company no. 2366906);

     "REC Group" means REC and its Subsidiaries  (except for any Project Finance
     Subsidiaries);

     "Receiver" has the meaning given to that term in the Debenture;

     "Recovering Bank" has the meaning given to that term in clause 15.2;

     "Reference  Banks" means The Chase  Manhattan  Bank and any two other banks
     selected by the  Facility  Agent with the  consent of the Primary  Borrower
     (which is not to be unreasonably  withheld),  or if any of them cease to so
     act, such other bank or banks  selected by the Facility Agent in accordance
     with clause 23.7;

     "Related  Persons"  each of the Facility  Agent,  the Security  Agent,  the
     Issuing Bank, any successor Facility Agent,  Security Agent or Issuing Bank
     arising under clause 17, the Arrangers and the Underwriters,  together with
     their respective Affiliates and the officers, directors, employees, agents,
     trustees and attorneys-in-fact of such persons and Affiliates;

     "Relevant  Arrangements" means any arrangements under or in connection with
     any  pooling  and  settlement  or onshore  transportation  arrangements  or
     agreements of the electricity  distribution,  supply or generation,  or gas
     transportation,  distribution  and/or  supply  industry  or energy  trading
     (including (but without limitation) the Pooling and Settlement Agreement or
     the Gas Framework  Agreement) or  telecommunications  or water  industry or
     energy or energy-


<PAGE>


     related  business or in connection  with any  transactions  or arrangements
     entered into in the ordinary  course of its business in a form usual in any
     such industry or business;

     "Relevant  Company" means any of the Primary Borrower,  the other Revolving
     Credit   Borrowers,   Finco  2,  Bidco,   the  Target  and  the   Principal
     Subsidiaries;

     "Relevant Offeror Company" means any of the Primary  Borrower,  Finco 2 and
     Bidco;

     "Relevant Substance" means any radioactive emissions, radiation, noise, any
     natural or artificial  substance  whatsoever  (whether in a solid or liquid
     form or in the form of a gas or vapour and whether alone or in  combination
     with any other  substance) and includes,  without  limitation,  "waste" (as
     defined  in the  Environmental  Protection  Act  1990 or in any  equivalent
     legislation or regulation in force in any  jurisdiction in which any member
     of the Group is  incorporated,  owns  property  or assets or carries on any
     business or operations);

     "Reservations"  means (a) the  principle  that  equitable  remedies  may be
     granted or refused at the  discretion of the court,  (b) the  limitation on
     enforcement  by  laws  of  general  application   relating  to  insolvency,
     liquidation,  reorganisation, court schemes or administration, (c) the time
     barring of claims  under the  Limitation  Act 1980 and (d) the  possibility
     that  an  undertaking  to  assume  liability  for or to  indemnify  against
     non-payment of UK stamp duty may be void;

     "Revolving  Advance"  means each  borrowing made or to be made by way of an
     advance under the Revolving  Credit  Facility or (as the context  requires)
     the principal amount of that borrowing outstanding at any relevant time;

     "Revolving  Credit Facility" means the facility granted by the Banks to the
     Borrowers in accordance with clause 2.1(b);

     "Revolving  Credit Facility  Borrowers"  means the Primary Borrower and any
     Permitted  Borrower which accedes to this  Agreement as a Revolving  Credit
     Facility Borrower pursuant to clause 24;

     "Secretary  of State"  means the  Secretary of State for Trade and Industry
     from  time to time  or such  other  person  as may for the  time  being  be
     fulfilling  the functions of the  Secretary of State under the  Electricity
     Act or the Gas Acts;

     "Security Agent" means Chase Manhattan  International Limited or such other
     person as may be appointed security agent and trustee pursuant to clause 17
     of this Agreement;

     "Security Documents" means the Debenture, the Guarantees,  the Share Charge
     and any further  guarantees or security provided to the Security Agent from
     time to time under or in connection with this Agreement;

     "Security Interest" means any mortgage,  pledge, lien, charge,  assignment,
     right of set-off,  arrangement  for  retention of title,  hypothecation  or
     security interest,  or any other agreement or arrangement having the effect
     of conferring security or a security interest,  or any agreement to sell or
     otherwise  dispose of any asset on terms  whereby such asset is acquired or
     reacquired by any member of the Group;


<PAGE>


     "Share  Alternative"  means the limited option made available to holders of
     Target  Shares in the Offer  Documents to elect to receive  common stock of
     the Parent in place of the cash consideration otherwise payable;

     "Share  Charge"  means the share  charge,  in the agreed form,  dated on or
     about the date hereof granted by the Minority  Shareholder in favour of the
     Security Agent over its shares in Finco 2;

     "Share Value" means,  at any time until Bidco has acquired  shares carrying
     the  right to vote 75% of the  votes of each  class of  shares at a general
     meeting,  the value of the Target Shares acquired pursuant to the Offer and
     effectively  charged in favour of the  Security  Agent,  which shall at all
     times be  deemed  to be  calculated  by  reference  to the  price per share
     contained in the Offer;

     "Spot Rate" means,  in respect of any sum denominated in any currency other
     than Sterling at any date,  the Facility  Agent's spot rate of exchange for
     purchase of that sum in that currency in the London foreign exchange market
     with  Sterling at or about  11.00 am on that date for  delivery of such sum
     two Banking Days thereafter;

     "Sterling" and "(pound)" mean the lawful currency for the time being of the
     United  Kingdom  and in  respect  of all  payments  to be made  under  this
     Agreement  in Sterling  mean  immediately  available,  freely  transferable
     cleared funds;

     "Sterling Amount" means in respect of Outstanding  Contingent  Liabilities,
     the sum of the amount in Sterling of the Outstanding Contingent Liabilities
     under Letters of Credit  denominated in Sterling and the amount of Sterling
     required to purchase  the  currency  amount of the  Outstanding  Contingent
     Liabilities  under Letters of Credit  denominated in each other currency at
     the  Spot  Rate at that  time and so that  such  Sterling  Amount  shall be
     recalculated by the Facility Agent:

     (a)  in any event, on every Quarter Date; and

     (b)  on each date on which the Majority Banks request the Facility Agent to
          do so in  accordance  with the  provisions  of clause  4.11  (Currency
          Fluctuations),

     and  the   recalculated   amount  shall   thereupon   and  until  the  next
     recalculation  required by this Agreement constitute the Sterling Amount of
     Outstanding  Contingent  Liabilities  under any  Letters  of Credit for all
     purposes of this Agreement;

     "Subsidiary" means:

     (a)  a subsidiary within the meaning of section 736 of the Act; and

     (b)  for the  purposes of the  definition  of  "Affiliate"  and "Group" and
          clauses  10.1(a),  10.3,  20.7  and  schedule  6  only,  a  subsidiary
          undertaking within the meaning of section 258 of the Act;

     "Substitute" has the meaning given to that term in clause 16.3;

     "Substitution  Certificate" means a certificate  substantially in the terms
     of schedule 5;


<PAGE>


     "Syndication  Date"  means  the date as  determined  by the  Arrangers  and
     notified  by them to the  Primary  Borrower  on  which  syndication  of the
     Facilities has been fully completed;

     "Syndication  Letter" means the  syndication  letter from the Arrangers and
     the Underwriters to the Primary Borrower dated on or about the date of this
     Agreement, in the agreed form;

     "Takeover  Operative  Date"  means  the date  falling  120 days  after  the
     Unconditional Date;

     "Target" means The Energy Group PLC (company no. 3257256);

     "Target  Group"  means the  Target and its  Subsidiaries  from time to time
     (except any Project Finance Subsidiary);

     "Target PES Subsidiaries"  means any Subsidiary of the Target which holds a
     Licence;

     "Target  Shares" means the issued and to be issued shares in the capital of
     the Target  (including the Target's American  Depositary  Shares) which are
     the subject of the Offer;

     "Taxes"  includes all present and future taxes,  levies,  imposts,  duties,
     fees or  charges  of  whatever  nature  including  without  limitation  any
     interest or penalties  payable in  connection  with any failure or delay in
     paying any of the same and "Taxation" shall be construed accordingly;

     "Test Period" means:

     (a)  each  twelve-month  period  ending  on the  last  day of each  Quarter
          beginning with the last day of the second complete  Quarter  following
          the Unconditional Date; and

     (b)  each Accounting  Reference Period of the Primary Borrower ending on 31
          December in each year;

     "Third Amendment Agreement" means the agreement between the parties to this
     Agreement  dated  on or  about  18 May 1998  amending  and  restating  this
     Agreement;

     "Total  Commitments"  means,  in respect of a Facility  or (as the  context
     requires)  the  Facilities  at any  relevant  time,  and save as  otherwise
     provided  herein,  the total of the Commitments of all the Banks in respect
     of such Facility or Facilities (as appropriate) at such time;

     "Total  Contributions" means, in respect of any Facility or (as the context
     requires)  the   Facilities  at  any  relevant   time,  the  total  of  the
     Contributions  of all the Banks in respect of such  Facility or  Facilities
     (as appropriate) at such time;

     "Treaty  Lender"  means a person which is resident (as such term is defined
     in the  appropriate  double  taxation  treaty) in a country  with which the
     United  Kingdom  has a double  taxation  treaty  giving  residents  of that
     country  complete  exemption  from the  imposition  of any  withholding  or
     deduction for or on account of United  Kingdom Taxes on interest (and which
     does not carry on  business  in the  United  Kingdom  through  a  permanent
     establishment  with which the Indebtedness  under this Agreement in respect
     of which the interest is paid is effectively connected);

     "Trust  Period" means the period ending on the last day of the period of 80
     years from the date of this Agreement, which period (and no other) shall be
     the applicable perpetuity period;


<PAGE>


     "Trust  Property" means all or any part of the rights,  titles,  interests,
     assets and income that may now or hereafter be mortgaged, charged, assigned
     or granted or the subject of a Security  Interest in favour of the Security
     Agent or the Finance  Parties by or pursuant to the Finance  Documents  and
     the proceeds of any such security;

     "Unconditional  Date"  means  the date the  Offer  becomes  or is  declared
     unconditional in all respects;

     "Utilisation"  means the  making of an  Advance or the Issue of a Letter of
     Credit; and

     "Voting Shares" means  outstanding  shares of capital stock of any class of
     the Parent entitled to vote in the election of directors,  excluding shares
     entitled so to vote only upon the happening of some contingency.

1.3  Headings

     Clause  headings and the table of contents are inserted for  convenience of
     reference  only  and  shall  be  ignored  in  the  interpretation  of  this
     Agreement.

1.4  Construction of certain terms

     In this Agreement, unless the context otherwise requires:

     (a)  references  to clauses and schedules are to be construed as references
          to the clauses of, and schedules to, this  Agreement and references to
          this Agreement include its schedules;

     (b)  references to (or to any specified provision of) this Agreement or any
          other  document  shall be construed as  references  to this  Agreement
          (including any Accession  Certificate and  Substitution  Certificate),
          that  provision or that document as in force for the time being and as
          from time to time amended,  novated or supplemented in accordance with
          its terms,  or, as the case may be, with the agreement of the relevant
          parties and (where such consent is, by the terms of this  Agreement or
          the relevant document,  required to be obtained as a condition to such
          amendment  being  permitted) the prior written consent of the Facility
          Agent;

     (c)  references to a "regulation" include any present or future regulation,
          rule,  directive,  requirement,  request or guideline  (whether or not
          having the force of law) of any Government Entity;

     (d)  references  to  an  "authorisation"  mean  and  include  any  consent,
          authorisation, licence, approval and permit;

     (e)  words importing the plural shall include the singular and vice versa;

     (f)  references to a time of day are to London time;

     (g)  references to a "person" shall be construed as including references to
          an individual,  firm,  company,  corporation,  unincorporated  body of
          persons or any State or any of its agencies;


<PAGE>


     (h)  references   to  "assets"   include  all  or  part  of  any  business,
          undertaking, real property, personal property, shareholdings,  assets,
          revenues,   uncalled   capital  and  any  rights  (whether  actual  or
          contingent, present or future) to receive, or require delivery of, any
          of the foregoing;

     (i)  references to the  "equivalent" of an amount specified in a particular
          currency (the  "specified  currency  amount")  shall be construed as a
          reference to the amount of the other  relevant  currency  which can be
          purchased  with the specified  currency  amount in the London  foreign
          exchange  market  at or  about  11  a.m.  on  the  day  on  which  the
          calculation  falls  to be made  for  spot  delivery,  as  conclusively
          determined by the Facility  Agent (with the relevant  exchange rate of
          any such purchase being the "spot rate");

     (j)  references to any enactment  shall be deemed to include  references to
          such enactment as re-enacted, amended or extended;

     (k)  references  to  documents  being in the "agreed  form" mean  documents
          initialled  by both Lovell  White  Durrant (on behalf of the  Facility
          Agent and the Arrangers) and Norton Rose (on behalf of the Borrowers),
          or otherwise in the form required by the Facility Agent;

     (l)  references to "VAT" are to be construed as including references to any
          similar Tax;

     (m)  "including" and "in particular"  shall not be construed  restrictively
          but shall mean "including,  without prejudice to the generality of the
          foregoing" and "in particular, but without prejudice to the generality
          of the foregoing" respectively;

     (n)  obligations  of more than one Obligor  under this  Agreement are joint
          and several;

     (o)  references to documents being "certified copies" mean copies certified
          as being true,  complete and up-to-date copies as of a date no earlier
          than the date of this Agreement by an officer of the Primary  Borrower
          who is at such  time  duly  authorised  to  execute  or  certify  such
          documents on behalf of the Primary Borrower;

     (p)  "arms length  terms" means on terms which are fair and  reasonable  to
          the relevant member of the Group and no more or less favourable to the
          other  party to the  relevant  transaction  than could  reasonably  be
          expected  to be  obtained in a  comparable  transaction  with a person
          unconnected with the Group;

     (q)  references to "holding company", save as otherwise defined, shall bear
          the same  meaning  as in section  736 of the Act,  as if  extended  to
          bodies corporate wherever incorporated;

     (r)  a Letter of Credit being "repaid" or "prepaid" is effected by:

          (i)    providing  the Issuing  Bank with cash cover in the currency in
                 which that Letter of Credit is denominated;

          (ii)   reducing (in  accordance  with the terms of this  Agreement and
                 the relevant  Letter of Credit) the amount that may be demanded
                 under that  Letter of Credit (or by such  amount  automatically
                 reducing in accordance with the terms of the relevant Letter of
                 Credit); or


<PAGE>


          (iii)  cancelling  that Letter of Credit by returning  the original to
                 the Issuing Bank  together with written  confirmation  (in form
                 and  substance  satisfactory  to the  Issuing  Bank)  from  the
                 beneficiary  that the  Issuing  Bank has no  further  liability
                 under that Letter of Credit.

2.   THE COMMITMENTS

2.1  The Facilities

     The Banks,  relying  upon each of the  representations  and  warranties  in
     clause 9 and upon  and  subject  to the  conditions  hereof,  agree to make
     available:

     (a)  to the Primary Borrower, the Acquisition Facility in the principal sum
          of (pound)1,775,000,000;

     (b)  to the Primary Borrower,  the Interim Facility in the principal sum of
          (pound)1,150,000,000;

     (c)  to the Revolving  Credit  Facility  Borrowers,  the  Revolving  Credit
          Facility in the principal  sum of  (pound)700,000,000  (including  the
          stand-alone facility for REC provided for in clause 24.5).

     The  obligations of each Bank under this Agreement  shall be to participate
     in each Advance in the  proportion  which its  Commitment in respect of the
     relevant Facility bears to the Total Commitments in respect of the relevant
     Facility but so that no Bank shall be under any  obligation to  participate
     in an  Advance  if and to the  extent  its  Commitment  in  respect  of the
     relevant Facility would thereby be exceeded.

2.2  Finance Parties' obligations several

     The obligations of each Finance Party under this Agreement are several; the
     failure of any Finance Party to perform such obligations  shall not relieve
     any  other  Finance  Party  or any  Borrower  of any  of  their  respective
     obligations or liabilities under this Agreement nor shall any Finance Party
     be  responsible  for the  obligations of any other Finance Party under this
     Agreement.

2.3  Finance Parties' interests several

     Notwithstanding  any other term of this Agreement (but without prejudice to
     the  provisions of this  Agreement  relating to or requiring  action by the
     Majority  Banks) the  interests of the Finance  Parties are several and the
     amount  due to each of the  Finance  Parties  (for  its own  account)  is a
     separate and independent debt.  Without prejudice to any other provision of
     this  Agreement  (including  any  requirement  for action to be approved or
     instigated by, or with the consent or approval of, the Majority Banks) each
     of the  Finance  Parties  shall have the right to protect  and  enforce its
     rights to  amounts  which  have  become  due and  payable  to it under this
     Agreement  and it shall not be necessary  for any other Finance Party to be
     joined as an additional party in any proceedings for this purpose.


<PAGE>


3.   THE CONDITIONS

3.1  Documents and evidence

     Subject  to  clause  4.2(d),   no   Utilisation   may  be  made  until  the
     Unconditional  Date and until the Facility  Agent,  or its duly  authorised
     representative, shall have received the documents and evidence specified in
     Parts  A  and  B of  Schedule  3,  in  each  case  in  form  and  substance
     satisfactory to the Facility Agent which the Facility Agent shall,  once it
     is so satisfied, confirm in writing to the Primary Borrower.

3.2  General conditions precedent

     Subject to clause 3.3, in respect of each Facility,  the obligation of each
     Bank to contribute to a  Utilisation  is subject to the further  conditions
     that at the date of each Drawdown Notice and on each Drawdown Date:

     (a)  the applicable  representations and warranties set out in clause 9 are
          true and correct on and as of each such date as if each were made with
          respect to the facts and circumstances existing at such date; and

     (b)  no Default  shall have occurred and be continuing or would result from
          the making of such Utilisation,

     but this  clause  3.2(b)  shall not  prevent  the  rollover  of an existing
     Revolving  Credit Advance  (without  increasing  the amount  thereof) for a
     Maturity  Period  of no more  than one  month at any time  when no Event of
     Default has occurred and is continuing.

3.3  Conditions relating to Offer Advances during Certain Funds Period

     To ensure that the Primary  Borrower has resources  available to advance to
     Finco 2 funds to  on-lend  to Bidco  funds to enable  Bidco to  fulfil  its
     obligations  in respect of the Offer,  the Banks agree that, in relation to
     each Offer Advance  requested  and to be advanced  during the Certain Funds
     Period,  clause 3.2 shall not be applicable  and subject to satisfying  the
     requirements of clause 3.1 and to providing the appropriate Drawdown Notice
     at the appropriate time in accordance with this Agreement, the only further
     condition  to the  obligations  of the Banks to make such Offer  Advance is
     that at the date of each Drawdown Notice and on each Drawdown Date no Major
     Default  shall have  occurred  and be  continuing  or would result from the
     making of such Offer Advance.

     It is further confirmed, for the avoidance of doubt, that the commitment in
     this clause 3.3 operates  notwithstanding  any contrary  provisions  of the
     Finance  Documents  and that no Bank  shall be  entitled  to  rescind  this
     Agreement or to fail to contribute to an Offer Advance where the conditions
     in clause 3.3 are fulfilled.

3.4  Waiver of conditions precedent

     The  conditions  specified  in this  clause 3 are  inserted  solely for the
     benefit of the Banks and may be waived on their  behalf in whole or in part
     and  with  or  without  conditions  by the  Facility  Agent  acting  on the
     instructions of the Majority Banks in respect of any Advance.


<PAGE>


4.   ADVANCES UNDER THE FACILITIES

4.1  The Acquisition Facility, Interim Facility and Loan Note Facility

     (a)  Drawdown

          Subject to the terms and  conditions  of this  Agreement,  Acquisition
          Advances and Interim  Advances  shall be made to the Primary  Borrower
          following  receipt by the Facility Agent from the Primary  Borrower of
          an appropriately  completed Drawdown Notice relating to the respective
          Facility  not later than 11 a.m.  two Banking Days before the proposed
          Drawdown  Date  or in the  case  of the  first  Drawdown  Date  of the
          Acquisition  Facility  only, not later than 9.30 a.m. on such Drawdown
          Date.

     (b)  Amount

          Each  Drawdown  Notice  delivered  pursuant to clause  4.1(a) shall be
          irrevocable and specify:

          (i)    the proposed  Drawdown Date, which shall be a Banking Day prior
                 to the relevant Available Commitment Termination Date;

          (ii)   the  amount  of  the  proposed  Advance,   which  shall  be  of
                 (pound)10,000,000  (or any  larger  sum  which  is an  integral
                 multiple  of  (pound)5,000,000)  or,  if  less,  the  Available
                 Facility Amount in respect of the  Acquisition  Facility or the
                 Interim Facility (as the case may be) on the relevant  Drawdown
                 Date;

          (iii)  subject to clause 4.1(c), the first Interest Period relating to
                 the  Advance  in  question  (in  the  case  of the  Acquisition
                 Facility,  (being a period of 1, 2, 3 or 6 months or such other
                 duration as the Primary  Borrower and the Banks may agree,  and
                 in the case of the Interim Facility being one month) will begin
                 on the proposed Drawdown Date and end on a Banking Day which is
                 or  precedes  the  Final  Repayment  Date  (and in the  case of
                 Interim Advances, the relevant Available Commitment Termination
                 Date); and

          (iv)   the account to which the proceeds of the  proposed  Advance are
                 to be paid.

          There  shall be no more than 10  Acquisition  Advances  and 10 Interim
          Advances  outstanding  at any time and not more  than one  Acquisition
          Advance  and/or  Interim  Advance  may  be  made  in any  period  of 5
          consecutive Banking Days.

     (c)  Interest Periods at time of syndication

          The Primary Borrower shall until the Syndication Date select one month
          Interest  Periods or such other periods as the Facility  Agent and the
          Primary  Borrower  agree as being  necessary to effect the transfer of
          participations following syndication.

     (d)  Acquisition Facility

          No Interim  Advances  shall be made  unless and until the  Acquisition
          Facility  has been  drawn  down in full,  save that in order to ensure
          that the Loan Note  Facility  (which will increase with the receipt of
          further acceptances of the Offer which specify the Loan


<PAGE>


          Note  Alternative)  remains  as  a  sub-facility  of  the  Acquisition
          Facility,  prior to the date of each Advance, the Facility Agent shall
          deduct from the Available Facility Amount of the Acquisition Facility,
          the amount of Loan Note Facility  already  required to cover Loan Note
          Obligations  created by  acceptances  of the Offer prior to that date,
          and a reserve for the maximum  amount of Loan Note Facility  which may
          be required to meet further Loan Note Obligations which may arise from
          subsequent  acceptances  of the  Offer,  and  shall  notify  the Banks
          accordingly,  with the result that Interim  Advances may be drawn down
          prior to the Acquisition Facility being fully drawn, Provided that the
          Facility Agent shall in the light of further  acceptances of the Offer
          periodically  adjust the Available  Facility  Amount in respect of the
          Acquisition  Facility in such a manner as will ensure that as early as
          possible and in any event not later than the date of the making of the
          final Offer Advance under this Agreement the aggregate of:

          (i)  the  Acquisition  Advances  drawn down (other than under the Loan
               Note Facility); and

          (ii) the amount of the Loan Note Facility,

          shall  be  equal  to  the  Total  Commitments  under  the  Acquisition
          Facility.  The Banks shall  participate  in each Offer  Advance on the
          basis of the  notifications  made by the  Facility  Agent  under  this
          clause and if necessary to achieve the above, the Facility Agent shall
          require the making of  Acquisition  Advances (and  matching  mandatory
          prepayments  of the Interim  Facility),  which may (to the extent that
          the  amounts to be paid and  received  by any Bank are the same) be by
          way of book entries,  to ensure that the  Facilities  are drawn in the
          manner described in the proviso to this clause.

     (e)  Loan Note Obligations

          The Loan Note Facility  shall be available  until the Final  Repayment
          Date and Advances may be drawn down by the Primary  Borrower from time
          to time  under the Loan Note  Facility  to be on-lent to Finco 2 to be
          used  by it to  on-lend  to  Bidco  to  be  used  to  fund  Loan  Note
          Obligations.  To the extent  that,  by reason of the minimum  drawdown
          requirements  set out above, an Advance drawn down under the Loan Note
          Facility  exceeds  the then  outstanding  Loan Note  Obligations,  any
          excess  shall be retained by the  Primary  Borrower  and paid into the
          Loan  Note  Collateral  Account  which  shall  be  a  blocked  account
          maintained by the Security Agent.  The Security Agent shall permit the
          Primary Borrower to draw amounts from the Loan Note Collateral Account
          from time to time:

          (i)  to the extent of Loan Note Obligations then due, to be on-lent to
               Finco 2 to be used by it to  on-lend to Bidco to be used by Bidco
               to fund such Loan Note Obligations; provided that

          (ii) at the relevant  time,  no Event of Default  shall have  occurred
               which  has  not  been  remedied  or  waived  to  the   reasonable
               satisfaction of the Security Agent.

          The Loan Note Collateral Account shall not be a trust account and sums
          standing  to its  credit  from time to time shall be charged by way of
          fixed charge under the Debenture  and available to the Security  Agent
          by way of security.


<PAGE>


     (f)  Cancellation on Available Commitment Termination Date

          If there is any Available  Facility Amount  outstanding in relation to
          the  Acquisition  Facility  or the Interim  Facility on the  Available
          Commitment  Termination  Date  in  respect  of  such  Facility,   such
          Available  Facility  Amount  (other than the Loan Note  Facility as at
          such date) shall thereupon be  automatically  cancelled and no further
          Advance  may be made under the  Acquisition  Facility  (other than the
          Loan Note Facility) or the Interim Facility.

4.2  The Revolving Credit Facility

     (a)  Drawdown

          Subject  to the terms and  conditions  of this  Agreement,  and to the
          prior delivery of a notice of  cancellation of the agreement dated 5th
          August  1996  between  the Target and  Citibank  International  plc as
          agent,  Barclays Bank PLC and Midland Bank plc so that it is no longer
          available  for  drawing,  Revolving  Advances  shall  be  made  to the
          relevant  Revolving Credit Facility Borrower  following receipt by the
          Facility  Agent  from  such  Borrower  of an  appropriately  completed
          Drawdown  Notice  relating to the Revolving  Credit Facility not later
          than 11 a.m.  two  Banking  Days  before the  proposed  Drawdown  Date
          (which,  in respect of the first Revolving  Advance to be made for the
          purpose of refinancing certain Target Group Borrowed Money will be the
          Unconditional Date).

     (b)  Amount

          Each  Drawdown  Notice  delivered  to the Facility  Agent  pursuant to
          clause 4.2(a) shall be irrevocable and shall specify:

          (i)    the  proposed  Drawdown  Date,  which  shall be a  Banking  Day
                 falling prior to the Available Commitment Termination Date;

          (ii)   the  amount  of  the  Revolving  Advance,  which  shall  be  of
                 (pound)10,000,000  or  any  larger  sum  which  is an  integral
                 multiple  of  (pound)5,000,000   or,  if  less,  the  Available
                 Facility Amount in respect of the Revolving  Credit Facility on
                 the relevant Drawdown Date;

          (iii)  the  Maturity  Period which shall be of 1, 2, 3 or 6 months (or
                 such  other  period  as  the  Facility  Agent,  acting  on  the
                 instructions  of the Majority  Banks,  shall agree)  ending not
                 later than the Final Repayment Date;

          (iv)   the account to which the proceeds of the  proposed  Advance are
                 to be paid.

     (c)  Number of Advances

          There shall be no more than 10 Revolving  Advances  outstanding at any
          time,  and not more  than  one  Revolving  Advance  may be made in any
          period of 5 consecutive Banking Days.


<PAGE>


     (d)  First drawdown

          No  Revolving   Advance  may  be  made  unless  and  until  the  first
          Acquisition  Advance  could have been drawn down (but for the  delayed
          settlement of acceptances of the Offer) Provided that, notwithstanding
          the conditions  precedent in paragraphs  (b), (c), (d), (f) and (g) of
          Part  B of  Schedule  3  have  not  been  satisfied  and a  notice  of
          cancellation has not been delivered as required under clause 4.2(a) of
          this  Agreement but subject  otherwise to the terms and  conditions of
          this  Agreement,  the  Revolving  Facility  may be  utilised  to issue
          certain  Letters of Credit  agreed with the Facility  Agent in advance
          with an aggregate face value not exceeding US$100,000,000 and, subject
          to the accession of The Energy Group PLC as an additional  Borrower, a
          further (pound)100,000,000 of Advances.

     (e)  Calculation of Available Commitment

          For  the  purpose  of  calculating  the  Available   Commitment,   the
          Outstanding  Contingent  Liabilities  under a Letter  of  Credit  will
          initially  be its  Sterling  Amount  on the  Issue  Date,  subject  to
          recalculation  by the Facility Agent in accordance with the definition
          of "Sterling Amount" and clause 4.11 (Currency Fluctuations).

     (f)  Cancellation on the Available Commitment Termination Date

          Without prejudice to any other provision of this Agreement,  the Total
          Commitments  under the Revolving Credit Facility shall in any event be
          reduced  to  zero  on the  Available  Commitment  Termination  Date in
          respect of such  Facility and no Advance may be drawn by the Revolving
          Credit  Facility   Borrowers  under  the  Revolving   Credit  Facility
          thereafter.

4.3  Issue of Letters of Credit

     Subject to the provisions of this Agreement,  the Issuing Bank will Issue a
     Letter  of Credit  specified  in a  Drawdown  Notice  at the  request  of a
     Revolving Credit Facility Borrower,  if the Agent has received the Drawdown
     Notice  for a Letter of Credit in the form set out in Part C of  Schedule 2
     (Letters of Credit)  signed on behalf of that  Borrower not later,  save in
     the case of the first Issue of Letters of Credit  requested on 15 May 1998,
     than 11.00 am five Banking Days prior to the proposed Issue Date: and

     (a)  the  proposed  Issue  Date is a  Banking  Day on or  before  the Final
          Repayment Date;

     (b)  the face value of each Letter of Credit is a minimum  Sterling  Amount
          of (pound)1,000,000;

     (c)  the Expiry  Date falls on or before the  earlier of 12 months from the
          Issue Date and the Final Repayment Date;

     (d)  the Issuing Bank and (if  different) the Facility Agent has agreed its
          terms;

     (e)  the Sterling Amount of the Letter of Credit  requested does not exceed
          the  Available  Facility  Amount in  respect of the  Revolving  Credit
          Facility;

     (f)  after such  Issue,  there  will be no more than ten  Letters of Credit
          outstanding;


<PAGE>


     (g)  no order,  judgment or decree of any Governmental Entity or arbitrator
          shall be outstanding which by its terms purports to enjoin or restrain
          the Issuing  Bank from  Issuing  such Letter of Credit,  nor shall any
          requirement  of law  applicable  to the Issuing Bank or any request or
          directive   (whether  or  not  having  the  force  of  law)  from  any
          Governmental  Entity with jurisdiction over the Issuing Bank prohibit,
          or request that the Issuing Bank refrain from, the Issuance of Letters
          of Credit  generally or such Letter of Credit in  particular  or shall
          impose upon the Issuing Bank with respect to such Letter of Credit any
          restriction,  reserve or capital  requirement  (for which the  Issuing
          Bank is not otherwise compensated hereunder and which is not in effect
          on the date of this Agreement),  or shall impose upon the Issuing Bank
          any unreimbursed loss, cost or expense which was not applicable on the
          date of this  Agreement and which the Issuing Bank in good faith deems
          material to it;

     (h)  the  currency  in  which  the  relevant  Letter  of  Credit  is  to be
          denominated  is, in the opinion of the Issuing Bank,  not likely to be
          subject  to undue  fluctuation  against  Sterling  and is likely to be
          freely  convertible and available in sufficient  amounts to enable the
          Issuing Bank to discharge its obligations as they fall due;

     (i)  the Issuing  Bank has  approved  (and been  approved  by) the relevant
          beneficiary; and

     (j)  the total Sterling  Amount of all Outstanding  Contingent  Liabilities
          under  all  Letters  of  Credit  then  outstanding  would  not  exceed
          (pound)400,000,000.

4.4  Advances generally

     (a)  A  Drawdown  Notice (or notice  purporting  to be such)  shall only be
          effective  if it  complies  with this  Agreement  and only upon actual
          receipt by the Facility Agent and, once given, shall be irrevocable.

     (b)  As soon as practicable after receipt of each Drawdown Notice complying
          with this  Agreement the Facility Agent shall notify each Bank of such
          receipt  and of the date on which the  proposed  Advance is to be made
          and of the  relevant  Interest  Period  or,  as the case  may be,  the
          relevant Maturity Period and each Bank shall on such Drawdown Date or,
          the case may be,  on the  first day of the  relevant  Interest  Period
          participate in such Advance by making  available to the Facility Agent
          its portion of such Advance in accordance with clause 8.2.

4.5  Application of proceeds

     Without prejudice to the Borrowers'  obligations under clause 10.2(a), none
     of the Finance Parties shall have any responsibility for the application of
     the proceeds of any Advance by any Borrower.

4.6  Letters of Credit

     (a)  Issuing Bank as  principal:  the Issuing Bank will act as principal of
          each   Letter   of   Credit   Issued   by  it  and  each   Bank   will
          counter-indemnify  the  Issuing  Bank in  respect  of the  Outstanding
          Contingent Liabilities thereunder in the relevant Proportion;

     (b)  Borrowers' Authorisation and Indemnity:  each Borrower unconditionally
          and irrevocably:


<PAGE>


          (i)    authorises  the Issuing  Bank to comply  with any demand  which
                 appears to be duly made by a third party in respect of a Letter
                 of  Credit  without  any  further  reference  to  the  relevant
                 Borrower  on  the  terms  set  out  in  Schedule  7  (Terms  of
                 Borrowers' Indemnity);

          (ii)   agrees that its  authorisation  under clause  4.6(b)(i) and its
                 indemnity  under clause  4.6(b)(iv)  shall remain in full force
                 and effect and shall not be  discharged  until such date as the
                 Facility Agent (acting on the instructions of the Issuing Bank)
                 shall notify the relevant Borrower that it is satisfied (acting
                 reasonably)  that the Issuing Bank  remains  under no liability
                 (actual or contingent) in respect of any Letter of Credit;

          (iii)  agrees that each Letter of Credit is Issued subject to and with
                 the  benefit  of  the   provisions  of  Schedule  7  (Terms  of
                 Borrowers' Indemnity); and

          (iv)   if a Finance Party  suffers any  liabilities,  damages,  costs,
                 expenses,  losses and  charges  whatsoever  in  relation  to or
                 arising  out of any  Letter  of Credit  Issued  or  clause  4.7
                 (Banks'  Guarantee  and  Indemnity),  the benefit of Schedule 7
                 (Terms of  Borrowers'  Indemnity)  shall extend to such Finance
                 Party. A Borrower may finance a payment under such indemnity by
                 drawing down a Revolving  Advance if it is then  entitled to do
                 so in accordance with the terms of this Agreement.

4.7  Banks' Guarantee and Indemnity

     Each Bank hereby irrevocably and unconditionally:

     (a)  subject to clause 4.7(b),  guarantees to and  indemnifies on the terms
          set out in Schedule 8 (Terms of Interbank Guarantee and Indemnity) the
          Issuing Bank  severally in its Proportion and on demand by the Issuing
          Bank, the due and punctual performance by any relevant Borrower of all
          its  obligations  in  respect of each  Letter of Credit  Issued by the
          Issuing Bank;

     (b)  if  it is  not  permitted  by  its  constitutional  documents  or  any
          applicable law to grant guarantees, agrees that, upon any failure of a
          relevant  Borrower to make timely payment of any amount due in respect
          of a Letter of Credit,  such Bank shall take (and upon the  occurrence
          of an Event of Default  specified in clauses 12.1(e) to (n) (Events of
          Default) (or any event occurs  which under the  applicable  law of any
          relevant  jurisdiction has an analogous,  similar or equivalent effect
          to any such events)  shall be deemed to have taken without any further
          action, as of the Issue Date of each outstanding Letter of Credit), an
          undivided  participating interest from the Issuing Bank in each Letter
          of  Credit  outstanding  at such  time in a  proportion  equal to such
          Bank's Proportion.  Each Bank shall hold the Issuing Bank harmless and
          indemnify the Issuing Bank for such Bank's  proportionate share of any
          drawing  under any Letter of Credit in which it has taken an undivided
          participating interest under this clause 4.7;

     (c)  as a separate and independent stipulation agrees that any sum of money
          intended  to be the subject of the  guarantee  in clause  4.7(a),  and
          subject to clause 4.7(b) and Schedule 8 (Terms of Interbank  Guarantee
          and  Indemnity),  shall be recoverable  from it (in its Proportion) as
          sole principal debtor even if such sum would not be recoverable from


<PAGE>


          any relevant Borrower by reason of any legal limitation, disability or
          incapacity  or  liquidation  of  any of  them  or any  other  fact  or
          circumstance  (whether  known to the  Issuing  Bank or not) but  which
          would  have  been  recoverable  from  such Bank if it were the sole or
          principal  debtor in  respect of such  liability  in place of any such
          Borrower;

4.8  Calculation of Interest if Bank makes a Guarantee or Indemnity Payment

     Any  payment  made or to be made by a Bank  pursuant  to clause 4.7 (Banks'
     Guarantee and  Indemnity)  and any  unreimbursed  amount on the part of the
     Issuing Bank shall (for the purpose of calculating  interest  thereon which
     is due from the relevant Borrower) be deemed to have been made available to
     that  Borrower  by way of a Revolving  Advance on the date such  payment is
     made or is to be made (or  reimbursed)  and  accordingly  is subject to the
     terms  and  conditions  hereof  and,  after  the  earliest  date on which a
     Revolving  Advance could have been drawn down to fund such liability,  such
     amount  shall be treated as if it were an overdue sum with an initial  term
     of one month  but (for all other  purposes)  shall be  immediately  due and
     payable by the relevant Borrower.

4.9  Defaulting Banks

     If a Bank (a  "Defaulting  Bank")  fails to make payment on its due date of
     any amount (an "overdue amount") due from it for the account of the Issuing
     Bank pursuant to clause 4.7 (Banks' Guarantee and Indemnity) then until the
     Issuing  Bank (or the Agent on its  behalf)  has  received  payment of such
     overdue  amount  in full (and  without  prejudice  to any  other  rights or
     remedies of the Issuing Bank in respect of such failure):

     (a)  the Issuing Bank shall be entitled to receive any  remuneration  which
          such  Defaulting Bank would otherwise have been entitled to receive in
          respect of the Revolving Credit Facility; and

     (b)  the overdue amount shall bear interest at the rate of one per cent per
          annum over LIBOR plus the Additional  Cost for the time being from the
          due date until the date of payment and any such interest which accrues
          shall be compounded monthly.

4.10 Subrogation of Banks making guarantee payments

     (a)  Each  Obligor  agrees that if any Bank makes any payment  under clause
          4.7 (Banks' Guarantee and Indemnity) it will immediately be subrogated
          to any rights that the Issuing Bank may then have against the relevant
          Borrower  in respect of the amount paid and such  subrogation  will be
          subject  to the  terms  set out in  Schedule  7 (Terms  of  Borrowers'
          Indemnity).

     (b)  Each  Obligor  agrees to  indemnify  the Bank making such a payment in
          respect of such payment and all costs and expenses  properly  incurred
          by the Bank in recovering or attempting to recover any amount pursuant
          to such rights of subrogation.

4.11 Currency Fluctuations

     In addition and without prejudice to the Banks' other rights hereunder, the
     Facility  Agent shall on every Quarter Date (and at any other time at which
     it is requested to do so by the Majority Banks)  calculate the aggregate of
     the Sterling Amounts of all Outstanding  Contingent  Liabilities  under all
     Letters of Credit then outstanding.


<PAGE>


4.12 Clawback

     If the  Facility  Agent at any time issues a  certificate  addressed to the
     Primary  Borrower that in its opinion the aggregate of the Sterling Amounts
     of  Outstanding  Contingent  Liabilities  under all  Letters of Credit then
     outstanding  is equal to or  exceeds  105% of the  aggregate  amount of the
     Banks'  Commitments  under the Revolving Credit Facility less the amount of
     all outstanding  Revolving Advances at that time, the Agent may give notice
     to the Primary Borrower requiring it within five Banking Days either to:

     (a)  make arrangements to repay Revolving Advances and/or reduce the amount
          of the  Letters  of Credit  outstanding  so as to bring  the  Sterling
          Amount of all such  Outstanding  Contingent  Liabilities  to an amount
          equal to or below 100% of that aggregate amount; or

     (b)  provide the Issuing  Bank with cash cover in the currency in which any
          Letter of  Credit is  denominated  of such  amount as would  cause the
          requirements of this clause 4.12 to be satisfied.

4.13 Cash Cover

     Where cash cover is provided by an Obligor under clause 4.12  (Clawback) or
     otherwise  under this  Agreement,  the Issuing Bank or other recipient Bank
     undertakes  to place  the  relevant  cash  deposit  in an  account  with it
     (subject to such security  arrangements  as the Facility Agent may specify)
     bearing  interest at a rate and on the standard terms (other than as to the
     security  arrangements)  applicable  to  corporate  customers  of such Bank
     making deposits of an equivalent size and for an equivalent duration (or on
     such other terms as such Bank and the relevant Obligor may agree). Interest
     accruing  on cash  deposited  as cash cover shall be for the account of and
     paid to such  Obligor  but  shall  not be paid to any  Obligor  during  the
     continuance of an Event of Default.


5.   INTEREST AND INTEREST PERIODS

5.1  Interest on the Acquisition Advances and Interim Advances

     The Primary  Borrower  shall pay interest on each  Acquisition  Advance and
     Interim Advance in respect of each Interest Period on the relevant Interest
     Payment Date (or, in the case of Interest  Periods of more than six months,
     by  instalments,  every six months from the  commencement  of the  relevant
     Interest Period and on the relevant  Interest Payment Date) at the rate per
     annum  determined  by the  Facility  Agent to be the  aggregate  of (a) the
     Applicable Margin, (b) the Additional Cost and (c) LIBOR.

5.2  Interest Periods for the Acquisition Advances and Interim Advances

     (a)  The Primary  Borrower may by notice received by the Facility Agent not
          later than 11 a.m. on the second  Banking Day before the  beginning of
          each Interest  Period in respect of each  Acquisition  Advance specify
          whether  such  Interest  Period  shall have a duration of 1, 2, 3 or 6
          months  (or such other  period as the  Facility  Agent,  acting on the
          instructions of the Majority Banks,  may agree).  All Interest Periods
          for the Interim  Facility shall have a duration of one month,  save as
          provided in (b) below.


<PAGE>


     (b)  Every  Interest  Period in respect  of each  Acquisition  Advance  and
          Interim  Advance  shall be of the  duration  specified  by the Primary
          Borrower pursuant to clause 5.2(a) but so that:

          (i)  the initial  Interest Period in respect of each such Advance will
               commence  on the  relevant  Drawdown  Date  and  each  subsequent
               Interest Period in respect of each such Advance shall commence on
               the date of the expiry of the previous Interest Period, and until
               the Syndication  Date the provisions of clause 4.1(c) shall apply
               to the selection of Interest Periods;

          (ii) if otherwise there would be more than 10 Acquisition  Advances or
               10 Interim Advances  outstanding with different  Interest Payment
               Dates,  the Primary  Borrower shall select  Interest  Periods for
               such Advances ending on the same day as the then current Interest
               Period  for  another  such  Advance  and on the  last day of such
               Interest  Period,  such Advances shall be  consolidated  into and
               shall thereafter constitute a single Advance;

          (iii)if any  Interest  Period in  respect  of an  Acquisition  Advance
               would otherwise  overrun the Final Repayment Date or the date the
               First  Repayment is due, such  Interest  Period shall end on such
               date;

          (iv) if any  Interest  Period in respect of an Interim  Advance  would
               otherwise overrun the Available  Commitment  Termination Date for
               the Interim Facility,  it shall end on such Available  Commitment
               Termination Date; and

          (v)  if the  Primary  Borrower  fails to  select  the  duration  of an
               Interest  Period in respect of an Advance in accordance  with the
               provisions  of clause 5.2(a) and this clause 5.2(b) such Interest
               Period  shall have a duration of 3 months or such other period as
               shall  comply with this clause  5.2(b)  selected at the  Facility
               Agent's sole discretion.

5.3  Interest under the Revolving Credit Facility

     The relevant  Revolving Credit Facility Borrower shall pay interest on each
     Revolving  Advance on its  Maturity  Date (or,  in the case of a  Revolving
     Advance having a Maturity  Period of more than six months,  by instalments,
     every  six  months  from the  relevant  Drawdown  Date and on the  relevant
     Maturity Date) at the rate per annum determined by the Facility Agent to be
     the aggregate of (i) the Applicable  Margin,  (ii) the Additional  Cost and
     (iii) LIBOR.

5.4  Interest on unpaid sums

     (a)  If any Borrower fails to pay any sum (including,  without  limitation,
          any sum  payable  pursuant  to this  clause  5.4) on its due  date for
          payment under this  Agreement such Borrower shall pay interest on such
          sum from the due date up to the date of actual  payment (as well after
          as  before  judgment)  at a  rate  determined  by the  Facility  Agent
          pursuant to this clause 5.4.

     (b)  The period  beginning  on the due date for  payment  and ending on the
          date of actual payment shall be divided into successive periods of not
          more than  three  months as  selected  by the  Facility  Agent  (after
          consultation with the Banks so far as reasonably


<PAGE>


          practicable in the circumstances) each of which (other than the first,
          which shall  commence on such due date) shall commence on the last day
          of the  preceding  such  period  but so that if the  unpaid  sum is an
          amount of principal  which shall have become due and payable  prior to
          the next succeeding  Interest Payment Date relating thereto or, as the
          case may be, prior to the relevant  Maturity Date, then the first such
          period  selected  by the  Facility  Agent  shall end on such  Interest
          Payment Date or, as the case may be, such Maturity Date.

     (c)  The rate of interest  applicable to each period  referred to in clause
          5.4(b) shall  (subject to clause 5.6) be the aggregate (as  determined
          by the  Facility  Agent)  of (i) one per  cent  per  annum,  (ii)  the
          Applicable Margin (iii) the Additional Cost and (iv) LIBOR but so that
          if the unpaid sum is an amount of principal  (as referred to in clause
          5.4(b))  interest shall be payable on such unpaid sum during the first
          period  determined  pursuant  to clause  5.4(b) at a rate one per cent
          above the rate applicable thereto immediately before it fell due.

     (d)  Interest  under this  clause 5.4 shall be due and  payable on the last
          day of each period  determined by the Facility  Agent pursuant to this
          clause 5.4 or, if earlier,  on the date on which the sum in respect of
          which such interest is accruing shall actually be paid or on such date
          or other dates which the Facility  Agent may specify by written notice
          to the Primary  Borrower (but not more  frequently than once a month).
          Any interest  payable under this clause 5.4 which is not paid when due
          shall  be  deemed  an  unpaid  sum  and  shall  itself  bear  interest
          accordingly.

5.5  Notification of Interest Periods and interest rate

     The Facility Agent shall notify the Primary  Borrower (who shall notify any
     other  relevant  Borrower)  and the Banks  promptly of the duration of each
     Interest  Period,  Maturity  Period or other period for the  calculation of
     interest  (or, as the case may be,  default  interest)  and of each rate of
     interest determined by it under this clause 5.

5.6  Alternative interest rates

     If:

     (a)  in attempting to calculate LIBOR under paragraph (b) of the definition
          of LIBOR for a specified period the Facility Agent determines at 11.00
          a.m.  (London time) on the Quotation  Date that it is unable to obtain
          quotations for LIBOR from any of the Reference Banks in respect of the
          relevant Advance or unpaid sum for the specified period; or

     (b)  before its close of business on such day, the Facility  Agent has been
          notified  in  writing by a Bank or group of Banks to which 35% or more
          of the relevant  Advance or unpaid sum is (or, if the relevant Advance
          were made,  would then be) owed that LIBOR  calculated  in  accordance
          with its definition in this Agreement does not accurately  reflect the
          cost to them of funding their participation; or

     (c)  the Facility Agent,  acting reasonably,  determines that, by reason of
          circumstances  affecting the London  inter-bank  market,  adequate and
          fair  means  do not or will  not  exist  for  determining  the rate of
          interest applicable to the specified period,


<PAGE>


     then:

          (i)    the Facility Agent shall promptly notify in writing the Primary
                 Borrower and the Banks of such event or circumstance;

          (ii)   the Facility  Agent (on behalf of and after  consultation  with
                 the Banks)  shall,  within  three  Banking Days of such notice,
                 negotiate  with the Primary  Borrower with a view to agreeing a
                 substitute basis on which the relevant part of the Facility may
                 be maintained;

          (iii)  any  substitute  basis agreed in writing by the Facility  Agent
                 (on  behalf of and with the  consent  of all the Banks) and the
                 Primary  Borrower  within  30 days of such  notice  shall  take
                 effect  in  accordance  with its terms  and  interest  shall be
                 calculated as if the substitute basis had come into effect from
                 the beginning of the relevant specific period;

          (iv)   in  default  of   agreement   within  30  days,   each   Bank's
                 participation  in the  Advance  or  unpaid  sum (if any)  shall
                 during that  specific  period bear  interest at the annual rate
                 equal  to the  cost to that  Bank  (as  certified  by it to the
                 Primary  Borrower  within  ten  days  of the end of that 30 day
                 period and expressed as a percentage rate per annum) of funding
                 its participation during that specific period by whatever means
                 that Bank determines to be most appropriate plus the Applicable
                 Margin and the  Additional  Cost and if clause 5.4 (Interest on
                 unpaid sums) applies, a further one per cent.


6.   REPAYMENT, PREPAYMENT, CANCELLATION AND REDUCTIONS

6.1  Repayment of the Acquisition and Interim Advances

     The Primary Borrower shall repay in full:

     (a)  Acquisition Advances

          all outstanding Acquisition Advances on the following dates and in the
          following amounts:

          Date                               Amount ((pound))

          Second anniversary of the date     600,000,000 (less voluntary 
          of this Agreement                  prepayments previously made) (the
                                             "First Repayment")

          Final Repayment Date               All remaining Acquisition Advances
                                             outstanding (the "Final Repayment")

     (b)  Interim Advances

          all  outstanding   Interim   Advances  on  the  Available   Commitment
          Termination Date of the Interim Facility.


<PAGE>


6.2  Mandatory Repayment equal to Coal Proceeds

     (a)  On the Available  Commitment  Termination Date of the Interim Facility
          the Primary Borrower shall prepay outstanding  Acquisition Advances in
          an amount  equal to the product of the Coal  Proceeds and the fraction
          of the share capital of the Target acquired by Bidco at such date less
          the amount of the Interim Advances repaid under clause 6.1(b).

     (b)  Amounts repaid and/or prepaid in accordance with this clause 6.2 shall
          be applied in accordance with clause 6.6(c).

6.3  Repayment of Revolving Advances

     The relevant  Revolving Credit Facility Borrower shall repay each Revolving
     Advance  in full on its  Maturity  Date but,  subject  to the terms of this
     Agreement, amounts repaid may be reborrowed.

     On the  Final  Repayment  Date the  balance  of all  outstanding  Revolving
     Advances shall in any event be repaid in full and may not be reborrowed.

6.4  Optional prepayment of all the Banks

     The relevant Borrower may, subject to clause 6.6, prepay:

     (a)  an Acquisition  Advance or an Interim  Advance in whole or part (if in
          part, being  (pound)10,000,000  or any larger sum which is an integral
          multiple of  (pound)5,000,000) on the next succeeding Interest Payment
          Date in respect of such Advance or, together with any relevant amounts
          payable pursuant to clause 13.1, any other Banking Day,  Provided that
          in prepaying such Advance, the Banks to whom such Advance is owing are
          prepaid on a pro rata basis;

     (b)  Revolving  Advances  in  whole  (but not in  part)  together  with any
          relevant amounts payable pursuant to clause 13.1.

6.5  Affected Banks

     (a)  The relevant  Borrower may and,  where  required  under this Agreement
          shall  prepay  (in whole but not in part  only),  without  premium  or
          penalty,  subject to clause 6.6, the whole of the Contributions to all
          the  Facilities  of any  Affected  Bank.  Upon any such notice of such
          prepayment  being  given,  or as  provided  for in  clause  14.1,  the
          Commitments of the relevant Bank to all the relevant  Facilities shall
          be reduced to zero and the undrawn amount of the Total  Commitments in
          respect of all the Facilities shall be reduced accordingly.

     (b)  Instead of or, in  addition  to, its rights  under  clause  6.5(a) the
          relevant Borrower may on payment of the fee under clause 16.5, without
          prejudice  to clause  14.4,  require  the  Affected  Bank to  transfer
          pursuant   to  clause  16.5  at  par  all  of  its   Commitments   and
          Contributions to a Qualifying Bank nominated by the Borrower  provided
          that the relevant Qualifying Bank agrees (in its absolute  discretion)
          to accept the  transfer  to it and, in the case of clause  14.1,  that
          Bank is  lawfully  able to do so and the  transfer  is to take  effect
          prior  to  the  prepayment   date  specified  by  the  Facility  Agent
          thereunder.


<PAGE>


6.6  Prepayments generally

     (a)  No  prepayment  may be made pursuant to clauses 6.2, 6.4 or 6.5 unless
          the Primary  Borrower  shall have given the  Facility  Agent 5 Banking
          Days prior notice (or in the case of a  prepayment  pursuant to clause
          14.1 such notice as is required  under  clause  14.1)  specifying  the
          proposed date of the  prepayment  and the amount to be prepaid.  Every
          such notice shall be effective  only on actual receipt by the Facility
          Agent,  shall be irrevocable and shall oblige the relevant Borrower to
          make the relevant prepayment on the date specified.


     (b)  No amount of the Acquisition Facility or the Interim Facility which is
          repaid or prepaid may be reborrowed.

     (c)  Prepayments  (other  than  under  clause  6.5) shall be applied in the
          following order:

          (i)    against outstanding Interim Advances;

          (ii)   against outstanding  Acquisition  Advances, in inverse order of
                 maturity save that:

               (aa) prepayments  of Coal  Proceeds  under Clause 6.2(a) shall be
                    applied against the First  Repayment and thereafter  against
                    the Final Repayment; and

               (bb) voluntary  prepayments  shall be applied  first  against the
                    First Repayment and thereafter against the Final Repayment;

          (iii)  in repayment of outstanding Revolving Advances and in permanent
                 reduction of the Revolving Credit Facility;

          (iv)   to   provide   cash  cover  for  the   Outstanding   Contingent
                 Liabilities under the Revolving Credit Facility.

     (d)  All  prepayments  shall be made  together  with (to the  extent  these
          relate to the amounts  prepaid)  (i)  accrued  interest to the date of
          prepayment;  (ii) any  additional  amount payable under clauses 8.5 or
          14.2; and (iii) all other sums payable by the Borrower to the relevant
          Banks under this Agreement including,  without limitation, any accrued
          commitment  commission  payable under clause 7.2, any Letter of Credit
          commission  and fees under clause 7.3,  expenses  under clause 7.4 and
          any amounts payable under clause 13.1.

     (e)  No  Borrower  shall  prepay all or any part of an Advance  outstanding
          hereunder  except at the times and in the  manner  expressly  provided
          herein.

6.7  Cancellation of the Facilities

     The  Primary  Borrower  may at any time prior to the  Available  Commitment
     Termination  Date in  respect  of the  relevant  Facility  by notice to the
     Facility Agent (effective only on actual receipt) cancel with effect from a
     date not less than 10 Banking Days after the receipt by the Facility  Agent
     of such notice the whole or any part (if in part,  being  (pound)10,000,000
     or any larger


<PAGE>


     sum which is an integral  multiple of  (pound)5,000,000)  of the  Available
     Facility  Amount of the  relevant  Facility,  in each case which is not the
     subject of a Drawdown  Notice at such time.  Such notice shall  specify the
     Facility to which it refers, the date upon which such cancellation is to be
     made and the amount of such cancellation.  Any such notice of cancellation,
     once given,  shall be irrevocable and upon such cancellation  taking effect
     the  Commitments of the Banks in respect of the relevant  Facility shall be
     reduced  accordingly  (pro-rata their respective  Commitments in respect of
     the relevant Facility).

6.8  Termination

     The Commitment of each Bank shall be automatically cancelled and reduced to
     zero  at  the  close  of  business  in  London  on the  relevant  Available
     Commitment Termination Date or, if it occurs, the Cancellation Date.

7.   FEES AND EXPENSES

7.1  Arrangement, underwriting, participation and agency fees

     The Primary  Borrower shall pay to the Facility Agent or shall procure that
     there is paid, whether or not any part of the Commitments is ever advanced:

     (a)  on the date of this Agreement, for the account of the Arrangers,  fees
          of an amount agreed between the Primary  Borrower and the Arrangers in
          a letter dated on or about the date of this Agreement;

     (b)  on the date of this  Agreement and on each  anniversary  thereof until
          the end of the Finance Period,  for the account of the Facility Agent,
          an agency fee and for the account of the  Security  Agent,  a security
          agency  fee,  in each case of an amount  agreed  between  the  Primary
          Borrower and the Facility Agent in a letter dated on or about the date
          of this Agreement.

7.2  Commitment fees

     The Primary  Borrower shall pay to the Facility  Agent,  whether or not any
     part of the  Commitments is ever advanced,  from the date of this Agreement
     on each  Fee  Payment  Date  after  the date of this  Agreement  and on the
     Available  Commitment  Termination Date in respect of each Facility (or the
     Cancellation  Date if  earlier),  for  the  account  of  each of the  Banks
     (pro-rata  their  respective   Commitments  for  the  relevant   Facility),
     commitment  commission  computed in arrears at the Applicable  Fees Rate on
     the daily amount by which the Total  Commitments in respect of the relevant
     Facility  exceeds  the  aggregate  of the  Contributions  in respect of the
     relevant Facility.  Accrued  commitment  commission will also be payable on
     the  amount  of  any   Commitment   when  cancelled  on  the  date  of  its
     cancellation.

7.3  Letter of Credit Fees

     (a)  Each relevant  Borrower  shall (on the dates set out in clause 7.3(c))
          pay  commission  in Sterling to the Facility  Agent for the account of
          the Banks (in their respective Proportions) on the Issue of any Letter
          of Credit  requested by such Borrower in Sterling at a percentage rate
          per annum equal to the Applicable Margin on the Sterling Amount of the
          Outstanding   Contingent  Liabilities  under  such  Letter  of  Credit
          calculated


<PAGE>


          in each case on the date of Issue  and  recalculated  on each  Quarter
          Date from the Issue Date of such Letter of Credit until the earlier of
          its Expiry  Date or such date as the  Issuing  Bank and the Banks have
          ceased to be under any  liability  (actual or  contingent)  in respect
          thereof,  and on the basis of a 365 day year. If the relevant Borrower
          has provided cash cover for any Letter of Credit,  the percentage rate
          per annum payable on cash covered amounts shall instead be 0.25%.

     (b)  Each relevant  Borrower shall pay a fronting fee to the Facility Agent
          for the  account  of the  Issuing  Bank on the Issue of any  Letter of
          Credit at a rate of 0.2% per annum on the Sterling  Amount of the face
          amount of the relevant Letter of Credit payable in advance on the date
          of Issue and on each Quarter Date thereafter.

     (c)  The  commission  and fronting  fee payable  under  clauses  7.3(a) and
          7.3(b) in respect of each Letter of Credit shall be paid in advance on
          the  relevant  Issue Date and on each Quarter Date in each year during
          the  continuance  of such  Letter of  Credit  (or if such day is not a
          Banking Day, on the  preceding  Banking Day)  commencing  on the first
          Quarter Date  falling on or after the Issue of the relevant  Letter of
          Credit.  If a Letter of Credit is  terminated  leaving no  Outstanding
          Contingent  Liabilities  before a Quarter Date, any commission paid in
          advance  for the period from the date of  cancellation  until the next
          Quarter  Date shall be repaid to the  Borrower  which made the advance
          commission  payment by set-off  against any amounts  then due from the
          Borrower  to any  Finance  Party or, if no such  amounts  are due,  by
          payment in cash.

     (d)  For the  avoidance  of doubt,  the Issuing  Bank's  Proportion  of the
          commission  at the rate and  calculated  in the  manner  specified  in
          clause  7.3(a)  shall be payable to the Issuing Bank in respect of its
          residual liability in its capacity as a Bank,  notwithstanding that it
          does not purport to guarantee itself in its capacity as Issuing Bank.

     (e)  The  Borrowers   shall  pay  interest  on  the  amount   demanded  and
          outstanding under the indemnity given by them in respect of Letters of
          Credit in accordance with clause 4.8  (Calculation of Interest if Bank
          makes a Guarantee or Indemnity  Payment) in addition to the commission
          and  other  fees  payable  under  this  Agreement  in  respect  of the
          Revolving Credit Facility.

7.4  Expenses

     The Primary Borrower shall reimburse the Arrangers, the Banks, the Security
     Agent and the Facility Agent from time to time within three Banking Days of
     demand:

     (a)  all reasonable costs and expenses (including without limitation legal,
          printing and  out-of-pocket  expenses)  together  with any VAT thereon
          incurred by the Facility  Agent and the Arrangers in  connection  with
          the  negotiation,  preparation and execution of the Finance  Documents
          and  the  completion  and  syndication  of  the  transactions  therein
          contemplated,  and the  negotiation,  preparation and execution of any
          amendment  or  extension  of, or the granting of any waiver or consent
          under, any of the Finance Documents; and

     (b)  without  prejudice to the  generality  of (c) below,  all expenses and
          costs (including  without limitation the fees and expenses of lawyers,
          accountants,  surveyors, valuers,  environmental consultants and other
          professional  advisers  and  out-of-pocket  expenses)  incurred by the
          Facility  Agent in  connection  with the  obtaining of reports  and/or
          advice


<PAGE>


          and/or  the  undertaking  of  investigations  by or on  behalf  of the
          Facility  Agent into or concerning  the Primary  Borrower or the Group
          following the  occurrence of a Default and whilst it is continuing (or
          where the  Majority  Banks'  reasonable  opinion is that a Default may
          have  occurred) and the Primary  Borrower  undertakes to give,  and to
          procure that its  Subsidiaries  give, all such  reasonable  assistance
          (including,  without limitation, access to its and/or their properties
          and  financial and other  records) at all times as the Facility  Agent
          shall  reasonably  require for the purpose of enabling such reports or
          advice to be prepared or such investigations to be undertaken; and

     (c)  after a  Default  has  occurred,  all costs  and  expenses  (including
          without  limitation legal and out-of-pocket  expenses) incurred by any
          of the Finance Parties in contemplation of, or otherwise in connection
          with, the enforcement or attempted  enforcement of, or preservation or
          attempted  preservation  of any  rights  under,  any  of  the  Finance
          Documents,  or  otherwise  in respect of the  recovery,  or  attempted
          recovery,  of moneys owing under the same,  together  with interest at
          the rate  referred  to in  clause  5.4  from  the  date on which  such
          expenses were incurred to the date of payment (as well after as before
          judgment).

7.5  Value Added Tax

     All fees,  costs and  expenses  payable  pursuant to this clause 7 shall be
     paid together with an amount equal to any VAT thereon payable by any of the
     Finance Parties in respect of such fees and expenses.

7.6  Stamp and other duties

     The  Primary  Borrower  shall  pay all  stamp,  documentary,  registration,
     notarisation  or other  duties  or Taxes  (including  any  duties  or Taxes
     payable  by,  or  assessed  on,  the  Finance  Parties)  imposed  on  or in
     connection with the negotiation, preparation,  implementation and execution
     of any of the Finance  Documents and the  syndication of the Facilities and
     shall indemnify the Finance Parties against any liability arising by reason
     of any delay or  omission  by the  Primary  Borrower  to pay such duties or
     Taxes.


8.   PAYMENTS AND TAXES; ACCOUNTS AND CALCULATIONS

8.1  No set-off or counterclaim; distribution to the Banks

     All payments to be made by any Borrower under this Agreement  shall be made
     in full,  without any set-off or counterclaim  whatsoever  and,  subject as
     provided in clause 8.5, free and clear of any  deductions or  withholdings,
     in Sterling  (except for costs,  charges or expenses which shall be payable
     in the currency in which they are  incurred) on the due date to the account
     of the Facility  Agent at such bank as the Facility  Agent may from time to
     time specify for this  purpose.  Save where this  Agreement  provides for a
     payment to be made for the account of a particular Finance Party or Finance
     Parties,  in which case the Facility  Agent shall  distribute  the relevant
     payment  to the  relevant  Finance  Party  or  Finance  Parties  concerned,
     payments to be made by any Borrower under this  Agreement  shall be for the
     account of all the Banks and the Facility Agent shall forthwith  distribute
     such  payments in like funds as are received by the  Facility  Agent to the
     Banks rateably for the account of such Banks'  respective  Facility Offices
     in accordance with their Commitments or Contributions, as the case may be.


<PAGE>


8.2  Payments by the Banks

     All sums to be advanced by the Banks to any Borrower  under this  Agreement
     shall be remitted in Sterling in immediately available funds not later than
     11 a.m. on the relevant Drawdown Date or, as the case may be, the first day
     of the relevant  Interest  Period to the account of the  Facility  Agent at
     such bank as the Facility Agent may have notified to the Banks and shall be
     paid by the  Facility  Agent on such date to the  account  of the  relevant
     Borrower in England specified in the relevant Drawdown Notice.

8.3  Non-Banking Days

     When any payment under this Agreement would otherwise be due on a day which
     is not a Banking  Day,  the due date for payment  shall be postponed to the
     next  following  Banking  Day  unless  such  Banking  Day falls in the next
     calendar  month,  in which case  payment  shall be made on the  immediately
     preceding Banking Day.

8.4  Facility Agent may assume receipt

     Where any sum is to be paid under this  Agreement to the Facility Agent for
     the  account of another  person,  the  Facility  Agent may assume  that the
     payment  will be made when due and may (but shall not be  obliged  to) make
     such sum  available to the person so entitled.  If it proves to be the case
     that such  payment was not made to the Facility  Agent,  then the person to
     whom such sum was so made available shall on request refund such sum to the
     Facility Agent together with interest thereon  sufficient to compensate the
     Facility Agent for the cost of making available such sum up to (and/or,  as
     the case may be, the cost to the  relevant  other  person of not  receiving
     such sum until) the date of such  repayment and the person by whom such sum
     was payable  shall  indemnify  the Facility  Agent (or the  relevant  other
     person) for any and all loss or expense  which the  Facility  Agent (or the
     relevant  other person) may sustain or incur as a  consequence  of such sum
     not having been paid on its due date together  with any interest,  expenses
     and penalties payable or incurred in connection therewith.

8.5  Grossing-up for Taxes

     If at  any  time  any  Borrower  is  required  to  make  any  deduction  or
     withholding  in  respect of Taxes from any  payment  due under any  Finance
     Document for the account of any Finance Party (or if the Facility Agent, or
     as the  case  may be,  the  Security  Agent  is  required  to make any such
     deduction or withholding  from a payment to a Finance  Party),  the sum due
     from the  relevant  Borrower in respect of such payment  shall,  subject to
     clause 8.6, be increased to the extent  necessary to ensure that, after the
     making of such  deduction or  withholding  (and any further  deduction  and
     withholding which may be levied on the additional amounts paid by reason of
     this clause),  each Finance Party receives on the due date for such payment
     (and  retains,  free from any  liability  in respect of such  deduction  or
     withholding) a net sum equal to the sum which it would have received and so
     retained had no such deduction or  withholding  been made or required to be
     made and (without prejudice to the foregoing provisions of this clause 8.5)
     each Borrower shall  indemnify each Finance Party on demand by the Facility
     Agent against any losses or costs incurred by any of them together with any
     interest,   expenses  and  penalties  payable  or  incurred  in  connection
     therewith  by  reason  of any  failure  of such  Borrower  to make any such
     deduction or withholding.


<PAGE>


     Each Borrower  shall  promptly  deliver to the Facility Agent any receipts,
     certificates or other proof evidencing the amounts (if any) paid or payable
     in respect of any such deduction or withholding.

8.6  Qualifying Bank

     (a) If:

          (i)  any Bank is not or ceases to be a Qualifying Bank; and

          (ii) as a result an Obligor is required  to deduct or withhold  United
               Kingdom  income tax in respect of payments of interest to be made
               by such Obligor to that Bank under any Finance  Document or would
               otherwise  have been  required to make an indemnity  payment or a
               greater indemnity payment under clause 8.5 or 14.2,

          then  such  Obligor  shall  (as the case may be) not be  liable to pay
          under clause 8.5 in respect of any such payment of interest any amount
          in excess of the amount it would have been obliged to pay if such Bank
          were a  Qualifying  Bank,  nor shall it be liable to make an indemnity
          payment or a greater  indemnity  payment  under  clause 8.5 or, as the
          case  may be,  Clause  14.2  than  would  have  been  required  if the
          aforesaid  Bank had been or had not  ceased  to be a  Qualifying  Bank
          Provided that this Clause 8.6 shall not apply,  and such Obligor shall
          be obliged to comply with its obligations  under clause 8.5, or as the
          case may be 14.2, if on or after the date hereof:

          (aa) there  shall  have  been  any  change  in,  or  in  the  official
               interpretation  or  application  of,  any  relevant  law  or  the
               practice of the United Kingdom Inland Revenue (or, in the case of
               a Treaty Lender, any Government Entity in the country in which it
               is  resident  for the  purpose of the  relevant  double  taxation
               treaty) and as a result thereof the Bank is not or ceases to be a
               Qualifying Bank, or

          (bb) the  Bank  referred  to in  clause  8.6(a)  has  transferred  its
               Facility  Office in respect of any  Facility  outside  the United
               Kingdom or has  become a Bank  hereunder  with a Facility  Office
               outside the United  Kingdom in respect of any  Facility,  in each
               case, with the consent of the Primary  Borrower if and insofar as
               required under this Agreement.

     (b)  A person  intending  to make a claim  pursuant  to clause  8.5  shall,
          promptly after such person becomes aware of the  circumstances  giving
          rise to such  claim  and the  amount  of such  claim,  deliver  to the
          Primary  Borrower  through the Facility  Agent a  certificate  to that
          effect  specifying  the  amount  of  such  claim  and  setting  out in
          reasonable detail the basis of such claim, provided that nothing shall
          require such person to disclose any confidential  information relating
          to the organisation of its affairs.

     (c)  If at any time after the date of this Agreement any Bank is aware that
          it is not or will cease to be a Qualifying Bank (for whatever reason),
          it shall promptly notify the Primary Borrower.

     (d)  A Treaty Lender will submit such claim to the appropriate  authorities
          (together with such forms,  papers, other documents and/or evidence as
          necessary) as may be required


<PAGE>


          for the Obligors to make payment of interest to such Treaty  Lender on
          its  Advances  free of  withholding  or deduction on account of United
          Kingdom  Tax. No Obligor will be liable to pay any  additional  amount
          under clause 8.5 in respect of the withholding or deduction on account
          of United Kingdom income tax from any such interest  unless such claim
          has been  submitted to those  authorities  promptly  after that Treaty
          Leader  became a party to this  Agreement  as a Treaty  Lender  or the
          proviso to clause 8.6(a) applies.

8.7  Claw-back of Tax benefit

     If following any such  deduction or withholding as is referred to in clause
     8.5  any  Finance  Party  determines  in its  sole  discretion  that it has
     received  or been  granted  a credit  against  or  remission  for any Taxes
     payable by it, such Finance Party shall,  subject to the relevant  Borrower
     having made any increased payment in accordance with clause 8.5 and subject
     to there not being any Default which is continuing,  and to the extent that
     such  Finance  Party can do so without  prejudicing  the  retention  of the
     amount of such credit or  remission  and without  prejudice to the right of
     such Finance  Party to obtain any other  relief or  allowance  which may be
     available to it,  reimburse the relevant  Borrower with such amount as such
     Finance Party shall in its absolute discretion certify to be the proportion
     of such credit or remission  as will leave such  Finance  Party (after such
     reimbursement)  in no worse  position  than it would have been in had there
     been no such  deduction  or  withholding  from the payment by the  relevant
     Borrower as aforesaid. Such reimbursement shall be made forthwith upon such
     Finance  Party  certifying  that the amount of such credit or remission has
     been  received by it,  provided  that the  Finance  Party shall be the sole
     judge of the  amount  of any such  benefit  and of the date on which it was
     received.  Nothing  contained in this  Agreement  shall  interfere with the
     right of any Finance Party to arrange its tax affairs in whatever manner it
     thinks  fit nor  oblige  any  Finance  Party to  disclose  any  information
     regarding  its tax  affairs  and  computations.  Without  prejudice  to the
     generality of the foregoing,  no Borrower  shall,  by virtue of this clause
     8.7,  be  entitled  to enquire  about any  Finance  Party's  tax affairs or
     computations.  The Finance  Parties are under no obligation to  investigate
     whether any tax credit is available or to claim any tax credit.  Any amount
     paid by any  Finance  Party  to a  Borrower  under  this  clause  shall  be
     conclusive  evidence  of the amount  payable  and will be  accepted  by the
     Borrower in full and final settlement of its claim.

8.8  Bank accounts

     Each Bank  shall  maintain,  in  accordance  with its usual  practices,  an
     account or accounts evidencing the amounts from time to time lent by, owing
     to and paid to it under this Agreement. The Facility Agent shall maintain a
     control  account  showing the  utilisation of the Facilities and other sums
     owing by each  Borrower  under this  Agreement  and all payments in respect
     thereof  made by each  Borrower  from  time to time.  In any  legal  action
     arising out of or in connection with the Finance Documents the entries made
     in the  accounts  maintained  pursuant  to this  clause 8.8  shall,  in the
     absence of manifest error, be conclusive as to the amount from time to time
     owing by each Borrower under this Agreement.

8.9  Partial payments

     If:

     (a)  on any date on which a payment is due to be made by any Borrower under
          this  Agreement,  the amount  received by the Facility Agent from such
          Borrower falls short of the total amount of the payment due to be made
          by such Borrower on such date; or


<PAGE>


     (b)  on any date on which the Facility  Agent receives any payment from the
          Security Agent or otherwise receives any amount representing  proceeds
          of  realisations  or  other  recoveries  under  any  of  the  Security
          Documents,  the amount of such payment or other receipt falls short of
          the total amount owing to the Finance  Parties under this Agreement on
          such date

     then (in any such  case),  without  prejudice  to any  rights  or  remedies
     available to the Finance  Parties under any of the Finance  Documents,  the
     Facility Agent shall apply the amount actually received by it in or towards
     discharge of the  obligations  of such Borrower under this Agreement in the
     following order, notwithstanding any appropriation made, or purported to be
     made, by such Borrower:

          (i)    first,  in or  towards  payment,  on a pro-rata  basis,  of any
                 unpaid costs and expenses of the Facility Agent, Security Agent
                 or the Arrangers under this Agreement;

          (ii)   secondly,  in or towards  payment  to the Banks,  on a pro-rata
                 basis, of any amount owing to the Banks under clause 20.2;

          (iii)  thirdly, in or towards payment to the Arrangers,  on a pro-rata
                 basis,  of any portion of the fees payable  under clause 7.1(a)
                 which remains unpaid;

          (iv)   fourthly,  in or towards  payment to the Facility Agent and the
                 Security Agent, on a pro-rata basis, of any portion of the fees
                 payable under clause 7.1(b) which remains unpaid;

          (v)    fifthly,  in or towards  payment  to the  Banks,  on a pro-rata
                 basis,  of any  accrued  commitment  commission  payable  under
                 clause 7.2 which shall have become due but remains unpaid;

          (vi)   sixthly,  in or towards  payment  to the  Banks,  on a pro-rata
                 basis, of any accrued interest, Letter of Credit commission and
                 (in the case of the  Issuing  Bank)  Letter of Credit  fronting
                 fees or  commission  which  shall  have  become  due but remain
                 unpaid,  but so that any amount payable by virtue of clause 8.5
                 shall be excluded;

          (vii)  seventhly,  in or towards  payment to the Banks,  on a pro-rata
                 basis, of any principal which shall have become due but remains
                 unpaid;

          (viii) eighthly,  in or  towards  payment  to  any  such  Banks,  on a
                 pro-rata basis, of any amount payable to any Banks by virtue of
                 clause 8.5 which remains unpaid; and

          (ix)   ninthly,  in or towards  payment  of any other sum which  shall
                 have become due but remains  unpaid (and, if more than one such
                 sum so remains unpaid, on a pro-rata basis).

     Each reference in clause 8.9(i) to (ix) (inclusive) to a category of unpaid
     sums  shall  include  interest  thereon  payable  in  accordance  with this
     Agreement (including, without limitation,


<PAGE>


     default  interest under clause 5.4).  Accordingly,  clause 8.9(vi) shall be
     construed  as  referring  to interest  on  principal  and accrued  interest
     thereon which remain unpaid to the extent due.

     The order of application  set out in this clause 8.9(v) to 8.9(ix) shall be
     varied by the Facility Agent if the Majority  Banks so direct,  without any
     reference to, or consent or approval from, the Borrowers.

8.10 Calculations

     All interest and other payments of an annual nature under this Agreement or
     any of  the  Security  Documents  shall  accrue  from  day  to  day  and be
     calculated on the basis of the actual  number of days  elapsed,  and in the
     case of Sterling a 365 day year and in the case of other  currencies  a 360
     day year.  In  calculating  the actual  number of days  elapsed in a period
     which is one of a series of  consecutive  periods with no interval  between
     them or a period on the last day of which any  payment  falls to be made in
     respect of such period,  the first day of such period shall be included but
     the last day excluded.

     Where the Applicable  Margin or Additional  Cost changes during any period,
     interest and  commitment  fees shall be calculated  on the rate  prevailing
     from day to day.

8.11 Certificates conclusive

     Any certificate of, or determination  by, a Finance Party as to any rate of
     interest or any other  amount  payable  under this  Agreement or any of the
     Security  Documents  shall, in the absence of manifest error, be conclusive
     and binding  evidence of such rate or amount on each  Borrower  and (in the
     case of a certificate  of or  determination  by the Facility  Agent) on the
     Banks.

8.12 Effect of monetary union

     If the country of any national currency in which any amount is expressed to
     be payable under this Agreement participates in economic and monetary union
     in accordance with Article 109J of the Treaty on European Union, then:

     (a)  any amount  expressed  to be  payable  under  this  Agreement  in that
          national currency shall (until the end of the transitional  period) be
          made in that national  currency or in Euros as the Facility Agent may,
          by not less than two Banking Days' notice to the Primary  Borrower and
          the Banks to that effect, require;

     (b)  any amount so required  under clause 8.12(a) to be paid in Euros shall
          be  converted  from  that  national  currency  at the rate  stipulated
          pursuant  to  Article  109L(4)  of the  Treaty on  European  Union and
          payment  of the  amount in Euro  derived  from such  conversion  shall
          discharge the  obligation  of the relevant  party to pay such national
          currency amount; and

     (c)  after  consultation  with  the  Primary  Borrower  and the  Banks  and
          notwithstanding  clause 22, the  Facility  Agent  shall be entitled to
          make from time to time such  amendments  to this  Agreement  as it may
          determine to be  necessary  to take account of monetary  union and any
          consequent  changes in market practices  (whether as to the settlement
          or rounding of  obligations,  the calculation of interest or otherwise
          howsoever).


<PAGE>


          Any amendment so made to this Agreement by the Facility Agent shall be
          promptly  notified  to the  other  Finance  Parties  and  the  Primary
          Borrower by the  Facility  Agent and shall be binding on all the other
          Finance  Parties  and  any  Borrower  and  any  other  party  to  this
          Agreement.


9.   REPRESENTATIONS AND WARRANTIES

9.1  Repeated representations and warranties

     Each Obligor  party hereto  represents  and warrants to each Finance  Party
     that (subject to clause 9.5):

     (a)  Due incorporation:  it and the other members of the Group from time to
          time are duly  incorporated  and  validly  existing  under the laws of
          England  as  limited  liability  companies  and have power to carry on
          their respective businesses as they are now being conducted and to own
          their respective property and other assets;

     (b)  Corporate  Power:  it and the other  Obligors  have power to  execute,
          deliver and perform  their  respective  obligations  under each of the
          Finance  Documents  to  which  they  are  parties  and to  borrow  the
          Commitments; all necessary corporate, shareholder and other action has
          been taken to  authorise  the making of the Offer and the issue of the
          Press Release and the Offer Documents, and the execution, delivery and
          performance of the same and no limitation on the powers of any Obligor
          to borrow will be exceeded as a result of any Advance under any of the
          Finance  Documents and no limitation on any of their respective powers
          to give  guarantees  and/or to create  security  will be exceeded as a
          result of the execution and delivery of any of the Security Documents;

     (c)  Binding obligations:  (subject, in the case of the Security Documents,
          to registration  under section 395 Companies Act 1985) (i) each of the
          Finance  Documents  when  executed  and  delivered by any Obligor will
          (subject to the Reservations)  constitute,  valid, legally binding and
          enforceable  obligations  of it in  accordance  with their  respective
          terms and (ii) it is not necessary, to ensure the legality,  validity,
          enforceability  or  admissibility  in evidence of any Finance Document
          that they or any  other  instrument  be  notarised,  filed,  recorded,
          registered or enrolled in any court, public office or elsewhere in the
          United Kingdom or elsewhere or that any stamp, registration or similar
          tax or charge be paid in the  United  Kingdom  or  elsewhere  on or in
          relation to any Finance Documents;

     (d)  No conflict with other obligations: the execution and delivery of, the
          exercise of its rights and the performance of its  obligations  under,
          and compliance with the provisions of, the Finance Documents by it and
          all other  Obligors will not (i)  contravene  any existing  applicable
          law, statute, rule or regulation or any judgment,  decree or permit to
          which any of them are subject,  (ii)  conflict  with, or result in any
          breach of any of the terms of, or  constitute  a default  under any of
          the  Licences or the Pooling and  Settlement  Agreement,  or under any
          other  agreement or other  instrument to which any of them are a party
          or are subject or by which any of their property is bound to an extent
          which is reasonably  likely in the reasonable  opinion of the Majority
          Banks to have a Material Adverse Effect,  (iii) contravene or conflict
          with any  provision  of their  respective  Memorandum  or  Articles of
          Association  or (iv) result,  other than pursuant to the provisions of
          any of the Finance Documents, in the creation or imposition of, or


<PAGE>


          oblige any member of the Group to create,  any Security Interest (save
          in favour  of the  Finance  Parties)  on any  member  of the  Group's,
          assets, rights or revenues; and

     (e)  Pari passu: in the case of each Borrower,  its obligations  under this
          Agreement are its direct,  general and  unconditional  obligations and
          rank at  least  pari  passu  with all its  other  present  and  future
          unsecured and  unsubordinated  Indebtedness  with the exception of any
          obligations  which  are  mandatorily  preferred  by  law  and  not  by
          contract.

9.2  Non-repeating representations and warranties

     Each Obligor party hereto  further  represents  and warrants to each of the
     Finance Parties that (subject to clause 9.5):

     (a)  Clean  company:  (other than as may result from entry into the Finance
          Documents,  the Offer Documents and the documents  ancillary  thereto,
          copies of which have been provided to the Arrangers) prior to the date
          of this Agreement  neither the Primary  Borrower nor Finco 2 nor Bidco
          has undertaken any trading or incurred any material liabilities of any
          nature whatsoever  whether actual or contingent other than liabilities
          for  professional  fees and any  liability  which  would  arise if the
          relevant company were wound up;

     (b)  Winding  Up:  no  meeting  has been  convened  for the  winding  up or
          administration of the Primary  Borrower,  Finco 2, Bidco or (so far as
          the Primary  Borrower  is aware) any other  member of the Group and so
          far as the Primary  Borrower is aware, no such step is intended by any
          of them and no petition,  application or the like is  outstanding  for
          the winding up or administration of any of them;

     (c)  Full Disclosure: so far as the Primary Borrower, Finco 2 and Bidco are
          aware, the written factual information supplied by or on behalf of the
          Primary Borrower,  Finco 2, Bidco or the Parent, to any of the Finance
          Parties  in  connection  with  this  Agreement,  the  Parent  and  its
          Subsidiaries,  the Offer  and/or the Target Group  (including  but not
          limited  to the Press  Release  and the Offer  Document  and any other
          information concerning the Borrowed Monies, cash balances and Security
          Interests  of the Target  Group) was and  remains  (except  insofar as
          superseded by later  material  supplied to the Finance  Parties by the
          Primary  Borrower  prior  to the  date of  this  Agreement)  true  and
          accurate in all material  respects and it is not aware of any material
          facts or  circumstances  that have not been  disclosed  to the Finance
          Parties  and which  might  reasonably  be  expected to have a Material
          Adverse Effect,  or which might  reasonably be expected to be material
          to a bidder in the  context of whether to make an offer or whether the
          offer is correctly priced;

     (d)  Agreed Projections:  the Agreed Projections delivered to the Arrangers
          prior to the date of this Agreement in the agreed form were arrived at
          after careful  consideration,  were fair and were based on assumptions
          which were  reasonable  having regard to the state of knowledge of the
          officers of the Primary Borrower, Finco 2 and Bidco;

     (e)  No Default: no Default has occurred and is continuing;

     (f)  Existing  Security:  no Security Interest exists on or over any member
          of the Group's assets except as permitted by clause 11.1(a); and


<PAGE>


     (g)  Litigation:

          (i)  no litigation,  alternative  dispute  resolution,  arbitration or
               administration  proceeding  is taking  place,  pending or, to the
               knowledge  of the  officers of the Primary  Borrower,  Finco 2 or
               Bidco, threatened against the Primary Borrower, Finco 2 or Bidco;
               and

          (ii) so  far  as it  is  aware,  no  litigation,  alternative  dispute
               resolution,  arbitration or  administration  proceeding is taking
               place,  pending or  threatened  against  any other  member of the
               Group which is reasonably  likely (in the  reasonable  opinion of
               the  Majority  Banks) in either  case to have a Material  Adverse
               Effect.

9.3  Representations on and from the Takeover Operative Date

     Each Obligor  party hereto  represents  and warrants to each Finance  Party
     that on the Takeover Operative Date:

     (a)  Compliance with Environmental Laws: each member of the Group:

          (i)  as at the Takeover Operative Date complies; and

          (ii) has (to the extent that non-compliance would be reasonably likely
               to give rise to a material liability as at the Takeover Operative
               Date) at all times complied,

          in  all  material   respects  with  all   Environmental   Laws,  where
          non-compliance,  in each case,  would be  reasonably  likely to have a
          Material Adverse Effect;

     (b)  No Environmental Claims:

          (i)  no Environmental  Claim is pending or has been made or threatened
               against  any  member  of the  Group  or any of  their  respective
               officers in their capacity as such; and

          (ii) no member of the Group is aware of any circumstances or situation
               which  would be  reasonably  likely to  result  in it having  any
               liability in relation to Environmental Matters,

          which, in either case,  would be reasonably  likely to have a Material
          Adverse Effect;

     (c)  The Licensees:

          (i)  each relevant  Licensee has been duly authorised by the Secretary
               of State  under  Section 6 of the  Electricity  Act to  generate,
               and/or distribute and/or supply  electricity  and/or, as the case
               may be,  section  7 of the Gas Act 1986 to supply  and  transport
               gas; and

          (ii) no Licensee is in contravention of:

               (A)  any term or condition of any Licence; or


<PAGE>


               (B)  any  requirement of the  Electricity  Act or Gas Acts or any
                    regulations made thereunder; or

               (C)  any  other  statutory  requirement  or any  final  order  or
                    confirmed  provisional  order made under the Electricity Act
                    or Gas Acts; or

               (D)  any  undertaking  given  by  it  to  the  Director  General,
                    Director  General of Gas Supply or the Secretary of State in
                    relation  to the conduct of its  business as a generator  of
                    electricity or, as the case may be, as a public  electricity
                    supplier  or (as the case may be)  public  gas  supplier  or
                    transporter;

               the contravention or consequence of which is reasonably likely to
               have a Material Adverse Effect;

     (d)  The Licences:

          (i)    each  Licence  is in full  force and  effect  and  neither  the
                 Director General nor the Director General of Gas Supply nor the
                 Secretary of State has given notice to revoke a Licence;

          (ii)   no  amendment of any of the terms of a Licence has been made or
                 proposed;

          (iii)  no   other   material   licence,   consent,    undertaking   or
                 authorisation  necessary  for the  carrying on by any member of
                 the  Group of its  business  substantially  as it is  currently
                 carried on has been  terminated  or breached or not obtained or
                 is otherwise not in full force and effect;

          which in either case is reasonably  likely to have a Material  Adverse
          Effect.

9.4  Repetition

     The  representations  and warranties in clauses 9.1 and 9.3 shall be deemed
     to be  repeated  on and as of the  first  Drawdown  Date (or in the case of
     clause 9.3, the Takeover Operative Date), each subsequent Drawdown Date and
     each  Interest  Payment  Date,  as if made with  reference to the facts and
     circumstances existing on each such date, and shall, after the first set of
     financial statements have been delivered under clauses 10.1(b)(i) and (ii),
     be  deemed to  include  a  representation  that the then  latest  financial
     statements  delivered to the Banks under clauses  10.1(b)(i)  and (ii) have
     been  prepared in accordance  with the  Appropriate  Accounting  Principles
     which have been  consistently  applied and give a true and fair view of (or
     in the case of unaudited  accounts,  present with reasonable  accuracy) the
     financial  position of the Primary Borrower and the consolidated  financial
     position of the Group  respectively  as at the date to which such financial
     statements  were made up and the results of the  operations  of the Primary
     Borrower and the results of the  operations of the Group  respectively  for
     the relevant period, and in the case of audited accounts are not subject to
     any qualifications save of a technical and non-adverse nature.

9.5  Application to Target Group

     Each representation or warranty given in respect of Target or any member of
     the  Target  Group  on any  date up to (but  not  including)  the  Takeover
     Operative Date shall be given only by the


<PAGE>


     Primary Borrower,  Finco 2 and Bidco and only on a qualified basis,  namely
     that the  representation  and warranty is true and accurate  with regard to
     the Target and the Target Group so far as the Primary Borrower, Finco 2 and
     Bidco are aware as at the date of this Agreement.

9.6  Obligors' Acknowledgement

     Each Obligor party hereto acknowledges that the Finance Parties are relying
     on the  representations  and  warranties  but not on any other  information
     contradictory  to them or varying them of which the Finance  Parties or any
     of them  or  their  respective  agents  or  advisers  may  have  actual  or
     constructive knowledge.

9.7  Representation at time of Third Amendment Agreement

     Each Obligor  party hereto  represents  and warrants to each Finance  Party
     that so far as it is aware  (subject  to clause  9.5) all  written  factual
     information   (including  all   supplements   and  updates  to  the  Agreed
     Projections)  supplied  on or  prior  to the  date of the  Third  Amendment
     Agreement  by or on behalf of the Primary  Borrower,  Finco 2, Bidco or the
     Parent to any Finance Party or  prospective  Finance Party for the purposes
     of the  information  memorandum  referred  to in  clause  16.16(f)  and the
     Syndication  Letter was and remains  (except insofar as superseded by later
     material supplied to the Finance Parties by the Primary Borrower,  Finco 2,
     Bidco or the Parent prior to the date of the Second Supplemental Agreement)
     true and  accurate in all  material  respects  and does not omit to state a
     material fact necessary in order to make the statements  contained  therein
     not materially misleading in the light of the circumstances under which the
     statements were made.


10.  POSITIVE UNDERTAKINGS

10.1 Information Undertakings

     Each Obligor party hereto undertakes with each of the Finance Parties that,
     throughout the Finance Period (but subject to clause 11.2):

     (a)  Preparation of financial statements: it will:

          (i)  Annual audited financial statements: beginning with the financial
               year ending 31 December  1998,  prepare  financial  statements in
               respect  of  itself  and  consolidated  financial  statements  in
               respect of the Group and  consolidated  financial  statements  of
               Finco 2 in accordance with the Appropriate  Accounting Principles
               (consistently  applied)  in  respect of each  financial  year and
               cause the same to be reported on by the Auditors; and

          (ii) Quarterly  financial  statements:  after the Unconditional  Date,
               prepare unaudited  consolidated financial statements of the Group
               and the consolidated  financial  statements of Finco 2 in respect
               of each Quarter in each  financial  year in  accordance  with the
               Appropriate Accounting Principles (consistently applied);

     (b)  Delivery of  financial  statements:  it will  deliver to the  Facility
          Agent,  for distribution to the Banks,  sufficient  copies for all the
          Banks of each of the following documents:


<PAGE>


          (i)    Annual  audited  financial  statements:  at the  time of  issue
                 thereof to the  shareholders of the Primary  Borrower and Finco
                 2, but in any event not  later  than 120 days  after the end of
                 the financial year to which they relate,  the audited financial
                 statements  referred to in clause 10.1(a)(i) for each financial
                 year  together,  in each case,  with the report of the Auditors
                 thereon,  the notes thereto,  the directors' report thereon and
                 the certificate referred to in clause 10.1(b)(iii);

          (ii)   Unaudited management accounts:  within 45 days after the end of
                 each Quarter in each financial  year,  consolidated  management
                 accounts  for the  Group  and for  Finco 2 in  respect  of such
                 Quarter  prepared in accordance with the requirements of clause
                 10.1(a)(ii) together with the certificate referred to in clause
                 10.1(b)(iii);

          (iii)  Compliance  with  Financial  Undertakings:  with  each  set  of
                 accounts  delivered  by it under  clauses  10.1(b)(i)  and (ii)
                 above  (except  the  first  Quarter's   accounts  under  clause
                 10.1(b)(ii)), the Primary Borrower will deliver to the Facility
                 Agent  a  certificate  signed  by a  director  of  the  Primary
                 Borrower:

                (aa) confirming  compliance  with the financial  undertakings in
                     clause  10.3(a) as at the end of the relevant  Test Period;
                     and

                (bb) setting out in reasonable detail and in a form satisfactory
                     to  the  Facility  Agent  the  computations   necessary  to
                     demonstrate such compliance;

          (iv)   Regulatory Accounts: at the time of their issue to the relevant
                 Government   Entity  or  regulator,   all  accounts  and  other
                 financial  statements or information  required under any law or
                 regulation to be provided to any  Government  Entity,  industry
                 regulator or similar body or person;

          (v)    Reports and notices to shareholders and creditors:  at the time
                 of  issue  thereof  every  report,  circular,  notice  or  like
                 document issued by the Primary  Borrower,  Finco 2 and/or Bidco
                 to its  shareholders  or creditors  generally  and every notice
                 convening  a meeting  of its  shareholders  or any class of its
                 shareholders; and

          (vi)   Further  information:   promptly  upon  request,  such  further
                 information  concerning the financial position of the Group (or
                 any  member  of it)  as the  Facility  Agent  shall  reasonably
                 require;

     (c)  Notice of Default:  it will promptly  upon becoming  aware of the same
          inform the Facility Agent of any Default;

     (d)  Notice of  litigation:  it will,  upon becoming aware that the same is
          threatened or pending and in any case promptly after the  commencement
          thereof,  give  to  the  Facility  Agent  notice  in  writing  of  any
          litigation,    alternative   dispute   resolution,    arbitration   or
          administrative  proceedings or any dispute affecting any member of the
          Group or any of their respective  assets,  rights or revenues which if
          determined  against it could  reasonably  be  expected  to result in a
          liability   (including  costs)  of  more  than   (pound)10,000,000  or
          otherwise have a Material Adverse Effect; and


<PAGE>


     (e)  Environmental  Claims:  promptly upon receipt of formal written notice
          of the same inform the Facility  Agent of any  material  Environmental
          Claim.

10.2 General Undertakings

     Each Obligor party hereto undertakes with each of the Finance Parties that,
     throughout the Finance Period but subject to clause 11.2:

     (a)  Use of proceeds:  it will procure that the proceeds of Advances  under
          the  Facilities are used  exclusively  for their  respective  purposes
          specified in clause 1.1;

     (b)  Consents  etc  relating  to the Finance  Documents:  it will obtain or
          cause to be obtained,  maintain in full force and effect and comply in
          all material  respects with the conditions and  restrictions  (if any)
          imposed  in, or in  connection  with,  every  consent,  authorisation,
          licence or approval of any Government  Entity or consents  required by
          it   in   connection   with   the   execution,   delivery,   validity,
          enforceability  or admissibility in evidence of the Finance  Documents
          and do, or cause to be done, all other acts and things, which may from
          time to time be necessary  under  applicable law for the continued due
          performance  of all its (or its  Subsidiaries)  obligations  under the
          Finance Documents;

     (c)  Pari passu:  it will ensure  that its  obligations,  and those of each
          other Obligor, under each of the Finance Documents shall, at all times
          be direct,  general and  unconditional  obligations  and rank at least
          pari  passu  with all its  other  present  and  future  unsecured  and
          unsubordinated  Indebtedness  with the  exception  of any  obligations
          which are mandatorily preferred by law and not by contract;

     (d)  Licences and Environmental Laws:

          (i)  it will obtain and  maintain  and procure that each member of the
               Group obtains and maintains in full force and effect each Licence
               required for the carrying on of their respective businesses; and

          (ii) it will obtain and  maintain  and procure that each member of the
               Group  obtains and  maintains  in full force and effect all other
               material Environmental Licences and ensures that its business and
               the business of each of its Subsidiaries complies in all respects
               with  all  material  Environmental  Laws and all  other  material
               Environmental Licences;

     (e)  Clear Market:  from the date of this Agreement  until the  Syndication
          Date it will not and will  procure  that no member of the Group  will,
          except with the prior written  consent of the Arrangers or in relation
          to the refinancing in full of the Facilities,  mandate or place in the
          syndicated or bilateral loan markets any Borrowed  Money, or issue any
          floating rate notes, other than the Facilities;

     (f)  Hedging  Transactions:  within 150 days of the date of this  Agreement
          the Primary  Borrower shall enter into one or more hedging  agreements
          so as to swap the floating  element of interest on the Facilities to a
          fixed rate in respect of at least 50% of the  Acquisition  Facilities,
          such hedging agreements to be:

          (i)  with a counterparty  having a credit rating with Standard & Poors
               of at least A; and


<PAGE>


          (ii) for a period or periods  such that the  average  maturity  of the
               hedging  agreements  is at least 2 years  after the date on which
               the hedging agreements are entered into;

          any such hedging  agreement to which it is at any time party governing
          the terms of a hedging transaction  required by this Agreement must be
          entered  into with one of the  Banks and  should be in the form of the
          ISDA  1992  Master  Agreement  (Multicurrency  Cross-Border)  and will
          provide for "two way payments" in the event of a  termination  of that
          hedging  transaction entered into under such hedging agreement whether
          upon a Termination  Event or an Event of Default (as defined  therein)
          meaning that the "Defaulting  Party" under that hedging agreement will
          be  entitled  to  receive  payment  under  the  relevant   termination
          provisions if the net replacement value of all terminated transactions
          effected under that hedging agreement is in its favour;


     (g)  Upstreaming:

          (i)  it will take all steps  available to it to ensure that sufficient
               funds are lawfully  (and subject to  compliance  with  applicable
               regulations  including  the  Licences)  upstreamed  (directly  or
               indirectly) to it by the Target Group,  Finco 2 and Bidco (by way
               of dividend or  otherwise)  to ensure that it is able to meet its
               obligations under this Agreement;

          (ii) in particular,  it will take all steps  available to it to ensure
               that an  amount  equal to the  proceeds  of the  Coalco  Disposal
               Agreement  (or as much of such  proceeds  as it is or can be made
               lawful and in compliance  with  regulations as are referred to in
               (i) above to  upstream)  are  lawfully  upstreamed  (directly  or
               indirectly)  from the Target to the Primary  Borrower (and not to
               any  minority  shareholder  in  Finco  2,  unless  such  minority
               shareholder  makes a simultaneous  equity  investment of an equal
               amount  into the  Primary  Borrower,  the  proceeds  of which are
               applied in immediate  prepayment of the  Facilities in accordance
               with  clause  6)  as  soon  as  is   practicable   following  the
               Unconditional  Date,  provided  that  the  Primary  Borrower  may
               refrain from  requiring the  upstreaming  of such proceeds for so
               long as:

               (aa) it does not own 100% of the issued share  capital of Target;
                    and

               (bb) the  Offer is still  open for  acceptance,  and/or  Bidco is
                    still   entitled  to  implement  or  is  in  the  course  of
                    implementing   the  procedures  in  Section  428-30  of  the
                    Companies Act;

     (h)  Insurance:  it will  procure  that each member of the Group  maintains
          insurances  on and  in  relation  to  its  business  and  assets  with
          reputable  underwriters or insurance  companies against such risks and
          to such extent that is usual for companies carrying on a business such
          as that carried on by such member of the Group;


<PAGE>


     (i)  Investment  Agreement:  the Primary  Borrower,  Finco 2 and Bidco will
          comply with their obligations  under the Investment  Agreement save if
          and insofar as they conflict with clause 11.1(f).

10.3 Financial Undertakings

     (a)  Each Obligor party hereto  undertakes with each of the Finance Parties
          that,  from the  Unconditional  Date  and  thereafter  throughout  the
          Finance Period, it will procure that:

          (i)  for each Test Period,  the ratio of EBITDA to Net Interest  Costs
               is not less than 2:1;

          (ii) as at the last day of each Test Period, the Leverage Ratio is not
               more  than  70%  until  and  including  30  September  2000,  and
               thereafter 65%;

          where a Test  Period  commences  prior to the  Unconditional  Date the
          calculation of the Financial Definitions shall be amended so that:

               (aa) for the purposes of calculating Net Interest Costs the whole
                    amount of the Advances drawn down and other  Utilisations as
                    at the end of the  relevant  Test Period  shall be deemed to
                    have been made on the first day of such Test  Period  and no
                    amount in  respect of Net  Interest  Costs  attributable  to
                    Indebtedness  which is  refinanced  in  connection  with the
                    Acquisition shall be brought into account; and

               (bb) for all purposes Coalco will be deemed not to have been part
                    of the Group;

     (b)  Each Obligor party hereto shall procure that:

          (i)  as from the  Unconditional  Date until  such time as Bidco  shall
               have acquired shares carrying the right to vote 75% of each class
               of shares of the Target, the Share Value of all the Target Shares
               acquired and effectively  charged to the Security Agent shall not
               at any time be less than twice the  aggregate of the  outstanding
               Advances (excluding Revolving Credit Advances) at that time;

          (ii) on each Drawdown Date, the sum of:

               (aa) 50% of the Share Value of all the Target  Shares  consisting
                    of American  Depositary  Receipts  acquired and  effectively
                    charged to the Security Agent, plus;

               (bb) the Share  Value of all other  Target  Shares  acquired  and
                    effectively charged to the Security Agent,

               shall not be less than the aggregate of the outstanding Advances;

     (c)  Each of the Primary  Borrower and Finco 2 undertakes  with each of the
          Finance Parties that it will not adopt any accounting policy or change
          the  consistency of application of its accounting  principles from the
          Appropriate Accounting Principles unless:


<PAGE>


          (i)  the revised  policy and practice  adopted from time to time is in
               accordance  with generally  accepted  accounting  practice in the
               United Kingdom, and

          (ii) prior to any  revised  policy  and  practice  being  adopted  the
               Primary  Borrower has notified the Facility Agent thereof and, if
               required by the Facility Agent, will negotiate in good faith with
               the Facility  Agent in order that the Financial  Covenants may be
               amended as required by the  Facility  Agent in order for it to be
               able to make the same  judgments as to the financial  performance
               of the  Group  as it is  able to  under  the  present  accounting
               policy.

          If such  negotiations  are not  concluded to the  satisfaction  of the
          Facility  Agent  within a period of 30 days from the  commencement  of
          such negotiations each of the Primary Borrower and Finco 2 agrees that
          it  will  procure  that  the  Auditors  provide  financial  statements
          reflecting the Appropriate  Accounting Policies,  and any reference in
          this Agreement to financial  statements  under this Agreement shall be
          construed as a reference to such  financial  statements as adjusted to
          reflect the Appropriate Accounting Policies;

     (d)  For the purposes of calculating Net Interests  Costs,  any incremental
          impact of interest rate hedging  transactions or refinancings  entered
          into by the  Primary  Borrower  from time to time  shall be treated as
          varying the Net Interest Costs payable by Finco 2, whether or not they
          actually do so;

     (e)  Each of the Primary  Borrower and Finco 2 undertakes  with each of the
          Finance  Parties  that it will  not  vary or  waive  the  terms of the
          Investment  Agreement,  and  undertakes  to procure that the principal
          amount of the  intercompany  loan from the Primary Borrower to Finco 2
          is not reduced  save by way of amounts  which are repaid by Finco 2 to
          the Primary Borrower and promptly applied by the Principal Borrower in
          repayment  and  permanent  reduction  of sums  outstanding  under  the
          Facilities.

10.4 The Offer

     (a)  The Primary  Borrower,  Finco 2 and Bidco each  undertake with each of
          the Finance  Parties that it shall (or shall procure that Bidco shall,
          as applicable):

          (i)    until the  earlier  of the date the Offer  lapses or is finally
                 closed,  comply in all  material  respects  with the Code,  the
                 Financial   Services  Act  1986  and  the  Act  and  all  other
                 applicable laws and regulations  relevant in the context of the
                 Offer;

          (ii)   provide the Facility Agent with such information  regarding the
                 progress  of  the  Offer  as it  may  reasonably  request  and,
                 provided  no  breach of the Code  would  result,  all  material
                 written advice given to it in respect of the Offer;

          (iii)  not declare the Offer  unconditional  at a level of acceptances
                 below that required by Rule 10 of the Code;

          (iv)   ensure  that at no time  shall  circumstances  arise  whereby a
                 mandatory  offer is  required to be made by the terms of Rule 9
                 of the Code in respect of the Target Shares;


<PAGE>


          (v)  not,  without the prior consent of the  Arrangers  (acting on the
               instructions  of the Majority  Banks),  waive,  amend or agree or
               decide not to enforce, in whole or in part, the conditions of the
               Offer  set  out in  paragraphs  (c)  (Referral)  or  (b)  (Coalco
               Disposal Agreement) of Appendix 1 to the Press Release;

          (vi) not,  without the prior consent of the  Arrangers  (acting on the
               instructions  of the  Majority  Banks),  such  consent  not to be
               unreasonably withheld or delayed, waive, amend (but not including
               extending  the  Offer  period,  which  shall  be at  the  Primary
               Borrower's  discretion  provided  that the Offer is closed within
               the period  required by clause  10.4(f) below) or agree or decide
               not to invoke, in whole or in part, in any material respect,  any
               of the other  material  conditions  of the Offer (and the Primary
               Borrower,   Finco  2  and  Bidco   acknowledge   that  the  total
               Indebtedness of the Target Group requiring to be refinanced,  and
               the amount of any  contingent  liabilities  of the  Target  Group
               which  would  or  might   crystallise  upon  the  Offer  becoming
               unconditional, are material), provided that the Primary Borrower,
               Finco 2 and Bidco  shall not be in breach of this  clause (vi) if
               they fail to invoke a condition of the Offer because the Takeover
               Panel has directed that they may not do so.

     (b)  Each of the  Primary  Borrower,  Finco 2 and  Bidco  acknowledges  and
          confirms  to the  Finance  Parties  that if any event or  circumstance
          occurs which under the  conditions  of the Offer may entitle  Bidco to
          lapse the Offer,  Bidco will promptly notify the Facility Agent and if
          in the  reasonable  opinion  of  the  Majority  Banks  such  event  or
          circumstance  would have a material and adverse  affect on the ability
          of the Borrowers to comply with their material  obligations under this
          Agreement (or the adequacy of the facilities available for refinancing
          indebtedness  or  other  liabilities  of the  Target  Group)  and  the
          Facility  Agent acting on the  instructions  of the Majority  Banks so
          requests,  Bidco will promptly seek the consent of the Takeover  Panel
          to lapse the Offer.  If the Takeover Panel consents to Bidco's lapsing
          the Offer in the light of such event or circumstance, Bidco shall then
          lapse the Offer promptly.

     (c)  Each  of the  Primary  Borrower,  Finco 2 and  Bidco  shall  keep  the
          Arrangers informed and consult with them as to:

          (i)    the terms of any undertaking or assurance  proposed to be given
                 by it, any of its  Affiliates or any member of the Target Group
                 to the Director General,  the Director General of Gas Supply or
                 the  Secretary  of State for Trade and  Industry in  connection
                 with the Offer;

          (ii)   the terms of any  modification to any of the Licences  proposed
                 in connection with the Offer;

          (iii)  any terms  proposed in  connection  with any  authorisation  or
                 determination  necessary or appropriate in connection  with the
                 Offer;

          If the Majority Banks (acting  reasonably) state that in their opinion
          such proposed  undertakings(s),  assurance(s),  modification(s) and/or
          term(s),  or  compliance  therewith,  would  materially  and adversely
          affect  the  ability  of  the  Group  to  comply  with  its   material
          obligations under the Finance Documents,  Bidco shall promptly request
          the Takeover Panel to confirm (and shall use its reasonable endeavours
          to ensure that the  Takeover  Panel does  confirm)  that the  Takeover
          Panel will not object to the lapsing of


<PAGE>


          the  Offer as a result of the  non-satisfaction  of  whichever  of the
          conditions  in Appendix 1 to the Press  Release is relevant,  provided
          that  Bidco  will not be obliged to lapse the Offer as a result of any
          proposed  modifications of any Licence or any proposed undertakings or
          assurances from the Primary Borrower,  Finco 2, Bidco or any member of
          the  Target  Group to be given to the  Director  General to the extent
          that such  modifications,  undertakings or assurances (as the case may
          be) are no more  onerous  than  those  set  out  and  required  by the
          Director General from Pacificorp and/or the Target Group in accordance
          with the terms of the Monopolies and Mergers  Commission  Report dated
          19 December 1997 into the original Pacificorp offer for the Target. If
          the Takeover Panel gives a confirmation  substantially in those terms,
          Bidco shall at the  earliest  opportunity  declare the Offer lapsed by
          reason of the non- fulfilment of such condition(s).

     (d)  Each of the  Primary  Borrower,  Finco 2 and  Bidco  acknowledges  and
          confirms to the Finance  Parties  that the Offer,  or an  accompanying
          circular to  shareholders  of the Target,  should also contain a super
          class one resolution to be passed by the  shareholders  of the Target,
          seeking  approval of the completion of the Coalco  Disposal  Agreement
          with  effect on and from the  Unconditional  Date.  Where the  context
          permits,  all  references in this  Agreement (and in the Offer) to the
          Offer being accepted and/or becoming  unconditional shall be construed
          to include such approval being granted.

     (e)  Each of the  Primary  Borrower,  Finco 2 and Bidco  undertakes  to the
          Finance  Parties that within 15 days of the date on which  acceptances
          of the Offer are  received  from  holders  of not less than 90% of the
          Target Shares to which the Offer  relates,  Bidco shall procure that a
          director of Bidco issues a statutory  declaration  pursuant to section
          429(4) of the  Companies  Act  1985,  gives  notice  to all  remaining
          holders of the Target  Shares that it intends to acquire  their shares
          pursuant to section  429 of the  Companies  Act 1985,  and Bidco shall
          subsequently purchase all such shares.

     (f)  Each of the  Primary  Borrower,  Finco 2 and Bidco  undertakes  to the
          Finance Parties that Bidco shall in any event give notice to close the
          Offer no later than 120 days after the date of this Agreement,  unless
          the  Arrangers  agree in their  absolute  discretion  to  extend  such
          period.

10.5 Delisting

     Each of the Primary  Borrower,  Finco 2 and Bidco undertakes to the Finance
     Parties to procure that, as soon as legally and practically  possible after
     the Unconditional  Date, the American  Depositary Shares represented by the
     American  Depositary  Receipts  tendered to Bidco shall be  converted  into
     ordinary shares of the Target or otherwise held in form satisfactory to the
     Security  Agent,  the Target shall be removed from the Official List of the
     London Stock Exchange Limited and reregistered as a private company and its
     American  Depositary  Shares  shall be  delisted  from  the New York  Stock
     Exchange.


<PAGE>


11.  NEGATIVE UNDERTAKINGS

11.1 Negative undertakings

     Each Obligor party hereto  undertakes with each of the Finance Parties that
     throughout  the Finance  Period (but subject to clause  11.2),  without the
     prior written  consent of the Facility Agent acting on the  instructions of
     the Majority Banks:

     (a)  Negative  pledge:  it will not permit,  and will procure that no other
          member of the Group will permit,  any  Security  Interest by it or any
          other member of the Group to subsist,  arise or be created or extended
          over  all  or  any  part  of  their   respective   present  or  future
          undertakings,  assets,  rights  or  revenues,  save for any  Permitted
          Security Interest;

     (b)  No other Borrowed  Money: it will not, and will procure that no member
          of the  Group  will,  incur  or  permit  to exist  on its  behalf  any
          obligations  in respect of Borrowed Money  (excluding any  guarantees,
          indemnities  or other forms of  assurance  against  financial  loss in
          respect of Borrowed  Money,  which are  referred to in clause  11.1(d)
          below) to any person except:

          (i)    the Facilities;

          (ii)   the Loan Notes;

          (iii)  Borrowed  Money  owed by any  member  of the  Group to  another
                 member of the Group;

          (iv)   Borrowed Money incurred  under the hedge  transactions  entered
                 into pursuant to clause  10.2(f)  and/or clause (l) of Schedule
                 3, Part A or any other  transaction  entered  into to hedge the
                 transactions referred to in such clause (l);

          (v)    Borrowed  Money to the extent  secured  by a Security  Interest
                 permitted  by  paragraphs  (c)  (d)  (e)  (f)  and  (l)  of the
                 definition of Permitted Security Interest, but only for so long
                 as such Security Interest remains a Permitted Security Interest
                 and, with respect to paragraph (l) only, secures Borrowed Money
                 which  is  intended  to  be a  temporary  bridging  loan  to be
                 refinanced by a Project Finance Borrowing;

          (vi)   Borrowed  Money  incurred to repay and discharge the Facilities
                 in full;

          (vii)  Borrowed Money of the Target Group as at the Unconditional Date
                 (and refinancings thereof) provided that:

                 (aa) each  refinancing  extends  the  tenor  of the  refinanced
                      amount to beyond the Final Repayment Date; and

                 (bb) all  refinancings  shall  be  of  a  like  nature  to  the
                      Indebtedness  or facility being  refinanced or shall be by
                      way of capital markets  instruments which are of a similar
                      nature to the Target Group's existing  instruments  having
                      regard  to  market  conditions  and  the  issuer's  credit
                      status, or are structurally or contractually  subordinated
                      to  the   Facilities   and  the  Guarantees  in  a  manner
                      satisfactory  to the Majority  Banks (acting  reasonably);
                      and

                 (cc) any new  facilities for Borrowed Money entered into by the
                      Target Group  between the date of this  Agreement  and the
                      Unconditional Date


<PAGE>


                      (except the REC's  facility  referred  to in clause  24.5)
                      shall be  cancelled  and repaid in full within 180 days of
                      the Unconditional Date;

          (viii) provided that as a result of Borrowed Money incurred under this
                 paragraph (viii) the outstanding Advances under the Acquisition
                 Facility  would  be not more  than(pound)1,011,000,000  and the
                 total  Borrowed  Money  in  the  Primary  Borrower   (excluding
                 Borrowed  Money  which is  subordinated  to the  Facilities  as
                 referred      to     in     (ix)      below)      would     not
                 exceed(pound)1,611,000,000,  Borrowed  Money may be incurred by
                 way of a Permitted  Capital  Markets  Instrument  issued by the
                 Primary Borrower  provided that the proceeds are applied solely
                 to repay or prepay all or any part of the Facilities.

                 If the  Primary  Borrower  shall  exercise  its rights to incur
                 Borrowed  Money  and  repay  or  prepay  all  or  part  of  the
                 Facilities  under and in  compliance  with  this  sub-paragraph
                 (viii) and no  Default  has  occurred  and is  continuing,  the
                 Facility  Agent and the Security Agent shall permit the lenders
                 under the relevant  Permitted  Capital  Markets  Instrument (in
                 this  clause,  the  "New  Capital  Markets  Lenders")  to  take
                 security  over  the  shares  in  Finco  2 held  by the  Primary
                 Borrower and by the Minority Shareholder (in terms satisfactory
                 to the Majority Banks) and shall execute a pari passu agreement
                 with the New Capital Markets Lenders (in terms  satisfactory to
                 the Majority Banks) agreeing that the Finance  Parties' and the
                 New Capital Markets  Lenders'  security over the Finco 2 shares
                 shall rank pari  passu,  and in  addition  the  Facility  Agent
                 acting on the instructions of the Majority Banks shall elect in
                 its discretion which of the following alternatives it wishes to
                 occur so as to put the New  Capital  Markets  Lenders in a pari
                 passu position with the Finance Parties:

                 (aa) the  Security  Agent  to  release  all  of  the  remaining
                      guarantees  and security  constituted by the Debenture and
                      the  Guarantees,  save for the Finance  Parties'  security
                      over the Finco 2 shares referred to above; or

                 (bb) the  Security  Agent to retain all or part of the security
                      and guarantees  referred to in (aa) above,  but permit the
                      New Capital  Markets  Lenders to take  identical  security
                      and/or  guarantees  to that retained and to execute a pari
                      passu   agreement  with  the  Finance  Parties  (on  terms
                      satisfactory  to the  Majority  Banks)  agreeing  that the
                      guarantees and/or security held by the Finance Parties and
                      the New Capital Markets Lenders shall rank pari passu;

          (ix)   to the extent  that it is  necessary  to repay the  outstanding
                 Interim  Advances  under clause 6.1(b),  or prepay  Acquisition
                 Advances  under  clause 6.2 but the Primary  Borrower is either
                 unable or elects not to meet such payments by upstreaming  Coal
                 Proceeds, Borrowed Money incurred which is contractually and/or
                 structurally subordinated to the Facilities and Guarantees in a
                 manner satisfactory to the Majority Banks;

          (x)    contracts for  differences and contracts to hedge commodity and
                 energy related  exposures and positions in the ordinary  course
                 of trading;

          (xi)   in respect of the  Target,  Borrowed  Money in addition to that
                 permitted by sub-clauses (i) to (x) above, provided that:


<PAGE>


                 (aa) the Target has provided a guarantee to the Security  Agent
                      in  respect  of all of the  obligations  of the  Borrowers
                      hereunder; and

                 (bb) such  Borrowed  Money  would not result in a breach of the
                      Leverage  Ratio  if it  were  added  to  Consolidated  Net
                      Borrowings  as at the end of the  last  Test  Period  (and
                      calculating  the  Leverage  Ratio  taking into account any
                      assets  acquired  with  such  Borrowed  Money),   and  the
                      Leverage Ratio was recalculated;

          (xii)  Borrowed Money arising under the Standby Credit  Facility dated
                 28  October,  1996 to the  extent  that it is used to fund  the
                 consideration  payable  by any  third  party  to  acquire  rent
                 participations  under and in accordance with the  documentation
                 (as amended in July 1998) relating to the Deed of Assignment of
                 Rents dated 28th October, 1996;

     (c)  Disposals:  it shall  procure  that  neither  it nor any member of the
          Group  will,  either  in  a  single  transaction  or  in a  series  of
          transactions,  whether  related  or not  and  whether  voluntarily  or
          involuntarily,  sell, factor, discount, transfer, licence, lend, grant
          or lease or otherwise dispose of:

          (i)  any shares in Finco 2, Bidco, any Target Shares and any shares in
               REC or in any holding company thereof; or

          (ii) all or any part of the assets or  undertaking of the Target Group
               (except the assets  referred to in  paragraph  (i) above),  other
               than:

               (aa) to another member of the Group;

               (bb) pursuant to the Coalco Disposal Agreement;

               (cc) disposals in the ordinary course of trading;

               (dd) disposals of obsolete or redundant plant and equipment;

               (ee) other  disposals  to third  parties on arm's  length  terms,
                    provided that the  consideration for such disposals does not
                    exceed  (pound)50,000,000  in aggregate for the Group in any
                    financial year;

               (ff) in any financial year,  disposals of assets by any member of
                    the Target Group,  (1) the gross value of which  (based,  in
                    relation to a disposal  occurring  before the first delivery
                    of any annual  audited  accounts in  accordance  with clause
                    10.1(b),  on the annual  audited  accounts in respect of the
                    financial  year to 31  December  1997 and,  in  relation  to
                    disposals occurring thereafter,  on the audited consolidated
                    accounts of the Target Group most recently  delivered to the
                    Facility  Agent) when aggregated with all other disposals by
                    each member of the Target Group during such  financial  year
                    not permitted by any other paragraph of this clause 11.1(c),
                    does not exceed an amount  equal to 10% of the  consolidated
                    gross  assets of the  Target  Group as shown in such  annual
                    audited  consolidated  accounts  (excluding  Coalco  and its
                    Subsidiaries)


<PAGE>


                    and  (2) in  respect  of  which  the  net  proceeds  of such
                    disposal  will be  applied  (A)  within  one  year of  their
                    receipt in or towards acquiring for any member of the Target
                    Group assets of a type ordinarily  employed in the operation
                    of  any  business  permitted  by  clause  11.1(i)  or (B) in
                    prepayment of any Acquisition  Advance or Interim Advance in
                    accordance with clause 6.6;

               (gg) disposals  constituting  the creation of Permitted  Security
                    Interests;

               (hh) securitisations of receivables of the REC in accordance with
                    the REC's securitisation  programme in existence at the date
                    of this Agreement (or comparable programme(s)) Provided that
                    the amount advanced against the billed,  unbilled and future
                    flow receivables in such programmes at any one time does not
                    exceed   (pound)400,000,000   in   aggregate   in  all  such
                    programmes; or

               (ii)  other disposals where the proceeds are upstreamed  promptly
                     to the Primary Borrower and used in repayment or prepayment
                     of the Advances in accordance with clause 6.6;

          (d)  Restriction on Guarantees: it shall not and shall procure that no
               other  member  of the  Group  shall  give  any  guarantee  (which
               includes  an  indemnity  or  other  form  of  assurance   against
               financial loss), except:

               (i)    where the  guarantee  is given by a member of the Group in
                      connection  with cash  management  and netting  facilities
                      extended to the Group by a bank or  financial  institution
                      in the normal course of business; or

               (ii)   any  guarantee,  indemnity,  letter of  credit or  similar
                      assurance   against  financial  loss  under  any  Relevant
                      Arrangements;

               (iii)  guarantees in favour of the Finance Parties;

               (iv)   guarantees of Borrowed Money or other obligations of other
                      members of the Group, where such guarantees are already in
                      existence  as  at  the   Unconditional   Date   (including
                      guarantees  given by the same  guarantor  companies as had
                      previously  guaranteed the relevant  obligation in respect
                      of a new  obligation  which  refinances  or  replaces  the
                      existing  obligation) provided that any such guarantees of
                      Borrowed  Money  entered  into  between  the  date of this
                      Agreement and the  Unconditional  Date shall be discharged
                      and  released  within 180 days of the  Unconditional  Date
                      (unless  the   guarantee   was  created   pursuant  to  an
                      obligation existing as at the date of this Agreement);

               (v)    any guarantee  permitted under clause  11.1(b)(xi)(aa)  or
                      clause 11.1(b)(viii)(bb);

               (vi)   any other  guarantees given with the prior written consent
                      of the Majority Banks;

               (vii)  any guarantees  given in respect of Borrowed Money falling
                      within  clause  11,1(b)(v)  by virtue of the  reference to
                      paragraph (l) of the Permitted Security


<PAGE>


                      Interest  definition (or prospective  liabilities which on
                      being  drawn  down,  would fall under that  heading)  of a
                      member of the Group (which is intended to become a Project
                      Finance  Subsidiary)  for so long  as it is not a  Project
                      Finance Subsidiary and the potential liabilities which are
                      secured  by such  guarantees,  when  aggregated  with  any
                      amount of Borrowed  Money which is permitted  under clause
                      11.1(b)(v) by virtue of the reference in clause 11.1(b)(v)
                      to  paragraph  (l)  of  the  Permitted  Security  Interest
                      definition (but without double  counting) would not exceed
                      the limit set out in that paragraph (l);

               (viii) any  guarantee  permitted  from time to time in accordance
                      with clause 11.1(g)(iii) or (iv);

               (ix)   guarantees  not  exceeding  $147,000,000  in  aggregate in
                      favour of the Pension Benefit Guaranty Corporation;

               (x)    any  guarantee  given  in  connection  with   cross-border
                      leasing  arrangements  in  relation  to  the  King's  Lynn
                      generating  facility  owned by a member  of the  Group and
                      which is constituted by or relates to:

                      (aa) the payment of rental amounts or termination  amounts
                           by any person  pursuant to such  arrangements  to the
                           extent  that  the   obligations   of  the   person(s)
                           primarily liable for such amounts are  collateralised
                           in full by means of  investments  in US Treasury zero
                           coupon bonds and/or cash  deposited  with a financial
                           institution  rated AA or higher by  Standard & Poor's
                           Rating Group and/or Aa2 or higher by Moody's Investor
                           Services Group;

                      (bb) the payment of termination  amounts (other than those
                           permitted to be guaranteed by virtue of (aa) above or
                           (cc)   below)  by  any   person   pursuant   to  such
                           arrangements  or  any  obligation  of any  person  to
                           reimburse or  counterindemnify  an issuer of a letter
                           of credit  to the  extent  that the  letter of credit
                           secures such  termination  amounts  Provided that the
                           maximum aggregate amount of such termination  amounts
                           does not exceed US$125 million;

                      (cc) the  payment  of any  other  termination  amount  not
                           otherwise  permitted to be  guaranteed  under (aa) or
                           (bb) above to the extent  such  amount  arises from a
                           reduction in the value of the US Treasury zero coupon
                           bonds  referred  to in (aa)  above  on  account  of a
                           fluctuation in US interest rates; and/or

                      (dd) the guaranteeing of indemnity  obligations  customary
                           in finance lease transactions  and/or which relate to
                           the continued  possession and operation by any member
                           of the Group of the King's Lynn generating facility.

               (xi)   guarantees   in  respect  of  the   payment  of  fees  and
                      indemnities  in respect of  liabilities,  losses or claims
                      and any costs and expenses  arising,  suffered or incurred
                      in connection  with the amendment and waiver in July 1998,
                      as a result of the  Acquisition,  of certain  terms of the
                      rent factoring transaction governed


<PAGE>


                      by the Deed of  Assignment  of Rents dated 28 October 1996
                      and the documentation relating thereto; and

               (xii)  guarantees  given with respect to Borrowed Money permitted
                      under Clause 11.1(b)(xii).

          (e)  The Licences: it shall procure that each Licensee will:

               (i)    take all  appropriate  steps  efficiently  to perform  and
                      discharge  the  duties and  functions  of a  generator  of
                      electricity  or,  as the case may be,  public  electricity
                      supplier  in  accordance   with  the   provisions  of  the
                      Electricity Act and, in particular, to comply with:

                      (aa) the terms and conditions of the Licence;

                      (bb) the  provisions  of  any  final  order  or  confirmed
                           provisional order made under the Electricity Act; and

                      (cc) all Licence  Undertakings given by it to the Director
                           General  and/or the  Secretary of State in respect of
                           the  matters  referred  to in  Section  25(5)  of the
                           Electricity Act;

               (ii)   not consent to any  amendment to the terms and  conditions
                      of the Licence if that  amendment is reasonably  likely to
                      have a Material Adverse Effect;

               (iii)  not consent to any  revocation of the Licence except where
                      a replacement  Licence is to be granted to a member of the
                      Group in its place;

               (iv)   promptly inform the Facility Agent of any material Licence
                      Undertakings  given by it or any Affiliate to the Director
                      General,  and/or the  Secretary of State and  subsequently
                      comply with its terms;

               (v)    promptly supply to the Facility Agent:

                      (aa) certified  copies of all notices or orders  served on
                           it by the Director  General or the Secretary of State
                           in  exercise  of the powers  conferred  on him by the
                           Electricity Act;

                      (bb) details  of  any  references  to the  Monopolies  and
                           Mergers Commission; and

                      (cc) details of the exercise or purported  exercise by the
                           Secretary  of State or the  Director  General  of the
                           powers conferred on him by the Fair Trading Act 1973,
                           the  Competition  Act 1980  and/or  Section 12 of the
                           Electricity Act;

               (vi)   ensure that all times the Licensee has sufficient  working
                      capital to finance the  performance  and  discharge of its
                      duties as a generator of  electricity  or, as the case may
                      be, public  electricity  supplier,  in accordance with the
                      provisions  of the  Electricity  Act  and  the  terms  and
                      conditions of any Licence; and


<PAGE>


               (vii)  not permit any person  other than a member of the Group to
                      perform or manage on its behalf any of its  functions as a
                      public electricity supplier, as set out in any Licence and
                      the Electricity Act;

          (f)  Dividend payments: neither the Primary Borrower nor Finco 2 will:

               (i)    redeem or purchase any of its shares or  otherwise  reduce
                      its share capital,  or declare or pay (including,  without
                      limitation, by way of set-off,  combination of accounts or
                      otherwise) any dividend or make any other  distribution or
                      payment  (whether  in cash or in  specie),  including  any
                      interest and/or unpaid  dividends,  to its shareholders or
                      their Affiliates for the time being; or

               (ii)   make any payment (including, without limitation, by way of
                      set-off, combination of accounts or otherwise) of interest
                      or principal, or make any other payment, in respect of any
                      loan stock or  similar  instrument  issued by the  Primary
                      Borrower or Finco 2 (other than payments in respect of the
                      intercompany  loan from the  Primary  Borrower  to Finco 2
                      referred to in the Investment Agreement),

               unless:

                      (aa) the Primary  Borrower or, as the case may be, Finco 2
                           has  notified  the  Facility  Agent in writing of the
                           proposed  payment or distribution at least 15 days in
                           advance of the proposed payment date; and

                      (bb) to  the  extent  that  the  most   recent   financial
                           statements  provided  to  the  Facility  Agent  under
                           clause  10.1(b)(ii)  and the  accompanying  financial
                           covenant compliance  certificates confirm in a manner
                           satisfactory    to   the   Facility   Agent   (acting
                           reasonably)  that there is no breach of the  Leverage
                           Ratio covenant, and there would still be no breach of
                           the  Leverage  Ratio  covenant  as at the  end of the
                           financial   Quarter  if  the   proposed   payment  or
                           distribution (and any related advance corporation tax
                           or similar  tax) was  deducted  from  Adjusted  Share
                           Capital  and  Reserves  at the end of such  preceding
                           Quarter  and  if  Consolidated   Net  Borrowings  was
                           increased to reflect any increase in Consolidated Net
                           Borrowings  since the end of the  preceding  Quarter,
                           and the relevant financial covenant recalculated; and

                      (cc) no Default has occurred and is continuing; and

                      (dd) Bidco holds at least 90% of the Target Shares;

          (g)  Contracts and arrangements  between the Group and the Parent:  it
               will  not,  and will  procure  that no other  member of the Group
               will,  enter into any  arrangement or contract with the Parent or
               any of its  Subsidiaries or Affiliates (not being a member of the
               Group), or any Project Finance  Subsidiaries,  save for contracts
               entered into on an arm's  length basis in the ordinary  course of
               trade  (and in any event  neither  it nor any member of the Group
               will make any loan to or give any  guarantee  in  respect  of the
               Parent or any of its  Subsidiaries  or  Affiliates  (not  being a
               member of the  Group) or  Project  Finance  Subsidiaries)  except
               that:


<PAGE>


               (i)  the Primary  Borrower  may provide  loans to Bidco to enable
                    Bidco to at any time after the  Unconditional  Date repay to
                    the Parent the Excess Equity Funding; or

               (ii) any member of the Group may make  equity  investments  in or
                    loans to Project  Finance  Subsidiaries if and to the extent
                    such loans or equity  investments  are financed  directly or
                    indirectly by further equity subscribed by the Parent and/or
                    the Minority  Shareholder or subordinated loans permitted in
                    accordance with clause 11.1(b)(ix) made by the Parent and/or
                    the Minority Shareholder to the Primary Borrower or Finco 2;
                    or

               (iii) to the extent that:

                     (aa) the  conditions  in  clause  11.1(f)(aa)  to (dd)  are
                          satisfied, and

                     (bb) neither  the Primary  Borrower  nor Finco 2 is able to
                          make  any  payment  or   distribution   under   clause
                          11.1(f)(i) or (ii) in a sufficient amount,

                    any member of the Group may give any guarantee in respect of
                    the obligations of or make any loan to or equity  investment
                    in a Project  Finance  Subsidiary to finance any  particular
                    project  identified  in  Schedule  9 up to a maximum  amount
                    equal to 20% of the identified total investment  required as
                    set out in Schedule 9 alongside  the name of the  particular
                    project  provided  that any such  guarantee,  loan or equity
                    investment is to be used only for that project (and no other
                    project);

               (iv) any member of the Group may give any  guarantee  or make any
                    loan to or equity investment in a Project Finance Subsidiary
                    to the  extent  that at the time the  conditions  in  clause
                    11.1(f)(aa) to (dd) are satisfied and such  guarantee,  loan
                    or equity  investment  does not  exceed the  maximum  amount
                    available  to the Primary  Borrower  and Finco 2 to make any
                    payment or distribution under clause 11.1(f)(i) or (ii),

               Provided that any payment or  distribution  otherwise  capable of
               being made under and for the  purposes  of clause  11.1(f)(i)  or
               (ii) or  capable of being  utilised  for the  purposes  of clause
               11.1(g)(iii)  or (iv) shall be  reduced  (a) by the amount of any
               outstanding  guarantee,  loan or equity  investment made or given
               and  permitted  under  clauses  11.1(g)(iii)  or (iv) and (b) the
               amount (if any) of the Coal Proceeds which have been  distributed
               to the Borrower by way of dividend.

          (h)  Amalgamation  and merger:  it will not,  and will procure that no
               other  member of the Group  will,  amalgamate  or merge  with any
               other  company or person  (other than intra- Group or if a member
               of the Group is the  surviving  corporation,  and such  merger or
               amalgamation would not result in an Event of Default);

          (i)  Change in  business:  it will not,  and will ensure that no other
               member of the Group will,  carry on any business other than those
               which are usual for  electricity  companies in the United Kingdom
               including, without limitation,  electricity distribution,  supply
               and generation and energy trading and business activities related
               to the gas,  telecommunications  and water  industries.  Provided
               that the  limitation  of business  activities  contained  in this
               clause 11.1(i) will not apply to any other business activities


<PAGE>


               carried on by members of the Group as long as such other business
               activities  do not in aggregate  account for more than 10% of the
               consolidated gross assets or gross revenues of the Group;

          (j)  Primary  Borrower,  Finco 2 and Bidco business and  Subsidiaries:
               the  Primary  Borrower,  Finco 2 and  Bidco  will  not  (save  as
               permitted  under clause 11.1(g)) (i) carry on any business or own
               any material  assets other than their  shareholdings  in Finco 2,
               Bidco and the Target  respectively,  intra-group  credit balances
               and credit  balances in bank  accounts  (which shall be held with
               the Security  Agent or as it directs),  (ii) establish or acquire
               any company or other entity or (iii) incur any liabilities  other
               than in connection with this Agreement and the Acquisition;

          (k)  Target  Group  Acquisitions:  the Primary  Borrower,  Finco 2 and
               Bidco shall  procure that the Target and its  Subsidiaries  shall
               not  acquire  any  business,  assets or shares  without the prior
               written consent of the Majority Banks, save for:

               (i)      where  the  business,  assets or  shares  acquired  fall
                        within the  Group's  general  business as  described  in
                        subclause  11.1(i)  above   (disregarding  the  business
                        activities  referred to in the  proviso to that  clause)
                        and are subject to regulation by a Government  Entity as
                        to  pricing  and  operations,  or  constitute  any other
                        business  within the limits  permitted by the proviso to
                        subclause 11.1(i) above;

               (ii)     acquisitions  by Project Finance  Subsidiaries  where no
                        funds or assets of, or other  financial  support by, the
                        Primary  Borrower,  Bidco or any member of the Group are
                        invested  in,  lent  to or  otherwise  provided  to such
                        Project Finance  Subsidiary in connection with or at any
                        time after the  acquisition,  save as provided by clause
                        11.1(g); and

               (iii)    acquisitions by Project Finance  Subsidiaries  where any
                        equity  investment or  subordinated  debt required to be
                        invested in the Project  Finance  Subsidiary is obtained
                        by the Project Finance Subsidiary from third parties (or
                        the Parent) and not from resources of the Group, save as
                        provided by clause 11.1(g);

               (iv)     acquisitions  by members of the Group which are intended
                        to become Project  Finance  Subsidiaries,  provided that
                        the  financing  for any such  acquisition  complies with
                        sub-paragraphs 11.1(b)(v) and 11.1(d)(vii).

          (l)  Treasury  Transactions:  it will not,  and will  procure  that no
               other  member  of the  Group  will,  enter  into any  Derivatives
               Transactions,  save for hedging financial  exposures of the Group
               arising  in the  ordinary  course  of  business  and the  hedging
               agreements  contemplated  by clause  10.2(f)  and  clause  (l) of
               Schedule 3, Part A or any other transaction entered into to hedge
               the transactions referred to in such clause (l); and

          (m)  Regulations  G, T, U and X: it will not use the Facilities or the
               proceeds of the Facilities in  contravention of Regulations G, T,
               U or X of the Board of Governors of the Federal Reserve System of
               the United States of America.

11.2 Application to Target Group

     No  covenant  or  undertaking  (except the  financial  covenants  in clause
     10.3(a)) shall apply to the Target Group until the Takeover Operative Date,
     but the Primary Borrower, Finco 2 and Bidco


<PAGE>


     shall use all commercially reasonable endeavours to procure that the Target
     Group is run as if the covenants and undertakings in this Agreement applied
     to it as from the Unconditional Date.

12.  EVENTS OF DEFAULT

12.1 Events of Default

     Each of the  events set out below is an Event of  Default  (whether  or not
     caused by any reason whatsoever outside the control of any Relevant Company
     (or any other person)) namely if:

     (a)  Non-payment:  any Borrower or Obligor fails to pay any sum due from it
          under  any of the  Finance  Documents  on its due  date in the  manner
          stipulated in the relevant  Finance  Document (or within three Banking
          Days of the due date if the delay is caused by technical  difficulties
          or administrative error in the transfer of funds); or

     (b)  Breach of certain  obligations:  any Borrower or other Obligor commits
          any breach or omits to observe any of the  obligations or undertakings
          expressed  to be  assumed  by it under  clause  10.3,  10.4,  11.1(a),
          11.1(f) or 11.1(i); or

     (c)  Breach of other obligations: any Borrower or other Obligor commits any
          breach of or omits to observe any of the  obligations or  undertakings
          expressed  to be  assumed  by it under  any of the  Finance  Documents
          (other than any such  obligations  referred  to in clause  12.1(a) and
          (b)) and in  respect  of any such  breach or  omission  which,  in the
          reasonable  opinion of the Majority Banks, is capable of remedy,  such
          action as shall remedy the same to the reasonable  satisfaction of the
          Majority  Banks  shall  not  have  been  taken  within  21 days of the
          relevant Obligor becoming aware of such default; or

     (d)  Misrepresentation:  any representation,  warranty or statement made or
          deemed to be made or repeated by or on behalf of any Borrower or other
          Obligor in, or in connection with, any of the Finance  Documents or in
          any  notice,  accounts,  certificate  or  statement  referred to in or
          delivered under any of the Finance Documents is or proves to have been
          incorrect  or  misleading  and if  capable of being  remedied,  in the
          reasonable  opinion of the  Majority  Banks,  is not  remedied  to the
          reasonable  satisfaction  of the Majority Banks 21 days after the date
          on  which  the  relevant   Group   Company   becomes   aware  of  such
          misrepresentation; or

     (e)  Cross-default:

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

          (ii)  any  Borrowed  Money of a member  of the  Group is  declared  or
                becomes  capable  of being  declared  (by  reason of an event of
                default  or  default  howsoever  described)  to be or  otherwise
                becomes due and payable prior to its specified maturity; or

          (iii) any  Borrowed  Money of a member of the Group which is repayable
                on demand is not repaid on demand being made,


<PAGE>


               in  circumstances  where, in all or any of the above  paragraphs,
               the Borrowed  Money  amounts in aggregate at any one time to more
               than  (pound)20,000,000  or its  equivalent in other  currencies,
               unless the Borrowed  Money  concerned  is being  disputed in good
               faith and the Primary  Borrower has shown to the Facility Agent's
               satisfaction  (acting  reasonably)  that  it  has  adequate  cash
               reserves  to pay that  Borrowed  Money and its other  outstanding
               debts; or

     (f)  Legal  process:  (without  prejudice  to any other  provision  of this
          Agreement)  any  final  judgment  or  order  in  an  amount  exceeding
          (pound)2,000,000  (or its equivalent in other currencies) made against
          any Relevant  Company is not stayed or complied with or paid within 28
          days (or in the case of  payments,  when due (if later)) or a creditor
          attaches  or  takes   possession   of,  or  a   distress,   execution,
          sequestration  or other process is levied or enforced upon or sued out
          against, any part of the undertakings,  assets,  rights or revenues of
          any  Relevant  Company  with a book value or market value in excess of
          (pound)2,000,000 and is not discharged or stayed within 14 days; or

     (g)  Insolvency: any Relevant Company (i) is deemed unable to pay its debts
          in  accordance  with  Section  123(1)(a),  (b)  or  (e)  or (2) of the
          Insolvency Act 1986 unless,  in the case of Section  123(1)(a) only, a
          statutory  notice has been  withdrawn,  stayed or dismissed  within 14
          days or (ii) is unable generally to pay its debts as they fall due; or

     (h)  Administration:  (i) any meeting of any  Relevant  Company is convened
          for  the  purpose  of   considering   any  resolution  to  present  an
          application  for  an  administration  order  or  (ii)  a  petition  on
          administration  order is  presented  to the Court in  relation  to any
          Relevant  Offeror  Company or (iii) a petition  for an  administration
          order in relation to any other  Relevant  Company is  presented to the
          court or an  administration  order is sought of the court on the basis
          of an  undertaking to  subsequently  present a petition which is being
          contested  by the  Relevant  Company in good  faith  with  appropriate
          proceedings  diligently pursued,  and is not discharged within 21 days
          or (iv)  any  Relevant  Company  passes a  resolution  to  present  an
          application for an administration order or (v) an administration order
          is made in relation to any Relevant Company; or

     (i)  Compositions etc: any steps are taken, or negotiations  commenced,  by
          any  Relevant  Company  or by  any  of its  creditors  with a view  to
          proposing any kind of composition,  scheme of arrangement,  compromise
          or  arrangement,  in each case  involving  such company and any of its
          creditors; or

     (j)  Appointment of receivers and managers: (i) any administrative or other
          receiver or any manager is appointed  of any  Relevant  Company or any
          material part of its assets and/or  undertaking  or (ii) the directors
          of any Relevant  Company request any person to appoint such a receiver
          or manager or (iii) any other steps are taken to enforce any  Security
          Interest   over  all  or  any  material  part  of  the  assets  and/or
          undertakings of any Relevant Company; or

     (k)  Winding up: (i) any meeting of any  Relevant  Company is convened  for
          the purpose of considering any resolution for (or to petition for) its
          winding up or (ii) any Relevant  Company passes such a resolution;  or
          (iii) any  person  presents  any  petition  for the  winding up of any
          Relevant  Company (not being a petition which the Primary Borrower can
          demonstrate  to the  satisfaction  of the Facility  Agent is frivolous
          vexatious  or an  abuse  of the  process  of the  court)  which is not
          discharged  within 14 days or (iv) an order for the  winding up of any
          Relevant  Company is made,  not (in any case) being a 


<PAGE>


          winding-up  of a  Subsidiary  of the  Primary  Borrower  involving  an
          amalgamation  or  reorganisation  on a  solvent  basis  which has been
          approved in advance by the Facility Agent (acting reasonably); or

     (l)  Dissolution:  any corporate,  legal or administrative  proceedings are
          commenced by any person (including,  without limitation, the Registrar
          of Companies) with a view to the dissolution of any Relevant  Company,
          not being a dissolution involving an amalgamation or reorganisation on
          a solvent  basis which has been  approved  in advance by the  Facility
          Agent (acting reasonably); or

     (m)  Analogous  proceedings:  there  occurs,  in relation  to any  Relevant
          Company,  in any country or  territory in which any of them carries on
          business  or to the  jurisdiction  of whose  courts  any part of their
          assets is subject,  any event which, in the reasonable  opinion of the
          Majority  Banks,  appears in that country or  territory to  correspond
          with,  or have an effect  equivalent  to,  any of those  mentioned  in
          clauses 12.1(f) to (l) (inclusive) or any Relevant  Company  otherwise
          becomes subject, in any such country or territory, to the operation of
          any law relating to insolvency, bankruptcy or liquidation; or

     (n)  Cessation of business:  other than in relation to a disposal permitted
          under this  Agreement,  any  Relevant  Company  suspends  or ceases or
          threatens to suspend or cease to carry on its business; or

     (o)  Change of Control:

          (i)   Bidco  ceases to be a wholly owned  subsidiary  (as that term is
                used in section 736 of the Act) of Finco 2; or

          (ii)  Finco 2 ceases to be a wholly  owned  Subsidiary  of the  Parent
                (other than as permitted by paragraph  (iii) below) and at least
                a 90% owned direct subsidiary of the Primary Borrower; or

          (iii) less than 100% (until the first anniversary of the Unconditional
                Date) or 75% (until the second  anniversary of the Unconditional
                Date) or 60%  (thereafter)  of the equity  share  capital of the
                Primary  Borrower is held by the Parent (directly or indirectly)
                at any time; or

          (iv)  Bidco at any time reduces its shareholding in the Target; or

          (v)   REC, any other Licensee  ceases to be a wholly-owned  Subsidiary
                of the Target; or

          (vi)  there is a Change in Control of the Parent; or

     (p)  Distribution Business/Generation Business:

          (i)   the  Group  ceases,  or  threatens  to  cease,  to  carry on the
                Distribution Business;

          (ii)  all or a majority  of the issued  shares of the  Licensee or any
                other Relevant  Company or the whole or any material part of the
                assets or revenues of the  Distribution  Business or  Generation
                Business are seized, nationalised,


<PAGE>


                expropriated or compulsorily  acquired by or under the authority
                of a Government Entity;

          (iii) any change is made in the statutory or  regulatory  requirements
                applicable to the Distribution  Business or Generation  Business
                or any new statutory or regulatory  requirements  are imposed on
                it which would be reasonably  likely to have a Material  Adverse
                Effect; or

     (q)  Licences:

          (i)   the Secretary of State gives notice in writing of the revocation
                of a Licence  for any  reason or a Licence  ceases to be in full
                force and effect in any material  respect except where a similar
                licence is or  licences  are granted to a member of the Group in
                its place;

          (ii)  without  prejudice  to  paragraph  (i)  above,  any  legislation
                (whether primary or subordinate) with regard to the creditors of
                Licensees or the ability of Licensees to raise  finance  under a
                Licence or with regard to  generators or  electricity  or public
                electricity  suppliers  generally is enacted and that  enactment
                would be reasonably likely to have a Material Adverse Effect;

          (iii) any  amendment is made to the terms and  conditions of a Licence
                and the amendment would be reasonably  likely to have a Material
                Adverse Effect;

     (r)  Electricity Act:

          (i)   any of the provisions of the Electricity Act (or any subordinate
                legislation)   detailing   the  rights,   powers,   authorities,
                obligations and duties of the Secretary of State or the Director
                General,  or the  manner  in or time  at  which  they  are to be
                exercised,  are  repealed or amended in a manner  which would be
                reasonably likely (in the opinion of the Majority Banks) to have
                a Material Adverse Effect; or

          (ii)  the  Licensee  fails to comply  with a final  order  (within the
                meaning  of  section  25 of  the  Electricity  Act)  or  with  a
                provisional order (within the meaning of that section) which has
                been  confirmed  under that section and in either case which has
                not been revoked under that section or the validity of which has
                not been questioned  under section 27 of the Electricity Act, if
                such  failure  to comply  would be  reasonably  likely to have a
                Material Adverse Effect; or

     (s)  Pooling and Settlement Agreement: REC or any other member of the Group
          ceases to be a party to the Pooling and Settlement  Agreement,  or any
          notice requiring REC or any other member of the Group to cease to be a
          party to the Pooling and Settlement Agreement is given to such company
          under the relevant  clauses of the Pooling and  Settlement  Agreement,
          except  where  another  member  of the  Group  becomes a party to that
          agreement in its place;

     (t)  Gas Framework  Agreement:  REC or any other member of the Group ceases
          to be a party  to the Gas  Framework  Agreement  where  this  would be
          reasonably  likely to lead to a Material Adverse Effect,  except where
          another  member of the Group becomes a party to that  agreement in its
          place;


<PAGE>


     (u)  Finance Documents:  any Finance Document is not or ceases to be legal,
          valid and binding on or enforceable  against any Obligor or is alleged
          by any Borrower or other Obligor to be ineffective for any reason; or

     (v)  Unlawfulness:  it becomes  unlawful  at any time for any  Borrower  or
          other Obligor to perform all or any of its material  obligations under
          any of the Finance Documents;

     (w)  Coalco  Disposal  Agreement:  the Target varies,  waives or amends any
          material  provision  of the Coalco  Disposal  Agreement  or the Escrow
          Agreement (save with the prior written consent of the Majority Banks).

12.2 Acceleration

     The Facility Agent may, and, if so requested by the Majority Banks,  shall,
     without prejudice to any other rights of the Finance Parties:

     (a)  Certain  Funds Period:  during the Certain  Funds Period,  at any time
          after the happening of a Major Default; or

     (b)  Other  times:  at any other time,  after the  happening of an Event of
          Default,

     and so long as the same is continuing, by notice to the Primary Borrower:

          (i)   declare that the obligation of each Bank to make its Commitments
                available shall be terminated,  whereupon the Total  Commitments
                in respect of all Facilities shall be reduced to zero forthwith;
                and/or

          (ii)  declare that the Advances and all interest,  fees and commitment
                commission  accrued and all other sums payable under the Finance
                Documents  have  become due and  payable or have  become due and
                payable on demand,  whereupon the same shall,  immediately or in
                accordance  with  the  terms  of  such  notice,  become  due and
                payable; and/or

          (iii) demand   full  cash   cover  for  the   Outstanding   Contingent
                Liabilities  under all Letters of Credit then outstanding in the
                currency  in which  those  Letters  of Credit  are  denominated;
                and/or

          (iv)  declare that the Security Documents (or any of them) have become
                enforceable (in whole or in part).

          On or at any  time  after  the  making  of any such  declaration,  the
          Facility  Agent shall be entitled,  to the exclusion of the Borrowers,
          to select the duration of Interest Periods.

12.3 Limited rights of rescission during the Certain Funds Period

     Priorto the end of the Certain Funds Period,  except as expressly permitted
     by  clause  12.2(a),  none of the  Finance  Parties  shall  have or seek to
     exercise any right of rescission or other remedy in  consequence  of any of
     the  representations  or warranties in the Finance Documents being or being
     proved to have been incorrect in any respect or any Borrower  having failed
     to perform, observe or comply with any of its obligations,  undertakings or
     agreements  under  the 


<PAGE>


     Finance  Documents or otherwise  (except for the  Security  Agent's  rights
     under the Debenture to take control of and vote the Target Shares).

12.4 Application to Target Group

     Without  limitation  to clauses 9.5, 11.2 and 12.3,  the  occurrence of any
     event falling  within clause 12.1 in respect of the Target or any member of
     the Target Group at any time prior to the Takeover Operative Date shall not
     (unless it  constitutes  a breach of clause  11.2)  constitute  an Event of
     Default or a Default if:

     (a)  the same arises under clauses 12.1(e), (f), (i) or (u); and

     (b)  the event is remedied to the satisfaction of the Majority Banks by the
          Takeover Operative Date.

13.  INDEMNITIES

13.1 Miscellaneous indemnities

     The Primary  Borrower  shall within three Banking Days of demand  indemnify
     each Finance  Party,  without  prejudice to any of their other rights under
     any of the  Finance  Documents,  against  any cost,  loss,  claim,  expense
     (including loss of Applicable Margin and legal fees) or liability  together
     with any Tax thereon which such Finance Party shall certify as sustained or
     incurred by it as a consequence of:

     (a)  any  default in payment  by any  Borrower  of any sum under any of the
          Finance Documents when due,

     (b)  the occurrence of any other Default,

     (c)  any  prepayment of the Facilities or part thereof being made otherwise
          than on an Interest Payment Date or, as the case may be, Maturity Date
          relative thereto,

     (d)  any Advance not being made for any reason (excluding,  but only to the
          extent of the indemnification of a particular Finance Party, any gross
          negligence or wilful  default by such Finance  Party) after a Drawdown
          Notice has been given, or

     (e)  any notice sent by telefax failing to be received,

     including,  in any such  case,  but not  limited  to,  any loss or  expense
     sustained or incurred in  maintaining or funding its  Contributions  or any
     part thereof or in liquidating or re-employing  deposits from third parties
     acquired or contracted for to fund all or any part of its  Contributions or
     any other amount owing to such Finance Party.

13.2 Currency of account; currency indemnity

     (a)  No payment by any Borrower under any of the Finance Documents which is
          made in a currency other than the currency ("Contractual Currency") in
          which such  payment is  required to be made  pursuant to the  relevant
          Finance  Documents  shall discharge the obligation in respect of which
          it is made except to the extent of the net proceeds in the


<PAGE>


          Contractual  Currency  received by the Facility Agent upon the sale of
          the  currency so  received,  after taking into account any premium and
          costs of exchange in connection with such sale.

     (b)  The Finance Parties shall not be obliged to accept any such payment in
          a currency other than the  Contractual  Currency nor shall the Finance
          Parties be liable to any Borrower for any loss or alleged loss arising
          from  fluctuations  in exchange  rates  between the date on which such
          payment is so received by the Facility Agent and the date on which the
          Facility Agent effects such sale, as to which the Facility Agent shall
          (as against each Borrower) have an absolute discretion.

     (c)  If any sum due from any  Borrower  under any Finance  Documents or any
          order or judgment  given or made in relation  hereto is required to be
          converted from the  Contractual  Currency or the currency in which the
          same is payable  under such order or judgment  (the "first  currency")
          into another  currency (the "second  currency") for the purpose of (i)
          making or filing a claim or proof against any Borrower, (ii) obtaining
          an order or judgment in any court or other tribunal or (iii) enforcing
          any order or judgment  given or made in relation to any of the Finance
          Documents,  each  Borrower  shall  indemnify  and hold  harmless  each
          Finance  Party from and against  any loss  suffered as a result of any
          difference  between (A) the rate of exchange  used for such purpose to
          convert the sum in question  from the first  currency  into the second
          currency  and (B) the rate or rates of  exchange  at which  each  such
          Finance  Party may in the  ordinary  course of business  purchase  the
          first currency with the second  currency upon receipt of a sum paid to
          it in satisfaction,  in whole or in part, of any such order, judgment,
          claim or proof.

     (d)  Any amount due from any Borrower under the indemnity contained in this
          clause 13.2 shall be due as a separate  debt and shall not be affected
          by judgment  being obtained for any other sums due under or in respect
          of any of the  Finance  Documents  and the  term  "rate  of  exchange"
          includes any premium and costs of exchange  payable in connection with
          the purchase of the first currency with the second currency.

13.3 Acquisition finance indemnity

     The Primary Borrower shall forthwith on demand indemnify each Finance Party
     and each of their respective Affiliates and Subsidiaries and its respective
     directors officers and employees (each being an "Indemnified  Person") from
     and against any cost, claim, loss,  expense (including without  limitation,
     the fees,  costs and  expenses  of legal  advisors  arising  from any legal
     procedures (including, without limitation, any administrative regulatory or
     judicial  actions  or  investigations)  to which  that  Indemnified  Person
     becomes  subject or joined as a party or which may be threatened or pending
     against  it) or  liability  together  with  any Tax  thereon  which  may be
     incurred or asserted against such  Indemnified  Person arising out of or in
     connection  with the Offer  (whether or not made) or it agreeing to finance
     or refinance any  acquisition by Bidco or any person acting in concert with
     Bidco of any  shares or share  options of any class in Target or the use of
     the proceeds of any Advance  (save to the extent any such loss or liability
     arises  as a result  of the  gross  negligence  or  wilful  default  of the
     relevant Finance Party).

13.4 No settlement without consent

     The Primary  Borrower  agrees on its own behalf and on behalf of each other
     member  of the  Group  that,  without  the prior  written  consent  of each
     relevant Agent and the Majority Banks,


<PAGE>


     no member of the Group will settle,  compromise  or consent to the entry of
     any judgment in any pending or threatened claim, action, suit or proceeding
     in   respect   of  which   indemnification   could  be  sought   under  the
     indemnification  provisions of clauses 8.4, 8.5, 8.6, 7.6, 13, 16.14,  20.2
     or 20.3 (whether or not any indemnitee  thereunder (the "Indemnitee") is an
     actual or  potential  party to such  claim,  action,  suit or  proceeding),
     unless  such  settlement,  compromise  or  consent  does  not  include  any
     statement as to an admission of fault,  culpability or failure to act by or
     on behalf of any  Indemnitee  and does not  involve any payment of money or
     other value by any Indemnitee or any injunctive  relief or factual findings
     or stipulations binding on any Indemnitee.


14.  UNLAWFULNESS, INCREASED COSTS, ALTERNATIVE INTEREST RATES

14.1 Unlawfulness

     (a)  If it is or becomes  contrary to any law or  regulation or contrary to
          any  request  from or  requirement  of any  fiscal  monetary  or other
          authority (with which such Finance Party would normally  comply) for a
          Finance  Party to  contribute  to any  Utilisation  or to maintain its
          Commitments  in respect of a Facility  or fund its  Contribution  to a
          Facility,  such Finance Party shall  promptly  after becoming aware of
          the same,  through the  Facility  Agent,  notify the Primary  Borrower
          whereupon  (a) such Finance  Party's  Commitments  shall be reduced to
          zero  (and,  if it is the  Issuing  Bank,  it  shall  have no  further
          obligation to Issue Letters of Credit if to do so would in the opinion
          of the Issuing Bank be or become  contrary to any law or regulation or
          contrary to any request from or requirement of any fiscal  monetary or
          other authority (with which such Finance Party would normally comply))
          and (b) if the  Facility  Agent  on  behalf  of the  Finance  Party so
          requires  each  relevant  Borrower  shall be  obliged  to  prepay  the
          Contribution  of such Finance  Party to such Facility and provide full
          cash cover for any Outstanding  Contingent Liabilities of the relevant
          Finance  Party on a future date  specified by the  Facility  Agent not
          being  earlier  than the latest date  permitted by the relevant law or
          regulation  or not  contrary  to  such  request  or  requirement.  Any
          prepayment  pursuant to this clause 14.1 shall be made  together  with
          all amounts referred to in clause 6.6.

     (b)  When any relevant Borrower makes any prepayment under this clause 14.1
          the  Facility  Agent shall not  release the amount of such  prepayment
          which is cash cover for any Outstanding  Contingent Liabilities of the
          relevant  Finance  Party to such Finance  Parties but shall place such
          monies on suspense  account  and such money may be used as  collateral
          for the actual and the contingent liabilities of that Finance Party to
          the Issuing  Bank,  which  liabilities  shall remain in full force and
          effect  notwithstanding such prepayment;  and such Finance Party shall
          remain liable under all the relevant  provisions of this  Agreement to
          the Issuing Bank to pay in cash any shortfall  between the amount held
          by the Facility Agent and its liabilities under this Agreement.

14.2 Increased costs

     If the result of any change in, or in the interpretation or application of,
     or the introduction of, (after the date of this Agreement):

     (a)  any law (including,  the  introduction of the proposed Bank of England
          Act following the publication of the Bank of England Bill 1997) or


<PAGE>


     (b)  any regulation,  request or requirement (which if not having the force
          of law is one of a kind with which the relevant  Finance  Party or, as
          the case may be, its holding company habitually  complies),  including
          those relating to Taxation, capital adequacy, European monetary union,
          liquidity, reserve assets, cash ratio deposits and special deposits or
          requested  or  required  by  any  central  bank   (including   without
          limitation  any European  Central  Bank) or other  fiscal  monetary or
          other authority,

     is to:

          (i)    subject  any Finance  Party or its holding  company to Taxes or
                 change the basis of Taxation of any Finance  Party with respect
                 to any  payment  under  this  Agreement  (other  than  Taxes or
                 Taxation on the  overall  net income,  profits or gains of such
                 Finance  Party  imposed  in  the   jurisdiction  in  which  its
                 principal office or Facility Office is located); and/or

          (ii)   increase  the cost to,  or impose an  additional  cost on,  any
                 Finance  Party  or its  holding  company  in  entering  into or
                 performing its obligations  under the Finance  Documents and/or
                 in  making or  keeping  available  all or part of such  Finance
                 Party's  Commitments  and/or maintaining or funding all or part
                 of such Finance  Party's  Contributions  (and/or  providing any
                 guarantee   or   indemnity   of  any  other   Finance   Party's
                 obligations); and/or

          (iii)  reduce  the  amount  payable  or the  effective  return  to any
                 Finance Party under this Agreement; and/or

          (iv)   reduce any  Finance  Party's or its holding  company's  rate of
                 return  on its  overall  capital  by  reason of a change in the
                 manner in which it is required to allocate capital resources in
                 respect of all or any of the advances or obligations  comprised
                 in a class of advances or  obligations  formed by or  including
                 such Finance Party's share in  Utilisations  made or to be made
                 under this Agreement; and/or

          (v)    require  any  Finance  Party or its  holding  company to make a
                 payment or forgo a return  calculated by reference to or on any
                 amount  received or receivable by such Finance Party under this
                 Agreement; and/or

          (vi)   require  any Finance  Party or its holding  company to incur or
                 sustain a loss (including a loss of future  potential  profits)
                 by  reason  of  being  obliged  to  deduct  all or part of such
                 Finance Party's  Commitments or Contributions  from its capital
                 for regulatory purposes,

          then and in each such case (but subject to clause 8.6 and 14.3):

                 (aa) such  Finance  Party  shall  notify the  Primary  Borrower
                      through  the  Facility  Agent  in  writing  of such  event
                      promptly upon its becoming aware of the same; and

                 (bb) following such  notification  the Primary  Borrower shall,
                      whether or not such Finance  Party's  Contribution  to any
                      Facility  has been repaid,  pay to the  Facility  Agent on
                      demand for the  account of such  Finance  Party the amount
                      which  such  Finance  Party  specifies  (in a  certificate
                      setting


<PAGE>


                      forth the basis of the  computation of such amount but not
                      including  any  matters  which such  Finance  Party or its
                      holding  company regards as  confidential)  is required to
                      compensate  such Finance Party and/or its holding  company
                      in its  sole  discretion  for  such  liability  to  Taxes,
                      increased or additional cost, reduction,  payment, forgone
                      return or loss.

     For the purposes of this clause 14.2 each  Finance  Party may in good faith
     allocate or spread costs and/or losses among its assets and liabilities (or
     any class thereof) on such basis as it considers appropriate.

     Each  Finance  Party  shall use all  reasonable  endeavours  to notify  the
     Primary  Borrower as soon as reasonably  practicable  of any such increased
     cost,  reduction,  payment or forgone return which is to result in a demand
     under clause 14.2(bb).

     For the  purposes of this clause  14.2 and clause  14.4  "holding  company"
     means,  in  relation  to a Finance  Party,  the  company or entity (if any)
     within  the  consolidated  supervision  of  which  such  Finance  Party  is
     included.

     For the purposes of this clause 14.2,  the Borrowers  acknowledge  that any
     requirement  that the Finance Parties treat interest  hereunder as anything
     other than interest shall be a change in law or the interpretation thereof.

14.3 Exceptions

     Nothing in clause  14.2 shall  entitle  any  Finance  Party to receive  any
     amount  in  respect  of  compensation  for any  such  liability  to  Taxes,
     increased or additional cost, reduction, payment, forgone return or loss to
     the extent that the same:

     (a)  is taken into account in calculating the Additional Cost; or

     (b)  is the subject of an additional payment under clause 8.5; or

     (c)  arises as a consequence of (or of any law or regulation  implementing)
          (i) the proposals for international convergence of capital measurement
          and capital  standards  published  by the Basle  Committee  on Banking
          Regulations  and  Supervisory  Practices  in July 1988 and/or (ii) any
          applicable  directive of the  European  Union (in each case) unless it
          results from any change in, or in the  interpretation  or  application
          of, such  proposals or any such  applicable  directive  (or any law or
          regulation implementing the same) occurring after the date hereof; or

     (d)  is  attributable  to Taxation save where it is recovered  under clause
          14.2(i); or

     (e)  is attributable to the wilful default or gross negligence of a Finance
          Party.

     For the purposes of clause 14.3(c) the term  "applicable  directive"  means
     (exclusively)  each of the Own Funds  Directive  (89/299/EEC  of 17th April
     1989) and the Solvency Ratio Directive (89/647/EEC of 18th December 1989).


<PAGE>


14.4 Mitigation

     If, in respect of any Finance  Party (an  "Affected  Bank"),  circumstances
     arise or exist which would result in:

     (a)  any  Borrower  being  required  to make an  increased  payment to that
          Finance Party pursuant to clause 8.5;

     (b)  the  reduction of that Finance  Party's  Commitment  in respect of any
          Facility to zero or any Borrower being required to prepay that Finance
          Party's Contribution to any Facility pursuant to clause 14.1;

     (c)  any Borrower  being required to make a payment to any Finance Party to
          compensate  such Finance Party or its holding  company for a liability
          to Taxes,  increased or additional cost, reduction,  payment,  forgone
          return or loss pursuant to clause 14.2(bb); or

     (d)  any Borrower not being entitled to a deduction for UK corporation  tax
          purposes in respect of interest  payable under this  Agreement to that
          Finance Party;

     then,  without in any way limiting,  reducing or otherwise  qualifying  the
     obligations  of any Borrower under clause 8 and this clause 14 (and subject
     to the Borrower's  rights under clause 6.5),  such Finance Party shall,  in
     consultation  with the Facility  Agent,  endeavour to take such  reasonable
     steps  (and/or,  in the case of clause  14.2(bb) and where the increased or
     additional cost, reduction,  payment, forgone return or loss is that of its
     holding  company,  endeavour to procure that its holding company takes such
     reasonable  steps) as are open to it (or,  as the case may be, its  holding
     company) to mitigate or remove such circumstances unless the taking of such
     steps might (in the opinion of such Finance  Party) be  prejudicial to such
     Finance  Party (or, as the case may be, its holding  company)  and provided
     that  such  Finance  Party  shall be under no  obligation  to take any such
     action if in the  opinion  of such  Finance  Party to do so might  have any
     adverse effect upon its business, operations or financial condition.


15.  SET-OFF AND PRO-RATA PAYMENTS

15.1 Set-off

     Each Borrower hereby agrees that each Finance Party may at any time, whilst
     any Default shall be continuing  notwithstanding  any settlement of account
     or other matter  whatsoever,  combine or consolidate all or any of its then
     existing accounts  wheresoever  situate (including  accounts in the name of
     such Finance Party or of such Borrower  jointly with others),  whether such
     accounts are  current,  deposit,  loan or of any other  nature  whatsoever,
     whether they are subject to notice or not and whether they are  denominated
     in Sterling  or in any other  currency,  and  set-off or  transfer  any sum
     standing  to the  credit of any one or more  such  accounts  in or  towards
     satisfaction  of any moneys,  obligations or liabilities  which are due and
     payable by such Borrower to such Finance Party under the Finance  Documents
     but are unpaid.  For this  purpose  each  Finance  Party is  authorised  to
     purchase with the moneys  standing to the credit of such account such other
     currencies as may be necessary to effect such application. No Finance Party
     shall be obliged to exercise  any right  given to it by this  clause  15.1.
     Each  Finance  Party shall  notify the  Facility  Agent  promptly  upon the
     exercise or purported exercise of any right of


<PAGE>


     set-off in  relation  to any  member of the Group  giving  full  details in
     relation  thereto and the  Facility  Agent shall  inform the other  Finance
     Parties.

15.2 Pro-rata payments

     (a)  If at any time any Bank (the  "Recovering  Bank") receives or recovers
          any amount owing to it by any Borrower  under this Agreement by direct
          payment,  set-off or in any manner  other than by payment  through the
          Facility  Agent (not being a payment  received  from a Substitute or a
          sub-participant  in such Bank's  Contribution  to any  Facility or any
          other  payment  of an amount due to the  Recovering  Bank for its sole
          account),  the Recovering Bank shall,  within two Banking Days of such
          receipt or recovery (a "Relevant  Receipt")  notify the Facility Agent
          of the amount of the Relevant Receipt. If the Relevant Receipt exceeds
          the  amount  which the  Recovering  Bank would  have  received  if the
          Relevant Receipt had been received by the Facility Agent then:

          (i)   within two Banking  Days of demand by the  Facility  Agent,  the
                Recovering  Bank shall pay to the Facility Agent an amount equal
                to the excess;

          (ii)  the Facility  Agent shall treat the excess amount so paid by the
                Recovering  Bank as if it were a  payment  made by the  relevant
                Borrower and shall  distribute the same to the Banks (other than
                the Recovering Bank); and

          (iii) as between the relevant  Borrower and the  Recovering  Bank, the
                excess amount so  re-distributed  shall be treated as not having
                been paid but the  obligations  of the relevant  Borrower to the
                other Banks shall, to the extent of the amount so re-distributed
                to them, be treated as discharged.

     (b)  If any part of a  Relevant  Receipt  subsequently  has to be wholly or
          partly  refunded by the  Recovering  Bank  (whether to a liquidator or
          otherwise) each Bank to which any part of such Relevant Receipt was so
          re-distributed  shall on request from the Recovering Bank repay to the
          Recovering  Bank such Bank's pro-rata share of the amount which has to
          be refunded by the Recovering Bank.

     (c)  Each  Bank  shall  on  request  supply  to  the  Facility  Agent  such
          information  as the  Facility  Agent may from time to time request for
          the purpose of this clause 15.2.

     (d)  Notwithstanding  the  foregoing  provisions  of this clause  15.2,  no
          Recovering  Bank shall be obliged to share any Relevant  Receipt which
          it receives or recovers  pursuant to legal  proceedings taken by it to
          recover any sums owing to it under this Agreement with any other party
          which  has a  legal  right  to,  but  does  not,  either  join in such
          proceedings or commence and diligently pursue separate  proceedings to
          enforce  its  rights  in  the  same  or  another   court  (unless  the
          proceedings  instituted by the Recovering Bank are instituted by it in
          breach of clause 18.2).

     (e)  The amounts due from each relevant Borrower to each of the Banks shall
          reflect any payments and receipts  among the Banks  prescribed by this
          clause.

     (f)  Nothing  in this  clause  15.2 shall  prevent  the  Issuing  Bank from
          recovering from the relevant  Borrowers any amounts due under a Letter
          of Credit issued by the Issuing Bank.


<PAGE>


15.3 No release

     For the  avoidance  of doubt it is  hereby  declared  that  failure  by any
     Recovering  Bank to comply  with the  provisions  of clause  15.2 shall not
     release  any  other   Recovering  Bank  from  any  of  its  obligations  or
     liabilities under clause 15.2.

15.4 No charge

     The  provisions of this clause 15 are not intended to, shall not, and shall
     not be construed so as to,  constitute a charge by a Bank. In particular it
     is not  intended to create a charge over all or any part of a sum  received
     or recovered by any Bank in the circumstances mentioned in clause 15.2.


16.  ASSIGNMENT, SUBSTITUTION AND LENDING OFFICES

16.1 Benefit and burden

     This  Agreement  shall be binding  upon,  and enure for the benefit of, the
     Finance  Parties  and  the  Borrowers  and  their  respective   successors,
     transferees and assigns.

16.2 No assignment by the Borrowers

     The Borrowers may not assign or otherwise  transfer any of their respective
     rights or obligations under any of the Finance Documents.

16.3 Substitution

     Each Bank (an  "Existing  Bank")  may at any time  assign all or any of its
     rights and benefits  under the Finance  Documents  or novate in  accordance
     with clause 16.5 all or any part of its rights, benefits and/or obligations
     under the Finance  Documents to another  Qualifying  Bank (a  "Substitute")
     with the consent of the Issuing  Bank,  and with the consent of the Primary
     Borrower  (not to be  unreasonably  withheld  or  delayed),  save that such
     consent of the Primary  Borrower  will not be required  to  assignments  or
     novations which take place prior to the Syndication Date.

16.4 Assignment

     If any Bank assigns all or any of its rights and benefits under the Finance
     Documents  in  accordance  with  clause  16.3,  then,  unless and until the
     assignee has agreed with the other  Finance  Parties that it shall be under
     the same  obligations  towards each of them as it would have been if it had
     been an original party thereto as a Bank,  the other Finance  Parties shall
     not be obliged to recognise that assignee as having the rights against each
     of them which it would have had if it had been such a party thereto.

16.5 Substitution Certificate

     Subject to clause 16.5 (b), if a duly  completed  Substitution  Certificate
     duly executed by the Existing Bank and the  Substitute is five Banking Days
     before the proposed  Effective  Date (unless the Facility  Agent  otherwise
     agrees) delivered to and counter-signed by the Facility


<PAGE>


     Agent (for itself and the other  parties to this  Agreement  other than the
     Existing  Bank),   then  on  the  Effective  Date  (as  specified  in  that
     Substitution  Certificate)  to the extent that the Existing  Bank's rights,
     benefits and obligations  under the Finance Documents are expressed in such
     Substitution  Certificate  to be the subject of a novation in favour of the
     Substitute effected pursuant to this clause 16.5:

          (i)   the existing  parties to the Finance  Documents and the Existing
                Bank shall be released from their respective obligations towards
                one   another   under   the   Finance   Documents   ("discharged
                obligations")  except for any obligation which the Existing Bank
                has to the Issuing Bank under clause 4.7 (Bank's  Guarantee  and
                Indemnity)  before the date on which the  novation  takes  place
                unless otherwise agreed in writing by the Issuing Bank and their
                respective   rights   against  one  another  under  the  Finance
                Documents ("discharged rights") shall be cancelled;

          (ii)  the Substitute  party to such  Substitution  Certificate and the
                existing   parties  to  the  Finance   Documents   shall  assume
                obligations  towards each other which differ from the discharged
                obligations  only insofar as they are owed to or assumed by such
                Substitute instead of to or by such Existing Bank;

          (iii) the Substitute  party to such  Substitution  Certificate and the
                existing  parties to the Finance  Documents shall acquire rights
                against each other which differ from the discharged  rights only
                insofar as they are  exercisable  by or against such  Substitute
                instead of by or against such Existing Bank; and

          (iv)  the Finance  Parties  shall acquire the same rights and benefits
                and assume the same obligations between themselves as they would
                have acquired and assumed had such  Substitute  been an original
                party  hereto  as  a  Bank  with  the  rights,  benefits  and/or
                obligations  acquired  or  assumed  by it as a  result  of  such
                transfer;

          and,  on such  Effective  Date,  the  Substitute  shall  (unless  such
          novation  is  part  of  the  syndication  process  carried  out by the
          Arrangers)  pay to the  Facility  Agent  for its own  account a fee of
          (pound)750.  The Facility Agent shall promptly  notify the other Banks
          of  the  receipt  by it of  any  Substitution  Certificate  and  shall
          promptly  deliver  a copy  of  such  Substitution  Certificate  to the
          Primary Borrower.

16.6 Reliance on Substitution Certificate

     The  Facility  Agent (on behalf of itself and the  Security  Agent) and the
     Borrowers shall be fully entitled to rely on any  Substitution  Certificate
     delivered to the Facility Agent in accordance with the foregoing provisions
     of this clause 16 which is complete  and regular on its face as regards its
     contents and purportedly  signed on behalf of the relevant Existing Bank(s)
     and the  Substitute(s)  and none of the Facility Agent,  the Security Agent
     and the Borrowers shall have any liability or  responsibility  to any party
     as a consequence of placing  reliance on and acting in accordance  with any
     such Substitution Certificate if it proves to be the case that the same was
     not authentic or duly authorised.


<PAGE>


16.7 Authorisation of Facility Agent

     Each party to this Agreement  irrevocably  authorises the Facility Agent to
     counter-sign each  Substitution  Certificate on its behalf for the purposes
     of clause 16.5 without any further consent of, or  consultation  with, such
     party except,  in the case of the Primary  Borrower,  any consent  required
     pursuant to clause 16.3.

16.8 Accession Deeds

     The Obligors  shall from time to time at the request of the Facility  Agent
     promptly execute any accession deed to any of the Security Documents and do
     any other act or thing or execute such further documents as directed by the
     Facility Agent in connection  with the transfer of rights or benefits under
     clause 16.3.

16.9 Costs and Expenses

     The Primary  Borrower  shall,  promptly after demand by the Facility Agent,
     pay to the Facility Agent and the Security  Agent the reasonable  costs and
     expenses incurred by them or any other Finance Party in connection with the
     creation  of  valid  security  in  respect  of  any  Substitute  taking  an
     assignment of rights and/or an assumption of obligations pursuant to clause
     16 in those  jurisdictions  requiring  further steps to be taken  following
     such assignment or assumption.

16.10 Construction of certain references

     If any Bank novates all or any part of its rights, benefits and obligations
     as provided in clause 16.3 all  relevant  references  in this  Agreement to
     such Bank shall  thereafter be construed as a reference to such Bank and/or
     its Substitute to the extent of their respective interests.

16.11 Lending offices

     Each Bank  shall  lend  through  its  office at the  address  specified  in
     schedule  1 or,  as the  case  may  be,  in or  pursuant  to  any  relevant
     Substitution  Certificate or through any other office of such Bank selected
     from time to time by such Bank  through  which such Bank wishes to lend for
     the  purposes  of this  Agreement.  If the office  through  which a Bank is
     lending is changed  pursuant to this clause  16.11,  such Bank shall notify
     the  Facility  Agent  promptly of such change.  No Bank shall  exercise its
     rights under this clause in any manner which might  reasonably  be expected
     to result in it not being a Qualifying Bank.

16.12 Disclosure of information

     The Obligors party to this Agreement  agree that the Finance Parties may at
     any  time  disclose  such  information  relating  to  the  Obligors,  their
     Affiliates  and associated  companies as shall come into their  possession,
     whether or not in relation to the Facilities:

     (a)  to any prospective assignee, Substitute or sub-participant;

     (b)  to their respective advisers, professional or otherwise;

     (c)  to any Affiliate of such Finance Party;

     (d)  to the other Finance Parties;

     (e)  if required to do so by an order of a court in any jurisdiction;


<PAGE>


     (f)  under any law or regulation or to any applicable  regulatory authority
          (including the Bank of England) in any jurisdiction; and

     (g)  where such information shall have already entered the public domain,

     and in the case of (a) and (b) above,  subject to requiring and receiving a
     written  confirmation  from the recipient of the  information  that it will
     treat in confidence any confidential information so disclosed to it and not
     use it for any unauthorised purpose and, upon receipt of such confirmation,
     such  Finance  Party  shall in no way be  liable  or  responsible  for such
     information  not  being  kept  confidential  by  such  proposed   assignee,
     Substitute or other person.

16.13 Restrictions on novations

     Any novation by an Existing Bank which is  transferring  part (but not all)
     of its  Commitment  may only be made under this clause 16 if (i) it is made
     in respect  of a  Commitment  of  (pound)5,000,000  or any larger  integral
     multiple of (pound)5,000,000 and (ii) as a consequence of such novation (or
     as a consequence of that and any other novation between the same or related
     parties  taking  effect at or about the same  time) the  Commitment  of the
     Existing  Bank  would be not less than  (pound)5,000,000.  If part (but not
     all) of a Bank's  Contribution is being transferred,  the previous sentence
     shall be read as if it  referred  to  "Contribution",  "Contributions"  and
     assignment   instead  of  "Commitment"  and  "Commitments"  and  "novation"
     respectively.

16.14 No obligation

     The Existing Bank shall not be obliged by any Finance Document to:

     (a)  accept a re-transfer  from the  Substitute of any of the rights and/or
          obligations assigned or transferred under this clause 16; or

     (b)  indemnify  the  Substitute  for any  losses  arising  by reason of any
          Obligor's  failure  to  perform  its  obligations  under  any  Finance
          Documents or otherwise.

16.15 Syndication

     It is  acknowledged  that at the date of this  Agreement the Facilities are
     being made  available  by the  Underwriters  with the  intention  that each
     Underwriter may transfer any part of its  participation  in accordance with
     clause 16.5 (Substitution) and, accordingly, references to the Banks shall,
     before  the  first  date  on  which  such  transfer  shall  be  made of the
     Underwriter's  rights,  benefits and  obligations  under this  Agreement in
     accordance  with clause 16.5  (Substitution),  be  construed as a reference
     solely to the Underwriters.

16.16 Obligors' undertakings in connection with syndication

     The Obligors  acknowledge  that syndication of the Facilities in accordance
     with this  clause  16.16 and the  Syndication  Letter  will take  place and
     undertake  to take  reasonable  steps to  assist  and  co-operate  with the
     Arrangers, the Facility Agent and the Underwriters in syndication by, among
     other things:

     (a)  co-operating  with site visits by the Banks and persons invited by the
          Arrangers  to  participate  (in this clause  16.16 only,  together the
          "Banks");


<PAGE>


     (b)  participating   at  an   appropriate   senior   management   level  in
          presentations to the Banks  concerning the Parent,  the members of the
          Group and their activities;

     (c)  using reasonable endeavours to obtain appropriate  authorisations from
          the Auditors, other accountants, consultants and professional advisers
          to release for the benefit of the Banks any  information  addressed to
          any Obligor and/or the Facility Agent;

     (d)  refraining  from making any statement,  announcement or publication or
          doing any act or thing which may obstruct syndication in any way;

     (e)  providing the Banks with such  information  relating to the Parent and
          members  of the  Group,  and  their  associated  companies  and  their
          activities as the Banks reasonably request;

     (f)  assisting the Facility Agent and the Arrangers in the  preparation and
          review  of any  information  which  such  Facility  Agent  and/or  the
          Arrangers   reasonably   require  for  the  purposes  of  syndication,
          including  assisting in the preparation of any information  memorandum
          and the giving of such additional warranties as the Facility Agent may
          reasonably  request  of the  contents  of the  information  and/or the
          warranties  in  clause  9,  provided  that  any  such  warranties  are
          expressed  to be to the  best  of the  relevant  Obligor's  knowledge,
          information and belief and that the Obligors may disclose against such
          warranties such matters as they deem appropriate;

     (g)  passing on to the Facility  Agent any enquiries  received by them from
          potential Banks; and

     (h)  agreeing to amendments to the Finance  Documents of an  administrative
          or  technical  nature or to correct  typographical  or other  clerical
          errors.


17.  FACILITY AGENT AND SECURITY AGENT

17.1 Appointment of Facility Agent and Security Agent

     Each Finance Party (except the relevant  agent) appoints the Facility Agent
     to act as its agent in connection  with the Finance  Documents to which the
     Facility  Agent is a party and the  Security  Agent to act as its agent and
     trustee in relation to the Security  Documents,  and authorises each of the
     Facility  Agent and the Security  Agent to exercise such rights,  remedies,
     powers and discretions as are  specifically  delegated to them by the terms
     of this Agreement and the Security  Documents  together with all reasonably
     incidental rights,  powers and discretions.  The Obligors shall be entitled
     to assume that the Facility  Agent and the  Security  Agent  represent  the
     Finance  Parties  (except the relevant  agent),  the Reference Banks or the
     Majority  Banks (as the case may be),  and that all  consents  and  notices
     given by the  Facility  Agent or the  Security  Agent on their  behalf  are
     validly given.

17.2 Separate treatment of syndication division

     In acting as Facility Agent or Security Agent,  the Facility Agent's or, as
     the case may be, the Security Agent's  syndication  division (or such other
     division as may undertake such task) shall be treated as a separate  entity
     from any other of its divisions or departments and, despite the


<PAGE>


     provisions of clauses 17 to 21, if the Facility  Agent or Security Agent or
     any Related  Person  acts for or  transacts  business  with any member of a
     group comprising the Parent and its Affiliates or associated companies (the
     "Parent Group") or any other person which may be a trade  competitor of the
     Parent  Group or Target  Group or any  member of either  such  group or may
     otherwise have commercial  interests similar to those of any member of such
     groups in any capacity in relation to any other matter (including as a Bank
     under this  Agreement),  any information  acquired by the Facility Agent or
     Security  Agent or any Related Person in such other capacity may be treated
     as confidential by the Facility Agent or Security Agent.  The Borrowers and
     Bidco hereby  expressly  acknowledge  that the Finance  Parties and Related
     Persons may be providing debt  financing,  equity capital or other services
     (including  financial  advisory  services)  to other  persons with whom the
     Parent  or the Group  may have  conflicting  interests  in  respect  of the
     Facilities or otherwise.

17.3 Actions of Facility Agent and Security Agent

     Each action taken or decision  made by the  Facility  Agent or the Security
     Agent under or in relation to any Finance Document with requisite authority
     under this Agreement, including on the basis of the requisite instructions,
     shall be binding on all the Finance Parties.

17.4 Notification  of retirement of Facility  Agent,  Security  Agent or Issuing
     Bank

     Each of the Facility Agent,  the Security Agent and/or the Issuing Bank may
     resign its appointment  under this Agreement at any time without  assigning
     any reason  therefor by giving not less than 30 days' prior written  notice
     to that effect to each of the other parties to this Agreement Provided that
     no such resignation  shall be effective until a successor for such Facility
     Agent,  Security Agent or Issuing Bank (as the case may be) is appointed in
     accordance with the succeeding provisions of this clause.

17.5 Successor Facility Agent, Security Agent or Issuing Bank

     If the Facility  Agent,  Security Agent or Issuing Bank gives notice of its
     resignation  pursuant to clause 17.4,  then any reputable  and  experienced
     bank or other  financial  institution  with an office  in London  may after
     consultation  with the Primary Borrower be appointed as a successor to such
     Facility Agent,  Security Agent or Issuing Bank (as the case may be) by the
     Majority  Banks but, if no such  successor  is so  appointed,  the Facility
     Agent, Security Agent or Issuing Bank (as the case may be) may appoint such
     a successor itself.

17.6 Provisions relating to successor Facility Agent,  Security Agent or Issuing
     Bank

     With  effect from the date that a successor  is  appointed  and accepts the
     office of Facility  Agent,  Security  Agent or, as the case may be, Issuing
     Bank and executes such necessary documentation under this clause 17:

     (a)  as regards the other Finance Parties and the Obligors,  such successor
          shall  become  bound by all the  obligations  of the  Facility  Agent,
          Security  Agent or, as the case may be,  the  Issuing  Bank and become
          entitled  to all  the  rights,  privileges,  powers,  authorities  and
          discretions of the Facility Agent,  Security Agent or, as the case may
          be, the Issuing Bank under the Finance Documents;

     (b)  the agency of the retiring  Facility  Agent,  the  trusteeship  of the
          retiring  Security  Agent  or, as the case may be,  the  duties of the
          Issuing Bank shall terminate and the retiring


<PAGE>


          Facility  Agent,  Security  Agent or, as the case may be, the retiring
          Issuing  Bank  shall be  discharged  from  any  further  liability  or
          obligation under the Finance  Documents,  but without prejudice to any
          liabilities which the retiring  Facility Agent,  Security Agent or, as
          the  case  may  be,  the  retiring  Issuing  Bank  may  have  incurred
          (including  with  respect  to  the  retiring  Issuing  Bank  any  then
          outstanding  Issued Letter of Credit)  before the  termination  of its
          agency, trusteeship and/or duties;

     (c)  the costs,  charges  and  expenses  of the  retiring  Facility  Agent,
          Security Agent or, as the case may be, the retiring Issuing Bank shall
          be discharged if recoverable under the provisions of this Agreement;

     (d)  the provisions of the Finance  Documents  shall continue in effect for
          the benefit of any retiring Facility Agent,  Security Agent or, as the
          case may be, the retiring Issuing Bank in respect of any actions taken
          or  omitted  to be  taken  by it or any  event  occurring  before  the
          termination of its agency,  trusteeship  and/or duties (including with
          respect  to the  retiring  Issuing  Bank any then  outstanding  Issued
          Letter of Credit);

     (e)  it is intended  that (except only as may be agreed in writing  between
          any retiring  Security Agent and its successor with the prior approval
          of the Majority Banks), in the case of the appointment of successor to
          the Security  Agent,  the  property,  assets and rights  vested in the
          retiring  Security  Agent pursuant to the Security  Documents  should,
          with  immediate  effect,  be vested in such  successor  Security Agent
          under the  provisions of the Trustee Act 1925,  either by operation of
          law or,  failing  that,  by  assignment  or other form of  transfer or
          conveyance;

     (f)  at any time and from  time to time  following  such  appointment  of a
          successor to the Security Agent, the retiring  Security Agent shall do
          and execute all acts, deeds and documents  reasonably required by such
          successor in order to transfer to such  successor  Security  Agent (or
          its nominee,  as such successor may direct) any such property,  assets
          and rights which shall not have vested in such  successor by operation
          of law and all such acts,  deeds and documents  under clauses  17.6(e)
          and (f) shall be done or, as the case may be,  executed at the cost of
          the retiring Security Agent; and

     (g)  the retiring Facility Agent,  Security Agent or Issuing Bank shall (at
          the expense of the Primary Borrower) provide its successor with copies
          of such of its records as its successor  reasonably  requires to carry
          out its functions as such.

17.7 Merger of Facility Agent, Security Agent or Issuing Bank

     Any corporation  into which the Facility  Agent,  the Security Agent or the
     Issuing Bank may be merged or converted or any  corporation  with which the
     Facility Agent,  the Security Agent or the Issuing Bank may be consolidated
     or any  corporation  resulting from any merger,  conversion,  amalgamation,
     consolidation  or other  reorganisation  to which the Facility  Agent,  the
     Security  Agent or the Issuing Bank shall be a party  shall,  to the extent
     permitted by applicable  law, be the  successor  Facility  Agent,  Security
     Agent or, as the case may be,  Issuing  Bank under this  Agreement  and the
     other Finance Documents (as appropriate) without the execution or filing of
     any  document  or any further act on the part of any of the parties to this
     Agreement  or, as the case may be, the other  Finance  Documents  save that
     notice  of  merger,  conversion,   amalgamation,   consolidation  or  other
     reorganisation  shall  forthwith  be given to the Primary  Borrower and the
     Banks.


<PAGE>


17.8 Role of Issuing Bank

     The  Issuing  Bank  shall act on behalf of the Banks  with  respect  to any
     Letters of Credit Issued by it and the documents associated therewith until
     such time and  except  for so long as the  Facility  Agent may agree at the
     request of the  Majority  Banks to act for such  Issuing  Bank with respect
     thereto.


18.  POWERS

18.1 General powers

     Each of the Facility  Agent,  the Security  Agent,  the  Arrangers  and the
     Underwriters may:

     (a)  assume that the Facility  Office of each Bank is that  identified with
          its signature below (or, in the case of a Substitute,  that identified
          in the Substitution  Certificate under which it became a party to this
          Agreement)  until it has received from such Bank a notice  designating
          some other  office of such Bank as its  Facility  Office,  and may act
          upon any such notice  until the same is  superseded  by a further such
          notice;

     (b)  engage and pay for the advice or services of any lawyers,  accountants
          or other  advisers  whose  advice  or  services  may  seem  necessary,
          expedient or desirable to it and may rely upon any advice so obtained;

     (c)  rely as to matters of fact which  might  reasonably  be expected to be
          within the  knowledge  of an Obligor upon a  certificate  or statement
          signed by or on behalf of that Obligor;

     (d)  rely upon any  communication or document  believed by it to be genuine
          and correct and to have been  communicated  or signed by the person by
          whom it purports to be communicated or signed;

     (e)  refrain from  exercising any right,  power or discretion  vested in it
          under any Finance Document unless and until instructed by the Majority
          Banks or, where  required,  all of the Banks as to whether or not such
          right,  power or  discretion  is to be  exercised  and, if it is to be
          exercised,  as to the manner in which it should be  exercised,  and it
          shall not be liable for acting or refraining from acting in accordance
          with or in the absence of such instructions;

     (f)  refrain  from  taking any step to protect or enforce the rights of any
          Finance Party under any Finance  Document and from beginning any legal
          action or proceeding  arising out of or in connection with any Finance
          Document  until  it has  been  indemnified  and/or  secured  as it may
          require  (whether by way of payment in advance or  otherwise)  against
          all costs,  claims,  expenses  (including  legal fees) and liabilities
          which  it  will  or  may  expend  or  incur  in  complying  with  such
          instructions;

     (g)  refrain  from doing  anything  which  would or might in its opinion be
          contrary to any  applicable  law or any  requirements  (whether or not
          having the force of law) of any  governmental,  judicial or regulatory
          body or  otherwise  render it liable to any  person,  and do  anything
          which is in its opinion  necessary to comply with any such  applicable
          law or requirement;


<PAGE>


     (h)  do any act or thing in the  exercise  of any of its  powers and duties
          under the Finance  Documents  which may  lawfully be done and which in
          its absolute  discretion  it deems  advisable for the  protection  and
          benefit of the Finance Parties collectively;

     (i)  perform any of its duties,  obligations and responsibilities under the
          Finance Documents by or through its personnel or agents; and

     (j)  accept  deposits  from,  lend  money  (secured  or  unsecured)  to and
          generally engage in any kind of banking or other business with, be the
          owner or holder of any  shares or other  securities  of,  and  provide
          advisory or other  services to the Parent and its  Affiliates,  and/or
          the Group or any of the  Finance  Parties,  without any  liability  to
          account.

18.2 Specific powers of Facility Agent and Security Agent

     Each of the Facility Agent and the Security Agent:

     (a)  may assume that:

          (i)   any representation made by the Obligors in or in connection with
                the Finance Documents is true;

          (ii)  no Default has occurred;

          (iii) no  Obligor  is in breach of or  default  under its  obligations
                under any Finance Document; and

          (iv)  any right,  power,  authority or discretion vested in any of the
                Finance  Documents upon the Majority  Banks,  all Banks,  or any
                other person or group of persons has not been exercised,

          unless the Facility  Agent or, as the case may be, the Security  Agent
          has in its capacity as agent (or where relevant, as agent and trustee)
          for  the  relevant  Finance  Parties  received  actual  notice  to the
          contrary from any other party to any Finance Document;

     (b)  shall be at  liberty  to place  any  Finance  Document  and any  other
          instruments, documents or deeds delivered to it pursuant thereto or in
          connection  therewith for the time being in its possession in any safe
          deposit, safe or receptacle selected by the Security Agent or Facility
          Agent,  as the  case may be,  or with  any  bank,  any  company  whose
          business  includes  undertaking  the safe  custody of documents or any
          firm of lawyers of good repute and may make any such  arrangements  as
          it thinks fit for  allowing  the  Primary  Borrower  access to, or its
          solicitors or auditors possession of, such documents when necessary or
          convenient  and, in the absence of gross  negligence or wilful default
          on its part, shall not be responsible for any loss thereby incurred;

     (c)  may,  whenever  it  thinks  fit,  delegate  by  power of  attorney  or
          otherwise  to any person or persons all or any of the rights,  trusts,
          powers,  authorities  and  discretion  vested  in  it by  any  Finance
          Document and such  delegation  may be made upon such terms and subject
          to such  conditions  and subject to such  regulations  as the Security
          Agent or Facility  Agent,  as the case may be, may think fit and shall
          not be bound to supervise


<PAGE>


          the  proceedings  or (in the  absence  of gross  negligence  or wilful
          default on its part) be in any way  responsible  for any loss incurred
          by  reason  of any  misconduct  or  default  on the  part of any  such
          delegate;

     (d)  notwithstanding anything else herein contained, may refrain from doing
          anything  which  would or  might in its  opinion  be  contrary  to any
          relevant  law  of  any  jurisdiction  or  any  relevant  directive  or
          regulation  of any  agency  of any  state  or  which  would  or  might
          otherwise  render it liable to any persons  and may do anything  which
          is, in its  opinion,  necessary  or  desirable to comply with any such
          law, directive or regulations;

     (e)  may  indemnify  itself  and/or every  attorney,  agent or other person
          appointed by it under any Finance  Document out of the Trust  Property
          against all  Liabilities (as defined in clause 20.3) and/or in respect
          of any other  matter or thing  done or  omitted  to be done in any way
          relating to any Finance  Document or by law and/or  acting as Facility
          Agent or Security Agent (as the case may be);

     (f)  shall have the power to  institute,  prosecute and defend any suits or
          actions or other proceedings  affecting the Facility Agent or Security
          Agent  respectively or the Trust Property and to compromise any matter
          or  difference  or  submit  any  such  matter  to  arbitration  and to
          compromise  or  compound  any  debts  owing to the  Facility  Agent or
          Security Agent respectively or any other claims against it or any such
          terms as it shall deem sufficient and to make petition upon such terms
          as it shall deem desirable;

     (g)  save as  otherwise  expressly  provided  herein,  shall have  absolute
          discretion  as to the exercise or non  exercise  (and as to the manner
          and  time  of  any  such  exercise)  of  all  rights,  trust,  powers,
          authorities  and  discretions  vested  in it by  any  of  the  Finance
          Documents but shall be entitled to refrain from  exercising any right,
          power or discretion vested in it as agent or trustee under any Finance
          Document  unless and until  instructed by the Majority Banks or, where
          required  under  this  Agreement,  all Banks as to whether or not such
          right,  power or  discretion  is to be  exercised  and, if it is to be
          exercised, as to the manner in which it should be exercised; and

     (h)  shall have absolute discretion as to the exercise or non-exercise (and
          as to the manner and time of any such exercise) of all rights,  trust,
          powers,  authorities and discretions in relation to any matter,  or in
          any context,  not expressly  provided for by this Agreement to act or,
          as the  case  may be,  refrain  from  acting  in  accordance  with the
          instructions of the Majority Banks;

     (i)  shall  have the power to give or enter into any  indemnity,  warranty,
          guarantee,  undertaking  or  covenant  or to  enter  into  any type of
          agreement as it shall,  with the  approval of the Majority  Banks (or,
          where  required  under this  Agreement,  all Banks) and subject to all
          other  provisions of the Finance  Documents,  think fit in relation to
          the Trust Property;

     (j)  shall  (subject to clause 19) be  entitled  (in its own name or in the
          names of nominees) to invest moneys from time to time including in the
          case of the Security  Agent moneys  forming part of the Trust Property
          or otherwise  held by it as a consequence  of any  enforcement  of the
          security  constituted by the Security  Documents which, in the opinion
          of the Facility Agent or (as the case may be) the Security  Agent,  it
          would not be practicable to distribute immediately by placing the same
          on deposit in the name or under the  control of itself as it may think
          fit without being under any duty to diversify


<PAGE>


          the same and it shall not be responsible  for any loss due to interest
          rate or exchange rate fluctuations;

     (k)  with respect to its own Commitments and  Contributions (if any), shall
          have the same  rights and powers  under this  Agreement  and the other
          Finance  Documents  as any  other  Bank and may  exercise  the same as
          though it were not performing the duties and functions delegated to it
          under this Agreement  and/or the other Finance  Documents and the term
          "Banks" shall, unless the context clearly otherwise indicates, include
          the  Security  Agent  and  the  Facility  Agent  in  their  individual
          capacities as Banks.

18.3 Specific powers of Security Agent

     The Security Agent:

     (a)  shall have all the powers and  discretions  conferred upon trustees by
          the Trustee  Act 1925 (to the extent not  inconsistent  herewith)  and
          upon  the  Security  Agent by this  Agreement  and the  other  Finance
          Documents and upon a receiver  appointed  under any Finance  Documents
          (as though the Security Agent were a receiver thereunder);

     (b)  shall,  without  prejudice  to  any  of the  powers,  discretions  and
          immunities  conferred  upon  trustees  by law (and to the  extent  not
          inconsistent  with  the  provisions  of this  Agreement  or any of the
          Security  Documents),  have all the same powers and  discretions  as a
          natural person acting as the beneficial  owner of such property and/or
          as are conferred upon the Security Agent by this Agreement  and/or any
          Security  Document  but so that the Security  Agent may only  exercise
          such powers and  discretions to the extent that it is authorised to do
          so by the provisions of this Agreement;

     (c)  shall have full power to determine all questions and doubts arising in
          relation to the interpretation or application of any of the provisions
          of this  Agreement or any of the Security  Documents as it affects the
          Security  Agent  and every  such  determination  (whether  made upon a
          question  actually raised or implied in the acts or proceedings of the
          Security  Agent)  shall be  conclusive  and  shall  bind all the other
          parties to this Agreement and the Security Documents;

     (d)  may  at  any  time  appoint  any  person   (whether  or  not  a  trust
          corporation)  to act either as a separate  trustee or as a  co-trustee
          jointly  with it (i) if it  considers  such  appointment  to be in the
          interests  of  the  Finance  Parties  or  (ii)  for  the  purposes  of
          conforming to any legal requirements, restrictions or conditions which
          the Security Agent deems relevant for the purposes  hereof,  and shall
          give prior notice to the Primary  Borrower  and the Facility  Agent of
          any such  appointment;  and any  person so  appointed  shall have such
          powers, authorities and discretions (including the receipt and payment
          of money) and such duties and  obligations  as shall be  conferred  or
          imposed on such person by the instrument of appointment and shall have
          the same benefits  under clauses 17 to 23 as the Security  Agent;  and
          the  Security  Agent  shall  have  power in like  manner to remove any
          person so appointed;  and may pay to any person so appointed,  and any
          costs,  charges and expenses incurred by such person in performing its
          functions pursuant to such appointment,  shall for the purposes hereof
          be treated as costs,  charges and  expenses  incurred by the  Security
          Agent in performing its function as trustee hereunder;


<PAGE>


     (e)  has at its absolute discretion the right to make or retain or register
          in the  names of  nominees  any  investment  of any part or all of the
          Trust Property;

     (f)  without  prejudice to the provisions of any of the Finance  Documents,
          shall  have the right to,  but shall not be under any  obligation  to,
          insure any of the Trust  Property  or to require  any other  person to
          maintain any such insurance and (in the absence of gross negligence or
          wilful  default  on the  part  of the  Security  Agent)  shall  not be
          responsible  for any loss  which may be  suffered  by any  person as a
          result  of the  lack of or  inadequacy  or  insufficiency  of any such
          insurance;

     (g)  may at its sole  discretion,  and  without  reference  to the  Finance
          Parties,  release any asset or assets from the  Security  Documents to
          the extent that their  disposal or release is permitted or required by
          the terms of this Agreement or any of the Security Documents;

     (h)  shall be entitled to make the deductions and  withholdings (on account
          of Taxes or otherwise)  from payments to the Facility Agent  hereunder
          which it is required  by any  applicable  law to make,  and to pay all
          Taxes which may be assessed  against it in respect of any of the Trust
          Property, in respect of anything done by it in its capacity as trustee
          or otherwise by virtue of its capacity as trustee;

     (i)  shall be entitled  to carry out all  dealings  with the other  Finance
          Parties  through the  Facility  Agent and shall be entitled to rely on
          the Facility  Agent's  certificate as to the entitlement of all or any
          of the Finance Parties; and

     (j)  shall be  authorised  to execute  each of the  Security  Documents  on
          behalf of the Finance Parties.


19.  DUTIES

19.1 Specific duties of the Facility Agent and the Security Agent

     Each of the Facility  Agent and the Security  Agent (for the benefit of the
     other Finance Parties only) shall:

     (a)  promptly  upon receipt  inform each Bank of the contents of any notice
          or document or other  information  received by it on or after the date
          of this  Agreement  in its  capacity  as  Facility  Agent  under  this
          Agreement  from any  Obligor or as Security  Agent under the  Security
          Documents from any Obligor;

     (b)  promptly  notify  each Bank of the  occurrence  of any  Default or any
          material  breach  by  any  Obligor  in  the  due  performance  of  its
          obligations under this Agreement or any Security Document of which the
          Facility  Agent or,  as the case may be,  the  Security  Agent (in its
          capacity as such) has received  written notice from any other party to
          any Finance Document;

     (c)  save  as  otherwise  provided  herein,  act  in  accordance  with  any
          instructions  given to it by the Majority  Banks  (which  instructions
          shall be binding on all of the Finance Parties);


<PAGE>


     (d)  if so instructed by the Majority  Banks (or,  where so required  under
          this Agreement,  all Banks), refrain from exercising any right, remedy
          power or discretion vested in it under the Finance Documents;

     (e)  except  as  regards  purely   administrative  acts,  consult  whenever
          reasonably  practicable with the Banks before doing or refraining from
          doing any act or thing in the  exercise of its powers as agent  and/or
          trustee;

     (f)  to the extent  that it  receives  or  recovers  monies  following  the
          service of a notice in accordance with Clause 12.2 pursuant to or as a
          result  of any  breach  of  any  Finance  Document  to be  applied  in
          discharging any obligation  (whether actual or contingent,  present or
          future) of any Obligor under any Finance  Document,  apply such monies
          (without  prejudice to the respective  rights of the Facility Agent or
          the  Security  Agent  pursuant to any  Finance  Document to credit any
          monies received by it to any suspense  account) as between the Finance
          Parties  in  accordance  with  clause  8.9 as if they  were a  partial
          payment; and

     (g)  shall make each such  application  and/or  distribution  as soon as is
          practicable  after the  relevant  moneys are received by, or otherwise
          become  available  to, it save that  (without  prejudice  to any other
          provision  contained  in any of the Security  Documents)  the Security
          Agent (acting on the instructions of the Facility Agent), the Facility
          Agent or any  Receiver  may  credit  any  moneys  received  by it to a
          suspense account for so long and in such manner as the Security Agent,
          Facility Agent or such Receiver may from time to time determine with a
          view to preserving the rights of the Finance Parties or any of them to
          prove for the whole of their respective claims against any Borrower or
          any other person liable.

19.2 Specific duties of Security Agent

     The  Security  Agent (for the benefit of the other  Finance  Parties  only)
     shall:

     (a)  during the Trust Period hold the Trust  Property as trustee upon trust
          for the Finance Parties from time to time and (as well after as before
          enforcement)   perform  and   exercise   (as  the  case  may  be)  the
          obligations,  rights  and  benefits  vested  or to be  vested  in  the
          Security Agent by the Finance  Documents or any document  entered into
          pursuant  thereto in accordance  with the  provisions of Clauses 17 to
          23.

     (b)  (subject to the  provisions  contained  in clause 3.3  (Certain  Funds
          Period))  only make demand  under the  Security  Documents  and to the
          extent  practicable  enforce the security  constituted by the Security
          Documents:

          (i)   before the Final Repayment Date at the direction of the Majority
                Banks,  if  any  of  the  Facilities  has  been  declared  to be
                immediately  due and payable by the Facility  Agent under clause
                12.2; or

          (ii)  on or after the Final  Repayment  Date at the  direction  of any
                Bank,  if any Borrower  defaults in repaying the  Facilities  in
                full on the Final  Repayment  Date or in paying any other amount
                due by any  Borrower  to any  Finance  Party,  under the Finance
                Documents; or


<PAGE>


          (iii) at any  time,  if  requested  to do so by a member  of the Group
                which has granted security to the Security Agent;

     (c)  hold any recoveries  which it receives under the security  constituted
          by the  Security  Documents on trust for  distribution  to the Finance
          Parties, in accordance with the provisions of this clause 19 and shall
          hold the security  constituted by the Security  Documents on trust for
          the  Finance  Parties,  to give  effect  to this  Agreement  and shall
          exercise its rights,  powers and duties  under the Security  Documents
          (and particularly  those concerned with the protection and enforcement
          of  the  security  afforded  by  such  documents)  and/or  under  this
          Agreement for the benefit of all Finance Parties; and

     (d)  carry out all  dealings  with the other  Finance  Parties  through the
          Facility Agent.


20.  EXONERATION

20.1 Absence of obligation on initial Finance Parties

     Despite  anything  to the  contrary  expressed  or implied  in any  Finance
     Document, each of the Facility Agent, the Security Agent, the Issuing Bank,
     the Arrangers and the Underwriters shall:

     (a)  not be bound to  enquire as to and will have no  liability  in respect
          of:

          (i)   whether  or not  any  representation  or  warranty  made  by any
                Obligor under or in connection with any Finance Document is true
                complete or adequate;

          (ii)  the occurrence or otherwise of any Default;

          (iii) the  performance  by any  Obligor of its  obligations  under any
                Finance Document; or

          (iv)  any breach or default by any Obligor of or under its obligations
                under any Finance Document;

     (b)  not be bound to account to any Finance  Party for any fee or other sum
          or the profit element of any sum received by it for its own account;

     (c)  not be bound to disclose to any other person any information  relating
          to any  member of the Group if such  disclosure  would or might in its
          opinion  constitute  a  breach  of any  law or  regulation  or duty of
          confidentiality or be otherwise actionable at the suit of any person;

     (d)  not be under any  fiduciary or other duty towards any Finance Party or
          under any obligations  other than those expressly  provided for in any
          Finance Documents;

     (e)  not be liable (in the  absence of its own gross  negligence  or wilful
          default):

          (i)  for any  failure,  omission,  or  defect  in the  due  execution,
               delivery,    validity,    legality,    adequacy,     performance,
               enforceability,  or  admissibility  in  evidence  of any  Finance
               Document or any communication, report or other document delivered
               under any Finance Document; or


<PAGE>


          (ii) in respect of its  exercise  or  failure to  exercise  any of its
               powers and duties under any Finance Document; or

     (f)  not have any  duties,  obligations  or  liabilities  other  than those
          expressly  provided  for in this  Agreement  and  (in the  case of the
          Security  Agent)  the  Security  Documents  and have no  liability  or
          responsibility  (in the absence of its own gross  negligence or wilful
          default) of any kind to:

          (i)  any  member of the Group  arising  out of or in  relation  to any
               failure  or delay in the  performance  or breach  by any  Finance
               Party (other than itself) of any of its  obligations  under or in
               connection with any Finance Document; or

          (ii) any Finance Party arising out of or in relation to:

               (aa) the financial condition of any member of the Group; or

               (bb) any  failure  or delay in the  performance  or breach by any
                    Obligor  of any of its  obligations  under or in  connection
                    with any Finance Document or the Facilities;

     (g)  not be bound to check or enquire on behalf of any other  Finance Party
          into or liable for the  adequacy,  accuracy,  execution,  genuineness,
          enforceability,  admissibility  in  evidence  or  completeness  of any
          communication delivered to it under any of the Finance Documents,  any
          legal or other opinions, reports, valuations, certificates, appraisals
          or other  documents  delivered  or made or required to be delivered or
          made at any time in connection with any of the Finance Documents,  any
          security  to be  constituted  thereby  or any  other  report  or other
          document,  statement  or  information  circulated,  delivered or made,
          whether orally or otherwise and whether  before,  on or after the date
          of this Agreement;

     (h)  be entitled to accept without  enquiry,  requisition or objection such
          right and title as any Obligor  may have to that part of the  property
          belonging to it (or any part thereof)  which is the subject  matter of
          any Finance  Document and not be bound or concerned to  investigate or
          make any  enquiry  into the  right  or  title of such  person  to such
          property (or any part thereof) or, without prejudice to the foregoing,
          to require such person to remedy any defect in such person's  right or
          title as aforesaid;

     (i)  in enforcing the security  constituted by the Finance Documents and in
          determining  the respective  entitlements of the Finance  Parties,  be
          entitled to rely on its own account;

     (j)  be entitled  to invest  monies  which in the  opinion of the  Facility
          Agent  or  Security  Agent  (as the  case  may be) may not be paid out
          promptly  following  receipt in the name or under the  control of such
          Facility  Agent or  Security  Agent (as the case may be) in any of the
          investments for the time being authorised by law for the investment by
          trustees of trust monies or in any other  investments  whether similar
          to the  aforesaid or not which may be requested by the Majority  Banks
          or by placing  the same on deposit in the name or under the control of
          the  Facility  Agent or the Security  Agent as the  Facility  Agent or
          Security  Agent (as the case may be) may  think  fit and the  Facility
          Agent and Security  Agent (as the case may be) may at any time vary or
          transpose any such investments for or into any others of a like nature
          and (in the absence of gross


<PAGE>


          negligence  or wilful  default on the part of such  Facility  Agent or
          Security Agent) shall not be responsible for any loss thereby incurred
          whether due to depreciation in value of such  investments or any other
          reason whatever;

     (k)  not be bound to take any steps or perform any  obligation  or exercise
          any right or fulfil any request if to do so might in its sole  opinion
          breach or  conflict  with or  contradict  or be  contrary to any rule,
          regulation,  law, regulatory  requirement,  court order or judgment in
          any jurisdiction or expose the Facility Agent, the Security Agent, the
          Arrangers or the Underwriters to liabilities in any jurisdiction or be
          otherwise actionable at the suit of any person;

     (l)  not be liable for any failure:

          (i)    to  require  the  deposit  with  it of  any  deed  or  document
                 certifying,  representing or  constituting  the title of any of
                 the  Obligors  to  any  of  the  property  mortgaged,  charged,
                 assigned or otherwise  encumbered  by or pursuant to any of the
                 Security Documents;

          (ii)   to obtain  any  licence,  consent  or other  authority  for the
                 execution, delivery, validity, legality, adequacy, performance,
                 enforceability  or  admissibility  in  evidence  of  any of the
                 Finance Documents;

          (iii)  to register or notify any of the foregoing in  accordance  with
                 the  provisions  of any of the documents of title of any of the
                 Obligors;

          (iv)   to effect or procure  registration of or otherwise  protect any
                 of  the  security   created  by  the   Security   Documents  by
                 registering the same under any applicable  registration laws in
                 any territory;

          (v)    to take,  or to require any of the Obligors to take,  any steps
                 to  render  the  security  created  by the  Security  Documents
                 effective  or to secure the  creation of any  ancillary  charge
                 under the laws of any other jurisdiction; or

          (vi)   to require  any  further  assurances  in relation to any of the
                 Security Documents;

          (vii)  to  become or  remain a  mortgagee  or  heritable  creditor  in
                 possession (or equivalent in any foreign jurisdiction);

          (viii) to take or omit to take any other action under or in connection
                 with the  Security  Documents  or any aspect  thereof  (save as
                 otherwise expressly provided in clause 19); or

          (ix)   in the  case of  each  of the  Facility  Agent,  Arrangers  and
                 Underwriters, by the Security Agent to perform or discharge any
                 of its duties or obligations under the Security Documents;

     (m)  in the case of the Security  Agent,  not be bound to supervise,  or be
          responsible for any loss incurred by reason of any act or omission of,
          any trustee or co-trustee of the Security  Agent if the Security Agent
          shall have exercised  reasonable care in the selection of such trustee
          or co-trustee; and


<PAGE>


     (n)  have no  liability  (save as  otherwise  provided in clauses 17 to 23)
          otherwise in connection  with the Facilities or their  negotiations or
          for  acting  (or as  the  case  may  be  refraining  from  acting)  in
          connection with the instructions of the Majority Banks.

20.2 Indemnity from Banks

     Each Bank and the Issuing Bank shall, in its  Proportion,  on demand by the
     Facility  Agent,  the  Security  Agent or any  Arranger  from time to time,
     indemnify the Facility  Agent or, as the case may be, the Security Agent or
     the Arranger,  against any and all fees (to the extent properly  chargeable
     by the  Facility  Agent or, as the case may be, the  Security  Agent or the
     Arranger  under any Finance  Document but not promptly  recovered  from the
     Obligors),  costs,  claims and expenses and  liabilities  including any VAT
     thereon:

     (a)  to which the Facility Agent or, as the case may be, the Security Agent
          becomes  subject by reason of it acting as agent or security  trustee;
          or

          (ii)  incurred  by the  Facility  Agent  or,  as the case may be,  the
                Security Agent or any attorney,  agent, delegate or other person
                appointed by the Facility  Agent or the Security Agent under any
                Finance  Document in relation to or arising out of the taking or
                holding of any of the  security  given or created by or pursuant
                to any of the Finance Documents or in the execution or purported
                or   attempted   execution  of  the  rights,   trusts,   powers,
                authorities, discretions and obligations vested in it; or

          (iii) which it is otherwise entitled to recover from any Obligor,

     in each case under any of the Finance  Documents or by law,  including
     those  relating  to all  actions,  proceedings,  claims and demands in
     respect of any matter or thing done or omitted in any way  relating to
     the Finance Documents any exercise or non exercise of any right, power
     or  discretion,  and all  amounts  due to the  Facility  Agent  or the
     Security Agent by way of  remuneration  for acting as agent or trustee
     (as the case may be) under any of the Finance Documents  (collectively
     the "Liabilities").  Each Borrower shall  counter-indemnify  the Banks
     and the Issuing  Bank  against all  payments by them under this clause
     20.2.  If a Bank or the Issuing Bank  (referred to in this clause 20.2
     as a "defaulting  Bank") fails to pay its due contribution  under this
     indemnity,  then the  Facility  Agent  or,  as the  case  may be,  the
     Security  Agent  may  (without  prejudice  to  its  other  rights  and
     remedies) deduct the amount due from the defaulting Bank from any sums
     which are then or afterwards in its possession  which would  otherwise
     be payable to the defaulting Bank.

20.3 Indemnity from Trust Property

     The Security Agent and every  employee,  officer,  trustee or co-trustee or
     other person  appointed by it in connection with its appointment  under the
     Security  Documents  (each a  "Protected  Party")  shall be  entitled to be
     indemnified  out of the  Trust  Property  in  respect  of all  liabilities,
     damages, costs, claims, charges or expenses whatsoever properly incurred or
     suffered by any Protected Party:

     (a)  in the  execution  or exercise  or bona fide  purported  execution  or
          exercise of the trusts, rights, powers,  authorities,  discretions and
          duties created or conferred by or pursuant to the Security Documents;


<PAGE>


     (b)  as a  result  of any  breach  by a member  of the  Group of any of its
          obligations under any Security Document;

     (c)  in  respect of any  Environmental  Claim  made or  asserted  against a
          Protected Party which would not have arisen if the Security  Documents
          had not been executed; and

     (d)  in respect of any matter or thing done or omitted in any way  relating
          to the  Trust  Property  or  the  provisions  of  any of the  Security
          Documents.

     The rights conferred by this clause 20.3 are without prejudice to any right
     to indemnity by law given to trustees generally and to any provision of the
     Security  Documents  entitling the Security Agent or any other person to an
     indemnity in respect of, and/or reimbursement of, any liabilities, damages,
     costs, claims, charges or expenses incurred or suffered by it in connection
     with any of the Security  Documents or the  performance of any duties under
     any of the Security Documents.  Nothing contained in this clause 20.3 shall
     entitle  any  Protected   Party  to  be   indemnified  in  respect  of  any
     liabilities, damages, costs, claims, charges or expenses to the extent that
     the  same  arise  from  such  person's  own  gross   negligence  or  wilful
     misconduct.

20.4 Disclaimer

     Neither  the  Facility  Agent,  the  Security  Agent,  nor any  Arranger or
     Underwriter  accepts  responsibility  to any  other  Finance  Party for the
     accuracy and/or completeness of any information supplied in connection with
     any Finance Document or for the legality, validity, effectiveness, adequacy
     or  enforceability  of any Finance Document and neither the Facility Agent,
     the  Security  Agent,  nor any Arranger or  Underwriter  shall be under any
     liability to any other  Finance  Party as a result of taking or omitting to
     take any action in relation to any Finance  Document (except in the case of
     its gross negligence or wilful misconduct).

20.5 No actions against individuals

     Each of the Banks agrees that it will not assert or seek to assert  against
     any  director,  officer or employee of the  Facility  Agent,  the  Security
     Agent,  any  Arranger or  Underwriter  any claim it may have against any of
     them in respect of the matters referred to in clause 20.4.

20.6 Credit appraisals

     It is agreed by each Bank, by virtue of its execution of this  Agreement or
     its accession to this Agreement, that it has itself been, and will continue
     to be, solely  responsible for making its own independent  appraisal of and
     investigations into the financial condition,  creditworthiness,  condition,
     affairs,  status and nature of each member of the Group, and,  accordingly,
     each Bank  confirms to the Facility  Agent,  the Security  Agent,  and each
     Arranger and Underwriter that it:

     (a)  does not enter  into this  Agreement  nor accede to it on the basis of
          and has not  relied  on and will not rely on any  statement,  opinion,
          forecast or other  representation  (whether  negligent or innocent) or
          warranty  or other  provision  (in any  case  whether  oral,  written,
          express or implied)  made by, or agreed to, the  Facility  Agent,  the
          Security  Agent,  any Arranger,  any  Underwriter or any other Bank to
          induce it to enter into this  Agreement or any other Finance  Document
          except as  expressly  set out therein and the  remedies  available  in
          respect of any such misrepresentation or untrue statement made to such
          Bank shall be limited  to a claim for  breach of  contract  under this
          Agreement; and


<PAGE>


     (b)  has not  relied  on and  will  not  rely on the  Facility  Agent,  the
          Security Agent, any Arranger, any Underwriter or any other Bank:

          (i)  to check or enquire on its behalf into the adequacy,  accuracy or
               completeness of any  information  provided by or on behalf of any
               member  of the  Group in  connection  with any  Finance  Document
               and/or the  transactions  contemplated  in the Finance  Documents
               (whether or not such information has been or is after the date of
               this Agreement circulated to such Bank by the Facility Agent, the
               Security Agent, any Arranger or Underwriter or as the case may be
               any other Bank); or

          (ii) to  assess  or keep  under  review on its  behalf  the  financial
               condition, creditworthiness, condition, affairs, status or nature
               of any member of the Group.

     Provided  that  clause   20.6(a)  shall  not  apply  to  any  statement  or
     representation  made  fraudulently,  or to any provision of this  Agreement
     which was induced by fraud for which the  remedies  available  shall be all
     those available under English law.

20.7 Exoneration of Related Persons

     All the  provisions  of this  clause 20 and of any other  provision  of any
     Finance  Document  protecting  (including  indemnifying)  or  limiting  the
     liability  of any  Finance  Party,  or  exonerating  it from  liability  or
     responsibility,  which may enure to the benefit of the such  Finance  Party
     shall also be deemed to be given for the benefit of the Security  Agent and
     all  Related  Persons to whom they are capable of relating or in respect of
     whom they are capable of taking effect.

20.8 Pre-contractual effect of exoneration

     For the avoidance of doubt,  the  guarantee,  indemnity,  exonerations  and
     other  protections in favour of the Facility Agent, the Security Agent, the
     Arrangers,  the  Underwriters  and the  Related  Persons  contained  in the
     Finance  Documents  shall take effect in respect of all events,  action and
     omissions  occurring  before the execution and completion of this Agreement
     as  well as  events,  actions  and  omissions  occurring  on or  after  its
     execution and  completion  and to the extent that any  liability  should be
     adjudged to have arisen prior to the date of this Agreement, such liability
     is hereby completely released.

20.9 Common Parties

     Notwithstanding  that the Facility  Agent and the  Security  Agent may from
     time to time be the same entity,  the Facility Agent and the Security Agent
     have entered into this Agreement in their  separate  capacities as agent or
     (as  appropriate)  security  agent  and  trustee  for the  Finance  Parties
     provided  that,  where this  Agreement  provides for the Facility  Agent or
     Security  Agent to  communicate  with or  provide  instructions  to another
     Facility  Agent or Security Agent while the two parties in question are the
     same  entity,  it will not be  necessary  for  there to be any such  formal
     communication or instructions.


<PAGE>


21.  ENFORCEMENT AND RECOVERIES

21.1 Obligations owed by Obligors to Finance Parties

     Each Obligor agrees that:

     (a)  the  security  comprised in the  Security  Documents  may be enforced,
          realised and  distributed  by the Security Agent and Facility Agent in
          accordance with their respective powers and obligations to the Finance
          Parties set out in clauses 18 and 19;

     (b)  the obligations and liabilities the subject of the Security  Documents
          shall  only be  discharged  by virtue of receipt  or  recovery  by the
          Security  Agent of monies,  or of payments made by the Security  Agent
          hereunder, to the extent that the ultimate recipient actually receives
          monies from the Security Agent hereunder;

     (c)  if it receives any sum from any person which,  pursuant to the Finance
          Documents, should have been paid to the Security Agent, such sum shall
          be held on trust for the Finance  Parties and shall  forthwith be paid
          over to the Security Agent;

     (d)  it hereby waives,  to the extent  permitted under  applicable law, all
          rights it may  otherwise  have to require  that the  security  created
          pursuant to the Facility Documents be enforced in any particular order
          or manner or that any sum received or recovered  from any person or by
          virtue  of  the  enforcement  of  any of  the  security  or any  other
          Encumbrance  of any  nature  over any  assets  or  revenues,  which is
          capable of being applied in or towards discharge of any of the Secured
          Obligations  is so  applied,  whether on receipt or recovery or at any
          time thereafter.

21.2 Obligations owed by Finance Parties to Facility Agent and Security Agent

     The Finance Parties agree between themselves:

     (a)  to furnish to the Facility  Agent,  for  transmission  to the Security
          Agent,  such information as the Security Agent may reasonably  specify
          (through the Facility  Agent) as being  necessary or desirable for the
          purpose of enabling  the  Security  Agent to perform its  functions as
          trustee or administrator;

     (b)  to  co-operate  with each  other and with the  Security  Agent and any
          Receiver  under the Security  Documents in realising  the property and
          assets subject to the Security  Documents and in ensuring that the net
          proceeds realised under the Security  Documents after deduction of the
          expenses of  realisation  are applied in accordance  with clause 19.1;
          and

     (c)  not to take any action separately to enforce or attempt to enforce any
          of the Security  Documents or to exercise any rights,  discretions  or
          powers or to grant any  consents or releases  under or pursuant to any
          of the Security  Documents or  otherwise  have direct  recourse to the
          security  and/or  guarantees   constituted  by  any  of  the  Security
          Documents.


<PAGE>


21.3 Perpetuity period

     The trusts  constituted or evidenced in or by the Security  Documents shall
     remain in full force and effect during the Trust Period.


22.  DETERMINATION OF MATTERS

22.1 Majority Bank matters: amendments and waivers

     Except as provided in clause 22.4 and 22.5  (Unanimous  consent),  with the
     prior written consent of the Majority Banks,  the Facility Agent (or as the
     case may be, the Security Agent) and the Primary  Borrower may from time to
     time:

     (a)  enter into written  amendments,  supplements or  modifications  to the
          Finance Documents (however  fundamental) for the purpose of adding any
          provisions  to the  Finance  Documents  or  changing in any manner the
          rights and/or obligations of any of the Borrowers, the Facility Agent,
          the Security Agent and the Banks; and

     (b)  execute  and  deliver  to any  Borrower a written  instrument  waiving
          prospectively or retrospectively,  on such terms and conditions as the
          Facility Agent (or, as the case may be, Security Agent) may specify in
          such  instrument,  any of  the  requirements  of  any  of the  Finance
          Documents, or giving any consents or approvals thereunder.

22.2 Documentation of Majority Bank changes

     Any action so authorised and effected by the Facility Agent or the Security
     Trustee  under  clause  22.1  shall be  documented  in such  manner  as the
     Facility Agent shall (with the approval of the Majority  Banks)  determine,
     shall be promptly  notified to the Banks by the Facility Agent and (without
     prejudice  to the  generality  of clause  17.3) shall be binding on all the
     Banks.

22.3 Majority bank matters: enforcement

     If the Facility  Agent makes a  declaration  under clause 12.2 the Facility
     Agent shall,  in the names of all the Banks,  take such action on behalf of
     the Banks and conduct  such  negotiations  with any  Borrower and any other
     members of the Group and  generally  administer  the Advances in accordance
     with the wishes of the Majority Banks.  All the Banks shall be bound by the
     provisions of this clause 22.3 and no Bank shall be entitled to take action
     independently against any Borrower or any other member of the Group without
     the prior consent of the Majority Banks.

22.4 All Bank matters: amendments and waivers

     Except with the prior written consent of all the Banks,  the Facility Agent
     shall not have  authority on behalf of the Banks to agree with any Borrower
     any  amendment  or  modification  to this  Agreement  or to  vary or  waive
     breaches  of or  defaults  under or  otherwise  excuse  performance  of any
     provision of this Agreement by any Obligor,  if the effect of such would be
     to:

     (a)  reduce the Applicable Margin;


<PAGE>


     (b)  postpone  the  due  date  or  reduce  the  amount  of any  payment  of
          principal,  interest, commitment commission or other amount payable by
          any Borrower under this Agreement;

     (c)  change the  currency  in which any  amount is payable by any  Borrower
          under this Agreement;

     (d)  have the effect of  changing  the amount of any  Facility,  any Bank's
          Commitment or the principal or face amount or currency of any Advance;

     (e)  extend any period during which a Drawdown Notice may be delivered;

     (f)  change any provision of this Agreement  which  expressly  requires the
          approval or consent of all the Banks such that the  relevant  approval
          or consent may be given  otherwise  than with the  sanction of all the
          Banks;

     (g)  change the definitions of Borrowed Moneys,  Security Interests,  Event
          of Default, Major Default, Majority Banks, Default, Cancellation Date,
          Certain  Funds  Period,   Available  Commitment  Termination  Date  or
          Substitution Certificate;

     (h)  change clause 15.2 (Pro-rata Payments) or clause 3.3; or

     (i)  change this clause 22 or clause 23.

22.5 All Bank matters: security

     Except with the prior written consent of all the Banks,  the Facility Agent
     shall not have  authority on behalf of the Banks to authorise  the Security
     Agent to agree amendments or  modifications to the Security  Documents with
     the  members of the Group (or the Parent on their  behalf)  and/or  vary or
     waive breaches of, or defaults under, or otherwise  excuse  performance of,
     any  provision of any of the Security  Documents by any member of the Group
     if the effect of such would be to:

     (a)  release any member of the Group from the security  constituted  by any
          Security Document;

     (b)  release any of the Charged Assets from the security constituted by any
          Security Document other than any such release (pursuant to (a) or (b))
          as part of a disposal made pursuant to the terms of this  Agreement or
          once the Facilities have been repaid and/or discharged in full and the
          Finance Period has terminated;

     (c)  agree with the Parent or any other  member of the Group any  amendment
          of, or action in  relation  to, any of the  Security  Documents  which
          would have the effect of:

          (i)  extending  the due date or  reducing  the  amount of any  payment
               under any Security Document or

          (ii) changing  the  currency in which any amount is payable  under any
               Security Document.


<PAGE>


22.6 Execution of new security

     For the purposes of this clause 22 it is expressly  agreed and acknowledged
     that  the  execution  of a  guarantee  and/or  deed of  adherence  by a new
     Subsidiary or other  Obligor or proposed  Obligor or any deed or instrument
     pursuant to a further  assurance  provision in this  Agreement or the other
     Finance  Documents shall not constitute an amendment or modification to, or
     variation of, any of the Finance Documents.

22.7 Veto of Security Agent and Facility Agent

     Regardless of any other provision in this Agreement, the Facility Agent, or
     as the case may be, the  Security  Agent,  shall not be obliged to agree to
     any such waiver, amendment, supplement or modification if it would:

     (a)  amend, modify or waive any provision of clause 22; or

     (b)  otherwise  amend,  modify or waive any of the  Facility  Agent's,  the
          Arrangers'  or the  Security  Agent's  rights under any of the Finance
          Documents or subject the Facility  Agent or the Security  Agent to any
          additional obligations under such documents.

22.8 Administrative determinations

     The Facility  Agent may determine  purely  administrative  matters  without
     reference to the Banks.

23.  BASIS OF DECISIONS

23.1 Meaning of Majority Banks

     Where this  Agreement  or any of the  Security  Documents  provides for any
     matter to be determined by reference to the opinion of, or to be subject to
     the consent or request of, the Majority Banks or for any action to be taken
     on the instructions of the Majority Banks, such opinion,  consent,  request
     or  instructions  shall (as  between  the Banks) only be regarded as having
     been validly  given or issued by the Majority  Banks if all the Banks shall
     have received  prior notice of the matter on which such  opinion,  consent,
     request or  instructions  are  required  to be  obtained  and the  relevant
     majority of Banks shall have given or issued such opinion, consent, request
     or  instructions,  but so that (as  between  the  Obligors  and the Finance
     Parties)  the  Obligors  shall each be entitled  (and bound) to assume that
     such  notice  shall  have  been  duly  received  by each  Bank and that the
     relevant  majority  shall have been obtained to constitute  Majority  Banks
     when  notified to this effect by the Facility  Agent whether or not this is
     the case.

23.2 Notice to Majority Banks

     If,  within 10 Banking  Days (or in the case of any  approval  sought under
     clause 10.4, 2 Banking Days) of the Facility Agent despatching to each Bank
     a notice requesting instructions (or confirmation of instructions) from the
     Banks or the agreement of the Banks to any amendment, modification, waiver,
     variation or excuse of performance  for the purposes of, or in relation to,
     any of the Finance  Documents,  the Facility Agent has not received a reply
     specifically  giving or  confirming  or  refusing  to give or  confirm  the
     relevant  instructions  or, as the case may be,  approving  or  refusing to
     approve the proposed amendment,  modification,  waiver, variation or excuse
     of  performance,  then  (subject to clause 23.4) the  Facility  Agent shall
     treat any Bank


<PAGE>


     which has not so responded as having  indicated a desire to be bound by the
     wishes of 662/3 per cent. of those Banks (measured in terms of the relevant
     Contributions  or, if none, the relevant  Commitments of those Banks) which
     have so responded.  Any Bank which notifies the Facility Agent of a wish or
     intention to abstain on any particular  issue shall be treated as if it had
     not responded.

23.3 Meaning of all Banks

     Where this Agreement or any other Finance Document, provides for any matter
     to be  determined  by  reference to the opinion of, or to be subject to the
     consent of or request of all of the Banks or the Banks  acting  unanimously
     or for any  action to be taken on the  instruction  of all the  Banks  such
     opinion, consent, request or instructions shall (as between the Banks) only
     be regarded as having been validly given or issued by all the Banks (or the
     Banks acting unanimously) if all the Banks shall have received prior notice
     (the  "Agent's  Notice")  of such matter  containing  a request for written
     instructions from such Bank to be received by the Facility Agent or, as the
     case may be, the Security  Agent within ten Banking Days of the receipt (or
     the deemed receipt  pursuant to clause 25.1(b)) of the Agent's Notice.  If,
     in  respect  of a Bank,  the  Facility  Agent  or the  Security  Agent,  as
     appropriate:

     (a)  shall not have received written instructions in respect of such matter
          from such Bank; and

     (b)  the  Facility  Agent or  Security  Agent shall have  received  written
          instructions in respect of such matter from at least five other Banks,

     in each case within such time period  (and  subject to clause  23.4),  such
     Bank shall be deemed to have irrevocably  renounced and waived its right to
     make any such determination,  approval,  consent or provide instructions to
     the Facility Agent or the Security  Agent in respect of such matter;  shall
     not have any rights,  recourse or remedy  against the Facility Agent or the
     Security Agent in respect of such matter; and shall be bound (as shall each
     of the Obligors) by the determination, approval, consent or instructions of
     the other Banks in respect of such matter.  Clauses 23.1 and 23.2 shall not
     apply in  relation  to those  matters  which are to be  decided  by all the
     Banks.

23.4 Late responses

     In any case where a Bank  fails to  respond  within the time limit set down
     under clauses 23.2 or 23.3, such Bank's response, if it responds before any
     determination  or instruction is acted upon or communicated to any Obligor,
     will be taken into account as if it had been received within the time limit
     Provided  that the  Facility  Agent  has  received  actual  notice  of such
     response before any such action or communication.

23.5 Costs

     If any Borrower  requests,  or if the Facility Agent requires in accordance
     with  clause  10.3(c)  or  any  other  provision  of  this  Agreement,  any
     amendment,  supplement,  modification or waiver under clause 22.1 (Majority
     Bank  matters)  or  clauses  22.4 or 22.5  (All  Bank  matters),  then  the
     Borrowers  shall, on demand by the Facility  Agent,  reimburse the Facility
     Agent for all costs and expenses (including legal fees),  together with any
     VAT on them, incurred by the Facility Agent in the negotiation, preparation
     and  execution  of any  written  instrument  contemplated  by  clause  22.1
     (Majority Bank matters) or clauses 22.4 or 22.5 (All Bank matters).


<PAGE>


23.6 No partnership

     This  Agreement  shall not and shall not be construed so as to constitute a
     partnership between the parties or any of them.

23.7 Change of Reference Banks

     If:

     (a)  the  whole of the  Contributions  (if any) of any  Reference  Bank are
          prepaid;

     (b)  the  Commitments  (if any) of any  Reference  Bank are reduced to zero
          prior to the end of the Finance Period;

     (c)  a Reference Bank novates the whole of its rights and  obligations  (if
          any) as a Bank under this Agreement; or

     (d)  a Reference  Bank ceases to provide  quotations to the Facility  Agent
          upon  request  for the  purposes  of  determining  LIBOR  (where  such
          quotations are required  having regard to the definition of "LIBOR" in
          clause 1.2)

     the Facility Agent may,  acting on the  instructions of the Majority Banks,
     terminate the  appointment of such  Reference  Bank and after  consultation
     with the Primary  Borrower  appoint  another Bank to replace such Reference
     Bank.


24.  MATTERS CONCERNING THE BORROWERS

24.1 Additional Borrower

     The Primary  Borrower  may,  at any time during the term of this  Agreement
     (unless a Default  shall  have  occurred  and be  continuing),  notify  the
     Facility  Agent  that  a  Permitted  Borrower  is  to be  designated  as an
     additional Borrower under the Revolving Credit Facility.  Such notice shall
     be in writing and signed by the Primary Borrower and the relevant Permitted
     Borrower  and  shall  take  effect  in  accordance  with  its  terms on the
     condition that:

     (a)  such   Permitted   Borrower  shall  have  entered  into  an  Accession
          Certificate  with the Facility Agent which,  subject to (b) below, the
          Facility  Agent  shall  execute  on behalf of all the  parties to this
          Agreement  (and all such  parties  so  authorise  the  Facility  Agent
          without any further consent of, or consultation with, such party); and

     (b)  such  Permitted  Borrower,  before  entering  into  such an  Accession
          Certificate,   shall  have   fulfilled  all   appropriate   conditions
          precedent,  as notified to the Primary Borrower by the Facility Agent,
          to the  satisfaction  of the Facility Agent  including the delivery to
          the Facility Agent of the documents and evidence referred to in Part C
          of  Schedule  3 in form and  substance  satisfactory  to the  Facility
          Agent.

     Upon satisfaction of such conditions such Permitted Borrower shall become a
     party to this  Agreement  in the  capacity  of a Borrower in respect of the
     Revolving  Credit  Facility and shall assume all the obligations and rights
     of such a Borrower under this Agreement.


<PAGE>


24.2 Primary Borrower as Obligors' agent

     Each  Obligor  by  its   execution  of  this   Agreement  or  an  Accession
     Certificate,  as the case may be,  irrevocably  appoints and authorises the
     Primary Borrower:

     (a)  as agent for each Borrower and Bidco to receive all notices, requests,
          demands or other  communications  under this  Agreement  which  shall,
          without  prejudice to any other effective mode of serving the same, be
          properly  served on the  Obligor  concerned  if served on the  Primary
          Borrower in accordance with clause 25.1; and

     (b)  to give all notices  (including any Drawdown Notices) and instructions
          and make such  agreements  expressed  to be capable of being  given or
          made by such  Obligor or  Obligors  in this  Agreement  (including  an
          agreement   for  the   continuance   of  any  guarantee  or  security)
          notwithstanding  that they may affect  such  Obligor  without  further
          reference to, or the consent of, such Obligor and such Obligor  shall,
          as regards  the  Finance  Parties,  be bound  thereby  as though  such
          Obligor  itself had given  such  notice or  instructions  or made such
          agreement.

24.3 Obligations unconditional

     The  obligations  of each  Obligor  under this  Agreement  and the Security
     Documents  are  unconditional  and  irrevocable  (subject  to  the  express
     provisions of this Agreement or any Security  Document) and shall not be in
     any way affected or discharged by reason of any matter  affecting the Offer
     or the Acquisition (or the Offer Documents). Each Obligor acknowledges that
     any  approval or  authorisation  given under this  Agreement  or a Security
     Document by a Finance Party in relation to the Offer or the Acquisition (or
     the Offer Documents) shall not constitute any representation or warranty by
     such (or any)  Finance  Party as to the adequacy or  effectiveness  of such
     Offer  or  the   Acquisition  (or  the  Offer   Documents),   the  purchase
     consideration payable by Bidco, the commercial  advisability of any Obligor
     or Bidco entering into the arrangements contemplated thereby or otherwise.

24.4 Obligations Several

     The  obligations  of each  Obligor  under this  Agreement  and the Security
     Documents  are  several  and the  failure of any  Obligor  to perform  such
     obligations  shall not release any other Obligor of its  obligations  under
     this Agreement.

24.5 Stand-alone Revolving Credit Facility to REC

     The  Finance  Parties  and the  Obligors  agree  that they shall as soon as
     reasonably  practicable  after the date of the Press Release agree the form
     of an agreement  for a  stand-alone  revolving  credit  facility to be made
     available  by the  Banks to REC (the  "REC  Facility  Agreement").  The REC
     Facility  Agreement  shall be entered into between the Finance  Parties and
     REC upon the Unconditional Date and, upon such date, the Commitment of each
     Bank in respect of the Revolving  Credit Facility shall reduce by an amount
     equal  to the  commitment  assumed  by such  Bank  under  the REC  Facility
     Agreement.  The REC  Facility  Agreement  shall be on terms and  subject to
     conditions identical,  mutatis mutandis, to the terms and conditions of the
     Revolving Credit Facility as set out herein save that it shall:

     (a)  create a  commitment  on the part of each of the  Banks  (pro  rata to
          their   respective    Proportions)   of   an   aggregate   amount   of
          (pound)250,000,000;


<PAGE>


     (b)  be available for the general corporate purposes of REC;

     (c)  have an  Applicable  Fees  Rate of 0.25% and an  Applicable  Margin of
          0.50%;

     (d)  contain no  covenants,  representations  and  warranties  or events of
          default  referencing  any  person  other  than  REC and  that all such
          covenants,  representations and warranties and events of default shall
          be confined  to, and to events  occurring  in respect of, the REC (but
          otherwise   corresponding   where   applicable,   to  the   covenants,
          representations and warranties and events of default in this Agreement
          which by their  terms  herein  operate to  include  the REC Group) and
          without limitation to the above the following clauses shall not appear
          in the REC Facility  Agreement:  9.2,  10.2(e),  (f), (g), 10.4, 10.5,
          10.6, 11.1(f),  12.1(o)(i),  (ii) or (iii),  12.1(w), and any covenant
          contained  in clause 10.3 shall be replaced by the  covenant in clause
          20.14(b) of the agreement between the Target,  Citibank  International
          plc (as agent),  Barclays Bank PLC and Midland Bank plc dated 5 August
          1996.

     Following such stand-alone REC facility being executed:

          (i)  the  Revolving  Credit  Facility  shall  reduce by the  principal
               amount of the  commitment  created  under  such  stand-alone  REC
               facility; and

          (ii) amounts  committed or outstanding  thereunder shall not be deemed
               to be committed or outstanding under this Agreement.


25.  NOTICES AND OTHER MATTERS

25.1 Address for Notice

     Every notice,  request,  demand or other communication under this Agreement
     shall:

     (a)  be in writing  delivered  personally or by first-class  prepaid letter
          (airmail if available) or telefax;

     (b)  be deemed to have been received, subject as otherwise provided in this
          Agreement,  in the case of a letter,  when  delivered  personally or 2
          days  after  it has been  put  into  the  post  and,  in the case of a
          telefax, when a complete and legible copy is received by the addressee
          (unless the time of despatch of any telefax is after close of business
          in which case it shall be deemed to have been  received at the opening
          of business on the next business day); and

     (c)  be sent:

          (i)   to the Primary  Borrower  (for  itself,  Bidco,  Finco 2 and the
                other Borrowers) at:

                Kempson House
                Camomile Street
                London EC3A 7AN


<PAGE>


                Telefax:   +44 171 283 6500
                Attention: Andrew Bamber/Marcus Dougherty

          (ii)  to the Facility Agent at:

                Chase Manhattan International Ltd
                Trinity Tower
                9 Thomas More Street
                London E1 9YT

                Telefax:   +44 171 777 2360
                Attention: Stephen Clarke

          (iii) to the Security Agent at:

                Chase Manhattan International Ltd
                Trinity Tower
                9 Thomas More Street
                London E1 9YT

                Telefax:         +44 171 777 2360
                Attention:       Stephen Clarke

          (iv)  to the Issuing Bank at:

                The Chase Manhattan Bank
                Trinity Tower
                9 Thomas More Street
                London E1 9YT

                Telefax:         +44 171 777 2360
                Attention:       Stephen Clarke

          (v)   to each Bank at its  address  or  telefax  number  specified  in
                schedule  1 or in, or  pursuant  to, any  relevant  Substitution
                Certificate

          (vi)  to the Arrangers:

                Chase Manhattan plc
                125 London Wall
                London EC2Y 5AJ
 
                Telefax:         +44 171 777 3840
                Attention:       Cheryl Boucher/Kristian Orssten

                Lehman Brothers International (Europe)
                3 World Financial Center
                10th Floor
                200 Vesey Street
                New York
                NY 10285


<PAGE>


                Telefax:         001 212 528 0819
                Attention:       Michele Swanson

                Merrill Lynch Capital Corporation
                C/o Merrill Lynch & Co
                World Financial Center
                North Tower
                250 Vesey Street
                New York
                NY 10281

                Telefax:         001 212 447 9461
                Attention:       Pete Wersching

          or to such  other  address  or telefax  number as is  notified  by the
          Primary Borrower, or a Finance Party, as the case may be, to the other
          parties to this Agreement.

25.2 Notice to Facility Agent

     Every notice,  request,  demand or other communication under this Agreement
     to be given by a Borrower shall be given by the Primary Borrower and by the
     Primary  Borrower to any other party shall be given to the  Facility  Agent
     for onward  transmission as appropriate and to be given to a Borrower shall
     (except as otherwise  provided in this  Agreement) be given by the Facility
     Agent to the Primary Borrower.

25.3 No implied waiver, remedies cumulative

     No  failure or delay on the part of the  Finance  Parties or any of them to
     exercise any power,  right or remedy  under this  Agreement or any Security
     Document shall operate as a waiver thereof, nor shall any single or partial
     exercise  by the  Finance  Parties  or any of them of any  power,  right or
     remedy  preclude any other or further  exercise  thereof or the exercise of
     any other power,  right or remedy.  The remedies provided in this Agreement
     and each of the Security  Documents are cumulative and are not exclusive of
     any remedies provided by law.

25.4 English translations

     All certificates,  instruments and other documents to be delivered under or
     supplied in connection with this Agreement shall be in the English language
     or shall be accompanied by a certified  English  translation upon which the
     Finance Parties shall be entitled to rely.

25.5 Counterparts

     This  Agreement  may be executed in any number of  counterparts  and by the
     different parties on separate counterparts,  each of which when so executed
     and delivered  shall be an original,  but all  counterparts  shall together
     constitute one and the same instrument.

25.6 Severance

     If any  provision  of this  Agreement  is held to be  illegal,  invalid  or
     unforceable in whole or in part this  Agreement  shall continue to be valid
     as to its other provisions and the remainder of the affected provision.


<PAGE>


26.  GOVERNING LAW AND JURISDICTION

26.1 Law

     This Agreement shall be governed by English law.

26.2 Submission to jurisdiction

     The parties to this Agreement  agree for the benefit of the Finance Parties
     that:

     (a)  if any party  has any claim  against  any other  arising  out of or in
          connection  with this  Agreement,  such claim shall (subject to clause
          26.2(c)) be  referred to the High Court of Justice in England,  to the
          jurisdiction of which each of the parties irrevocably submits;

     (b)  the jurisdiction of the High Court of Justice in England over any such
          claim against any Finance Party shall be a non-exclusive  jurisdiction
          and no courts  outside  England  shall  have  jurisdiction  to hear or
          determine any such claim; and

     (c)  nothing in this clause 26.2 shall limit the right of any Finance Party
          to refer any such claim  against  any  Borrower  to any other court of
          competent  jurisdiction  outside England, to the jurisdiction of which
          any Borrower hereby irrevocably agrees to submit, nor shall the taking
          of  proceedings  by any Finance Party before the courts in one or more
          jurisdictions   preclude  the  taking  of  proceedings  in  any  other
          jurisdiction whether concurrently or not.

IN WITNESS  whereof the parties to this  Agreement have caused this Agreement to
be duly executed on the date first above written.


<PAGE>

<TABLE>
<CAPTION>
                                                      Schedule 1

                                            The Banks and their Commitments


=================================================================================================================
                                                                       Commitments
-----------------------------------------------------------------------------------------------------------------
                Bank                    Acquisition Facility         Interim Facility            Revolving Credit
                                              (pound)                     (pound)                    Facility
        Address and telefax                                                                           (pound)
               number
<S>                                          <C>                          <C>                       <C>        
-----------------------------------------------------------------------------------------------------------------
The Chase Manhattan Bank                     591,666,667                  383,333,334               233,333,334

125 London Wall
London
EC2Y 5AJ

Fax:  +44 171 777 3840
Attn: Jane Ritchie
-----------------------------------------------------------------------------------------------------------------

Lehman Commercial Paper                      591,666,666                  383,333,333               233,333,333
Inc. 

3 World Financial Center
10th Floor
200 Vesey Street
New York
NY 10285

Fax:  +212 528 0819
Tel:  +212 526 0330
Attn: Michele Swanson
-----------------------------------------------------------------------------------------------------------------

Merrill Lynch Capital                        591,666,667                  383,333,333               233,333,333
Corporation

4 World Financial Center
C/o Merrill Lynch & Co
North Tower
7th Floor
250 Vesey Street
New York
NY 10281 - 1307

Tel:  +212 449 9461
Attn: Pete Wersching
-----------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>


                                   Schedule 2

                            Forms of Drawdown Notice


                                     Part A

                      The Acquisition and Interim Facility



To:  [Name and address of Facility Agent]                              [DATE]

Attention: _____

                (pound) Credit Facilities Agreement dated _____ 1998

1.   We refer to the above  Agreement and hereby give you notice that we wish to
     draw down an [Acquisition/Interim] Advance [under the Loan Note Facility]:

          (a)  on |_| 19|_| ;

          (b)  in the sum of (pound)_____ ;

          (c)  [with  a  first   Interest   Period   in   respect   thereof   of
               _____ months.] [with the first Interest Period in respect thereof
               to expire on _____ 19]; and

          (d)  [the  proceeds of such Advance to be credited to [name and number
               of  account]  at [name of bank in London]  [Loan Note  Collateral
               Account].

[2.  We confirm  that each  condition  specified in clause 3 is satisfied on the
     date of this Drawdown Notice.] OR

[2.  We confirm that:

     (a)  the Advance is an Offer Advance;

     [(b) the date of this  Drawdown  Notice is within the Certain Funds Period;
          and]

     (c)  each condition in clause 3.3 is satisfied on the date of this Drawdown
          Notice.]


3.   Words and expressions defined in the Agreement shall have the same meanings
     where used herein.

                              For and on behalf of
                             TU Finance (No. 1) Ltd


                             ______________________
                                    Director


<PAGE>
                                     Part B

                          The Revolving Credit Facility


To:  [Name and address of Facility Agent]                                 [DATE]

Attention: _____

                (pound) Credit Facilities Agreement dated _____ 1998


1.   We refer to the above  Agreement  and hereby  give you notice that [name of
     Borrower] wishes to draw a Revolving Credit Advance:

     (a)  on _____ 19 _____ ;

     (b)  in the sum of (pound)_____;

     (c)  with a Maturity Period in respect thereof of o months; and

     (d)  the  proceeds  of such  fund to be  credited  to [name  and  number of
          account] with [details of bank in London].

2.   We confirm that:

     (a)  no  event  or  circumstance  has  occurred  and  is  continuing  which
          constitutes a Default; and

     (b)  the applicable representations and warranties contained in clause 9 of
          the  Agreement are true and correct at the date hereof as if made with
          respect to the facts and circumstances existing at such date.

3.   Words and expressions defined in the Agreement shall have the same meanings
     where used herein.


                              For and on behalf of
                               [Name of Borrower]


                              ____________________
                                    Director


<PAGE>


                                     Part C

                               Letters of Credit


To:  [Name and address of Facility Agent]


Attention:_______________________                      


                                                                          [DATE]


                (pound) Credit Facilities Agreement dated o 1998

1.   We refer to the above  Agreement  and hereby  give you notice that [name of
     Borrower] requests the Issue of a Letter of Credit as follows:

     (a)  Drawdown Date: [ _____ ]

     (b)  Expiry Date: [_____ ]

     (c)  Currency: [ _____ ]

     (d)  Beneficiary: [ _____ ]

     (e)  Amount: [_____ ]

     (f)  Purpose: [ _____ ]

     (g)  Issue instructions: [ _____ ]

     (h)  Documents required to be presented: [ _____ ].

2.   We confirm that:

     (a)  no  event  or  circumstance  has  occurred  and  is  continuing  which
          constitutes a Default; and

     (b)  the applicable representations and warranties contained in clause 9 of
          the  Agreement are true and correct at the date hereof as if made with
          respect to the facts and circumstances existing at such date.

3.   Words and expressions defined in the Agreement shall have the same meanings
     where used herein.

                              For and on behalf of
                               [Name of Borrower]

                              ____________________
                                    Director


<PAGE>


                                   Schedule 3

                              Conditions Precedent

        Part A - Documents and Evidence required as Conditions Precedent
                     prior to the issue of the Press Release

(a)  Certified  copies of the  memorandum  and articles of  association  and the
     certificate of  incorporation  and any change of name  certificates  of the
     Primary Borrower, Finco 2 and Bidco, in the agreed form.

(b)  Certified  copies  of  resolutions  of the  shareholders  and the  board of
     directors of each of the Primary Borrower,  Finco 2 and Bidco in the agreed
     form approving:

     (i)    the  execution  and  delivery  of  and  the   performance  of  their
            respective obligations under the Finance Documents to which they are
            a party;

     (ii)   the  acquisition  of the  Target  on the terms  and  subject  to the
            conditions  set out in the Offer  Documents  and the  issuing of the
            Offer Documents;

     (iii)  the execution and completion of the Investment Agreement; and

     (iv)   (in the case of the shareholders' resolutions) the adoption of their
            respective articles of association,

     and authorising a person or persons (specified by name or office) on behalf
     of each  of them to sign  such  documents  and any  other  documents  to be
     delivered by them under such documents.

(c)  A  certificate  of a duly  authorised  signatory  of  each  of the  Primary
     Borrower,  Finco 2 and Bidco setting out the names and specimen  signatures
     of the persons authorised to sign on behalf of such companies the documents
     referred to in clause (b) above and any other  documents to be delivered by
     such  companies  pursuant  to them,  and  confirming  that the  resolutions
     referred  to in (b) above are still in effect  and have not been  varied or
     rescinded.

(d)  The opinions of Lovell White Durrant,  English  solicitors for the Facility
     Agent and (in the agreed form) of the Parent's US counsel.

(e)  Certified  copies of the Press  Release  and the Offer  Documents,  each as
     despatched by Bidco,  and of the Loan Note  Instrument (in the agreed form)
     and the Investment Agreement (duly executed).

(f)  The Agreed Projections.

(g)  Certified copies of the Coalco Disposal Agreement and the Escrow Agreement.

(h)  A side  letter  from the Parent to the  Facility  Agent in the agreed  form
     confirming that it is aware of the terms of this Agreement, that it and its
     Subsidiaries  will comply with clear market and syndication  obligations in
     the same terms as are in clause 10.2(e) and clause 16.16, and that it will:


<PAGE>


     (i)    not permit the memorandum and articles of association of the Primary
            Borrower  to be amended  without  the prior  written  consent of the
            Facility Agent;

     (ii)   not receive any dividends,  distributions or other payments from the
            Primary  Borrower or any other member of the Group save as permitted
            by clause  11.1(f),  and in the event that it does  receive any such
            payments in breach of clause 11.1(f), it will hold them on trust for
            the payer and forthwith return them to the payer; and

     (iii)  provide and maintain  appropriate  senior  management  for the Group
            during the continuance of the Facilities.

(i)  A report from Coopers & Lybrand in the agreed form.

(j)  The Fee Letters, duly executed and countersigned, and the fees and expenses
     payable  under the Fee Letters and under  clause 7 on or before the date of
     issue of the Press Release.

(k)  The Syndication Letter, duly countersigned.

(l)  Written  confirmation  that an option has been purchased to buy a fixed sum
     of (pound) Sterling with the amount of the Coal Proceeds.


        Part B - Documents and Evidence required as Conditions Precedent
                              to the First Drawdown

(a)  Written confirmation from a duly authorised officer of the Primary Borrower
     that the Office of Fair Trading has announced  that it is not the intention
     of the Secretary of State for Trade and Industry to refer the  Acquisition,
     or any matters arising from it, to the Monopolies and Mergers Commission.

(b)  Evidence satisfactory to the Facility Agent, to the Arrangers and the Banks
     dated as at the date of the first  Drawdown  Notice that  completion of the
     Coalco  Disposal  Agreement is  unconditional  in all respects save for any
     condition or conditions relating to the Offer becoming unconditional in all
     respects, and that the consideration required for the purchaser to complete
     the Coalco Disposal Agreement has been received in full by the Escrow Agent
     (as defined in the Escrow Agreement),  subject to the Escrow Agreement, and
     that such amount will be released unconditionally to the Target without the
     need for any further confirmations,  consents,  permissions or actions from
     or on the part of any person,  save only for the confirmation  (referred to
     in (d) below) from the  financial  advisers to the Offer that the Offer has
     become unconditional in all respects.

(c)  Evidence satisfactory to the Facility Agent that

     (i)  the Parent (in respect of 90% of the required amount) and the Minority
          Shareholder   (in   respect   of  10%)   have   invested   an   amount
          of(pound)1,678,082,000  in  cash  in  subscription  for  equity  share
          capital in the Primary  Borrower and Finco 2 respectively or by way of
          capitalisation  of intercompany  loans made to the Primary Borrower or
          Finco 2  respectively  being  loans  on-lent to Bidco to  finance  the
          purchase of Target on the open market  Provided that,  the Parent,  as
          contemplated by the Investment Agreement,  may transfer all its shares
          in Finco 1 to any other wholly-owned  Subsidiary of the Parent if such
          transfer  is  notified  to the Agent in advance of such  transfer,  in
          which  case the 


<PAGE>


            investment referred to above will be that of such wholly-owned
            Subsidiary not the Parent; and

     (ii)   the Primary  Borrower has in turn invested the entire sum subscribed
            under  paragraph (i) above by way of equity share capital into Finco
            2, and Finco 2 shall have  invested  the entire sum  (including  the
            subscription monies provided by the Minority  Shareholder) by way of
            equity share capital into Bidco; and

     (iii)  the cash proceeds of such investments referred to in (ii) above have
            been  paid  in  full  by  Bidco  to the  receiving  bankers  for the
            financing of the Acquisition; and

     (iv)   all  shares  acquired  at  such  time  pursuant  to  the  Loan  Note
            Alternative and the Share  Alternative  have been transferred to and
            are beneficially owned by Bidco.

(d)  A certified copy of the announcement by the financial advisers to the Offer
     that the  Offer  has  become  or has  been  declared  unconditional  in all
     respects.

(e)  All share  certificates  representing  Target Shares which Bidco owns as at
     the first  Drawdown  Date,  together with stock  transfer forms executed in
     blank to enable the Security  Agent or its nominee to become  registered as
     the owner of such shares, except to the extent that such share certificates
     are lodged with the receiving bankers to the Offer or any brokers executing
     market  purchases  on the Parent or Bidco's  behalf and are  covered by the
     acknowledgement issued by such persons to the Security Agent referred to in
     sub-clause (i)(ii) of Part B of this Schedule.

(f)  Written confirmation from a duly authorised officer of the Primary Borrower
     that the terms and  conditions of the Offer have not been waived,  amended,
     varied or declared to be satisfied  other than in compliance with the terms
     of this Agreement.

(g)  The fees and expenses  payable under the Fees Letters and under clause 7 on
     or before the Unconditional Date.

(h)  The Loan  Note  Instrument,  duly  executed  by the  parties  thereto;  the
     Debenture,  duly executed by the Primary  Borrower,  Finco 2 and Bidco; and
     the Share Charge duly executed by the Minority Shareholder, together with:

     (i)  such directions by Bidco to, and/or undertakings from, the trustees of
          the American Depositary Receipts and American Depositary Shares and/or
          the person  performing  similar  functions to the Receiving Bankers to
          the offer in the United States as the Agent,  acting reasonably and on
          counsel's   advice,   considers  to  be  normal  and  appropriate  for
          perfecting a valid  security  interest in the United  States over such
          depositary receipts and depositary shares; and

     (ii) share  certificates  and stock  transfer  forms  executed  in blank in
          respect of the whole of the issued share capital of Finco 2 and Bidco;

(i)  Certified copies of:

     (i)  the  agreement  appointing  Royal Bank of  Scotland  plc as  receiving
          bankers to the Offer, in the agreed form; and


<PAGE>

     (ii) the  notice  to the  receiving  bankers  and any  brokers  engaged  to
          purchase Target Shares in the market and their  acknowledgement,  each
          in the form set out in the Third Schedule to the Debenture.



               Part C - To be delivered by each Permitted Borrower

(a)  A certified copy of the certificate of incorporation and the memorandum and
     articles of association of the Permitted Borrower.

(b)  A  certified  copy of the  resolutions  of the  board of  directors  of the
     Permitted Borrower  evidencing  approval of this Agreement and the Security
     Documents  (to  which  that  company  is  a  party)  and   authorising  its
     appropriate duly authorised  officers to execute and deliver this Agreement
     and those  Security  Documents  and to give all  notices and take all other
     action  required by the relevant  company  under this  Agreement  and those
     Security Documents.

(c)  Specimen  signatures,  authenticated by the company secretary or a director
     of the Permitted Borrower,  of the persons authorised in the resolutions of
     the board of directors referred to in paragraph (b) above.

(d)  The Accession Certificate duly executed by the Permitted Borrower.

(e)  A certificate of a director of the Permitted  Borrower  certifying that the
     borrowing  and/or  guaranteeing of the Total  Commitments in respect of the
     Revolving  Credit  Facility would not cause any borrowing  limit binding on
     the Permitted Borrower to be exceeded.

(f)  A  cross-guarantee  executed  by  the  Permitted  Borrower  and  the  other
     Revolving Credit Facility Borrowers in favour of the Security Agent of each
     other's liabilities under the Revolving Credit Facility (excluding any such
     liabilities  which  the  relevant  Borrower  is  not  permitted  by  law to
     guarantee), in the form required by the Facility Agent.


<PAGE>


                                   Schedule 4

                         Calculation of Additional Cost

1.   The Additional  Cost for any period shall (subject to paragraph 5 below) be
     calculated in accordance with the following formula:

                   BY + L(Y - X) + S(Y - Z) per cent per annum
                   ------------------------
                                  100 - (B + S)

     where on the day of application of the formula:

     B    is the percentage of the Facility Agent's eligible  liabilities  which
          the Bank of England  then  requires  the  Facility  Agent to hold on a
          non-interest-bearing deposit account in accordance with its cash ratio
          requirements;

     Y    is the rate at which  Sterling  deposits  are offered by the  Facility
          Agent to leading banks in the London  Interbank  Market at or about 11
          a.m. on that day for the relevant period;

     L    is the  percentage of eligible  liabilities  which (as a result of the
          requirements  of the Bank of England) the Facility Agent  maintains as
          secured money with members of the London Discount  Market  Association
          or in certain marketable or callable  securities  approved by the Bank
          of England;

     X    is the rate at which secured Sterling investments may be placed by the
          Facility Agent with members of the London Discount Market  Association
          at or  about  11 a.m.  on that  day for the  relevant  period  or,  if
          greater,  the rate at which  Sterling  bills of  exchange  (of a tenor
          equal  to  the   duration  of  the  relevant   period)   eligible  for
          rediscounting  at the Bank of England can be  discounted in the London
          Discount Market at or about 11 a.m. on that day;

     S    is the percentage of the Facility Agent's eligible  liabilities  which
          the Bank of England  requires the Facility Agent to place as a special
          deposit; and

     Z    is the interest  rate  expressed as a percentage  per annum allowed by
          the Bank of England on special deposits.

2.   For the purpose of this schedule 4:

2.1  "eligible  liabilities"  and "special  deposits" have the meanings given to
     them at the time of application of the formula by the Bank of England; and

2.2  "relevant  period" in  relation to each  period for which  Additional  Cost
     falls to be calculated means:

     (a)  if it is 3 months or less, that period; or

     (b)  if it is more than 3 months, 3 months.


<PAGE>


2.3  In the application of the formula,  B, Y, L, X, S and Z are included in the
     formula as figures and not as percentages, e.g. if B = 0.5 per cent and Y =
     15 per cent BY is calculated as 0.5 x 15.

2.4  The formula shall be applied on the first day of each relevant period. Each
     amount shall be rounded up to the nearest four decimal places.

2.5  If the  Facility  Agent  determines  that a  change  in  circumstances  has
     rendered,  or will render,  the formula  inappropriate,  the Facility Agent
     (after  consultation  with the Banks) shall notify the Primary  Borrower of
     the manner in which the Additional  Cost will  subsequently  be calculated.
     The manner of calculation  so notified by the Facility Agent shall,  in the
     absence of manifest error, be binding on all the parties.


<PAGE>

                                   Schedule 5

                        Form of Substitution Certificate
                          (referred to in clause 16.5)

NB   1.   Banks are advised not to employ Substitution Certificates or otherwise
          to assign, novate or transfer interests in the Agreement without first
          ensuring that the  transaction  complies with all applicable  laws and
          regulations, including the Financial Services Act 1986 and regulations
          made thereunder.

     2.   It is  expected  that  Banks will  enter  into  separate  arrangements
          dealing  with  the  monies  to be  paid  to the  Existing  Bank by the
          Substitute in consideration of the novation (e.g.  principal,  accrued
          interest,  fees and any  mismatched  funding  adjustment).  Unless the
          Effective Date is a rollover date,  mismatches of parties' funding may
          arise.  This Certificate does not deal with these issues,  nor does it
          deal with any interim risk  participation  the Existing Bank may grant
          to the Substitute pending the Effective Date.




To:  [Name of Facility Agent] on its own behalf, as Facility Agent and on behalf
     of each other party to the Agreement mentioned below.

Attention:____________________                                            [DATE]

                            Substitution Certificate

This Substitution  Certificate relates to a (pound)[o] Facilities Agreement (the
"Agreement")  dated 2 March 1998  between TU Finance  (No. 1) Ltd as the initial
Borrower (1) TU Finance Ltd and Bidco (2), Chase  Manhattan plc, Lehman Brothers
International  (Europe),  Merrill Lynch Capital  Corporation  as Arrangers  (3),
various banks and financial institutions as Underwriters (4) The Chase Manhattan
Bank as Issuing Bank (5) Chase Manhattan International Limited as Facility Agent
(6) and Chase  Manhattan  International  Limited as  Security  Agent (7).  Terms
defined  in the  Agreement  shall  have the same  meaning  in this  Substitution
Certificate.

1.   [Existing  Bank] (the  "Existing  Bank") (a)  confirms  the accuracy of the
     summary  of its  participation  in the  Agreement  set out in the  schedule
     below; and (b) requests  [Substitute Bank] (the  "Substitute") to accept by
     way of novation the portion of such participation specified in the schedule
     to this  Substitution  Certificate by  counter-signing  and delivering this
     Substitution  Certificate  to the  Facility  Agent at its  address  for the
     service of notices specified in the Agreement.

2.   The Substitute hereby requests the Facility Agent (on behalf of itself, the
     other  Finance  Parties,  the  Borrowers  and  all  other  parties  to  the
     Agreement) to accept this  Substitution  Certificate as being  delivered to
     the Facility  Agent  pursuant to and for the purposes of clause 16.5 of the
     Agreement so as to take effect in accordance  with the terms of such clause
     16.5 on [date of transfer] (the "Effective  Date") or on such later date as
     may be determined in accordance with the terms of the Agreement.

3.   The Facility  Agent (on behalf of itself,  the other Finance  Parties,  the
     Borrowers  and all other  parties to the  Agreement)  confirms the novation
     effected by this Substitution Certificate


<PAGE>


     pursuant to and for the  purposes of clause 16.5 of the  Agreement so as to
     take effect in accordance with the terms of such clause 16.5.

4.   The Substitute confirms:

     (a)  that it has received a copy of the  Agreement and each of the Security
          Documents and all other  documentation and information  required by it
          in connection with the transactions  contemplated by this Substitution
          Certificate;

     (b)  that it has not relied upon any statement,  opinion, forecast or other
          representation  or  warranty  made by the  Existing  Bank or any other
          party to induce it to enter into this Substitution Certificate;

     (c)  that it has made and will  continue to make,  without  reliance on the
          Existing Bank or any other Finance Party,  and based on such documents
          as it considers appropriate, its own appraisal of the creditworthiness
          of any Borrower and the Group and its own independent investigation of
          the financial condition, prospects and affairs of any Borrower and the
          Group in connection with the making and continuation of the Facilities
          under the Agreement and the other Finance Documents;

     (d)  that neither the Existing  Bank nor any other  Finance  Party shall at
          any  time  be  deemed  to have  had or have a duty or  responsibility,
          either  historically,  initially or on a continuing  basis, to provide
          the Substitute  with any credit or other  information  with respect to
          any Borrower or any other member of the Group whether  coming into its
          possession  before the  making of any  Advance or at any time or times
          thereafter, other than (in the case of the Facility Agent) as provided
          in clause 19.1 of the Agreement;

     (e)  that it has made and will  continue to make its own  assessment of the
          legality,  validity,  enforceability and sufficiency of the Agreement,
          the  Security   Documents,   any  other  Finance   Document  and  this
          Substitution  Certificate  and has not relied and will not rely on the
          Existing Bank or any other Finance Party or any statements made by any
          of them in that respect;

     (f)  that,  accordingly,  none of the Existing  Bank nor any other  Finance
          Party makes any  representations or warranties in respect of, or shall
          have any liability or  responsibility to the Substitute in respect of,
          any of the foregoing matters or any other matter referred to in clause
          20 of the Agreement;

     (g)  that it is a Qualifying Bank; and

     (h)  that it has signed an appropriate  confidentiality  undertaking issued
          by the Existing Bank.

5.   The Substitute hereby undertakes to the Existing Bank, the Finance Parties,
     the Borrowers  and each of the other parties to the Agreement  that it will
     perform in  accordance  with its terms all those  obligations  which by the
     terms of the  Agreement  will be assumed by it after  counter-signature  of
     this Substitution Certificate by the Facility Agent.

6.   The  Substitute   irrevocably   and   unconditionally   guarantees  to  and
     indemnifies the Issuing Bank as required under clause 4.7 (Banks' Guarantee
     and Indemnity).


<PAGE>


7.   Without  limiting  the  above  paragraphs,  nothing  in  this  Substitution
     Certificate obliges the Existing Bank to:

     (a)  accept  any  re-transfer  from the  Substitute  of any of the  rights,
          benefits and/or obligations hereby transferred; or

     (b)  support  any  losses  incurred  by the  Substitute  by  reason  of any
          non-performance  by the  Borrowers or any other party to the Agreement
          or any of the Security  Documents or any document  relating thereto of
          any of its obligations under the same.

8.   This Substitution Certificate and the rights and obligations of the parties
     hereunder  shall be governed by and  construed in  accordance  with English
     law.

Note:This  Substitution  Certificate is not a security,  bond, note,  debenture,
     investment or similar instrument.

AS  WITNESS  the hands of the  authorised  signatories  of the  parties  to this
Substitution Certificate on the date appearing below.

<TABLE>
<CAPTION>

                                  The Schedule



THE ACQUISITION FACILITY

<S>                          <C>                                 <C>   
Commitment (pound)                                              Portion Transferred (pound)

    [_____]                                                              [_____]

Contion (pound)              Next Interest Payment Date         Portion Transferred (pound)

    [_____]                            [_____]                           [_____]



THE INTERIM FACILITY

Commitment (pound)                                              Portion Transferred (pound)

    [_____]                                                              [_____]

Contribution (pound)         Next Interest Payment Date         Portion Transferred (pound)

    [_____]                            [_____]                           [_____]
</TABLE>


<PAGE>


<TABLE>
<CAPTION>
THE REVOLVING CREDIT FACILITY

<S>                                 <C>                              <C>      
Commitment (pound)                                                   Portion Transferred ((pound))

         [_____]                                                                [_____]

Contribution ((pound))              Next Maturity Date(s)            Portion Transferred ((pound))

         [_____]                          [_____]                               [_____]


Transferor's share of                                                Portion of Letters of Credit
Outstanding Letters of Credit                                        Transferred

         [_____]                                                                [_____]


                      Administrative Details of Substitute

Lending Office:
Account for payments:
Telephone:
Telefax:
Attention:

[Existing Bank]                     [Substitute]
By: __________                      By: ________
Date:                               Date:


The Facility Agent
By: __________
Date:

on its own behalf and on behalf of all other  parties  to the  Agreement  (other
than the Existing Bank)
</TABLE>


<PAGE>


                                   Schedule 6

                          Form of Accession Certificate

To:  [name of Facility  Agent] on its own behalf as Facility Agent and on behalf
     of each other party to the Agreement.

Attention:                                                                [Date]

                              Accession Certificate

This  Accession  Certificate  relates to a (pound)o  Facilities  Agreement  (the
"Agreement") dated 2 March 1998 between, among others, the Primary Borrower (1),
Finco 2 and Bidco  (2),  Chase  Manhattan  plc,  Lehman  Brothers  International
(Europe),  Merrill Lynch Capital Corporation as Arrangers (3), various banks and
financial  institutions as Underwriters  (4) The Chase Manhattan Bank as Issuing
Bank (5) Chase Manhattan  International  Limited as Facility Agent (6) and Chase
Manhattan  International  Limited as Security  Agent (7).  Terms  defined in the
Agreement shall have the same meaning in this Accession Certificate.

1.   [_____] (the "Acceding  Borrower")  hereby  requests the Facility Agent (on
     behalf of itself and all other  parties to the  Agreement)  to accept  this
     Accession  Certificate as being delivered to the Facility Agent pursuant to
     and for the  purposes of clause 24.1 of the  Agreement so as to take effect
     in accordance with the respective terms thereof on the date hereof.

2.   The Acceding Borrower is, pursuant to this Accession Certificate,  acceding
     to the Agreement as a Borrower in respect of the Revolving  Credit Facility
     (only)  and  accordingly  shall,  subject  to the  terms of this  Accession
     Certificate and the Agreement,  become a Revolving Credit Facility Borrower
     under the Agreement.

3.   The  Facility  Agent (on  behalf of  itself,  and all other  parties to the
     Agreement)  confirms the novation  effected by this  Accession  Certificate
     pursuant to and for the  purposes of clause 24.1 of the  Agreement so as to
     take effect in accordance with the terms thereof.

4.   The Acceding Borrower hereby undertakes to the Facility Agent (on behalf of
     itself and the other  Finance  Parties)  that it will perform in accordance
     with their terms all those  obligations which by the terms of the Agreement
     will be assumed  by it as a Borrower  after  acceptance  of this  Accession
     Certificate by the Facility Agent.

5.   [This  Accession   Certificate  is  intended  to  take  effect  as  a  Deed
     notwithstanding that the Facility Agent may execute it under hand only.]

6.   This Accession  Certificate  and the rights and  obligations of the parties
     hereunder  shall be governed by and  construed in  accordance  with English
     law.

IN WITNESS whereof this Accession Certificate has been entered into as a Deed on
the date above.

                       Notice Details of Acceding Borrower

Address:

Telephone:

Telefax:


<PAGE>


Attention:




The Acceding Borrower

[Execution particulars - Acceding Borrower to execute as a Deed]




The Facility Agent

By:

_____

on its own behalf and on behalf of
all the other parties to the Facility Agreement.


<PAGE>


                                   Schedule 7

                          Terms of Borrowers' Indemnity


1.   Each Borrower  unconditionally  and  irrevocably  undertakes to the Issuing
     Bank as follows:

     (a)  each Borrower  will at all times on demand  indemnify the Issuing Bank
          against all actions, suits, proceedings, claims, demands, liabilities,
          damages, costs, expenses,  losses and charges whatsoever (except those
          arising from the gross negligence or wilful  misconduct of the Issuing
          Bank) in  relation  to or  arising  out of the Issue of any  Letter of
          Credit  and each  Borrower  will  pay to the  Facility  Agent  for the
          account of the Issuing Bank in immediately  available funds and in the
          currency in which the  relevant  Letter of Credit is  denominated  the
          amount of all payments  made  (whether  directly or by way of set-off,
          counterclaim or otherwise howsoever) and all losses, costs or expenses
          suffered or incurred  from time to time by the Issuing  Bank,  arising
          under any  liability  which the Issuing  Bank has  incurred  under the
          Issue of any  Letter of  Credit  and any of the  indemnities  relating
          thereto;

     (b)  the  liability  of each  Borrower  under this  indemnity  shall not be
          affected  by any time  being  given or by  anything  being done by the
          Issuing  Bank  unless the same  constitutes  the gross  negligence  or
          wilful misconduct of the Issuing Bank.

2.   Each of the Borrowers  specifically  releases and  indemnifies  the Issuing
     Bank against the consequences of:

     (a)  the  failure of the  Issuing  Bank or any other  person to receive any
          telex or telephone message in a form in which it was despatched; and

     (b)  any delay that may occur during the course of the  transmission of any
          such message

     save in respect of any failure arising from the gross  negligence or wilful
     misconduct of the Issuing Bank.

3.   (a)  The   obligations  of  any  Borrower  under  this  Agreement  and  any
     L/C-Related  Document to reimburse  the Issuing Bank for a drawing  under a
     Letter of Credit and to repay any drawing under a Letter of Credit which is
     converted into Advances, shall be unconditional and irrevocable,  and shall
     be paid  strictly in accordance  with the terms of this  Agreement and each
     such other  L/C-Related  Document  under all  circumstances,  including the
     following:

          (i)   any lack of validity or  enforceability of this Agreement or any
                L/C-Related Document;

          (ii)  any change in the time, manner or place of payment of, or in any
                other term of,  all or any of the  obligations  of the  relevant
                Borrower  in  respect  of any  Letter  of  Credit  or any  other
                amendment or waiver of or any consent to  departure  from all or
                any of the L/C-Related Documents;

          (iii) the existence of any claim, set-off, defence or other right that
                the  relevant   Borrower  may  have  at  any  time  against  any
                beneficiary or any transferee of any


<PAGE>


                Letter of Credit (or any person for whom any such beneficiary or
                any such  transferee  may be acting),  the  Issuing  Bank or any
                other person,  whether in connection  with this  Agreement,  the
                transactions contemplated hereby or by the L/C-Related Documents
                or any unrelated transaction;

          (iv)  any draft, demand, certificate or other document presented under
                any Letter of Credit  proving to be  forged,  fraudulent,  (save
                where the Issuing Bank should  decline to make payment under the
                terms  of the  Uniform  Customs  and  Practice  for  Documentary
                Credits (1993) (ICC  Publication No. 500 (the "UCPDC"))  invalid
                or  insufficient  in any respect or any statement  therein being
                untrue or inaccurate in any respect; or any loss or delay in the
                transmission  or otherwise of any document  required in order to
                make a drawing under any Letter of Credit;

          (v)   any  payment  by the  Issuing  Bank  under any  Letter of Credit
                against  presentation  of a draft or  certificate  that does not
                strictly  comply with the terms of any Letter of Credit;  or any
                payment  made by the Issuing  Bank under any Letter of Credit to
                any person  purporting  to be a trustee in  bankruptcy,  debtor-
                in-possession,   assignee   for  the   benefit   of   creditors,
                liquidator,  receiver or other representative of or successor to
                any beneficiary or transferee of any Letter of Credit, including
                any arising in  connection  with any  voluntary  or  involuntary
                proceeding,  process or arrangement under any law, regulation or
                procedure  relating to insolvency in any jurisdiction  including
                in   relation  to  winding   up,   bankruptcy,   administration,
                administrative   receivership,   receivership   and  management,
                receivership,  judicial  custodianship,  judicial trusteeship or
                the  appointment of a judicial  conservator or other official or
                the reconstruction,  rescheduling,  readjustment,  moratorium or
                suspension of payments of any Indebtedness;

          (vi)  any exchange,  release or non-perfection  of any collateral,  or
                any release or  amendment  or waiver of or consent to  departure
                from any other  guarantee,  for all or any of the obligations of
                the relevant Borrower in respect of any Letter of Credit; or

          (vii) any other circumstance or happening  whatsoever,  whether or not
                similar   to  any  of  the   foregoing,   including   any  other
                circumstance that might otherwise constitute a defence available
                to, or a discharge of, the relevant Borrower;

     (b)  The  obligations  of each of the  Borrowers  under the Senior  Finance
          Documents  shall not be  affected  in any way by reason of any time or
          other indulgence which may be granted:

          (i)   to the Issuing Bank by any  beneficiary of any Letter of Credit;
                or

          (ii)  by the  Issuing  Bank  to  any  person  from  whom  it may  seek
                reimbursement in respect of sums paid out by it under any Letter
                of Credit or any other  obligation  pursuant thereto or pursuant
                to this Agreement, as the case may be.

4.   The Issuing Bank may, at any time,  without  affecting any security created
     by, pursuant to or in relation to this Agreement or the rights,  powers and
     remedies conferred upon it by this Agreement, any such security or by law:


<PAGE>


     (a)  offer or  agree  to or  enter  into  agreement  for the  extension  or
          variation of the Issue of any Letter of Credit (provided it does so in
          accordance with written instructions of the Borrower); or

     (b)  offer or agree to give any time or other  indulgence for any sums paid
          out by it under any Letter of Credit or any obligation pursuant to any
          Letter of Credit.

5.   Any rights  conferred  on the Issuing  Bank by this  Agreement  and by each
     document executed in relation to this Agreement shall be in addition to and
     not in substitution for or derogation of any other rights which the Issuing
     Bank  may at any time  have to seek  from any  person  reimbursement  of or
     indemnification  against  payments made or  liabilities  incurred under any
     Letter of Credit, any obligation pursuant thereto or to this Agreement.

6.   Any  satisfaction of obligations by any Borrower or any other person to the
     Issuing Bank or any discharge  given by the Issuing Bank to any Borrower or
     any other  person in respect of  obligations  under this  Agreement  or any
     related  agreement  between the Issuing  Bank and any Borrower or any other
     person  shall  be,  and be  deemed  always  to have  been,  void if any act
     satisfying  any of such  obligations  or on the  faith  of  which  any such
     discharge was given or any such agreement was entered into is  subsequently
     avoided  by law  (otherwise  than as a result of any act or  default by the
     Issuing Bank).

7.   Any Letter of Credit shall be considered to be outstanding  until the later
     of:

     (a)  its Expiry Date,  or a reasonable  time after its Expiry Date to allow
          for the presentation of documents through an advising bank; and

     (b)  if, in the opinion of the Issuing Bank, its liability under the Letter
          of Credit  does not expire on its stated  Expiry  Date or there is any
          doubt as to its  Expiry  Date,  the  date of  return  of the  document
          evidencing  the Issuing Bank's  liability to the relevant  beneficiary
          under any Letter of Credit.

8.   Each Borrower confirms and agrees that:

     (a)  the  Issuing  Bank  shall  make any  payment  that  appears to be duly
          requested or demanded in writing by any  beneficiary  under any Letter
          of  Credit  subject  to its  compliance  (where  applicable)  with its
          obligations  as Issuing Bank under the UCPDC  regardless of whether or
          not the relevant  Borrower shall be in any way in breach of any of its
          obligations  under or by virtue of the  transaction in connection with
          which the Letter of Credit was Issued and  without  making any further
          reference to the relevant Borrower or any investigation as to the bona
          fide  nature,  validity or  genuineness  of any such request or demand
          (unless, under applicable law, the Issuing Bank is under no obligation
          to make such payment), and

     (b)  the liability of such Borrower  hereunder and the right and obligation
          of the Issuing Bank to make such payment shall be in no way diminished
          or  prejudiced  if it should  appear  that,  as between  the  relevant
          Borrower and that  beneficiary,  that beneficiary was not entitled for
          whatever  reason to demand  payment under the Letter of Credit or that
          such  demand  was not  valid  or  genuine  (subject  as  mentioned  in
          paragraph 8(a) above).


<PAGE>


                                   Schedule 8

                   Terms of Interbank Guarantee and Indemnity


1.   Each  Bank  agrees to pay to the  Facility  Agent  for the  account  of the
     Issuing  Bank on demand made  through the  Facility  Agent under clause 4.7
     (Banks'  Guarantee and Indemnity) to such account as the Facility Agent may
     have  specified for the purpose in immediately  available  funds and in the
     currency  in which  the  relevant  Letter of  Credit  is  denominated,  its
     Proportion of:

     (a)  any and every sum of money which such Borrower shall from time to time
          be liable to pay to the  Issuing  Bank in  respect  of that  Letter of
          Credit in full  without  set-off or  counterclaim  on the later of the
          date that the Issuing Bank has itself to make payment under the Letter
          of  Credit  (as  notified  by the  Facility  Agent to such Bank in the
          demand)  and two  Banking  Days  after  receipt  by such  Bank of such
          demand; and

     (b)  full cash cover for the Outstanding  Contingent Liabilities under that
          Letter  of  Credit  at any time  after  the  Issuing  Bank has  become
          entitled to demand an indemnity  through the Facility Agent in respect
          thereof from the relevant  Borrower and which shall not have been paid
          at the time such demand is made.

2.   Where a Bank  makes a payment  pursuant  to  paragraph  1 after the date on
     which the  Issuing  Bank  makes the  relevant  payment  under the Letter of
     Credit in  question,  such Bank shall pay on demand to the Issuing Bank its
     Proportion (as calculated in clause 4.7) of such amount as the Issuing Bank
     certifies as necessary to compensate it for funding the amount  demanded in
     the interim.

3.   No  assurance,  security  or  payment  avoided  under any law  relating  to
     bankruptcy,  liquidation,  insolvency,  reconstruction or reorganisation or
     any similar laws and no release, settlement, arrangement or discharge which
     may have been given or made on the basis of any such assurance, security or
     payment shall  prejudice or affect the right of the Issuing Bank to recover
     from each of the Banks to the full extent of their obligations under clause
     4.7.

4.   The  obligations  of each Bank  under  clause  4.7  shall not be  impaired,
     affected or revoked by any act,  omission,  matter,  thing or  circumstance
     whatsoever  which  but for this  provision  might  operate  to  release  or
     exonerate  such Bank from all or any part of its  obligations  under clause
     4.7 or reduce,  impair or affect such  obligations or cause all or any part
     of such obligations to be irrecoverable  from or unenforceable  against any
     Obligor or to discharge,  reduce, affect or impair any of such obligations,
     including without limitation:

     (a)  any  time,  waiver  or  indulgence   granted  to  any  person  or  the
          forbearance  of the Issuing Bank in enforcing the  obligations  of any
          person  under  any  Finance  Document  or  in  respect  of  any  other
          guarantee, security, obligation, right or remedy;

     (b)  the  recovery  of any  judgment  against  any  person or any action to
          enforce the same;

     (c)  the  taking  of any other  security  from any  person or the  failure,
          refusal, or neglect to take, perfect or enforce, any rights,  remedies
          or  securities  from or  against  any person or all or any part of the
          security constituted by any of the Finance Documents;


<PAGE>


     (d)  any alteration in the  constitution of any Obligor or any defect in or
          irregular  exercise of the  borrowing or other powers of any person or
          any legal  limitation,  disability,  incapacity or other  circumstance
          relating to any person or any legal limitation, disability, incapacity
          or other  circumstance  relating  to any  person  whether  arising  in
          relation to any Finance Document or otherwise howsoever;

     (e)  subject to clause 22.4 and 22.5 (Unanimous consents), any amendment or
          supplement to or variation of any L/C - Related  Document or any other
          Finance Document;

     (f)  the   insolvency,   bankruptcy,    liquidation,    reconstruction   or
          reorganisation of, or analogous  proceedings relating to any person or
          any  composition or  arrangement  made by any of them with the Issuing
          Bank,  any Bank or any other person or any transfer or  extinction  of
          any liabilities of any Obligor by any law, order  regulation,  decree,
          court order or similar instrument;

     (g)  any irregularity, unenforceability or invalidity of any obligations of
          any person  under any  security or  document  (to the intent that such
          Bank's  obligations  under clause 4.7 shall remain in full force as if
          there were no such irregularity, unenforceability or invalidity);

     (h)  the occurrence of an Event of Default;

     (i)  the existence of any claim,  set-off  defence or other right which any
          Obligor may have  against any  beneficiary  of any Letter of Credit or
          any other person; or

     (j)  any  draft,  certificate  or any other  document  presented  under any
          Letter  of  Credit  proving  to  be  forged,  fraudulent,  invalid  or
          insufficient  in any respect or any statement  therein being untrue or
          inaccurate in any respect.

5.   The Issuing Bank shall be entitled to enforce the  obligations of each Bank
     under  clause 4.7  without  making any demand on or taking any  proceedings
     against  or  filing  any  proof  of claim in any  insolvency,  winding  up,
     dissolution  or liquidation of any person or exhausting any right or remedy
     against any person or taking any action to enforce any part of the security
     constituted or evidenced by any of the Finance Documents.

6.   The  obligations  of  each  Bank  under  clause  4.7  shall  be  continuing
     obligations  and shall  extend to the ultimate  balance of the  obligations
     referred  to  therein.  If, for any reason,  such  obligations  cease to be
     continuing  obligations,  the Issuing  Bank may open a new account  with or
     continue  any existing  account  with any person and the  liability of each
     Bank in respect of amounts  guaranteed  by it pursuant to clause 4.7 at the
     date of such cessation shall remain regardless of any payments in or out of
     any such account.

7.   The  Issuing  Bank's  rights  under  clause 4.7 shall be in addition to and
     shall be in no way  prejudiced  by any other rights of or security  held by
     the Issuing Bank in relation to the obligations of any Obligor. The Issuing
     Bank's  rights under clause 4.7 are in addition to and are not exclusive of
     those provided by law.

8.   A certificate  of the Issuing Bank as to any amount due to it from any Bank
     pursuant  to clause 4.7 shall be  conclusive  (in the  absence of  manifest
     error).


<PAGE>


                                   Schedule 9

            Projects which may be financed under clause 11.1(g)(iii)


            Name of project                       Total investment required

            Norway                                   (pound)175,000,000
            Finland                                   (pound)75,000,000
            Spain                                    (pound)180,000,000
            Sweden                                    (pound)25,000,000
            Poland                                   (pound)150,000,000
            UK                                       (pound)170,000,000


<PAGE>


PRIMARY BORROWER, FINCO 2 AND BIDCO

Signed for and on behalf of
TU Finance (No. 1) Ltd
(company number 3505836)



[Robert S. Shapard]
__________________________________


Signed for and on behalf of
TU Finance (No.  2) Ltd
(company number 3514100)



[Robert S. Shapard]
__________________________________


Signed for and on behalf of
TU Acquisitions PLC
(company number 3455523)



[Robert S. Shapard]
__________________________________



JOINT LEAD ARRANGERS

Signed for and on behalf of
Chase Manhattan plc
as Arranger



[Cheryl Boucher]
__________________________________


<PAGE>

Signed for and on behalf of
Lehman Brothers International (Europe)
as Arranger



[Julian Entwisle]
__________________________________



Signed for and on behalf of
Merrill Lynch Capital Corporation
as Arranger



[Stephen B. Paras]
__________________________________



ORIGINAL BANKS

Signed for and on behalf of
The Chase Manhattan Bank
as Underwriter



[Jane Ritchie]
__________________________________



Signed for and on behalf of
Lehman Commercial Paper Inc
as Underwriter



 [Dennis J Dee]
__________________________________


<PAGE>


Signed for and on behalf of
Merrill Lynch Capital Corporation
as Underwriter



[Stephen B. Paras]
__________________________________


ISSUING BANK



Signed for and on behalf of
The Chase Manhattan Bank
as Issuing Bank



[Jane Ritchie]
__________________________________


FACILITY AGENT

Signed for and on behalf of
Chase Manhattan International Limited
as Facility Agent



[Jane Ritchie]
__________________________________


SECURITY AGENT

Signed for and on behalf of
Chase Manhattan International Limited
as Security Agent



[Jane Ritchie]
__________________________________