<PAGE>

                                                                    EXHIBIT 2(c)


                                                                  CONFORMED COPY

                                   AGREEMENT

                             DATED 12th March, 1999

                              (Pounds)600,OOO,OOO

                    MULTICURRENCY REVOLVING CREDIT FACILITY

                                      FOR

                               SCOTTISH POWER PLC

                                  ARRANGED BY

                         THE ROYAL BANK OF SCOTLAND PLC

                                 ALLEN & OVERY
                                     London
                                  BK: 207112.5
<PAGE>

                                     INDEX

Clause                                                                      Page

1.    Interpretation ..........................................................1
2.    The Facilities .........................................................17
3.    Purpose ................................................................18
4.    Conditions precedent ...................................................18
5.    Drawdown ...............................................................18
6.    Repayment ..............................................................20
7.    Prepayment and cancellation ............................................20
8.    Interest ...............................................................21
9.    Optional Currencies ....................................................22
10.   Payments ...............................................................24
11.   Taxes ..................................................................26
12.   Market disruption ......................................................28
13.   Increased costs ........................................................29
14.   Illegality and mitigation ..............................................30
15.   Guarantee ..............................................................31
16.   Representations and warranties .........................................33
17.   Undertakings ...........................................................35
18.   Default ................................................................41
19.   The Agent and the Arranger .............................................45
20.   Fees ...................................................................50
21.   Expenses ...............................................................51
22.   Stamp duties ...........................................................51
23.   Indemnities ............................................................51
24.   Evidence and calculations ..............................................52
25.   Amendments and waivers .................................................53
26.   Changes to the Parties .................................................53
27.   Disclosure of information ..............................................56
28.   Set-off ................................................................57
29.   Pro rata sharing .......................................................57
30.   Severability ...........................................................58
31.   Counterparts ...........................................................58
32.   Notices ................................................................59
33.   Governing law ..........................................................59
34.   Jurisdiction ...........................................................59

Schedules

1.    Banks and Commitments ..................................................61
2.    Part 1 - Conditions precedent documents to be delivered before
      the first Loan .........................................................62
      Part 2 - Conditions precedent documents to be delivered by
      Holdco in accordance with Clause 26.4 (Accession) ......................64
3.    Calculation of the Mandatory Cost ......................................66
4.    Part 1 - Form of Request ...............................................68
      Part 2 - Form of Selection Notice ......................................69
5.    Form of Novation Certificate ...........................................70
6.    Form of legal opinion of Allen & Overy .................................71
7.    Form of legal opinion of Maclay Murray & Spens .........................74
8.    Guarantor Accession Agreement ..........................................78
Signatories ..................................................................79
<PAGE>

--------------------------------------------------------------------------------


THIS AGREEMENT is dated 12th March, 1999 between:

(1)   SCOTTISH POWER PLC (to be renamed "Scottish Power UK plc" on the Scheme
      Date) (Registered No. SC117120P) (the "Company");

(2)   THE ROYAL BANK OF SCOTLAND PLC as arranger (in this capacity the
      "Arranger");

(3)   THE FINANCIAL INSTITUTIONS listed in Schedule 1 as banks (the "Banks");
      and

(4)   THE ROYAL BANK OF SCOTLAND PLC as agent (in this capacity the "Agent").

IT IS AGREED as follows:

1.    INTERPRETATION

1.1   Definitions

      In this Agreement:

      "Affiliate"

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

      "Agent's Spot Rate of Exchange"

      means the Agent's spot rate of exchange for the purchase of the relevant
      Optional Currency in the London foreign exchange market with Sterling at
      or about 11.00 a.m. on a particular day.

      "Appointee"

      means Southern Water Services Limited (registered number 2366670) a wholly
      owned subsidiary of SWP.

      "Appointment"

      means the instrument of appointment dated August 1989 of the Appointee as
      water undertaker and sewerage undertaker for the Franchise Area under the
      Water Act 1989 as subsequently repealed and replaced by the Water Act.

      "Balance Sheet"

      means, at any time, the latest published audited consolidated balance
      sheet of the Group on a historic cost basis.

      "Borrowings"

      means any indebtedness in respect of:

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

      (b)   any debt security including any bond, note or loan stock;

--------------------------------------------------------------------------------
<PAGE>

                                       2

--------------------------------------------------------------------------------


      (c)   any acceptance under any acceptance credit facility opened by a bank
            or other financial institution;

      (d)   the sale or discounting of receivables (except to the extent that
            such sale or discounting is on a non-recourse basis);

      (e)   any lease which the Company accounts for as a finance lease as such
            term is described in the Statement of Standard Accounting Practices
            No. 21 (or any successor statement or financial reporting standard);

      (f)   any accrued fixed or minimum premium payable on the repayment or
            redemption of any instrument referred to in sub-paragraph (b) above;

      (g)   for the purposes of Clause 18.5 (Cross-default) only, interest rate
            swaps, currency swaps (including spot and forward exchange
            contracts), caps, collars, floors and similar obligations;

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

      (i)   any guarantee, indemnity and/or other form of assurance against
            financial loss by any member of the Group in respect of any
            indebtedness of any person of a type referred to in sub-paragraphs
            (a) to (h) above (in the case of (g), for the purposes of Clause
            18.5 (Cross default) only),

      and any amount outstanding in a currency other than Sterling is to be
      taken into account at its Sterling equivalent calculated on the basis of
      the Agent's spot rate of exchange at 11.00 a.m. on the day the relevant
      amount falls to be calculated. However, indebtedness owing by one member
      of the Group to another member of the Group shall not be taken into
      account as Borrowings and, for the purposes of calculating the amount of
      Borrowings at any time:

      (i)   deep discount borrowings will be valued at the amount attributed to
            them in the then latest Balance Sheet; and

      (ii)  no item of indebtedness will be double counted by the inclusion of
            both the primary indebtedness and indebtedness arising under a
            guarantee, indemnity and/or other form of assurance with respect to
            that primary indebtedness.

      "Business Day"

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

      (a)   London; and

      (b)   Glasgow; and

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

--------------------------------------------------------------------------------
<PAGE>

                                       3

--------------------------------------------------------------------------------


      (d)   in relation to a transaction involving euros, a day on which the
            Trans-European Automated Realtime Gross Settlement Express System
            ("Target") is operating.

      "Commitment"

      means:

      (a)   in relation to a Bank which is a Bank on the date of this Agreement,
            the amount set opposite its name in Schedule 1; and

      (b)   in relation to a Bank which becomes a Bank after the date of this
            Agreement the amount of Commitment acquired by it under Clause 26
            (Changes to the Parties) or pursuant to any Finance Document,

      in each case, to the extent not cancelled, reduced or transferred under
      this Agreement.

      "Consolidated EBITDA"

      means in respect of any financial year of the Group, the consolidated
      profits of the Group before:

      (a)   Net Interest Payable;

      (b)   tax;

      (c)   depreciation;

      (d)   amortisation (including, for the avoidance of doubt, of goodwill);
            and

      (e)   extraordinary and exceptional items,

      but adjusted by deducting any amount attributable to minority interests.

      "Dangerous Substance"

      means any radioactive emissions and any natural or artificial substance
      (whether in solid or liquid form or in the form of a gas or vapour and
      whether alone or in combination with any other substance) capable (in each
      case) of causing harm to man or any other living organism or damaging the
      environment or public health or welfare, including (without limitation)
      any controlled, special, hazardous, toxic, radioactive or dangerous waste.

      "Default"

      means an Event of Default or an event which, with the giving of notice,
      lapse of time, or fulfilment of any other applicable condition (or any
      combination of the foregoing), would constitute an Event of Default.

      "Drawdown Date"

      means the date of the advance of a Loan.

--------------------------------------------------------------------------------
<PAGE>

                                       4

--------------------------------------------------------------------------------


      "EC"

      means the European Community and its successors.

      "EMU"

      means European Economic and Monetary Union as contemplated by the treaty
      establishing the EC.

      "EMU Legislation"

      means legislative measures of the European Council in relation to EMU.

      "Environmental Law"

      means all laws, regulations, codes of practice, circulars, guidance
      notices and the like (whether in the United Kingdom or elsewhere) whether
      or not having the force of law but if not having the force of law
      compliance with which is customary in the industry concerning the
      protection of human health or the environment or the conditions of the
      work place or the generation, transportation, storage, treatment or
      disposal of Dangerous Substances.

      "Environmental Licence"

      means any permit, licence, authorisation, consent or other approval
      required by any Environmental Law.

      "euro"

      means the single currency of the Participating Member States.

      "euro unit"

      means a currency unit of the euro as defined in EMU Legislation.

      "Event of Default"

      means an event specified as such in Clause 18.1 (Events of Default).

      "Existing Facilities"

      means the credit facilities made available to the Company under the
      Existing Facility Agreements.

      "Existing Facility Agreements"

      means:

      (a)   the (pound)25,000,000 bilateral facility agreement dated August 1994
            made between the Company and The Royal Bank of Scotland plc;

--------------------------------------------------------------------------------
<PAGE>

                                       5

--------------------------------------------------------------------------------


      (b)   the (pound)25,000,000 bilateral facility agreement dated August 1994
            made between the Company and Warburg Dillon Read;

      (c)   the (pound)25,000,000 bilateral facility agreement dated August 1994
            made between the Company and The Sanwa Bank, Limited; and

      (d)   the (pound)25,000,000 bilateral facility agreement dated August 1994
            made between the Company and The Chase Manhattan Bank.

      "Facilities"

      means the facilities referred to in Clause 2.1 (Facilities).

      "Facility Office"

      means, subject to Clause 26.7 (Change of Facility Office), the office(s)
      notified by a Bank to the Agent:

      (a)   on or before the date it becomes a Bank; or

      (b)   by not less than five Business Days' notice.

      as the office(s) through which it will perform all or any of its
      obligations under this Agreement.

      "Fee Letter"

      means the letter dated the date of this Agreement between the Agent, the
      Arranger and the Company setting out the amount of various fees referred
      to in Clause 20 (Fees).

      "Final Repayment Date"

      means:

      (a)   in the case of a Revolving Loan, the Term Date; or

      (b)   if the Term-out Option is exercised, 24th June, 2001.

      "Finance Document"

      means this Agreement, the Fee Letter, a Guarantor Accession Agreement, a
      Novation Certificate or any other document designated as such by the Agent
      and the Company.

      "Finance Party"

      means the Arranger, a Bank or the Agent.

--------------------------------------------------------------------------------
<PAGE>

                                       6

--------------------------------------------------------------------------------


      "Franchise Area"

      means each of:

      (a)   the area described in paragraph 1 of Schedule 1 of the Appointment
            in respect of the Appointee's appointment as a water undertaker; and

      (b)   the area described in paragraph 2 of Schedule 1 of the Appointment
            in respect of the Appointee's appointment as a sewerage undertaker.

      "Guarantor Accession Agreement"

      means a deed substantially in the form of Schedule 8 with such amendments
      as the Agent may approve or reasonably require.

      "Group"

      means at any time the Company and its Subsidiaries at that time.

      "Hedging Liabilities"

      means indebtedness arising in respect of obligations of the type referred
      to in paragraph (g) of the definition of "Borrowings" in this Clause 1.1.

      "Holdco"

      means New Scottish Power plc (to be renamed "Scottish Power plc" on the
      Scheme Date) (Registered No. SC193794) which shall, following the Scheme
      Date, be the Holding Company of the Company.

      "Holdco Group"

      means at any time Holdco and its Subsidiaries at that time.

      "Interest Payable"

      means, in respect of any financial period, all interest, discount and
      acceptance commission and all other continuing, regular or periodic costs,
      charges and expenses in the nature of Interest (whether paid, payable or
      capitalised) or treated for accounting purposes as interest, incurred by
      the Group in effecting, servicing or maintaining Total Consolidated
      Borrowings during that period.

      "Interest Period"

      has the meaning given to it in Clause 8.2 (Interest Periods for Term
      Loans).

      "Interest Receivable"

      means, in respect of any financial period, interest and amounts in the
      nature of interest received during that period by the Group from persons
      outside the Group.

--------------------------------------------------------------------------------
<PAGE>

                                       7

--------------------------------------------------------------------------------


      "Investments"

      means:

      (a)   cash on current account or cash on deposit with, or certificates of
            deposit issued by, or bills of exchange accepted by, any bank
            incorporated in an OECD country from which proceeds are readily
            remittable to the United Kingdom, and in each case, where the
            deposit or the maturity is for a duration of six months or less; and

      (b)   bonds or treasury bills issued by an OECD government or agency,
            bonds rated single-A or above by a major rating agency and
            commercial paper rated A1 or P1 by a major rating agency, in each
            case, where the proceeds of which are readily remittable to the
            United Kingdom.

      "Licence"

      means each public electricity licence granted by the Secretary of State to
      a member of the Group under section 6(1) of the Electricity Act 1989.

      "Loan"

      means a Revolving Loan or a Term Loan.

      "LIBOR"

      means, in relation to a Loan:

      (a)   the rate per annum which appears on Telerate Page 3750 or Telerate
            Page 3740 (as appropriate); or

      (b)   if no such offered quotation appears on Telerate Page 3750 or
            Telerate Page 3740, the arithmetic mean (rounded upward to four
            decimal places) of the rates, as supplied to the Agent at its
            request quoted by the Reference Banks to leading banks in the London
            interbank market,

      in each case, at or about 11.00 a.m. on the applicable Rate Fixing Day for
      the offering of deposits in the currency of the relevant Loan for a period
      comparable to its Term or Interest Period (as appropriate).

      For the purposes of this definition, "Telerate Page 3750" or "Telerate
      Page 3740" means the display designated as "Page 3750" or "Page 3740" (as
      appropriate) on the Telerate Service (or other such page as may replace
      Page 3750 or Page 3740 on that service) or such other service as may be
      nominated by the British Bankers' Association as the information vendor
      for the purpose of displaying British Bankers' Association Interest
      Settlement Rates for various currencies.

      "Majority Banks"

      means, at any time, Banks whose Commitments:

      (a)  then aggregate more than 66 2/3 per cent. of the Total Commitments;
           or
--------------------------------------------------------------------------------
<PAGE>

                                       8

--------------------------------------------------------------------------------


      (b)   if the Term-Out Option has been exercised, then aggregate more than
            66 2/3 per cent. of the Term Loans; or

      (c)   if no Loans are then outstanding and the Total Commitments have been
            reduced to zero, aggregated more than 66 2/3 per cent. of the Total
            Commitments immediately before the reduction.

      "Mandatory Cost"

      means the cost imputed to the Banks of compliance with the regulations of
      the Bank of England, the Financial Services Authority or other reserve or
      mandatory liquid asset costs or special deposit costs during each Term or
      Interest Period under this Agreement expressed as a rate per annum
      determined in accordance with Schedule 3.

      "Margin"

      means 0.45 per cent per annum.

      "national currency unit"

      means the currency unit (other than a euro unit) of a Participating Member
      State.

      "Net Gearing Percentage"

      means the amount of Total Consolidated Net Borrowings expressed as a
      percentage of the amount of Tangible Consolidated Net Worth.

      "Net Interest Payable"

      means, in respect of any financial period, Interest Payable during that
      period less Interest Receivable during that period.

      "Novation Certificate"

      means a duly completed certificate, substantially in the form of
      Schedule 5.

      "Obligor"

      means the Company or Holdco when it executes and delivers a Guarantor
      Accession Agreement in accordance with Clause 26.4 (Accession).

      "Operating Profit"

      means the consolidated net pre-taxation profits (after adding back Net
      Interest Payable) of the Group for a financial year of the Group before
      taking account of any extraordinary profits (or losses).

--------------------------------------------------------------------------------
<PAGE>

                                       9

--------------------------------------------------------------------------------


      "Optional Currency"

      means US Dollars or any other currency (other than Sterling) which is for
      the time being freely transferable and convertible into Sterling and
      deposits of which are readily available in the London interbank market.

      "Original Group Accounts"

      means the audited consolidated accounts of the Group for the year ended
      31st March, 1998.

      "Original Sterling Amount"

      means:

      (a)   the principal amount of a Loan denominated in Sterling; or

      (b)   the principal amount of a Loan denominated in an Optional Currency:

            (i)   translated into Sterling on the basis of the Agent's Spot Rate
                  of Exchange three Business Day's before its Drawdown Date; or

            (ii)  in the case of a Term Loan which is outstanding, the
                  equivalent in Sterling of the amount of that Term Loan if it
                  had first been drawn down and had remained denominated in
                  Sterling.

      "Outstandings"

      means at any time, the aggregate of each outstanding Loan.

      "Participating Member State"

      means a member state of the European Union that adopts a single currency
      in accordance with the treaty establishing the EC.

      "Party"

      means a party to this Agreement.

      "Permitted Security Interest"

      means:

      (a)   any Security Interest created or outstanding with the prior written
            consent of the Majority Banks;

      (b)   any lien or hypothecation arising by operation of law or contained
            in a contract for the sale of goods, supply of services or joint
            operation of assets entered into in the ordinary course of trade of
            the company creating the same;

      (c)   Security Interests not otherwise permitted under paragraphs (a) and
            (b) above provided that the aggregate principal amount of the
            indebtedness secured by Security

--------------------------------------------------------------------------------
<PAGE>

                                       10

--------------------------------------------------------------------------------


            Interests permitted under this paragraph (c) shall not at any time
            exceed an amount equal to 15 per cent. of Tangible Consolidated Net
            Worth at that time; and

      (d)   any Security Interest created by a Project Finance Subsidiary to
            secure its Project Finance Borrowings.

      "Principal Subsidiary"

      means any Subsidiary of the Company:

      (a)   whose profits (before taxation and before extraordinary items and
            any taxation relating thereto) are 10 per cent. or more of the
            consolidated net profits of the Group (before taxation and before
            extraordinary items and any taxation relating thereto); or

      (b)   whose gross assets are 10 per cent. or more of the consolidated
            gross assets of the Group; or

      (c)   whose Net Assets are 10 per cent. or more of the consolidated Net
            Assets of the Group,

      all as shown (in the case of any Subsidiary) in its most recent annual
      accounts and (in the case of the Group) in the most recent annual
      consolidated accounts of the Group and for this purpose "Net Assets" in
      relation to any Subsidiary means its total assets (excluding goodwill)
      less its total liabilities and in relation to the Group means the total
      assets (excluding goodwill) of the Group less its total liabilities; and

      (d)   any other Subsidiary or Subsidiaries of the Company to whom all or
            substantially all of the assets or business of a Principal
            Subsidiary are transferred.

      "Project Finance Borrowings"

      means any Borrowing which finances, and any Hedging Liabilities incurred
      in the financing of the acquisition, development, ownership and/or
      operation of an asset:

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

      (b)   in respect of which the person or persons to whom such Borrowing is
            or may be owed by the relevant debtor (whether or not a member of
            the Group) has or have no recourse whatsoever to any member of the
            Group (other than to a Project Finance Subsidiary) for the repayment
            thereof other than:

            (i)   recourse to such debtor for amounts limited to the cash flow
                  or net cash flow (other than historic cash flow or historic
                  net cash flow) from such asset; and/or

            (ii)  recourse to such debtor for the purpose only of enabling
                  amounts to be claimed in respect of such Borrowing in an
                  enforcement of any Security Interest given by such debtor over
                  such asset or the income, cash flow or other proceeds deriving
                  therefrom (or given by any shareholder or the like in the
                  debtor over its shares or like interest in the capital of the
                  debtor) to secure such Borrowing, provided that (I) the extent
                  of such recourse to such debtor

--------------------------------------------------------------------------------
<PAGE>

                                       11

--------------------------------------------------------------------------------


                  is limited solely to the amount of any recoveries made on any
                  such enforcement, and (II) such person or persons are not
                  entitled, by virtue of any right or claim arising out of or in
                  connection with such Borrowing, to commence proceedings for
                  the winding up or dissolution of the debtor or to appoint or
                  procure the appointment of any receiver, trustee or similar
                  person or officer in respect of the debtor or any of its
                  assets (save only for the assets the subject of such Security
                  Interest); and/or

            (iii) recourse to such debtor generally, or directly or indirectly
                  to a member of the Group, under any form of assurance,
                  undertaking or support, which recourse is limited to a claim
                  for damages (other than liquidated damages and damages
                  required to be calculated in a specified way) for breach of an
                  obligation (not being a payment obligation or an obligation to
                  procure payment by another or an indemnity in respect thereof
                  or any obligation to comply or to procure compliance by
                  another with any financial ratios or other tests of financial
                  condition) by the person against whom such recourse is
                  available.

      "Project Finance Subsidiary"

      means any Subsidiary of the Company:

      (a)   which is a company whose principal assets and business are
            constituted by the ownership, acquisition, development and/or
            operation of an asset whether directly or indirectly;

      (b)   none of whose Borrowings in respect of the financing of such
            ownership, acquisition, development and/or operation of an asset
            benefits from any recourse whatsoever to any member of the Group
            (other than the Subsidiary itself or another Project Finance
            Subsidiary) in respect of the repayment thereof, except as expressly
            referred to in paragraph (b)(iii) of the definition of Project
            Finance Borrowings in this Clause 1.1; and

      (c)   which has been designated as such by the Company by written notice
            to the Agent, provided that the Company may give written notice to
            the Agent at any time that any Project Finance Subsidiary is no
            longer a Project Finance Subsidiary, whereupon it shall cease to be
            a Project Finance Subsidiary.

      "Qualifying Bank"

      means an institution which is:

      (a)   for the time being a bank as defined in the Income and Corporation
            Taxes Act 1988 for the purpose of section 349 of that Act and which
            is within the charge to corporation tax as regards all interest
            receivable by it under this Agreement; or

      (b)   a financial institution lending through any other branch, affiliate
            or agency if, at the time such financial institution becomes a
            Party, the financial institution or affiliate (as the case may be)
            is a resident in a country with which the United Kingdom has an
            appropriate double taxation treaty pursuant to which the Company,
            upon receiving an appropriate direction from the UK Inland Revenue
            Financial Intermediaries and

--------------------------------------------------------------------------------
<PAGE>

                                       12

--------------------------------------------------------------------------------


            Claims Office, will be permitted to pay interest in respect of
            advances made by that financial institution under this Agreement
            without withholding of United Kingdom income tax.

      "Rate Fixing Day"

      means:

      (a)   the Drawdown Date for a Loan denominated in Sterling; or

      (b)   the second Business Day before the Drawdown Date for a Loan
            denominated in an Optional Currency (other than euros); or

      (c)   the second Target Business Day before the Drawdown Date for a Loan
            denominated in euros.

      "Reference Banks"

      means, subject to Clause 26.5 (Reference Banks), the principal London
      offices of The Royal Bank of Scotland plc, National Westminster Bank Plc
      and Bayerische Landesbank Girozentrale, London Branch.

      "Relevant Group"

      means:

      (a)   in the case of the Company, the Group; or

      (b)   in the case of Holdco, the Holdco Group.

      "Repayment Date"

      means:

      (a)   in respect of a Revolving Loan, the last day of its Term; or

      (b)   in respect of a Term Loan, the Final Repayment Date.

      "Request"

      means a request made by the Company for a Loan, substantially in the form
      of Part 1 of Schedule 4.

      "Reservations"

      means the qualifications as to matters of law only contained in the legal
      opinions set out in Schedules 6 and 7.

--------------------------------------------------------------------------------
<PAGE>

                                       13

--------------------------------------------------------------------------------


      "Revolving Loan"

      means the principal amount of a borrowing by the Company under this
      Agreement made before the exercise of the Term-out Option or the principal
      amount outstanding of that borrowing.

      "Ring Fenced Group"

      means Holdco and any Affiliate of Holdco that is not also a member of the
      Group.

      "Scheme"

      means the proposed scheme of arrangement pursuant to which (amongst other
      things) the Company will become a Subsidiary of Holdco.

      "Scheme Date"

      means the date on which the Scheme becomes effective.

      "Security Interest"

      means any mortgage, pledge, lien, charge, assignment by way of security or
      subject to a proviso for redemption, assignation in security, standard
      security, hypothec or security interest or any other agreement or
      arrangement having the effect of conferring security.

      "Selection Notice"

      means a notice substantially in the form of Part 2 of Schedule 4.

      "Sterling"

      means the lawful currency for the time being of the U.K.

      "Subsidiary"

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

      "Supplemental Agreement"

      means an agreement dated on or about the date of this Agreement between
      The Royal Bank of Scotland plc as agent ("RBS") and the Company amending a
      credit agreement dated 24th June, 1996 as amended by a letter dated 29th
      January, 1998 (the "Credit Agreement") between, amongst others, the
      Company and RBS whereby the Banks (as defined in the Credit Agreement)
      agreed to make a (pound)2,600,000,000 facility available to the Company.

      "SWP"

      means Southern Water PLC (registered number 2366620).

--------------------------------------------------------------------------------
<PAGE>

                                       14

--------------------------------------------------------------------------------


      "Tangible Consolidated Net Worth"

      means at any time the aggregate of:

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

      (b)   the amount standing to the credit of the consolidated capital and
            revenue reserves of the Group;

      based on the Balance Sheet but adjusted by:

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

      (ii)  deducting any amount standing to the debit of the profit and loss
            account for the Group for the period ending on the date of the
            Balance Sheet, to the extent not included in sub-paragraph (b)
            above;

      (iii) deducting any amount attributable to goodwill or any other
            intangible asset;

      (iv)  deducting any amount attributable to a revaluation of assets after
            31st March, 1998 or, in the case of assets of a company which
            becomes a member of the Group after that date, the date on which
            that company becomes a member of the Group unless in either case
            such revaluation is based on valuations by independent valuers;

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

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

      (vii) excluding any amounts required to be set aside for taxation payable
            by the Group;

      (viii) excluding any amount attributable to minority interests; and

      (ix)  eliminating inconsistencies between the accounting principles
            applied in connection with the Balance Sheet and those applied in
            connection with the Original Group Accounts.

      "Target Business Day"

      means a day on which Target is operating.

--------------------------------------------------------------------------------
<PAGE>

                                       15

--------------------------------------------------------------------------------


      "Term"

      means the period selected by the Company in a Request (other than a
      Request for a Term Loan) for which the relevant Loan is to be outstanding.

      "Term Date"

      means the date falling 364 days after the date of this Agreement.

      "Term Loan"

      means the principal amount of each borrowing by the Company under this
      Agreement made after the exercise of the Term-out Option or the principal
      amount outstanding of that borrowing.

      "Term-out Option"

      means the option of the Company in Clause 5.5 (Term-out Option) to convert
      the revolving credit facility into a term loan facility.

      "Total Commitments"

      means the aggregate for the time being of the Commitments, being
      (pound)600,000.000 at the date of this Agreement.

      "Total Consolidated Borrowings"

      means, at any time, the aggregate principal amount (or amounts equivalent
      to principal, howsoever described) comprised in the Borrowings of the
      Company and its Subsidiaries at that time calculated on a consolidated
      basis. Any amount outstanding in a currency other than Sterling is to be
      taken into account at its Sterling equivalent calculated on the basis of
      the Agent's Spot Rate of Exchange on the day the relevant amount falls to
      be calculated.

      "Total Consolidated Net Borrowings"

      means, at any time, Total Consolidated Borrowings less the aggregate
      principal amount of Investments beneficially owned by the Group free from
      Security Interests (to the extent the proceeds of the same are readily
      remittable to the UK) at that time.

      "U.K."

      means the United Kingdom.

      "Water Act"

      means the Water Industry Act 1991 and any subordinate legislation,
      regulations and codes of practice made or issued under it.

      "US Dollars"

      means the lawful currency for the time being of the United States of
      America.

--------------------------------------------------------------------------------
<PAGE>

                                       16

--------------------------------------------------------------------------------


1.2   Construction

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

      (i)   "assets" includes properties, revenues and rights of every
            description;

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

            a "month" is a reference to a period starting on one day in a
            calendar month and ending on the numerically corresponding day in
            the next calendar month, except that, if there is no numerically
            corresponding day in the month in which that period ends, that
            period shall end on the last Business Day in that calendar month;

            a "regulation" includes any regulation, rule, official directive,
            request or guideline (whether or not having the force of law) of any
            governmental body, agency, department or regulatory, self-regulatory
            or other authority or organisation;

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

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

      (iv)  a person includes its successors and assigns;

      (v)   a Finance Document or another document is a reference to that
            Finance Document or that other document as amended, novated or
            supplemented; and

      (vi)  a time of day is a reference to London time.

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

(c)   (i)   Terms used in the definitions of "Borrowings", "Consolidated
            EBITDA", "Interest Payable", "Interest Receivable", "Net Interest
            Payable", "Operating Profit", "Tangible Consolidated Net Worth",
            "Total Consolidated Borrowings" and "Total Consolidated Net
            Borrowings" in Clause 1.1 (Definitions) are to be calculated in
            accordance with the accounting principles applied in connection with
            the Original Group Accounts.

      (ii)  If there is a dispute as to any interpretation or computation for
            sub-paragraph (i) above, the interpretation or computation of the
            auditors for the time being of the Company will prevail.

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

--------------------------------------------------------------------------------
<PAGE>

                                       17

--------------------------------------------------------------------------------


2.    THE FACILITIES

2.1   Facilities

      (a)   Subject to the terms of this Agreement, the Banks grant to the
            Company the following facilities:

            (i)   prior to the exercise of the Term-out Option, a committed
                  multicurrency revolving credit facility under which the Banks
                  agree to make Revolving Loans to the Company; and

            (ii)  if the Term-out Option is exercised, a committed multicurrency
                  term loan facility under which the Banks agree to make Term
                  Loans to the Company.

      (b)   The Banks shall, when requested by the Company, make to the Company
            Loans up to an aggregate principal amount not exceeding, at any
            time, the Total Commitments at that time.

      (c)   No Bank is obliged to lend more than its Commitment.

2.2   Number of Requests and Drawdowns

      No Request may specify a Drawdown Date which is within three Business
      Day's of another Drawdown Date, although up to three Loans may be made on
      the same day. Subject to the above, any number of Requests may be
      delivered on the same day and/or specifying the same Drawdown Date,
      whether or not the Terms or Interest Periods requested are similar.

2.3   Limits

      (a)   The aggregated Original Sterling Amount of all outstanding Loans
            shall not exceed the Total Commitments.

      (b)   No Bank is obliged to participate if it would cause the Original
            Sterling Amount of its participations in the Loans to exceed its
            Commitment.

2.4   Nature of a Finance Party's rights and obligations

      (a)   The obligations of a Finance Party under the Finance Documents are
            several. Failure of a Finance Party to carry out those obligations
            does not relieve any other Party of its obligations under the
            Finance Documents. No Finance Party is responsible for the
            obligations of any other Finance Party under the Finance Documents.

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

2.5   Change of Currency

      If a change in any currency of a country occurs, this Agreement will be
      amended to the extent the Agent acting reasonably and in consultation with
      the Company specifies to be necessary to reflect the change in currency
      and to put the Banks in the same position, so far as possible, that they
      would have been in if no change in currency had occurred.

--------------------------------------------------------------------------------
<PAGE>

                                       18

--------------------------------------------------------------------------------


3.    PURPOSE

      (a)   The Company shall apply each Loan towards its general corporate
            purposes.

      (b)   Without affecting the obligations of the Company in any way, no
            Finance Party is bound to monitor or verify the application of any
            Loan.

4.    CONDITIONS PRECEDENT

4.1   Documentary conditions precedent

      The obligations of each Finance Party to the Company under this Agreement
      are subject to the condition precedent that the Agent has notified the
      Company and the Banks that it has received all of the documents set out in
      Part I of Schedule 2 in form and substance satisfactory to the Agent.

4.2   Further conditions precedent

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

      (i)   the representations and warranties in Clause 16 (Representations and
            warranties) to be repeated on those dates are correct and will be
            correct immediately after the Loan is made; and

      (ii)  no Default is outstanding or could reasonably be expected to result
            from the making of the Loan.

5.    DRAWDOWN

5.1   Receipt of Requests

      The Company may utilise the Facility if the Agent receives a duly
      completed Request, not later than:

      (a)   9.30 a.m. on the proposed Drawdown Date for a Loan denominated in
            Sterling which is to be used solely for the purposes of repayment of
            commercial paper which is due for repayment on that Drawdown Date;
            or

      (b)   12.00 noon one Business Day before the applicable Rate Fixing Day
            for a Loan denominated in:

            (i)   an Optional Currency; or

            (ii)  Sterling if borrowed for a purpose other than that set out in
                  paragraph (a) above.

5.2   Completion of Requests

      A Request will not be regarded as having been duly completed unless:

      (a)   the Drawdown Date is a Business Day falling before the Term Date;

--------------------------------------------------------------------------------
<PAGE>

                                       19

--------------------------------------------------------------------------------


      (b)   the principal amount of the Loan is a minimum of (pound)25,000,000
            and an integral multiple of (pound)5,000,000 (or its equivalent in
            an Optional Currency) or the principal amount of the Loan is equal
            to the balance of the undrawn Total Commitments as at the proposed
            Drawdown Date;

      (c)   subject to Clause 5.5 (Term-out Option), it specifies whether it is
            a Term Loan or a Revolving Loan;

      (d)   in the case of a Revolving Loan only, one Term is specified which:

            (i)   does not extend beyond the Term Date; and

            (ii)  is a period of one, two, three or six months.

      (e)   in the case of a Term Loan the Interest Period selected complies
            with Clause 8.2 (Interest Period for Term Loans);

      (f)   the payment instructions comply with Clause 10 (Payments);

      (g)   the amount selected under paragraph (b) above does not cause Clause
            2.3 (Limits) to be contravened; and

      (h)   if the currency selected is an Optional Currency it complies with
            Clause 9 (Optional Currencies).

5.3   Amount of each Bank's participation in a Loan

      The amount of a Bank's participation in a Loan will be the proportion of
      that Loan which its Commitment bears to the Total Commitments on the date
      of receipt of the relevant Request.

5.4   Notification of the Banks

      The Agent shall promptly notify each Bank of the details of the requested
      Loan and the amount of its participation in the Loan.

5.5   Term-out Option

      (a)   The Company may, by giving not less than 10 days' prior notice to
            the Agent, exercise the Term-out Option.

      (b)   Subject to the terms of this Agreement, any Loans borrowed after the
            date the Term-out Option is exercised will be Term Loans.

      (c)   The unutilised portion of the Total Commitments shall be cancelled
            by close of business on the Term Date.

5.6   Payment of proceeds

      Subject to the terms of this Agreement, each Bank shall make its
      participation in each Loan available to the Agent for the Company on the
      relevant Drawdown Date.

--------------------------------------------------------------------------------
<PAGE>

                                       20

--------------------------------------------------------------------------------


6.    REPAYMENT

      The Company shall repay each Loan in full on its Repayment Date to the
      Agent for the Banks.

7.    PREPAYMENT AND CANCELLATION

7.1   Automatic cancellation of the Total Commitments

      The Commitment of each Bank shall be automatically cancelled at close of
      business on the Term Date.

7.2   Voluntary prepayment

      The Company may, by giving not less than 30 days' prior notice to the
      Agent, prepay any Term Loan on the last day of its Interest Period in
      whole or in part (but, if in part, in a minimum Original Sterling Amount
      of (pound)25,000,000 and an integral multiple of (pound)5,000,000 (or its
      equivalent in an Optional Currency) in which the relevant Loan is then
      outstanding).

7.3   Voluntary cancellation

      The Company may, by giving not less than 30 days' prior notice to the
      Agent, cancel the unutilised portion of the Total Commitments in whole or
      in part (but, if in part, in a minimum Original Sterling Amount of
      (pound)25,000,000 and all integral multiple of (pound)5,000,000). Any
      cancellation in part shall be applied against the Commitment of each Bank
      pro rata.

7.4   Additional right of prepayment and cancellation

      If any Obligor is required to pay any amount to or for the account of a
      Bank under Clause 11 (Taxes) or Clause 13 (Increased costs) the Company
      may, whilst the circumstances giving rise to the requirement continue,
      serve a notice of prepayment and cancellation on that Bank through the
      Agent. On the date falling five Business Day's after the date of service
      of the notice:

      (a)   the Company shall prepay that Bank's participation in all the Loans
            together with all other amounts payable by it to that Bank under
            this Agreement; and

      (b)   the Bank's Commitment shall be cancelled.

7.5   Miscellaneous provisions

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

      (b)   All prepayments under this Agreement shall be made together with
            accrued interest on the amount prepaid.

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

      (d)   Any amount of a Revolving Loan prepaid under this Agreement may
            subsequently be reborrowed. Subject to Clause 9.3 (Change of
            currency of Term Loan) and Clause 9.4 (Same

--------------------------------------------------------------------------------
<PAGE>

                                       21

--------------------------------------------------------------------------------


      Optional Currency), no amount of any Term Loan prepaid may subsequently be
      reborrowed. No amount of the Total Commitments cancelled under this
      Agreement may subsequently be reinstated.

8.    INTEREST

8.1   Interest rate

      The rate of interest on each Loan for its Term or Interest Period (as
      appropriate) is the rate per annum determined by the Agent to be the
      aggregate of the applicable:

      (a)   Margin;

      (b)   LIBOR; and

      (c)   Mandatory Cost.

8.2   Interest Periods for Term Loans

      (a)   The life of each Term Loan will be divided into successive periods
            (each an "Interest Period") for the calculation of interest. The
            first Interest Period will be the period selected in the Request for
            that Term Loan, and in the case of a Term Loan that has been
            borrowed, in a Selection Notice received by the Agent not later than
            10.00 a.m. three Business Days before the end of the current
            Interest Period (being one, two, three or six months).

      (b)   If an Interest Period extends beyond the Final Repayment Date, it
            shall be shortened so that it ends on the Final Repayment Date.

      (c)   If the Company fails to select an Interest Period for an outstanding
            Term Loan in accordance with paragraph (a) above, that Interest
            Period will, subject to the other provisions of this Clause 8, be
            one month.

8.3   Non-Business Days

      If an Interest Period would otherwise end on a day which is not a Business
      Day, that Interest Period shall instead end on the next Business Day in
      that calendar month (if there is one) or the preceding Business Day (if
      there is not).

8.4   Due dates

      Except as otherwise provided in this Agreement, accrued interest on each
      Loan is payable by the Company on the last day of its Term or Interest
      Period.

8.5   Default interest

      (a)   If an Obligor fails to pay any amount payable by it under the
            Finance Documents, it shall forthwith on demand by the Agent pay
            interest on the overdue amount from the due date up to the date of
            actual payment, as well after as before judgment, at a rate (the
            "default rate") determined by the Agent to be one per cent. per
            annum above the higher of:

            (i)   the rate on the overdue amount under Clause 8.1 (Interest
                  rate) immediately before the due date (if of principal); and

--------------------------------------------------------------------------------
<PAGE>

                                       22

--------------------------------------------------------------------------------


            (ii)  the rate which would have been payable if the overdue amount
                  had, during the period of non-payment, constituted a Loan in
                  the currency of the overdue amount for such successive Terms
                  or Interest Periods of such duration as the Agent may
                  determine (each a "Designated Term").

      (b)   The default rate will be determined on each Business Day or the
            first day of the relevant Designated Term, as appropriate.

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

      (d)   Default interest will be compounded monthly (where paragraph (a)(i)
            applies) and at the end of each Designated Term (in each other
            case).

8.6   Notification of rates of interest

      The Agent shall promptly notify each relevant Party of the determination
      of a rate of interest under this Agreement.

9.    OPTIONAL CURRENCIES

9.1   Selection

      (a)   The Company shall select the currency of a Revolving Loan in the
            relevant Request.

      (b)   The Company shall select the currency of a Term Loan for an Interest
            Period in either the relevant Request or, if a Term Loan is
            outstanding, a notice received by the Agent not later than 5
            Business Days' before the commencement of that Interest Period. In
            the latter case, the Company may specify whether that Term Loan is
            to be denominated in more than one currency, and, if so, the amount
            in Sterling of each such currency (being a minimum Original Sterling
            Amount of (pound)25,000,000 or an integral multiple of
            (pound)5,000,000 or the balance of the Term Loan, if more).

      (c)   The currency of each Loan must be Sterling or an Optional Currency.

      (d)   If the Company fails to give a notice in respect of an outstanding
            Term Loan in accordance with paragraph (b) above, that Term Loan
            will remain denominated for its next Interest Period in the same
            currency in which it is then denominated.

      (e)   Each part of a Term Loan which is to be denominated in a different
            currency from any other part of that Term Loan shall be treated as a
            separate Term Loan.

      (f)   The Company may not choose a currency if as a result the Loans would
            be denominated at any time in more than 3 currencies.

      (g)   The Agent shall notify each Bank of the currency and the Original
            Sterling Amount of each Loan and the applicable Agent's Spot Rate of
            Exchange promptly after they are ascertained.

--------------------------------------------------------------------------------
<PAGE>

                                       23

--------------------------------------------------------------------------------


9.2   Revocation of currency

      If, before 9.30 a.m. on any Rate Fixing Day, the Agent receives notice
      from a Bank that:

(a)   it is impracticable for the Bank to fund its participation in the relevant
      Loan in the relevant Optional Currency during its Term or Interest Period
      (as appropriate) in the ordinary course of business in the London
      interbank market; and/or

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

      the Agent shall give notice to the Company and to the Banks to that effect
      before 11.00 a.m. on that day. In this event:

      (i)   the Company and the Banks may agree that the drawdown will not be
            made; or

      (ii)  in the absence of agreement, that Bank's participation in the Loan
            (or, if more than one Bank is similarly affected, those Banks'
            participations in the Loan) shall be treated as a separate Loan
            denominated in Sterling during the relevant Term or Interest Period
            (as appropriate).

9.3   Change of currency of Term Loan

      (a)   If a Term Loan is to be continued during its next Interest Period in
            a different currency (the "new currency") from that in which it is
            currently denominated, that Term Loan shall be repaid by the Company
            in full at the end of its current Interest Period in the currency in
            which it is then denominated and, subject to the terms of this
            Agreement, shall forthwith be re-advanced by the Banks in the new
            currency.

      (b)   If the new currency is Sterling, the amount of each Bank's
            participation in that Term Loan will be its participation in the
            Original Sterling Amount (as such Original Sterling Amount has been
            reduced by any repayment or prepayment of part of such Loan under
            this Agreement) of that Term Loan for that Interest Period.

      (c)   If the new currency is an Optional Currency, the amount of each
            Bank's participation in that Term Loan will be determined by
            converting into the new currency its participation in the Original
            Sterling Amount (as such Original Sterling Amount has been reduced
            by any repayment or prepayment of part of such Loan under this
            Agreement) of that Term Loan on the basis of the Agent's Spot Rate
            of Exchange three Business Days before the commencement of that
            Interest Period.

9.4   Same Optional Currency

      (a)   If a Term Loan is to be continued during its next Interest Period in
            the same Optional Currency as that in which it is denominated during
            its current Interest Period, the Agent shall calculate the
            difference between the amount of the Term Loan (in that Optional
            Currency) for the current Interest Period and for the next Interest
            Period. The amount of the Term Loan for the next Interest Period
            will be determined by notionally converting into that Optional
            Currency the Original Sterling Amount of the Term Loan on the basis
            of the Agent's Spot Rate of Exchange three Business Days before the
            commencement of that Interest Period.

--------------------------------------------------------------------------------
<PAGE>

                                       24

--------------------------------------------------------------------------------


      (b)   At the end of the current Interest Period (but subject always to
            paragraph (c) below):

            (i)   if the amount of the Term Loan for the next Interest Period is
                  less than that of the preceding Interest Period, the Company
                  shall repay the difference in such Optional Currency; or

            (ii)  if the amount of the Term Loan for the next Interest Period is
                  greater than that of the preceding Interest Period, each Bank
                  shall forthwith make available to the Agent for the Company
                  its participation in the difference and the Agent shall pay to
                  the Company the difference in such Optional Currency.

      (c)   If the Agent's Spot Rate of Exchange for the next Interest Period
            shows an appreciation or depreciation of the Optional Currency
            against Sterling of less than five per cent. when compared with the
            Original Exchange Rate, no amounts are payable in respect of the
            difference. In this Clause 9 (Optional Currencies) "Original
            Exchange Rate" means the Agent's Spot Rate of Exchange used for
            determining the amount of the Optional Currency for the Interest
            Period which is the later of the following:

            (i)   the Interest Period during which the Term Loan was first
                  denominated in that Optional Currency if the Term Loan has
                  since then remained denominated in that Optional Currency; and

            (ii)  the most recent Interest Period immediately prior to which a
                  difference was required to be paid under this Clause 9.4.

9.5   Prepayments and repayments

      If a Term Loan is to be repaid or prepaid by reference to an Original
      Sterling Amount, the Optional Currency amount to be repaid or prepaid
      shall be determined by reference to the Agent's Spot Rate of Exchange last
      used for determining the Optional Currency amount of that Term Loan under
      this Clause 9 or, if applicable, the Original Exchange Rate.

10.   PAYMENTS

10.1  Place

      All payments by an Obligor or a Bank under the Finance Documents shall be
      made to the Agent to its account at such office or bank as it may notify
      to the Obligors or that Bank for this purpose.

10.2  Funds

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

10.3  Distribution

      (a)   Each payment received by the Agent under this Agreement for another
            Party shall, subject to paragraphs (b) and (c) below, be made
            available by the Agent to that Party by payment (on the date and in
            the currency and funds of receipt) to its account with such office
            or bank:

--------------------------------------------------------------------------------
<PAGE>

                                       25

--------------------------------------------------------------------------------


            (i)   in the principal financial centre of the relevant currency; or

            (ii)  in the case of euro units or national currency units, in the
                  principal financial centre of a Participating Member State or
                  London,

            as it may notify to the Agent for this purpose by not less than 5
            Business Days' prior notice.

      (b)   The Agent may apply any amount received by it for an Obligor in or
            towards payment (on the date and in the currency and funds of
            receipt) of any amount due from an Obligor under the Finance
            Documents.

      (c)   Where a sum is to be paid under the Finance Documents to the Agent
            for the account of another Party, the Agent is not obliged to pay
            that sum to that Party until it has established that it has actually
            received that sum. The Agent may, however, assume that the sum has
            been paid to it in accordance with this Agreement and, in reliance
            on that assumption, make available to that Party a corresponding
            amount. If the sum has not been made available but the Agent has
            paid a corresponding amount to another Party, that Party shall
            forthwith on demand refund the corresponding amount to the Agent
            together with interest on that amount from the date of payment to
            the date of refund, calculated at a rate determined by the Agent to
            reflect its cost of funds.

10.4  Currency

      (a)   A repayment or prepayment of a Loan or any part of a Loan is payable
            in the currency in which the Loan is denominated on its due date.

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

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

      (d)   Any other amount payable under the Finance Documents is, except as
            otherwise provided in this Agreement, payable in Sterling.

10.5  Set-off and counterclaim

      All payments made by an Obligor under the Finance Documents shall be made
      without set-off or counterclaim.

10.6  Non-Business Days

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

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

--------------------------------------------------------------------------------
<PAGE>

                                       26

--------------------------------------------------------------------------------


10.7  Partial payments

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

            (i)   first, in or towards payment of any unpaid costs and expenses
                  of the Agent under the Finance Documents;

            (ii)  secondly, in or towards payment pro rata of any accrued fees
                  due but unpaid under Clause 20.2 (Commitment fee);

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

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

            (v)   fifthly, in or towards payment pro rata of any other sum due
                  but unpaid under the Finance Documents.

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

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

10.8  Netting of payments

      (a)   If on any date an amount (the "first amount") is to be advanced or
            paid by a Bank under this Agreement and an amount (the "second
            amount") is due from an Obligor to that Bank under the Finance
            Documents, the Obligor instructs that Bank to apply the first amount
            in or towards payment of the second amount.

      (b)   The relevant Bank shall remain obliged to advance any excess (or, as
            the case may be, an Obligor shall remain obliged to pay any
            shortfall) in accordance with this Clause 10. Nothing in this Clause
            10.8 shall be effective to create a charge.

11.   TAXES

11.1  Gross-up

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

--------------------------------------------------------------------------------
<PAGE>

                                       27

--------------------------------------------------------------------------------


11.2  Tax receipts

      All taxes required by law to be deducted or withheld by an Obligor from
      any amounts paid or payable under the Finance Documents shall be paid by
      the relevant Obligor when due and the Obligor shall, within 30 days of the
      payment being made, deliver to the Agent for the relevant Bank an original
      or certified copy of an official receipt or such other evidence, if any,
      as is then customary, evidencing that such deduction or withholding has
      been made and has been accounted for to the appropriate authorities.

11.3  Qualifying Banks

      (a)   If, otherwise than as a result of the introduction of, change in, or
            change in the interpretation, administration or application of, any
            law, treaty or regulation or any practice or concession of the UK
            Inland Revenue occurring after the date of this Agreement, a Bank is
            not or has ceased to be a Qualifying Bank or is not or has ceased to
            be beneficially entitled to all interest received by it in respect
            of advances made by it under this Agreement, no Obligor will be
            liable to pay to or for the account of that Bank under Clause 11.1
            (Gross-up) any amount in respect of taxes levied or imposed by the
            U.K. or any taxing authority of or in the UK in excess of the amount
            it would have been obliged to pay if that Bank had been, or had not
            ceased to be a Qualifying Bank and had been beneficially entitled to
            all interest received by it in respect of advances made by it under
            this Agreement.

      (b)   Each Bank warrants and represents to the Obligors on the date of
            this Agreement or (if later) on the date on which it becomes a Party
            that it is a Qualifying Bank and is beneficially entitled to all
            interest receivable by it in respect of advances made by it under
            this Agreement.

      (c)   Each Bank which ceases to be a Qualifying Bank or which ceases to be
            beneficially entitled to interest received by it in respect of
            advances made by it under this Agreement will notify the Company
            forthwith upon becoming aware that it has so ceased.

11.4  Tax Credit

      (a)   If an Obligor makes a payment pursuant to Clause 11.1 (Gross-up) for
            the account of any Bank and that Bank has received or been granted a
            credit against, or relief or remission or repayment of, any tax paid
            or payable by it (a "Tax Credit") which is attributable to that
            payment or the corresponding payment under the Finance Document that
            Bank shall, to the extent that it can do so without prejudice to the
            retention of the amount of such credit, relief, remission or
            repayment, pay to the Obligor concerned such amount as the Bank
            shall have reasonably determined to be attributable to such payments
            and which will leave the Bank (after such payment) in no better or
            worse position than it would have been if the Obligor had not been
            required to make any deduction or withholding.

      (b)   Nothing in this Clause 11.4 shall interfere with the right of a Bank
            to arrange its tax affairs in whatever manner it thinks fit and
            without limiting the foregoing no Bank shall be under any
            obligation, except as expressly stated in sub-clause (a) above, to
            claim a Tax Credit or to claim a Tax Credit in priority to any other
            claims, relief, credit or deduction available to it. No Bank shall
            be obliged to disclose any information relating to its tax affairs
            or any computations in respect thereof.

--------------------------------------------------------------------------------
<PAGE>

                                       28

--------------------------------------------------------------------------------


11.5  Double Tax Treaties

      For the purposes of Clause 11.3(a) above, a financial institution which is
      a Qualifying Bank by virtue of satisfying part (b) of the definition
      thereof shall nevertheless not be treated as a Qualifying Bank until the
      Obligors receive an appropriate direction as described in that part (b).

12.   MARKET DISRUPTION

12.1  Market disturbance

      (a)   If LIBOR is to be determined in accordance with paragraph (b) of its
            definition and a Reference Bank does not supply an offered rate by
            l1.30 a.m. on the applicable Rate Fixing Day, the applicable LIBOR
            shall, subject to paragraph (b) below, be determined on the basis of
            the quotations of the remaining Reference Banks.

      (b)   If, in relation to any proposed Loan:

            (i)   LIBOR is to be determined in accordance with paragraph (b) of
                  its definition and no, or only one, Reference Bank supplies a
                  rate by 11.30 a.m. on the applicable Rate Fixing Day for the
                  purposes of determining the applicable LIBOR; or

            (ii)  the Agent otherwise determines (which determination shall be
                  conclusive and binding on all parties) that adequate and fair
                  means do not exist for ascertaining the applicable LIBOR,

      the Agent shall promptly notify the Company and the relevant Banks of the
      fact and that this Clause 12 is in operation.

12.2  Alternative rates

      If the Agent gives a notice under Clause 12.1 (Market disturbance):

      (a)   the Company and the Banks may (through the Agent) agree that in the
            case of a Loan which has not been borrowed, that Loan shall not be
            borrowed; or

      (b)   in the absence of agreement, a Loan (if it has not been borrowed)
            shall still be made: and

            (i)   the Term or the Interest Period (as appropriate) of the Loans
                  concerned shall be one month; and

            (ii)  during the Term or the Interest Period (as appropriate) of
                  each Loan the rate of interest applicable to that Loan shall
                  be the applicable Margin plus the Mandatory Cost plus the rate
                  per annum which is expressed as a percentage rate per annum of
                  the cost to the Bank concerned of funding that Loan from
                  whatever sources it may reason ably select, which rate shall
                  be notified by the Bank concerned to the Agent before that
                  last date of such Term or the Interest Period (as
                  appropriate).

--------------------------------------------------------------------------------
<PAGE>

                                       29

--------------------------------------------------------------------------------


13.   INCREASED COSTS

13.1  Increased costs

      (a)   Subject to Clause 13.2 (Exceptions), the Company shall forthwith on
            demand by a Finance Party pay that Finance Party the amount of any
            increased cost incurred by it as a result of any law or regulation
            (including any relating to taxation or reserve asset, special
            deposit, cash ratio, liquidity or capital adequacy requirements or
            any other form of banking or monetary control).

      (b)   In this Agreement "increased cost" means:

            (i)   an additional cost incurred by a Finance Party as a result of
                  it having entered into, or performing, maintaining or funding
                  its obligations under, this Agreement; or

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

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

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

13.2  Exceptions

      Clause 13.1 (Increased costs) does not apply to any increased cost:

      (a)   compensated for by the payment of the Mandatory Cost;

      (b)   attributable to any tax or amounts in respect of tax which must be
            deducted from any amounts payable or paid by the Company or payable
            or paid by the Agent to a Finance Party under the Finance Documents;

      (c)   attributable to any change in the rate of tax on the overall net
            income, profits or gains of a Bank (or the overall net income,
            profits or gains of a division or branch of the Bank) imposed in the
            jurisdiction in which its principal office or Facility Office is
            situate;

      (d)   arising directly out of the implementation by the applicable
            authorities having jurisdiction over such Finance Party and/or its
            Facility Office of the matters set out in the statement of the Basle
            Committee on Banking Regulations and Supervisory Practices dated
            July, 1988 and entitled "International Convergence of Capital
            Measurement and Capital Standards or in the European Council
            Directives of 17th April, 1989 (on the own funds of credit
            institutions (89/299/EEC)) and 18th December, 1989 (on a solvency
            ratio for credit institutions (89/647/EEC)), in each case, as
            amended, modified, supplemented, restated or replaced up to the date
            hereof,

--------------------------------------------------------------------------------
<PAGE>

                                       30

--------------------------------------------------------------------------------


      which is in terms or has effects reasonably foreseeable by such Finance
      Party as at the date of this Agreement.

14.   ILLEGALITY AND MITIGATION

14.1  Illegality

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

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

(b)   (i)   the Company shall to the extent required and within the period
            allowed or, if no period is allowed, forthwith prepay that Bank's
            participation in all the Loans together with all other amounts
            payable by it to that Bank under this Agreement; and

      (ii)  the Bank's Commitment shall be cancelled.

14.2  Mitigation

      Notwithstanding the provisions of Clauses 11 (Taxes), 13 (Increased costs)
      and 14.1 (Illegality), if in relation to a Bank or (as the case may be)
      the Agent circumstances arise which would result in:

      (a)   any deduction, withholding or payment of the nature referred to in
            Clause 11 (Taxes); or

      (b)   any increased cost of the nature referred to in Clause 13 (Increased
            costs); or

      (c)   a notification pursuant to Clause 14.1 (Illegality),

      then without in any way limiting, reducing or otherwise qualifying the
      rights of that Bank or the Agent, that Bank shall upon becoming aware of
      the same notify the Agent thereof (whereupon the Agent shall notify the
      Company) and such Bank shall use reasonable endeavours to transfer its
      participation in the Facility and its rights hereunder and under the
      Finance Documents to another financial institution or Facility Office not
      affected by the circumstances having the results set out in (a), (b) or
      (c) above and shall otherwise take such reasonable steps as may be open to
      it to mitigate the effects of such circumstances provided that such Bank
      shall not be under any obligation to take any such action if, in its
      reasonable opinion, to do so might have a material adverse effect upon its
      business, operations or financial condition or might involve it in any
      unlawful activity or any activity that is contrary to any request,
      guidance or directive of any competent authority (whether or not having
      the force of law) or (unless indemnified to its satisfaction) might
      involve it in any expense or tax disadvantage.

--------------------------------------------------------------------------------
<PAGE>

                                       31

--------------------------------------------------------------------------------


15.   GUARANTEE

15.1  Guarantee

      Holdco (if it becomes an Obligor by executing and delivering a Guarantor
      Accession Agreement in accordance with Clause 26.4 (Accession)),
      irrevocably and unconditionally and notwithstanding the release of the
      Company or any other person under the terms of any composition or
      arrangement with any creditors of any member of the Group:

      (a)   as principal obligor guarantees to each Finance Party prompt
            performance by the Company of all its obligations under the Finance
            Documents;

      (b)   undertakes with each Finance Party that, whenever the Company does
            not pay any amount when due under or in connection with any Finance
            Document. Holdco shall forthwith on demand by the Agent pay that
            amount as if Holdco instead of the Company were expressed to be the
            principal obligor; and

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

15.2  Continuing guarantee

      This guarantee is a continuing guarantee and will extend to the ultimate
      balance of all sums payable by the Company under the Finance Documents and
      shall not be discharged by any intermediate payment or discharge in whole
      or in part.

15.3  Reinstatement

      (a)   Where any discharge (whether in respect of the obligations of any
            Obligor or any security for those obligations or otherwise) is made
            in whole or in part or any arrangement is made on the faith of any
            payment, security or other disposition which is avoided or must be
            restored on insolvency, liquidation or otherwise without limitation,
            the liability of Holdco under this Clause 15 shall continue as if
            the discharge or arrangement had not occurred.

      (b)   Each Finance Party may concede or compromise any claim that any
            payment, security or other disposition is liable to avoidance or
            restoration.

15.4  Waiver of defences

      The obligations of Holdco under this Clause 15 will not be affected by an
      act, omission, matter or thing which, but for this provision, would
      reduce, release or prejudice any of its obligations under this Clause 15
      or prejudice or diminish those obligations in whole or in part, including
      (whether or not known to it or any Finance Party):

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

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

--------------------------------------------------------------------------------
<PAGE>

                                       32

--------------------------------------------------------------------------------


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

      (d)   any variation (however fundamental) or replacement of a Finance
            Document or any other document or security so that references to
            that Finance Document in this Clause 15 shall include each variation
            or replacement;

      (e)   any unenforceability, illegality or invalidity of any obligation of
            any person under any Finance Document or any other document or
            security, to the intent that Holdco's obligations under this Clause
            15 shall remain in full force and its guarantee be construed
            accordingly, as if there were no unenforceability, illegality or
            invalidity;

      (f)   any postponement, discharge, reduction, non-provability or other
            similar circumstance affecting any obligation of Holdco under a
            Finance Document resulting from any insolvency, liquidation or
            dissolution proceedings or from the law, regulation or order so that
            each such obligation shall for the purposes of Holdco's obligations
            under this Clause 15 be construed as if there were no such
            circumstances; or

      (g)   the release of the Company or any other person under the terms of
            any composition or arrangement with any creditor of any member of
            the Group.

15.5  Immediate recourse

            Holdco waives any right it may have of first requiring any Finance
            Party (or any trustee or agent on its behalf) to proceed against or
            enforce any other rights or security or claim payment from any
            person before claiming from Holdco under this Clause 15.

15.6  Appropriations

            If a notice has been served on the Company under Clause 18.19
            (Acceleration) then, until all amounts which may be or become
            payable by the Obligors under or in connection with the Finance
            Documents have been irrevocably paid in full, each Finance Party (or
            any trustee or agent on its behalf) may:

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

      (b)   hold in a suspense account any moneys received from Holdco or on
            account of the Holdco's liability under this Clause 15 which shall
            bear interest at an appropriate commercial rate as reasonably
            determined by such Finance Party.

15.7  Non-competition

      Until all amounts which may be or become payable by the Obligors under or
      in connection with the Finance Documents have been irrevocably paid in
      full, Holdco shall not, after a claim has been made or by virtue of any
      payment or performance by it under this Clause 15:

--------------------------------------------------------------------------------
<PAGE>

                                       33

--------------------------------------------------------------------------------


      (a)   be subrogated to any rights, security or moneys held, received or
            receivable by any Finance Party (or any trustee or agent on its
            behalf) or be entitled to any right of contribution or indemnity in
            respect of any payment made or moneys received on account of
            Holdco's liability under this Clause 15;

      (b)   claim, rank, prove or vote as a creditor of the Company or its
            estate in competition with any Finance Party (or any trustee or
            agent on its behalf) unless otherwise required by law; or

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

      Holdco shall hold in trust for and forthwith pay or transfer to the Agent
      for the Finance Parties any payment or distribution or benefit of security
      received by it contrary to this Clause 15.7 or if required by law as
      contemplated by paragraph (b) above or as directed by the Agent.

15.8  Additional security

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

16.   REPRESENTATIONS AND WARRANTIES

16.1  Representations and warranties

      Each Obligor makes the representations and warranties (in respect of
      itself and the Relevant Group only) set out in this Clause 16
      (Representations and warranties) to each Finance Party.

16.2  Status

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

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

16.3  Powers and authority

      It has the power to enter into and perform, and has taken all necessary
      action to authorise the entry into, performance and delivery of, the
      Finance Documents to which it is or will be a party and the transactions
      contemplated by those Finance Documents.

16.4  Legal validity

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

--------------------------------------------------------------------------------
<PAGE>

                                       34

--------------------------------------------------------------------------------


16.5  Non-conflict

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

      (a)   any law or regulation or judicial or official order; or

      (b)   the constitutional documents of any member of the Relevant Group; or

      (c)   to the best of the knowledge, information and belief of its
            Directors, any document which is binding upon any member of the
            Relevant Group or any asset of any member of the Relevant Group,

      in any such case to an extent or in a manner which would have a material
      adverse effect on its ability to perform its obligations under this
      Agreement.

16.6  No default

      (a)   No Default is outstanding or would result from the making of any
            Loan; and

      (b)   no other event is outstanding which constitutes (or, with the giving
            of notice, lapse of time, determination of materiality or the
            fulfilment of any other applicable condition or any combination of
            the foregoing, is reasonably likely to constitute) a default under
            any document which is binding on any member of the Relevant Group or
            any asset of any member of the Relevant Group to an extent or in a
            manner which might have a material adverse effect on its ability to
            perform its obligations under the Finance Documents.

16.7  Authorisations

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

16.8  Licences

      (a)   Each member of the Relevant Group which requires a Licence from the
            Secretary of State under Section 6(1) of the Electricity Act 1989
            for the conduct of its business has been duly licensed under that
            Section.

      (b)   The Appointee is the duly appointed water and sewerage undertaker
            for the Franchise Area pursuant to the Appointment.

16.9  Accounts

      The audited consolidated accounts of the Relevant Group most recently
      delivered to the Agent (which in respect of the Company only, at the date
      of this Agreement, are the Original Group Accounts):

      (a)   have been prepared in accordance with accounting principles and
            practices generally accepted in the United Kingdom consistently
            applied; and

--------------------------------------------------------------------------------
<PAGE>

                                       35

--------------------------------------------------------------------------------


      (b)   fairly represent the consolidated financial condition of the
            Relevant Group as at the date to which they were drawn up.

16.10 Litigation

      Save as disclosed in writing to the Agent prior to the date of this
      Agreement, no litigation, arbitration or administrative proceedings in
      relation to any member of the Relevant Group are current or, to its
      knowledge, pending or threatened, which are reasonably expected to be
      adversely determined and which would, if adversely determined, be likely
      to have a material adverse effect on the ability of any Obligor to perform
      its obligations under this Agreement.

16.11 Information

      (a)   All of the factual information supplied by it to the Agent in
            connection with the Finance Documents is true in all material
            respects and not misleading in any respect and there are no facts or
            matters not disclosed in writing to the Agent the omission of which
            makes any such factual information incorrect or misleading in any
            respect.

      (b)   Nothing has occurred since the date the information was provided
            which renders the information contained in it untrue or misleading
            in any material respect and which, if disclosed, may affect the
            decision of a person considering whether to enter into this
            Agreement.

16.12 Times for making representations and warranties

      The representations and warranties set out in this Clause 16:

      (a)   (i)   in the case of the Company, are made by it on the date of this
                  Agreement; and

            (ii)  in the case of Holdco will be deemed to be made by it on the
                  date it executes and delivers a Guarantor Accession Agreement
                  to the Agent in accordance with Clause 26.4 (Accession); and

      (b)   other than Clause 16.11 (Information), are deemed to be repeated by
            the Obligors on the date of each Request, each Drawdown Date and the
            first day of each Term or Interest Period with reference to the
            facts and circumstances then existing.

17.   UNDERTAKINGS

17.1  Duration

      The undertakings in this Clause 17 (Undertakings) will remain in force
      from the date of this Agreement for so long as any amount is or may be
      outstanding under this Agreement or any Commitment is in force.

17.2  Certificates

      The Company shall, when it delivers consolidated accounts of the Group in
      accordance with Clause 17.3 (a) and (b) (Financial Information), also
      deliver a certificate as to the Net Gearing Percentage evidenced by those
      accounts.

--------------------------------------------------------------------------------
<PAGE>

                                       36

--------------------------------------------------------------------------------


17.3  Financial information

      Each Obligor shall supply to the Agent in sufficient copies for all the
      Banks:

      (a)   as soon as the same are available (and in any event within 180 days
            of the end of each of its financial years) its audited financial
            statements and the audited consolidated accounts of the Relevant
            Group for that financial year;

      (b)   as soon as the same are available (and in any event within 90 days
            of the end of the first half-year of each of its financial years)
            the unaudited consolidated accounts of the Relevant Group for that
            half-year;

      (c)   (in respect of the Company only), together with the accounts
            specified in:

            (i)   paragraph (a) above, a certificate signed by one of its senior
                  officers on its behalf setting out in reasonable detail
                  computations establishing compliance with Clause 17.13
                  (Financial covenants) as at the date to which those accounts
                  were drawn up;

            (ii)  paragraph (b) above, a certificate signed by one of its senior
                  officers on its behalf setting out in reasonable detail
                  computations establishing compliance with Clause 17.13 (a)
                  (Financial covenants) as at the date to which those accounts
                  were drawn up; and

      (d)   as soon as the same are available (and in any event within 90 days
            from the end of the period for which they are produced) the
            quarterly unaudited consolidated accounts of the Relevant Group.

17.4  Information - Miscellaneous

      Each Obligor shall supply to the Agent:

      (a)   all documents despatched by it to its shareholders (or any class of
            them) or its creditors (or any class of them) at the same time as
            they are despatched;

      (b)   promptly upon becoming aware of them, details of any litigation,
            arbitration or administrative proceedings which are current,
            threatened or pending, and which might, if adversely determined,
            have a material adverse effect on its ability to perform its
            obligations under the Finance Documents; and

      (c)   promptly, such further information in the possession or control of
            any member of the Relevant Group regarding its financial condition
            as any Finance Party through the Agent may reasonably request,

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

17.5  Notification of Default

      Each Obligor shall notify the Agent of any Default (and the steps, if any,
      being taken to remedy it) promptly upon becoming aware of it.

--------------------------------------------------------------------------------
<PAGE>

                                       37

--------------------------------------------------------------------------------


17.6  Compliance certificates

      Each Obligor shall supply to the Agent promptly at any time, if the
      Majority Banks so request and they have or the Agent has grounds for
      believing that a Default may be outstanding, a statement signed by one of
      its senior officers on its behalf incorporating such information as it has
      in its possession which may be relevant as to whether any Default is
      outstanding and, if a Default is stated to be outstanding, stating the
      steps if any being taken to remedy it. Such statements shall contain such
      certificates as the Majority Banks may reasonably require as to questions
      of fact which are within the knowledge of the Obligor providing such
      statements.

17.7  Authorisations

      Each Obligor shall promptly:

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

      (b)   if requested, supply certified copies to the Agent of,

      any authorisation required under any law or regulation to enable it to
      perform its obligations under, or for the validity or enforceability of,
      any Finance Document.

17.8  Pari passu ranking

      Each Obligor shall procure that its obligations under the Finance
      Documents do and will rank at least pari passu with all its other present
      and future unsecured obligations, except for taxes, national insurance
      contributions, employee remuneration and benefits and any other
      obligations which from time to time are mandatorily preferred by law
      applying to companies generally.

17.9  Negative pledge

      (a)   Subject to paragraph (b) below, the Company shall not, and shall
            procure that no other member of the Group will, create or permit to
            subsist, any Security Interest on any of its assets.

      (b)   Notwithstanding paragraph (a) above, the Company may create, or
            permit to subsist, Permitted Security Interests on its assets.

      (c)   Holdco will not create or permit to subsist any Security Interest on
            any of its assets.

17.10 Disposals

      (a)   Each Obligor shall not and shall procure that no other member of, in
            the case of the Company, the Group and, in the case of Holdco, the
            Ring Fenced Group will, either in a single transaction or in a
            series of transactions, whether related or not and whether
            voluntarily or in voluntarily, sell, transfer, grant or lease or
            otherwise dispose of all or any material part of its assets.

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

            (i)   disposals made in the ordinary course of business of the
                  disposing entity;

--------------------------------------------------------------------------------
<PAGE>

                                       38

--------------------------------------------------------------------------------


            (ii)  disposals of assets in exchange for other assets comparable or
                  superior as to type, value and quality;

            (iii) the disposal of assets on arm's length terms;

            (iv)  sale and lease-back transactions the net financial effect of
                  each of which (looking at the sale and any related lease-back
                  together) represent a transaction on arm's length terms;

            (v)   the disposal of assets to other members of, in the case of the
                  Company, the Group and, in the case of Holdco, the Ring Fenced
                  Group; and

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

17.11 Environmental matters

      Each Obligor will comply and will procure that each member of the Relevant
      Group complies in all material respects with:

      (a)   the terms and conditions of all Environmental Licences applicable to
            it; and

      (b)   all other applicable Environmental Law,

      where failure to comply with the relevant Environmental Licence or
      Environmental Law might reasonably be expected to have a material adverse
      effect on its ability to comply with its obligations under the Finance
      Documents.

17.12 The Existing Facilities

      The Company will procure that the Existing Facilities are cancelled in
      full within 30 days of the date of this Agreement.

17.13 Financial covenants

      (a)   The Company shall procure that as at the last day of each period of
            twelve months ending on the last day of each financial year and each
            financial half-year of the Company, the ratio of Total Consolidated
            Net Borrowings to Consolidated EBITDA does not at any time exceed
            4.0:1.

      (b)   The Company shall procure that the ratio of Operating Profit for a
            financial year of the Group to Net Interest Payable for the same
            financial year is not, with respect to any financial year
            (commencing with the financial year ended 31st March, 1998), less
            than 2.75 to 1.

17.14 Restriction on Borrowings of Subsidiaries

      The Company shall procure, at any time when the Net Gearing Percentage is
      equal to or greater than 75 per cent., that none of its Subsidiaries will
      have outstanding any Borrowings, except for:

      (a)   those incurred on the terms of the Finance Documents;

      (b)   Borrowings incurred with the prior consent of the Majority Banks;

--------------------------------------------------------------------------------
<PAGE>

                                       39

--------------------------------------------------------------------------------


      (c)   Borrowings owed by a member of the Group to another member of the
            Group;

      (d)   Borrowings of a Subsidiary of the Company which becomes a member of
            the Group after the date of this Agreement, which is not created in
            contemplation of or in connection with that company becoming a
            member of the Group, so long as the same is discharged on or before
            the date falling 6 months after it becomes a member of the Group or
            (if later) the first date upon which it can be so discharged without
            any premium or penalty (other than reimbursement to the relevant
            lender of any costs for breaking any fixture period relating to that
            lender's funding arrangements);

      (e)   Project Finance Borrowings not exceeding (pound)400,000,000 in
            aggregate at any one time outstanding;

      (f)   Borrowings from the European Investment Bank for an initial term
            exceeding 9 years and not exceeding (pound)100,000,000 in aggregate
            at any one time outstanding;

      (g)   Borrowings comprised in tax based finance leases (being finance
            leases as defined in the statement of Standard Accounting Principles
            and Practices No. 21 or any successor statement or financial
            reporting standard) in aggregate not exceeding at any one time
            (pound)5O,000,000;

      (h)   Borrowings incurred by a Subsidiary of the Company which has entered
            into a guarantee in favour of the Finance Parties, in form and
            substance satisfactory to the Agent, of all of the Company's
            obligations under the Finance Documents;

      (i)   Borrowings of Subsidiaries of the Company which are non-trading
            financing vehicles:

            (i)   where the proceeds of the Borrowings are on lent to the
                  Company; or

            (ii)  which are Hedging Liabilities,

            and where the only assets of those Subsidiaries are those loans to
            the Company and receivables under instruments evidencing or creating
            those Hedging Liabilities;

      (j)   Subject to paragraph (k) below, any other Borrowings of any
            Subsidiary of the Company so long as:

            (i)   the aggregate amount of those Borrowings incurred by any one
                  Subsidiary does not exceed (pound)50,000,000 or its equivalent
                  in other currencies; and

            (ii)  the amount of those Borrowings, when aggregated with the
                  Borrowings of all other Subsidiaries of the Company permitted
                  under this paragraph (j) does not exceed, at any time,
                  (pound)100,000,000 (or its equivalent in other currencies) at
                  that time; and

      (k)   Borrowings made by way of a tradeable instrument in a maximum amount
            of (pound)100,000,000 and for a maximum period of 10 years
            commencing on 29th January, 1998 issued by the Appointee to assist
            it in fulfilling its obligations to the Director General of Water
            Services.

--------------------------------------------------------------------------------
<PAGE>

                                       40

--------------------------------------------------------------------------------


      In this Clause 17.14:

      (A)   Borrowings of a Subsidiary arising in respect of guarantees issued
            by it, at any time, shall be taken into account in an amount equal
            to the actual (and not the nominal) amount guaranteed by that
            guarantee at that time; and

      (B)   Borrowings of Subsidiaries party to an intra-Group bank netting
            arrangement in relation to the usual operation of current accounts,
            at any time, shall be taken into account only in an amount equal to
            the net debit balance outstanding in respect of all accounts subject
            to that netting arrangement, at that time.

17.15 Distributions

      (a)   Subject to paragraph (b) and Clause 17.16(a) (Lending and
            guarantees) below, the Company shall not make any loans, provide any
            form of credit, or pay or make any dividends or distributions in
            respect of any class of equity or preference shares in cash or in
            kind (a "Distribution") to any member of the Ring Fenced Group.

      (b)   Notwithstanding paragraph (a) above and subject to Clause 17.16(b)
            to (e) (inclusive) (Lending and guarantees) below, the Company may
            make the following Distributions to Holdco:

            (i)   prior to completion of the acquisition by Holdco of the shares
                  in PacifiCorp (pursuant to the merger announced on 7th
                  December, 1998), Distributions in an amount not exceeding the
                  aggregate of:

                  (A)   (pound)500,000,000 made on terms that the proceeds of
                        any such Distribution may only be used by Holdco for the
                        sole purpose of financing a share buy-back of its shares
                        in an equivalent amount; and

                  (B)   payment of any initial establishment expenses incurred
                        by it in connection with its acquisition of the shares
                        in PacifiCorp; and

            (ii)  in any six month period Distributions in an aggregate amount
                  not exceeding an amount equal to the consolidated
                  post-taxation profits of the Company for that six month period
                  and, after the Scheme Date, Distributions in an aggregate
                  amount not exceeding an amount equal to the lower of:

                  (A)   100 per cent. of dividends on ordinary share capital
                        made in respect of that six month period by Holdco to
                        its shareholders; and

                  (B)   the consolidated post-taxation profits of the Company
                        for that six month period.

17.16 Lending and guarantees

      The Company shall not, and shall procure that no member of the Group will:

      (a)   subject to Clause 17.15(b) (Distributions), make any loans or
            provide any form of credit to members of the Ring Fenced Group;

--------------------------------------------------------------------------------
<PAGE>

                                       41

--------------------------------------------------------------------------------


      (b)   give any guarantee or indemnity to or for the benefit of members of
            the Ring Fenced Group or for the benefit of any person in respect of
            any obligation or enter into any document under which any member of
            the Group assumes the liability of members of the Ring Fenced Group;

      (c)   either in a single transaction or in a series of transactions
            whether related or not and whether voluntarily or involuntarily,
            sell, transfer, grant or lease or otherwise dispose of all or any
            part of its assets to a member of the Ring Fenced Group;

      (d)   create or permit to subsist any Security Interest on any of its
            assets in respect of any indebtedness owed by members of the Ring
            Fenced Group; or

      (e)   enter into any agreement with members of the Ring Fenced Group
            unless it is on arm's length terms in the ordinary course of
            business.

18.   DEFAULT

18.1  Events of Default

      Each of the events set out in Clauses 18.2 (Non-payment) to 18.18
      (Enforceability) (inclusive) is an Event of Default (whether or not caused
      by any reason whatsoever outside the control of any Obligor or any other
      person).

18.2  Non-payment

      Any Obligor does not pay, within three Business Days of notification by
      the Agent that such amount is unpaid after having become due, any amount
      payable by it under the Finance Documents at the place at and in the
      currency in which it is expressed to be payable.

18.3  Breach of other obligations

      Any Obligor does not comply with any provision of the Finance Documents
      (other than those referred to in Clause 18.2 (Non-payment)) and such
      failure (if capable of remedy before the expiry of such period) continues
      unremedied for a period of 30 days from the date on which the Agent gives
      notice to that Obligor requiring the same to be remedied.

18.4  Misrepresentation

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

18.5  Cross-default

      (a)   Any Borrowings (other than Hedging Liabilities) of a member of the
            Group are not paid when due or within any applicable grace period
            provided in the original documentation therefor; or

--------------------------------------------------------------------------------
<PAGE>

                                       42

--------------------------------------------------------------------------------


      (b)   any Hedging Liabilities are not paid within a period of five
            Business Days of the due date or any applicable grace period
            provided in the original documentation therefor, whichever is the
            shorter; or

      (c)   any Borrowings of a member of the Group become prematurely due and
            payable or are placed on demand in each case as a result of an event
            of default or termination event (howsoever described) under the
            document relating to those Borrowings; or

      (d)   any Security Interest securing Borrowings over any asset of a member
            of the Group becomes enforceable and the holder thereof shall
            commence proceedings or appoint a receiver, manager or similar
            officer to take steps to enforce the same,

            except that this Clause 18.5 shall not apply to:

            (i)   Project Finance Borrowings; or

            (ii)  Borrowings:

                  (A)   liability for payment of which is being contested in
                        good faith by appropriate proceedings provided that if
                        the Company's auditors determine that the amount in
                        dispute should be provided for in the relevant accounts,
                        that the auditors verify that such amount is fully
                        provided against; or

                  (B)   the aggregate principal amount of which (taking into
                        account, in the case of Hedging Liabilities, the net
                        payment due to the relevant counterparties as the
                        principal amount for this purpose) is (pound)10,000,000
                        or less or its equivalent in other currencies.

18.6  Insolvency

      (a)   Any Obligor or a Principal Subsidiary is, or is deemed for the
            purposes of any law to be, unable to pay its debts (within the
            meaning of Section 123(1) or, in the case of an Obligor only, 123(2)
            of the Insolvency Act 1986 but, for the purposes of this Clause
            18.6, Section 123(1)(a) of the Insolvency Act 1986 shall have effect
            as if for "(pound)750" there was substituted "(pound)250,000" or
            such higher figure as the Majority Banks may from time to time
            agree);

      (b)   any Obligor or a Principal Subsidiary suspends making payments on
            all or any class of its debts or announces an intention to do so, or
            a moratorium is declared in respect of any of its indebtedness; or

      (c)   an Obligor or a Principal Subsidiary by reason of financial
            difficulties, begins negotiations with one or more of its creditors
            with a view to the readjustment or rescheduling of any of its
            indebtedness.

18.7  Administration

      (a)   Any meeting of any Obligor or any Principal Subsidiary is convened
            for the purpose of considering any resolution to present an
            application for an administration order; or

      (b)   any Obligor or any Principal Subsidiary passes a resolution to
            present an application for an administration order; or

--------------------------------------------------------------------------------
<PAGE>

                                       43

--------------------------------------------------------------------------------


      (c)   an application for an administration order in relation to any
            Obligor or any Principal Subsidiary is presented to the court and
            either (i) that Obligor or such Principal Subsidiary does not apply
            to the court within 30 days after the presentation of such petition
            requesting the court to refuse such petition or (ii) it does so
            apply but such petition is not refused by such court within 60 days
            after such application for the refusal of such petition; or

      (d)   any Obligor or any Principal Subsidiary has an administration order
            made in relation to it or a special administration order is made
            under the Water Act in relation to the Appointee.

18.8  Compositions etc

      (a)   Subject to paragraph (b) below, an Obligor or any Principal
            Subsidiary has any voluntary arrangement proposed in relation to it
            under Section 1 of the Insolvency Act 1986 or enters into any other
            composition, scheme of arrangement, compromise or arrangement
            involving that Obligor or such Principal Subsidiary and their
            respective creditors generally (other than for the purposes of
            reconstruction or amalgamation upon terms and within such period as
            may previously have been approved in writing by the Majority Banks).

      (b)   Paragraph (a) above will not apply to the Scheme provided that on or
            before the Scheme Date the Agent receives the following documents:

            (i)   a copy of the circular sent to shareholders of the Company;
                  and

            (ii)  a copy of the interlocutor of the Court sanctioning the Scheme
                  under section 425 of the Companies Act 1985 (the "Act") and
                  confirming that in accordance with section 137 of the Act, the
                  reduction of the capital proposed under the Scheme has been
                  delivered to the Registrar of Companies for registration and
                  that this order and relevant minutes have been registered by
                  him.

18.9  Winding up

      (a)   Any meeting of the shareholders of any Obligor or any Principal
            Subsidiary is convened for the purpose of considering any resolution
            for (or to petition for) its winding up (other than in connection
            with a reconstruction or amalgamation upon terms and within such
            period as may previously have been approved in writing by the
            Majority Banks); or

      (b)   Any Obligor or any Principal Subsidiary passes any resolution for
            its winding up other than a resolution previously approved in
            writing by the Majority Banks (other than in connection with a
            reconstruction or amalgamation upon terms and within such period as
            may previously have been approved in writing by the Majority Banks);
            or

      (c)   A petition for the winding up of any Obligor or any Principal
            Subsidiary is presented to the court and either (i) that Obligor or
            such Principal Subsidiary does not apply to the court within 30 days
            after the presentation of such petition requesting the court to
            refuse such petition, or (ii) it does so apply but such petition is
            not refused by such court within 60 days after such application for
            the refusal of such petition; or

      (d)   Any Obligor or any Principal Subsidiary becomes subject to a winding
            up order.

--------------------------------------------------------------------------------
<PAGE>

                                       44

--------------------------------------------------------------------------------


18.10 Appointment of receivers and managers

(a)   Any liquidator, trustee in bankruptcy, judicial custodian, compulsory
      manager, receiver, administrative receiver, administrator or the like is
      appointed in respect of any Obligor or any Principal Subsidiary or any
      material part of its assets or undertaking and (in the case of a receiver
      only) such appointment continues for more than 30 days; or

(b)   the directors of any Obligor or any Principal Subsidiary request the
      appointment of a liquidator, trustee in bankruptcy, judicial custodian,
      compulsory manager, receiver, administrative receiver, administrator or
      the like.

18.11 Creditors' process

      Any attachment, sequestration, distress, execution or diligence (whether
      on the dependence or otherwise) affects any material asset of any Obligor
      or any Principal Subsidiary and is not discharged within 21 days.

18.12 Analogous proceedings

      There occurs, in relation to any Obligor or any Principal Subsidiary, any
      event anywhere which corresponds to any of those mentioned in Clauses 18.6
      (Insolvency) to 18.11 (Creditors' process) (inclusive).

18.13 Unlawfulness

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

18.14 Revocation and Modification of Licences or Appointment etc

(a)   Any Licence or the Appointment is:

      (i)   revoked, surrendered, terminated or disposed of (or any notice of
            revocation or termination is issued by the relevant Secretary of
            State); or

      (ii)  modified; or

      (iii) in the case of the Appointment, varied under Section 7 of the Water
            Act,

      in any manner or circumstances which would have a material adverse effect
      on the ability of any Obligor to perform its obligations under this
      Agreement; or

(b)   any final enforcement order is made or any provisional enforcement order
      is confirmed with respect to the Appointee under the Water Act (other than
      where the Appointee demonstrates to the satisfaction of the Majority Banks
      that the order is being contested in good faith by the Appointee pursuant
      to the Water Act) and failure to comply with such order is likely to have
      a material adverse effect on the Company's ability to perform its
      obligations under this Agreement.

18.15 Cessation of business

      Any Obligor ceases to carry on all or a substantial part of its business.

--------------------------------------------------------------------------------
<PAGE>

                                       45

--------------------------------------------------------------------------------


18.16 Change of control of SWP, Appointee or the Company

(a)   SWP is not or ceases to be a Subsidiary of the Company; or

(b)   the Appointee is not or at any time ceases to be a wholly owned Subsidiary
      of SWP; or

(c)   at any time after the Scheme Date, the Company ceases to be a wholly owned
      Subsidiary of Holdco.

18.17 Guarantee

      On the date (falling on or after the Scheme Date) upon which Holdco gives
      any guarantee, Security Interest, indemnity or enters into any other
      similar arrangement in respect of any of the obligations of any of its
      Subsidiaries in the Ring Fenced Group, Holdco does not enter into a
      Guarantor Accession Agreement in accordance with Clause 26.4 (Accession)
      or the documents set out in Part 2 of Schedule 2 are either not provided
      or are not in form or substance satisfactory to the Agent (acting
      reasonably) on that date.

18.18 Enforceability

      On or after the date Holdco enters into a Guarantor Accession Agreement,
      the guarantee in Clause 15 (Guarantee) is not, or is alleged by Holdco not
      to be, binding on or enforceable against Holdco.

18.19 Acceleration

      On and at any time after the occurrence of an Event of Default while such
      event is continuing the Agent may, and shall if so directed by the
      Majority Banks, by notice to the Company:

      (a)   cancel the Total Commitments; and/or

      (b)   demand that all of the Loans, together with accrued interest, and
            all other amounts accrued under this Agreement be immediately due
            and payable, whereupon they shall become immediately due and
            payable; and/or

      (c)   demand that all or part of the Loans be payable on demand, whereupon
            they shall immediately become payable on demand.

19.   THE AGENT AND THE ARRANGER

19.1  Appointment and duties of the Agent

      Each Finance Party (other than the Agent) irrevocably appoints the Agent
      to act as its agent under and in connection with the Finance Documents,
      and irrevocably authorises the Agent on its behalf to perform the duties
      and to exercise the rights, powers and discretions that are specifically
      delegated to it under or in connection with the Finance Documents,
      together with any other incidental rights, powers and discretions. The
      Agent shall have only those duties which are expressly specified in this
      Agreement. Those duties are solely of a mechanical and administrative
      nature.

--------------------------------------------------------------------------------
<PAGE>

                                       46

--------------------------------------------------------------------------------


19.2  Role of the Arranger

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

19.3  Relationship

      The relationship between the Agent and the other Finance Parties is that
      of agent and principal only. Nothing in this Agreement constitutes the
      Agent as trustee or fiduciary for any other Party or any other person and
      the Agent need not hold in trust any moneys paid to it for a Party or be
      liable to account for interest on those moneys.

19.4  Majority Banks' directions

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

19.5  Delegation

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

19.6  Responsibility for documentation

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

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

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

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

19.7  Default

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

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

--------------------------------------------------------------------------------
<PAGE>

                                       47

--------------------------------------------------------------------------------


19.8  Exoneration

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

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

19.9  Reliance

      The Agent may:

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

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

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

19.10 Credit approval and appraisal

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

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

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

19.11 Information

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

(b)   The Agent shall promptly supply a Bank with a copy of each document
      received by the Agent under Clause 4 (Conditions precedent) upon the
      request and at the expense of that Bank.

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

--------------------------------------------------------------------------------
<PAGE>

                                       48

--------------------------------------------------------------------------------


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

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

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

19.12 The Agent and the Arranger individually

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

(b)   Each of the Agent and the Arranger may:

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

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

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

19.13 Indemnities

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

(b)   A Bank's proportion of the liability or loss set out in paragraph (a)
      above is the proportion which the Original Sterling Amount of its
      participation in the Loans (if any) bear to the Original Sterling Amount
      of all the Loans on the date of the demand. If, however, there are no
      Loans outstanding on the date of demand, then the proportion will be the
      proportion which its Commitment bears to the Total Commitments at the date
      of demand or, if the Total Commitments have been cancelled, bore to the
      Total Commitments immediately before being cancelled.

19.14 Compliance

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

(b)   Without limiting paragraph (a) above, the Agent need not disclose any
      information relating to any Obligor or any of its related entities if the
      disclosure might, in the opinion of the Agent,

--------------------------------------------------------------------------------
<PAGE>

                                       49

--------------------------------------------------------------------------------


      constitute a breach of any law or regulation or any duty of secrecy or
      confidentiality or be otherwise actionable at the suit of any person.

19.15 Resignation of Agent

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

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

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

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

(e)   Upon its resignation becoming effective, this Clause 19 shall continue to
      benefit the retiring Agent in respect of any action taken or not taken by
      it under or in connection with the Finance Documents while it was the
      Agent, and, subject to paragraph (d) above, it shall have no further
      obligation under any Finance Document.

19.16 Banks

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

19.17 Extraordinary management time and resources

      In addition to the fees (if any) paid or payable to the Agent pursuant to
      Clause 20 (Fees), an Obligor shall, on demand by the Agent, reimburse it
      for its own account at such reasonable daily or hourly rates as the Agent
      may separately agree with that Obligor from time to time, the reasonable
      cost of utilising its management time or other resources in connection
      with taking all such steps or other action which:

      (a)   that Obligor requests, in connection with:

            (i)   the granting or proposed granting of any waiver or consent
                  under any Finance Document; or

            (ii)  any amendment or proposed amendment to any Finance Document;
                  or

      (b)   which any Obligor or the Majority Banks request(s) in connection
            with:

--------------------------------------------------------------------------------
<PAGE>

                                       50

--------------------------------------------------------------------------------


            (i)   any breach by any Obligor of its obligations under any Finance
                  Document or any investigations in respect of any such breach;
                  or

            (ii)  the preservation and enforcement of any of the rights of the
                  Finance Parties under the Finance Documents; or

            (iii) the occurrence of a Default.

20.   FEES

20.1  Front-end fees

      The Company shall pay to the Agent for the Arranger front-end fees in the
      amounts agreed in the Fee Letter on the date of this Agreement which the
      Agent shall distribute to the Banks in the manner agreed between the Agent
      and the Banks.

20.2  Commitment fee

(a)   The Company shall pay to the Agent for each Bank a commitment fee computed
      at the rate of 0.175 per cent. per annum on the undrawn, uncancelled
      amount of that Bank's Commitment during the period from the date of this
      Agreement up to and including the Term Date. For this purpose Loans are
      taken at their Original Sterling Amount.

(b)   Accrued commitment fee is payable quarterly in arrear. Accrued commitment
      fee is also payable to the Agent for the relevant Bank(s) on the cancelled
      amount of its Commitment at the time the cancellation takes effect.

20.3  Utilisation fee

(a)   If, on any day, the Outstandings exceed (pound)200,000,000, a utilisation
      fee shall be payable by the Company to the Agent, for the account of the
      Banks, on the amount of the Outstandings on that day.

(b)   Subject to paragraph (a) above, the utilisation fee, which shall accrue
      from day to day during the period beginning on the date of this Agreement
      and ending on the Final Repayment Date, shall be calculated at the rate of
      0.05 per cent. per annum on the Outstandings on that day.

(c)   The utilisation fee is payable quarterly in arrear.

20.4  Agent's fee

      The Company shall pay to the Agent for its own account an agency fee in
      the amount and at the times agreed in the Fee Letter.

20.5  VAT

      Any fee referred to in this Clause 20 (Fees) is exclusive of any value
      added tax or any other tax which might be chargeable in connection with
      that fee. If any value added tax or other tax is so chargeable, it shall
      be paid by the Company at the same time as it pays the relevant fee.

--------------------------------------------------------------------------------
<PAGE>

                                       51

--------------------------------------------------------------------------------


21.   EXPENSES

21.1  Initial and special costs

      The Company shall forthwith on demand pay the Agent and the Arranger the
      amount of all reasonable costs and expenses (including legal fees)
      incurred by each of them in connection with:

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

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

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

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

      (c)   any other matter, not of an ordinary administrative nature, arising
            out of or in connection with a Finance Document.

21.2  Enforcement costs

      The Company shall forthwith on demand pay to each Finance Party the amount
      of all reasonable costs and expenses (including legal fees) incurred by
      it:

      (a)   in connection with the enforcement of, or the preservation of any
            rights under, any Finance Document; or

      (b)   in investigating any possible Default.

22.   STAMP DUTIES

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

23.   INDEMNITIES

23.1  Currency indemnity

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

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

--------------------------------------------------------------------------------
<PAGE>

                                       52

--------------------------------------------------------------------------------


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

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

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

23.2  Other indemnities

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

      (a)   the occurrence of any Default;

      (b)   the operation of Clause 2.5 (Change of currency), 18.19
            (Acceleration) or Clause 29 (Pro rata sharing);

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

      (d)   (other than by reason of negligence or default by a Finance Party) a
            Loan not being made after the Company has delivered a Request for
            that Loan.

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

24.   EVIDENCE AND CALCULATIONS

24.1  Accounts

      Accounts maintained by a Finance Party in connection with this Agreement
      are prima facie evidence of the matters to which they relate.

24.2  Certificates and determinations

      Any certification or determination by a Finance Party of a rate or amount
      under this Agreement is, in the absence of manifest error, conclusive
      evidence of the matters to which it relates.

24.3  Calculations

      Interest (including any applicable Mandatory Cost) and the fee payable
      under Clause 20.2 (Commitment fee) accrue from day to day and are
      calculated on the basis of the actual number of days elapsed and a year of
      365 days or, in the case of interest payable on an

--------------------------------------------------------------------------------
<PAGE>

                                       53

--------------------------------------------------------------------------------


      amount denominated in an Optional Currency only or where the market
      practice otherwise dictates, 360 days.

25.   AMENDMENTS AND WAIVERS

25.1  Procedure

(a)   Subject to Clause 25.2 (Exceptions), any term of the Finance Documents may
      be amended or waived with the agreement of the Company (on behalf of each
      Obligor), the Majority Banks and the Agent. The Agent may effect, on
      behalf of the Banks, an amendment to which they or the Majority Banks have
      agreed.

(b)   The Agent shall promptly notify the other Parties of any amendment or
      waiver effected under paragraph (a) above, and any such amendment or
      waiver shall be binding on all the Parties.

25.2  Exceptions

      An amendment or waiver which relates to:

      (a)   the definition of "Majority Banks" in Clause 1.1;

      (b)   an extension of the date for, or a decrease in an amount or a change
            in the currency of, any payment under the Finance Documents;

      (c)   an increase in a Bank's Commitment;

      (d)   the incorporation of additional borrowers;

      (e)   a term of a Finance Document which expressly requires the consent of
            each Bank; or

      (f)   Clause 29 (Pro rata sharing) or this Clause 25,

            may not be effected without the consent of each Bank.

25.3  Waivers and remedies cumulative

      The rights of each Finance Party under the Finance Documents:

      (a)   may be exercised as often as necessary;

      (b)   are cumulative and not exclusive of its rights under the general
            law; and

      (c)   may be waived only in writing and specifically.

      Delay in exercising or non-exercise of any such right is not a waiver of
      that right.

26.   CHANGES TO THE PARTIES

26.1  Transfers by Obligors

      No Obligor may assign, transfer, novate or dispose of any of, or any
      interest in, its rights and/or obligations under this Agreement.

--------------------------------------------------------------------------------
<PAGE>

                                       54

--------------------------------------------------------------------------------


26.2  Transfers by Banks

(a)   A Bank (the "Existing Bank") may at any time assign, transfer or novate
      any of its rights and/or obligations under this Agreement (in a minimum
      amount equal to (pound)10,000,000 or, if less with respect to a particular
      Bank, the balance of that Bank's Commitment at the time of transfer) to
      another bank or financial institution which is a Qualifying Bank (the "New
      Bank"). The prior consent of the Company is required for any such
      assignment, transfer or novation, unless:

      (i)   the New Bank is another Bank or an Affiliate of a Bank; or

      (ii)  a Default is outstanding.

      However, the prior consent of the Company must not be unreasonably
      withheld or delayed and will be deemed to have been given if, within 14
      days of receipt by the Company of an application for consent, it has not
      been expressly refused.

(b)   A transfer of obligations will be effective only if either:

      (i)   the obligations are novated in accordance with Clause 26.3
            (Procedure for novations); or

      (ii)  the New Bank confirms to the Agent and the Company that it is a
            Qualifying Bank and that it undertakes to be bound by the terms of
            this Agreement as a Bank in form and substance satisfactory to the
            Agent. On the transfer becoming effective in this manner the
            Existing Bank shall be relieved of its obligations under this
            Agreement to the extent that they are transferred to the New Bank.

(c)   Nothing in this Agreement restricts the ability of a Bank to sub-contract
      an obligation if that Bank remains liable under this Agreement for that
      obligation except that no Bank may subcontract any such obligation if the
      effect of such contract would be that a person other than a Qualifying
      Bank has any beneficial entitlement to any interest received by it under
      this Agreement.

(d)   On each occasion that an Existing Bank assigns, transfers or novates any
      of its rights and/or obligations under this Agreement, the New Bank shall,
      on the date the assignment, transfer and/or novation takes effect, pay to
      the Agent for its own account a fee of (pound)750.

(e)   An Existing Bank is not responsible to a New Bank for:

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

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

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

(f)   Each New Bank confirms to the Existing Bank and the other Finance Parties
      that it:

--------------------------------------------------------------------------------
<PAGE>

                                       55

--------------------------------------------------------------------------------


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

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

(g)   Nothing in any Finance Document obliges an Existing Bank to:

      (i)   accept a re-transfer from a New Bank of any of the rights and/or
            obligations assigned, transferred or novated under this Clause; or

      (ii)  support any losses incurred by the New Bank by reason of the
            non-performance by the Company of its obligations under this
            Agreement or otherwise.

(h)   Any reference in this Agreement to a Bank includes a New Bank, but
      excludes a Bank if no amount is or may be owed to or by that Bank under
      this Agreement and its Commitment has been cancelled or reduced to nil.

26.3  Procedure for novations

(a)   A novation is effected if the Existing Bank and the New Bank deliver to
      the Agent a Novation Certificate in the form of Schedule 5 and the Agent
      executes it.

(b)   Each Party (other than the Existing Bank and the New Bank) irrevocably
      authorises the Agent to execute any duly completed Novation Certificate in
      the form of Schedule 5 on its behalf.

(c)   To the extent that they are expressed to be the subject of the novation in
      the Novation Certificate:

      (i)   the Existing Bank and the other Parties (the "existing Parties")
            will be released from their obligations to each other (the
            "discharged obligations");

      (ii)  the New Bank and the existing Parties will assume obligations
            towards each other which differ from the discharged obligations only
            insofar as they are owed to or assumed by the New Bank instead of
            the Existing Bank;

      (iii) the rights of the Existing Bank against the existing Parties and
            vice versa (the "discharged rights") will be cancelled; and

      (iv)  the New Bank and the existing Parties will acquire rights against
            each other which differ from the discharged rights only insofar as
            they are exercisable by or against the New Bank instead of the
            Existing Bank,

      all on the date of execution of the Novation Certificate by the Agent or,
      if later, the date specified in the Novation Certificate.

--------------------------------------------------------------------------------
<PAGE>

                                       56

--------------------------------------------------------------------------------


26.4  Accession

(a)   Prior to the date that Holdco guarantees any obligations of any of its
      Subsidiaries in the Ring Fenced Group, the Company shall procure that
      Holdco delivers to the Agent a Guarantor Accession Agreement, duly
      executed by it.

(b)   Upon execution and delivery of a Guarantor Accession Agreement and all
      those other documents listed in Part 2 of Schedule 2, in each case in form
      and substance satisfactory to the Agent (acting reasonably), Holdco agrees
      to be bound by the terms of the Finance Documents.

26.5  Reference Banks

      If a Reference Bank (or, if a Reference Bank is not a Bank, the Bank of
      which it is an Affiliate) ceases to be one of the Banks, the Agent shall
      (in consultation with the Company) appoint another Bank or an Affiliate of
      a Bank to replace that Reference Bank.

26.6  Register

      The Agent shall keep a register of all the Parties and shall supply any
      other Party (at that Party's expense) with a copy of the register on
      request.

26.7  Change of Facility Office

      No Bank will change its Facility Office if, at the time of the change,
      circumstances exist which would oblige the Company to pay that Bank any
      amount under Clause 11.1 (Taxes) or Clause 13 (Increased costs) which it
      would not have been obliged to pay if that Bank had retained the same
      Facility Office.

27.   DISCLOSURE OF INFORMATION

(a)   A Bank may disclose to one of its Affiliates or any person with whom it is
      proposing to enter, or has entered into, any kind of transfer,
      participation or other agreement in relation to this Agreement:

      (i)   a copy of any Finance Document; and

      (ii)  any information which that Bank has acquired under or in connection
            with any Finance Document.

      Provided that any such Affiliate or person has agreed in writing to
      maintain the confidentiality of any such document or information on the
      same terms (with appropriate consequential changes) as set out in
      paragraph (c) below.

(b)   The prior written consent of the Company is required for any disclosure
      under paragraph (a) above unless:

      (i)   that person is another Bank or an Affiliate of a Bank; or

      (ii)  a Default is outstanding.

--------------------------------------------------------------------------------
<PAGE>

                                       57

--------------------------------------------------------------------------------


      However, the prior consent of the Company must not be unreasonably
      withheld or delayed and will be deemed to have been given if, within 10
      Business Days of receipt by an Obligor of an application for consent, it
      has not been expressly refused.

(c)   Subject to paragraph (a) above, each Bank shall keep confidential and not,
      without the prior written consent of the Company, use any information
      (other than information which is publicly available unless as a result of
      a breach of this Clause 27) supplied by or on behalf of an Obligor under
      this Agreement otherwise than in connection with this Agreement. However,
      each Bank is entitled to disclose any information:

      (i)   in connection with any legal proceedings arising out of or in
            connection with this Agreement; or

      (ii)  if required to do so by an order of a court of competent
            jurisdiction whether in pursuance of any procedure for discovering
            documents or otherwise; or

      (iii) pursuant to any law or regulation in accordance with which that Bank
            is required to act; or

      (iv)  to any governmental, banking or taxation authority of competent
            jurisdiction; or

      (v)   to its auditors or legal or other professional advisers.

28.   SET-OFF

      A Finance Party may set off any matured obligation owed by an Obligor
      under this Agreement (to the extent beneficially owned by that Finance
      Party) against any obligation (whether or not matured) owed by that
      Finance Party to that Obligor, regardless of the place of payment, booking
      branch or currency of either obligation. If the obligations are in
      different currencies, the Finance Party may convert either obligation at a
      market rate of exchange in its usual course of business for the purpose of
      the set-off. If either obligation is unliquidated or unascertained, the
      Finance Party may set off in an amount estimated by it in good faith to be
      the amount of that obligation.

29.   PRO RATA SHARING

29.1  Redistribution

      If any amount owing by an Obligor under this Agreement to a Finance Party
      (the "recovering Finance Party") is discharged by payment, set-off or any
      other manner other than through the Agent in accordance with Clause 10
      (Payments) (a "recovery"), then:

      (a)   the recovering Finance Party shall, within three Business Days,
            notify details of the recovery to the Agent;

      (b)   the Agent shall determine whether the recovery is in excess of the
            amount which the recovering Finance Party would have received had
            the recovery been received by the Agent and distributed in
            accordance with Clause 10 (Payments);

--------------------------------------------------------------------------------
<PAGE>

                                       58

--------------------------------------------------------------------------------


      (c)   subject to Clause 29.3 (Exception), the recovering Finance Party
            shall, within three Business Days of demand by the Agent, pay to the
            Agent an amount (the "redistribution") equal to the excess;

      (d)   the Agent shall treat the redistribution as if it were a payment by
            that Obligor under Clause 10 (Payments) and shall pay the
            redistribution to the Finance Parties (other than the recovering
            Finance Party) in accordance with Clause 10.7 (Partial payments);
            and

      (e)   after payment of the full redistribution, the recovering Finance
            Party will be subrogated to the portion of the claims paid under
            paragraph (d) above, and that Obligor will owe the recovering
            Finance Party a debt which is equal to the redistribution,
            immediately payable and of the type originally discharged.

29.2  Reversal of redistribution

      If under Clause 29.1 (Redistribution):

      (a)   a recovering Finance Party must subsequently return a recovery, or
            an amount measured by reference to a recovery, to an Obligor; and

      (b)   the recovering Finance Party has paid a redistribution in relation
            to that recovery,

      each Finance Party shall, within three Business Days of demand by the
      recovering Finance Party through the Agent, reimburse the recovering
      Finance Party all or the appropriate portion of the redistribution paid to
      that Finance Party. Thereupon the subrogation in Clause 29.1(e)
      (Redistribution) will operate in reverse to the extent of the
      reimbursement.

29.3  Exception

      A recovering Finance Party need not pay a redistribution to the extent
      that it would not, after the payment, have a valid claim against the
      Obligor concerned in the amount of the redistribution pursuant to Clause
      29.1(e) (Redistribution).

30.   SEVERABILITY

      If a provision of any Finance Document is or becomes illegal, invalid or
      unenforceable in any jurisdiction, that shall not affect:

      (a)   the legality, validity or enforceability in that jurisdiction of any
            other provision of the Finance Documents; or

      (b)   the legality, validity or enforceability in other jurisdictions of
            that or any other provision of the Finance Documents.

31.   COUNTERPARTS

      This Agreement may be executed in any number of counterparts, and this has
      the same effect as if the signatures on the counterparts were on a single
      copy of this Agreement.

--------------------------------------------------------------------------------
<PAGE>

                                       59

--------------------------------------------------------------------------------


32.   NOTICES

32.1  Giving of notices

      All notices or other communications under or in connection with this
      Agreement shall be given in writing or by facsimile. Any such notice will
      be deemed to be given as follows:

      (a)   if in writing, when delivered; and

      (b)   if by facsimile, when received.

      However, a notice given in accordance with the above but received on a
      non-working day or after business hours in the place of receipt will only
      be deemed to be given on the next working day in that place.

32.2  Addresses for notices

(a)   The address and facsimile number of each Party (other than the Agent) for
      all notices under or in connection with this Agreement are:

      (i)   that notified by that Party for this purpose to the Agent on or
            before it becomes a Party; or

      (ii)  any other notified by that Party for this purpose to the Agent by
            not less than five Business Days' notice.

(b)   The address and facsimile number of the Agent is:

      The Royal Bank of Scotland plc
      Loans Administration
      Corporate Banking Office
      5-10  Great Tower Street
      London EC3P 3HX

      Facsimile number: 0171 220 7370

      or such other as the Agent may notify to the other Parties by not less
      than five Business Days' notice.

(c)   The Agent shall, promptly upon request from any Party, give to that Party
      the address, telex number or facsimile number of any other Party
      applicable at the time for the purposes of this Clause.

33.   GOVERNING LAW

      This Agreement is governed by English law.

34.   JURISDICTION

(a)   Each of the parties hereto irrevocably agrees, for the benefit of the
      Agent and the Banks, that the courts of England shall have jurisdiction to
      hear and determine any suit, action or

--------------------------------------------------------------------------------
<PAGE>

                                       60

--------------------------------------------------------------------------------


      proceeding, and to settle any disputes, which may arise out of or in
      connection with this Agreement and, for such purposes, irrevocably submits
      to the jurisdiction of such courts.

(b)   The Company irrevocably waives any objection which it might now or
      hereafter have to the courts referred to in paragraph (a) above being
      nominated as the forum to hear and determine any suit, action or
      proceeding, and to settle any disputes, which may arise out of or in
      connection with this Agreement and agrees not to claim that any such court
      is not a convenient or appropriate forum.

(c)   The submission to the jurisdiction of the courts referred to in paragraph
      (a) above shall not (and shall not be construed so as to) limit the right
      of the Agent or the Banks to take proceedings in any other court of
      competent jurisdiction nor shall the taking of proceedings in any one or
      more jurisdictions preclude the taking of proceedings in any other
      jurisdiction, whether concurrently or not.

This Agreement has been entered into on the date stated at the beginning of this
Agreement.

--------------------------------------------------------------------------------
<PAGE>

                                       61

--------------------------------------------------------------------------------


                                   SCHEDULE 1

                             BANKS AND COMMITMENTS

Banks                                                            Commitments
                                                                   (Pounds)

The Royal Bank of Scotland plc                                (Pounds)30,000,000
Bayerische Landesbank Girozentrale, London Branch             (Pounds)30,000,000
National Westminster Bank Plc                                 (Pounds)30,000,000
Citibank N.A.                                                 (Pounds)25,000,000
Barclays Bank PLC                                             (Pounds)25,000,000
National Australia Bank Limited                               (Pounds)25,000,000
Banca di Roma SpA                                             (Pounds)20,000,000
Banque Nationale de Paris London Branch                       (Pounds)20,000,000
CIBC Wood Gundy Ireland Ltd                                   (Pounds)20,000,000
Commerzbank Aktiengesellschaft, London Branch                 (Pounds)20,000,000
Deutsche Bank AG London                                       (Pounds)20,000,000
ING Bank N.V.                                                 (Pounds)20,000,000
Midland Bank plc                                              (Pounds)20,000,000
Morgan Guaranty Trust Company of New York                     (Pounds)20,000,000
Paribas                                                       (Pounds)20,000,000
The Bank of Nova Scotia                                       (Pounds)20,000,000
The Sanwa Bank, Limited                                       (Pounds)20,000,000
The Toronto-Dominion Bank                                     (Pounds)20,000,000
Westdeutsche Landesbank Girozentrale                          (Pounds)20,000,000
ABN AMRO Bank N.V.                                            (Pounds)15,000,000
Credit Lyonnais                                               (Pounds)15,000,000
KBC Bank N.V.                                                 (Pounds)15,000,000
Australia and New Zealand Banking Group Limited               (Pounds)10,000,000
Commonwealth Bank of Australia, London Branch                 (Pounds)10,000,000
Leonia Corporate Bank plc                                     (Pounds)10,000,000
Banca Monte dei Paschi di Siena SpA                           (Pounds)10,000,000
Norddeutsche Landesbank Girozentrale, London Branch           (Pounds)10,000,000
Bankgesellschaft Berlin AG, London Branch                     (Pounds)10,000,000
Bayerische Hypo- und Vereinsbank AG                           (Pounds)10,000,000
Chase Manhattan Bank                                          (Pounds)10,000,000
Den Danske Bank Aktieselskab                                  (Pounds)10,000,000
Landesbank Baden-Wurttemberg                                  (Pounds)10,000,000
The Bank of Tokyo-Mitsubishi, Limited                         (Pounds)10,000,000
The Dai-Ichi Kangyo Bank, Limited                             (Pounds)10,000,000
The Governor and Company of the Bank of Scotland              (Pounds)10,000,000

                                          Total Commitments
                                                              -----------------

                                                             (Pounds)600,000,000

                                                              -----------------

--------------------------------------------------------------------------------
<PAGE>

                                       62

--------------------------------------------------------------------------------


                                   SCHEDULE 2

                                     PART 1

             CONDITIONS PRECEDENT DOCUMENTS TO BE DELIVERED BEFORE
                                 THE FIRST LOAN

1.    A copy of the memorandum and articles of association, certificate of
      incorporation and certificate of incorporation on change of name (if any)
      of the Company.

2.    A copy of a resolution of the board of directors of the Company:

      (i)   approving the terms of, and the transactions contemplated by the
            Finance Documents resolving that it execute the Finance Documents to
            which it is a party and any related and/or ancillary documents;

      (ii)  authorising a specified person or persons to execute the Finance
            Documents to which it is a party on its behalf; and

      (iii) authorising a specified person or persons, on its behalf, to sign
            and/or despatch all other documents and notices to be signed and/or
            despatched by it under or in connection with the Finance Documents.

3.    A certificate of a director of the Company certifying that the utilisation
      of the Facility in full would not cause any internal borrowing limit
      binding on the Company to be exceeded.

4.    A certificate of an authorised signatory certifying:

      (a)   that each copy document specified in this Part 1 of Schedule 2 is
            correct, complete and in full force and effect as at a date no
            earlier than the date of this Agreement; and

      (b)   the specimen signatures of its authorised signatories.

5.    A legal opinion of Allen & Overy, legal advisers to the Agent, addressed
      to the Finance Parties substantially in the form of Schedule 6.

6.    A legal opinion of Maclay Murray & Spens, legal advisers to the Agent in
      Scotland, addressed to the Finance Parties substantially in the form of
      Schedule 7.

Miscellaneous

7.    A copy of each Licence held by a member of the Group.

8.    A copy of the Supplemental Agreement duly executed by the Company and the
      Agent.

9.    Evidence that Existing Facilities have been cancelled and any outstandings
      under those Existing Facilities have been or will be repaid in full.

10.   A copy of any other authorisation or other document, opinion or assurance
      which the Agent considers to be necessary or desirable in connection with
      the entry into and performance of,

--------------------------------------------------------------------------------
<PAGE>

                                       63

--------------------------------------------------------------------------------


      and the transactions contemplated by, any Finance Document or for the
      validity and enforceability of any Finance Document and which, in either
      case, is notified to the Company prior to the execution of this Agreement.

--------------------------------------------------------------------------------
<PAGE>

                                       64

--------------------------------------------------------------------------------


                                     PART 2

                         CONDITION PRECEDENT DOCUMENTS
                  TO BE DELIVERED BY HOLDCO IN ACCORDANCE WITH
                            CLAUSE 26.4 (ACCESSION)

Authorisations

1.    A copy of the memorandum and articles of association, certificate of
      incorporation and certificate of incorporation on change of name (if any)
      of Holdco.

2.    A copy of a resolution of the board of directors of Holdco:

      (a)   approving the terms of, and the transactions contemplated by the
            Guarantor Accession Agreement and resolving that it execute the
            Guarantor Accession Agreement;

      (b)   authorising a specified person or persons to execute the Guarantor
            Accession Agreement on its behalf; and

      (c)   authorising a specified person or persons, on its behalf, to sign
            and/or despatch all other documents and notices to be signed and/or
            despatched by it under or in connection with the Guarantor Accession
            Agreement.

3.    A certificate of a director of Holdco certifying that the execution of the
      Guarantor Accession Agreement will not result in any breach or any
      restriction binding on Holdco.

4.    A certificate of an authorised signatory of Holdco certifying:

      (a)   that each copy document specified in Part 2 of this Schedule 2 is
            correct, complete and in full force and effect as at a date no
            earlier than the date of the Guarantor Accession Agreement; and

      (b)   the identity and specimen signatures of the directors, authorised
            signatories and secretary of Holdco.

Legal opinion

5.    A legal opinion of Allen & Overy, legal advisers to the Agent, addressed
      to the Finance Parties.

6.    A legal opinion of Maclay Murray & Spens, legal advisers to the Agent in
      Scotland, addressed to the Finance Parties.

Miscellaneous

7.    Guarantor Accession Agreement duly executed by Holdco.

--------------------------------------------------------------------------------
<PAGE>

                                       65

--------------------------------------------------------------------------------


8.    A copy of any other authorisation or other document, opinion or assurance
      which the Agent considers to be necessary in connection with the entry
      into and performance of the transactions contemplated by, the Guarantee or
      for the validity and enforceability of the Guarantee.

--------------------------------------------------------------------------------
<PAGE>

                                       66

--------------------------------------------------------------------------------


                                   SCHEDULE 3

                       CALCULATION OF THE MANDATORY COST

(a)   The Mandatory Cost for each Loan for each period in respect of which
      interest is payable is the rate determined by the Agent to be equal to the
      rate notified by the Agent and calculated in accordance with the following
      formulae:

      in relation to a Loan denominated in Sterling:

      BY + S(Y-Z) + F x 0.01 % per annum = Mandatory Cost
      ----------------------
           100-(B + S)

      in relation to any other Loan:

      F x 0.01 % per annum = Mandatory Cost
      --------
           300

      where on the day of application of the formula:

      B     is the percentage of the Agent's eligible liabilities which the Bank
            of England requires the 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 Agent to
            leading banks in the London interbank market at or about 11.00 a.m.
            on that day for the Term or Interest Period;

      S     is the percentage of the Agent's eligible liabilities which the Bank
            of England requires the Agent to place as a special deposit;

      Z     is the interest rate per annum allowed by the Bank of England on
            special deposits; and

      F     is the charge payable by the Agent to the Financial Services
            Authority under paragraph 2.02 or 2.03 (as appropriate) of the Fees
            Regulations (but where for this purpose, the figure in paragraph
            2.02b and 2.03b will be deemed to be zero) expressed in pounds per
            (pound)1 million of the fee base of the Agent.

(b)   For the purposes of this Schedule 3:

      (i)   "eligible liabilities" and "special deposits" have the meanings
            given to them at the time of application of the formula by the Bank
            of England;

      (ii)  "fee base" has the meaning given to it in the Fees Regulations;

--------------------------------------------------------------------------------
<PAGE>

                                       67

--------------------------------------------------------------------------------


      (iii) "Fees Regulations" means:

            (A)   prior to 31st March, 1999, the Banking Supervision (Fees)
                  Regulations 1998; and

            (B)   on and after 31st March, 1999, any regulations governing the
                  payment of fees for banking supervision.

(c)   In the application of the formula, B, Y, S and Z are included in the
      formula as figures and not as percentages, e.g. if B = 0.5% and Y = 15%,
      BY is calculated as 0.5 x 15.

(d)   (i)   The formula is applied on the first day of each relevant period
            comprised in the relevant Term or Interest Period.

      (ii)  Each rate calculated in accordance with the formula is, if
            necessary, rounded upward to the nearest four decimal places.

(e)   If the Agent determines (after consultation with the Banks) that a change
      in circumstances has rendered, or will render, the formula inappropriate,
      the Agent shall notify the Company of the manner in which the Mandatory
      Cost will subsequently be calculated. The manner of calculation so
      notified by the Agent shall, in the absence of manifest error, be binding
      on all the parties to this Agreement.

--------------------------------------------------------------------------------
<PAGE>

                                       68

--------------------------------------------------------------------------------


                                   SCHEDULE 4

                                     PART 1

                                FORM OF REQUEST

To:   THE ROYAL BANK OF SCOTLAND PLC as Agent

From: SCOTTISH POWER PLC
                                                          Date: [              ]

        Scottish Power plc-(pound)600,000,000 Revolving Credit Agreement
                          dated [              ], 1999

1.    We wish to borrow a Loan as follows:

      (a)   Drawdown Date: [              ]

      (b)   Original Sterling Amount: (pound)[              ]

      (c)   Currency: [              ]

      (d)   Term/First Interest Period: [              ]

      (e)   Payment instructions: [              ]

2.    We confirm that each condition specified in Clause 4.2(a) (Further
      conditions precedent) (except as specified in paragraph (b) of that
      Clause) is satisfied on the date of this Request.

3.    We confirm that the Loan will be used [in accordance with Clause 3
      (Purpose)/solely for the purposes of repayment of commercial paper which
      is due for repayment on the Drawdown Date].

4.    We confirm that the borrowing of the above referenced Loan will not cause
      any borrowing limit binding on Scottish Power plc to be exceeded.

By:

SCOTTISH POWER PLC
Authorised Signatory

--------------------------------------------------------------------------------
<PAGE>

                                       69

--------------------------------------------------------------------------------


                                     PART 2

                            FORM OF SELECTION NOTICE

From: Scottish Power plc

To:   The Royal Bank of Scotland plc

       Scottish Power plc - (pound)600,000,000 Revolving Credit Agreement
                          dated [              ], 1999

1.    We write in connection with the Loan in the sum of [              ]
      outstanding/to be made under the Agreement.

2.    We write to inform you that we have selected [              ] as the
      duration of the next Interest Period relating thereto.

By:


SCOTTISH POWER PLC


                                                            --------------------
                                                            Authorised Signatory


                                                            --------------------
                                                            Authorised Signatory

--------------------------------------------------------------------------------
<PAGE>

                                       70

--------------------------------------------------------------------------------


                                   SCHEDULE 5

                          FORM OF NOVATION CERTIFICATE

To:   THE ROYAL BANK OF SCOTLAND PLC as Agent

From: [THE EXISTING BANK] and [THE NEW BANK]              Date: [              ]

       Scottish Power plc - (pound)600,000,000 Revolving Credit Agreement
                          dated [              ], 1999

We refer to Clause 26.3 (Procedure for novations).

1.    We [              ] (the "Existing Bank") and [              ] (the "New
      Bank") agree to the Existing Bank and the New Bank novating all the
      Existing Bank's rights and obligations referred to in the Schedule in
      accordance with Clause 26.3 (Procedure for novations).

2.    The specified date for the purposes of Clause 26.3(c) is [date of
      novation].

3.    The Facility Office and address for notices of the New Bank for the
      purposes of Clause 32.2 (Addresses for notices) are set out in the
      Schedule.

4.    This Novation Certificate is governed by English law.

                                  THE SCHEDULE

                      Rights and obligations to be novated

[Details of the rights and obligations of the Existing Bank to be novated].

[New Bank]

[Facility Office                 Address for notices]

[Existing Bank]               [New Bank]        THE ROYAL BANK OF SCOTLAND PLC

By:                           By:               By:

Date:                         Date:             Date:


--------------------------------------------------------------------------------
<PAGE>

                                       71

--------------------------------------------------------------------------------


                                   SCHEDULE 6

                     FORM OF LEGAL OPINION OF ALLEN & OVERY

To:   The Royal Bank of Scotland plc
      Waterhouse Square
      138-142 Holborn
      London EC1N 2TH
      (as Agent for the Finance Parties)

                                                          [              ], 1999

Dear Sirs,


                      Scottish Power plc (the "Company") -
                 (pound)600,000,000 Revolving Credit Agreement
              dated [              ], 1999 (the "Credit Agreement")

We have acted as legal advisers in England to The Royal Bank of Scotland plc
(the "Agent") in connection with a Credit Agreement dated [              ], 1999
(the "Credit Agreement") made between the Company as borrower, The Royal Bank of
Scotland plc as Arranger, the Banks (as defined therein) and the Agent.

Terms defined in the Credit Agreement have the same meanings when used in this
opinion.

We have received instructions from and participated in discussions with the
Agent about the provisions contained in the Credit Agreement.

We have examined the following documents:

(a)   an executed copy of the Credit Agreement; and

(b)   the legal opinion of Maclay Murray & Spens legal advisers to the Agent in
      Scotland dated [              ], 1999 and addressed to the Finance
      Parties.

Except as stated above we have not examined any contracts, instruments or other
documents entered into by or affecting the Company or any corporate records of
the Company and have not made any other enquiries concerning the Company.

In giving this opinion, we have assumed:

(i)   the genuineness of all signatures;

(ii)  the authenticity and completeness of all documents submitted to us as
      originals;

(iii) the conformity to original documents of all documents submitted to us as
      copies and the authenticity and completeness of such original documents;

--------------------------------------------------------------------------------
<PAGE>

                                       72

--------------------------------------------------------------------------------


(iv)  the power and authority to execute and the due execution of the Credit
      Agreement by the Company, each Bank, the Arranger and the Agent, and that
      the obligations expressed to be assumed by each Bank, the Arranger and the
      Agent under the Credit Agreement are legally valid;

(v)   that, so far as the laws of Scotland are concerned, the Credit Agreement
      constitutes a valid and legally binding obligation of the Company in
      accordance with its terms; and

(vi)  that the certificates and other documents dated earlier than the date
      hereof and on which we have expressed reliance remain accurate and that
      there have been no variations to any such certificates or documents.

We have not investigated the laws of any country other than England and this
opinion is given only with respect to English law. We assume that no foreign law
which may apply with respect to the Credit Agreement or the transactions and
matters contemplated thereby would be such as to affect any of the conclusions
stated herein. We express no opinion as to matters of fact.

Based upon and subject to the foregoing and subject to any matters not disclosed
to us we are of the opinion that, so far as the present laws of England are
concerned and subject to the qualifications set out below:

(A)   Legal validity  The Credit Agreement constitutes valid and legally binding
      obligations of the Company.

(B)   Stamp duties  No stamp or registration duty or similar taxes or charges
      are payable in the United Kingdom in respect of the execution or delivery
      of the Credit Agreement.

(C)   Registrations  It is not necessary to register the Credit Agreement in any
      public office or elsewhere in England.

Notwithstanding the foregoing this opinion is subject to the following
qualifications:

(i)   The validity, performance and enforcement of the Credit Agreement may be
      limited by bankruptcy, insolvency, reorganisation or similar laws
      affecting creditors' rights generally.

(ii)  Remedies such as specific performance or the issue of an injunction are
      available only at the discretion of the court. Specific performance is not
      usually granted and an injunction is not usually issued where damages
      would be an adequate alternative.

(iii) The Credit Agreement provides for interest to be paid on overdue amounts.
      Such interest may amount to a penalty under English law and may therefore
      not be recoverable.

(iv)  We express no opinion as to the enforceability of Clause 29 (Pro rata
      sharing) of the Credit Agreement.

(v)   An English court may stay proceedings if concurrent proceedings are being
      brought elsewhere.

(vi)  There could be circumstances in which an English court would not treat as
      conclusive those certificates and determinations which the Credit
      Agreement states are to be so treated.

--------------------------------------------------------------------------------
<PAGE>

                                       73

--------------------------------------------------------------------------------


(vii) The obligations contained in Clause 22 (Stamp duties) of the Agreement may
      be void in respect of stamp duty payable in the United Kingdom.

(viii) Clause 30 (Severability) of the Credit Agreement may not be effective in
       certain circumstances depending on the nature of the prohibition or
       unenforceability in question.

(ix)  The Credit Agreement may be amended orally by the parties thereto
      notwithstanding provisions therein to the contrary.

(x)   English courts may not give effect to any provision for reimbursement of
      legal costs incurred by an unsuccessful litigant.

(xi)  The effectiveness of terms exculpating a party from a liability or duty
      otherwise owed may be limited by law.

(xii) There is no authority as to whether or not an English court would give
      effect to the currency indemnity contained in Clause 23.1 (Currency
      indemnity) of the Credit Agreement. However, the English courts will now
      render judgments in foreign currencies.

(xiii) On the assumption that a Novation Certificate is duly completed,
       executed, authorised and delivered to the Agent in accordance with the
       Credit Agreement and any conditions to which the Novation Certificate is
       expressed to be subject are satisfied, then the provisions of Clause 26.3
       (Procedure for novations) will operate in accordance with its terms.
       However, without prejudice to the preceding sentence, no opinion is
       expressed with respect to any Novation Certificate issued after the date
       of this opinion because we do not know the identity of the parties
       concerned and this opinion is given only as at today's date. In any
       event, it should be noted that in certain circumstances transactions
       employing Novation Certificates and assignments or transfers of interests
       in the Credit Agreement may require compliance with the Financial
       Services Act 1986.

(xiv) A person may not be able to enforce a provision of the Credit Agreement
      expressed to be in his favour unless he is a party.

This opinion is given for the sole benefit of the Agent, the Arranger and the
Banks which are the original parties to the Credit Agreement and may not be
disclosed to, or relied upon by, any other person or be quoted or made public in
any way without our prior written consent.

Yours faithfully,

--------------------------------------------------------------------------------
<PAGE>

                                       74

--------------------------------------------------------------------------------


                                   SCHEDULE 7

                 FORM OF LEGAL OPINION OF MACLAY MURRAY & SPENS

Ref:  RJL/SMK

[              ], 1999

The Royal Bank of Scotland plc
Waterhouse Square
138-142 Holborn
LONDON
EC1N 2TH
(as Agent for the Finance Parties)

Dear Sirs,

You have asked for our opinion in connection with an agreement of even date with
this opinion between Scottish Power plc as borrower (the "Company"), The Royal
Bank of Scotland plc as Arranger, the Banks (as defined therein) and The Royal
Bank of Scotland plc as agent (the "Agent") (the "Facility Agreement").

For the purposes of this opinion, we have examined copies of and base our
opinion on the following documents, copies of which we have signed and attach
for the purposes of identification (other than the Company Search):

(a)   an executed copy of the Facility Agreement;

(b)   a certified copy of the Memorandum and Articles of Association of the
      Company;

(c)   a microfiche of the files of the Company obtained from the Registrar of
      Companies in Edinburgh on [     , 1999] (the "Company Search");

(d)   a certified copy of the minutes of a meeting of the board of directors of
      the Company held on [    1999] (the "Directors' Minutes");

(e)   a certificate of a director of the Company confirming that the utilisation
      by the Company of the said Facility (as defined in the Facility Agreement)
      (the "Director Certificate") in full would not cause any internal
      borrowing limit binding on the Company to be exceeded; and

(f)   a certificate of an authorised signatory of the Company (the "Authorised
      Signatory Certificate") certifying that each of the items in paragraphs
      (b) and (d) is correct, complete and in full force. The Director
      Certificate and Authorised Signatory Certificate are herein together
      referred to as "the Certificates").

--------------------------------------------------------------------------------
<PAGE>

                                       75

--------------------------------------------------------------------------------


We have not made any other enquiries concerning the Company and in particular we
have not concerned ourselves with investigating or verifying any matters of fact
or opinion (whether set out in any of the documents referred to above or
elsewhere) other than as expressly stated herein. We have not reviewed and
express no opinion on any government regulations, subordinate legislation or
statutes relating to the operation of the electricity, water or sewerage
industries in the United Kingdom.

We have assumed for the purposes of this opinion:

(i)   the capacity, power and authority of each of the Joint Arrangers, the
      Co-Arranger, the Banks and the Agent to enter into and perform their
      respective obligations under the Facility Agreement and the due execution
      and delivery of the Facility Agreement by each of the Arrangers, the Banks
      and the Agent;

(ii)  that the Facility Agreement has been signed by [              ] and
      [              ] on behalf of the Company and that the Facility Agreement
      has been duly delivered;

(iii) the conformity to original documents of all documents supplied to us as
      photocopies, specimen or facsimile copies;

(iv)  that each of the statements contained in the Certificates (on which we
      have relied without further inquiry) is true and correct as at the date
      hereof;

(v)   that the meeting of the board of directors of the Company held on
      [              ], 1999 was duly convened and held;

(vi)  that the information disclosed by the Company Search was accurate in all
      respects and that such Search did not fail to disclose any material
      information which had been delivered for registration but which did not
      appear on the microfiche supplied by the Companies Registry in Edinburgh;

(vii) the Company has not passed a voluntary winding-up resolution, no petition
      has been presented or order made by the Court for the winding up,
      dissolution or administration of the Company and no receiver, trustee,
      administrator or similar official has been appointed in relation to the
      Company or any of its assets or revenues; and

(viii) that the Facility Agreement constitutes a legal, valid and binding
       obligation of the parties thereto under English law to which it is
       expressed to be subject and that the performance of the obligations
       thereunder is not illegal or unenforceable by virtue of the law of any
       jurisdiction (other than Scotland) in which they are to be performed.

We have not made any investigation of and do not express any opinion as to the
laws of any jurisdiction outside Scotland and this opinion relates only to the
laws of Scotland as they exist at the date hereof.

Based upon and subject to the foregoing and subject to the reservations
hereinafter referred to and to any matters not disclosed to us, we are of the
opinion that:

1.    The Company is a limited liability company duly incorporated under the
      laws of Scotland and has full corporate power and authority to execute,
      deliver and perform its obligations under the Facility Agreement.

--------------------------------------------------------------------------------
<PAGE>

                                       76

--------------------------------------------------------------------------------


2.    The execution and delivery by the Company of the Facility Agreement and
      the performance of its obligations thereunder have been duly authorised by
      all requisite corporate action on its part.

3.    The obligations of the Company under the Facility Agreement are valid and
      binding obligations of the Company under the law of Scotland and would be
      so treated in the Courts of Scotland.

4.    The entry into and performance of the Facility Agreement by the Company
      and the transaction and matters to be implemented thereunder do not
      violate (i) Scottish Law or (ii) the Memorandum and Articles of
      Association of the Company.

5.    It is not necessary to file, register or record the Facility Agreement
      with any court or authority in Scotland.

6.    No stamp, registration or other similar taxes or charges are payable in
      Scotland with respect to the execution or delivery of the Facility
      Agreement.

7.    The choice of English law to govern the Facility Agreement is valid and
      effective under the private international law of Scotland. Subject to the
      usual exceptions affecting such matters as procedure, the availability of
      remedies and any provision which is repugnant to the law of Scotland, the
      law of England will accordingly be applied by the Courts of Scotland if
      any dispute arising from or contractual claim connected with the Facility
      Agreement comes under their jurisdiction. A judgment rendered against the
      Company by a competent court in England and registered in Scotland
      pursuant to the provisions of the Civil Jurisdiction and Judgments Act
      1982 will be enforceable by the Scottish Courts.

8.    The submission by the Company to the jurisdiction of the courts of England
      is valid and binding on the Company.

The foregoing opinion is subject to the following qualifications:

(a)   We do not express any view on the particular remedies available on
      enforcement, such as specific implement or interdict, which are
      discretionary remedies.

(b)   The enforcement of the Facility Agreement may be limited by applicable
      laws relating to prescription, limitation, bankruptcy, liquidation,
      receivership, administration, insolvency or other laws relating to
      creditors' rights generally or by the application of rules of equity or
      public policy.

(c)   A Scottish court may refuse to give effect to any provisions of the
      Facility Agreement providing for the payment of legal costs and other
      costs, charges and expenses in respect of the cost of unsuccessful
      litigation brought before such court or where that court has itself made
      an order for costs.

(d)   Any provision contained in the Facility Agreement to the effect that a
      calculation and/or certification will be conclusive and binding may not be
      effective if such calculation or certification is fraudulent or erroneous
      on its face and will not necessarily prevent judicial enquiry into the
      merit of any claim under the relative document.

--------------------------------------------------------------------------------
<PAGE>

                                       77

--------------------------------------------------------------------------------


(e)   Any provision in the Facility Agreement relating to default interest would
      be unenforceable if it were held to constitute a penalty and not a genuine
      and reasonable pre-estimate of the damage likely to be suffered as a
      result of the default in payment of the amount in question.

(f)   We express no opinion whether any provision in the Facility Agreement
      conferring on any party thereto a right of set off or similar right would
      be effective against a liquidator or creditor.

(g)   We have not been asked to advise you in connection with the preparation of
      the Facility Agreement and we therefore express no opinion on the
      implications of the Facility Agreement or on whether the Facility
      Agreement gives effect to the commercial intentions of the parties.

(h)   Any undertakings or indemnities in relation to United Kingdom stamp duties
      given by the Company may be void under the provisions of Section 117 of
      the Stamp Act 1891.

(i)   A Scottish court may stay proceedings if concurrent proceedings are being
      brought elsewhere.

(j)   The effectiveness of terms exculpating a party from a liability or duty
      otherwise owed is limited by law.

This opinion shall be governed by and construed in accordance with the law of
Scotland.

This opinion is strictly limited to the matters specifically stated herein and
is not to be read as extending by implication to any other matter.

This opinion is provided solely for the benefit of the person to which it is
addressed and may not be communicated to or relied upon by any other person,
firm or corporation whatsoever.

Yours faithfully,

--------------------------------------------------------------------------------
<PAGE>

                                       78

--------------------------------------------------------------------------------


                                   SCHEDULE 8

                         GUARANTOR ACCESSION AGREEMENT

To:   THE ROYAL BANK OF SCOTLAND plc as Agent

From: [HOLDCO]

                      Scottish Power plc (the "Company") -
                 (pound)600,000,000 Revolving Credit Agreement
              dated [              ], 1999 (the "Credit Agreement")

We refer to Clause 26.4 (Accession) of the Credit Agreement.

We, [HOLDCO] of 1 Atlantic Quay, Glasgow G2 8SP (Registered no. SC193794) agree
to become, with effect from the date of this Deed, an Obligor under the Credit
Agreement and to be bound by the terms of the Finance Documents as an Obligor in
accordance with Clause 26.4 (Accession).

Our address for notices for the purposes of Clause 32.2 (Addresses for notices)
is:

[



                              ]

This Agreement is intended to take effect as a deed under English law.

THE COMMON SEAL of                              )
[HOLDCO]                                        )
was affixed in                                  )
the presence of:                                )

Director

Director/Secretary

--------------------------------------------------------------------------------
<PAGE>

                                       79

--------------------------------------------------------------------------------


                     SIGNATORIES TO THE FACILITY AGREEMENT

Company

SCOTTISH POWER PLC

By:   A.J.M. COATS


Arranger

THE ROYAL BANK OF SCOTLAND PLC

By:   J.H.M. HARE


Agent

THE ROYAL BANK OF SCOTLAND PLC

By:   J.H.M. HARE


Banks

THE ROYAL BANK OF SCOTLAND PLC

By:   J.H.M. HARE


BAYERISCHE LANDESBANK GIROZENTRALE, LONDON BRANCH

By:   TIMOTHY R. HALL


NATIONAL WESTMINSTER BANK PLC

By:   JONATHAN J. WHITICAR


CITIBANK N.A.

By:   JONATHON BISHOP


BARCLAYS BANK PLC

By:   JOHN A.C. BATTERS


NATIONAL AUSTRALIA BANK LIMITED (A.C.N. 004044937)

By:   DAVID RAWSON

--------------------------------------------------------------------------------
<PAGE>

                                       80

--------------------------------------------------------------------------------


BANCA DI ROMA SPA

By:   J.G. CONNOLLY     PETER SCHARF


BANQUE NATIONALE DE PARIS LONDON BRANCH

By:   D. WARD


CIBC WOOD GUNDY IRELAND LTD

By:   J.H.M. HARE (Power of Attorney)


COMMERZBANK AKTIENGESELLSCHAFT, LONDON BRANCH

By:   R.S. SULLIVAN     H.L. NUTTALL


DEUTSCHE BANK AG LONDON

By:   B.D. STEVENSON


ING BANK N.V.

By:   A.M. PRECIOUS


MIDLAND BANK PLC

By:   PAUL E. TWEEDALE


MORGAN GUARANTY TRUST COMPANY OF NEW YORK

By:   MARK HALL


PARIBAS

By:   ANDREW STEWART HASTINGS


THE BANK OF NOVA SCOTIA

By:   W. CURRIE


THE SANWA BANK, LIMITED

By:   PETER BLACKBURN LUCAS


THE TORONTO-DOMINION BANK

By:   MARK CHERRY

--------------------------------------------------------------------------------
<PAGE>

                                       81

--------------------------------------------------------------------------------


WESTDEUTSCHE LANDESBANK GIROZENTRALE

By:   G.P.A. TAYLOR     JOHN A. FINN


ABN AMRO BANK N.V.

By:   J.P. CLIFFE


CREDIT LYONNAIS

By:   M.A. STEWART


KBC BANK N.V.

By:   LISA TAYLOR


AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

By:   A.F. WOSKA


COMMONWEALTH BANK OF AUSTRALIA, LONDON BRANCH

By:   NICHOLAS WALKER


LEONIA CORPORATE BANK PLC

By:   PAUL STONE


BANCA MONTE DEI PASCHI DI SIENA SPA

By:   DUNCAN ROUSE      R. BOCCANERA


NORDDEUTSCHE LANDESBANK GIROZENTRALE, LONDON BRANCH

By:   NEIL ROBERTSON


BANKGESELLSCHAFT BERLIN AG, LONDON BRANCH

By:   LESLIE J. COLLETT


BAYERISCHE HYPO- UND VEREINSBANK AG

By:   T. DEININGER      K. BRIGHT


CHASE MANHATTAN BANK

By:   NICHOLAS CONRON

--------------------------------------------------------------------------------
<PAGE>

                                       82

--------------------------------------------------------------------------------


DEN DANSKE BANK AKTIESELSKAB

By:   J.H.M. HARE (Power of Attorney)


LANDESBANK BADEN-WURTTEMBERG

By:   J.H.M. HARE (Power of Attorney)


THE BANK OF TOKYO-MITSUBISHI, LIMITED

By:   DAVID DALLISON


THE DAI-ICHI KANGYO BANK, LIMITED

By:   COLIN VITTERY


THE GOVERNOR AND COMPANY OF THE BANK OF SCOTLAND

By:   J.H.M. HARE (Power of Attorney)

--------------------------------------------------------------------------------