Document:

CONFORMED COPY

                            DATED 16th October, 1995
                            ------------------------

                        NORTHERN ELECTRIC FINANCE plc (1)

                            NORTHERN ELECTRIC plc (2)

                                       and

                 THE LAW DEBENTURE TRUST CORPORATION p.l.c. (3)

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

                                MASTER TRUST DEED

                                  constituting
                       (pound)100,000,000 8.625 per cent.
                            Guaranteed Bonds due 2005
                                       and
                       (pound)100,000,000 8.875 per cent.
                            Guaranteed Bonds due 2020
                     with power to issue further securities

                                   Norton Rose
                                     London

<PAGE>

                                    CONTENTS

Clause                               Heading                            Page

1       Interpretation.....................................................2
        1.1    Definitions.................................................2
        1.2    Construction of certain references..........................9
        1.3    Definitions in Conditions..................................11
        1.4    Headings...................................................11
        1.5    Schedules..................................................11
        1.6    Enforceability.............................................11

2       Amounts of Original Bonds and covenant to pay.....................12
        2.1    Amounts of Original Bonds..................................12
        2.2    Original Bonds separate series.............................12
        2.3    Covenant to pay............................................12
        2.4    Discharge..................................................14
        2.5    Payment after default......................................14
        2.6    Ranking of obligations.....................................15

3       Guarantee
        3.1    Guarantor's liability......................................16
        3.2    No payments by Company.....................................16
        3.3    Consents and authorisations................................18
        3.4    Application of moneys received.............................19
        3.5    Nature of obligations......................................19

4       Forms of Original Bonds and Original Coupons
        4.1    Original Global Bond.......................................19
        4.2    Original Bonds and Original Coupons........................19
        4.3    Signature..................................................20
        4.4    Issue......................................................21
        4.5    Bondholder deemed to be absolute owner.....................21

5       Stamp duties and taxes............................................21
        5.1    Stamp duties...............................................21
        5.2    Change of taxing jurisdiction..............................22

6       Further Bonds.....................................................22
        6.1    Liberty to create..........................................22
        6.2    Means of constitution......................................23
        6.3    Noting of supplemental deeds...............................23
        6.4    Notice of further issues...................................23
        6.5    Separate series............................................24

7       Application of moneys received by Trustee.........................24
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        7.1    Declaration of trust.......................................24
        7.2    Accumulation...............................................25
        7.3    Investment.................................................25

8       Covenants to comply with provisions...............................26

9       Covenants.........................................................27
10      Remuneration and indemnification of Trustee.......................33
11      Provisions supplemental to Trustee Act 1925.......................36
12      Trustee liable for breach of trust................................42

13      Waiver, proof of default, consents and Trustee's power to apply to
          Court...........................................................43
14      Trustee not precluded from entering into contracts................44
15      Modification and substitution.....................................45
16      Appointment, retirement and removal of Trustee....................50
17      Couponholders.....................................................52
18      Communications....................................................53
19      Powers in addition................................................54
20      Severability......................................................54
21      Execution.........................................................55
22      Counterparts......................................................55
23      Governing law.....................................................55

Schedule

1       Part I    Form of individual Certificate for Original Bonds 2005..56
1       Part II   Form of Original Global Bond 2005.......................58
1       Part III  Form of Original Coupon 2005............................66
2       Terms and Conditions of Original Bonds 2005.......................68

3       Part I    Form of individual Certificate for Original Bonds 2020..69
3       Part II   Form of Original Global Bond 2020.......................71
3       Part III  Form of Original Coupon 2020............................79
3       Part IV   Form of Original Talon 2020.............................81
4       Terms and Conditions of Original Bonds 2020.......................83
5       Provisions for meetings of Bondholders............................84

<PAGE>

        THIS TRUST DEED is made on 16th October, 1995 BETWEEN:

     (1)  NORTHERN  ELECTRIC FINANCE plc whose  registered  office is at Carliol
          House,  Market Street,  Newcastle-upon-Tyne  NEl 6NE (the "Company" or
          the "Issuer");

     (2)  NORTHERN  ELECTRIC plc whose  registered  office is at Carliol  House,
          Market Street, Newcastle-Upon-Tyne NEl 6NE (the "Guarantor"); and

     (2)  THE LAW DEBENTURE TRUST CORPORATION  p.l.c. whose registered office is
          at Princes House, 95 Gresham  Street,  London EC2V 7LY (the "Trustee",
          which  expression  shall,  where the  context so admits,  include  all
          persons for the time being the trustee or trustees of these presents).

WHEREAS:

     (A)  The Company,  incorporated in England and Wales with registered number
          3070482,  has by  resolution  of its Board of Directors  passed on 9th
          October,  1995  authorised the issue of  (pound)100,000,000  8.625 per
          cent. Guaranteed Bonds due 2005 and (pound)100,000,000 8.875 per cent.
          Guaranteed Bonds 2020 to be constituted by these presents.

     (B)  The  Guarantor,  incorporated  in England  and Wales  with  registered
          number 2366942,  has by resolution of a duly  authorised  committee of
          its Board of Directors  passed on 9th October,  1995  resolved to give
          its  guarantee  in  relation to the said Bonds upon and subject to the
          terms and conditions of these presents.

     (C)  The  Trustee  has agreed to act as trustee  of these  presents  on and
          subject to the terms and conditions set out in these presents.

          NOW THIS DEED WITNESSES AND IT IS HEREBY AGREED AND DECLARED
          as follows:

                                       1
<PAGE>

     1    Interpretation
         --------------

     1.1  Definitions: In these presents, unless the context otherwise requires,
          the following expressions shall have the following meanings:

          "AGENCY  AGREEMENT" means, in relation to the Original Bonds 2005, the
          Paying Agency Agreement dated 16th October,  1995 between the Company,
          the Guarantor,  the Trustee,  the Principal Paying Agent and the other
          Paying  Agents  whereby  the Agents were  appointed  in respect of the
          Original  Bonds  2005,  in relation to the  Original  Bonds 2020,  the
          Paying Agency Agreement dated 16th October,  1995 between the Company,
          the Guarantor,  the Trustee,  the Principal Paying Agent and the other
          Paying  Agents  whereby  the Agents were  appointed  in respect of the
          Original  Bonds  2020 and,  in  relation  to any  Further  Bonds,  the
          agreement  appointing,  on terms previously approved in writing by the
          Trustee, the Principal Paying Agent and the other Paying Agents and/or
          any other Agent in respect of such  Further  Bonds and, in relation to
          the relevant Bonds,  includes any agreement  (whether made pursuant to
          another  agreement  or  otherwise)  appointing,  on  terms  previously
          approved in writing by the Trustee, a further or another Agent and any
          other agreement for the time being in force,  the terms of which shall
          have been previously  approved in writing by the Trustee,  relating to
          the  duties  of any  Agent  or  amending  or  modifying  any  of  such
          agreements;

          "Agents"  means,  in relation to the  Original  Bonds,  the  Principal
          Paying Agent and the other Paying Agents or, as the context  requires,
          any of them and,  in  relation to any  Further  Bonds,  any  Principal
          Paying Agent and other Paying  Agents and other agent  approved by the
          Trustee  appointed  under the  Agency  Agreement  in  respect  of such
          Further Bonds or, as the context requires, any of them;

          "Auditors" means the auditors for the time being of the Company or the
          Guarantor  (as the  case may  require)  or,  if  there  shall be joint
          auditors, any one

                                       2
<PAGE>

          or more of such  auditors  or, in the event of their  being  unable or
          unwilling to carry out any action  requested of them pursuant to these
          presents,  such  other  chartered  accountant  or  firm  of  chartered
          accountants  as may be nominated by the Company or the  Guarantor  (as
          the case may require) with the prior  written  approval of the Trustee
          or, in default  of such  nomination  and  approval,  nominated  by the
          Trustee after  consultation  with the Company or the Guarantor (as the
          case may require) where such  consultation  is not  prejudicial to the
          interests of the Bondholders for the purpose;

          "Bondholder" and, in relation to a Bond,  "holder" means the bearer of
          that Bond;

          "Bonds" means the Original  Bonds and/or,  as the context may require,
          any Further Bonds;

          "Cedel" means Cedel Bank, societe anonyme;

          "Certificate"  means a certificate in definitive  form  representing a
          Bond   including   any  Global  Bond  and  includes  any   replacement
          certificate  in  definitive  form  issued  pursuant  to  the  relevant
          Conditions;

          "Conditions"  means, in relation to the Original Bonds 2005, the terms
          and  conditions set out in Schedule 2 and, in relation to the Original
          Bonds  2020,  the terms and  conditions  set out in  Schedule 4 or, in
          either  case,  other  the  terms  and  conditions  for the time  being
          endorsed  on the  Original  Bonds as the same may from time to time be
          modified in  accordance  with these  presents and  references in these
          presents to a particular  numbered Condition shall, in relation to the
          Original  Bonds be  construed  accordingly  and,  in  relation  to any
          Further Bonds, the terms and conditions for the time being endorsed on
          such Further Bonds and  references  in these  presents to a particular
          numbered  Condition  shall,  in relation to any Further Bonds,  unless
          either referring  specifically to a particular  numbered  Condition of
          such Further Bonds or the context otherwise requires,

                                       3
<PAGE>

          be  construed  as a  reference  to  the  provisions  (if  any)  in the
          Conditions   thereof  which  corresponds  to  the  provisions  of  the
          particular numbered Condition of the Original Bonds;

          "Couponholder" and, in relation to a Coupon, "holder" means the bearer
          of a Coupon;

          "Coupons"  means the  Original  Coupons  and/or,  as the  context  may
          require,  the bearer  interest  coupons for the time being relating to
          any Further Bonds or, as the context may require, a specific number of
          them and  includes  any  replacement  coupons  issued  pursuant to the
          relevant Conditions and, where the context so permits,  the Talons (if
          any);

          "Couponholder" means, in relation to a Coupon, the bearer of a Coupon;

          "Euroclear" means Morgan Guaranty Trust Company of New York,  Brussels
          office, as operator of the Euroclear System;

          "Event of Default" means any of the events described in paragraphs (a)
          to (i) (inclusive)  of Condition  10 which,  in the case of the events
          described in paragraphs (b),(c),(e),(f),(g) and (h) of such Condition,
          shall  have been  certified  in  writing  by the  Trustee to be in its
          opinion materially prejudicial to the interests of the Bondholders;

          "Extraordinary  Resolution" has the meaning set out in paragraph 21 of
          Schedule 5;

          "Further Bonds" means any further bonds or notes or similar securities
          issued in accordance  with the provisions of Clause 6 and  constituted
          by a deed  supplemental  to this Master  Trust Deed or, as the context
          may require,  a specific number of them and includes the  Certificates
          representing the same including any relevant Global Bond;

                                        4

<PAGE>

          "Global  Bond'  means the  Original  Global Bond 2005  and/or,  as the
          context may  require,  the Original  Global Bond 2020  and/or,  as the
          context may require,  any other global Bond  Certificate in definitive
          form representing Further Bonds or any of them;

          issue" includes allot and vice versa;

          "London Stock Exchange" means The International  Stock Exchange of the
          United Kingdom and the Republic of Ireland Limited;

          "Original Bonds" means, the Original Bonds 2005 and/or, as the context
          may require, the Original Bonds 2020;

          "Original  Bonds 2005" means the Bonds in bearer form  comprising  the
          (pound)100,000,000   8.625  per  cent.   Guaranteed   Bonds  due  2005
          constituted by these presents and for the time being  outstanding  or,
          as the context may require, a specific number of them and includes the
          Certificates  representing the same including the Original Global Bond
          2005;

          "Original  Bonds 2020" means the Bonds in bearer form  comprising  the
          (pound)100,000,000   8.875  per  cent.   Guaranteed   Bonds  due  2020
          constituted by these presents and for the time being  outstanding  or,
          as the context may require, a specific number of them and includes the
          Certificates  representing the same including the Original Global Bond
          2020;

          "Original  Bondholders"  means the  holders  for the time being of the
          Original Bonds;

          "Original  Coupons"  means the Original  Coupons  2005 and/or,  as the
          context may require, the Original Coupons 2020;

          "Original  Coupons  2005" means the Coupons  relating to the  Original
          Bonds 2005;

                                        5

<PAGE>

          "Original  Coupons  2020" means the Coupons  relating to the  Original
          Bonds 2020;

          "Original  Couponholders"  means the holders for the time being of the
          Original Coupons;

          "Original Global Bond" means the Original Global Bond 2005 and/or,  as
          the context may require, the Original Global Bond 2020;

          "Original  Global  Bond 2005" means the single  temporary  global Bond
          Certificate in definitive form representing the Original Bonds 2005;

          "Original  Global  Bond 2020" means the single  temporary  global Bond
          Certificate in definitive form representing the Original Bonds 2020;

          "Original Talons 2020" means the Talons relating to the Original Bonds
          2020;

          "outstanding"  means,  in relation to the Bonds,  all the Bonds issued
          other than:

          (a)  those which have been redeemed and  cancelled in accordance  with
               the Conditions;

          (b)  those in respect of which the date for  redemption  in accordance
               with  the  Conditions  has  occurred  and the  redemption  moneys
               (including  all  interest  accrued  on such Bonds to the date for
               such redemption and any interest  payable under Condition 4 after
               such date) have been duly paid to the relevant  Bondholder (or to
               a person on behalf of such  Bondholder)  or to the  Trustee or to
               the  Principal  Paying Agent as provided in the proviso to Clause
               2.3 and remain  available for payment  against  presentation  and
               surrender of Bonds and/or Coupons, as the case may be;

                                        6

<PAGE>

          (c)  those which have  become void or in respect of which  claims have
               become prescribed under Condition 9;

          (d)  those mutilated or defaced Bonds which have been  surrendered and
               cancelled in exchange for replacement Bonds pursuant to Condition
               13;

          (e)  (for  the  purpose  only  of  determining   how  many  Bonds  are
               outstanding  and without  prejudice to their status for any other
               purpose) those Bonds which are alleged to have been lost,  stolen
               or destroyed and in respect of which  replacement Bonds have been
               issued pursuant to Condition 13;

          (f)  those  which have been  purchased  and  cancelled  as provided in
               Condition 6;

          (g)  the Global Bond to the extent  that it shall have been  exchanged
               for individual Bonds,

           provided that for the purposes of:

          (i)  ascertaining  the right to attend and vote at any  meeting of the
               Bondholders;

          (ii) the  determination  of how many  Bonds  are  outstanding  for the
               purposes  of Clause 8.2 and  Conditions  7(D),  10, 11 and 15 and
               Schedule 5;

          (iii) the exercise of any  discretion,  power or  authority  which the
               Trustee is required, expressly or impliedly, to exercise in or by
               reference to the interests of the Bondholders or, as the case may
               be, any of them; and

          (iv) the determination by the Trustee whether any event, circumstance,
               matter or thing is, in the  opinion  of the  Trustee,  materially
               prejudicial to the interests of the Bondholders,

                                        7

<PAGE>

               those Bonds (if any) which are beneficially  held by, or are held
               on  behalf  of,  the  Company  or  the  Guarantor  or  any of the
               Subsidiaries  and not  yet  cancelled  shall  (unless  and  until
               cancelled  or,  as the  case  may be,  ceasing  to be so held) be
               deemed not to remain outstanding;

               "Paying  Agents" means,  in relation to the Original  Bonds,  the
               several  institutions  (including the Principal  Paying Agent) at
               their respective  specified offices referred to in the Conditions
               and, in relation to any Further Bonds, such institutions at their
               respective  specified  offices  as shall be  appointed  under the
               Agency  Agreement  as Paying  Agents in respect  of such  Further
               Bonds by or on  behalf  of the  Company  with the  prior  written
               approval of the Trustee or, in any case, such other  institutions
               at their respective specified offices as may from time to time be
               appointed under the Agency  Agreement as Paying Agents in respect
               of the  relevant  Bonds by or on behalf of the  Company  with the
               prior written approval of the Trustee;

               "Potential Event of Default" means an event or circumstance which
               would with the giving of notice  and/or  lapse of time and/or the
               issuing  of a  certificate  and/or  the  fulfilment  of any other
               requirement  provided  for in  Condition  10  become  an Event of
               Default;

               "Principal  Paying  Agent"  means,  in relation  to the  Original
               Bonds,  Barclays Bank PLC at its specified office in its capacity
               as Principal  Paying Agent in respect of the Original  Bonds and,
               in  relation  to  any  Further  Bonds,  such  institution  at its
               specified office as shall be appointed under the Agency Agreement
               as the Principal Paying Agent in respect of such Further Bonds by
               or on behalf of the Company  with the prior  written  approval of
               the  Trustee  or,  in any case,  such  other  institution  at its
               specified  office as may from time to time be appointed under the
               Agency  Agreement  as  Principal  Paying  Agent in respect of the
               relevant  Bonds by or on  behalf  of the  Company  with the prior
               written approval of the Trustee;

                                        8

<PAGE>

               "specified  office" means,  in relation to any Agent,  either the
               office  identified  with its name at the end of the Conditions or
               any other  office  approved by the  Trustee  and  notified to the
               Bondholders pursuant to Clause 9.1(k);

               "Subsidiary" means a subsidiary for the time being of the Company
               or the Guarantor;

               "Talons"  means the Original  Talons 2020 and/or,  as the context
               may  require,   the  talons  relating  to,  and  exchangeable  in
               accordance  with the  provisions  therein  contained  for further
               Coupons  relating  to,  any  relevant  Further  Bonds  or, as the
               context may require,  a specific  number of them and includes any
               replacement talons issued pursuant to the relevant Conditions;

               "these  presents"  means this Master  Trust Deed,  including  its
               Schedules,  as altered from time to time,  and any other document
               executed in  accordance  with or  pursuant  to this Master  Trust
               Deed,  as ~o altered,  and expressed to be  supplemental  to this
               Master  Trust Deed and  includes  the Bonds,  the Coupons and the
               Conditions; and

               "trust  corporation"  means a corporation  entitled by rules made
               under the Public  Trustee  Act 1906 or  entitled  pursuant to any
               other  legislation  applicable  to a trustee in any  jurisdiction
               other than  England  to carry out the  functions  of a  custodian
               trustee.

     1.2  Construction of certain references: Unless otherwise provided in these
          presents, references in these presents to:

          (a)  costs, charges,  remuneration or expenses shall include any value
               added tax, turnover tax or similar tax charged in respect thereof
               and legal fees and expenses on a full indemnity basis;

                                        9

<PAGE>

          (b)  "sterling"  and "pound"  shall be construed as  references to the
               lawful currency for the time being of the United Kingdom;

          (c)  the   expressions   subsidiary  and  holding   company  have  the
               respective meanings ascribed thereto by the Companies Act 1985;

          (d)  any  action,  remedy or method of  judicial  proceedings  for the
               enforcement of rights of creditors  shall include,  in respect of
               any jurisdiction  other than England,  references to such action,
               remedy or method of judicial  proceedings  for the enforcement of
               rights of creditors available or appropriate in such jurisdiction
               as shall most nearly approximate thereto;

          (e)  words denoting the singular  number only shall include the plural
               number and vice versa;

          (f)  words denoting one gender only shall include the other genders:

          (g)  words denoting  persons only shall include firms and corporations
               and vice versa;

          (h)  any provision of any statute shall be deemed also to refer to any
               statutory  modification or re-enactment  thereof or any statutory
               instrument,  order or  regulation  made  thereunder or under such
               modification or re-enactment;

          (i)  any  document  shall be  deemed  also to  refer to any  amendment
               thereto;

          (j)  Schedules  and  Clauses  shall  be  construed  as  references  to
               Schedules to, and to Clauses of, this Trust Deed respectively;

                                       10
<PAGE>

          (k)  the  carrying  out of the trusts of these  presents  includes the
               exercise of the functions of the Trustee under these presents and
               the exercise of the powers, authorities and discretions vested in
               the Trustee (or any agent or delegate or sub-delegate)  by, under
               or pursuant to these presents;

          (1)  taking proceedings against the Company and/or the Guarantor shall
               be deemed to include  references to proving in the  winding-up of
               the Company and/or the Guarantor; and

          (m)  principal  or principal  amount of and/or  interest in respect of
               the Bonds shall include any premium and other additional  amounts
               which may be payable under Condition 6(B) or 8 or (in the case of
               Condition 8) under any obligations undertaken in addition thereto
               or in substitution therefor pursuant to these presents.

     1.3  Definitions  in  Conditions:  Words  and  expressions  defined  in the
          Conditions  and not  otherwise  defined  in the main body of any other
          document comprised in these presents shall when used in these presents
          have the meanings given to them in the Conditions.

     1.4  Headings: Headings shall be ignored in construing these presents.

     1.5  Schedules:  The Schedules to any document  comprised in these presents
          form part of these presents and shall have effect accordingly.

     1.6  Enforceability:  If at any time any provision of these  presents is or
          becomes illegal, invalid or unenforceable in any respect under the law
          of any jurisdiction,  neither the legality, validity or enforceability
          of the  remaining  provisions  of  these  presents  nor the  legality,
          validity  or  enforceability  of such  provision  under the law of any
          other jurisdiction shall in any way be affected or impaired thereby.

                                       11

<PAGE>

     2    Amounts of Original Bonds and covenant to pay

     2.1  Amounts of  Original  Bonds:  The  aggregate  principal  amount of the
          Original  Bonds 2005 is limited to  (pound)100,000,000.  The aggregate
          principal   amount  of  the   Original   Bonds   2020  is  limited  to
          (pound)100,000,000.

     2.2  Original  Bonds  separate  series:  The  Original  Bonds  2005 and the
          Original  Bonds 2020 shall be separate  series and the  provisions  of
          Clauses 1.1 (to the extent  applicable),  2.3,  2.4, 2.5, 2.6, 3, 4.3,
          4.4, 4.5 and of Clauses 5 to 23 (inclusive) and Schedule 5 shall apply
          mutatis  mutandis  separately and  independently to the Original Bonds
          2005 and the Original Bonds 2020 and shall be construed accordingly.

     2.3  Covenant to pay: The Company will by 11.00 a.m.  (London  time) on any
          date when the Original  Bonds or any of them bec9me due to be redeemed
          or,  if  the  due  date  is  not a  Business  Day  in  London,  on the
          immediately following Business Day in London unconditionally pay to or
          to the order of the Trustee in sterling in immediately available funds
          in London (or such other  place as the  Trustee  and the  Company  may
          agree in writing) the principal  amount of the Original Bonds becoming
          due for  redemption on that date and will (subject to the  Conditions)
          up to and  including  the date of such payment  (both before and after
          judgment)  unconditionally so pay to or to the order of the Trustee in
          sterling in immediately available funds in London (or such other place
          as the Trustee  and the Company may agree in writing)  interest on the
          principal  amount of the Original Bonds  outstanding as set out in the
          Conditions, provided that:

          (a)  every payment of any such principal  amount and/or  interest made
               to or to the order of the  Principal  Paying Agent as provided in
               the  Agency  Agreement   shall,  to  such  extent,   satisfy  the
               applicable  such  obligation  except to the extent  that there is
               failure in the subsequent payment of such principal amount and/or
               interest  (as  the  case  may  be)  to  the   relevant   Original
               Bondholders or Original Couponholders (as the case may be);

                                       12
<PAGE>

          (b)  in the case of any payment of principal  amount  and/or  interest
               made after the due date therefor or following the  application of
               Condition  10,  the  principal  amount  in  respect  of which the
               payment  thereof or of the  interest  thereon  shall have been so
               made  shall  continue  to bear  interest  until  the day the full
               amount due has been received by or to the order of the Trustee or
               by the Principal Paying Agent as provided in the Agency Agreement
               and  notice  to  that  effect  has  been  given  to the  Original
               Bondholders if required in accordance with Clause 9.1(i),  except
               to the extent that there is failure in the subsequent  payment of
               such principal amount and/or interest (as the case may be) to the
               relevant Original  Bondholders or Original  Couponholders (as the
               case may be),  and so that a full  amount  due shall be deemed to
               have been  received  by or to the order of the Trustee on the day
               when by 11.00 a.m.  (London  time) such amount shall have been so
               received in sterling in immediately available funds in London (or
               such other  place ,as the  Trustee  and the  Company may agree in
               writing); and

          (c)  in the event that on the occasion for  redemption  or purchase of
               any Original  Bond falling to be redeemed or, as the case may be,
               purchased  payment of any principal amount and/or interest due in
               respect of that Original Bond is improperly  withheld or refused,
               the principal  amount in respect of which the payment  thereof or
               of the interest thereon shall have been so improperly withheld or
               refused  will  continue to bear  interest as  aforesaid up to and
               including  the date on which such  payment is deemed to have been
               received  by the Trustee as  provided  in  paragraph  (b) of this
               proviso.

          The Trustee  will hold the  benefit of this  covenant on trust for the
          Original Bondholders and Original Couponholders.

     2.4  Discharge: Subject to Clause 2.5, any payment to be made in respect of
          the Bonds or the Coupons by the Company,  the Guarantor or the Trustee
          may be

                                       13

<PAGE>

          made as  provided  in the  Conditions  and any  payment  so made  will
          (subject  to Clause  2.5) to such  extent be a good  discharge  to the
          Company, the Guarantor or the Trustee, as the case may be.

     2.5  Payment after default:  At any time after a Potential Event of Default
          has  occurred and whilst the same is  subsisting  or after an Event of
          Default has occurred and is continuing the Trustee may:

          (a)  by  notice in  writing  to the  Company,  the  Guarantor  and the
               Agents,  require the Agents, until notified by the Trustee to the
               contrary, so far as permitted by any applicable law:

               (i)  to act  thereafter  as Agents of the  Trustee in relation to
                    payments  to be made by or on  behalf of the  Trustee  under
                    these  presents on the terms of the Agency  Agreement  (with
                    consequential  amendments  as  necessary  and save  that the
                    Trustee's  liability for the  indemnification,  remuneration
                    and all other  out-of-pocket  expenses of the Agents will be
                    limited  to the  amounts  for  the  time  being  held by the
                    Trustee  in  respect  of the  Bonds  on the  terms  of these
                    presents)  and  thereafter to hold all Bonds and Coupons and
                    all moneys, documents and records held by them in respect of
                    Bonds and Coupons to the order of the Trustee: and/or

               (ii) to deliver all Bonds and  Coupons and all moneys,  documents
                    and records held by them in respect of the Bonds and Coupons
                    to the  Trustee or as the  Trustee  directs in such  notice,
                    provided  that such  notice  shall be deemed not to apply to
                    any documents or records which the relevant Agent is obliged
                    not to release by any law or regulation; and

          (b)  by notice in writing to the  Company  and the  Guarantor  require
               each of them to make all  subsequent  payments  in respect of the
               Bonds and the

                                       14

<PAGE>

               Coupons  to or to  the  order  of  the  Trustee  and  not  to the
               Principal Paying Agent.

          If the Potential  Event of Default in respect of which the Trustee has
          given notice in writing to the Company,  the  Guarantor and the Agents
          as aforesaid shall cease to subsist and Provided that

          (i)  no other  Potential  Event of Default  shall have occurred and be
               subsisting or be about to occur; or

          (ii) no Event of Default  shall have  occurred and be continuing or be
               about to occur; or

          (iii) the Bonds shall  not have  been  declared  immediately  due and
               repayable,

          the Trustee  shall by notice in writing to the Company,  the Guarantor
          and the Agents  require the Agents to cease  acting  forthwith  as the
          Agents of the Trustee.

          The  provisions  of  this  Clause  2.5  may  apply  on any  number  of
          occasions.

     2.6  Ranking of obligations:  The Company hereby covenants with the Trustee
          that the  obligations  of the  Company in respect of the Bonds and the
          Coupons constitute direct,  unconditional and, subject to Condition 3,
          unsecured  obligations  of the  Company  and  that the  Bonds  and the
          Coupons  rank and  will  rank pari  passu  and  rateably  without  any
          preference or priority among  themselves and,  subject to Condition 3,
          rank and will rank pan passu with all other outstanding  unsecured and
          unsubordinated obligations of the Company, present and future, but, in
          the  event  of the  insolvency  of the  Company,  only  to the  extent
          permitted  by  applicable   laws   relating  to   creditors'   rights.

                                       15
<PAGE>

     3    Guarantee

     3.1  Guarantor's   liability:   The  Guarantor   hereby   irrevocably   and
          unconditionally guarantees to the Trustee the due and punctual payment
          by the Company of all moneys  payable  from time to time in respect of
          the  Original  Bonds  and the  Original  Coupons  (including,  without
          prejudice to the generality of the foregoing,  all additional  amounts
          payable  pursuant to Condition  8) and all other  moneys  payable from
          time to time under or pursuant to these presents as follows:

          (a)  if and whenever the Company  shall make default in the payment of
               any such  moneys,  the  Guarantor  shall  forthwith  upon written
               demand therefor by the Trustee  irrevocably  and  unconditionally
               pay to or to the order of the Trustee in  sterling  the amount in
               respect of which such  default has been made and any  payment so
               made  shall to such  extent  cure  such  default  by the  Company
               subject as provided in Clauses 2.3,  2.4 and 2.5, the  provisions
               of which Clauses shall apply mutatis mutandis to such payment;

          (b)  as a separate and independent  stipulation  the Guarantor  agrees
               that  any  such  moneys  which  may not be  recoverable  from the
               Company  by  reason  of  any  legal  limitation,   disability  or
               incapacity on or of the Company or any other fact or circumstance
               shall  nevertheless  be recoverable  from the Guarantor as though
               the same had been  incurred by the  Guarantor  and the  Guarantor
               were the sole and principal  debtor in respect  thereof and shall
               be paid by the Guarantor  forthwith upon written demand  therefor
               by  the  Trustee.  The  Guarantor  shall  not  be  exonerated  or
               discharged  from  liability  by time  being  given,  or any other
               indulgence or  concession  being  granted,  to the Company by the
               Trustee  or  by  the   Original   Bondholders   or  the  Original
               Couponholders  or any of them or by anything  done by the Trustee
               in  exercise  of  any  of  the  trusts,  powers,  authorities  or
               discretions vested in it by these presents or by anything

                                       16
<PAGE>

               which the Original  Bondholders or the Original  Couponholders or
               the  Trustee or any of them may do or omit or neglect to do or by
               any other dealing or thing which,  but for this provision,  might
               operate  to  exonerate  or  discharge  the  Guarantor   from  its
               obligations  hereunder.  It is further  agreed as a separate  and
               independent  stipulation  that any sums of money which may not be
               recoverable  from the  Guarantor  on the  footing of a  guarantee
               whether  by reason of any legal  limitation,  disability  or. any
               other  fact or  circumstances  and  whether  or not  known to the
               Trustee or the Original Bondholders or the Original Couponholders
               or any  of  them  shall  nevertheless  be  recoverable  from  the
               Guarantor  as sole or  principal  debtor in respect  thereof  and
               shall be paid by the  Guarantor  to the  Trustee  forthwith  upon
               written demand therefor by the Trustee;

          (c)  this guarantee  shall be a continuing  guarantee and  accordingly
               shall remain in operation until all such moneys have been paid or
               satisfied  in  full  and  shall  be in  addition  to  and  not in
               substitution  for, and shall not be affected by, any other rights
               which the Trustee or the  Original  Bondholders  or the  Original
               Couponholders or any of them may have under or by virtue of these
               presents and may be enforced without first having recourse to any
               such rights and without taking any steps or  proceedings  against
               the Company;

          (d)  the  Trustee  may  from  time to time  make  any  arrangement  or
               compromise with the Guarantor in relation to this guarantee which
               the Trustee may think fit;

          (e)  prior to the liquidation of the Company, the Guarantor shall not,
               without the prior  written  consent of the  Trustee,  at any time
               after  default has been made by the Company in the payment of any
               such moneys and so long as any moneys  payable  from time to time
               by the  Guarantor  in respect  of such  defaulted  moneys  remain
               unpaid,  exercise  in  respect  of any  amounts  paid  under this
               guarantee  any  right  of  subrogation,

                                       17

<PAGE>

               indemnity or reimbursement or any other right or remedy which the
               Guarantor may have in respect of or as a result of such payment;

          (f)  in the event of the  liquidation  of the  Company,  if any moneys
               shall then be payable by the Guarantor under this guarantee,  the
               Guarantor  will,  until all such moneys payable from time to time
               in respect of the Original Bonds and the Original Coupons and all
               other moneys payable from time to time under or pursuant to these
               presents  have been  paid in full,  hold the  benefit  of all its
               claims  against  the  Company  upon  trust to pay the same to the
               Trustee and shall  prove for such claims  against the Company and
               the Guarantor hereby irrevocably authorises the Company to pay to
               the Trustee, to the extent that all such moneys payable from time
               to time in respect of the Original Bonds and the Original Coupons
               and all other moneys  payable under or pursuant to these presents
               shall not have been paid in full,  all  moneys  due in respect of
               such claims;

          (g)  if any payment received by the Trustee or any Original Bondholder
               or Original  Couponholder pursuant to the provisions hereof shall
               be avoided  under any laws  relating to  bankruptcy,  insolvency,
               corporate  reorganisation  or other similar events,  such payment
               shall not be  considered as having  discharged or diminished  the
               liability of the Guarantor,  and this guarantee shall continue to
               apply as if such payment had at all times  remained  owing by the
               Company and the  Guarantor  shall  indemnify  the Trustee and the
               Original  Bondholders  and  Original   Couponholders  in  respect
               thereof.

     3.2  No payments  by Company:  If any moneys  shall  become  payable by the
          Guarantor  under the  guarantee,  this Company  shall not (save in the
          event  of the  liquidation  of the  Company),  so long as such  moneys
          remain unpaid, pay any moneys for the time being due by the Company to
          the Guarantor.

                                       18
<PAGE>

     3.3  Consents  and  authorisations:  If at any  time any  authorisation  or
          approval  becomes  necessary to permit the Guarantor to pay any moneys
          payable  from time to time in  respect  of the  Original  Bonds or the
          Original  Coupons or under or pursuant to these presents in accordance
          with the terms of these  presents  as a result of any  change  in, any
          change in the official  application  of, or any amendment to, the laws
          or regulations of the United  Kingdom,  the Guarantor  shall forthwith
          apply for the necessary  authorisation  and approval and shall provide
          copies of such  application  as soon as reasonably  practicable to the
          Trustee.  The Guarantor shall provide copies of such authorisation and
          approval to the Trustee as soon as they are obtained.

     3.4  Application  of moneys  received by  Trustee:  Any amount from time to
          time received by the Trustee under this guarantee  shall be applied by
          the Trustee in accordance with the provisions of Clause 7.

     3.5  Nature of obligations: The Guarantor hereby covenants with the Trustee
          that the obligations of the Guarantor under this guarantee  constitute
          direct,   unconditional   and,   subject  to  Condition  3,  unsecured
          obligations  of the  Guarantor  and,  subject to Condition 3, rank and
          will  rank  pan  passu  with  all  other  outstanding   unsecured  and
          unsubordinated  obligations of the Guarantor,  present and future but,
          in the event of the  insolvency of the  Guarantor,  only to the extent
          permitted by applicable laws relating to creditors' rights.

     4    Forms of Original Bonds and Original Coupons

     4.1  Original  Global  Bond:  The  Original  Bonds 2005 will  initially  be
          represented  by the Original  Global Bond 2005 and the Original  Bonds
          2020 will initially be  represented by the Original  Global Bond 2020,
          each in the principal amount of  (pound)100,000,000  and each of which
          will be exchangeable for relevant  individual Original Bonds (serially
          numbered)  in  denominations  of   (pound)1,000,   (pound)10,000   and
          (pound)100,000  each with Coupons  attached as set out in the relevant
          Original  Global Bond.  The Company shall issue each  Original  Global
          Bond  to a bank  depositary

                                       19

<PAGE>

          common to both Euroclear and Cedel on terms that such depositary shall
          hold the same for the account of the persons  who would  otherwise  be
          entitled to receive the Original Bonds (as notified to such depositary
          by the  Principal  Paying  Agent) and the  successors in title to such
          persons as  appearing  in the records of  Euroclear  and Cedel for the
          time being.  The Company  shall issue the relevant  Original  Bonds in
          exchange for the relevant Original Global Bond only in accordance with
          the provisions  thereof.  Pending exchange of an Original Global Bond,
          its holder will be deemed to be the holder of the relevant  individual
          Original Bonds and Original Coupons for all purposes.

     4.2  Original Bonds and Original Coupons: The Certificates representing the
          Original  Bonds and the Original  Coupons will be security  printed in
          accordance  with  the  applicable  stock  exchange  requirements.  The
          individual Certificates representing Original Bonds 2005, the Original
          Global  Bond  2005  and  the  Original  Coupons  2005  will  be  in or
          substantially  in the respective  forms set out in Parts I, II and III
          of Schedule 1 and the  Original  Bonds 2005 will be endorsed  with the
          Conditions  set  out  in  Schedule  2.  The  individual   Certificates
          representing  Original Bonds 2020, the Original  Global Bond 2020, the
          Original  Coupons  2020 and the  Original  Talons  2020  will be in or
          substantially  in the respective forms set out in Parts I, II, III and
          IV of Schedule 3 and the Original Bonds 2020 will be endorsed with the
          Conditions  set out in Schedule 4. Title to the Original Bonds and the
          Original Coupons shall pass by delivery.

     4.3  Signature:  Each  Original  Global  Bond  and  individual  Certificate
          representing  Original  Bonds  and  Original  Coupon  will  be  signed
          manually  or in  facsimile  by two  Directors  of the  Company and two
          Directors of the Guarantor and will be  authenticated  by or on behalf
          of the Principal  Paying Agent.  The Company and the Guarantor may use
          the  facsimile  signature  of any  person  who is at the  date of this
          Master  Trust  Deed  a  Director  of  the  Company  or  the  Guarantor
          respectively even if at the time of issue of any Original Global Bond,
          individual Certificate  representing Original Bonds or Original Coupon
          he no longer holds such office. An Original Global Bond, an individual
          Certificate representing

                                       20
<PAGE>

          Original  Bonds or an Original  Coupon  which is not so  executed  and
          authenticated shall not be valid for any purpose. Each Original Global
          Bond  and  individual  Certificate  representing  Original  Bonds  and
          Original  Coupon  which shall be so executed and  authenticated  shall
          represent valid binding and enforceable obligations of the Company and
          of the Guarantor.

     4.4  Issue:  Issue and delivery of the Original  Bonds shall be complete on
          the issue and  delivery of the  relevant  Original  Global Bond to the
          depositary referred to in Clause 4.1 (or its representative) by, or at
          the order of, the Company and the Guarantor.

     4.5  Bondholder  deemed to be absolute owner:  The Company,  the Guarantor,
          the  Trustee and the Agents may (to the fullest  extent  permitted  by
          applicable  laws) deem and treat the holder of any Bond and the holder
          of any Coupon as the absolute  owner of such Bond or such  Coupon,  as
          the case may be, for all  purposes  (whether  or not such Bond or such
          Coupon shall be overdue and notwithstanding any notice of ownership or
          writing thereon or any notice of previous loss or theft thereof),  and
          the Company,  the  Guarantor,  the Trustee and the Agents shall not be
          affected by any notice or other matter to the contrary,  and shall not
          be liable to anyone for so treating such holder.  All payments made to
          any such holder shall be valid and, to the extent of the sums so paid,
          effective  to  satisfy  and  discharge  the  liability  for the moneys
          payable upon such Bond or Coupon, as the case may be.

     5    Stamp duties and taxes

     5.1  Stamp duties:  The Company  (failing which the Guarantor) will pay any
          capital,  stamp, issue,  registration,  documentary and other similar
          taxes and duties and all costs and  expenses,  including  interest and
          penalties,  payable in the United  Kingdom,  Belgium and Luxembourg in
          respect of the creation,  constitution, issue and original offering of
          the Bonds and the  Coupons,  and the  execution  and delivery of these
          presents. The Company (failing which the Guarantor) will also

                                       21
<PAGE>

          indemnify the Trustee,  the Bondholders and the Couponholders from and
          against all stamp,  issue,  registration,  documentary and other taxes
          and duties  paid by any of them in any  jurisdiction  in  relation  to
          which the  liability to pay arises  directly as a result of any action
          taken by or on behalf of the  Trustee  or, as the case may be,  (where
          entitled  under  Condition  11  to  do  so)  the  Bondholders  or  the
          Couponholders  to  enforce  the  obligations  of  the  Company  or the
          Guarantor under these presents.

     5.2  Change of taxing  jurisdiction:  If the Company  and/or the  Guarantor
          becomes subject generally to the taxing  jurisdiction of any territory
          or any  political  subdivision  or authority  of or in that  territory
          having power to tax other than or in addition to the United Kingdom or
          any political  sub-division  or authority of or in the United Kingdom,
          the  Company and the  Guarantor  will  (unless  the Trustee  otherwise
          agrees)  give  to the  Trustee  an  undertaking  in  form  and  manner
          satisfactory  to the  Trustee in terms  corresponding  to the terms of
          Condition 8 with the  substitution  for,  or,  where  applicable,  the
          addition to, the references in that Condition to the United Kingdom of
          references  to  that  other  or  additional   territory  or  political
          sub-division  or  authority  to the taxing  jurisdiction  of which the
          Company  and/or  the  Guarantor  (as the  case may be) has  become  so
          subject and in such event these presents will be read accordingly.

     6    Further Bonds

     6.1  Liberty to  create:  The  Company  may from time to time  without  the
          consent of the Bondholders or  Couponholders  create and issue further
          bonds or notes or similar  securities,  in bearer or registered  form,
          ranking pari passu with the Original Bonds and either  having the same
          terms and  conditions as the Original Bonds in all respects (or in all
          respects  except  for the  amount of the  first  payment  of  interest
          thereon) or upon such terms and conditions as to interest, conversion,
          premium,  redemption and otherwise as the Directors of the Company may
          at the time of issue thereof determine.  Any such further bonds having
          the same terms and conditions as the Original Bonds in all respects or

                                       22
<PAGE>

          which  after the first  payment  of  interest  will have the same such
          terms and conditions shall (if applicable, after such first payment of
          interest) be  consolidated  and form a single series with the Original
          Bonds and any Further  Bonds forming a single series with the Original
          Bonds.

     6.2  Means of  constitution:  Any Further Bonds created and issued pursuant
          to Clause  6. 1 so as to form  either  immediately  or after the first
          payment of interest a single series with the Original Bonds or Further
          Bonds of any series shall be  constituted  by a deed  supplemental  to
          these  presents  and  any  other  further  bonds,   notes  or  similar
          securities  created and issued  pursuant  to Clause 6.1 may,  with the
          consent  of the  Trustee,  be so  constituted.  The  Company  and  the
          Guarantor  shall  prior to the  issue of  Further  Bonds  execute  and
          deliver  to the  Trustee a deed  supplemental  to these  presents  (if
          applicable  duly stamped or denoted) and  containing a covenant by the
          Company in the form mutatis mutandis of Clause 2.3, and a guarantee by
          the Guarantor in the form mutatis mutandis of Clause 3, in relation to
          the principal  amount of and interest in respect of such Further Bonds
          and such  other  provisions  (corresponding  to any of the  provisions
          contained in these presents) as the Trustee shall require.

     6.3  Noting of supplemental  deeds: A memorandum of every such supplemental
          deed shall be endorsed by the Trustee on this Master Trust Deed and by
          the Company and the  Guarantor on each  duplicate of this Master Trust
          Deed.

     6.4  Notice of further issues:  Whenever it is proposed to create and issue
          any Further Bonds, the Company shall give to the Trustee not less than
          seven days' notice in writing of its  intention to do so,  stating the
          amount of Further Bonds proposed to be created and issued.

     6.5  Separate  series:  Any Further  Bonds not forming a single series with
          the  Original  Bonds or  Further  Bonds  of any  series  shall  form a
          separate series and accordingly, unless for any purpose the Trustee in
          its absolute discretion shall otherwise  determine,  the provisions of
          Clauses 1.1 (to the extent applicable),

                                       23
<PAGE>

          2.4,  2.5,  2.6,  4.3,  4.4,  4.5,  5 and 6.2 and of  Clauses  7 to 23
          (inclusive)  and Schedule 5 shall apply (if at all)  mutatis  mutandis
          separately and  independently to the Bonds of each series and shall be
          construed accordingly.

     7    Application of moneys received by Trustee

     7.1  Declaration  of trust:  All moneys  received by the  Trustee  under or
          pursuant to these presents will,  regardless of any  appropriation  of
          all or part of them by the Company or, in respect of amounts  received
          from the Guarantor,  the Guarantor,  be held by the Trustee upon trust
          to apply them (subject to Clause 7.2):

          (a)  first, in payment or satisfaction of all costs, charges, expenses
               and  liabilities  properly  incurred in or about the  exercise of
               powers conferred on the Trustee by these presents or otherwise in
               relation  to these  presents  and  payments  made by the  Trustee
               under any of the  provisions  contained in these presents and of
               all remuneration payable to the Trustee under these presents with
               interest  thereon (as  provided in Clause 10.4) and in payment or
               satisfaction of all amounts payable pursuant to these presents to
               any attorney,  manager, agent, delegate or other person appointed
               by or under these presents;

          (b)  secondly,  in payment of any principal and interest and all other
               sums owing in respect of the Bonds and the Coupons pari passu and
               rateably; and

          (c)  thirdly,  in payment of the  balance  (if any) to the Company for
               itself or, in respect of amounts received from the Guarantor, the
               Guarantor for itself.

          Without  prejudice to this Clause 7.1, if the Trustee holds any moneys
          which  represent  principal  or  interest  or other sums in respect of
          Bonds or Coupons

                                       24
<PAGE>

          which  have  become  void or in respect of which  claims  have  become
          prescribed  under  Condition 9, the Trustee will hold such moneys upon
          the above trusts.

          7.2  Accumulation:  If the amount of the moneys at any time  available
               for payment in respect of the Bonds under Clause 7.1 is less than
               10  per  cent  of  the   principal   amount  of  the  Bonds  then
               outstanding,  the  Trustee  may, at its  discretion,  invest such
               moneys in  accordance  with the  provisions  of Clause  7.3.  The
               Trustee may retain such  investments and accumulate the resulting
               income until the investments and the accumulations, together with
               any other  funds for the time  being  under  the  control  of the
               Trustee and available for such payment, amount to at least 10 per
               cent of the principal  amount of the Bonds then  outstanding  and
               then such  investments,  accumulations and funds (after deduction
               of any  applicable  taxes or provisions  made  therefor)  will be
               applied as specified in Clause 7.1.

          7.3  Investment:  Any moneys which under the trusts  herein  contained
               ought to or may be invested by the Trustee may be invested in the
               name  or  under  the  control  of  the  Trustee  in  any  of  the
               investments for the time being  authorised by English law for the
               investment   by  trustees  of  trust   moneys  or  in  any  other
               investments,  whether  similar to the aforesaid or not, which may
               be  selected  by the Trustee or by placing the same on deposit in
               the name or under the  control of the  Trustee  with such bank or
               other  financial  institution as the Trustee may, in its absolute
               discretion,  think  fit and the  Trustee  may at any time vary or
               transpose  any  of  such  investments  for  or  into  other  such
               investments  and shall not be responsible for any loss occasioned
               thereby whether by depreciation in value or otherwise.

          8    Covenants to comply with provisions

          8.1  Compliance  with  these  presents:  Each of the  Company  and the
               Guarantor  hereby  covenants with the Trustee that it will comply
               with and perform and observe all the provisions of these presents
               which are expressed to be binding

                                       25
<PAGE>

         on it (including those which may subsequently be determined to be
         illegal, invalid or unenforceable for any reason). The Trustee shall be
         entitled to enforce the obligations of the Company and the Guarantor
         under these presents.

          8.2  When Trustee  required to act:  The Trustee is hereby  authorised
               and it is declared  that the Trustee  shall be entitled to assume
               without  enquiry (in the absence of express written notice to the
               Trustee from the Company or. the  Guarantor,  as the case may be,
               to the  contrary)  that the  Company and the  Guarantor  are duly
               performing and observing all covenants and  provisions  contained
               in these presents and on their  respective  parts to be performed
               and  observed.  Notwithstanding  knowledge  by or  notice  to the
               Trustee of any breach of any such  covenant or provision it shall
               be in the  discretion  of the Trustee  whether or not to take any
               action or proceedings to enforce the performance  thereof and the
               Trustee  shall  not be  bound to  enforce  the same or any of the
               covenants or provisions of these presents unless and until in any
               of such  cases (but  subject to  Condition  10) the  Trustee,  is
               required to do so by an Extraordinary Resolution or in writing by
               the holders of not less than one-quarter part in principal amount
               of the Bonds for the time being outstanding, and then only if the
               Trustee  shall be  indemnified  to its  satisfaction  against all
               actions,  proceedings,  costs, claims and demands to which it may
               render itself liable and all costs, charges, damages and expenses
               which it may incur by so doing.  Only the Trustee may enforce the
               provisions of these presents. No Bondholder or Couponholder shall
               be entitled to proceed  directly  against the Company  unless the
               Trustee  having  become bound as  aforesaid  to take  proceedings
               fails so to do within a reasonable  period and such failure shall
               be continuing.

          9    Covenants

          9.1  So long as any  Bond is  outstanding,  the  Company  will and the
               Guarantor will procure that the Company will:

                                       26
<PAGE>

          (a)  Carry on and conduct its affairs in an efficient  manner and keep
               books of account:  at all times carry on and conduct its affairs,
               and procure that each of the Subsidiaries carries on and conducts
               its  affairs,  in a proper and  efficient  manner  and keep,  and
               procure  that each of the  Subsidiaries  keeps,  proper  books of
               account  and,  at any time  after the  occurrence  of an Event of
               Default or a  Potential  Event of Default or if the  Trustee  has
               reasonable  grounds to believe that any such event has  occurred,
               so far as permitted by applicable  law,  allow,  and procure that
               each of the  Subsidiaries  will  allow,  the  Trustee  and anyone
               appointed  by  it  to  whom  the  Company   and/or  the  relevant
               Subsidiary  has no  reasonable  objection  access to the books of
               account   of  the   Company   and/or  the   relevant   Subsidiary
               respectively  at all  reasonable  times  during  normal  business
               hours;

          (b)  Notice of  security  interests:  notify  the  Trustee in writing
               immediately  upon becoming aware that the provisions of Condition
               3 shall have become  applicable by reason of any  encumbrance  or
               security  interest  referred  to therein  being  created or being
               permitted to subsist or arising;

          (c)  Notice  of  Event of  Default:  notify  the  Trustee  in  writing
               immediately upon becoming aware of the occurrence of any Event of
               Default or Potential Event of Default;

          (d)  Information:  so far as permitted by applicable  law, give to the
               Trustee such  information  and assistance as it requires to carry
               out the trusts of these presents;

          (e)  Financial  statements  etc.:  send to the  Trustee  two copies or
               translations,  in each case in the English language,  of:

               (i)  all  accounts,  financial  statements  and reports for or in
                    respect  of any  annual,  half-yearly  or  other  period  in
                    respect of which any

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<PAGE>

               account, financial statement or report is prepared by the Company
               for issue to its  shareholders,  together  with any report of the
               Auditors thereon, as soon as practicable, and in any event within
               six months, after the last day of such period;

               (ii) all  notices,  statements,  circulars  and  other  documents
                    issued,  sent or given to  holders  of the  shares or of any
                    other securities of the Company (other than the Bonds) or of
                    any of the  Subsidiaries,  and which,  in the opinion of the
                    Trustee,  have a material  bearing on the  interests  of the
                    Bondholders,  when such documents are issued,  sent or given
                    to such holders; and

               (iii)  all notices, statements,  circulars  and  other  documents
                    issued, sent or given to Bondholders when such documents are
                    issued,  sent or given to Bondholders and prior thereto,  in
                    the case of any such document addressed to Bondholders, send
                    to the  Trustee  two copies of the form of such  document at
                    least 48 hours prior to publication,

               and so that:

               (a)  if and to the extent that any account,  financial  statement
                    or report referred to in paragraph (i) of this Clause 9.1(e)
                    shall not be prepared or adjusted on a basis consistent with
                    that used for the relevant preceding period, that fact shall
                    be stated in such account, financial statement or report (as
                    the case may be);

               (b)  any document  referred to in paragraph  (iii) in this Clause
                    9.1(e)  addressed to  Bondholders  shall be issued,  sent or
                    given  in a  form  previously  approved  in  writing  by the
                    Trustee  (such  approval,   unless  so  expressed,   not  to
                    constitute  approval  for the  purposes of section 57 of the
                    Financial Services Act 1986 of any such

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<PAGE>

                    notice  which is an  investment  advertisement  (as  therein
                    defined)); and

               (c)  any notice,  statement,  circular and other document issued,
                    sent or given to  Bondholders  shall  be so  issued  sent or
                    given in accordance with Condition 14;

                    (f)  Certificates of Directors:  send to the Trustee, within
                         ten days after a request by the  Trustee  therefor  and
                         also  (without  the  necessity  for  any  such  demand)
                         promptly  or in any event  within 14 days of its annual
                         audited  financial   statements  being  issued  to  its
                         shareholders,  a  certificate  signed  by  two  of  its
                         Directors  certifying  to the effect that,  having made
                         all reasonable enquiries, in the opinion of the persons
                         so certifying as at a date (the `Certification  Date"),
                         being not more than  five days  before  the date of the
                         certificate,  no Event of Default or Potential Event of
                         Default  had  occurred  since  the date of this  Master
                         Trust Deed or, if later, the Certification  Date of the
                         last such  certificate  (if any) and,  if such an event
                         had occurred, giving details of it;

                    (g)  Reports of Auditors:  procure that the Auditors furnish
                         to the  Trustee  such  reports and  information  as the
                         Trustee may request in connection  with any calculation
                         or matter arising under these presents;

                    (h)  Further acts: so far as permitted by applicable law, do
                         all such  further  things  as may be  necessary  in the
                         opinion of the Trustee to give effect to these presents
                         and to enable  the  Trustee  to carry out the trusts of
                         these presents;

                    (i)  Notice of late  payment:  forthwith  after a request by
                         the  Trustee  give  notice  to the  Bondholders  of any
                         unconditional  payment to the Trustee or the  Principal
                         Paying  Agent of any sum due in respect of the Bonds or
                         Coupons made after the due date for such payment;

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<PAGE>

                    (j)  Listing  of Bonds:  use all  reasonable  endeavours  to
                         maintain at its expense a listing or quotation  for the
                         Bonds on the London Stock Exchange  and/or on any other
                         stock exchange or securities  market on which the Bonds
                         shall for the time being be listed or quoted,  provided
                         that if, notwithstanding such endeavours,  it is unable
                         to do so or if the  terms  and  conditions  subject  to
                         which  such  listing or  quotation  is  maintained  are
                         agreed by the  Trustee in writing to be unduly  onerous
                         (whether  by reason of  expense or  otherwise)  and the
                         Trustee  is  satisfied   that  the   interests  of  the
                         Bondholders would not be thereby materially prejudiced,
                         the Company will instead use all reasonable  endeavours
                         to obtain  and  maintain  at its  expense a listing  or
                         quotation for the Bonds on such other stock exchange or
                         securities  market as it may  (with  the prior  written
                         approval of the Trustee)  decide and will promptly give
                         notice (in a form previously approved in writing by the
                         Trustee) to the Bondholders of any delisting or listing
                         or grant or loss of quotation  for the Bonds  occurring
                         hereafter (other than the initial listing on the London
                         Stock Exchange);

                    (k)  Change in  Agents:  give not less  than 14 days'  prior
                         notice  to  the   Bondholders  of  any  appointment  or
                         resignation or removal of any Agent or of any change by
                         any  Agent  of  its  specified  office,  in  each  case
                         occurring after the date of this Master Trust Deed, and
                         not make any such  appointment  or removal  without the
                         prior written approval of the Trustee;

                    (1)  Bonds held by the Company etc.:  send to the Trustee as
                         soon as  practicable  after being so  requested  by the
                         Trustee a  certificate  signed by two  Directors of the
                         Company setting out the total number of Bonds which, at
                         the date of such certificate, were held by or on behalf
                         of  the   Company   and   each   of  its   Subsidiaries
                         respectively and which had not been cancelled;

                                       30
<PAGE>

                    (m)  Early  redemption:  give  prior  written  notice to the
                         Trustee  of  any   proposed   redemption   pursuant  to
                         Condition  6(B)  or (C)  and,  if it  gives  notice  to
                         Bondholders  of its  intention  to  redeem  any  Bonds
                         pursuant to Condition  6(B), make selections by lot (if
                         appropriate) and redeem Bonds accordingly;

                    (n)  Agency  Agreement:  comply  with  and  perform  all its
                         obligations  under  the  Agency   Agreement,   use  all
                         reasonable  endeavours  to  procure  that  each  of the
                         Agents  complies  with  and  performs  its  obligations
                         thereunder, not take any steps to prevent compliance by
                         the Agent in  accordance  with the terms of the  Agency
                         Agreement and not amend or modify the Agency  Agreement
                         without the prior written consent of the Trustee;

                    (o)  Availability   of   information:   make  available  for
                         inspection  at the  specified  offices  of  the  Agents
                         copies  of  the  accounts,   financial  statements  and
                         reports  referred to in Clause  9.1(d) as from the date
                         of issue thereof to the Company's shareholders;

                    (p)  Cedel and Euroclear:  use all reasonable  endeavours to
                         provide  assistance  to Cedel and/or  Euroclear (as the
                         case  may be) in the  issuance  of any  certificate  or
                         other  document  requested by the Trustee  under Clause
                         11(q) as soon as practicable after such request;

                    (q)  Filings:  duly and  punctually  comply  with or procure
                         that there is complied  with all filing,  reporting and
                         similar   requirements   required  in  accordance  with
                         applicable  English  law and  regulations  from time to
                         time  relating in any manner  whatsoever  to the Bonds,
                         and  deliver to the  Trustee  two copies of all orders,
                         directions  notices given or made to the Company by the
                         London Stock  Exchange and any other stock  exchange or
                         securities market on which the Bonds shall for the time
                         being be listed

                                       31
<PAGE>

                         or quoted (other than of a purely procedural, routine
                         or technical nature) together, if applicable, with
                         English language translations thereof;

                    (r)  Principal  Subsidiaries:  give to the Trustee within 14
                         days of its annual audited  financial  statements being
                         issued to its shareholders and also within 14 days of a
                         request by the  Trustee,  either a  certificate  by the
                         Auditors listing the Principal  Subsidiaries  which, as
                         at the last day of the latest completed  financial year
                         of the  Company  or as at the  date  specified  in such
                         request, were the consolidated  Principal  Subsidiaries
                         or, if the Company has no such Principal  Subsidiaries,
                         a certificate to that effect signed by two Directors of
                         the Company.

          9.2  Covenants by the Guarantor:  The Guarantor  hereby covenants with
               the Trustee in the terms of Clauses  9.1(a),  (b), (c), (d), (e),
               (f),  (g),  (h),  (k),  (1),  (n),  (o),  (p),  (q) and (r) as if
               references  to  the  Company  therein  were  references  to  the
               Guarantor.  So long as any Bond is outstanding the Guarantor will
               send to the Trustee a certificate of the Guarantor  signed by two
               of its Directors:

               (a)  specifying  details  of any  modification  to the  terms and
                    conditions  of  the  PES  Licence,  such  certificate  to be
                    provided promptly upon any such modification being made; and

               (b)  specifying any higher figure  determined by the Director (as
                    defined in the PES Licence) as is mentioned in Condition 10,
                    such  certificate  to be  provided  within  five days of the
                    Director determining such figure by notice in writing to the
                    Secretary  of State (as defined in the PES  Licence) and the
                    Guarantor.

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<PAGE>

          10   Remuneration and indemnification of Trustee

          10.1 Normal  remuneration:  So long as any  Bond  is  outstanding  the
               Company  (failing which the Guarantor) will pay to the Trustee by
               way of  remuneration  for its services as Trustee such sum as may
               from time to time be agreed between them. Such  remuneration will
               accrue from day to day from the date of this Trust Deed until the
               trusts of these  presents  shall be finally wound up and shall be
               payable on such dates as shall be agreed  between the Company and
               the  Trustee.  Upon the issue of any Further  Bonds,  the rate of
               remuneration  in  force   immediately   prior  thereto  shall  be
               increased  by such  amount,  and as from such  date,  as shall be
               agreed between the Company and the Trustee.

          10.2 Extra remuneration:  At any time after the occurrence of an Event
               of Default  or a  Potential  Event of  Default or if the  Trustee
               finds it expedient in the interests of  Bondholders or necessary,
               or if the Trustee is requested by the Company or the Guarantor to
               undertake  duties  which  the  Trustee  and  the  Company  or the
               Guarantor  (as the  case may be)  agree  to be of an  exceptional
               nature or otherwise outside the scope of the normal duties of the
               Trustee  under these  presents,  the Company  (failing  which the
               Guarantor) will pay such additional remuneration as may be agreed
               between the Company and the Trustee or,  failing  agreement as to
               any of the  matters  in this  Clause  10.2  (or as to  such  sums
               referred  to in Clause 10.  1), as  determined  by a merchant  or
               investment bank in London of international repute selected by the
               Trustee and approved by the Company or,  failing  such  approval,
               nominated on the  application by the Trustee by the President for
               the time being of The Law Society of England and Wales. In making
               its  determination  such merchant or investment bank shall act as
               an expert and not as an arbitrator and its  determination of such
               matter shall, in the absence of manifest error, be conclusive and
               binding  on  the  Company,   the  Guarantor,   the  Trustee,  the
               Bondholders  and the  Couponholders.  The  expenses  involved  in
               appointing  such  merchant  or  investment  bank and the fees and
               expenses of the merchant or investment  bank shall be paid by the
               Company (failing which by the Guarantor).

                                       33
<PAGE>

          10.3 Expenses:  The Company (failing which by the Guarantor) will also
               pay or  discharge on a full  indemnity  basis (in priority to any
               payment  to the  Bondholders  and the  Couponholders)  all costs,
               charges,  liabilities  and  expenses  properly  incurred  by  the
               Trustee in relation to the  preparation  and  execution  of these
               presents and the carrying out of the trusts of these presents and
               the exercise of the powers, authorities and discretions vested in
               the Trustee by or pursuant to these presents,  including, but not
               limited to, Legal and travelling  expenses and any stamp,  issue,
               registration,  documentary  or other  taxes or duties paid by the
               Trustee  in  connection  with any legal  proceedings  brought  or
               contemplated  by the Trustee against the Company or the Guarantor
               for enforcing any obligation under these presents.

          10.4 Payment of Expenses:  All such costs,  charges,  liabilities  and
               expenses incurred by the Trustee and payments made referred to in
               Clause 10 will be payable or reimbursable by the Company (failing
               which the Guarantor) on a full indemnity  basis within 14 days of
               demand by the Trustee and:

               (i)  in the case of payments  made by the  Trustee  prior to such
                    demand will carry interest from the date on which the demand
                    is made at the rate of 2 per cent  per  annum  over the base
                    rate for the time being of Barclays Bank PLC; and

               (ii) in all other cases will carry  interest at such rate from 30
                    days after the date on which the demand is made or where the
                    demand  properly  specifies that payment is to be made on an
                    earlier date from such earlier date.

          10.5 Indemnity:   The  Company  (failing  which  the  Guarantor)  will
               indemnify  the  Trustee  (in  priority  to  any  payment  to  the
               Bondholders and the  Couponholders) in respect of all liabilities
               and expenses properly incurred by the Trustee in the carrying out
               of the trusts of these  presents  or by anyone  appointed  by the
               Trustee or to whom any of the  functions  of the  Trustee  may be
               delegated by the

                                       34
<PAGE>

     Trustee in such  carrying  out of the trusts of these  presents and against
     any loss, liability, cost, claim, action, demand or expense (including, but
     not  limited  to, all costs,  charges  and  expenses  paid or  incurred  in
     disputing or defending any of the foregoing)  which the Trustee or any such
     person may  properly  incur or which may be made against the Trustee or any
     such  person,  arising out of or in relation to or in  connection  with the
     appointment of the Trustee or any such person and any thing done or omitted
     by the Trustee in such  carrying out of the trusts of these  presents or by
     any such person under or pursuant to such  delegation,  provided  that such
     indemnity  shall not  extend to any such  loss,  ~liability,  cost,  claim,
     action,  demand or expense  incurred  or  suffered by any agent or delegate
     appointed by the Trustee in the event of  negligence  or wilful  default of
     such agent or delegate. The Trustee may retain and pay out of any moneys in
     its hands  arising  from the  carrying  out of the trusts of, or  otherwise
     trusts under,  these  presents all sums  necessary to effect such indemnity
     and also the remuneration of the Trustee as herein before provided.

          10.6 Value added tax: The Company  (failing which the Guarantor) shall
               pay to the Trustee (in priority to any payment to the Bondholders
               and the  Couponholders) an amount equal to any value added tax or
               similar  tax  chargeable  in respect of any payment to be made to
               the Trustee under these presents.

          10.7 Provisions  continuing:  The  provisions  of Clauses 10.3 to 10.6
               (inclusive) will continue in full force and effect in relation to
               the Trustee even if it may have ceased to be Trustee.

          10.8 The  Trustee  shall be  entitled in its  absolute  discretion  to
               determine in respect of which series of Bonds any costs, charges,
               liabilities  and  expenses  incurred  under or  pursuant to these
               presents  have  been  incurred  or to  allocate  any such  costs,
               charges,  liabilities and expenses between the Original Bonds and
               any Further Bonds of any series.

                                       35
<PAGE>

          11   Provisions supplemental to Trustee Act 1925

          By   way of  supplement  to  the  Trustee  Act  1925  it is  expressly
               declared in the terms of the following  provisions of this Clause
               11:

          (a)  Advice:  The  Trustee  may in  carrying  out the  trusts of these
               presents act on the opinion or advice of, or information obtained
               from,  any  accountant,   lawyer,   valuer,   surveyor,   broker,
               auctioneer or other expert,  whether obtained by the Company, the
               Guarantor or the Trustee,  and will not be  responsible to anyone
               for any loss occasioned by so acting. Any such opinion, advice or
               information may be sent or obtained by letter,  telephone,  telex
               or  facsimile or cable  transmission  and the Trustee will not be
               liable to anyone for acting in good faith on any opinion,  advice
               or information purporting to be conveyed by such means even if it
               contains some error or is not authentic.

          (b)  Notification of execution:  The Trustee need not notify anyone of
               the execution of these presents.

          (c)  Resolutions of  Bondholders:  The Trustee will not be responsible
               for having  acted in good faith upon a resolution  purporting  to
               have been passed at a meeting of Bondholders (in respect of which
               minutes  have been made and  signed)  even though it may later be
               found that there was a defect in the constitution of such meeting
               or in the procedures thereat or in the signing of such resolution
               or that  such  resolution  was not  valid  or  binding  upon  the
               Bondholders or Couponholders for any reason whatsoever.

          (d)  Certificate signed by Directors: The Trustee may call for and may
               accept  as  sufficient  evidence  of any  fact or  matter  or the
               expediency  of any act a  certificate  signed by two Directors of
               the Company or of the  Guarantor  certifying  to the effect that,
               having made all reasonable enquiries, in the

                                       36

<PAGE>

               opinion of the  persons so  certifying  such fact or matter is as
               stated in the  certificate  or such act is  expedient  and in any
               such case and in the case of any  certificate  given under Clause
               9.1(f) or  15.2(a)(iv)  the Trustee may rely  absolutely  on such
               certificate  and need not call for any further  evidence and will
               not be responsible  for any loss that may be occasioned by it not
               calling  for  further  evidence  or  by it  acting  on  any  such
               certificate.

          (e)  Deposit of documents:  The Trustee may deposit these presents and
               any other  documents  in any part of the world with any banker or
               banking   company  or  entity  the  business  of  which  includes
               undertaking  the safe  custody of documents or with any lawyer or
               firm of lawyers  believed by it to be of good repute,  may at its
               discretion  make  any  such  arrangements  as it  thinks  fit for
               allowing  the  Company  or  the  Guarantor   access  to,  or  its
               solicitors or auditors access to or possession of, such documents
               and the  Trustee  shall not be  responsible  for or  required to
               insure against loss, liability,  claim, action, demand or expense
               incurred in connection with any such deposit, access or provision
               and may pay all sums to be paid on  account  of or in  respect of
               any such  deposit,  provided  that,  unless in the opinion of the
               Trustee it is required in connection  with the enforcement of any
               obligation of the Company or the Guarantor  under these  presents
               or otherwise in connection with the carrying out of the trusts of
               these  presents or unless it comprises  the holding or placing of
               such documents in the United Kingdom the Trustee may not take any
               such action if a liability to stamp duty or other duties or taxes
               would thereby arise.

          (f)  Discretion of Trustee:  Save as otherwise  expressly  provided in
               these presents,  the Trustee will have absolute and  uncontrolled
               discretion  as to the  exercise  of the powers,  authorities  and
               discretions conferred on, and the functions of, the Trustee under
               these  presents,  will not be responsible to anyone for any loss,
               liability, cost, claim, action, demand, expenses

                                       37
<PAGE>

               or  inconvenience   which  may  result  from  their  exercise  or
               non-exercise  and any such  exercise or  non-exercise  shall,  as
               between the Trustee and the Bondholders and the Couponholders, be
               conclusive and binding on the Bondholders and the Couponholders.

          (g)  Agents:  The Trustee  may, in the  carrying  out of the trusts of
               these presents,  instead of acting personally,  employ and pay an
               agent  believed  by it to be of  good  repute,  whether  or not a
               lawyer or other professional  person, to transact or conduct,  or
               concur in transacting  or  conducting,  any business and to do or
               concur in doing any acts  required  to be done by the  Trustee in
               carrying  out of the  trusts  of these  presents  (including  the
               receipt  and  payment of money) and any  Trustee  being a lawyer,
               accountant,  broker or other person  engaged in any profession or
               business  shall be  entitled  to  charge  and be paid all  usual
               professional  and other charges for business  transacted and acts
               done by him or his firm in  connection  with the  trusts of these
               presents  (including  matters which ought to or should have been
               attended to in person by a trustee not being engaged in any trade
               or  profession)  and also his  reasonable  charges in addition to
               disbursements  for all other work and business  done and all time
               spent by him or his firm in  connection  with matters  arising in
               connection  with  these  presents.   The  Trustee  shall  not  be
               responsible  to anyone for any  misconduct or omission or default
               on the part of any such  agent so  employed  by it or be bound to
               supervise the proceedings or acts of any such agent.

          (h)  Delegation: The Trustee may, in the execution and exercise of all
               or any of the trusts, powers,  authorities and discretions vested
               in it by these  presents and the  Conditions,  act by responsible
               officers  or a  responsible  officer  for the  time  being of the
               Trustee, and the Trustee may also whenever it thinks it expedient
               in the interests of the Bondholders, whether by power of attorney
               or  otherwise,  and  after  such  consultation  (if any) with the
               Company and the Guarantor as the Trustee may

                                       38
<PAGE>

               consider to be practicable, delegate to any person or fluctuating
               body of persons all or any of the trusts, powers, authorities and
               discretions vested in it by these presents and the Conditions and
               any such  delegation  may be made upon such terms and  conditions
               and subject to such regulations (including power to sub-delegate)
               as the Trustee may think fit and provided  that the Trustee shall
               have exercised reasonable care in the selection of such delegate,
               it shall not be bound to supervise, the proceedings and shall not
               in any way or to any extent be responsible  for any loss incurred
               by any  misconduct  or  default on the part of such  delegate  or
               sub-delegate. The Trustee shall give prompt notice to the Company
               and the Guarantor of the appointment (and termination thereof) of
               any  delegate as  aforesaid  and shall  procure that any delegate
               shall also give prompt notice to the Company and the Guarantor of
               any sub-delegate.  Notwithstanding the above, the Trustee may not
               delegate the right to give written notice to the Company that the
               Bonds are  immediately  due and  repayable  unless  prior to such
               delegation the Trustee  provides to the Company and the Guarantor
               confirmation  in writing that the Trustee has been advised by its
               legal advisers that it should delegate the right (with or without
               any other rights, trusts, powers, authorities and discretions) to
               another  person  or  fluctuating  body of  persons  because  of a
               conflict  of interest  or  possible  conflict of interest  and/or
               other similar  circumstances  which the Trustee might face, or be
               subjected to, as the trustee of these  presents if it were not to
               delegate that right.

          (i)  Forged Bonds: The Trustee will not be liable to the Company,  the
               Guarantor or any Bondholder or  Couponholder  by reason of having
               accepted as valid or not having rejected any Certificate,  Coupon
               or other document  relating to any Bond purporting to be such and
               later found to be forged or not authentic.

                                       39
<PAGE>

          (j)  Confidentiality:  Unless ordered to do so by a court of competent
               jurisdiction,  the  Trustee  shall not be required to disclose to
               any Bondholder or Couponholder any confidential, financial, price
               sensitive or other  information  made available to the Trustee by
               the Company or the  Guarantor or any of the  Subsidiaries  and no
               Bondholder or  Couponholder  shall be entitled to take any action
               to obtain  from the Trustee  any such  information  (and for this
               purpose any unpublished accounts and other unpublished  financial
               information of or concerning the Company, the Guarantor or any of
               the Subsidiaries shall be considered to be confidential).

          (k)  Determinations  conclusive: As between itself and the Bondholders
               and Couponholders,  the Trustee shall have power to determine all
               questions and doubts arising in relation to any of the provisions
               of these presents.  Every such  determination,  whether made upon
               such a  question  actually  raised  or  implied  in the  acts  or
               proceedings of the Trustee, shall be conclusive in the absence of
               manifest error and shall bind the Trustee,  the Bondholders,  the
               Couponholders  and  all  other  persons  interested  under  these
               presents.

          (l)  Currency  conversion:  Where  it is  necessary  or  desirable  to
               convert any sum from one  currency to another,  it shall  (unless
               otherwise  provided  under these  presents or required by law) be
               converted at such rate or rates,  in accordance  with such method
               and as at such date as may be specified by the Trustee but having
               regard to current  rates of  exchange,  if  available.  Any rate,
               method and date so specified will be binding on the Company,  the
               Guarantor, the Bondholders and the Couponholders.

          (m)  Events of Default and other  events:  The  Trustee may  determine
               whether or not a default in the  performance or observance by the
               Company or the Guarantor of any of their  respective  obligations
               is in its  opinion  capable of remedy  and/or  whether or not any
               event is in its opinion materially

                                       40
<PAGE>

               prejudicial to the interests of the Bondholders or has a material
               adverse  effect on the  Company's or the  Guarantor's  ability to
               perform  or to comply  with any of its  obligations  under  these
               presents.  Any such  determination will be conclusive and binding
               upon  the  Company,  the  Guarantor,   the  Bondholders  and  the
               Couponholders.  Notwithstanding the foregoing  provisions of this
               Clause  11.1(m) or any other  provisions of these  presents,  the
               Trustee shall not be bound to take any steps to ascertain whether
               or not any  Event of  Default  or  Potential  Event  of  Default,
               Negative  Rating  Event,  Restructuring  Event or any event which
               could  lead  to  the   occurrence   of  or  could   constitute  a
               Restructuring  Event has occurred and, until it shall have actual
               knowledge  or express  notice  pursuant to these  presents to the
               contrary,  the Trustee  shall be entitled to assume that no Event
               of Default,  Potential  Event of Default,  Negative Rating Event,
               Restructuring Event or any other such event has occurred and that
               each of the Company and the Guarantor is observing and performing
               all its obligations under these presents.

          (n)  Payment  for and  delivery  of  Bonds:  The  Trustee  will not be
               responsible  for the receipt or application by the Company of the
               proceeds of the issue of the Bonds,  the exchange of interests in
               the  Global  Bond  for  individual   Bonds  or  the  delivery  of
               individual Bonds to the persons entitled to them.

          (o)  Bonds held by the Company  etc: In the  absence of  knowledge  or
               express  notice to the contrary,  the Trustee may assume  without
               enquiry  that no Bonds or Coupons  are for the time being held by
               or on  behalf  of  the  Company,  the  Guarantor  or  any  of the
               Subsidiaries  and that none of such  companies has any beneficial
               interest therein.

          (p)  Interests of Bondholders:  In connection with the carrying out of
               the trusts of these  presents  (including,  but not  limited  to,
               those  in  relation  to  any  proposed  modification,  waiver  or
               authorisation of any breach or

                                       41

<PAGE>

               proposed breach of any of the Conditions or any of the provisions
               of these presents or any proposed substitution in accordance with
               Clause 15), the Trustee shall have regard to the interests of the
               Bondholders as a class and in particular,  but without  prejudice
               to the generality of the foregoing,  shall not have regard to the
               consequences   of  such  exercise  for   individual   Bondholders
               resulting from their being for any purpose  domiciled or resident
               in, or otherwise  connected with, or subject to the  jurisdiction
               of,  any  particular  territory  or  any  political  sub-division
               thereof or  otherwise  to the tax  consequences  thereof  and the
               Trustee  shall  not  be  entitled  to  require,   nor  shall  any
               Bondholder  or  Couponholder  be  entitled  to  claim,  from  the
               Company,  the  Guarantor,  the  Trustee  or any other  person any
               indemnification or payment of or in respect of any tax arising in
               consequence of any such exercise upon  individual  Bondholders or
               Couponholders  except to the extent  provided  for in Condition 8
               and/or  in  any  undertaking  given  in  addition  thereto  or in
               substitution therefor pursuant to these presents.

          (q)  Cedel and Euroclear:  The Trustee may call for any certificate or
               other  document  to be  issued  by Cedel or  Euroclear  as to the
               principal  amount of Bonds  represented by a Global Bond standing
               to the  account  of any  person.  Any such  certificate  or other
               document  shall be conclusive  and binding for all purposes.  The
               Trustee  shall not be  liable  to any  person by reason of having
               accepted as valid or not having rejected any certificate or other
               document  to such  effect  purporting  to be  issued  by Cedel or
               Euroclear and subsequently found to be forged or not authentic.

     12   Trustee liable for breach of trust

          Nothing in these presents  shall, in any case in which the Trustee has
          failed to show the  degree  of care and  diligence  required  of it as
          Trustee having regard to the  provisions of these presents  conferring
          on the Trustee  any powers,  authorities  or  discretions,  exempt the
          Trustee from, or indemnify it against, any

                                       42

<PAGE>

         liability which by virtue of any rule of law would otherwise attach to
         it in respect of any breach of trust of which it may be guilty.

     13   Waiver,  proof of default,  consents and  Trustee's  power to apply to
          Court

     13.1 Waiver:  The Trustee may,  without the consent of the  Bondholders  or
          Couponholders  and without  prejudice  to its rights in respect of any
          subsequent  breach,  Potential  Event of Default or Event of  Default,
          from time to time and at any time, if in its opinion, the interests of
          the Bondholders will not be materially  prejudiced  thereby,  waive or
          authorise,  on such  terms  and  conditions  as seem  expedient  to it
          (including with retrospective effect) any breach or proposed breach by
          the  Company  or the  Guarantor  of any of  the  provisions  of  these
          presents or determine that any Event of Default or Potential  Event of
          Default  will not be treated as such,  provided  that the Trustee will
          not exercise any of the powers  conferred on it by this Clause 13.1 in
          contravention  of any  express  direction  given  by an  Extraordinary
          Resolution  or by a request made pursuant to Condition 11, but no such
          direction or request will affect any previous waiver, authorisation or
          determination. Any such waiver, authorisation or determination will be
          binding on the Bondholders and the Couponholders and, if, but only if,
          the  Trustee so  requires,  will be  notified  to the  Bondholders  in
          accordance  with  Condition 14 by the Company or the Guarantor as soon
          as practicable.

     13.2 Proof of default:  If it is proved that as regards any specified  Bond
          or Coupon the Company or the  Guarantor has made default in paying any
          sum due to the relevant  Bondholder or  Couponholder,  such proof will
          (unless the contrary be proved) be  sufficient  evidence that the same
          default  has been made as regards  all other Bonds or (as the case may
          be) Coupons which are then payable.

     13.3 Consents:  Where under these presents provision is made for the giving
          of any consent or the exercise of any  discretion by the Trustee,  any
          such consent may be given and any such  discretion may be exercised on
          such terms and conditions

                                       43
<PAGE>

          (if any) as the  Trustee  may think fit and may be given or  exercised
          with  retrospective   effect.  The  Company  and  the  Guarantor,   as
          applicable,  shall  observe and perform any such terms and  conditions
          and the  Trustee  may at any time waive or agree a  variation  in such
          terms and conditions.

     13.4 Trustees'  power to apply to Court:  The Trustee may at any time apply
          to the Court for an order that the powers and the  carrying out of the
          trusts of these presents be exercised or carried into execution  under
          the  direction of the Court and for any other order in relation to the
          execution and administration of the powers and the carrying out of the
          trusts of these  presents as the Trustee  shall deem  expedient and it
          may  assent to or  approve  any  application  to the Court made at the
          instance of any of the  Bondholders  and shall be  indemnified  by the
          Company  or,  failing  which,  the  Guarantor  against  all the costs,
          charges  and  expenses  incurred  by  and  in  relation  to  any  such
          application or proceedings.

     14   Trustee not precluded from entering into contracts

          Neither  the  Trustee  nor any  director,  officer  or  employee  of a
          corporation  acting as a Trustee,  whether acting for itself or in any
          other  capacity,  will be precluded in any way from becoming the owner
          of, or acquiring  any interest  in, or holding,  or disposing  of, any
          Bond or  Coupon  or any  shares  or  securities  of the  Company,  the
          Guarantor, any Subsidiary or any associated companies thereof with the
          same  rights as it would have had if the  Trustee or such  person were
          not the Trustee or connected with the Trustee or from entering into or
          being interested in any contracts or transactions or arrangements with
          the Company, the Guarantor, any Subsidiary or any associated companies
          thereof  or from  acting  on,  or as  depositary  or  agent  for,  any
          committee or body of holders of any  securities  of the  Company,  the
          Guarantor,  any Subsidiary or any associated companies thereof and the
          Trustee  will be entitled to retain,  and will not be liable to anyone
          to  account  for,  any  profit,   share  of   brokerage,   commission,
          remuneration   or  other   benefit  made  or  received  in  connection
          therewith.

                                       44
<PAGE>

15   Modification and substitution

15.1 Modification: The Trustee may agree, without the consent of the Bondholders
     or the  Couponholders,  to any  modification to these presents which in its
     opinion  is of a  formal,  minor or  technical  nature  or which is made to
     correct a manifest error. The Trustee may also so agree to any modification
     to these presents which in its opinion is not materially prejudicial to the
     interests  of the  Bondholders,  but so that such power shall not extend to
     any such  modification  as is  mentioned  in the proviso to paragraph 19 of
     Schedule 5. Any such modification as is permitted by this Clause 15.1 shall
     be binding  upon the  Bondholders  and the  Couponholders  and,  unless the
     Trustee  otherwise  agrees,   will  be  notified  by  the  Company  to  the
     Bondholders in accordance with Condition 14 as soon as practicable.

15.2 Substitution:

          (a)  The Trustee may,  without the consent of the  Bondholders  or the
               Couponholders,  but  so  as  to  bind  the  Bondholders  and  the
               Couponholders,  agree with the Company and the  Guarantor  to the
               substitution  of the  Guarantor  or  any  Subsidiary  or  holding
               company  of the  Guarantor  or any  subsidiary  of  such  holding
               company (the  "Substituted  Obligor") in place of the Company (or
               of any previous  substitute  under this Clause 15.2, 15.3) as the
               principal debtor under these presents, provided that:

               (i)  the  Trustee  is  satisfied  that such  substitution  is not
                    materially prejudicial to the interests of the Bondholders;

               (ii) a trust deed is executed  or some other form of  undertaking
                    is  given  by  the   Substituted   Obligor  and,  where  the
                    Substituted  Obligor is not the Guarantor,  the Guarantor to
                    the  Trustee,  in a  form  and  manner  satisfactory  to the
                    Trustee, agreeing to be

                                       45
<PAGE>

                    bound or, as the case may be, to continue to be bound by the
                    provisions of these  presents  binding on the Company or, as
                    the  case  may be,  the  Guarantor  with  any  consequential
                    amendments  which the Trustee may deem  appropriate as fully
                    as if the  Substituted  Obligor  had  been  named  in  these
                    presents as the principal debtor in place of the Company (or
                    of any  preVious  substitute  under this  Clause  15.2) and,
                    unless  the  Substituted  Obligor  is  the  Guarantor,   the
                    guarantee of the Guarantor in these  presents had been given
                    accordingly;

               (iii)  where the Substituted Obligor is subject  generally to the
                    taxing  jurisdiction  of  any  territory  or  any  political
                    sub-division or any authority of or in that territory having
                    power to tax (for  the  purpose  of this  Clause  15.2,  the
                    "Substituted  Territory")  other than or in  addition to any
                    territory  to the  taxing  jurisdiction  of which (or to any
                    such political sub-division or authority of or in which) the
                    Company (or any previous  substitute under this Clause 15.2)
                    is subject  generally  (for the purpose of this Clause 15.2,
                    the  "Existing  Territory"),  the  Substituted  Obligor will
                    (unless the Trustee otherwise agrees) give to the Trustee an
                    undertaking in form and manner  satisfactory  to the Trustee
                    in terms  corresponding to the terms of Condition 8 with the
                    substitution for or, where applicable,  the addition to, the
                    references  in that  Condition to the Existing  Territory of
                    references  to the  Substituted  Territory and in such event
                    these presents will be read accordingly;

               (iv) if any two of the directors or other officers  acceptable to
                    the  Trustee  of  the  Substituted  Obligor  certify  to the
                    Trustee  to the  effect  that,  having  made all  reasonable
                    enquiries,  in the opinion of the persons so certifying  the
                    Substituted  Obligor will be solvent  immediately after such
                    substitution,  the Trustee may rely

                                       46
<PAGE>

                    absolutely on such  certificate  and need not have regard to
                    the  financial  condition,   profits  or  prospects  of  the
                    Substituted  Obligor  or  compare  them  with  those  of the
                    Company (or any previous  substitute under this Clause 15.2)
                    or call  for any  further  evidence  and the  provisions  of
                    Clause 11(d) shall apply; and

               (v)  the Company,  the  Guarantor  (and any  previous  substitute
                    under  Clause 15.3) and,  the  Substituted  Obligor (and any
                    previous substitute under this Clause 15.2) comply with such
                    other   requirements  as  the  Trustee  may  direct  in  the
                    interests of the Bondholders.

               In the case of such substitution,  the Trustee may agree, without
               the consent of the Bondholders or the Couponholders,  to a change
               of law governing  these presents  provided that such change would
               not, in the opinion of the Trustee, be materially  prejudicial to
               the interests of the  Bondholders.  Any such  substitution  as is
               permitted   by  this  Clause  15.2  shall  be  binding  upon  the
               Bondholders and the Couponholders.

          (b)  Release of existing  obligor:  Any such  agreement by the Trustee
               pursuant to this Clause 15.2 will, if so expressed but subject to
               Clause  15.2(a)(v),  operate to release  the Company (or any such
               previous  substitute)  from any or all of its  obligations  under
               these presents. Not later than 14 days after the execution of any
               such  documents  and after  compliance  with  such  requirements,
               notice  of the  substitution  will be  given  by the  Substituted
               Obligor to the  Bondholders  in accordance  with  Condition 14 as
               soon as practicable.

          (c)  Completion of substitution:  Upon the execution of such documents
               and compliance with such  requirements,  the Substituted  Obligor
               will be deemed  to be named in these  presents  as the  principal
               debtor in place of the  Company  (or of any  previous  substitute
               under this Clause 15.2) and

                                       47
<PAGE>

               these  presents  will be deemed to be  modified in such manner as
               shall be necessary to give effect to the substitution.

15.3 Substitution:

          (a)  The Trustee may,  without the consent of the  Bondholders  or the
               Couponholders,  but  so  as  to  bind  the  Bondholders  and  the
               Couponholders,  agree with the Company and the  Guarantor  to the
               substitution   of  any  Subsidiary  or  holding  company  of  the
               Guarantor  or  any  subsidiary  of  such  holding   company  (the
               "Substituted  Guarantor")  in place of the  Guarantor  (or of any
               previous   substitute  under  this  Clause  15.2,  15.3)  as  the
               guarantor  of the  obligations  of the Company  (or any  previous
               substitute under Clause 15.2) under these presents  guaranteed by
               the  Guarantor (or if any previous  substitute  under this Clause
               15.3) under these presents, provided that:

               (i)  the  Trustee  is  satisfied  that such  substitution  is not
                    materially prejudicial to the interests of the Bondholders;

               (ii) the PES Licence is transferred to the Substituted Guarantor;

               (iii)  a trust deed is executed or some other form of undertaking
                    is given by the Substituted  Guarantor to the Trustee,  in a
                    form and manner satisfactory to the Trustee,  agreeing to be
                    bound by the  provisions  of these  presents  binding on the
                    Guarantor  with  any  consequential   amendments  which  the
                    Trustee may deem  appropriate as fully as if the Substituted
                    Guarantor had been named in these  presents as the guarantor
                    of  such  obligations  of the  Company  (or of any  previous
                    substitute  under Clause 15.2) in place of the Guarantor (or
                    of  any  previous   substitute   under  this  Clause  15.3);

                                       48
<PAGE>

               (iv) where the Substituted  Guarantor is subject generally to the
                    taxing  jurisdiction  of  any  territory  or  any  political
                    sub-division or any authority of or in that territory having
                    power to tax (for the  purpose  of this  Clause  15(3),  the
                    "Substituted  Territory')  other than or in  addition to any
                    territory  to the  taxing  jurisdiction  of which (or to any
                    such political sub-division or authority of or in which) the
                    Guarantor  (or any  previous  substitute  under this  Clause
                    15.3) is subject  generally  (for the purpose of this Clause
                    15(3), the "Existing Territory'),  the Substituted Guarantor
                    will  (unless  the  Trustee  otherwise  agrees)  give to the
                    Trustee an  undertaking in form and manner  satisfactory  to
                    the Trustee in terms corresponding to the terms of Condition
                    8 with  the  substitution  for  or,  where  applicable,  the
                    addition  to,  the  references  in  that  Condition  to  the
                    Existing   Territory  of  references   to  the   Substituted
                    Territory  and in such  event  these  presents  will be read
                    accordingly;

               (v)  if any two of the directors or other officers  acceptable to
                    the  Trustee  of the  Substituted  Guarantor  certify to the
                    Trustee  to the  effect  that,  having  made all  reasonable
                    enquiries,  in the opinion of the persons so certifying  the
                    Substituted Guarantor will be solvent immediately after such
                    substitution,  the  Trustee  may  rely  absolutely  on  such
                    certificate  and  need  not  have  regard  to the  financial
                    condition, profits or prospects of the Substituted Guarantor
                    or  compare  them  with  those of the  Guarantor  (or of any
                    previous  substitute under this Clause 15.3) or call for any
                    further  evidence and the provisions of Clause 11.1(d) shall
                    apply; and

               (vi) the Company (and any previous substitute under clause 15.2),
                    the  Guarantor  and  the  Substituted   Guarantor  (and  any
                    previous substitute under this Clause 15.3) comply with such
                    other

                                       49
<PAGE>

                    requirements  as the Trustee may direct in the  interests of
                    the Bondholders.

                    In the case of such  substitution,  the  Trustee  may agree,
                    without the consent of the Bondholders or the Couponholders,
                    to a change of law governing  these  presents  provided that
                    such change  would not, in the  opinion of the  Trustee,  be
                    materially  prejudicial to the interests of the Bondholders.
                    Any such  substitution  as is  permitted by this Clause 15.3
                    shall be binding upon the Bondholders and the Couponholders.

               (b)  Release  of  existing  obligor:  Any such  agreement  by the
                    Trustee  pursuant to this Clause 15.3 will,  if so expressed
                    but  subject to Clause  15.3(a)(vi),  operate to release the
                    Guarantor (or any such previous  substitute) from any or all
                    of its obligations  under these presents.  Not later than 14
                    days after the  execution  of any such  documents  and after
                    compliance   with   such   requirements,   notice   of   the
                    substitution  will be given by the Substituted  Guarantor to
                    the  Bondholders in accordance  with Condition 14 as soon as
                    practicable.

               (c)  Completion  of  substitution:  Upon  the  execution  of such
                    documents  and  compliance  with  such   requirements,   the
                    Substituted  Guarantor  will be  deemed to be named in these
                    presents as the  guarantor of the  obligations  aforesaid of
                    the  Company (or of any  previous  substitute  under  Clause
                    15.2)  in  place  of  the  Guarantor  (or  of  any  previous
                    substitute  under this Clause 15.3) and these  presents will
                    be  deemed  to be  modified  in  such  manner  as  shall  be
                    necessary to give effect to the substitution.

16   Appointment, retirement and removal of Trustee

16.1 Appointment:  The Company  will have the power of  appointing a new Trustee
     but no  person  will  be so  appointed  unless  previously  approved  by an
     Extraordinary  Resolution.  A  trust  corporation  will at all  times  be a
     Trustee and

                                       50
<PAGE>

     may be the sole Trustee.  Any appointment of a new Trustee will be notified
     by the Company to the Bondholders and to the Agents as soon as practicable.

16.2 Retirement  and  removal:  Any Trustee may retire at any time on giving not
     less than three months' notice in writing to the Company without giving any
     reason and  without  being  responsible  for any costs  occasioned  by such
     retirement and the Bondholders may by Extraordinary  Resolution  remove any
     Trustee provided that the retirement or removal of any sole Trustee or sole
     trust  corporation will not become  effective until a trust  corporation is
     appointed as successor Trustee. If a sole Trustee or sole trust corporation
     gives notice of retirement or an Extraordinary Resolution is passed for its
     removal  under this Clause 16.2, it will use all  reasonable  endeavours to
     procure  that  another  trust  corporation  be  appointed  as Trustee.  Any
     replacement  or  retirement of a Trustee will be notified by the Company to
     the Bondholders and to the Agents as soon as practicable.

16.3 Co-Trustees:  The Trustee may,  notwithstanding  the  provisions  of Clause
     16.1,  by notice in writing to the Company and the  Guarantor  (but without
     the need for the consent of the Company, the Guarantor,  the Bondholders or
     the  Couponholders)  appoint  any  person to act as an  additional  Trustee
     jointly with the Trustee:

     (a)  if the Trustee  considers  such  appointment to be in the interests of
          the Bondholders;

     (b)  for the purpose of conforming with any legal requirement,  restriction
          or condition in any  jurisdiction in which any particular act is to be
          performed; or

     (c)  for the purpose of  obtaining a judgment  in any  jurisdiction  or the
          enforcement in any  jurisdiction of either a judgment already obtained
          or

                                       51
<PAGE>

          any of the  provisions  of these  presents  against the Company or the
          Guarantor.

          Subject to the  provisions of these presents the Trustee may confer on
          any person so appointed  such  functions as it thinks fit. The Trustee
          may by notice in writing to the Company, the Guarantor and such person
          remove any person so  appointed.  At the request of the  Trustee,  the
          Company  and the  Guarantor  will  forthwith  execute  and do all such
          documents,  acts  and  things  as  may be  required  to  perfect  such
          appointment  or  removal  and the  Company  and the  Guarantor  hereby
          irrevocably appoints the Trustee to be its attorney in its name and on
          its behalf to do so. Any appointment or removal of any such additional
          Trustee  shall be  notified  by the  Company or the  Guarantor  to the
          Bondholders and to the Agents as soon as practicable.

16.4 Competence of a majority of Trustees:  If there are more than two Trustees,
     the majority of such Trustees will (provided such majority includes a trust
     corporation)  be  competent  to  carry  out  all or  any  of the  Trustee's
     functions.

17   Couponholders

               17.1 Notices:  Neither the Trustee, the Company nor the Guarantor
               need give any notice to the  Couponholders  for any purpose under
               these  presents  and the  Couponholders  will be  deemed  to have
               notice of the contents of any notice given to the Bondholders.

17.2 Bondholders  assumed to hold Coupons:  Even if it has express notice to the
     contrary,  whenever  the  Trustee  is  required  to  exercise  any  of  its
     functions, powers, authorities or discretions by reference to the interests
     of the  Bondholders,  the Trustee shall assume that each  Bondholder is the
     holder of all Coupons relating to each Bond of which he is the bearer.

                                       52
<PAGE>

18   Communications

     Any notice, confirmation, demand, certificate or other document given, made
     or served,  or required to be given,  made or served,  under these presents
     shall be in the  English  language  and shall be  given,  made or served by
     letter delivered personally or by facsimile transmission:

     (a)  in the case of the Company, to it at:

               Carliol House,
               Market Street,
               Newcastle-Upon-Tyne NEl 6NE

               Fax no.          0191 210 2081

               Attention:       The Finance Director

     (b)  in the case of the Guarantor, to it at:

               Carliol House,
               Market Street,
               Newcastle-Upon-Tyne NEl 6NE

               Fax no.          0191 210 2081

               Attention:       The Finance Director

                                       53
<PAGE>

     (c)  in the case of the Trustee, to it at:

               Princes House,

               95 Gresham Street,

               London EC2V 7LY

               Fax no.          0171 606 0643 or 0171 726 4063

               Attention:       The Secretary

          or, in each case, to such other  address or facsimile  number as shall
          have been  notified (in  accordance  with this Clause 18) to the other
          parties.

          Any such communication  will take effect, in the case of delivery,  at
          the time of delivery or, in the case of facsimile transmission, at the
          time of despatch.

          Any  communication  not by letter  shall be  confirmed  by letter  but
          failure  to send or  receive  the  letter  of  confirmation  shall not
          invalidate the original communication.

19   Powers in addition

     The  powers  conferred  upon  the  Trustee  by these  presents  shall be in
     addition to any powers which may from time to time be vested in the Trustee
     by the general law or as a holder of any of the Bonds or Coupons.

20   Severability

     Notwithstanding  that any  provision  of  these  presents  may  prove to be
     illegal or unenforceable,  the remaining provisions of these presents shall
     continue in full force and effect.

                                       54
<PAGE>

21   Execution

     Each of the parties to this Master Trust Deed intends it to be a deed,  and
     agrees to execute and  deliver it as a deed.  The  signature  or sealing of
     this  Master  Trust  Deed by or on behalf of a party  shall  constitute  an
     authority  to the  solicitors,  or an agent or employee of the  solicitors,
     acting for that party in connection  with this Master Trust Deed to deliver
     it as a deed on behalf of that party.

22   Counterparts

         These presents may be executed in counterparts, and the counterparts
together shall constitute one deed.

23       Governing law

          These presents  shall be governed by and construed in accordance  with
          English law.

          IN WITNESS  whereof this Master Trust Deed has been executed as a deed
          the day and year first above written.

                                       55
<PAGE>

                                   Schedule 1
                                   ----------

                                     Part I
                                     ------

             Form of individual Certificate for Original Bonds 2005
             ------------------------------------------------------

On the front:
        ISIN:                           Serial No:                     Cert No:

                          NORTHERN ELECTRIC FINANCE plc
    (Incorporated with limited liability in England and Wales - No. 3070482)

          (pound)100,000,000 8.625 per cent. Guaranteed Bonds due 2005
                   guaranteed as to principal and interest by
                              NORTHERN ELECTRIC plc
    (Incorporated with limited liability in England and Wales - No. 2366942)

The Bonds in respect of which this  Certificate is issued are in bearer form and
form part of the series  designated  as specified in the title (the  "Bonds") of
Northern Electric Finance plc (the "Issuer")  constituted by a Master Trust Deed
dated  16th  October,  1995  between  the  Issuer,  Northern  Electric  plc (the
"Guarantor") and The Law Debenture Trust Corporation  p.l.c. as the Trustee (the
"Trust Deed",  which  expression  includes all deeds  supplemental to such Trust
Deed). The Bonds are subject to, and have the benefit of, the Trust Deed and the
Terms and Conditions (the "Conditions") set out on the reverse hereof.

The  Issuer  for value  received  hereby  promises  to pay to the bearer of this
Certificate the principal  amount of  (pound)[1,000/10,000/100,000][(One/Ten/One
Hundred)] Thousand pounds sterling on 16th October, 2005 or on such earlier date
as such principal  amount may become  payable in accordance  with the Conditions
and the Trust Deed together with interest  thereon and any other moneys  payable
in respect of the Bonds in accordance with the Conditions and the Trust Deed.

The Bonds are  guaranteed  as to principal  and interest by the Guarantor on the
terms of the Trust Deed.

This Certificate  shall not be valid or become  obligatory for any purpose until
signed on behalf of the  Issuer and the  Guarantor  and  authenticated  by or on
behalf of the Principal Paying Agent.

Dated ______________________

                                       56

<PAGE>

In witness whereof the Issuer and the Guarantor have caused this  Certificate to
be signed in facsimile on their respective behalves.

Northern Electric Finance plc                   Northern Electric plc

By: _________________________                   By: ___________________
    Director                                        Director

By:__________________________                   By: ___________________
    Director                                        Director

Certificate of Authentication
-----------------------------

This Certificate is authenticated by or on behalf of the Principal Paying Agent.

By: _________________________
     Authorised Signatory

ANY  UNITED  STATES  PERSON  WHO  HOLDS  THIS  OBLIGATION  WILL  BE  SUBJECT  TO
LIMITATIONS  UNDER THE UNITED STATES INCOME TAX LAWS,  INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.

[NEITHER  THE  ISSUER NOR THE  GUARANTOR  HAS BEEN OR WILL BE  REGISTERED  AS AN
"INVESTMENT COMPANY" UNDER THE UNITED STATES INVESTMENT COMPANY ACT OF 1940.]

On the back:

                              Terms and Conditions
                              --------------------

                                Details of Agents
                                -----------------

                                       57
<PAGE>

                                   Schedule 1
                                   ----------

                                     Part II
                                     -------

                        Form of Original Global Bond 2005

                                                                          ISIN:

                          NORTHERN ELECTRIC FINANCE plc
    (Incorporated with limited liability in England and Wales - No. 3070482)
          (pound)100,000,000 8.625 per cent. Guaranteed Bonds due 2005
                   guaranteed as to principal and interest by
                              NORTHERN ELECTRIC plc
    (Incorporated with limited liability in England and Wales - No. 2366942)

                        TEMPORARY GLOBAL BOND CERTIFICATE
                        ---------------------------------

The Bonds in respect of which this temporary  Global Bond  Certificate is issued
are in bearer form and comprise the series of Bonds  designated  as specified in
the  title  (the  "Bonds")  of  Northern  Electric  Finance  plc (the  "Issuer")
constituted by a Master Trust Deed dated 16th October,  1995 between the Issuer,
Northern Electric plc (the "Guarantor") and The .Law Debenture Trust Corporation
p.l.c.  as the Trustee (the "Trust Deed",  which  expression  includes all deeds
supplemental to such Trust Deed). The Bonds are subject to, and have the benefit
of, the Trust Deed  including  the Terms and  Conditions  set out on the reverse
hereof.

The  Issuer  for value  received  hereby  promises  to pay to the bearer of this
Certificate  the  principal  amount  of  (pound)100,000,000  (or such  lesser or
greater  amount as is duly  endorsed  in the third  column of Schedule A to this
Certificate)  on 16th  October,  2005 or on such earlier date as such  principal
amount  may become  payable in  accordance  with the Trust  Deed  together  with
interest  thereon  and any  other  moneys  payable  in  respect  of the Bonds in
accordance with the Trust Deed.

The Bonds are  guaranteed  as to principal  and interest by the Guarantor on the
terms of the Trust Deed.

This  temporary   Global  Bond   Certificate  is  exchangeable   for  individual
Certificates representing Bonds in bearer form with Coupons attached. The Issuer
hereby irrevocably  undertakes to deliver individual  Certificates  representing
Bonds in exchange for this temporary  Global Bond  Certificate on and after 26th
November, 1995 (the "Exchange Date").

On or after the Exchange  Date this  temporary  Global Bond  Certificate  may be
exchanged in whole or in part for individual Certificates  representing Bonds in
an  aggregate  principal  amount  not  exceeding  the  principal  amount of this
temporary Global

                                       58

<PAGE>

Bond  by the  submission  of  this  temporary  Global  Bond  Certificate  to the
Principal  Paying Agent  together  with a certificate  from Cedel Bank,  soci6t~
anonyme ("Cedel") or Morgan Guaranty Trust Company of New York, Brussels office,
as operator of the Euroclear System ("Euroclear") substantially to the following
effect:

                         CERTIFICATE OF CLEARING SYSTEM

                          NORTHERN ELECTRIC FINANCE plc

   (pound)100,000,000 8.625 per cent. Guaranteed Bonds due 2005 (the "Bonds")

        Common Code:                                                   ISIN:

This is to certify  that,  based  solely on  certificates  we have  received  in
writing,   by  tested  telex  or  by   electronic   transmission,   from  member
organisations appearing in our records as persons being entitled to a portion of
the principal amount set forth below (Our "Member Organisations")  substantially
in the form set out in the temporary Global Bond Certificate  representing Bonds
(the form of which is set out in Part II of Schedule 1 to the Master  Trust Deed
constituting  the  Bonds)  as of the date  hereof ...................  principal
amount of the Bonds (i) is owned by persons  that are not  citizens or residents
of the United States, domestic partnerships, domestic corporations or any estate
or trust the income of which is subject to United States federal income taxation
regardless  of its source  ("United  States  persons"),  (ii) is owned by United
States  persons  that  are (a)  foreign  branches  of  United  States  financial
institutions   (as   defined   in   U.S.   Treasury   Regulations   Section   1.
165-12(c)(1)(v))  ("financial institutions") purchasing for their own account or
for resale,  or (b) United States persons who acquired the Bonds through foreign
branches of United States financial  institutions and who hold the Bonds through
such United  States  financial  institutions  on the date hereof (and, in either
case (a) or (b), each such United States  financial  institution has agreed,  on
its own  behalf or  through  its  agent,  that we may  advise  the Issuer or the
Issuer's   agent  that  it  will  comply  with  the   requirements   of  Section
165(j)(3)(A),  (B) or (C) of the Internal Revenue Code of 1986, as amended,  and
the  regulations  thereunder),  or (iii) is owned by United  States  or  foreign
financial  institutions for purposes of resale during the restricted  period (as
defined in U.S. Treasury  Regulations Section 1.  163-5(c)(2)(i)(D)(7)),  and to
the  further  effect  that  United  States  or  foreign  financial  institutions
described  in (iii) above  (whether or not also  described in (i) or (ii) above)
have  certified  that they have not  acquired  the Bonds for  purposes of resale
directly  or  indirectly  to a United  States  person or to a person  within the
United States or its possessions.

We further  certify (i) that we are not making  available  herewith for exchange
(or, if relevant,  exercise of any rights or  collection  of any  interest)  any
portion  of the Bonds  represented  by the  temporary  Global  Bond  Certificate
excepted  in such  certificates  and (ii) that as of the date hereof we have not
received any  notification  from any of our Member  Organisations  to the effect
that the statements made by such Member Organisation with respect to any portion
of the part  submitted  herewith for exchange (or, if relevant,  exercise of any
rights or  collection  of any  interest) are no longer true and cannot be relied
upon as of the date hereof.

                                       59

<PAGE>

We understand  that this  certificate is required in connection with certain tax
laws of the United States. In connection  therewith,  if administrative or legal
proceedings   are  commenced  or  threatened  in  connection   with  which  this
certificate  is or would be relevant,  we  irrevocably  authorise you to produce
this certificate to any interested parry in such proceedings.

Dated:  _______________*

                                Yours faithfully,

                          [Cedel Bank, societe anonyme]

                                       or

                   [MORGAN GUARANTY TRUST COMPANY OF NEW YORK,

                                Brussels office,

                      as operator of the Euroclear System]

                        By:  ______________________

* To be dated no earlier than the Exchange Date.

Any person appearing in the records maintained by Cedel or Euroclear as entitled
to any interest in Bonds  represented by this temporary  Global Bond Certificate
shall be  entitled  to  require  the  exchange  of this  temporary  Global  Bond
Certificate for (an) individual Certificate(s) representing such Bonds in bearer
form  by  delivering  or  causing  to be  delivered  to  Cedel  or  Euroclear  a
certificate in  substantially  the following  form (copies of which  certificate
will be available at the office of Cedel in Luxembourg and Euroclear in Brussels
and at the  specified  office  of each  of the  Paying  Agents):

                  "CERTIFICATE OF CLEARING SYSTEM PARTICIPANT

                         NORTHERN ELECTRIC FINANCE plc

   (pound)100,000,000 8.625 per cent. Guaranteed Bonds due 2005 (the "Bonds")

        Common Code:                                                     ISIN:

To:  [Cedel Bank,  societe  anonyme] [Morgan Guaranty Trust Company of New York,
     Brussels office, as operator of the Euroclear System]

                                       60
<PAGE>

This is to certify that,  as of the date hereof,  and except as set forth below,
the Bonds  held by you for our  account  (i) are owned by  persons  that are not
citizens or  residents of the United  States,  domestic  partnerships,  domestic
corporations  or any  estate or trust the  income of which is  subject to United
States  federal  income  taxation  regardless  of  its  source  ("United  States
persons"), (ii) are owned by United States persons that are (a) foreign branches
of United States financial institutions (as defined in U.S. Treasury Regulations
Section 1. 165-12(c)(1)(v))  ("financial institutions") purchasing for their own
account or for  resale,  or (b) United  States  persons who  acquired  the Bonds
through foreign  branches of United States  financial  institutions and who hold
the Bonds through such United States  financial  institutions on the date hereof
(and, in either case (a) or (b), each such United States  financial  institution
hereby agrees,  on its own behalf or through its agent,  that you may advise the
Issuer or the  Issuer's  agent  that it will  comply  with the  requirements  of
Section  165(j)(3)(A),  (B) or (C) of the  Internal  Revenue  Code of  1986,  as
amended, and the regulations thereunder), or (iii) are owned by United States or
foreign  financial  institutions  for purposes of resale  during the  restricted
period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)),
and in addition,  if an owner of Bonds is a United  States or foreign  financial
institution  described in (iii) above  (whether or not also  described in (i) or
(ii) above), this is to certify further that such financial  institution has not
acquired the Bonds for  purposes of resale  directly or  indirectly  to a United
States person or to a person within the United States or its possessions.

As used herein,  "United  States" means the United States of America  (including
the States and the District of Columbia);  and its "possessions"  include Puerto
Rico,  the U.S.  Virgin  Islands,  Guam,  American  Samoa,  Wake  Island and the
Northern Mariana Islands.

We  undertake to advise you promptly by tested telex on or prior to that date on
which you intend to submit  your  certificate  relating to the Bonds held by you
for our account in accordance with your documented  procedures if any applicable
statement  herein is not  correct on such date,  and in the  absence of any such
notification it may be assumed that this certificate applies as of such date.

This  certificate  excepts  and  does  not  relate  to   .......................
principal amount of the Bonds in respect of which we are not able to certify and
as to which we  understand  exchange  and  delivery of  individual  Certificates
representing Bonds (or, if relevant, exercise of any rights or collection of any
interest) cannot be made until we do so certify.

We understand  that this  certificate is required in connection with certain tax
laws of the United States. In connection  therewith,  if administrative or legal
proceedings   are  commenced  or  threatened  in  connection   with  which  this
certificate  is or would be relevant,  we  irrevocably  authorise you to produce
this certificate to any interested party in such proceeding.

Dated:  __________________*

                                       61
<PAGE>

By:  ____________________

     [Name of person giving certificate] as, or as
     agent for, the  beneficial owner(s) of the
     Bonds in respect of which this certificate is issued.

*    To be dated no earlier than the fifteenth day prior to the Exchange Date."

Until the exchange of this  temporary  Global Bond  Certificate  for  individual
Certificates  representing Bonds pursuant to the foregoing provisions, no person
as aforesaid  shall (except as stated herein) be entitled to receive any payment
by way of  principal  or  interest in respect of the Bonds  represented  by this
temporary  Global  Bond  Certificate  (unless,  upon  due  presentation  of this
temporary  Global Bond  Certificate  for  exchange,  delivery of any  individual
Certificate  representing  Bonds shall be improperly  withheld or refused) or to
receive  (an)  individual  Certificate(s)  representing  Bonds  which  he  would
otherwise be entitled to receive.

Upon any  exchange of this  temporary  Global Bond  Certificate  for  individual
Certificates  representing Bonds the portion of the principal amount represented
by this  temporary  Global Bond  Certificate  in respect of which such  exchange
shall be  effected  shall  be  endorsed  by the  Principal  Paying  Agent on the
Schedule  of  exchanges  for  individual  Certificates  hereon,   whereupon  the
principal amount  represented by this temporary Global Bond Certificate shall be
reduced for all purposes by the amount of such portion.

Subject to the second  preceding  paragraph,  no  provisions  of this  temporary
Global Bond  Certificate  shall alter or impair the  obligation of the Issuer to
pay the  principal  and interest in respect of the Bonds when due in  accordance
with the Trust Deed or the obligations of the Guarantor under the Trust Deed.

This temporary  Global Bond Certificate is governed by and shall be construed in
accordance with English law.

This temporary Global Bond Certificate  shall not be valid or become  obligatory
for any  purpose  until  signed on behalf of the  Issuer and the  Guarantor  and
authenticated by or on behalf of the Principal Paying Agent.

Dated  _______________________

In witness  whereof the Issuer and the  Guarantor  have  caused  this  temporary
Global Bond Certificate to be signed in facsimile on their respective behalves.

                                       62

<PAGE>

Northern Electric Finance plc Director          Northern Electric plc

By: __________________________________          By: ____________________
     Director                                        Director

By: __________________________________          By: ____________________
    Director                                          Director

Certificate of Authentication
-----------------------------

This temporary  Global Bond  Certificate is authenticated by or on behalf of the
Principal Paying Agent.

By: __________________________
      Authorised Signatory

ANY  UNITED  STATES  PERSON  WHO  HOLDS  THIS  OBLIGATION  WILL  BE  SUBJECT  TO
LIMITATIONS  UNDER THE UNITED STATES INCOME TAX LAWS,  INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS  165(j) AND 1287(a) OF THE UNITED STATES  INTERNAL  REVENUE
CODE.

[NEITHER  THE  ISSUER NOR THE  GUARANTOR  HAS BEEN OR WILL BE  REGISTERED  AS AN
"INVESTMENT COMPANY" UNDER THE U.S. INVESTMENT COMPANY ACT OF 1940.]

                                       63
<PAGE>

               Schedule of exchanges for individual Certificates
               -------------------------------------------------

The principal  amount of the Bonds  represented  by this  temporary  Global Bond
Certificate has been reduced as a result of the issue of individual Certificates
representing  Bonds in respect of a portion of such principal amount in exchange
as follows:

            Amount of decrease
            ------------------
            in principal amount
            -------------------
            of Bonds                Principal amount of         Notation made by
            --------                -------------------         ----------------
            represented by          Bonds represented by        or on behalf of
            --------------          --------------------        ---------------
Date of     Global Bond             Global Bond Certificate     Principal Paying
-------     -----------             -----------------------     ----------------
exchange    Certificate             following such decrease     Agent
--------    -----------             -----------------------     -----

                                       64
<PAGE>

                            Schedule of interest paid
                            -------------------------

Date of payment                 Amount of interest              Notation made
---------------                 ------------------              -------------

                                       65

<PAGE>

                                   Schedule 1
                                   ----------

                                    Part III
                                    --------

                          Form of Original Coupon 2005
                          ----------------------------

On the front:
        ISIN:                       Serial No:                       Coupon No:

                          NORTHERN ELECTRIC FINANCE plc

    (Incorporated with limited liability in England and Wales - No. 3070482)

           (pound)100,000,000 8.625 per cent Guaranteed Bonds due 2005

                   guaranteed as to principal and interest by

                              NORTHERN ELECTRIC plc

    (Incorporated with limited liability in England and Wales - No. 2366942)

         Coupon for _____________ due on - 199[6/7/8/9/2000/1/2/3/4/5].

This  Coupon  relates  to  interest  payable  on   (pound)[1,OO0/10,000/100,000]
[(One/Ten/One  Hundred  Thousand)]  principal  amount of the Bonds designated as
specified  in the title (the  "Bonds")  of  Northern  Electric  Finance plc (the
"Issuer")  constituted  by a Master Trust Deed dated 16th October,  1995 between
the Issuer,  Northern Electric plc (the "Guarantor") and The Law Debenture Trust
Corporation p.l.c. as the Trustee (the "Trust Deed",  which expression  includes
all deeds supplemental to such Trust Deed).

This  Coupon is payable to bearer  (subject  to the Trust  Deed,  including  the
Conditions  endorsed  on the  Certificate  representing  the Bonds to which this
Coupon relates, which shall be binding upon the holder of this Coupon whether or
not it is for the time being  attached  to such  Certificate)  at the  specified
offices of the Paying  Agents set out on the  reverse  hereof (or any further or
other Paying Agents or specified  offices duly  appointed or nominated from time
to time and notified to the Bondholders).

Such interest is guaranteed by the Guarantor.

This  Coupon  is  negotiable  separately  from the  Bonds to which  this  Coupon
relates.

This Coupon shall not be valid or become obligatory for any purpose until signed
on behalf of the  Company  and  authenticated  by or on behalf of the  Principal
Paying Agent.

Dated:_____________________

                                       66
<PAGE>

In witness  whereof the Company and the Guarantor  have caused this Coupon to be
signed in facsimile on their respective behalves.

Northern Electric Finance plc                        Northern Electric plc

By: _________________________                        By: _________________
     Director                                              Director

By: _________________________                        By: _________________
     Director                                              Director

Certificate of Authentication
-----------------------------

This Coupon is authenticated by or on behalf of the Principal Paying Agent

By:  _________________________
       Authorised Signatory

ANY  UNITED  STATES  PERSON  WHO  HOLDS  THIS  OBLIGATION  WILL  BE  SUBJECT  TO
LIMITATIONS  UNDER THE UNITED STATES INCOME TAX LAWS,  INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS  165(j) AND 1287(a) OF THE UNITED STATES  INTERNAL  REVENUE
CODE.

[NEITHER  THE  ISSUER NOR THE  GUARANTOR  HAS BEEN OR WILL BE  REGISTERED  AS AN
"INVESTMENT COMPANY" UNDER THE U.S. INVESTMENT COMPANY ACT OF 1940.]

On the back:

                            Details of Paying Agents
                            ------------------------

                                       67
<PAGE>

                                   Schedule 2
                                   ----------

                   Terms and Conditions of Original Bonds 2005
                   -------------------------------------------

                                       68
<PAGE>

                        TERMS AND CONDiTIONS OF THE BONDS

     The  following is the text of the terms and  conditions  of the Bonds which
will be endorsed on each Bond in definitive form:

     The  (pound)100,000,000  8.625  per  cent.  Guaranteed  Bonds due 2005 (the
"Bonds",  which  expression  shall in these  Terms and  Conditions,  unless  the
context  otherwise  requires,  include  any  further  bonds  issued  pursuant to
Condition  17 and forming a single  series with the Bonds) of Northern  Electric
Finance plc (the  "Issuer")  are  constituted  by a master trust deed dated 16th
October,  1995 (the "Trust Deed", which expression shall wherever the context so
admits include any deed supplemental thereto) made between the Issuer, Northern
Electric plc (the  "Guarantor") and The Law Debenture Trust  Corporation  p.l.c.
(the "Trustee",  which  expression  shall include all persons for the time being
the trustee or trustees  under the Trust Deed) as trustee for the holders of the
Bonds (the  "Bondholders") The issue of the Bonds was authorised by a resolution
of the board of directors of the Issuer passed on 9th October,  1995. The giving
of the guarantee by the Guarantor was authorised by a written  resolution of the
board of directors of the Guarantor passed on 14th September,  1995 appointing a
committee of the board for the purposes of the giving of the  guarantee and by a
resolution  of such duly  appointed  committee  of the board of directors of the
Guarantor  passed on 9th October,  1995. The Bonds are, on issue,  listed on The
International  Stock  Exchange of the United Kingdom and the Republic of Ireland
Limited  (the  "London  Stock  Exchange").  The  statements  in these  Terms and
Conditions include summaries of, and are subject to, the detailed  provisions of
and  definitions  in the Trust  Deed.  Copies of the Trust Deed and of an agency
agreement  dated 16th October,  1995 (the "Agency  Agreement")  made between the
Issuer,  the  Guarantor,  Barclays  Bank PLC,  as  principal  paying  agent (the
"Principal  Paying Agent",  which expression  shall include any successor),  the
other paying agents named therein (together with the Principal Paying Agent, the
"Paying  Agents",  which  expression  shall include any  additional or successor
paying  agents) and the Trustee  are  available  for  inspection  during  normal
business  hours by the  Bondholders  and the  holders  of the  interest  coupons
appertaining to the Bonds (respectively,  the "Couponholders" and the "Coupons",
at the registered office for the time being of the Trustee, being at the date of
issue of the Bonds at Princes House, 95 Gresham  Street,  London EC2V 7LY and at
the  specified  office of each of the Paying  Agents.  The  Bondholders  and the
Couponholders  are  entitled to the benefit of, and are bound by, and are deemed
to  have  notice  of,  all the  provisions  of the  Trust  Deed  and the  Agency
Agreement.

1.   Form, Denominations and Title

     The Bonds are in bearer form,  serially  numbered,  in the denominations of
(pound)1,000,  (pound)10,000  and  (pound)100,000  each with Coupons attached on
issue. Title to the Bonds and to the Coupons will pass by delivery. Bonds of one
denomination may not be exchanged for Bonds of another denomination.

     The Issuer,  the  Guarantor,  any Paying  Agent and the Trustee may (to the
fullest  extent  permitted by applicable  laws) deem and treat the holder of any
Bond and the holder of any Coupon as the absolute owner thereof for all purposes
(whether  or not the Bond or Coupon  shall be overdue  and  notwithstanding  any
notice of  ownership  or writing on the Bond or Coupon or any notice of previous
loss or theft of the Bond or Coupon).

2.   Status and Guarantee

     The Bonds and the  Coupons are direct,  unconditional  and,  subject to the
provisions of Condition 3, unsecured  obligations of the Issuer and,  subject as
aforesaid,   rank  and  will  rank  pari passu,  without  any  preference  among
themselves,  with all other outstanding unsecured and unsubordinated obligations
of the  Issuer,  present  and future,  but,  in the event of  insolvency  of the
Issuer,  only to the extent  permitted by applicable laws relating to creditors'
rights.

The Guarantor has, in the Trust Deed, unconditionally and irrevocably guaranteed
the due and  punctual  payment of the  principal of and interest on the Bonds as
and when the same shall  become due and  payable  together  with any  additional
amounts  payable  pursuant to Condition 8 and all other moneys payable under the
Trust Deed. The  obligations of the Guarantor  under the terms of such guarantee
constitute direct,  unconditional and, subject to the provisions of Condition 3,
unsecured  obligations of the Guarantor and such  obligations rank and will rank
pari passu with all other outstanding  unsecured and unsubordinated  obligations
of the  Guarantor,  present and future,  but, in the event of  insolvency of the
Guarantor,  only  to  the  extent  permitted  by  applicable  laws  relating  to
creditors' rights.

<PAGE>

3.   Negative Pledge

     So long as any of the Bonds  remains  outstanding  (as defined in the Trust
Deed)  each of the  Issuer  and  the  Guarantor  will  ensure  that no  Relevant
Indebtedness of the Issuer,  the Guarantor or any PES Subsidiary or of any other
person and no guarantee by the Issuer,  the  Guarantor or any PES  Subsidiary of
any  Relevant  Indebtedness  of any other  person will be secured by a mortgage,
charge,  lien,  pledge or other security  interest (each a "Security  Interest")
upon,  or with respect to, any of the present or future  business,  undertaking,
assets or revenues (including any uncalled capital) of the Issuer, the Guarantor
or any PES  Subsidiary  unless the Issuer or the  Guarantor,  as the case may be
shall, before or at the same time as the creation of the Security Interest, take
any and all action necessary to ensure that:

     (a)  all amounts payable by the Issuer under the Bonds, the Coupons and the
          Trust Deed or, as the case may be. the  obligations  of the  Guarantor
          under the  guarantee  referred  to in  Condition  2 are secured to the
          satisfaction  of the Trustee  equally and  rateably  with the Relevant
          Indebtedness  or guarantee of Relevant  Indebtedness,  as the case may
          be, by such Security Interest; or

     (b)  such  other  Security  Interest  or  guarantee  or  other  arrangement
          (whether  or not  including  the  giving of a  Security  Interest)  is
          provided  in respect of all  amounts  payable by the Issuer  under the
          Bonds,  the  Coupons  and the  Trust  Deed or,  as the case may be, in
          respect  of the  obligations  of the  Guarantor  under  the  guarantee
          referred  to in  Condition  2 either (i) as the  Trustee  shall in its
          absolute  discretion  deem  not  materially  less  beneficial  to  the
          interests  of the  Bondholders  or (ii) as  shall  be  approved  by an
          Extraordinary  Resolution  (as  defined  in  the  Trust  Deed)  of the
          Bondholders,

save that the Issuer,  the  Guarantor or any PES  Subsidiary  may create or have
outstanding a Security  Interest in respect of any of its Relevant  Indebtedness
and/or any guarantees  given by the Issuer,  the Guarantor or any PES Subsidiary
in  respect  of any  Relevant  Indebtedness  of any other  person  (without  the
obligation to provide a Security  Interest or guarantee or other  arrangement in
respect of the Bonds, the Coupons and the Trust Deed or, as the case may be, the
obligations of the Guarantor  under the said guarantee as aforesaid)  where such
Relevant  Indebtedness  has an initial  maturity  falling not earlier  than 31st
December,  2005 and is of a maximum aggregate amount outstanding at any time not
exceeding the greater of (pound)20,000,000  and 20 per cent, of the Consolidated
Tangible Net Worth (as defined below).

     For the purposes of these Terms and Conditions:

     (a)  "Consolidated  Tangible  Net Worth" means at any  particular  time the
          aggregate  of the  amount  paid  up on the  Guarantor's  issued  share
          capital and the  consolidated  distributable  - and  non-distributable
          reserves of the Group (as shown in the most recently published audited
          consolidated financial statements of the Group), after:

          (i)  deducting  the total of any debit  balance on the profit and loss
               account and the book value of any intangible assets including but
               not limited to goodwill; and

          (ii) excluding any minority interests in Subsidiary Undertakings;

but  adjusted as may be  necessary  in respect of any  variation  in the paid-up
share  capital  or share  premium  account  of the Group  since the date of that
balance  sheet and further  adjusted as may be  necessary  to reflect any change
since the date of that balance sheet in the Subsidiary  Undertakings  comprising
the Group.

     A report by the Auditors (as defined in the Trust Deed~ as to the amount of
the  Consolidated  Tangible Net Worth at any given time shall, in the absence of
manifest error, be conclusive and binding on all parties.

     (b)  "Excluded  Subsidiary"  means  any  Subsidiary  of the  Issuer  or the
          Guarantor  (other than a Subsidiary  which holds a public  electricity
          supply licence granted under the Electricity Act 1989):

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

          (ii) none of whose  indebtedness  for borrowed money in respect of the
               financing  of such  ownership,  acquisition,  development  and/or
               operation  of an asset is subject to any recourse  whatsoever  to
               any member of the Group (other than another Excluded  Subsidiary)
               in respect of the repayment thereof; and

<PAGE>

          (iii) which has been designated as such by the Issuer or the Guarantor
               by written notice to the Trustee, provided that the Issuer or the
               Guarantor,  as the case may be,  may give  written  notice to the
               Trustee at any time that any Excluded  Subsidiary is no longer an
               Excluded  Subsidiary,  whereupon it shall cease to be an Excluded
               Subsidiary;

     (c)  "Group"   means  the   Guarantor,   the  Issuer  and  the   Subsidiary
          Undertakings;

     (d)  "PES  Subsidiary"  means any Subsidiary of the Guarantor which holds a
          public electricity  supply licence granted under the  Electricity  Act
          1989;

     (e)  "Project   Finance   Indebtedness"   means  any   present   or  future
          indebtedness  (whether  being  principal,  premium,  interest or other
          amounts) to finance a project:

          (i)  which is incurred by an Excluded Subsidiary; or

          (ii) in respect of which  recourse  to any member of the Group for the
               repayment or payment of any sum relating to such  indebtedness is
               limited to:

               (1)  the assets of a single  purpose  company  (other  than a PES
                    Subsidiary)  the principal  assets and business of which are
                    constituted  by such project and which was  established  for
                    the purpose of incurring such indebtedness; or

               (2)  the  assets of the  project  and the  rights,  revenues  and
                    insurance proceeds derived therefrom or related thereto,

          with no recourse to any other assets of the Group (other than those of
          an Excluded Subsidiary);

          (f)  "Relevant  Indebtedness" means any present or future indebtedness
               (whether being principal,  premium, interest or other amounts) in
               the form of or represented by notes, bonds, debentures, debenture
               stock, loan stock or other securities, whether issued for cash or
               in whole or in part for a  consideration  other  than  cash,  and
               which,  with the  agreement  of the person  issuing  the same are
               quoted,  listed or ordinarily  dealt in on any stock  exchange or
               recognised over-the-counter or other securities market, but shall
               not in any event include Project Finance Indebtedness;

          (g)  "Subsidiary" means a subsidiary within the meaning of Section 736
               of the Companies Act 1985;

          (h)  "Subsidiary  Undertaking"  shall have the meaning  given to it by
               Section  258 of the  Companies  Act 1985 (but shall  exclude  any
               undertakings  (as  defined  in  the  Companies  Act  1985)  whose
               accounts  are not included in the then latest  published  audited
               consolidated  accounts of the  Guarantor,  nor (in the case of an
               undertaking which has first become a subsidiary  undertaking of a
               member of the Group  since the date as at which any such  audited
               accounts were prepared)  would its accounts have been so included
               or consolidated if it had become so on or before that date); and

          (i)  any reference to an obligation  being  guaranteed shall include a
               reference  to  an  indemnity   being  given  in  respect  of  the
               obligation.

4.   Interest

     The Bonds bear interest from (and including) 16th October, 1995 at the rate
of 8.625 per cent. per annum, payable annually in arrear on 16th October in each
year (each an  "Interest  Payment  Date"),  the first such payment to be made on
16th October, 1996 and to amount to a full year's interest.

     Each  Bond will  cease to bear  interest  from its due date for  redemption
unless,  upon due presentation,  payment of the principal in respect of the Bond
is improperly withheld or refused or unless default is otherwise made in respect
of such payment, in which event interest shall continue to accrue as provided in
the Trust Deed.

     When  interest is required to be  calculated in respect of a period of less
than a full  year,  it  shall  be  calculated  on the  basis  of a 360 day  year
consisting of 12 months of 30 days each and, in the case of an incomplete month,
the number of days elapsed.

5.   Payments

     Payments  of  principal  in respect of each Bond will only be made  against
presentation  and surrender (or, in the case of part payment only,  endorsement)
of the relevant Bond at the specified office

<PAGE>

of any of the  Paying  Agents.  Payments  of  interest  due on the  Bonds  on an
Interest  Payment Date will be made against  presentation  and surrender (or, in
the case of part  payment  only,  endorsement)  of the  relevant  Coupons at the
specified office of any of the Paying Agents.  Each such payment will be made at
the  specified  office of any  Paying  Agent,  at the option of the  holder,  by
sterling cheque drawn on a town clearing branch of, or by transfer to a sterling
account  maintained by the payee with, a bank in the City of London,  subject in
all cases to any applicable  fiscal or other laws and  regulations,  but without
prejudice to the provisions of Condition 8.

     Each Bond must be presented for payment together with all unmatured Coupons
appertaining  thereto  failing  which the full amount of any  missing  unmatured
Coupon (or, in the case of payment not being made in full,  that  proportion  of
the full amount of the missing  unmatured Coupons which the amount so paid bears
to the total amount due)  appertaining  thereto will be deducted from the amount
due for payment.  Each amount so deducted  will be paid in the manner  mentioned
above against  presentation and surrender (or, in the case of part payment only,
endorsement)  of such  missing  Coupon at any time before the expiry of 10 years
after the  Relevant  Date (as defined in Condition 8) in respect of the relevant
Bond  (whether or not such Coupon would  otherwise  have become void pursuant to
Condition 9), or, if later, five years after the date on which such Coupon would
have become due, but not thereafter.

     A holder  shall be entitled to present a Bond or Coupon for payment only on
a Presentation  Date and shall not be entitled to any further  interest or other
payment if a Presentation Date is after the due date.

     "Presentation Date" means a day which (subject to Condition 9):

     (a)  is or falls after the relevant due date but, if the due date is not or
          was not a Business  Day in the City of London,  is or falls  after the
          next following such Business Day; and

     (b)  is a Business Day in the place of the  specified  office of the Paying
          Agent at which the Bond or Coupon is presented for payment and, in the
          case of  payment  by  transfer  to a  sterling  account in the City of
          London as referred to above, in the City of London.

     "Business  Day"  means,  in  relation  to any place,  a day  (other  than a
Saturday  or Sunday) on which  commercial  banks and  foreign  exchange  markets
settle payments in that place.

     When making  payments to  Bondholders  or  Couponholders,  fractions of one
penny will be rounded down to the nearest whole penny.

     The names of the initial Paying Agents and their initial  specified offices
are set out at the end of these Terms and  Conditions.  The Issuer  reserves the
right, subject to the prior written approval of the Trustee, at any time to vary
or terminate the  appointment  of any Paying Agent and to appoint  additional or
other Paying  Agents  provided  that it will at all times  maintain at least two
Paying Agents having specified  offices in separate  European cities  previously
approved  in  writing  by the  Trustee,  one of which,  so long as the Bonds are
listed on the London Stock Exchange,  shall be London or such other place as the
London  Stock  Exchange may approve and one of which shall be outside the United
Kingdom. Notice of any such termination or appointment and of any changes in the
specified offices of the Paying Agents will be given to the Bondholders promptly
by the Issuer in accordance with Condition 14.

6.   Redemption and Purchase

     (A) Unless  previously  redeemed or  purchased  and  cancelled  as provided
below,  the  Issuer  will  redeem  the Bonds at their  principal  amount on 16th
October, 2005.

     (B) The Issuer may, at any time,  having given notice to the Bondholders in
accordance with this Condition 6(B) (which notice shall be irrevocable),  redeem
the Bonds in whole or in part (but if in part, in integral  multiples of (pound)
l,000,000 in principal amount  thereof),  at the price which shall be the higher
of the following, together with interest accrued up to the date of redemption:

     (i)  their principal amount; and

     (ii) that price (the "Redemption Price"), expressed as a percentage rounded
          to three decimal  places  (0.0005 being  rounded  down),  at which the
          Gross  Redemption  Yield on the Bonds, if they were to be purchased at
          such price on the third  dealing day prior to the  publication  of the
          notice of  redemption  (or, in the case of a partial  redemption,  the
          first notice of redemption  referred to below),  would be equal to the
          Gross  Redemption  Yield on such  dealing  day of the 8 1/2 per  cent.
          Treasury Stock 2005 or of such other United Kingdom  Government  Stock
          as the Trustee,  with the advice of three leading brokers operating in
          the
<PAGE>

          gilt-edged market and/or gilt-edged market makers,  shall determine to
          be  appropriate  (the  "Reference  Stock")  on the basis of the middle
          market price of the Reference Stock prevailing on such dealing day, as
          determined by Barclays de Zoete Wedd Limited (or such other  person(s)
          as the Trustee may approve).

     The Gross  Redemption  Yield on the Bonds and the  Reference  Stock will be
expressed as a percentage  and will be calculated on the basis  indicated by the
Joint  Index and  Classification  Committee  of the  Institute  and  Faculty  of
Actuaries as reported in the Journal of the  Institute of  Actuaries,  Vol. 105,
Part 1,  1978,  page 18 or on such other  basis as the  Trustee  may  previously
approve in writing.

     In the case of a redemption of all of the Bonds  pursuant to this Condition
6(B),  notice will be given to the  Bondholders by the Issuer in accordance with
Condition  14 once not less than 30 nor more than 60 days  before the date fixed
for redemption and will specify the date fixed for redemption and the redemption
price.

     In the case of a partial  redemption of Bonds, Bonds to be redeemed will be
selected individually by lot in such place as the Trustee may previously approve
in writing and in such manner as the Trustee  shall deem to be  appropriate  and
fair without involving any part of a Bond, not more than 65 days before the date
fixed for redemption.  In the case of a partial redemption of the Bonds pursuant
to this Condition 6(B), notice will be so given to the Bondholders by the Issuer
in accordance  with Condition 14 twice,  first not less than 80 nor more than 95
days, and secondly not less than 30 nor more than 60 days, before the date fixed
for  redemption.  Each notice will specify the date fixed for redemption and the
redemption  price,  the aggregate  principal amount of the Bonds to be redeemed,
the  serial  numbers  of Bonds  previously  called  (in  whole  or in part)  for
redemption and not presented for payment and the aggregate  principal  amount of
Bonds which will be outstanding  after the partial  redemption.  In addition the
second  such  notice will  specify  the serial  numbers of the Bonds  called for
redemption.

     Upon the  expiry of any such  notice as is  referred  to in this  Condition
6(B),  the Issuer shall be bound to redeem the Bonds to which the notice  refers
at the relevant  redemption  price at the date of such redemption  together with
interest accrued to but excluding such date.

     (C) If as a  result  of any  change  in,  or  amendment  to,  the  laws  or
regulations  of the United  Kingdom  or any  political  sub-division  of, or any
authority  in, or of, the United  Kingdom  having power to tax, or any change in
the application or official  interpretation  of such laws or regulations,  which
change or amendment becomes  effective after 10th October,  1995, the Issuer has
or will become obliged to pay  additional  amounts as provided or referred to in
Condition 8 (and such  amendment or change has been evidenced by the delivery by
the Issuer to the Trustee (who shall, in the absence of manifest  error,  accept
such  certificate  and  opinion  as  sufficient   evidence  thereof)  of  (i)  a
certificate  signed by two  directors  of the  Issuer  on  behalf of the  Issuer
stating that such amendment or change has occurred (irrespective of whether such
amendment or change is then effective), describing the facts leading thereto and
stating that such obligation  cannot be avoided by the Issuer taking  reasonable
measures  available  to it and (ii) an  opinion  in a form  satisfactory  to the
Trustee of independent legal advisers of recognised standing to whom the Trustee
shall have no reasonable  objection to the effect that such  amendment or change
has  occurred  (irrespective  of  whether  such  amendment  or  change  is  then
effective)),  the Issuer may at its  option,  having  given not less than 30 nor
more than 60 days' notice to the  Bondholders  in accordance  with  Condition 14
(which notice shall be  irrevocable),  redeem all the Bonds (other than Bonds in
respect of which the Issuer shall have given a notice of redemption  pursuant to
Condition  6(B) prior to any notice being given under this  Condition  6(C)) but
not some only, at their principal amount together with interest (if any) accrued
to (but excluding) the date of redemption, provided that no notice of redemption
shall be given earlier than 90 days before the earliest date on which the Issuer
would be required to pay such  additional  amounts  were a payment in respect of
the Bonds then due.

     Upon expiry of any such notice as is  referred  to in this  Condition  6(C)
(and  subject as provided  above),  the Issuer  shall be bound to redeem all the
Bonds  at  their  principal  amount  together  with  interest  accrued  to  (but
excluding) the redemption date.

     (D) The Issuer,  the Guarantor or any of their respective  Subsidiaries may
at any time purchase Bonds together with unmatured  Coupons in any manner and at
any price in the open  market or by private  treaty.  If  purchases  are made by
tender,  tenders must be available to all Bondholders  alike. Bonds purchased by
the Issuer, the Guarantor or any of their respective Subsidiaries may be held or
reissued or resold or surrendered for cancellation.

     (E) All Bonds which are redeemed will forthwith be cancelled (together with
all relative  unmatured  Coupons  attached to or surrendered with the Bonds) and
may not be reissued or resold.

<PAGE>

     (F) While any Bonds are held by the Issuer,  the  Guarantor or any of their
respective Subsidiaries,  such Bonds shall not entitle the holder to vote at, or
to be  counted in the quorum  for,  any  meeting  of  Bondholders  and,  for the
purposes of the provisions of the Trust Deed concerning meetings of Bondholders,
will not be regarded as being in issue.

7.   Redemption at the Option of Bondholders

     (A) For the purposes of these Terms and Conditions:

     (i)  "independent financial adviser" means a financial adviser appointed by
          the Guarantor and previously  approved in writing by the Trustee (such
          approval  not to be  unreasonably  withheld  or  delayed)  or,  if the
          Guarantor  shall not have  appointed such an adviser within 21 days of
          becoming  aware of the  occurrence  of a  Restructuring  Event and the
          Trustee is indemnified to its  satisfaction  against the costs of such
          adviser,  appointed  by the Trustee  following  consultation  with the
          Guarantor;

     (ii) "Investment  Grade Rating" means a rating of at least investment grade
          BBB- in the case of Standard & Poor's Corporation and Baa3 in the case
          of Moody's Investors Services Inc. or their respective equivalents for
          the time being; ~ "Negative  Certification"  means a certificate given
          in writing to the Trustee by an independent  financial  adviser that a
          Restructuring  Event  will  be  or  is,  in  its  opinion,  materially
          prejudicial to the interests of the Bondholders;

     (iv) A "Negative  Rating Event" shall be deemed to have occurred if (X) the
          Guarantor  does not,  either  prior to or not later than 14 days after
          the  date of a  Negative  Certification  in  respect  of the  relevant
          Restructuring Event, seek, and thereupon use all reasonable endeavours
          to  obtain,  a  rating  of  the  Bonds  or  any  other  unsecured  and
          unsubordinated  debt of the  Guarantor  (or of any  Subsidiary  of the
          Guarantor  (including,  without  limitation,  the Issuer) and which is
          guaranteed on an unsecured and unsubordinated  basis by the Guarantor)
          having an initial  maturity of five years or more from a Rating Agency
          or (Y) if the Guarantor does so seek and use such endeavours but it is
          unable,  as a  result  of such  Restructuring  Event,  to  obtain  the
          Investment Grade Rating (and, in this definition, "seek" shall include
          procuring the relevant Subsidiary to seek);

     (v)  "Pooling and  Settlement  Agreement"  means the  agreement  dated 30th
          March,  1990 (as amended and restated up to 22nd April,  1994) made by
          the Guarantor  with The National  Grid Company plc and others  setting
          out the rules  and  procedures  for the  operation  of an  electricity
          trading pool and of a settlement  system as in force on 10th  October,
          1995 and, while the same has effect, the Initial Settlement  Agreement
          also dated 30th March,  1990 and made between the same parties,  as in
          force on 10th October, 1995;

     (vi) A "Put  Event"  occurs on either  (X) the date of the last to occur of
          all of the following (aa) a Restructuring  Event, (bb) either a Rating
          Downgrade or, as the case may be, a Negative Rating Event and (cc) the
          relevant Negative Certification or (Y) the date on which the Guarantor
          receives  a notice  from the  Secretary  of  State as  referred  to in
          Article I l(4)(a) of the  Guarantor's  Articles of  Association  as in
          effect on 10th October, 1995;

     (vii)" Rating  Agency" means  Standard & Poor's  Corporation  or any of its
          subsidiaries and their successors or Moody's Investors Service Inc. or
          any of its  subsidiaries  and their  successors  or any rating  agency
          substituted  for either of them (or any permitted  substitute of them)
          by the Guarantor from time to time with the prior written  approval of
          the  Trustee  (such  approval  not  to  be  unreasonably  withheld  or
          delayed);

     (viii) Following  a  Restructuring  Event,  a "Rating  Downgrade"  shall be
          deemed to have occurred in respect of that Restructuring  Event if the
          then current  rating  assigned to the Rated  Securities  by any Rating
          Agency  (whether  provided by a Rating Agency at the invitation of the
          Guarantor  or by its own  volition)  is  withdrawn or reduced from the
          Investment  Grade  Rating  or, if the  Rating  Agency  shall then have
          already rated the Rated  Securities below the Investment Grade Rating,
          the rating is lowered one full rating category;

     (ix) "Rated  Securities" means the Bonds, if at any time and for so long as
          they shall have a rating from a Rating Agency, and otherwise any other
          unsecured  and  unsubordinated  debt  of  the  Guarantor  (or  of  any
          Subsidiary  of  the  Guarantor  (including,  without  limitation,  the
          Issuer) and which is  guaranteed  on an unsecured  and  unsubordinated
          basis by the  Guarantor)  having an initial  maturity of five years or
          more which is rated by a Rating Agency;

<PAGE>

(x)  "Restructuring  Event"  means  the  occurrence  of any  one or  more of the
following events:

     (A)(aa) the  Secretary of State for Trade and  Industry (or any  successor)
          giving  the  Guarantor  written  notice of  revocation  of the  public
          electricity   supply  licence  (the  "PES  Licence")  granted  by  the
          Secretary of State for Energy to the Guarantor  under the  Electricity
          Act 1989 in relation to its  authorised  area and excluding any second
          tier supply  licence  provided  that the giving of notice  pursuant to
          paragraph  3 of Part 1 of the  PES  Licence  shall  not be  deemed  to
          constitute  the  revocation  of the PES Licence or (bb) the  Guarantor
          agreeing in writing with the Secretary of State for Trade and Industry
          (or any  successor) to any  revocation or surrender of the PES Licence
          or (cc) any legislation (whether primary or subordinate) being enacted
          terminating  or revoking the PES  Licence,  except in any such case in
          circumstances  where a licence or  licences on  substantially  no less
          favourable  terms is or are granted to the Guarantor or a wholly-owned
          Subsidiary of the Guarantor  (the  "Relevant  Subsidiary")  and in the
          case of such  Relevant  Subsidiary at the time of such grant it either
          executes in favour of the  Trustee an  unconditional  and  irrevocable
          guarantee  in  respect  of the Bonds in such form as the  Trustee  may
          previously  approve in writing (such  approval not to be  unreasonably
          withheld or delayed) or becomes the  principal  debtor under the Bonds
          in accordance with Condition 12; or

     (B)  any  modification  (other  than a  modification  which is of a formal,
          minor or technical  nature) being made to the terms and  conditions of
          the PES Licence on or after 10th  October,  1995  unless the  modified
          terms and  conditions  are certified by two directors of the Guarantor
          to be not materially less favourable to the business of the Guarantor;
          or

     (C)  (aa) the Pooling  and  Settlement  Agreement  being  terminated  under
          Clause 67.4 thereof and not being replaced by an agreement, commercial
          arrangement or open market mechanism or framework having substantially
          the same effect as the Pooling and Settlement Agreement,  in each case
          on terms  which  two  directors  of the  Guarantor  certify  to be not
          materially less favourable to the business of the Guarantor; or

          (bb) the Guarantor being given notice pursuant to Clause 67.3.2 of the
               Pooling and  Settlement  Agreement  requiring it to cease to be a
               party thereto; or

          (cc) any  notice  declaring  an event of  default  (as  defined in the
               Pooling and  Settlement  Agreement)  being given to the Guarantor
               under Clause  66.1.1 or 66.2  thereof and such default  remaining
               unremedied or unwaived; or

          (dd) any modification (other than a modification which is of a formal,
               minor  or  technical  nature)  being  made  to  the  Pooling  and
               Settlement  Agreement on or after 10th October,  1995, unless two
               directors of the Guarantor certify that any such modification has
               not had and will  not have a  materially  adverse  effect  on the
               amount or nature of any  payment  made or to be made by or to the
               Guarantor  pursuant to the Pooling and Settlement  Agreement or a
               materially  adverse effect on the financial rights or obligations
               of the  Guarantor  under the  Pooling and  Settlement  Agreement,
               provided  that any such  modification  shall,  to the  extent  it
               grants or confers powers or  discretions on the Director  General
               of Electricity  Supply (or any successor)  under or in respect of
               the Pooling  and  Settlement  Agreement,  be deemed not to have a
               materially adverse effect as aforesaid,  but for the avoidance of
               doubt any  modification  to the Pooling and Settlement  Agreement
               made  by the  Director  General  of  Electricity  Supply  (or any
               successor)  by  virtue  of or  pursuant  to any  such  powers  or
               discretions and which  otherwise would have a materially  adverse
               effect as provided above shall not by virtue of this subparagraph
               be  deemed  not to have  such an  effect;  or

          (ee) the Guarantor ceasing to be a party to the Pooling and Settlement
               Agreement  for any reason  (other than  pursuant to (bb) and (cc)
               above),   except  where  a  licence  is  granted  to  a  Relevant
               Subsidiary as contemplated by  sub-paragraph  (A)(X)(A) above and
               at or about  the same  time all  rights  and  obligations  of the
               Guarantor  pursuant to the Pooling and  Settlement  Agreement are
               assigned and  transferred  to such  Relevant  Subsidiary  in such
               manner as the Trustee  may  previously  approve in writing  (such
               approval not to be unreasonably  withheld or delayed); or

<PAGE>

     (D)  any  legislation  (whether  primary or  subordinate)  is enacted which
          removes,  qualifies or amends  (other than an amendment  which is of a
          formal,  minor or  technical  nature) the duties of the  Secretary  of
          State for Trade and  Industry (or any  successor)  and/or the Director
          General of Electricity  Supply (or any  successor)  under Section 3 of
          the Electricity Act 1989 as in force on 10th October, 1995, unless two
          directors of the Guarantor certify that such removal, qualification or
          amendment  does not have a materially  adverse effect on the financial
          condition of the Guarantor.

     (xi) "Restructuring Period" means:

          (A)  if at the time a  Restructuring  Event  occurs  there  are  Rated
               Securities, the period of 90 days starting from and including the
               day on which that Restructuring Event occurs; or

          (B)  if at the time a  Restructuring  Event  occurs there are no Rated
               Securities,  the period  starting  from and  including the day on
               which that  Restructuring  Event  occurs and ending on the day 90
               days  following the later of (an) the date on which the Guarantor
               shall  seek to obtain a rating  pursuant  to  Condition  7(A)(iv)
               prior to the expiry of the 14 days referred to in the  definition
               of  Negative  Rating  Event and (bb) the date on which a Negative
               Certification  shall have been given to the  Guarantor in respect
               of that Restructuring Event; and

     (xii)  A Rating Downgrade or a Negative  Rating  Event or a  non-Investment
          Grade  Rating  shall be deemed not to have  occurred as a result or in
          respect  of a  Restructuring  Event if the  Rating  Agency  making the
          relevant reduction in rating or, where applicable, declining to assign
          a rating of at least  investment grade as provided in this Condition 7
          does not announce or publicly confirm or inform the Trustee in writing
          at its request that the reduction or, where  applicable,  declining to
          assign a rating of at least investment grade was the result,  in whole
          or in part, of any event or circumstance  comprised in or arising as a
          result of the applicable Restructuring Event.

     The  Trust  Deed  provides  that the  Trustee  is under  no  obligation  to
ascertain  whether a  Restructuring  Event, a Negative Rating Event or any event
which could lead to the occurrence of or could constitute a Restructuring  Event
has  occurred  and until it shall have  actual  knowledge  or express  notice in
accordance  with the Trust Deed to the  contrary  the Trustee may assume that no
Restructuring Event, Negative Rating Event or other such event has occurred.

     (B)  If,  at any  time  while  any  of the  Bonds  remains  outstanding,  a
Restructuring  Event  occurs  and prior to the  commencement  of or  during  the
Restructuring  Period an independent  financial  adviser shall have certified in
writing to the Trustee that such  Restructuring  Event will not be or is not, in
its opinion,  materially  prejudicial to the interests of the  Bondholders,  the
following  provisions of this Condition 7 shall cease to have any further effect
in relation to such Restructuring Event.

     (C) If, at any time while any of the Bonds remains outstanding, either

          (i) a Restructuring Event occurs and (subject to Condition 7(B)):

               (X)  within the Restructuring Period, either:

                    (i)  if at the time such  Restructuring  Event  occurs there
                         are Rated Securities,  a Rating Downgrade in respect of
                         such Restructuring Event also occurs; or

                    (ii) if at such  time  there  are  no  Rated  Securities, a
                         Negative   Rating  Event  also   occurs;   and

               (Y)  an independent financial adviser shall have given a Negative
                    Certification; or

          (ii) the  Guarantor  receives a notice from the  Secretary of State as
               referred to in Article 11 (4)(a) of the  Guarantor's  Articles of
               Association as in effect on 10th October, 1995,

then,  unless, in the case of (ii) only, an independent  financial adviser shall
have  certified in writing to the Trustee within 12 days of issue of such notice
that  neither the notice of the  revocation  of the Licence by the  Secretary of
State nor the redemption by the Guarantor of all of its  preference  shares will
be or is,  in its  opinion,  materially  prejudicial  to  the  interests  of the
Bondholders and unless, in the case of both (i) and (ii), at any time the Issuer
shall have given a notice in respect of his Bond under  Condition  6(B) or under
Condition  6(C), in each case expiring  prior to the Put Date (as defined below)
each  Bondholder  shall have the option (the "Put Option") to require the Issuer
or, failing the Issuer, the Guarantor, to redeem or, at the option of the Issuer
or the Guarantor, as applicable, purchase (or procure the purchase

<PAGE>

of that Bond on the Put Date at its principal  amount  together with (or, where
purchased,  together  with an amount equal to) interest (if any) accrued to (but
excluding) the Put Date.

     A Restructuring  Event shall be deemed not to be materially  prejudicial to
the  interests of the  Bondholders  if,  notwithstanding  the  occurrence of the
Rating  Downgrade,  the rating  assigned to the Rated  Securities  by any Rating
Agency (as defined  below) is  subsequently  increased to the  Investment  Grade
Rating prior to any Negative Certification being given.

     Any  certification by an independent  financial  adviser as aforesaid as to
whether or not, in its opinion, any Restructuring Event will be or is materially
prejudicial  to the  interests  of the  Bondholders  shall,  in the  absence  of
manifest  error,  be  conclusive  and binding on the  Trustee,  the Issuer,  the
Guarantor, the Bondholders and the Couponholders.

     (D) Promptly  upon the Issuer or the  Guarantor  becoming  aware that a Put
Event, has occurred and in any event not later than 14 days after the occurrence
of a Put Event,  the  Issuer or the  Guarantor  shall,  and at any time upon the
Trustee becoming  similarly so aware the Trustee may, and if so requested by the
holders  of  at  least  one-quarter  in  principal  amount  of  the  Bonds  then
outstanding  shall,  give notice (a "Put Event  Notice") to the  Bondholders  in
accordance  with  Condition 14 specifying  the nature of the Put Event,  and the
procedure for exercising the Put Option.

     (E) To exercise the Put Option in respect of his Bond the  Bondholder  must
deliver such Bond to the specified office of any Paying Agent, on a day which is
a  Business  Day (as  defined in  Condition  5) in the City of London and in the
place of such  specified  office  falling  within the period (the "Put  Period")
commencing  on the date the Put  Event  Notice  is given  and  expiring  45 days
thereafter  accompanied by a duly completed and signed notice of exercise in the
form (for the time being current)  obtainable  from any specified  office of any
Paying  Agent (a "Put  Notice") and in which the  Bondholder  may specify a bank
account complying with the requirements of Condition 5 to which payment is to be
made under  this  Condition  7. Each Bond must be  delivered  together  with all
Coupons  appertaining  thereto maturing after the day (the "Put Date") being, in
the case of a Put Event  referred to in sub-clause  (X) of the definition of Put
Event,  the fifteenth day after the date of expiry of the Put Period and, in the
case of a Put Event  referred  to in  sub-clause  (Y) of the  definition  of Put
Event,  the day upon which such Bond is delivered at the specified office of any
Paying Agent by the  relevant  Bondholder  failing  which the full amount of any
such  missing  Coupon will be  deducted  from the amount due for  payment.  Each
amount so deducted  will be paid in the manner  provided in  Condition 5 against
presentation  and surrender (or, in the case of part payment only,  endorsement)
of such  missing  Coupon at any time  before  the  expiry of 10 years  after the
Relevant  Date (as  defined in  Condition  8) in respect  of the  relevant  Bond
(whether  or not the  Coupon  would  otherwise  have  become  void  pursuant  to
Condition 9) or, if later,  five years after the date on which such Coupon would
have become due, but not thereafter. The Paying Agent to which such Bond and Put
Notice are delivered shall issue to the Bondholder  concerned a non-transferable
receipt in respect of the Bond so  delivered.  Payment in respect of any Bond so
delivered  shall be made, if the holder duly specifies a bank account in the Put
Notice to which payment is to be made, on the Put Date, by transfer to that bank
account  and, in every other  case,  on or after the Put Date,  but in each case
against  presentation and surrender (or, as the case may be) endorsement of such
receipt at any specified office of any Paying Agent, subject in any such case as
provided in Condition 5. A Put Notice, once given, shall be irrevocable. For the
purposes of Conditions  1, 9, 10, 11, 13, and 15 and for certain other  purposes
specified in the Trust Deed,  receipts issued pursuant to this Condition 7 shall
be treated as if they were Bonds.  The Issuer  shall redeem or, at the option of
the Issuer,  purchase  (or procure the  purchase  of) the  relevant  Bond on the
applicable Put Date, unless such Bond has been previously  redeemed or purchased
in accordance with these Terms and Conditions.

8.   Taxation

     All  payments  in respect of the Bonds and the Coupons by the Issuer or, as
the case may be, the Guarantor  shall be made without  withholding  or deduction
for, or on account  of, any  present or future  taxes,  duties,  assessments  or
governmental  charges of whatever  nature  ("Taxes")  imposed or levied by or on
behalf of the United Kingdom, or any political sub-division of, or any authority
in, or of, the United  Kingdom  having power to tax,  unless the  withholding or
deduction of the Taxes is required by law. In that event,  the Issuer or, as the
case may be, the Guarantor will pay such additional  amounts as may be necessary
in order that the net amounts  received  by the  Bondholders  and  Couponholders
after the  withholding  or deduction  shall equal the  respective  amounts which
would have been  receivable  in respect of the Bonds or, as the case may be, the
Coupons in the absence of the withholding or deduction except that no additional
amounts  shall be payable in  relation  to any payment in respect of any Bond or
Coupon:

     (a)  to, or to a third  party on behalf  of, a holder  who is liable to the
          Taxes in respect  of the Bond or Coupon by reason of his  having  some
          connection  with the United Kingdom other than the mere holding of the
          Bond or Coupon; or

     (b)  presented for payment in the United Kingdom; or

     (c)  presented for payment more than 30 days after the Relevant Date except
          to the extent that a holder  would have been  entitled  to  additional
          amounts  on  presenting  the same for  payment on the last day of such
          period of 30 days; or

     (d)  to, or to a third party on behalf of, a holder who would not be liable
          or subject to the withholding or deduction by making a declaration of
          non-residence or other  similar  claim for exemption to the relevant
          tax authority.

     As used herein,  "Relevant  Date" means the date on which the payment first
becomes due but, if the full amount of the money  payable has not been  received
in London by the  Principal  Paying  Agent or the  Trustee  on or before the due
date,  it means the date on which,  the full amount of the money  having been so
received, notice to that effect shall have been duly given to the Bondholders by
the Issuer in accordance with Condition 14.

     Any  reference in these Terms and  Conditions  to any amounts in respect of
the Bonds shall be deemed also to refer to any  additional  amounts which may be
payable under this Condition 8 or under any  undertakings  given in addition to,
or in substitution for, this Condition 8 pursuant to the Trust Deed.

9.   Prescription

     Bonds and Coupons  will become void  unless  presented  for payment  within
periods  of 10 years  and five  years  respectively  from the  Relevant  Date in
respect  of the  Bonds  or,  as the case may be,  the  Coupons,  subject  to the
provisions of Condition 5.

10.  Events of Default

     The Trustee at its  discretion  may,  and if so requested in writing by the
holders  of  at  least  one-quarter  in  principal  amount  of  the  Bonds  then
outstanding or if so directed by an Extraordinary  Resolution of the Bondholders
shall,  (but in the case of the  happening  of any of the  events  mentioned  in
sub-paragraphs  (b), (c), (d), (e), (f), (g) and (h) below,  only if the Trustee
shall  have  certified  in  writing  to the  Issuer  that such  event is, in its
opinion,  materially prejudicial to the interests of the Bondholders and subject
in each case to the Trustee being  indemnified by, or on behalf of.  Bondholders
to its satisfaction), give notice to the Issuer and the Guarantor that the Bonds
are, and they shall accordingly  thereby  forthwith become,  immediately due and
repayable at their principal  amount together with accrued interest (as provided
in the Trust Deed) if any of the  following  events (each an "Event of Default")
shall have  occurred  (unless  such Event of Default  has been  remedied  to the
satisfaction of the Trustee):

     (a)  if  default  is made for a period of 7 days or more in the  payment of
          any  principal  or the  purchase  price  due in  respect  of any  Bond
          pursuant  to  Condition  7 or 14 days or  more in the  payment  of any
          interest due in respect of the Bonds or any of them; or

     (b)  if the Issuer or the Guarantor  fails to perform or observe any of its
          other obligations, covenants, conditions or provisions under the Bonds
          or the Trust Deed and (except where the Trustee  shall have  certified
          to the  Issuer  in  writing  that  it  considers  such  failure  to be
          incapable of remedy in which case no such notice or continuation as is
          hereinafter mentioned will be required) such failure continues for the
          period of 30 days (or such  longer  period as the  Trustee  may in its
          absolute  discretion permit) next following the service by the Trustee
          on the  Issuer  or the  Guarantor,  as the  case  may  be,  of  notice
          requiring the same to be remedied; or

     (c)  if (i) any other  indebtedness  for borrowed money of the Issuer,  the
          Guarantor or any Principal  Subsidiary becomes due and repayable prior
          to its stated  maturity  by reason of an event of  default  (howsoever
          described)  or (ii) any such  indebtedness  for borrowed  money is not
          paid  when due or, as the case may be,  within  any  applicable  grace
          period (as originally  provided) or (iii) the Issuer, the Guarantor or
          any  Principal  Subsidiary  fails to pay when due (or, as the case may
          be, within any originally  applicable grace period) any amount payable
          by it under any  present or future  guarantee  for,  or  indemnity  in
          respect of, any  indebtedness for borrowed money of any person or (iv)
          any  security  given by the Issuer,  the  Guarantor  or any  Principal
          Subsidiary  for any  indebtedness  for borrowed money of any person or
          any

<PAGE>

          guarantee  or  indemnity of  indebtedness  for  borrowed  money of any
          person becomes  enforceable  by reason of default in relation  thereto
          and steps are taken to  enforce  such  security  save in any such case
          where  there  is a  bona  fide  dispute  as to  whether  the  relevant
          indebtedness  for borrowed money or any such guarantee or indemnity as
          aforesaid shall be due and payable, provided that the aggregate amount
          of the relevant  indebtedness  for borrowed  money in respect of which
          any one or more of the events  mentioned  above in this  sub-paragraph
          (c) has or have occurred equals or exceeds whichever is the greater of
          (pound)20,000,000 or its equivalent in other currencies (as determined
          by the  Trustee) or two per cent.  of the  Consolidated  Tangible  Net
          Worth, and for the purposes of this sub-paragraph  (c),  "indebtedness
          for borrowed money" shall exclude Project Finance Indebtedness; or

     (d)  if any order shall be made by any  competent  court or any  resolution
          shall be passed for the winding up or dissolution of the Issuer or the
          Guarantor,   save   for  the   purposes   of   amalgamation,   merger,
          consolidation,   reorganisation,   reconstruction   or  other  similar
          arrangement on terms previously  approved in writing by the Trustee or
          by an Extraordinary Resolution of the Bondholders; or

     (e)  if any order shall be made by any  competent  court or any  resolution
          shall be passed  for the  winding  up or  dissolution  of a  Principal
          Subsidiary,   save  for  the   purposes   of   amalgamation,   merger,
          consolidation,   reorganisation,   reconstruction   or  other  similar
          arrangement (i) not involving or arising out of the insolvency of such
          Principal  Subsidiary  and under which all the surplus  assets of such
          Principal  Subsidiary  are  transferred to the Guarantor or any of its
          other  Subsidiaries  or (ii) the terms of which have  previously  been
          approved in writing by the Trustee or by an  Extraordinary  Resolution
          of the Bondholders; or

     (f)  if the Issuer,  the Guarantor or any Principal  Subsidiary shall cease
          to carry on the whole or substantially the whole of its business, save
          in each case for the purposes of amalgamation,  merger, consolidation,
          reorganisation,  reconstruction  or other similar  arrangement (i) not
          involving  or  arising  out  of the  insolvency  of  the  Issuer,  the
          Guarantor  or  such  Principal  Subsidiary  and  under  which  all  or
          substantially  all of its assets are  transferred to another member of
          the Group or (ii) under which all or  substantially  all of its assets
          are  transferred  to a third party or parties  (whether  associates or
          not)  for  full  consideration  by  the  Issuer,  the  Guarantor  or a
          Principal  Subsidiary  on an arm's  length  basis or (iii)  where  the
          transferee is or  immediately  upon such transfer  becomes a Principal
          Subsidiary or (iv) the terms of which have previously been approved in
          writing  by  the  Trustee  or by an  Extraordinary  Resolution  of the
          Bondholders,  provided that if the Guarantor  shall transfer the PES -
          Licence  it shall be  deemed  to have  ceased to carry on the whole or
          substantially the whole of its business (and none of exceptions (i) to
          (iii) shall  apply)  unless the  transferee  assumes all the  Issuer's
          obligations  under the Bonds and the Trust Deed as primary  obligor or
          gives a  guarantee  in  substitution  for the  Guarantor  in form  and
          substance  acceptable to the Trustee in respect of the  obligations of
          the Issuer under the Bonds and the Trust Deed; or

     (g)  if the Issuer, the Guarantor or any Principal Subsidiary shall suspend
          or shall threaten to suspend  payment of its debts  generally or shall
          be declared or adjudicated by a competent  court to be unable or shall
          admit in writing its  inability,  to pay its debts (within the meaning
          of Section 123(1) or (2) of the Insolvency Act 1986) as they fall due,
          or shall be  adjudicated  or found  insolvent by a competent  court or
          shall enter into any composition or other similar arrangement with its
          creditors under Section 1 of the Insolvency Act 1986; or

     (h)  if  a  receiver,   administrative  receiver,  administrator  or  other
          similar  official  shall be appointed in relation to the Issuer,  the
          Guarantor or any Principal Subsidiary or in relation to the whole or a
          substantial  part of the  undertaking  or  assets  of any of them or a
          distress,  execution or other process shall be levied or enforced upon
          or sued out against,  or an encumbrancer shall take possession of, the
          whole or a substantial part of the assets of any of them and in any of
          the  foregoing  cases  it or he shall  not be paid  out or  discharged
          within  60 days (or  such  longer  period  as the  Trustee  may in its
          absolute discretion permit).

     For the  purposes of  sub-paragraph  (g) above,  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 Director (as defined
in the PES Licence) may from time to time  determine by notice in writing to the
Secretary of State (as defined in the PES Licence) and the Guarantor.

     Neither the Issuer,  the Guarantor nor any  Principal  Subsidiary  shall be
deemed to be unable to pay its debts for the purposes of sub-paragraph (g) above
if any such demand as is mentioned in Section

<PAGE>

123(1)(a)  of the  Insolvency  Act 1986 is being  contested in good faith by the
Issuer, the Guarantor or the relevant Principal Subsidiary,  as the case may be,
with recourse to all  appropriate  measures and procedures or if any such demand
is satisfied before the expiration of such period as may be stated in any notice
given by the Trustee  under the first  paragraph of this  Condition  10. For the
purposes of these Terms and Conditions:

     (a)  a "Principal  Subsidiary"  at any time shall mean a Subsidiary  of the
          Issuer or the Guarantor (not being any Subsidiary of the Issuer or the
          Guarantor  whose  only  indebtedness  for  borrowed  money is  Project
          Finance Indebtedness):

          (A)  whose (i) net profits  before tax or (ii) gross assets  represent
               15 per cent. or more of the  consolidated  net profits before tax
               of  the  Group  or   consolidated   gross  assets  of  the  Group
               respectively  in each case as calculated by reference to the then
               latest   audited   financial   statements   of  such   Subsidiary
               (consolidated   in  the  case  of  a  company  which  itself  has
               Subsidiaries   and  which,   in  the  normal   course,   prepares
               consolidated  accounts) and the then latest audited  consolidated
               financial statements of the Group; or

          (B)  to which is transferred all or substantially all of the business,
               undertaking  and  assets  of a  Subsidiary  of the  Issuer or the
               Guarantor  which  immediately  prior  to  such  transfer  is  - a
               Principal  Subsidiary,  whereupon the transferor Subsidiary shall
               immediately cease to be a Principal Subsidiary and the transferee
               Subsidiary shall immediately become a Principal  Subsidiary under
               the provisions of this  sub-paragraph  (B) (but without prejudice
               to the provisions of sub-paragraph (A) above);

               all  as more fully defined in the Trust Deed.

               A report by the Auditors  that in their  opinion a Subsidiary  of
               the Issuer or the Guarantor is or is not or was or was not at any
               particular  time or throughout  any specified  period a Principal
               Subsidiary shall, in the absence of manifest error, be conclusive
               and  binding on the  Guarantor,  the  Issuer,  the  Trustee,  the
               Bondholders and the Couponholders; and

     (b)  "indebtedness   for  borrowed  money"  means  any  present  or  future
          indebtedness  (whether  being  principal,  premium,  interest or other
          amounts)  for or in respect of (i) money  borrowed,  (ii)  liabilities
          under or in  respect  of any  acceptance  credit,  or (iii) any notes,
          bonds,  debentures,  debenture  stock,  loan stock or other securities
          offered, issued or distributed whether by way of public offer, private
          placing, acquisition consideration or otherwise and whether issued for
          cash or in whole or in part for a consideration other than cash.

11.  Enforcement

     The Trustee may at any time, at its  discretion  and without  notice,  take
such  proceedings  against  the Issuer or the  Guarantor  as it may think fit to
enforce the provisions of the Trust Deed, the Bonds and the Coupons but it shall
not be bound to take any  proceedings  or any other  action in  relation  to the
Trust Deed,  the Bonds or the Coupons  unless (a) it shall have been so directed
by an Extraordinary  Resolution of the Bondholders or so requested in writing by
the  holders  of at least  one-quarter  in  principal  amount of the Bonds  then
outstanding,  and (b) it shall have been  indemnified  to its  satisfaction.  No
Bondholder or  Couponholder  shall be entitled to proceed  directly  against the
Issuer or the Guarantor  unless the Trustee,  having become bound so to proceed,
fails so to do within a reasonable period and such failure shall be continuing.

12.  Substitution

     The Trustee may,  without the consent of the Bondholders or  Couponholders,
agree with the  Issuer and the  Guarantor  to the  substitution  in place of the
Issuer (or of any previous  substitute  under this  Condition)  as the principal
debtor under the Bonds,  the Coupons and the Trust Deed of the  Guarantor or any
Subsidiary  or holding  company (as defined in section 736 of the  Companies Act
1985) of the Guarantor or any Subsidiary of such holding company, subject to (a)
the Bonds  continuing to be  unconditionally  and irrevocably  guaranteed by the
Guarantor (save where the Guarantor  itself has been  substituted for the Issuer
(or any previous  substitute)  or where the  Guarantor has  transferred  the PES
Licence to the  substituted  party),  (b) the Trustee being  satisfied  that the
interests  of  the  Bondholders  will  not  be  materially   prejudiced  by  the
substitution,  and (c) certain other  conditions set out in the Trust Deed being
complied with.

     The Trustee may,  without the consent of the Bondholders or  Couponholders,
agree with the  Issuer and the  Guarantor  to the  substitution  in place of the
Guarantor (or of any previous  substitute under

<PAGE>

this  Condition)  as the guarantor of the  obligations  of the Issuer (or of any
previous substitute under this Condition)  guaranteed by the Guarantor under the
Bonds,  the Coupons and the Trust Deed of any Subsidiary or holding  company (as
defined  in  section  736 of the  Companies  Act 1985) of the  Guarantor  or any
subsidiary of such holding  company,  subject to (a) the PES Licence having been
previously transferred to the substituted party; (b) the Trustee being satisfied
that the interest of the  Bondholders  will not be materially  prejudiced by the
substitution;  and (c) certain other  conditions set out in the Trust Deed being
complied with.

13.  Replacement of Bonds and Coupons

     If any Bond or Coupon is lost, stolen, mutilated,  defaced or destroyed, it
may be  replaced at the  specified  office of the Paying  Agent in London,  upon
payment  by the  claimant  of the  expenses  incurred  in  connection  with  the
replacement  and on such terms as to  evidence,  indemnity  and  security as the
Issuer may  reasonably  require.  Mutilated or defaced  Bonds or Coupons must be
surrendered before replacements will be issued.

14.   Notices

     Notices to the Bondholders  will be valid if published in a leading English
language  daily  newspaper  published in London or such other  English  language
daily  newspaper  with  general  circulation  in  ~Eur6pe  as  the  Trustee  may
previously approve in writing.  Any notice shall be deemed to have been given on
the date of  publication  or, if so published more than once, on the date of the
first publication.  It is expected that publication will normally be made in the
Financial  Times.  If publication as provided above is not  practicable,  notice
will be given in such  other  manner,  and shall be deemed to have been given on
such date, as the Trustee may previously approve in writing.

     Couponholders  will be  deemed  for all  purposes  to  have  notice  of the
contents  of any  notice  given  to the  Bondholders  in  accordance  with  this
Condition 14.

15.   Meetings of Bondholders, Modification, Waiver and Authorisation

     (a) The Trust Deed  contains  provisions  for  convening  meetings  of the
Bondholders  to consider any matter  affecting  their  interests,  including the
modification  by  Extraordinary  Resolution of these Terms and Conditions or the
provisions  of the  Trust  Deed.  The  quorum  at any  meeting  for  passing  an
Extraordinary  Resolution  will  be one  or  more  persons  present  holding  or
representing  a clear  majority  in  principal  amount of the Bonds for the time
being outstanding,  or at any adjourned such meeting one or more persons present
whatever the principal  amount of the Bonds held or  represented by him or them,
except that at any meeting,  the business of which includes the  modification of
certain of the  provisions  of these  Terms and  Conditions  and  certain of the
provisions of the Trust Deed, the necessary  quorum for passing an Extraordinary
Resolution will be one or more persons present holding or representing  not less
than  two-thirds,  or at any adjourned such meeting not less than one-third,  of
the  principal  amount  of  the  Bonds  for  the  time  being  outstanding.   An
Extraordinary  Resolution  passed  at any  meeting  of the  Bondholders  will be
binding on all  Bondholders,  whether or not they are  present at the meeting or
voted thereat, and on all Couponholders.

     (b) The  Trustee  may agree,  without  the  consent of the  Bondholders  or
Couponholders, to any modification (subject to certain exceptions) of, or to the
waiver or  authorisation of any breach or proposed breach of, any of these Terms
and  Conditions or any of the  provisions of the Trust Deed which is not, in the
opinion  of  the  Trustee,  materially  prejudicial  to  the  interests  of  the
Bondholders  or to any  modification  which is of a formal,  minor or  technical
nature or to correct a manifest error.

     (c) In  connection  with the  exercise by it of any of its trusts,  powers,
authorities or discretions  (including,  without  limitation,  any modification,
waiver,  authorisation  or  substitution),  the Trustee shall have regard to the
interests  of  the  Bondholders  as a  class  and,  in  particular  but  without
limitation,  shall not have regard to the  consequences  of the  exercise of its
trusts,  powers,  authorities or  discretions  for  individual  Bondholders  and
Couponholders  resulting from their being for any purpose  domiciled or resident
in, or  otherwise  connected  with,  or  subject  to the  jurisdiction  of,  any
particular territory and the Trustee shall not be entitled to require, nor shall
any  Bondholder  or  Couponholder  be  entitled to claim,  from the Issuer,  the
Guarantor,  the Trustee or any other  person any  indemnification  or payment in
respect of any tax consequences of any such exercise upon individual Bondholders
or Couponholders except to the extent already provided for in Condition 8 and/or
any  undertaking  given in  addition  to, or in  substitution  for,  Condition 8
pursuant to the Trust Deed.

     (d) Any  modification,  waiver or  authorisation  shall be  binding  on the
Bondholders and the Couponholders and, unless the Trustee agrees otherwise,  any
modification  shall be  notified  by the  Issuer to the  Bondholders  as soon as
practicable thereafter in accordance with Condition 14.

<PAGE>

16.  Indemnification of the Trustee

     The Trust Deed contains  provisions for the  indemnification of the Trustee
and for its relief from  responsibility,  including provisions relieving it from
taking action unless indemnified to its satisfaction.

17.   Further Issues

     The  Issuer is at  liberty  from time to time  without  the  consent of the
Bondholders or Couponholders to create and issue further bonds or notes (whether
in bearer or registered  form) either (a) ranking pari passu in all respects (or
in all respects save for the first payment of interest  thereon) and so that the
same shall be consolidated  and form a single series with the outstanding  bonds
or notes of any series  (including  the Bonds)  constituted by the Trust Deed or
any  supplemental  deed  or  (b)  upon  such  terms  as  to  ranking,  interest,
conversion,  redemption and otherwise as the Issuer may determine at the time of
the issue. Any further bonds or notes which are to form a single series with the
outstanding  bonds or notes of any series  (including the Bonds)  constituted by
the Trust Deed or any  supplemental  deed shall,  and any other further bonds or
notes may (with the prior written  consent of the Trustee),  be constituted by a
deed  supplemental  to the Trust Deed.  The Trust Deed contains  provisions  for
convening a single meeting of the  Bondholders and the holders of bonds or notes
of other series in certain circumstances where the Trustee so decides.

18.   Governing Law

     The Trust  Deed,  the Bonds and the Coupons  are  governed  by, and will be
construed in accordance with, English law.

                             PRINCIPAL PAYING AGENT

                                Barclays Bank PLC
                            BGSS Depositary Services
                                  8 Angel Court
                               Throgmorton Street
                                 London EC2R 7HT

                               OTHER PAYING AGENT

                     Banque Lnternationale a Luxembourg S.A.
                                 69 route d'Esch
                                L-1470 Luxembourg

<PAGE>

                                   Schedule 3
                                   ----------

                                     Part I
                                     ------

             Form of individual Certificate for Original Bonds 2020
             ------------------------------------------------------

On the front:
        ISIN:                   Serial No:                             Cert No:

                          NORTHERN ELECTRIC FINANCE plc

    (Incorporated with limited liability in England and Wales - No. 3070482)

          (pound)100,000,000 8.875 per cent. Guaranteed Bonds due 2020

                   guaranteed as to principal and interest by

                              NORTHERN ELECTRIC plc

     (Incorporated with limited liability in England and Wales - No.2366942)

The Bonds in respect of which this  Certificate is issued are in bearer form and
form part of the series  designated  as specified in the title ~the  "Bonds") of
Northern Electric Finance plc (the "Issuer")  constituted by a Master Trust Deed
dated  16th  October,  1995  between  the  Issuer,  Northern  Electric  plc (the
"Guarantor") and The Law Debenture Trust Corporation  p.l.c. as the Trustee (the
"Trust Deed",  which  expression  includes all deeds  supplemental to such Trust
Deed). The Bonds are subject to, and have the benefit of, the Trust Deed and the
Terms and Conditions (the "Conditions") set out on the reverse hereof.

The  Issuer  for value  received  hereby  promises  to pay to the bearer of this
Certificate the principal amount of (pound)[1,000/10,000/100,000]  [(One/Ten/One
Hundred)] Thousand pounds sterling on 16th October, 2005 or on such earlier date
as such principal  amount may become  payable in accordance  with the Conditions
and the Trust Deed together with interest  thereon and any other moneys  payable
in respect of the Bonds in accordance with the Conditions and the Trust Deed.

The Bonds are  guaranteed  as to principal  and interest by the Guarantor on the
terms of the Trust Deed.

This Certificate  shall not be valid or become  obligatory for any purpose until
signed on behalf of the  Issuer and the  Guarantor  and  authenticated  by or on
behalf of the Principal Paying Agent.

Dated  ____________________

                                       69
<PAGE>

In witness whereof the Issuer and the Guarantor have caused this Certificate to
be signed in facsimile on their respective behalves.

Northern Electric Finance plc                   Northern Electric plc

By:__________________________                   By:___________________
     Director                                        Director

By:__________________________                   By:___________________
     Director                                        Director

Certificate of Authentication
-----------------------------

This Certificate is authenticated by or on behalf of the Principal Paying Agent.

By: _______________________
     Authorised Signatory

ANY  UNITED  STATES  PERSON  WHO  HOLDS  THIS  OBLIGATION  WILL  BE  SUBJECT  TO
LIMITATIONS  UNDER THE UNITED STATES INCOME TAX LAWS,  INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 1650) AND 1287(a) OF THE INTERNAL REVENUE CODE.

[NEITHER  THE  ISSUER NOR THE  GUARANTOR  HAS BEEN OR WILL BE  REGISTERED  AS AN
"INVESTMENT COMPANY" UNDER THE UNITED STATES INVESTMENT COMPANY ACT OF 1940.]

On the back:

                              Terms and Conditions
                              --------------------

                                Details of Agents
                                -----------------

                                       70
<PAGE>

                                   Schedule 3
                                   ----------

                                     Part II
                                     -------

                        Form of Original Global Bond 2020
                        ---------------------------------

                                                                    ISIN:

                          NORTHERN ELECTRIC FINANCE plc

    (Incorporated with limited liability in England and Wales - No. 3070482)

          (pound)100,000,000 8.875 per cent. Guaranteed Bonds due 2020

                   guaranteed as to principal and interest by

                              NORTHERN ELECTRIC plc

    (Incorporated with limited liability in England and Wales - No. 2366942)

                        TEMPORARY GLOBAL BOND CERTIFICATE
                        ---------------------------------

The Bonds in respect of which this temporary  Global Bond  Certificate is issued
are in bearer form and comprise the series of Bonds  designated  as specified in
the  title  (the  "Bonds")  of  Northern  Electric  Finance  plc (the  "Issuer")
constituted by a Master Trust Deed dated 16th October,  1995 between the Issuer,
Northern  Electric plc (the "Guarantor") and The Law Debenture Trust Corporation
p.l.c.  as the Trustee (the "Trust Deed",  which  expression  includes all deeds
supplemental to such Trust Deed). The Bonds are subject to, and have the benefit
of, the Trust Deed  including  the Terms and  Conditions  set out on the reverse
hereof.

The  Issuer  for value  received  hereby  promises  to pay to the bearer of this
Certificate  the  principal  amount  of  (pound)100,000,000  (or such  lesser or
greater  amount as is duly  endorsed  in the third  column of Schedule A to this
Certificate)  on 16th  October,  2005 or on such earlier date as such  principal
amount  may become  payable in  accordance  with the Trust  Deed  together  with
interest  thereon  and any  other  moneys  payable  in  respect  of the Bonds in
accordance with the Trust Deed.

The Bonds are  guaranteed  as to principal  and interest by the Guarantor on the
terms of the Trust Deed.

This  temporary   Global  Bond   Certificate  is  exchangeable   for  individual
Certificates representing Bonds in bearer form with Coupons attached. The Issuer
hereby irrevocably  undertakes to deliver individual  Certificates  representing
Bonds in exchange for this temporary  Global Bond  Certificate on and after 26th
November, 1995 (the Exchange Date").

On or after the Exchange  Date this  temporary  Global Bond  Certificate  may be
exchanged in whole or in part for individual Certificates  representing Bonds in
an  aggregate  principal  amount  not  exceeding  the  principal  amount of this
temporary  Global

                                       71
<PAGE>

Bond  Certificate by the submission of this temporary Global Bond Certificate to
the Principal Paying Agent together with a certificate from Cedel Bank,  societe
anonyme ("Cedel") or Morgan Guaranty Trust Company of New York, Brussels office,
as operator of the Euroclear System ("Euroclear") substantially to the following
effect:

                         CERTIFICATE OF CLEARING SYSTEM

                          NORTHERN ELECTRIC FINANCE plc

   (pound)100,000,000 8.875 per cent. Guaranteed Bonds due 2020 (the "Bonds")

        Common Code:                                              ISIN:

This is to certify  that,  based  solely on  certificates  we have  received  in
writing,   by  tested  telex  or  by   electronic   transmission,   from  member
organisations appearing in our records as persons being entitled to a portion of
the principal amount set forth below (our "Member Organisations")  substantially
in the form set out in the temporary Global Bond Certificate  representing Bonds
(the form of which is set out in Part II of Schedule 3 to the Master  Trust Deed
constituting the Bonds), as of the date hereof ............  principal amount of
the Bonds (i) is owned by persons  that are not  citizens  or  residents  of the
United States,  domestic  partnerships,  domestic  corporations or any estate or
trust the income of which is subject to United States  federal  income  taxation
regardless  of its source  ("United  States  persons"),  (ii) is owned by United
States  persons  that  are (a)  foreign  branches  of  United  States  financial
institutions (as defined in U.S. Treasury Regulations Section 1. 165-12(c)(1)(v)
("financial  institutions")  purchasing for their own account or for resale,  or
(b) United  States  persons who acquired the Bonds through  foreign  branches of
United States financial  institutions and who hold the Bonds through such United
States  financial  institutions  on the date hereof (and,  in either case (a) or
(b), each such United States financial institution has agreed, on its own behalf
or through its agent,  that we may advise the Issuer or the Issuer's  agent that
it will comply with the requirements of Section 165(j)(3)(A),  (B) or (C) of the
Internal Revenue Code of 1986, as amended, and the regulations  thereunder),  or
(iii) is owned by United States or foreign  financial  institutions for purposes
of resale during the restricted period (as defined in U.S. Treasury  Regulations
Section 1.163-5(c)(2)(i)(D)(7)), and to the further effect that United States or
foreign  financial  institutions  described in (iii) above  (whether or not also
described in (i) or (ii) above) have  certified  that they have not acquired the
Bonds for purposes of resale directly or indirectly to a United States person or
to a person within the United States or its possessions.

We further  certify (i) that we are not making  available  herewith for exchange
(or, if relevant,  exercise of any rights or  collection  of any  interest)  any
portion  of the Bonds  represented  by the  temporary  Global  Bond  Certificate
excepted  in such  certificates  and (ii) that as of the date hereof we have not
received any  notification  from any of our Member  Organisations  to the effect
that the statements made by such Member Organisation with respect to any portion
of the part  submitted  herewith  for exchange

                                       72
<PAGE>

(or, if relevant,  exercise of any rights or  collection of any interest) are no
longer true and cannot be relied upon as of the date hereof.

We understand  that this  certificate is required in connection with certain tax
laws of the United States. In connection  therewith,  if administrative or legal
proceedings   are  commenced  or  threatened  in  connection   with  which  this
certificate  is or would be relevant,  we  irrevocably  authorise you to produce
this certificate to any interested party in such proceedings.

Dated: ____________________*

                                Yours faithfully,

                          [Cedel Bank, societe anonyme]

                                       or

                   [MORGAN GUARANTY TRUST COMPANY OF NEW YORK,

                                Brussels office,
                      as operator of the Euroclear System]

                             By:____________________

* To be dated no earlier than the Exchange Date.

Any person appearing in the records maintained by Cedel or Euroclear as entitled
to any interest in Bonds  represented by this temporary  Global Bond Certificate
shall be  entitled  to  require  the  exchange  of this  temporary  Global  Bond
Certificate for (an) individual Certificate(s) representing such Bonds in bearer
form  by  delivering  or  causing  to be  delivered  to  Cedel  or  Euroclear  a
certificate in  substantially  the following  form (copies of which  certificate
will be available at the office of Cedel in Luxembourg and Euroclear in Brussels
and at the  specified  office  of each  of the  Paying  Agents):

                   "CERTIFICATE OF CLEARING SYSTEM PARTICIPANT

                          NORTHERN ELECTRIC FINANCE plc

   (pound)100,000,000 8.875 per cent. Guaranteed Bonds due 2020 (the "Bonds")

        Common Code:                                                    ISIN:

To:  [Cedel Bank,  societe  anonyme] [Morgan Guaranty Trust Company of New York,
     Brussels office, as operator of the Euroclear System]

                                       73
<PAGE>

This is to certify that,  as of the date hereof,  and except as set forth below,
the Bonds  held by you for our  account  (i) are owned by  persons  that are not
citizens or  residents of the United  States,  domestic  partnerships,  domestic
corporations  or any  estate or trust the  income of which is  subject to United
States  federal  income  taxation  regardless  of  its  source  ("United  States
persons"), (ii) are owned by United States persons that are (a) foreign branches
of United States financial institutions (as defined in U.S. Treasury Regulations
Section 1. 165-12(c)(1)(v))  ("financial institutions") purchasing for their own
account or for  resale,  or (b) United  States  persons who  acquired  the Bonds
through foreign  branches of United States  financial  institutions and who hold
the Bonds through such United States  financial  institutions on the date hereof
(and, in either case (a) or (b), each such United States  financial  institution
hereby agrees,  on its own behalf or through its agent,  that you may advise the
Issuer or the  Issuer's  agent  that it will  comply  with the  requirements  of
Section  165(,j)(3)(A),  (B) or (C) of the  Internal  Revenue  Code of 1986,  as
amended, and the regulations thereunder), or (iii) are owned by United States or
foreign  financial  institutions  for purposes of resale  during the  restricted
period (as defined in U.S. Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)),
and in addition,  if an owner of Bonds is a United  States or foreign  financial
institution  described in (iii) above  (whether or not also  described in (i) or
(ii) above), this is to certify further that such financial  institution has not
acquired the Bonds for  purposes of resale  directly or  indirectly  to a United
States person or to a person within the United States or its possessions.

As used herein,  "United  States" means the United States of America  (including
the States and the District of Columbia);  and its "possessions"  include Puerto
Rico,  the U.S.  Virgin  Islands,  Guam,  American  Samoa,  Wake  Island and the
Northern Mariana Islands.

We  undertake to advise you promptly by tested telex on or prior to that date on
which you intend to submit  your  certificate  relating to the Bonds held by you
for our account in accordance with your documented  procedures if any applicable
statement  herein is not  correct on such date,  and in the  absence of any such
notification it may be assumed that this certificate applies as of such date.

This  certificate  excepts  and does not relate to  .................  principal
amount of the Bonds in  respect  of which we are not able to  certify  and as to
which  we   understand   exchange  and  delivery  of   individual   Certificates
representing Bonds (or, if relevant, exercise of any rights or collection of any
interest) cannot be made until we do so certify.

We understand that this certificate is required in connection with certain tax
laws of the United States. In connection therewith, if administrative or legal
proceedings are commenced or threatened in connection with which this
certificate is or would be relevant, we irrevocably authorise you to produce
this certificate to any interested party in such proceeding.

Dated: _____________________ *

                                       74
<PAGE>

By: ________________________

     [Name of person  giving  certificate]  as, or as agent for, the  beneficial
     owner(s) of the Bonds in respect of which this certificate is issued.

*    To be dated no earlier than the fifteenth day prior to the Exchange Date."

Until the exchange of this  temporary  Global Bond  Certificate  for  individual
Certificates  representing Bonds pursuant to the foregoing provisions, no person
as aforesaid  shall (except as stated herein) be entitled to receive any payment
by way of  principal  or  interest in respect of the Bonds  represented  by this
temporary  Global  Bond  Certificate  (unless,  upon due  presentation  of this
temporary  Global Bond  Certificate  for  exchange,  delivery of any  individual
Certificate  representing Bonds shall be improperly  withheld or- refused) or to
receive  (an)  individual  Certificate(s)  representing  Bonds  which  he  would
otherwise be entitled to receive.

Upon any  exchange of this  temporary  Global Bond  Certificate  for  individual
Certificates  representing Bonds the portion of the principal amount represented
by this  temporary  Global Bond  Certificate  in respect of which such  exchange
shall be  effected  shall  be  endorsed  by the  Principal  Paying  Agent on the
Schedule  of  exchanges  for  individual  Certificates  hereon,   whereupon  the
principal amount  represented by this temporary Global Bond Certificate shall be
reduced for all purposes by the amount of such portion.

Subject to the second  preceding  paragraph,  no  provisions  of this  temporary
Global Bond  Certificate  shall alter or impair the  obligation of the Issuer to
pay the  principal  and interest in respect of the Bonds when due in  accordance
with the Trust Deed or the obligations of the Guarantor under the Trust Deed.

This temporary  Global Bond Certificate is governed by and shall be construed in
accordance with English law.

This temporary Global Bond Certificate  shall not be valid or become  obligatory
for any  purpose  until  signed on behalf of the  Issuer and the  Guarantor  and
authenticated by or on behalf of the Principal Paying Agent.

Dated  _______________________

In witness  whereof the Issuer and the  Guarantor  have  caused  this  temporary
Global Bond Certificate to be signed in facsimile on their respective behalves.

Northern Electric Finance plc                   Northern Electric plc

By: __________________________                  By: _____________________
       Director                                        Director

By: __________________________                   By: ____________________
       Director                                         Director

                                       75
<PAGE>

Certificate of Authentication
-----------------------------

This temporary  Global Bond  Certificate is authenticated by or on behalf of the
Principal Paying Agent.

By:  _______________________
       Authorised Signatory

ANY  UNITED  STATES  PERSON  WHO  HOLDS  THIS  OBLIGATION  WILL  BE  SUBJECT  TO
LIMITATIONS  UNDER THE UNITED STATES INCOME TAX LAWS,  INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS  165(j) AND 1287(a) OF THE UNITED STATES  INTERNAL  REVENUE
CODE.

[NEITHER  THE  ISSUER NOR THE  GUARANTOR  HAS BEEN OR WILL BE  REGISTERED  AS AN
"INVESTMENT COMPANY" UNDER THE U.S. INVESTMENT COMPANY ACT OF 1940.]

                                       76
<PAGE>

                Schedule of exchanges for individual Certificates
                -------------------------------------------------

The principal  amount of the Bonds  represented  by this  temporary  Global Bond
Certificate has been reduced as a result of the issue of individual Certificates
representing  Bonds in respect of a portion of such principal amount in exchange
as follows:

             Amount of decrease
             ------------------
             in principal amount
             -------------------
             of Bonds               Principal amount of        Notation made by
             --------               -------------------        ----------------
             represented by         Bonds represented by       or on behalf of
             --------------         --------------------       ---------------
Date of      Global Bond            Global Bond Certificate    Principal Paying
-------      -----------            -----------------------    ----------------
exchange     Certificate            following such decrease    Agent
--------     -----------            -----------------------    -----

                                       77
<PAGE>

                            Schedule of interest paid
                            -------------------------

Date of payment                 Amount of interest              Notation made
---------------                 ------------------              -------------

                                       78
<PAGE>

                                   Schedule 3
                                   ----------

                                    Part III
                                    --------

                          Form of Original Coupon 2020
                          ----------------------------

On the front:
        ISIN:                        Serial No:                     Coupon No:

                          NORTHERN ELECTRIC FINANCE plc

    (Incorporated with limited liability in England and Wales - No. 3070482)

          (pound)100,000,000 8.875 per cent. Guaranteed Bonds due 2020

                   guaranteed as to principal and interest by

                              NORTHERN ELECTRIC plc
    (Incorporated with limited liability in England and Wales - No. 2366942)

 Coupon for................... due on 199[6/7/8/9/2000/1/2/3/4/5/6/7/8/9/10/11/
                               12/13/14/15/16/17/18/19/20].

This  Coupon  relates  to  interest  payable  on (pound)[1,000/10,000/100,000]
[(One/Ten/One  Hundred  Thousand)]  principal  amount of the Bonds designated as
specified  in the title (the  "Bonds")  of  Northern  Electric  Finance plc (the
"Issuer")  constituted  by a Master Trust Deed dated 16th October,  1995 between
the Issuer,  Northern Electric plc (the "Guarantor") and The Law Debenture Trust
Corporation p.l.c. as the Trustee (the "Trust Deed",  which expression  includes
all deeds supplemental to such Trust Deed).

This  Coupon is payable to bearer  (subject  to the Trust  Deed,  including  the
Conditions  endorsed  on the  Certificate  representing  the Bonds to which this
Coupon relates, which shall be binding upon the holder of this Coupon whether or
not it is for the time being  attached  to such  Certificate)  at the  specified
offices of the Paying  Agents set out on the  reverse  hereof (or any further or
other Paying Agents or specified  offices duly  appointed or nominated from time
to time and notified to the Bondholders).

Such interest is guaranteed by the Guarantor.

This  Coupon  is  negotiable  separately  from the  Bonds to which  this  Coupon
relates.

This Coupon shall not be valid or become obligatory for any purpose until signed
on behalf of the  Company  and  authenticated  by or on behalf of the  Principal
Paying Agent.

Dated: _________________________

                                       79
<PAGE>

In witness  whereof the Company and the Guarantor  have caused this Coupon to be
signed in facsimile on their respective behalves.

Northern Electric Finance plc                   Northern Electric plc

By: __________________________                  By: ___________________
    Director                                         Director

By: __________________________                  By: ___________________
    Director                                          Director

Certificate of Authentication
-----------------------------

This Coupon is authenticated by or on behalf of the Principal Paying Agent

By:________________________
     Authorised Signatory

ANY  UNITED  STATES  PERSON  WHO  HOLDS  THIS  OBLIGATION  WILL  BE  SUBJECT  TO
LIMITATIONS  UNDER THE UNITED STATES INCOME TAX LAWS,  INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS  165(j) AND 1287(a) OF THE UNITED STATES  INTERNAL  REVENUE
CODE.

[NEITHER  THE  ISSUER NOR THE  GUARANTOR  HAS BEEN OR WILL BE  REGISTERED  AS AN
"INVESTMENT COMPANY" UNDER THE U.S. INVESTMENT COMPANY ACT OF 1940.]

On the back:

                            Details of Paying Agents
                            ------------------------

                                       80

<PAGE>

                                   Schedule 3
                                   ----------

                                     Part IV
                                     -------

                           Form of Original Talon 2020
                           ---------------------------

On the front:

                          NORTHERN ELECTRIC FINANCE plc

    (Incorporated with limited liability in England and Wales - No. 3070482)

          (pound)100,000,000 8.875 per cent. Guaranteed Bonds due 2020
                   guaranteed as to principal and interest by
                              NORTHERN ELECTRIC plc
    (Incorporated with limited liability in England and Wales - No. 2366942)

    Talon relating to (pound)[1,OOO/1O,OOO/100,OOO] principal amount of Bonds

On and after ......, 200. further Coupons will be issued at the specified office
of any of the Paying Agents set out on the reverse  hereof  (and/or any other or
further Paying Agents and/or specified  offices as may from time to time be duly
appointed and notified to the Bondholders) upon production and surrender Of this
Talon.

If the Bond to which this Talon appertains shall become due and payable or shall
have been redeemed or cancelled  before the date for presentation of this Talon,
this  Talon  shall be void and no  further  Coupons  will be issued  in  respect
thereof.

[This Talon shall not be valid or become obligatory for any purpose until signed
on behalf of the Company and the Guarantor and  authenticated by or on behalf of
the Principal Paying Agent.

Dated: ______________________

In witness  whereof the Company and the  Guarantor  have caused this Talon to be
signed in facsimile on their respective behalves.

Northern Electric Finance plc                      Northern Electric plc

By:  _________________________                     By: ___________________
     Director                                          Director

     _________________________                         ___________________
     Director                                          Director

                                       81

<PAGE>

Certificate of Authentication
-----------------------------

This Talon is authenticated by or on behalf of the Principal Paying Agent

By:  ________________________
       Authorised Signatory]

ANY  UNITED  STATES  PERSON  WHO  HOLDS  THIS  OBLIGATION  WILL  BE  SUBJECT  TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS.  INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS  165(j) AND 1287(A) OF THE UNITED STATES  INTERNAL  REVENUE
CODE.

[NEITHER  THE  ISSUER NOR THE  GUARANTOR  HAS BEEN OR WILL BE  REGISTERED  AS AN
"INVESTMENT COMPANY" UNDER THE U.S. INVESTMENT COMPANY ACT OF 1940.]

On the back: _______________________

                            Details of Paying Agents
                            ------------------------

                                       82
<PAGE>

                                   Schedule 4

                   Terms and Conditions of Original Bonds 2020
                   -------------------------------------------

                                       83
<PAGE>

                        TERMS AND CONDITIONS OF THE BONDS

     The  following is the text of the terms and  conditions  of the Bonds which
will be endorsed on each Bond in definitive form:

     The  (pound)100,000,000  8.875  per  cent.  Guaranteed  Bonds due 2020 (the
"Bonds",  which  expression  shall in these  Terms and  Conditions,  unless  the
context  otherwise  requires,  include  any  further  bonds  issued  pursuant to
Condition  17 and forming a single  series with the Bonds) of Northern  Electric
Finance plc (the  "Issuer")  are  constituted  by a master trust deed dated 16th
October,  1995 (the "Trust Deed", which expression shall wherever the context so
admits include any deed supplemental thereto) made between the Issuer,  Northern
Electric plc (the  "Guarantor") and The Law Debenture Trust  Corporation  p.l.c.
(the "Trustee",  which  expression  shall include all persons for the time being
the trustee or trustees  under the Trust Deed) as trustee for the holders of the
Bonds (the "Bondholders"). The issue of the Bonds was authorised by a resolution
of the board of directors of the Issuer passed on 9th October,  1995. The giving
of the guarantee by the Guarantor was authorised by a written  resolution of the
board of directors of the Guarantor passed on 14th September,  1995 appointing a
committee of the board for the purposes of the giving of the  guarantee and by a
resolution  of such duly  appointed  committee of the board of directors of the
Guarantor  passed on 9th October,  1995. The Bonds are, on issue,  listed on The
International  Stock  Exchange of the United Kingdom and the Republic of Ireland
Limited  (the  "London  Stock  Exchange").  The  statements  in these  Terms and
Conditions include summaries of, and are subject to, the detailed  provisions of
and  definitions  in the Trust  Deed.  Copies of the Trust Deed and of an agency
agreement  dated 16th October,  1995 (the "Agency  Agreement")  made between the
Issuer,  the  Guarantor,  Barclays  Bank PLC,  as  principal  paying  agent (the
"Principal  Paying Agent",  which expression  shall include any successor),  the
other paying agents named therein (together with the Principal Paying Agent, the
"Paying  Agents",  which  expression  shall include any  additional or successor
paying  agents) and the Trustee  are  available  for  inspection  during  normal
business  hours by the  Bondholders  and the  holders  of the  interest  coupons
appertaining to the Bonds (respectively,  the "Couponholders" and the "Coupons",
which latter expression shall,  unless the context otherwise  requires,  include
the Talons referred to below) at the registered office for the time being of the
Trustee,  being at the date of issue of the Bonds at Princes House,  95 Gresharn
Street,  London  EC2V  7LY and at the  specified  office  of each of the  Paying
Agents.  The Bondholders and the  Couponholders  are entitled to the benefit of,
and are bound by, and are deemed to have  notice of, all the  provisions  of the
Trust Deed and the Agency Agreement.

1.   Form, Denominations and Title

     The Bonds are in bearer form,  serially  numbered,  in the denominations of
(pound)1,000,  (pound)10,000 and (pound)100,000  each with Coupons and one Talon
for further Coupons (a "Talon") attached on issue. Title to the Bonds and to the
Coupons will pass by delivery.  Bonds of one  denomination  may not be exchanged
for Bonds of another denomination.

     The Issuer,  the  Guarantor,  any Paying  Agent and the Trustee may (to the
fullest  extent  permitted by applicable  laws) deem and treat the holder of any
Bond and the holder of any Coupon as the absolute owner thereof for all purposes
(whether  or not the Bond or Coupon  shall be overdue  and  notwithstanding  any
notice of  ownership  or writing on the Bond or Coupon or any notice of previous
loss or theft of the Bond or Coupon).

2.   Status and Guarantee

     The Bonds and the  Coupons are direct,  unconditional  and,  subject to the
provisions of Condition 3, unsecured  obligations of the Issuer and,  subject as
aforesaid,   rank  and  will  rank  pari passu,  without  any  preference  among
themselves,  with all other outstanding unsecured and unsubordinated obligations
of the  Issuer,  present  and future,  but,  in the event of  insolvency  of the
Issuer,  only to the extent  permitted by applicable laws relating to creditors'
rights.

     The  Guarantor  has, in the Trust  Deed,  unconditionally  and  irrevocably
guaranteed the due and punctual  payment of the principal of and interest on the
Bonds as and when  the same  shall  become  due and  payable  together  with any
additional  amounts payable pursuant to Condition 8 and all other moneys payable
under the Trust Deed. The  obligations of the Guarantor  under the terms of such
guarantee  constitute  direct,  unconditional  and, subject to the provisions of
Condition 3, unsecured  obligations of the Guarantor and such  obligations  rank
and will rank pari passu with all other outstanding unsecured and unsubordinated
obligations  of  the  Guarantor,  present  and  future,  but,  in the  event  of
insolvency of the  Guarantor,  only to the extent  permitted by applicable  laws
relating to creditors' rights.

<PAGE>

3.   Negative Pledge

So long as any of the Bonds remains  outstanding  (as defined in the Trust Deed)
each of the Issuer and the Guarantor  will ensure that no Relevant  Indebtedness
of the Issuer, the Guarantor or any PES Subsidiary or of any other person and no
guarantee by the Issuer,  the  Guarantor or any PES  Subsidiary  of any Relevant
Indebtedness  of any other person will be secured by a mortgage,  charge,  lien,
pledge or other  security  interest (each a "Security  Interest")  upon, or with
respect  to,  any of the  present  or future  business,  undertaking,  assets or
revenues  (including any uncalled  capital) of the Issuer,  the Guarantor or any
PES  Subsidiary  unless the Issuer or the  Guarantor,  as the case may be shall,
before or at the same time as the  creation of the Security  Interest,  take any
and all action necessary to ensure that:

     (a)  all amounts payable by the Issuer under the Bonds, the Coupons and the
          Trust Deed or, as the case may be, the  obligations  of the  Guarantor
          under the  guarantee  referred  to in  Condition  2 are secured to the
          satisfaction  of the Trustee  equally and  rateably  with the Relevant
          Indebtedness  or guarantee of Relevant  Indebtedness,  as the case may
          be, by such Security Interest; or

     (b)  such  other  Security  Interest  or  guarantee  or  other  arrangement
          (whether  or not  including  the  giving of a  Security  Interest)  is
          provided  in respect of all  amounts  payable by the Issuer  under the
          Bonds,  the  Coupons  and the  Trust  Deed or,  as the case may be, in
          respect  of the  obligations  of the  Guarantor  under  the  guarantee
          referred  to in  Condition  2 either (i) as the  Trustee  shall in its
          absolute  discretion  deem  not  materially  less  beneficial  to  the
          interests  of the  Bondholders  or (ii) as  shall  be  approved  by an
          Extraordinary  Resolution  (as  defined  in  the  Trust  Deed)  of the
          Bondholders,

save that the Issuer,  the  Guarantor or any PES  Subsidiary  may create or have
outstanding a Security  Interest in respect of any of its Relevant  Indebtedness
and/or any guarantees  given by the Issuer,  the Guarantor or any PES Subsidiary
in  respect  of any  Relevant  Indebtedness  of any other  person  (without  the
obligation to provide a Security  Interest or guarantee or other  arrangement in
respect of the Bonds, the Coupons and the Trust Deed or, as the case may be, the
obligations of the Guarantor  under the said guarantee as aforesaid)  where such
Relevant  Indebtedness  h4s an initial  maturity  falling not earlier  than 31st
December,  2020 and is of a maximum aggregate amount outstanding at any time not
exceeding the greater of (pound)20,000,000  and 20 per cent. of the Consolidated
Tangible Net Worth (as defined below).

     For the purposes of these Terms and Conditions:

     (a)  "Consolidated  Tangible  Net Worth" means at any  particular  time the
          aggregate  of the  amount  paid  up on the  Guarantor's  issued  share
          capital  and  the  consolidated  distributable  and  non-distributable
          reserves of the Group (as shown in the most recently published audited
          consolidated financial statements of the Group), after:

          (i)  deducting  the total of any debit  balance on the profit and loss
               account and the book value of any intangible assets including but
               not limited to goodwill; and

          (ii) excluding any minority interests in Subsidiary Undertakings;

but  adjusted as may be  necessary  in respect of any  variation  in the paid-up
share  capital  or share  premium  account  of the Group  since the date of that
balance  sheet and further  adjusted as may be  necessary  to reflect any change
since the date of that balance sheet in the Subsidiary  Undertakings  comprising
the Group.

     A report by the Auditors (as defined in the Trust Deed) as to the amount of
the  Consolidated  Tangible Net Worth at any given time shall, in the absence of
manifest error, be conclusive and binding on all parties.

          (b)  "Excluded  Subsidiary"  means any Subsidiary of the Issuer or the
               Guarantor   (other  than  a  Subsidiary   which  holds  a  public
               electricity  supply  licence  granted under the  Electricity  Act
               1989):

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

               (ii) none of whose  indebtedness for borrowed money in respect of
                    the financing of such  ownership,  acquisition,  development
                    and/or  operation  of an asset is  subject  to any  recourse
                    whatsoever  to any member of the Group  (other than  another
                    Excluded  Subsidiary)  in respect of the repayment  thereof;
                    and
<PAGE>

               (iii) which  has  been  designated  as such by the Issuer  or the
                    Guarantor by written  notice to the Trustee,  provided  that
                    the  Issuer or the  Guarantor,  as the case may be, may give
                    written  notice to the Trustee at any time that any Excluded
                    Subsidiary is no longer an Excluded Subsidiary, whereupon it
                    shall cease to be an Excluded Subsidiary;

          (c)  "Group"  means  the  Guarantor,  the  Issuer  and the  Subsidiary
               Undertakings;

          (d)  "PES  Subsidiary"  means any  Subsidiary of the  Guarantor  which
               holds a public  electricity  supply  licence  granted  under  the
               Electricity Act 1989;

          (e)  "Project  Finance  Indebtedness"  means  any  present  or  future
               indebtedness (whether being principal, premium, interest or other
               amounts) to finance a project:

               (i)  which is incurred by an Excluded Subsidiary; or

               (ii) in respect of which  recourse to any member of the Group for
                    the  repayment  or  payment  of any  sum  relating  to  such
                    indebtedness  is  limited  to:

                    (1)  the assets of a single  purpose  company  (other than a
                         PBS  Subsidiary)  the principal  assets and business of
                         which are  constituted  by such  project  and which was
                         established   for  the   purpose  of   incurring   such
                         indebtedness; or

                    (2)  the assets of the project and the rights,  revenues and
                         insurance   proceeds   derived   therefrom  or  related
                         thereto,  with no recourse  to any other  assets of the
                         Group (other than those of an Excluded Subsidiary);

          (f)  "Relevant  Indebtedness" means any present or future indebtedness
               (whether being principal,  premium, interest or other amounts) in
               the form of or represented by notes, bonds, debentures, debenture
               stock, loan stock or other securities, whether issued for cash or
               in whole or in part for a  consideration  other  than  cash,  and
               which,  with the  agreement  of the person  issuing  the same are
               quoted,  listed or ordinarily  dealt in on any stock  exchange or
               recognised over-the-counter or other securities market, but shall
               not  in any  event  include  Project  Finance  Indebtedness;

          (g)  "Subsidiary" means a subsidiary within the meaning of Section 736
               of the Companies Act 1985;

          (h)  "Subsidiary  Undertaking"  shall have the meaning  given to it by
               Section  258 of the  Companies  Act 1985 (but shall  exclude  any
               undertakings  (as  defined  in  the  Companies  Act  1985)  whose
               accounts  are not included in the then latest  published  audited
               consolidated  accounts of the  Guarantor,  nor (in the case of an
               undertaking which has first become a subsidiary  undertaking of a
               member of the Group  since the date as at which any such  audited
               accounts were prepared)  would its accounts have been so included
               or consolidated if it had become so on or before that date); and

          (i)  any reference to an obligation  being  guaranteed shall include a
               reference  to  an  indemnity   being  given  in  respect  of  the
               obligation.

4.   Interest

     The Bonds bear interest from (and including) 16th October, 1995 at the rate
of 8.875 percent.  per annum, payable annually in arrear on 16th October in each
year (each an  "Interest  Payment  Date"),  the first such payment to be made on
16th October, 1996 and to amount to a full year's interest.

     Each  Bond will  cease to bear  interest  from its due date for  redemption
unless,  upon due presentation,  payment of the principal in respect of the Bond
is improperly withheld or refused or unless default is otherwise made in respect
of such payment, in which event interest shall continue to accrue as provided in
the Trust Deed.

     When  interest is required to be  calculated in respect of a period of less
than a full  year,  it  shall  be  calculated  on the  basis  of a 360 day  year
consisting of 12 months of 30 days each and, in the case of an incomplete month,
the number of days elapsed.

5.   Payments and exchange of Talons

     Payments  of  principal  in respect of each Bond will only be made  against
presentation  and surrender (or, in the case of part payment only,  endorsement)
of the  relevant  Bond at the  specified  office

<PAGE>

of any of the  Paying  Agents.  Payments  of  interest  due on the  Bonds  on an
Interest  Payment Date will be made against  presentation  and surrender (or, in
the case of part  payment  only,  endorsement)  of the  relevant  Coupons at the
specified office of any of the Paying Agents.  Each such payment will be made at
the  specified  office of any  Paying  Agent,  at the option of the  holder,  by
sterling cheque drawn on a town clearing branch of, or by transfer to a sterling
account  maintained by the payee with, a bank in the City of London,  subject in
all cases to any applicable  fiscal or other laws and  regulations,  but without
prejudice to the provisions of Condition 8.

     Each Bond must be presented for payment together with all unmatured Coupons
appertaining  thereto  failing  which the full amount of any  missing  unmatured
Coupon (or, in the case of payment not being made in full,  that  proportion  of
the full amount of the missing  unmatured Coupons which the amount so paid bears
to the total amount due)  appertaining  thereto will be deducted from the amount
due for payment.  Each amount so deducted  will be paid in the manner  mentioned
above against  presentation and surrender (or, in the case of part payment only,
endorsement)  of such  missing  Coupon at any time before the expiry of 10 years
after the  Relevant  Date (as defined in Condition 8) in respect of the relevant
Bond  (whether or not such Coupon would  otherwise  have become void pursuant to
Condition 9), or, if later, five years after the date on which such Coupon would
have become due,  but not  thereafter.

     A holder  shall be entitled to present a Bond or Coupon for payment only on
a Presentation  Date and shall not be entitled to any further  interest or other
payment if a Presentation Date is after the due date.

     "Presentation Date" means a day which (subject to Condition 9):

     (a)  is or falls after the relevant due date but, if the due date is not or
          was not a Business  Day in the City of London,  is or falls  after the
          next following such Business Day; and

     (b)  is a Business Day in the place of the  specified  office of the Paying
          Agent at which the Bond or Coupon is  presented  for  payment  and, in
          the, case of payment by transfer to a sterling  account in the City of
          London as referred to above, in the City of London.

     "Business  Day"  means,  in  relation  to any place,  a day  (other  than a
Saturday  or Sunday) on which  commercial  banks and  foreign  exchange  markets
settle payments in that place.

     When making  payments to  Bondholders  or  Couponholders,  fractions of one
penny will be rounded down to the nearest whole penny.

     On and after the Interest  Payment Date on which the final Coupon comprised
in any Coupon  sheet  relating to a Bond  matures,  the Talon  comprised  in the
Coupon Sheet relating to a Bond may be  surrendered  at the specified  office of
any  Paying  Agent  in  exchange  for a  further  Coupon  sheet  (including  any
appropriate further Talon), subject to the provisions of Condition 9. Each Talon
shall, for the purpose of these Terms and Conditions, be deemed to mature on the
Interest Payment Date on which the final Coupon comprised in the relative Coupon
sheet relating to the relevant Bond matures.

     The names of the initial Paying Agents and their initial  specified offices
are set out at the end of these Terms and  Conditions.  The Issuer  reserves the
right, subject to the prior written approval of the Trustee, at any time to vary
or terminate the  appointment  of any Paying Agent and to appoint  additional or
other Paying  Agents  provided  that it will at all times  maintain at least two
Paying Agents having specified  offices in separate  European cities  previously
approved  in  writing  by the  Trustee,  one of which,  so long as the Bonds are
listed on the London Stock Exchange,  shall be London or such other place as the
London  Stock  Exchange may approve and one of which shall be outside the United
Kingdom. Notice of any such termination or appointment and of any changes in the
specified offices of the Paying Agents will be given to the Bondholders promptly
by the Issuer in accordance with Condition 14.

6.   Redemption and Purchase

     (A) Unless  previously  redeemed or  purchased  and  cancelled  as provided
below,  the  Issuer  will  redeem  the Bonds at their  principal  amount on 16th
October, 2020.

     (B) The Issuer may, at any time,  having given notice to the Bondholders in
accordance with this Condition 6(B) (which notice shall be irrevocable),  redeem
the  Bonds  in  whole  or in part  (but if in part,  in  integral  multiples  of
(pound)1,000,000  in principal amount thereof),  at the price which shall be the
higher  of the  following,  together  with  interest  accrued  up to the date of
redemption:

     (i) their principal amount; and

<PAGE>

     (ii) that price (the "Redemption Price"). expressed as a percentage rounded
          to three decimal  places  (0.0005 being  rounded  down),  at which the
          Gross  Redemption  Yield on the Bonds, if they were to be purchased at
          such price on the third  dealing day prior to the  publication  of the
          notice of  redemption  (or, in the case of a partial  redemption,  the
          first notice of redemption  referred to below),  would be equal to the
          Gross  Redemption  Yield on such  dealing  day of the 8 3/4 per  cent.
          Treasury Stock 2017 or of such other United Kingdom  Government  Stock
          as the Trustee,  with the advice of three leading brokers operating in
          the gilt-edged market and/or gilt-edged market makers, shall determine
          to be appropriate  (the "Reference  Stock") on the basis of the middle
          market price of the Reference Stock prevailing on such dealing day, as
          determined by Barclays de Zoete Wedd Limited (or such other person(s)
          as the Trustee may approve).

     The Gross  Redemption  Yield on the Bonds and the  Reference  Stock will be
expressed as a percentage  and will be calculated on the basis  indicated by the
Joint  Index and  Classification  Committee  of the  Institute  and  Faculty  of
Actuaries as reported in the Journal of the  Institute of  Actuaries,  Vol. 105,
Part 1,  1978,  page 18 or on such other  basis as the  Trustee  may  previously
approve in writing.

     In the case of a redemption of all of the Bonds  pursuant to this Condition
6(B),  notice will be given to the  Bondholders by the Issuer in accordance with
Condition  14 once not less than 30 nor more than 60 days  before the date fixed
for redemption and will specify the date fixed for redemption and the redemption
price.

     In the case of a partial  redemption of Bonds, Bonds to be redeemed will be
selected individually by lot in such place as the Trustee may previously approve
in writing and in such manner as the Trustee  shall deem to be  appropriate  and
fair without involving any part of a Bond, not more than 65 days before the date
fixed for redemption.  In the case of a partial redemption of the Bonds pursuant
to this Condition 6(B), notice will be so given to the Bondholders by the Issuer
in accordance  with Condition 14 twice,  first not less than 80 nor more than 95
days, and secondly not less than 30 nor more than 60 days, before the date fixed
for  redemption.  Each notice will specify the date fixed for redemption and the
redemption  price,  the aggregate  principal amount of the Bonds to be redeemed,
the  serial  numbers  of Bonds  previously  called  (in  whole  or in part)  for
redemption and not presented for payment and the aggregate  principal  amount of
Bonds which will be outstanding  after the partial  redemption.  In addition the
second  such  notice will  specify  the serial  numbers of the Bonds  called for
redemption.

     Upon the  expiry of any such  notice as is  referred  to in this  Condition
6(B),  the Issuer shall be bound to redeem the Bonds to which the notice  refers
at the relevant  redemption  price at the date of such redemption  together with
interest accrued to but excluding such date.

     (C) If as a  result  of any  change  in,  or  amendment  to,  the  laws  or
regulations  of the United  Kingdom  or any  political  sub-division  of, or any
authority  in, or of, the United  Kingdom  having power to tax, or any change in
the application or official  interpretation  of such laws or regulations,  which
change or amendment becomes  effective after 10th October,  1995, the Issuer has
or will become obliged to pay  additional  amounts as provided or referred to in
Condition 8 (and such  amendment or change has been evidenced by the delivery by
the Issuer to the Trustee (who shall, in the absence of manifest  error,  accept
such  certificate  and  opinion  as  sufficient   evidence  thereof)  of  (i)  a
certificate  signed by two  directors  of the  Issuer  on  behalf of the  Issuer
stating that such amendment or change has occurred (irrespective of whether such
amendment or change is then effective), describing the facts leading thereto and
stating that such obligation  cannot be avoided by the Issuer taking  reasonable
measures  available  to it and (ii) an  opinion  in a form  satisfactory  to the
Trustee of independent legal advisers of recognised standing to whom the Trustee
shall have no reasonable  objection to the effect that such  amendment or change
has  occurred  (irrespective  of  whether  such  amendment  or  change  is  then
effective)),  the Issuer may at its  option,  having  given not less than 30 nor
more than 60 days' notice to the  Bondholders  in accordance  with  Condition 14
(which notice shall be  irrevocable),  redeem all the Bonds (other than Bonds in
respect of which the Issuer shall have given a notice of redemption  pursuant to
Condition  6(B) prior to any notice being given under this  Condition  6(C)) but
not some only, at their principal amount together with interest (if any) accrued
to (but excluding) the date of redemption, provided that no notice of redemption
shall be given earlier than 90 days before the earliest date on which the Issuer
would be required to pay such  additional  amounts  were a payment in respect of
the Bonds then due.

     Upon expiry of any such notice as is  referred  to in this  Condition  6(C)
(and  subject as provided  above),  the Issuer  shall be bound to redeem all the
Bonds  at  their  principal  amount  together  with  interest  accrued  to  (but
excluding) the redemption date.

     (D) The Issuer,  the Guarantor or any of their respective  Subsidiaries may
at any time purchase  Bonds  together with  unmatured  Coupons and Talons in any
manner and at any price in the open market

<PAGE>

or by private treaty. If purchases are made by tender, tenders must be available
to all Bondholders alike. Bonds purchased by the Issuer, the Guarantor or any of
their  respective  Subsidiaries may be held or reissued or resold or surrendered
for cancellation.

     (E) All Bonds which are redeemed will forthwith be cancelled (together with
all relative  unmatured  Coupons and Talons attached to or surrendered  with the
Bonds) and may not be reissued or resold.

     (F) While any Bonds are held by the Issuer,  the  Guarantor or any of their
respective Subsidiaries,  such Bonds shall not entitle the holder to vote at, or
to be  counted in the quorum  for,  any  meeting  of  Bondholders  and,  for the
purposes of the provisions of the Trust Deed concerning meetings of Bondholders,
will not be regarded as being in issue.

7.   Redemption at the Option of Bondholders (A) For the purposes of these Terms
     and Conditions:

     (i)  "independent financial adviser" means a financial adviser appointed by
          the Guarantor and previously  approved in writing by the Trustee (such
          approval  not to be  unreasonably  withheld  or  delayed)  or,  if the
          Guarantor  shall not have  appointed such an adviser within 21 days of
          becoming  aware of the  occurrence  of a  Restructuring  Event and the
          Trustee is indemnified to its  satisfaction  against the costs of such
          adviser,  appointed  by the Trustee  following  consultation  with the
          Guarantor;

     (ii) "Investment  Grade Rating" means a rating of at least investment grade
          BBB- in the case of Standard & Poor's Corporation and Baa3 in the case
          of Moody's Investors Services Inc. or their respective equivalents for
          the time being;

     (iii)" Negative  Certification" means a certificate given in writing to the
          Trustee by an independent financial adviser that a Restructuring Event
          will be or is, in its opinion, materially prejudicial to the interests
          of the Bondholders;

     (iv) A "Negative  Rating Event" shall be deemed to have occurred if (X) the
          Guarantor  does not,  either  prior to or not later than 14 days after
          the  date of a  Negative  Certification  in  respect  of the  relevant
          Restructuring Event, seek, and thereupon use all reasonable endeavours
          to  obtain,  a  rating  of  the  Bonds  or  any  other  unsecured  and
          unsubordinated  debt of the  Guarantor  (or of any  Subsidiary  of the
          Guarantor  (including,  without  limitation,  the Issuer) and which is
          guaranteed on an unsecured and unsubordinated  basis by the Guarantor)
          having an initial  maturity of five years or more from a Rating Agency
          or (Y) if the Guarantor does so seek and use such endeavours but it is
          unable,  as a  result  of such  Restructuring  Event,  to  obtain  the
          Investment Grade Rating (and, in this definition, "seek" shall include
          procuring the relevant Subsidiary to seek);

(v) "Pooling and  Settlement  Agreement"  means the agreement  dated 30th March,
1990 (as amended and restated up to 22nd April, 1994) made by the Guarantor with
The National  Grid Company plc and others  setting out the rules and  procedures
for the operation of an electricity  trading pool and of a settlement  system as
in force on 10th  October,  1995 and,  while the same has  effect,  the  Initial
Settlement  Agreement  also dated 30th  March,  1990 and made  between  the same
parties, as in force on 10th October, 1995;

     (vi) A "Put  Event"  occurs on either  (X) the date of the last to occur of
          all of the following (an) a Restructuring  Event, (bb) either a Rating
          Downgrade or, as the case may be, a Negative Rating Event and (cc) the
          relevant Negative Certification or (Y) the date on which the Guarantor
          receives  a notice  from the  Secretary  of  State as  referred  to in
          Article 1 1(4)(a) of the  Guarantor's  Articles of  Association  as in
          effect on 10th October, 1995;

     (vii)  "Rating Agency" means  Standard & Poor's  Corporation  or any of its
          subsidiaries and their successors or Moody's Investors Service Inc. or
          any of its  subsidiaries  and their  successors  or any rating  agency
          substituted  for either of them (or any permitted  substitute of them)
          by the Guarantor from time to time with the prior written  approval of
          the  Trustee  (such  approval  not  to  be  unreasonably  withheld  or
          delayed);

     (viii)  Following a  Restructuring  Event,  a "Rating  Downgrade"  shall be
          deemed to have occurred in respect of that Restructuring  Event if the
          then current  rating  assigned to the Rated  Securities  by any Rating
          Agency  (whether  provided by a Rating Agency at the invitation of the
          Guarantor  or by its own  volition)  is  withdrawn or reduced from the
          Investment Grade
<PAGE>

     Rating or, if the Rating Agency shall then have already rated the Rated
     Securities below the Investment Grade Rating, the rating is lowered one
     full rating category;

     (ix) "Rated  Securities" means the Bonds, if at any time and for so long as
          they shall have a rating from a Rating Agency, and otherwise any other
          unsecured  and  unsubordinated  debt  of  the  Guarantor  (or  of  any
          Subsidiary  of  the  Guarantor  (including,  without  limitation,  the
          Issuer) and which is  guaranteed  on an unsecured  and  unsubordinated
          basis by the  Guarantor)  having an initial  maturity of five years or
          more which is rated by a Rating Agency;

     (x)  "Restructuring  Event" means the  occurrence of any one or more of the
          following events:

          (A  (aa) the  Secretary  of  State  for  Trade  and  Industry (or  any
               successor)  giving the Guarantor  written notice of revocation of
               the public electricity supply licence (the "PES Licence") granted
               by the Secretary of State for Energy to the  Guarantor  under the
               Electricity  Act  1989 in  relation  to its  authorised  area and
               excluding any second tier supply licence provided that the giving
               of notice  pursuant  to  paragraph 3 of Part 1 of the PES Licence
               shall not be  deemed  to  constitute  the  revocation  of the PES
               Licence  or (bb)  the  Guarantor  agreeing  in  writing  with the
               Secretary of State for Trade and Industry (or any  successor)  to
               any  revocation  or  surrender  of the PES  Licence  or (cc)  any
               legislation   (whether  primary  or  subordinate)  being  enacted
               terminating or revoking the PES Licence,  except in any such case
               in circumstances  where a licence or licences on substantially no
               less  favourable  terms is or are granted to the  Guarantor  or a
               wholly-owned   Subsidiary   of  the  Guarantor   (the   "Relevant
               Subsidiary")  and in the case of such Relevant  Subsidiary at the
               time of such grant it either executes in favour of the Trustee an
               unconditional  and irrevocable  guarantee in respect of the Bonds
               in such form as the  Trustee  may  previously  approve in writing
               (such  approval  not to be  unreasonably  withheld or delayed) or
               becomes the principal  debtor under the Bonds in accordance  with
               Condition 12; or

          (B)  any modification (other than a modification which is of a formal,
               minor or technical nature) being made to the terms and conditions
               of the PES  Licence on or after  10th  October,  1995  unless the
               modified  terms and  conditions are certified by two directors of
               the  Guarantor  to be  not  materially  less  favourable  to  the
               business of the Guarantor; or

          (C)  (aa) the Pooling and Settlement  Agreement being terminated under
               Clause  67.4  thereof  and not being  replaced  by an  agreement,
               commercial  arrangement  or open market  mechanism  or  framework
               having   substantially   the  same  effect  as  the  Pooling  and
               Settlement  Agreement,  in each case on terms which two directors
               of the Guarantor  certify to be not materially less favourable to
               the business of the Guarantor; or

               (bb) the Guarantor  being given notice  pursuant to Clause 67.3.2
                    of the  Pooling and  Settlement  Agreement  requiring  it to
                    cease to be a party thereto; or

               (cc) any notice  declaring an event of default (as defined in the
                    Pooling  and  Settlement   Agreement)  being  given  to  the
                    Guarantor  under  Clause  66.1.1  or 66.2  thereof  and such
                    default remaining unremedied or unwaived; or

               (dd) any  modification  (other than a modification  which is of a
                    formal, minor or technical nature) being made to the Pooling
                    and  Settlement  Agreement on or after 10th  October,  1995,
                    unless two directors of the Guarantor  certify that any such
                    modification  has not had and  will  not  have a  materially
                    adverse  effect on the amount or nature of any payment  made
                    or to be made by or to the Guarantor pursuant to the Pooling
                    and Settlement  Agreement or a materially  adverse effect on
                    the financial  rights or obligations of the Guarantor  under
                    the Pooling and Settlement Agreement, provided that any such
                    modification  shall,  to the  extent it  grants  or  confers
                    powers or discretions on the Director General of Electricity
                    Supply (or any successor) under or in respect of the Pooling
                    and Settlement Agreement, be deemed not to have a materially
                    adverse effect as aforesaid,  but for the avoidance of doubt
                    any  modification  to the Pooling and  Settlement  Agreement
                    made by the Director  General of Electricity  Supply (or any
                    successor) by virtue of

<PAGE>

                    or  pursuant  to any such  powers or  discretions  and which
                    otherwise would have a materially adverse effect as provided
                    above shall not by virtue of this subparagraph be deemed not
                    to have such an effect; or

               (ee) the  Guarantor  ceasing  to be a party  to the  Pooling  and
                    Settlement  Agreement for any reason (other than pursuant to
                    (bb) and (cc) above), except where a licence is granted to a
                    Relevant   Subsidiary  as  contemplated   by   sub-paragraph
                    (A)(X)(A) above and at or about the same time all rights and
                    obligations  of the  Guarantor  pursuant  to the Pooling and
                    Settlement  Agreement are assigned and  transferred  to such
                    Relevant  Subsidiary  in  such  manner  as the  Trustee  may
                    previously  approve  in  writing  (such  approval  not to be
                    unreasonably withheld or delayed); or

          (D)  any legislation (whether primary or subordinate) is enacted which
               removes, qualifies or amends (other than an amendment which is of
               a formal, minor or technical  nature) the duties of the Secretary
               of State for Trade and  Industry  (or any  successor)  and/or the
               Director  General of Electricity  Supply (or any successor) under
               Section  3 of the  Electricity  Act  1989  as in  force  on  10th
               October, 1995, unless two directors of the Guarantor certify that
               such  removal,   qualification  or  amendment  does  not  have  a
               materially  adverse  effect  on the  financial  condition  of the
               Guarantor.

     (xi) "Restructuring Period" means:

          (A)  if at the time a  Restructuring  Event  occurs  there  are  Rated
               Securities, the period of 90 days starting from and including the
               day on which that Restructuring Event occurs; or

          (B)  if at the time a  Restructuring  Event  occurs there are no Rated
               Securities,  the period  starting  from and  including the day on
               which that  Restructuring  Event  occurs and ending on the day 90
               days  following the later of (aa) the date on which the Guarantor
               shall  seek to obtain a rating  pursuant  to  Condition  7(A)(iv)
               prior to the expiry of the 14 days referred to in the  definition
               of  Negative  Rating  Event and (bb) the date on which a Negative
               Certification  shall have been given to the  Guarantor in respect
               of that Restructuring Event; and

     (xii)  A Rating Downgrade or a Negative  Rating  Event or a  non-Investment
          Grade  Rating  shall be deemed not to have  occurred as a result or in
          respect  of a  Restructuring  Event if the  Rating  Agency  making the
          relevant reduction in rating or, where applicable, declining to assign
          a rating of at least  investment grade as provided in this Condition 7
          does not announce or publicly confirm or inform the Trustee in writing
          at its request that the reduction or, where  applicable,  declining to
          assign a rating of at least investment grade was the result,  in whole
          or in part, of any event or circumstance  comprised in or arising as a
          result of the applicable Restructuring Event.

     The  Trust  Deed  provides  that the  Trustee  is under  no  obligation  to
ascertain  whether a  Restructuring  Event, a Negative Rating Event or any event
which could lead to the occurrence of or could constitute a Restructuring  Event
has  occurred  and until it shall have  actual  knowledge  or express  notice in
accordance  with the Trust Deed to the  contrary  the Trustee may assume that no
Restructuring Event, Negative Rating Event or other such event has occurred.

     (B)  If,  at any  time  while  any  of the  Bonds  remains  outstanding,  a
Restructuring  Event  occurs  and prior to the  commencement  of or  during  the
Restructuring  Period an independent  financial  adviser shall have certified in
writing to the Trustee that such  Restructuring  Event will not be or is not, in
its opinion,  materially  prejudicial to the interests of the  Bondholders,  the
following  provisions of this Condition 7 shall cease to have any further effect
in relation to such Restructuring Event.

        (C) If, at any time while any of the Bonds remains outstanding. either

         (i) a Restructuring Event occurs and (subject to Condition 7(B)):

             (X) within the Restructuring Period, either:

               (i)  if at the time such  Restructuring  Event  occurs  there are
                    Rated  Securities,  a Rating  Downgrade  in  respect of such
                    Restructuring Event also occurs; or

               (ii) if at such time  there are no Rated  Securities,  a Negative
                    Rating Event also occurs;  and

               (Y)  an independent financial adviser shall have given a Negative
                    Certification; or
<PAGE>

          (ii) the  Guarantor  receives a notice from the  Secretary of State as
               referred to in Article 11 (4)(a) of the  Guarantor's  Articles of
               Association as in effect on 10th October, 1995,

then,  unless, in the case of (ii) only, an independent  financial adviser shall
have  certified in writing to the Trustee within 12 days of issue of such notice
that  neither the notice of the  revocation  of the Licence by the  Secretary of
State nor the redemption by the Guarantor of all of its  preference  shares will
be or is,  in its  opinion,  materially  prejudicial  to  the  interests  of the
Bondholders and unless, in the case of both (i) and (ii), at any time the Issuer
shall have given a notice in respect of his Bond under  Condition  6(B) or under
Condition  6(C), in each case expiring  prior to the Put Date (as defined below)
each  Bondholder  shall have the option (the "Put Option") to require the Issuer
or,  failing  the  Issuer,  the  Guarantor,  to redeem  or, at the option of the
Issuer, or the Guarantor,  as applicable,  purchase (or procure the purchase of)
that Bond on the Put Date at its  principal  amount  together  with  (or,  where
purchased,  together  with an amount equal to) interest (if any) accrued to (but
excluding) the Put Date.

     A Restructuring  Event shall be deemed not to be materially  prejudicial to
the  interests of the  Bondholders  if,  notwithstanding  the  occurrence of the
Rating  Downgrade,  the rating  assigned to the Rated  Securities  by any Rating
Agency (as defined  below) is  subsequently  increased to the  Investment  Grade
Rating prior to any Negative Certification being given.

     Any  certification by an independent  financial  adviser as aforesaid as to
whether or not, in its opinion, any Restructuring Event will be or is materially
prejudicial  to the  interests  of the  Bondholders  shall,  in the  absence  of
manifest  error,  be  conclusive  and binding on the  Trustee,  the Issuer,  the
Guarantor, the Bondholders and the Couponholders.

     (D) Promptly  upon the Issuer or the  Guarantor  becoming  aware that a Put
Event, has occurred and in any event not later than 14 days after the occurrence
of a Put Event,  the  Issuer or the  Guarantor  shall,  and at any time upon the
Trustee becoming  similarly so aware the Trustee may, and if so requested by the
holders of at least one-quarter in principal amount of We Bonds then outstanding
shall, give notice (a "Put Event Notice") to the Bondholders in accordance with
Condition  14  specifying  the nature of the Put Event,  and the  procedure  for
exercising the Put Option.

     (E) To exercise the Put Option in respect of his Bond the  Bondholder  must
deliver such Bond to the specified office of any Paying Agent, on a day which is
a  Business  Day (as  defined in  Condition  5) in the City of London and in the
place of such  specified  office  falling  within the period (the "Put  Period")
commencing  on the date the Put  Event  Notice  is given  and  expiring  45 days
thereafter  accompanied by a duly completed and signed notice of exercise in the
form (for the time being current)  obtainable  from any specified  office of any
Paying  Agent (a "Put  Notice") and in which the  Bondholder  may specify a bank
account complying with the requirements of Condition 5 to which payment is to be
made under  this  Condition  7. Each Bond must be  delivered  together  with all
Coupons  appertaining  thereto maturing after the day (the "Put Date") being, in
the case of a Put Event  referred to in sub-clause  (X) of the definition of Put
Event,  the fifteenth day after the date of expiry of the Put Period and, in the
case of a Put Event  referred  to in  sub-clause  (Y) of the  definition  of Put
Event,  the day upon which such Bond is delivered at the specified office of any
Paying Agent by the  relevant  Bondholder  failing  which the full amount of any
such  missing  Coupon will be  deducted  from the amount due for  payment.  Each
amount so deducted  will be paid in the manner  provided in  Condition 5 against
presentation  and surrender (or, in the case of part payment only,  endorsement)
of such  missing  Coupon at any time  before  the  expiry of 10 years  after the
Relevant  Date (as  defined in  Condition  8) in respect  of the  relevant  Bond
(whether  or not the  Coupon  would  otherwise  have  become  void  pursuant  to
Condition 9) or, if later,  five years after the date on which such Coupon would
have become due, but not thereafter. The Paying Agent to which such Bond and Put
Notice are delivered shall issue to the Bondholder  concerned a non-transferable
receipt in respect of the Bond so  delivered.  Payment in respect of any Bond so
delivered  shall be made, if the holder duly specifies a bank account in the Put
Notice to which payment is to be made, on the Put Date, by transfer to that bank
account  and, in every other  case,  on or after the Put Date,  but in each case
against  presentation and surrender (or, as the case may be) endorsement of such
receipt at any specified office of any Paying Agent, subject in any such case as
provided in Condition 5. A Put Notice, once given, shall be irrevocable. For the
purposes of Conditions  1, 9, 10, 11, 13, and 15 and for certain other  purposes
specified in the Trust Deed,  receipts issued pursuant to this Condition 7 shall
be treated as if they were Bonds.  The Issuer  shall redeem or, at the option of
the Issuer,  purchase  (or procure the  purchase  of) the  relevant  Bond on the
applicable Put Date, unless such Bond has been previously  redeemed or purchased
in  accordance  with these Terms and  Conditions.

<PAGE>

8.   Taxation

     All  payments  in respect of the Bonds and the Coupons by the Issuer or, as
the case may be, the Guarantor  shall be made without  withholding  or deduction
for, or on account  of, any  present or future  taxes,  duties,  assessments  or
governmental  charges of whatever  nature  ("Taxes")  imposed or levied by or on
behalf of the United Kingdom, or any political sub-division of, or any authority
in, or of, the United  Kingdom  having power to tax,  unless the  withholding or
deduction of the Taxes is required by law. In that event,  the Issuer or, as the
case may be, the Guarantor will pay such additional  amounts as may be necessary
in order that the net amounts  received  by the  Bondholders  and  Couponholders
after the  withholding  or deduction  shall equal the  respective  amounts which
would have been  receivable  in respect of the Bonds or, as the case may be, the
Coupons in the absence of the withholding or deduction except that no additional
amounts  shall be payable in  relation  to any payment in respect of any Bond or
Coupon:

     (a)  to, or to a third  party on behalf  of, a holder  who is liable to the
          Taxes in respect  of the Bond or Coupon by reason of his  having  some
          connection  with the United Kingdom other than the mere holding of the
          Bond or Coupon; or

     (b)  presented for payment in the United Kingdom; or

     (c)  presented for payment more than 30 days after the Relevant Date except
          to the extent that a holder  would have been  entitled  to  additional
          amounts  on  presenting  the same for  payment on the last day of such
          period of 30 days; or

     (d)  to, or to a third party on behalf of, a holder who would not be liable
          or subject to the  withholding or deduction by making a declaration of
          non-residence or other  similar  claim for exemption to the relevant
          tax authority.

     As used herein,  "Relevant  Date" means the date on which the payment first
becomes due but, if the full amount of the money  payable has not been  received
in London by the  Principal  Paying  Agent or the  Trustee  on or before the due
date,  it means the date on which,  the full amount of the money  having been so
received, notice to that effect shall have been duly given to the Bondholders by
the Issuer in accordance with Condition 14.

     Any  reference in these Terms and  Conditions  to any amounts in respect of
the Bonds shall be deemed also to refer to any  additional  amounts which may be
payable under this Condition 8 or under any  undertakings  given in addition to,
or in substitution for, this Condition 8 pursuant to the Trust Deed.

9.   Prescription

     Bonds and Coupons  (which for this purpose  shall not include  Talons) will
become void unless  presented  for payment  within  periods of 10 years and five
years  respectively  from the  Relevant  Date in respect of the Bonds or, as the
case may be, the Coupons,  subject to the provisions of Condition 5. There shall
not be included in any Coupon sheet  issued upon  exchange of a Talon any Coupon
which would be void upon issue under this Condition or Condition 5.

10.  Events of Default

     The Trustee at its  discretion  may,  and if so requested in writing by the
holders  of  at  least  one-quarter  in  principal  amount  of  the  Bonds  then
outstanding or if so directed by an Extraordinary  Resolution of the Bondholders
shall,  (but in the case of the  happening  of any of the  events  mentioned  in
sub-paragraphs  (b), (c), (d), (e), (f), (g) and (h) below,  only if the Trustee
shall  have  certified  in  writing  to the  Issuer  that such  event is, in its
opinion,  materially prejudicial to the interests of the Bondholders and subject
in each case to the Trustee being  indemnified by, or on behalf of,  Bondholders
to its satisfaction), give notice to the Issuer and the Guarantor that the Bonds
are, and they shall accordingly  thereby  forthwith become,  immediately due and
repayable at their principal  amount together with accrued interest (as provided
in the Trust Deed) if any of the  following  events (each an "Event of Default")
shall have  occurred  (unless  such Event of Default  has been  remedied  to the
satisfaction of the Trustee):

     (a)  if  default  is made for a period of 7 days or more in the  payment of
          any  principal  or the  purchase  price  due in  respect  of any  Bond
          pursuant  to  Condition  7 or 14 days or  more in the  payment  of any
          interest due in respect of the Bonds or any of them; or

     (b)  if the Issuer or the Guarantor  fails to perform or observe any of its
          other obligations, covenants, conditions or provisions under the Bonds
          or the Trust Deed and (except where the Trustee  shall have  certified
          to the Issuer in writing that it considers such failure to be

<PAGE>

          incapable of remedy in which case no such notice or continuation as is
          hereinafter mentioned will be required) such failure continues for the
          period of 30 days (or such  longer  period as the  Trustee  may in its
          absolute  discretion permit) next following the service by the Trustee
          on the  Issuer  or the  Guarantor,  as the  case  may  be,  of  notice
          requiring the same to be remedied; or

     (c)  if (i) any other  indebtedness  for borrowed money of the Issuer,  the
          Guarantor or any Principal  Subsidiary becomes due and repayable prior
          to its stated  maturity  by reason of an event of  default  (howsoever
          described)  or (ii) any such  indebtedness  for borrowed  money is not
          paid  when due or, as the case may be,  within  any  applicable  grace
          period (as originally  provided) or (iii) the Issuer, the Guarantor or
          any  Principal  Subsidiary  fails to pay when due (or, as the case may
          be, within any originally  applicable grace period) any amount payable
          by it under any  present or future  guarantee  for,  or  indemnity  in
          respect of, any  indebtedness for borrowed money of any person or (iv)
          any  security  given by the Issuer,  the  Guarantor  or any  Principal
          Subsidiary  for any  indebtedness  for borrowed money of any person or
          any guarantee or indemnity of  indebtedness  for borrowed money of any
          person becomes  enforceable  by reason of default in relation  thereto
          and steps are taken to  enforce  such  security  save in any such case
          where  there  is  a  bona fide dispute  as  to  whether  the  relevant
          indebtedness  for borrowed money or any such guarantee or indemnity as
          aforesaid shall be due and payable, provided that the aggregate amount
          of the relevant  indebtedness  for borrowed  money in respect of which
          any one or more of the events  mentioned  above in this  sub-paragraph
          (c) has or have occurred equals or exceeds whichever is the greater of
          (pound)20,000,000 or its equivalent in other currencies (as determined
          by the  Trustee) or two per cent.  of the  Consolidated  Tangible  Net
          Worth, and for the purposes of this sub-paragraph  (c),  "indebtedness
          for borrowed money" shall exclude Project Finance Indebtedness; or

     (d)  if any order shall be made by any  competent  court or any  resolution
          shall be passed for the winding up or dissolution of the Issuer or the
          Guarantor,   save   for  the   purposes   of   amalgamation,   merger,
          consolidation,   reorganisation,   reconstruction   or  other  similar
          arrangement on terms previously  approved in writing by the Trustee or
          by an Extraordinary Resolution of the Bondholders; or

     (e)  if any order shall be made by any  competent  court or any  resolution
          shall be passed  for the  winding  up or  dissolution  of a  Principal
          Subsidiary,   save  for  the   purposes   of   amalgamation,   merger,
          consolidation,   reorganisation,   reconstruction   or  other  similar
          arrangement (i) not involving or arising out of the insolvency of such
          Principal  Subsidiary  and under which all the surplus  assets of such
          Principal  Subsidiary  are  transferred to the Guarantor or any of its
          other  Subsidiaries  or (ii) the terms of which have  previously  been
          approved in writing by the Trustee or by an  Extraordinary  Resolution
          of the Bondholders; or

     (f)  if the Issuer,  the Guarantor or any Principal  Subsidiary shall cease
          to carry on the whole or substantially the whole of its business, save
          in each case for the purposes of amalgamation,  merger, consolidation,
          reorganisation,  reconstruction  or other similar  arrangement (i) not
          involving  or  arising  out  of the  insolvency  of  the  Issuer,  the
          Guarantor  or  such  Principal  Subsidiary  and  under  which  all  or
          substantially  all of its assets are  transferred to another member of
          the Group or (ii) under which all or  substantially  all of its assets
          are  transferred  to a third party or parties  (whether  associates or
          not)  for  full  consideration  by  the  Issuer,  the  Guarantor  or a
          Principal  Subsidiary  on an arm's  length  basis or (iii)  where  the
          transferee is or  immediately  upon such transfer  becomes a Principal
          Subsidiary or (iv) the terms of which have previously been approved in
          writing  by  the  Trustee  or by an  Extraordinary  Resolution  of the
          Bondholders,  provided  that if the Guarantor  shall  transfer the PES
          Licence  it shall be  deemed  to have  ceased to carry on the whole or
          substantially the whole of its business (and none of exceptions (i) to
          (iii) shall  apply)  unless the  transferee  assumes all the  Issuer's
          obligations  under the Bonds and the Trust Deed as primary  obligor or
          gives a  guarantee  in  substitution  for the  Guarantor  in form  and
          substance  acceptable to the Trustee in respect of the  obligations of
          the Issuer under the Bonds and the Trust Deed; or

     (g)  if the Issuer, the Guarantor or any Principal Subsidiary shall suspend
          or shall threaten to suspend  payment of its debts  generally or shall
          be declared or adjudicated by a competent  court to be unable or shall
          admit in writing its  inability,  to pay its debts (within the meaning
          of Section 123(1) or (2) of the Insolvency Act 1986) as they fall due,
          or shall be  adjudicated  or found  insolvent by a competent  court or
          shall enter into any composition or other similar arrangement with its
          creditors under Section 1 of the Insolvency Act 1986; or
<PAGE>

     (h)  if a receiver, administrative receiver, administrator or other similar
          official  shall be appointed in relation to the Issuer,  the Guarantor
          or  any  Principal  Subsidiary  or  in  relation  to  the  whole  or a
          substantial  part of the  undertaking  or  assets  of any of them or a
          distress,  execution or other process shall be levied or enforced upon
          or sued out against,  or an encumbrancer shall take possession of, the
          whole or a substantial part of the assets of any of them and in any of
          the  foregoing  cases  it or he shall  not be paid  out or  discharged
          within  60 days (or  such  longer  period  as the  Trustee  may in its
          absolute discretion permit).

     For the  purposes of  sub-paragraph  (g) above,  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 Director (as defined
in the PES Licence) may from time to time  determine by notice in writing to the
Secretary of State (as defined in the PES Licence) and the Guarantor.

     Neither the Issuer,  the Guarantor nor any  Principal  Subsidiary  shall be
deemed to be unable to pay its debts for the purposes of sub-paragraph (g) above
if any such demand as is mentioned in Section  123(1)(a) of the  Insolvency  Act
1986 is being  contested  in good  faith by the  Issuer,  the  Guarantor  or the
relevant  Principal  Subsidiary,  as the  case  may  be,  with  recourse  to all
appropriate  measures and  procedures or if any such demand is satisfied  before
the  expiration  of such  period  as may be stated  in any  notice  given by the
Trustee  under the first  paragraph  of this  Condition  10.

For the purposes of these Terms and Conditions:

     (a)  a "Principal  Subsidiary"  at any time shall mean a Subsidiary  of the
          Issuer or the Guarantor (not being any Subsidiary of the Issuer or the
          Guarantor  whose  only  indebtedness  for  borrowed  money is  Project
          Finance Indebtedness):

          (A)  whose (i) net profits  before tax or (ii) gross assets  represent
               15 per cent. or more of the  consolidated  net profits before tax
               of  the  Group  or   consolidated   gross  assets  of  the  Group
               respectively  in each case as calculated by reference to the then
               latest   audited   financial   statements   of  such   Subsidiary
               (consolidated   in  the  case  of  a  company  which  itself  has
               Subsidiaries   and  which,   in  the  normal  course,   prepares
               consolidated  accounts) and the then latest audited  consolidated
               financial statements of the Group; or

          (B)  to which is transferred all or substantially all of the business,
               undertaking  and  assets  of a  Subsidiary  of the  Issuer or the
               Guarantor which immediately prior to such transfer is a Principal
               Subsidiary, whereupon the transferor Subsidiary shall immediately
               cease to be a Principal Subsidiary and the transferee  Subsidiary
               shall  immediately  become  a  Principal   Subsidiary  under  the
               provisions of this  sub-paragraph  (B) (but without  prejudice to
               the provisions of sub-paragraph (A) above);

          all as more fully defined in the Trust Deed.

          A report by the Auditors  that in their  opinion a  Subsidiary  of the
          Issuer  or the  Guarantor  is or is  not  or  was  or  was  not at any
          particular  time  or  throughout  any  specified  period  a  Principal
          Subsidiary  shall, in the absence of manifest error, be conclusive and
          binding on the Guarantor, the Issuer, the Trustee, the Bondholders and
          the Couponholders; and

     (b)  "indebtedness   for  borrowed  money"  means  any  present  or  future
          indebtedness  (whether  being  principal,  premium,  interest or other
          amounts)  for or in respect of (i) money  borrowed,  (ii)  liabilities
          under or in  respect  of any  acceptance  credit,  or (iii) any notes,
          bonds,  debentures,  debenture  stock,  loan stock or other securities
          offered, issued or distributed whether by way of public offer, private
          placing, acquisition consideration or otherwise and whether issued for
          cash or in whole or in part for a consideration other than cash.

11.  Enforcement

     The Trustee may at any time, at its  discretion  and without  notice,  take
such  proceedings  against  the Issuer or the  Guarantor  as it may think fit to
enforce the provisions of the Trust Deed, the Bonds and the Coupons but it shall
not be bound to take any  proceedings  or any other  action in  relation  to the
Trust Deed,  the Bonds or the Coupons  unless (a) it shall have been so directed
by an Extraordinary  Resolution of the Bondholders or so requested in writing by
the  holders  of at least  one-quarter  in  principal  amount of the Bonds  then
outstanding,  and (b) it shall have been  indemnified  to its  satisfaction.  No
Bondholder or  Couponholder  shall be entitled to proceed  directly  against the
Issuer or the Guarantor  unless the Trustee,  having become bound so to proceed,
fails so to do within a reasonable period and such failure shall be continuing.

<PAGE>

12.  Substitution

     The Trustee may,  without the consent of the Bondholders or  Couponholders,
agree with the  Issuer and the  Guarantor  to the  substitution  in place of the
Issuer (or of any previous  substitute  under this  Condition)  as the principal
debtor under the Bonds,  the Coupons and the Trust Deed of the  Guarantor or any
Subsidiary  or holding  company (as defined in section 736 of the  Companies Act
1985) of the Guarantor or any Subsidiary of such holding company, subject to (a)
the Bonds  continuing to be  unconditionally  and irrevocably  guaranteed by the
Guarantor (save where the Guarantor  itself has been  substituted for the Issuer
(or any previous  substitute)  or where the  Guarantor has  transferred  the PES
Licence to the  substituted  party), (b) the  Trustee being  satisfied  that the
interests  of  the  Bondholders  will  not  be  materially   prejudiced  by  the
substitution,  and (c) certain other  conditions set out in the Trust Deed being
complied with.

     The Trustee may,  without the consent of the Bondholders or  Couponholders,
agree with the  Issuer and the  Guarantor  to the  substitution  in place of the
Guarantor (or of any previous  substitute under this Condition) as the guarantor
of the  obligations  of the Issuer  (or of any  previous  substitute  under this
Condition)  guaranteed  by the  Guarantor  under the Bonds,  the Coupons and the
Trust Deed of any  Subsidiary  or holding  company (as defined in section 736 of
the  Companies  Act 1985) of the  Guarantor  or any  subsidiary  of such holding
company,  subject to (a) the PES Licence having been  previously  transferred to
the substituted  party; (b) the Trustee being satisfied that the interest of the
Bondholders  will not be  materially  prejudiced  by the  substitution;  and (c)
certain other conditions set out in the Trust Deed being complied with.

13.  Replacement of Bonds and Coupons

     If any Bond or Coupon is lost, stolen, mutilated,  defaced or destroyed, it
may be  replaced at the  specified  office of the Paying  Agent in London,  upon
payment  by the  claimant  of the  expenses  incurred  in  connection  with  the
replacement  and on such terms as to  evidence,  indemnity  and  security as the
Issuer may  reasonably  require.  Mutilated or defaced  Bonds or Coupons must be
surrendered before replacements will be issued.

14.  Notices

     Notices to the Bondholders  will be valid if published in a leading English
language  daily  newspaper  published in London or such other  English  language
daily newspaper with general circulation in Europe as the Trustee may previously
approve in writing. Any notice shall be deemed to have been given on the date of
publication  or,  if so  published  more  than  once,  on the date of the  first
publication.  it is  expected  that  publication  will  normally  be made in the
Financial  Times.  If publication as provided above is not  practicable,  notice
will be given in such  other  manner,  and shall be deemed to have been given on
such date, as the Trustee may previously approve in writing.

     Couponholders  will be  deemed  for all  purposes  to  have  notice  of the
contents  of any  notice  given  to the  Bondholders  in  accordance  with  this
Condition 14.

15.  Meetings of Bondholders, Modification, Waiver and Authorisation

     (a) The Trust  Deed  contains  provisions  for  convening  meetings  of the
Bondholders  to consider any matter  affecting  their  interests,  including the
modification  by  Extraordinary  Resolution of these Terms and Conditions or the
provisions  of the  Trust  Deed.  The  quorum  at any  meeting  for  passing  an
Extraordinary  Resolution  will  be one  or  more  persons  present  holding  or
representing  a clear  majority  in  principal  amount of the Bonds for the time
being outstanding,  or at any adjourned such meeting one or more persons present
whatever the principal  amount of the Bonds held or  represented by him or them,
except that at any meeting,  the business of which includes the  modification of
certain of the  provisions  of these  Terms and  Conditions  and  certain of the
provisions of the Trust Deed, the necessary  quorum for passing an Extraordinary
Resolution will be one or more persons present holding or representing  not less
than  two-thirds,  or at any adjourned such meeting not less than one-third,  of
the  principal  amount  of  the  Bonds  for  the  time  being  outstanding.   An
Extraordinary  Resolution  passed  at any  meeting  of the  Bondholders  will be
binding on all  Bondholders,  whether or not they are  present at the meeting or
voted thereat, and on all Couponholders.

     (b) The Trustee  may  agree,  without  the  consent of the  Bondholders  or
Couponholders, to any modification (subject to certain exceptions) of, or to the
waiver or  authorisation of any breach or proposed breach of, any of these Terms
and  Conditions or any of the  provisions of the Trust Deed which is not, in the
opinion  of  the  Trustee,  materially  prejudicial  to  the  interests  of  the
Bondholders  or to any  modification  which is of a formal,  minor or  technical
nature or to correct a manifest error.

<PAGE>

     (c) In  connection  with the  exercise by it of any of its trusts,  powers,
authorities or discretions  (including,  without  limitation,  any modification,
waiver,  authorisation  or  substitution),  the Trustee shall have regard to the
interests  of  the  Bondholders  as a  class  and,  in  particular  but  without
limitation,  shall not have regard to the  consequences  of the  exercise of its
trusts,  powers,  authorities or  discretions  for  individual  Bondholders  and
Couponholders  resulting from their being for any purpose  domiciled or resident
in, or  otherwise  connected  with,  or  subject  to the  jurisdiction  of,  any
particular territory and the Trustee shall not be entitled to require, nor shall
any  Bondholder  or  Couponholder  be  entitled to claim,  from the Issuer,  the
Guarantor,  the Trustee or any other  person any  indemnification  or payment in
respect of any tax consequences of any such exercise upon individual Bondholders
or Couponholders except to the extent already provided for in Condition 8 and/or
any  undertaking  given in- addition to, or -in  substitution  for,  Condition 8
pursuant to the Trust Deed.

     (d) Any modification,  waiver  or  authorisation  shall be  binding  on the
Bondholders and the Couponholders and, unless the Trustee agrees otherwise,  any
modification  shall be  notified by .the  Issuer to the  Bondholders  as soon as
practicable thereafter in accordance with Condition 14.

16.  Indemnification of the Trustee

     The Trust Deed contains  provisions for the  indemnification of the Trustee
and for its relief from  responsibility,  including provisions relieving it from
taking action unless indemnified to its satisfaction.

17.  Further Issues

     The  Issuer is at  liberty  from time to time  without  the  consent of the
Bondholders or Couponholders to create and issue further bonds or notes (whether
in bearer or registered  form) either (a) ranking pari passu in all respects (or
in all respects save for the first payment of interest  thereon) and so that the
same shall be consolidated  and form a single series with the outstanding  bonds
or notes of any series  (including  the Bonds)  constituted by the Trust Deed or
any  supplemental  deed  or  (b)  upon  such  terms  as  to  ranking,  interest,
conversion,  redemption and otherwise as the Issuer may determine at the time of
the issue. Any further bonds or notes which are to form a single series with the
outstanding  bonds or notes of any series  (including the Bonds)  constituted by
the Trust Deed or any  supplemental  deed shall,  and any other further bonds or
notes may (with the prior written  consent of the Trustee),  be constituted by a
deed  supplemental  to the Trust Deed.  The Trust Deed contains  provisions  for
convening a single meeting of the  Bondholders and the holders of bonds or notes
of other series in certain circumstances where the Trustee so decides.

18.  Governing Law

     The Trust  Deed,  the Bonds and the Coupons  are  governed  by, and will be
construed in accordance with, English law.

                             PRINCIPAL PAYING AGENT

                                Barclays Bank PLC
                            BGSS Depositary Services
                                  8 Angel Court
                               Throgmorton Street
                                 London EC2R 7HT

                               OTHER PAYING AGENT
                     Banque Internationale a Luxembourg S.A.
                                 69 route d'Esch
                               L-1470 Luxembourg

<PAGE>

                                   Schedule 5
                                   ----------
                     Provisions for meetings of Bondholders
                     --------------------------------------

1       The following expressions shall have the following meanings:

          "voting  certificate"  means a  certificate  in the  English  language
          issued by a Paying Agent and dated in which it is stated:

          (a)  that on that date Bonds  (not  being  Bonds in respect of which a
               block voting  instruction  has been issued and is  outstanding in
               respect of the meeting  specified in such voting  certificate  or
               any  adjournment  of such  meeting)  bearing  specified  serial
               numbers were deposited with such Paying Agent (or to its order at
               a bank or other  depositary)  and  that  such  Bonds  will not be
               released until the earlier of:

               (i)  the conclusion of the meeting  specified in such certificate
                    or any adjournment of it whichever is the later; and

               (ii) the surrender of the  certificate  to the Paying Agent which
                    issued  it; and

          (b)  that its bearer is entitled  to attend and vote at such  meeting
               or any  adjournment of it in respect of the Bonds  represented by
               such certificate;

          "block voting  instruction"  means a document in the English  language
          issued by a Paying Agent and dated in which:

          (a)  it is certified that Bonds (not being Bonds in respect of which a
               voting  certificate has been issued and is outstanding in respect
               of the meeting specified in such block voting  instruction or any
               adjournment of it) have been deposited with such Paying Agent (or
               to its order at a bank or other  depositary)  and that such Bonds
               will not be released until the earlier of:

               (i)  the conclusion of the meeting  specified in such document or
                    any adjournment of it whichever is the later; and

               (ii) the surrender,  not less than 48 hours before the time fixed
                    for such  meeting or  adjournment,  of the  receipt for each
                    such  deposited  Bond which is to be  released to the Paying
                    Agent which issued it and the notification of such surrender
                    by such Paying  Agent to the  Company;

          (b)  it is  certified  that  each  depositor  of such  Bonds or a duly
               authorised  agent on his behalf has instructed  such Paying Agent
               that the votes  attributable to his Bonds so deposited  should be
               cast in a particular way in relation to each resolution to be put
               to such  meeting  or any  adjournment  of it and  that  all  such
               instructions are, during the period of

                                       84
<PAGE>

               48 hours  before  the time fixed for such  meeting  or  adjourned
               meeting, neither revocable nor subject to amendment;

          (c)  the total number and the serial numbers of the Bonds so deposited
               are listed,  distinguishing  with regard to each such  resolution
               between those in respect of which instructions have been so given
               (i) to vote for, and (ii) to vote against, the resolution; and

          (d)  any person named in such document (a "proxy") is  authorised  and
               instructed  by such Paying  Agent to vote in respect of the Bonds
               so listed in  accordance  with the  instructions  referred  to in
               sub-paragraph (c) above as set out in such document.

2    A holder of a Bond may obtain a voting  certificate  from a Paying Agent or
     require a Paying Agent to issue a block voting  instruction  by  depositing
     his Bond with such  Paying  Agent not later  than 48 hours  before the time
     fixed for any meeting.  Voting  certificates and block voting  instructions
     shall be valid until the relevant Bonds are released  pursuant to paragraph
     1 of this Schedule and until then the holder of any such voting certificate
     or (as  the  case  may  be)  the  proxy  named  in any  such  block  voting
     instruction  shall,  for all  purposes  in  connection  with any meeting or
     proposed meeting of Bondholders, be deemed to be the holder of the Bonds to
     which such voting certificate or block voting  instruction  relates and the
     Paying  Agent  with  which (or to the order of which)  such Bonds have been
     deposited  shall be deemed for such purposes not to be the holder of those
     Bonds.

3    Each of the  Company  and the  Trustee  at any time  may,  and the  Trustee
     (subject to its being indemnified to its satisfaction against all costs and
     expenses  thereby  occasioned)  upon a request in  writing  of  Bondholders
     holding not less than  one-tenth in  principal  amount of the Bonds for the
     time being outstanding  shall,  convene a meeting of Bondholders.  Whenever
     any such party is about to convene any such meeting it shall forthwith give
     notice in  writing to the other  parties of the day,  time and place of the
     meeting and of the nature of the  business to be  transacted  at it.  Every
     such  meeting  shall be held at such  time and  place  as the  Trustee  may
     previously approve in writing.

4    At least 21 days' notice (exclusive of the day on which the notice is given
     and of the day on which the meeting is held)  specifying  the day, time and
     place of meeting  shall be given to the  Bondholders.  A copy of the notice
     shall in all cases be given by the party convening the meeting to the other
     parties. Such notice shall also specify,  unless in any particular case the
     Trustee otherwise agrees,  the nature of the resolutions to be proposed and
     shall  include a statement to the effect that Bonds may be  deposited  with
     (or to the order of) any Paying Agent for the purpose of  obtaining  voting
     certificates or appointing  proxies not later than 48 hours before the time
     fixed for the meeting.

5    A person (who may, but need not, be a  Bondholder)  nominated in writing by
     the  Trustee  may take  the  chair at  every  such  meeting  but if no such
     nomination is

                                       85
<PAGE>

          made or if at any  meeting the person  nominated  shall not be present
          within 15 minutes after the time fixed for the meeting the Bondholders
          present shall choose one of their number to be chairman, failing which
          the Company or, failing  which,  the Guarantor may appoint a chairman.
          The  chairman of an  adjourned  meeting need not be the same person as
          was chairman of the original meeting.

6    At any such meeting any one or more persons present in person holding Bonds
     or voting  certificates or being proxies and holding or representing in the
     aggregate not less than one-tenth in principal  amount of the Bonds for the
     .time  being  outstanding  shall  (except  for the  purpose  of  passing an
     Extraordinary Resolution) form a quorum for the transaction of business and
     no business  (other than the choosing of a chairman) shall be transacted at
     any meeting unless the requisite  quorum be present at the  commencement of
     business.  The quorum at any such  meeting  for  passing  an  Extraordinary
     Resolution shall (subject as provided below) be one or more persons present
     in person holding Bonds or voting certificates or being proxies and holding
     or  representing  in the aggregate a clear majority in principal  amount of
     the Bonds for the time being outstanding,  provided that at any meeting the
     business of which includes the consideration of an Extraordinary Resolution
     to effect any of the matters  specified  in the proviso to  paragraph 19 of
     this  Schedule the quorum  shall be one or more  persons  present in person
     holding  Bonds or voting  9ertificates  or being  proxies  and  holding  or
     representing in the aggregate not less than two-thirds in principal  amount
     of the Bonds for the time being outstanding.

7    If within 15 minutes  from the time fixed for any such  meeting a quorum is
     not  present  the  meeting  shall,  if  convened  upon the  requisition  of
     Bondholders,  be  dissolved.  In any other  case it shall  stand  adjourned
     (unless the Company and the Trustee  agree that it be  dissolved)  for such
     period,  not being  less  than 14 days nor more  than 42 days,  and to such
     place, as may be decided by the chairman.  At such adjourned meeting one or
     more persons  present in person  holding  Bonds or voting  certificates  or
     being  proxies  (whatever  the  principal  amount  of the  Bonds so held or
     represented)  shall  form a quorum and may pass any  resolution  and decide
     upon all matters  which could  properly have been dealt with at the meeting
     from which the  adjournment  took place had a quorum  been  present at such
     meeting,  provided  that at any  adjourned  meeting  the  business of which
     includes the consideration of an Extraordinary  Resolution to effect any of
     the modifications specified in the proviso to paragraph 19 the quorum shall
     be  one  or  more  persons  present  in  person  holding  Bonds  or  voting
     certificates  or being proxies and holding or representing in the aggregate
     not less than one-third in principal amount of the Bonds for the time being
     outstanding.

8    The chairman may with the consent of (and shall if directed by) any meeting
     adjourn  such  meeting  from  time to time and from  place to place  but no
     business shall be transacted at any adjourned meeting except business which
     might  lawfully  have  been  transacted  at  the  meeting  from  which  the
     adjournment took place.

                                       86
<PAGE>

9    At least 10 days' notice of any meeting  adjourned through want of a quorum
     shall be  given in the same  manner  as for an  original  meeting  and such
     notice shall state the quorum required at such adjourned meeting.  It shall
     not,  however,  otherwise  be  necessary to give any notice of an adjourned
     meeting.

10   Every  question  submitted  to a  meeting  shall be  decided  in the  first
     instance by a show of hands and in case of  equality of votes the  chairman
     shall both on a show of hands and on a poll have a casting vote in addition
     to the vote or votes  (if any)  which he may have as a  Bondholder  or as a
     holder of a voting certificate or as a proxy.

11   At any  meeting,  unless a poll is  (before  or on the  declaration  of the
     result of the show of hands)  demanded by the  chairman,  the Company,  the
     Guarantor,  the Trustee or by one or more persons holding one or more Bonds
     or voting  certificates or being proxies and holding or representing in the
     aggregate not less than  one-fiftieth in principal  amount of the Bonds for
     the time being outstanding, a declaration by the chairman that a resolution
     has been carried or carried by a particular majority or lost or not carried
     by any particular majority shall be conclusive evidence of the fact without
     proof of the number or  proportion  of the votes  recorded  in favour of or
     against such resolution.

12   If at any meeting a poll is so  demanded,  it shall be taken in such manner
     and (subject as provided below) either at once or after such an adjournment
     as the  chairman  directs and the result of such poll shall be deemed to be
     the resolution of the meeting at which the poll was demanded as at the date
     of the taking of the poll.  The demand  for a poll  shall not  prevent  the
     continuation  of the meeting for the transaction of any business other than
     the question on which the poll has been demanded.

13   Any poll  demanded at any  meeting on the  election of a chairman or on any
     question of adjournment shall be taken at the meeting without adjournment.

14   The  Company,  the  Guarantor  and the Trustee  (through  their  respective
     representatives)  and their  respective  financial  and legal  advisers may
     attend and speak at any meeting of  Bondholders.  No one else may attend at
     any meeting of  Bondholders or join with others in requesting the convening
     of such a meeting unless he is the holder of a Bond or a voting certificate
     or is a proxy.

15   At any meeting on a show of hands every person who is present in person and
     who  produces a  Certificate  in respect of a Bond or a voting  certificate
     shall  have one vote and on a poll  every  such  person  and  every  person
     present  in person  who is a proxy  shall  have one vote in respect of each
     such principal amount as is equal to the lowest common  denomination of the
     Bonds forming a particular series.  Without prejudice to the obligations of
     proxies named in any block voting instruction,  any person entitled to more
     than one vote  need not use all his votes or cast all the votes to which he
     is entitled in the same way.

16   The proxy named in any block voting instruction need not be a Bondholder.

                                       87
<PAGE>

17   Each block voting  instruction  shall be deposited at the registered office
     of the Company,  or at such other place as the Trustee  shall  designate or
     approve,  not less than 24 hours before the time  appointed for holding the
     meeting or  adjourned  meeting at which the proxy named in the block voting
     instruction  proposes to vote and in default the block voting  instructions
     shall not be treated as valid  unless the  chairman of the meeting  decides
     otherwise before such meeting or adjourned meeting proceeds to business.  A
     notarially  certified copy of each such block voting  instruction  and, if
     required  by the  Trustee,  proof  satisfactory  to the  Trustee of its due
     execution on behalf of the  relevant  Paying Agent shall be produced by the
     proxy at the meeting or adjourned meeting but the Trustee shall not thereby
     be obliged to  investigate  or be  concerned  with the  validity of, or the
     authority of, the proxy named in any such block voting instruction.

18   Any vote given in accordance  with the terms of a block voting  instruction
     shall  be  valid  even  if  the  block  voting  instruction  or  any of the
     Bondholders'  instructions  pursuant  to  which  it was  executed  has been
     previously  revoked or amended,  provided  that no intimation in writing of
     such  revocation  or amendment  shall have been  received from the relevant
     Paying Agent by the Company or the Trustee at its  registered  office or by
     the  chairman of the meeting in each case not less than 24 hours before the
     time fixed for the meeting or  adjourned  meeting at which the block voting
     instruction is used.

19   A meeting of Bondholders shall,  subject to the Conditions,  in addition to
     the powers given above,  but without  prejudice to any powers  conferred on
     other persons by these presents,  have power  exercisable by  Extraordinary
     Resolution:

     (a)  to  sanction  any  proposal by the  Company or the  Guarantor  for any
          modification,  abrogation,  variation or compromise of, or arrangement
          in respect of, the rights of the Bondholders  and/or the Couponholders
          against the Company or the  Guarantor  or against any of its  property
          whether such rights shall arise under these presents or otherwise;

     (b)  to sanction any scheme or proposal for the exchange,  substitution  or
          sale of the Bonds for, or the  conversion  of the Bonds  into,  or the
          cancellation of the Bonds in consideration of, shares,  stock,  notes,
          bonds,  debentures,  debenture stock and/or other  obligations  and/or
          securities of the Company,  the Guarantor or any other body  corporate
          formed or to be formed, or for or into or in consideration of cash, or
          partly for or into or in consideration of such shares,  stock,  notes,
          bonds,  debentures,  debenture stock and/or other  obligations  and/or
          securities as aforesaid and partly for or into or in  consideration of
          cash;

     (c)  to  assent  to any  modification  of  these  presents  which  shall be
          proposed  by  the  Company,  the  Guarantor  or  the  Trustee;

     (d)  to  authorise  anyone to  concur  in and do all such  things as may be
          necessary   to  carry  out  and  give  effect  to  any   Extraordinary
          Resolution;

                                       88
<PAGE>

     (e)  to give  any  authority,  direction  or  sanction  which  under  these
          presents is required to be given by Extraordinary Resolution;

     (f)  to appoint any persons (whether  Bondholders or not) as a committee or
          committees to represent the interests of the Bondholders and to confer
          upon such committee or committees any powers or discretions  which the
          Bondholders could themselves exercise by Extraordinary Resolution;

     (g)  to approve a person  proposed to be  appointed as a new Trustee and to
          remove any Trustee;

     (h)  to approve  the  substitution  of any entity for the  Company  (or any
          previous substitute) as principal debtor under these presents;

     (i)  to approve the  substitution  of any entity for the  Guarantor (or any
          previous substitute) as the guarantor under these presents; and

     (j)  to discharge or exonerate the Trustee from any liability in respect of
          any act or omission  for which it may become  responsible  under these
          presents,

     provided  that the special  quorum  provisions  contained in the proviso to
     paragraph 6 of this Schedule and, in the case of an adjourned  meeting,  in
     the proviso to paragraph 7 of this Schedule  shall apply in relation to any
     Extraordinary  Resolution for the purpose of paragraph 19(b) or (h) of this
     Schedule or for the purpose of making any  modification  to the  provisions
     contained in these presents which would have the effect of:

          (i)  postponing  the  maturity  of the  Bonds  or the  dates  on which
               interest is payable in respect of the Bonds; or

          (ii) modifying the status of the Bonds; or

          (iii)  reducing or cancelling the principal amount of, or interest on,
               or other  amounts in respect of or reducing  the rate of interest
               on, the Bonds; or

          (iv) changing the currency of payment of the Bonds; or

          (v)  modifying the  provisions  contained in this Schedule  concerning
               the quorum required at any meeting of Bondholders or the majority
               required to pass an Extraordinary Resolution; or

          (vi) amending this proviso.

20   An  Extraordinary  Resolution  passed  at a  meeting  of  Bondholders  duly
     convened and held in accordance  with these  presents shall be binding upon
     all the Bondholders,  whether or not present at such meeting and whether or
     not they vote in  favour,  and upon all the  Couponholders  and each of the
     Bondholders and

                                       89
<PAGE>

     Couponholders shall be bound to give effect to it accordingly.  The passing
     of any such resolution shall be conclusive  evidence that the circumstances
     of such resolution justify the passing of it. The Company shall give notice
     of the passing of an Extraordinary Resolution to Bondholders within 14 days
     but failure to do so shall not invalidate the resolution.

21   The expression  "Extraordinary  Resolution"  means a resolution passed at a
     meeting of  Bondholders  duly  convened and held in  accordance  with these
     presents by a majority  consisting of not less than  three-quarters  of the
     votes cast.

22   Minutes of all  resolutions  and proceedings at every such meeting shall be
     made and  entered  in the  books to be from  time to time  provided  at the
     expense of the Company  for that  purpose by the Company or the Trustee and
     any such minutes, if purporting to be signed by the chairman of the meeting
     at which such resolutions  were passed or proceedings  transacted or by the
     chairman of the next succeeding meeting of Bondholders, shall be conclusive
     evidence of the matters  contained in them and until the contrary is proved
     every such meeting in respect of the proceedings of which minutes have been
     so made and signed shall be deemed to have been duly  convened and held and
     all  resolutions  passed or proceedings  transacted at it to have been duly
     passed and transacted.

23   Subject to all other provisions contained in these presents the Trustee may
     without the consent of the Bondholders  prescribe such further  regulations
     regarding the holding of meetings of Bondholders  and attendance and voting
     at them as the Trustee may in its sole discretion  determine,  including in
     particular (but without  prejudice to the generality of the foregoing) such
     regulations and requirements as the Trustee thinks reasonable:

     (a)  so as to satisfy  itself that  persons who  purport to  requisition  a
          meeting in accordance with paragraph 3 of this Schedule or who purport
          to make any  requisition  to the  Trustee  in  accordance  with  these
          presents are in fact Bondholders; and

     (b)  as to the form of voting  certificates or block voting instructions to
          be issued  pursuant to  paragraph 1 of this  Schedule so as to satisfy
          itself  that  persons  who purport to attend or vote at any meeting of
          Bondholders are entitled to do so in accordance with these presents.

24   (a)  If and whenever the Company shall have issued and have  outstanding
          any Bonds which are not  identical  and do not form one single  series
          then those Bonds which are in all respects  identical  shall be deemed
          to  constitute  a  separate  series  of the  Bonds  and the  foregoing
          provisions of this Schedule shall have effect subject to the following
          modifications:

          (i)  a  resolution  which in the  opinion of the  Trustee  affects one
               series only of the Bonds shall be deemed to have been duly passed
               if passed at a separate  meeting  of the  holders of the Bonds of
               that series;

                                       90
<PAGE>

          (ii) a  resolution  which in the opinion of the Trustee  affects  more
               than one series of the Bonds but does not give rise to a conflict
               of interest  between the holders of Bonds of any of the series so
               affected  shall be deemed to have been duly passed if passed at a
               single  meeting of the  holders of the Bonds of all the series so
               affected;

          (iii)  a resolution which in the opinion of the Trustee  affects  more
               than one  series  of the  Bonds  and  gives or may give rise to a
               conflict of  interest  between the holders of the Bonds of any of
               the series so  affected  shall be deemed to have been duly passed
               only if it shall  be duly  passed  at  separate  meetings  of the
               holders of the Bonds of each series so affected; and

          (iv) to all such meetings as aforesaid all the preceding provisions of
               this Schedule shall mutatis  mutandis apply as though  references
               therein to Bonds and holders were  references to the Bonds of the
               series or group of series in question  and to the holders of such
               Bonds respectively.

     (b)  If the Company shall have issued and have  outstanding (a) Bonds which
          are not  denominated  in sterling or (b) more than one series of Bonds
          denominated in sterling but in differing denominations,  the following
          provisions shall apply. In the case of any meeting of holders of Bonds
          of more than one  currency  the  principal  amount  of such  Bonds not
          denominated  in sterling  shall (i) for the purposes of paragraph 3 of
          this Schedule be the equivalent in sterling at the spot rate of a bank
          nominated by the Trustee for the  conversion of the relevant  currency
          or currencies  into  sterling on the seventh  dealing day (being a day
          (other  than a Saturday or a Sunday) on which banks in London are open
          for normal banking  business) prior to the day on which the request in
          writing  is  received  by the  Trustee  and (ii) for the  purposes  of
          paragraphs 6, 7, 11 and 15 of this Schedule (whether in respect of the
          meeting,   or  any  adjourned  such  meeting  or  any  poll  resulting
          therefrom) be the  equivalent in pounds  sterling at such spot rate on
          the seventh  dealing day (as defined  above)  prior to the day of such
          meeting  or,  if  applicable,   the  taking  of  such  poll.  In  such
          circumstances,  and  where  separate  series of Bonds  denominated  in
          sterling but of different denominations are to be treated together for
          the purposes of this  Schedule,  on any poll each person present shall
          have one vote for  every  complete  one pound of Bonds  (converted  as
          above) which he holds.

25   Nothing in these  presents  shall  prevent any of the proxies  named in any
     block voting  instruction or form of proxy from being a director,  managing
     director,  officer or representative  of, or otherwise  connected with, the
     Company, the Guarantor, the Subsidiaries or any of their respective holding
     and  associated  companies.

                                       91
<PAGE>

THE COMMON SEAL of                   )
NORTHERN ELECTRIC FINANCE plc        )
was hereunto affixed                 )
in the presence of:                  )

/s/ John Edwards
----------------
JOHN EDWARDS
Director

----------------
VALERIE GILES
Secretary

THE COMMON SEAL of                   )
NORTHERN ELECTRIC plc                )
was hereunto affixed                 )
in the presence of:                  )

/s/ Ron Dixon
--------------------
RON DIXON
Director

/s/ Valerie Giles
--------------------
VALERIE GILES
Secretary

THE COMMON SEAL of THE LAW           )
DEBENTURE TRUST CORPORATION p.l.c.   )
was hereunto affixed                 )
in the presence of:                  )

/s/ Julian Mason-Jebb
---------------------
JULIAN MASON-JEBB
Director

/s/ Clive Rakestrow
----------------------
CLIVE RAKESTROW
Assistant Trust Manager

                                       92Unassociated Document

 

 

EXHIBIT 10.71

 

MidAmerican
Energy Holdings Company

LONG-TERM
INCENTIVE PARTNERSHIP PLAN

As
Amended and Restated January 1, 2004

PLAN
DOCUMENT

 

 

MIDAMERICAN
ENERGY HOLDINGS COMPANY

LONG-TERM
INCENTIVE PARTNERSHIP PLAN

ARTICLE
I - PURPOSE
AND EFFECTIVE DATE

	
      1.1
	
      Purpose. The
      purpose of this Long-Term Incentive Partnership Plan (the “Plan”) is to
      permit a select group of management employees of MidAmerican Energy
      Holdings Company and its subsidiaries to share in significant increases in
      the value of the Company realized through the efforts of these
      individuals. It is intended that the Plan, by providing this award and
      deferral opportunity (U.S. only), will assist the Company in retaining and
      attracting individuals of exceptional ability and will act as an incentive
      to align their interests with those of the
Company.

	
      1.2
	
      Effective
      Date.
      The Plan was effective as of March 14, 2000, subsequently restated
      effective as of January 1, 2003, with the current Plan effective as of
      January 1, 2004.

ARTICLE
II - DEFINITIONS

For the
purpose of the Plan, the following terms shall have the meanings indicated,
unless the context clearly indicates otherwise:

	
      2.1
	
      Base
      Salary.
      “Base Salary” means the annual base salary rate payable to a Participant
      effective January 1 of the calendar year unless the Participant is a part
      of the CE U.K. pay review, in which case it is the annual base salary rate
      effective April 1 of the calendar year. For purposes of the Plan, Base
      Salary shall be calculated before reduction for any amounts deferred by
      the Participant pursuant to the Company’s tax qualified plans which may be
      maintained under Section 401(k) or Section 125 of the Internal Revenue
      Code of 1986, as amended (the “Code”), or pursuant to the MidAmerican
      Energy Holdings Company Executive Voluntary Deferred Compensation Plan or
      any other non-qualified plan which permits the voluntary deferral of
      compensation. Inclusion of any forms of compensation other than such
      “wages” and deferred “wages” is subject to approval of the Chairman &
      CEO and the President.

	
      2.2
	
      Beneficiary.
      “Beneficiary” means the person, persons or entity, as designated by the
      Participant, entitled under Article VII to receive any Plan benefits
      payable after the Participant’s death.

	
      2.3
	
      Board.
      “Board” means the Board of Directors of the Company or any duly authorized
      committee.

	
      2.4
	
      Company.
      “Company” means MidAmerican Energy Holdings Company, a Des Moines Iowa
      based corporation, and any directly or indirectly affiliated subsidiary
      corporations, any other affiliate designated by the Board, or any
      predecessor or successor to the business of any
thereof.

	
      2.5
	
      Determination
      Date.
      “Determination Date” means each business day on which the New York Stock
      Exchange is open for business.

 

 

2

	
      2.6
	
      Disability.
      “Disability” means a physical or mental condition that prevents the
      Participant from satisfactorily performing the Participant’s usual duties
      for the Company. The Chairman & CEO and the President shall determine
      the existence of Disability, in their sole reasonable discretion, and may
      rely on advice from a medical examiner satisfactory to them in making the
      determination.

	
      2.7
	
      Incentive
      Account(s).
      “Incentive Account(s)” means the account or accounts maintained on the
      books of the Company with respect to each Incentive Award and used solely
      to calculate the amount which may be payable to each Participant under the
      Plan and shall not constitute a separate fund of assets. Participants may
      have more than one Incentive Account maintained on their
      behalf.

	
      2.8
	
      Incentive
      Award(s).
      “Incentive Award(s)” means the award determined and allocated under the
      terms of the Plan. Each Incentive Award(s) shall be designated by the year
      to which the award relates (the “Award Year”) even though the value of the
      award may be determined and credited to a Participant’s Incentive Account
      in a subsequent year. An example: The Year 2003 Incentive Award may relate
      to the performance of the Company over the calendar year 2003 (the Award
      Year), even though the Incentive Award will only be determinable in
      2004.

	
      2.9
	
      Interest.
      “Interest” means the amount credited to each Participant’s Incentive
      Account(s) on each Determination Date, which shall be based on the
      Valuation Funds chosen by the Investment Committee as provided in Section
      2.16, below and in a manner consistent with Section 5.2. Such credits to a
      Participant’s Incentive Account(s) may be either positive or negative to
      reflect the increase or decrease in value of the Incentive Account(s) in
      accordance with the provisions of this
Plan.

	
      2.10
	
      Investment
      Committee.
      “Investment Committee” means the Participants of the Plan in the current
      Award Year. The Investment Committee shall designate the investment of the
      entire balance of all awards in one or more of the Valuation Funds for the
      sole purpose of determining the amount of Interest to be credited or
      debited to each Incentive Account(s).

	
      2.11
	
      Net
      Income.
      “Net Income” means the definition as applied under Generally Accepted
      Accounting Principles. The Chairman & CEO and the President may adjust
      Net Income for extraordinary and non-recurring events, when
      appropriate.

	
      2.12
	
      Nomination
      Committee.
      “Nomination Committee” means a group of Participants appointed by the
      Chairman & CEO and the President each plan year for the purposes of
      recommending the Initial and Performance
Allocations.

	
      2.13
	
      Participant.
      “Participant” means any employee who is eligible, pursuant to Article III,
      below, to participate in this Plan, and who has been so notified by the
      Chairman & CEO and the President. Such employee shall remain a
      Participant in this Plan for any award that has been made until such time
      as all benefits payable for that specific Award Year have been paid in
      accordance with the provisions hereof. A Participant may have an Incentive
      Account(s) and not be chosen to participate in a subsequent Award Year. In
      addition, a Participant may be designated as an Associate Participant
      under the terms of this Plan, and the rights and benefits attributable to
      these Associate Participants shall be those attributable to Participants
      under this Plan, unless clearly set forth otherwise. An Associate
      Participant may also be referred to as an “Associate” which term shall
      have the same meaning in all respects as Associate Participant. Likewise,
      a Participant may alternatively be referred to as a “Partner” which term
      shall have the same meaning in all respects as Participant. The use of the
      term “Partner” is not intended to, and does not convey any additional
      rights or responsibilities to a
Participant.

3

	
      2.14
	
      Plan.
      “Plan” means this Long-Term Incentive Partnership Plan as amended from
      time to time.

	
      2.15
	
      Retirement.
      “Retirement” means the termination of employment with the Company of the
      Participant after attaining age fifty-five (55) and five (5) years of
      service.

	
      2.16
	
      Valuation
      Funds.
      “Valuation Funds” means one or more of the independently established funds
      or indices that are identified and listed in Exhibit A. These Valuation
      Funds are used solely to calculate the Interest that is credited to each
      Incentive Account(s) in accordance with Article V, and does not represent,
      nor should it be interpreted to convey any beneficial interest on the part
      of the Participant in any specific asset or other property of the Company.
      The determination of the increase or decrease in the performance of each
      Valuation Fund shall be made by the Chairman & CEO and the President
      in their reasonable discretion by reference to the performance of such
      Valuation Funds. The Chairman & CEO and the President shall select the
      various Valuation Funds available to the Investment Committee pursuant to
      the Plan and shall set forth a list of these Valuation Funds attached
      hereto as Exhibit A, which may be amended from time to time at the
      discretion of the Chairman & CEO and the
President.

ARTICLE
III - ELIGIBILITY
AND PARTICIPATION

	
      3.1
	
      Eligibility.
      Eligibility to participate in the Plan shall be limited to those select
      key employees of the Company who are designated by the Chairman & CEO
      and the President from time to time. The Chairman & CEO and the
      President of the Company may designate certain key employees of the
      Company as Associate Participants to reflect their contributions to the
      success of the Company. Such Associate Participant may later be designated
      as a full Participant, in which event, the benefits due under this Plan,
      including any Allocations, shall be determined as set forth for a full
      Participant from the date specified.

	
      3.2
	
      Participation. An
      employee’s participation in the Plan for any Award Year shall be effective
      upon notification to the employee by the Chairman & CEO and the
      President.

ARTICLE
IV - INCENTIVE
AWARD

	
      4.1
	
      Annual
      Award.
      Prior to the beginning of each year, the Chairman & CEO and the
      President shall determine whether an Incentive Award shall be granted for
      the current plan year. If an Incentive Award is granted, the Chairman
      & CEO and the President will establish the award categories based upon
      Net Income target goals or such other criteria, as they deem appropriate
      for the plan year. The amount of the Incentive Award shall be determined
      as described in the Plan Summary each plan
year.

 

4

	
      4.2
	
      Allocation
      of Points.
      The amount of each Incentive Award shall be allocated among the eligible
      Participants in the following manner:

	 	
      a)
	
      Initial
      Point Allocation.
      The Nomination Committee shall make recommendations to the Chairman &
      CEO and the President to allocate initial points among participants for
      that year. The Chairman & CEO and the President shall either accept
      these recommendations or make adjustments that may increase, decrease or
      eliminate any initial point allocation to any individual Participant. Any
      points that are not allocated to Participants may be either refunded to
      the Company or reallocated at a later date as initial points or
      performance points at the discretion of the Chairman & CEO and the
      President.

	 	
      b)
	
      Performance
      Point Allocation.
      The Nomination Committee shall make recommendations to the Chairman &
      CEO and the President to allocate all, or a portion of, the remaining
      points for the Award Year, among the eligible Participants. The Chairman
      & CEO and the President shall either accept these recommendations or
      make adjustments that may increase, decrease or eliminate any such
      remaining point allocation to any individual Participant. Any award that
      is not allocated to Participants will be returned to the Company as an
      offset to Plan expenses.

	 	
      c)
	
      Maximum
      Allocation.
      Notwithstanding the above, the dollar value of the sum of the Initial and
      Performance Allocations made on behalf of any Participant for any single
      Award Year shall not exceed one hundred fifty percent (150%) of that
      Participant’s Base Salary for that Award
Year.

	
      4.3
	
      Determination
      of Annual Awards.
      The dollar value of any Incentive Award shall be determined by the
      Chairman & CEO and the President as soon as practical after the close
      of the Award Year, but in no event shall the dollar value of the Award be
      determined later than March 1st of
      the year following the Award Year. The value of a Participant’s share of
      any Incentive Award shall be credited to a Participant’s Incentive
      Account(s) as of the day determined by the Chairman & CEO and the
      President but in no event shall the date be later than March 1st of
      the year following the Award Year. Interest shall be credited (or debited)
      on each Determination Date. Any distributions to a Participant shall
      reduce the Participant’s Incentive Account(s) as of the date of such
      distribution.

	
      4.4
	
      Reduction
      of Awards.
      The Chairman & CEO and the President may, in their sole discretion,
      establish certain criteria that must be met for an Incentive Award to
      become effective. These criteria may include the achievement of certain
      safety performance goals, environmental, risk management or other goals
      established by the Chairman & CEO and the President. The determination
      of whether any applicable goals have been achieved with respect to an
      Incentive Award shall be determined by the Chairman & CEO and the
      President, as of the time that the dollar value of that Incentive Award is
      determined in Section 4.3 above.

ARTICLE
V - INCENTIVE
ACCOUNT(S)

	
      5.1
	
      Accounts.
      The Company shall maintain a separate bookkeeping account on behalf of
      each Participant in the Plan for each Incentive Award. The value of any
      Incentive Award(s) allocated to each Participant plus any Interest earned
      thereon shall be added to such Participant’s Incentive Account(s). These
      Incentive Accounts shall be used solely to calculate the amount payable to
      each Participant under the Plan and shall not constitute a separate fund
      of assets.

 

5

	
      5.2
	
      Timing
      of Credits.
      The value of a Participant’s share of any Incentive Award shall be
      credited to a Participant’s Incentive Account as of the day determined by
      the Chairman & CEO and the President but in no event shall the date be
      later than March 1st of
      the year following the Award Year. Each Incentive Account(s) shall be
      increased or decreased by the Interest credited on each Determination Date
      as though the balance of that Incentive Account(s) as of the date
      Incentive Awards are credited to a Participant’s Incentive Account, had
      been invested in the applicable Valuation Funds chosen by the Investment
      Committee. Any distributions to a Participant shall reduce the
      Participant’s Incentive Account(s) as of the date of such
      distribution.

	
      5.3
	
      Vesting
      of Accounts.
      Each Participant shall be twenty percent (20%) vested in his or her
      Incentive Account at December 31st of
      the Award Year and an additional twenty percent (20%) for each subsequent
      year. Participants must be employed on December 31st to
      vest for the year. The Participant shall be considered to be one hundred
      percent (100%) vested in the event of termination of service as a result
      of a Disability or death, and shall be considered to be one hundred
      percent (100%) vested in the event of Retirement, but only with respect to
      Incentive Awards granted for years prior to 2004.

	
      5.4
	
      Statement
      of Accounts.
      The Company shall give to each Participant a statement showing the
      balances in the Participant’s Incentive Account(s) no less frequently than
      on an annual basis.

ARTICLE
VI - PLAN
BENEFITS

	
      6.1
	
      Normal
      Benefit.
      The balance of each Participant’s Incentive Account(s) shall be paid no
      earlier than four (4) years, eleven (11) months from beginning of the
      Award Year and no later than the fifth anniversary of the beginning of the
      Award Year. Unless modified pursuant to Section 6.3 below, such amount
      shall be paid in the form of a lump sum.

	
      6.2
	
      Early
      Termination Benefit.
      In the event that a Participant terminates service with the Company prior
      to the fifth anniversary of an Award Year, the Participant shall receive
      the vested portion of the Incentive Account(s) as of the most recent
      Determination Date, payable in a lump sum. The amount shall be paid as
      soon as practical after the termination of service, but in no event later
      than thirty (30) days from the date of
termination.

	
      6.3
	
      Deferred
      Benefit (U.S. only).
      With respect to any Incentive Account, the Participant may elect, in a
      manner acceptable to the Company, to defer the receipt of certain benefits
      due under this Plan by filing an election to do so no later than December
      15th
      after the third anniversary of the beginning of the Award Year relating to
      the Incentive Account to be deferred:

	 	
      a)
	
      Such
      election must be accepted by the Administrative Committee of the
      MidAmerican Energy Holdings Company Executive Voluntary Deferred
      Compensation Plan;

	 	
      b)
	
      The
      balance of the Incentive Account as of the fifth anniversary of the Award
      Year shall be transferred to the MidAmerican Energy Holdings Company
      Executive Voluntary Deferred Compensation Plan as of that date and shall
      thereafter be subject to the terms and conditions of that
      plan;

 

6

	 	
      c)
	
      Such
      an election shall only permit the deferral of benefits payable under
      Section 6.1 above, and shall not defer the receipt of benefits payable
      under any other provision of the Plan; and

	 	
      d)
	
      The
      acceptance of such an election shall completely satisfy and discharge all
      obligations on the part of the Company to the Participant (and the
      Participant’s Beneficiary) with respect to such Incentive Account, and the
      Participant’s (and Participant’s Beneficiary’s) rights under the Plan with
      respect to such Incentive Account shall
terminate.

An
example: A Participant may elect to defer the receipt of his Year 2003 Incentive
Account by filing an election to do so prior to December 15, 2006. If such
election is in a form acceptable to the Company and the election is accepted by
the Administrative Committee of the MidAmerican Energy Holdings Company
Executive Voluntary Deferred Compensation Plan, the balance of the vested
portion of that plan year Incentive Account as of December 31, 2007, shall be
considered to be transferred to the MidAmerican Energy Holdings Company
Executive Voluntary Deferred Compensation Plan as of that date, and all
obligations with respect to the Year 2003 Incentive Account for that Participant
shall be deemed to be satisfied.

	
      6.4
	
      Death
      Benefit.
      In the event of the death of a Participant prior to complete payment of
      any Incentive Account(s), the Participant’s Beneficiary shall receive the
      remaining, vested balance of the Incentive Account(s) determined as if the
      Participant had terminated service as of the date of death. Such amounts
      shall be paid in a lump sum as soon as practical after the death of the
      Participant, but in no event later than thirty (30) days from the date of
      the Participant’s death.

	
      6.5
	
      Withholding
      and Payroll Taxes.
      The Company shall withhold from any payment made pursuant to the Plan any
      taxes required to be withheld from such payments under law. A Beneficiary,
      however, may elect not to have withholding of federal income tax pursuant
      to Section 3405(a)(2) of the Code, or any successor provision thereto
      (U.S. only).

	
      6.6
	
      Payment
      to Guardian.
      If a Plan benefit is payable to a minor, a person declared incompetent or
      a person incapable of handling the disposition of the property, the
      Company may direct payment to the guardian, legal representative or person
      having the care and custody of such minor or person. The Company may
      require proof of incompetence, incapacity or guardianship, as it may deem
      appropriate prior to distribution. Such distribution shall completely
      discharge the Company from all liability with respect to such
      benefit.

	
      6.7
	
      Effect
      of Payment.
      The full payment of the applicable benefit under this Article VI shall
      completely discharge all obligations on the part of the Company to the
      Participant (and the Participant’s Beneficiary) with respect to the
      operation of the Plan, and the Participant’s (and Participant’s
      Beneficiary’s) rights under the Plan shall
terminate.

ARTICLE
VII - BENEFICIARY
DESIGNATION

	
      7.1
	
      Beneficiary
      Designation.
      Each Participant shall have the right, at any time, to designate one (1)
      or more persons or entities as Beneficiary (both primary as well as
      secondary) to whom benefits under the Plan shall be paid in the event of
      Participant’s death prior to complete distribution of the Participant’s
      Incentive Account(s) balance. Each Beneficiary designation shall be in a
      written form prescribed by the Company and shall be effective only when
      filed with the Company during the Participant’s
  lifetime.

7

	
      7.2
	
      Changing
      Beneficiary.
      Any Beneficiary designation may be changed by a Participant without the
      consent of the previously named Beneficiary by the filing of a new
      Beneficiary designation with the Company. The filing of a new designation
      shall cancel all designations previously
filed.

	
      7.3
	
      Change
      in Marital Status.
      If the Participant’s marital status changes after the Participant has
      designated a Beneficiary, the following shall apply until such time as the
      Participant submits a revised Beneficiary
form.

	 	
      a)
	
      If
      the Participant is married at death but was unmarried when the designation
      was made, the designation shall be void.

	 	
      b)
	
      If
      the Participant is unmarried at death but was married when the designation
      was made:

 

	 	
      i)
	
      The
      designation shall be void if the former spouse was named as
      Beneficiary.

 

	 	
      ii)
	
      The
      designation shall remain valid if the spouse was not named and a
      non-spouse Beneficiary was named.

	 	
      c)
	
      If
      the Participant was married when the designation was made and is married
      to a different spouse at death:

	 	
      i)
	
      The
      designation shall be void if the former spouse was named as
      Beneficiary.

	 	
      ii)
	
      The
      designation shall remain valid if the former spouse was not named and a
      non-spouse Beneficiary was named.

	
      7.4
	
      No
      Beneficiary Designation.
      If any Participant fails to designate a Beneficiary in the manner provided
      above, if the designation is void, or if the Beneficiary designated by a
      deceased Participant dies before the Participant or before complete
      distribution of the Participant’s benefits, the Participant’s Beneficiary
      shall be the person in the first of the following classes in which there
      is a survivor:

	 	
      a)
	
      The
      Participant’s surviving spouse;

	 	
      b)
	
      The
      Participant’s children (including stepchildren) in equal shares, except if
      any of the children predeceases the Participant but leaves surviving
      issue, then such issue shall take by right of representation the share the
      deceased child would have taken if living;

	 	
      c)
	
      The
      Participant’s estate.

	
      7.5
	
      Effect
      of Payment.
      Payment to Beneficiary shall completely discharge the Company’s
      obligations under the Plan and the Company may require a release to that
      effect from the Beneficiary prior to the
distribution.

ARTICLE
VIII - ADMINISTRATION

	
      8.1
	
      Binding
      Effect of Decisions.
      The decision or action of the Chairman & CEO and the President with
      respect to any question arising out of or in connection with the
      administration, interpretation and application of the Plan and the rules
      and regulations promulgated hereunder shall be final, conclusive and
      binding upon all persons having any interest in the
  Plan.

 

 

8

ARTICLE
IX - CLAIMS
PROCEDURE

	
      9.1
	
      Claim.
      Any person or entity claiming a benefit, requesting an interpretation or
      ruling under the Plan (hereinafter referred to as “Claimant”), or
      requesting information under the Plan shall present the request in writing
      to the Chairman & CEO and the President, who shall respond in writing
      as soon as practical. The decision shall be in writing and shall state the
      reasons and the relevant Plan provisions. All decisions on review shall be
      final and bind all parties concerned.

	
      9.2
	
      Denial
      of Claim.
      If the claim or request is denied, the written notice of denial shall
      state:

	 	
      a)
	
      The
      reasons for denial, with specific reference to the Plan provisions on
      which the denial is based;

	 	
      b)
	
      A
      description of any additional material or information required and an
      explanation of why it is necessary; and

	 	
      c)
	
      An
      explanation of the Plan’s claim review
procedure.

	
      9.3
	
      Final
      Decision.
      The decision on review shall normally be made within sixty (60) days after
      receipt of Claimant’s claim or request. If an extension of time is
      required for a hearing or other special circumstances, the Claimant shall
      be notified and the time limit shall be one hundred twenty (120)
      days.

ARTICLE
X - AMENDMENT
AND TERMINATION OF PLAN

	
      10.1
	
      Amendment.
      The Board may at any time amend the Plan by written instrument, notice of
      which is given to all Participants and to any Beneficiary receiving
      payments, except that no amendment shall reduce any vested benefit or the
      amount accrued in any Incentive Account(s) or any deferral election as of
      the date such notice of the amendment is
given.

	
      10.2
	
      Company’s
      Right to Terminate.
      The Board may at any time partially or completely terminate the Plan by
      written instrument, notice of which is given to all Participants and to
      any Beneficiary receiving payments if, in its judgment, the tax,
      accounting or other effects of the continuance of the Plan, or potential
      payments would not be in the best interests of the Company provided that
      no such termination shall reduce any vested benefit and the amount accrued
      in any Incentive Account(s) or any deferral election as of the date such
      notice of termination is given.

	
      10.3
	
      Partial
      Termination.
      The Board may partially terminate the Plan and if such a partial
      termination occurs, the Plan shall continue to operate and be effective
      with regard to Incentive Awards allocated prior to the effective date of
      such partial termination.

	
      10.4
	
      Payment
      on Termination.
      In the event of a complete or partial termination hereunder, the Plan
      shall cease to operate or as to a partial termination, the Plan shall
      cease only with respect to the part terminated and the Company shall
      distribute each Incentive Account(s) to the appropriate Participant or
      Beneficiary. Payment shall be made as a lump sum within thirty (30) days
      of Plan termination unless deferral elections are effective, in which case
      payments shall be made to a Participant’s (or Beneficiary’s) account in
      such deferral plan.

 

9

ARTICLE
XI - MISCELLANEOUS

	
      11.1
	
      Unfunded
      Plan.
      The Plan is an unfunded plan maintained primarily to provide deferred
      compensation benefits for a select group of “management or
      highly-compensated employees” within the meaning of Sections 201, 301 and
      401 of the Employee Retirement Income Security Act of 1974, as amended
      (“ERISA”), and therefore is exempt from the provisions of Parts 2, 3 and 4
      of Title I of ERISA. Accordingly, the Board may terminate the Plan and
      make no further benefit payments or remove certain employees as
      Participants if it is determined by the United States Department of Labor,
      a court of competent jurisdiction, or an opinion of counsel that the Plan
      constitutes an employee pension benefit plan within the meaning of Section
      3 (2) of ERISA (as currently in effect or hereafter amended) which is not
      so exempt.

	
      11.2
	
      Company
      Obligation.
      The obligation to make benefit payments to any Participant under the Plan
      shall be an obligation solely of the
Company.

	
      11.3
	
      Unsecured
      General Creditor.
      Notwithstanding any other provision of the Plan, Participants and
      Participants’ Beneficiaries shall be unsecured general creditors, with no
      secured or preferential rights to any assets of the Company or any other
      party for payment of benefits under the Plan. Any property held by the
      Company for the purpose of generating the cash flow for benefit payments
      shall remain its general, unpledged and unrestricted assets. The Company’s
      obligation under the Plan shall be an unfunded and unsecured promise to
      pay money in the future.

	
      11.4
	
      Trust
      Fund.
      The Company shall be responsible for the payment of all benefits provided
      under the Plan. At its discretion, the Company may establish one (1) or
      more trusts for the purpose of assisting in the payment of such benefits.
      Although such a trust shall be irrevocable, its assets shall be held for
      payment of all the Company’s general creditors in the event of insolvency.
      To the extent any benefits provided under the Plan are paid from any such
      trust, the Company shall have no further obligation to pay them. If not
      paid from the trust, such benefits shall remain the obligation of the
      Company.

	
      11.5
	
      Nonassignability.
      Neither a Participant nor any other person shall have any right to
      commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise
      encumber, transfer, hypothecate or convey in advance of actual receipt of
      the amounts, if any, payable hereunder, or any part thereof, which are,
      and all rights to which are, expressly declared to be unassignable and
      non-transferable except only pursuant to the designated Beneficiary in the
      event of death or Disability or pursuant to a legal will or the laws of
      intestate succession. No part of the amounts payable shall, prior to
      actual payment, be subject to seizure or sequestration for the payment of
      any debts, judgments, alimony or separate maintenance owed by a
      Participant or any other person, nor be transferable by operation of law
      in the event of a Participant’s or any other person’s bankruptcy or
      insolvency.

	
      11.6
	
      Not
      a Contract of Employment.
      The Plan shall not constitute a contract of employment between the Company
      and the Participant. Nothing in the Plan shall give a Participant the
      right to be retained in the service of the Company or to interfere with
      the right of the Company to discipline or discharge a Participant at any
      time.

	
      11.7
	
      Protective
      Provisions. A
      Participant will cooperate with the Company by furnishing any and all
      information requested by the Company, in order to facilitate the payment
      of benefits hereunder.

10

	
      11.8
	
      Governing
      Law.
      The provisions of the Plan shall be construed and interpreted according to
      the laws of the State of Iowa, except as preempted by federal
      law.

	
      11.9
	
      Validity.
      If any provision of the Plan shall be held illegal or invalid for any
      reason, said illegality or invalidity shall not affect the remaining parts
      hereof, but the Plan shall be construed and enforced as if such illegal
      and invalid provision had never been inserted
herein.

	
      11.10
	
      Notice.
      Any notice required or permitted under the Plan shall be sufficient if in
      writing and hand delivered or sent by registered or certified mail. Such
      notice shall be deemed given as of the date of delivery or, if delivery is
      made by mail, as of the date shown on the postmark on the receipt for
      registration or certification. Mailed notice to the Chairman & CEO and
      the President shall be directed to the Company’s address. Mailed notice to
      a Participant or Beneficiary shall be directed to the individual’s last
      known address in the Company’s records.

	
      11.11
	
      Successors.
      The provisions of this Plan shall bind and inure to the benefit of the
      Company and its successors and assigns. The term successors as used herein
      shall include any corporate or other business entity which shall, whether
      by merger, consolidation, purchase or otherwise acquire all or
      substantially all of the business and assets of the Company, and
      successors of any such corporation or other business
    entity.

	
      11.12
	
      Taxing
      Authority.
      If a Participant is subject to a taxing authority or jurisdiction which
      would cause an Incentive Account to be recognized and taxed as income by
      that authority or jurisdiction prior to the time it would otherwise be
      payable under the terms of the Plan, then the provisions of the Plan, as
      applied to that Participant, shall be modified such that if the
      Participant is terminated for cause, as defined by the Chairman & CEO
      and the President, prior to the time an Incentive Account is payable, the
      Participant shall be considered zero percent (0%) vested in such award and
      the entire Incentive Account shall be
forfeited.

	 	 	 
	 	MidAmerican Energy Holdings
      Company
	 
 	 
 	 
 
	Date:   January 30, 2004	By:  	/s/  Greg Abel
	 	  Greg
  Abel
	 	

 

11

MIDAMERICAN
ENERGY HOLDINGS COMPANY

LONG-TERM
INCENTIVE PARTNERSHIP PLAN

EXHIBIT
A

Following
are the Valuation Funds as of January 1, 2003:

	
      ·
	
      Russell
      1000 Value (Large Cap Value)

	
      ·
	
      S&P
      500 Index [dividends reinvested] (Large Cap
Core)

	
      ·
	
      Russell
      1000 Growth Index (Large Cap Growth)

	
      ·
	
      Russell
      2000 Value Index (Small Cap Value)

	
      ·
	
      Russell
      2000 Growth Index (Small Cap Growth)

	
      ·
	
      Morgan
      Stanley EAFE Index (International)

	
      ·
	
      Lehman
      Brothers Aggregate Bond Index (Core Bond)

	
      ·
	
      Average
      of the one-year Treasury Bill constant maturity each October 15 (or the
      preceding business day if a holiday or weekend) of the prior year. (Stable
      Value)

The
Company reserves the right to change the Valuation Funds at any time pursuant to
the Plan.

 

12

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