Document:

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                                                                     EXHIBIT 4.9

                                                                  CONFORMED COPY

                             Dated 20 December 2001

                               SCOTTISH POWER plc
                              SCOTTISH POWER UK plc
                                   as Issuers
                                       and
                   THE LAW DEBENTURE TRUST CORPORATION p.l.c.

                         AMENDED AND RESTATED TRUST DEED

                                   relating to
                               SCOTTISH POWER plc
                              SCOTTISH POWER UK plc
                   U.S.$7,000,000,000 Debt Issuance Programme
                     Arranged by J.P. Morgan Securities Ltd.

                                   LINKLATERS
                                   & ALLIANCE

                                   LINKLATERS

                               Ref: JALB/EXM/ALIK

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                                    CONTENTS
<TABLE>

<S>                                                                                     <C>
1        Interpretation ..............................................................  1

2        Issue of Notes and Covenant to pay ..........................................  7

3        Form of the Notes ...........................................................  9

4        Stamp Duties and Taxes ......................................................  9

5        Application of moneys received by the Trustee ............................... 10

6        Covenants ................................................................... 10

7        Remuneration and Indemnification of the Trustee ............................. 15

8        Provisions supplemental to the Trustee Act 1925 and the Trustee Act 2000 .... 16

9        Trustee liable for negligence ............................................... 18

10       Waiver and proof of default ................................................. 19

11       Trustee not precluded from entering into contracts .......................... 19

12       Modification and Substitution ............................................... 19

13       Appointment, Retirement and Removal of the Trustee .......................... 21

14       Notes held in Clearing Systems and Couponholders ............................ 21

15       Currency Indemnity .......................................................... 22

16       Communications .............................................................. 22

17       Governing Law and Jurisdiction .............................................. 23

SCHEDULE 1 Part A Form of Temporary Global Note ...................................... 24

SCHEDULE 1 Part B Form of Permanent Global Note ...................................... 30

SCHEDULE 1 Part C Form of Global Certificate ......................................... 39

SCHEDULE 2 Part A Form of Bearer Note ................................................ 43

SCHEDULE 2 Part B Form of Certificate ................................................ 46

SCHEDULE 2 Part C Terms and Conditions of the Notes .................................. 49
</TABLE>

                                      -i-

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<TABLE>

<S>                                                                                    <C>
SCHEDULE 2 Part D Form of Coupon ..................................................... 68

SCHEDULE 2 Part E Form of Talon ...................................................... 70

SCHEDULE 2 Part F Form of Receipt .................................................... 72

SCHEDULE 3 Provisions for Meetings of Noteholders .................................... 73
</TABLE>

                                     -iii-

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This Amended and Restated Trust Deed is made on 20 December 2001 between:

(1)      SCOTTISH POWER plc and SCOTTISH POWER UK plc (each an "Issuer" and
         together the "Issuers") and

(2)      THE LAW DEBENTURE TRUST CORPORATION p.l.c. (the "Trustee", which
         expression, where the context so admits, includes any other trustee for
         the time being of this Trust Deed).

         Whereas:

(A)      The Issuers propose to issue from time to time euro medium term notes
         in an aggregate principal amount outstanding at any one time not
         exceeding the Programme Limit in accordance with the Programme
         Agreement (the "Programme") and to be constituted under this Trust
         Deed.

(B)      The Trustee has agreed to act as trustee of this Trust Deed on the
         following terms and conditions.

(C)      The parties hereto have agreed to amend and restate the amended and
         restated trust deed dated 1 December 2000 as it may have been amended
         from time to time (the "Original Trust Deed"). This Trust Deed amends
         and restates the Original Trust Deed. Any Notes issued on or after the
         date hereof shall be issued pursuant to this Trust Deed. This does not
         affect any Notes issued prior to the date of this Trust Deed.

This deed witnesses and it is declared as follows:

1        Interpretation

1.1      Definitions:

         In these presents unless there is anything in the subject or context
         inconsistent therewith all words and expressions defined in the
         Conditions shall have the same meaning in the rest of this Trust Deed
         and the following expressions shall have the following meanings:

         "Agency Agreement" means the Amended and Restated Agency Agreement
         relating to the Programme of even date herewith between the Issuers,
         The Law Debenture Trust Corporation p.l.c. as Trustee, Citibank, N.A.,
         London as Agent and the other Agents mentioned in it as it may be
         amended, supplemental or restated from time to time;

         "Agents" means the Issuing and Paying Agent, the other Paying Agents,
         the Calculation Agent, the Registrar, the other Transfer Agents or any
         of them;

         "Auditors" means the auditors for the time being of the Relevant Issuer
         or, if they are unable or unwilling to carry out any action requested
         of them under this Trust Deed, such other firm of accountants as may be
         nominated or approved in writing by the Trustee for the purpose;

         "Bearer Note" means a Note that is in bearer form, and includes any
         replacement Bearer Note issued pursuant to the Conditions and any
         temporary Global Note or permanent Global Note;

         "Calculation Agent" means any person named as such in the Conditions or
         any Successor Calculation Agent;

         "Capital and Reserves" shall have the meaning set out in Condition
         6(f);

                                      -1-

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         "Certificate" means a registered certificate representing one or more
         Registered Notes of the same Series and, save as provided in the
         Conditions, comprising the entire holding by a Noteholder of his
         Registered Notes of that Series and, save in the case of Global
         Certificates, being substantially in the form set out in Schedule 2;

         "Clearstream, Luxembourg" means Clearstream Banking, societe anonyme;

         "Conditions" means in respect of the Notes of each Series the terms and
         conditions applicable thereto which shall be substantially in the form
         set out in Schedule 2 as modified, with respect to any Notes
         represented by a Global Certificate or a Global Note, by the provisions
         of such Global Certificate or Global Note, and which shall incorporate
         any additional provisions forming part of such terms and conditions set
         out in the Pricing Supplement(s) relating to the Notes of that Series
         and shall be endorsed on the Definitive Notes subject to amendment and
         completion as referred to in the first paragraph of Schedule 2 Part C
         and any reference to a particularly numbered Condition shall be
         construed accordingly;

         "Contractual Currency" means, in relation to any payment obligation of
         any Note, the currency in which that payment obligation is expressed
         and, in relation to Clause 7, pounds sterling or such other currency as
         may be agreed between the Relevant Issuer and the Trustee from time to
         time;

         "Coupons" means the bearer coupons relating to interest bearing Bearer
         Notes or, as the context may require, a specific number of them and
         includes any replacement Coupons issued pursuant to the Conditions;

         "Definitive Note" means a Bearer Note in definitive form having, where
         appropriate, Coupons, Receipt(s) and/or a Talon attached on issue and,
         unless the context requires otherwise, means a Certificate (other than
         a Global Certificate) and includes any replacement Note or Certificate
         issued pursuant to the Conditions;

         "Euroclear" means Euroclear Bank S.A./N.V. as operator of the Euroclear
         System;

         "Event of Default" means an event described in Condition 10 that, if so
         required by that Condition, has been certified by the Trustee to be, in
         its opinion, materially prejudicial to the interests of the
         Noteholders;

         "Exchangeable Bearer Note" means a Bearer Note that is exchangeable in
         accordance with its terms for a Registered Note;

         "Excluded Subsidiary" has the meaning specified in Condition 6;

         "Extraordinary Resolution" has the meaning set out in Schedule 3;

         "Global Certificate" means a Certificate substantially in the form set
         out in Schedule 1 Part C representing Registered Notes of one or more
         Tranches of the same Series that are registered in the name of a
         nominee for Euroclear, Clearstream, Luxembourg and/or any other
         clearing system;

         "Global Note" means a temporary Global Note and/or, as the context may
         require, a permanent Global Note;

         "holder" in relation to a Note, Receipt, Coupon or Talon, and
         "Couponholder" and "Noteholder" have the meanings given to them in the
         Conditions;

                                      -2-

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         "Issuing and Paying Agent" means the person named as such in the
         Conditions or any Successor Issuing and Paying Agent in each case at
         its specified office;

         "Notes" means the euro medium term notes to be issued by either of the
         Issuers pursuant to the Programme Agreement, constituted by this Trust
         Deed and for the time being outstanding or, as the context may require,
         a specific number of them;

         "outstanding" means, in relation to the Notes, all the Notes issued
         except (a) those that have been redeemed in accordance with the
         Conditions, (b) those in respect of which the date for redemption has
         occurred and the redemption moneys (including all interest accrued on
         such Notes to the date for such redemption and any interest payable
         after such date) have been duly paid to the Trustee or to the Issuing
         and Paying Agent as provided in Clause 2 and remain available for
         payment against presentation and surrender of Notes, Certificates,
         Receipts and/or Coupons, as the case may be, (c) those that have become
         void or in respect of which claims have become prescribed, (d) those
         that have been purchased and cancelled as provided in the Conditions,
         (e) those mutilated or defaced Bearer Notes that have been surrendered
         in exchange for replacement Bearer Notes, (f) (for the purpose only of
         determining how many Notes are outstanding and without prejudice to
         their status for any other purpose) those Bearer Notes alleged to have
         been lost, stolen or destroyed and in respect of which replacement
         Notes have been issued, (g) those Exchangeable Bearer Notes that have
         been exchanged for Registered Notes, and (h) any temporary Global Note
         to the extent that it shall have been exchanged for a permanent Global
         Note and any Global Note to the extent that it shall have been
         exchanged for one or more Definitive Notes, in either case pursuant to
         its provisions provided that for the purposes of (1) ascertaining the
         right to attend and vote at any meeting of the Noteholders, (2) the
         determination of how many Notes are outstanding for the purposes of
         Conditions 10 and 11 and Schedule 3, (3) the exercise of any
         discretion, power or authority that the Trustee is required, expressly
         or impliedly, to exercise in or by reference to the interests of the
         Noteholders and (4) the certification (where relevant) by the Trustee
         as to whether a Potential Event of Default is in its opinion materially
         prejudicial to the interests of the Noteholders, those Notes that are
         beneficially held by or on behalf of the Relevant Issuer or any of its
         subsidiaries and not yet cancelled shall (unless no longer so held) be
         deemed not to remain outstanding;

         "Paying Agents" means the persons (including the Issuing and Paying
         Agent) referred to as such in the Conditions or any Successor Paying
         Agents in each case at their respective specified offices;

         "permanent Global Note" means a Global Note representing Bearer Notes
         of one or more Tranches of the same Series, either on issue or upon
         exchange of a temporary Global Note, or part of it, and which shall be
         substantially in the form set out in Schedule 1 Part B;

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

         "Pricing Supplement" means, in relation to a Tranche, a pricing
         supplement, supplemental to the offering circular relating to the
         Programme, issued specifying the relevant issue details of such
         Tranche, substantially in the form contained in Annex B to the
         Procedures Memorandum;

         "Principal Subsidiary" shall mean, in relation to Scottish Power plc:

                                      -3-

<PAGE>

         (a)   any Relevant Subsidiary; or

         (b)   any Subsidiary of Scottish Power plc (not being an Excluded
               Subsidiary or any other Subsidiary of Scottish Power plc 90 per
               cent. in principal amount of whose indebtedness for borrowed
               money is Project Finance Indebtedness):

               (i)   whose (a) profits on ordinary activities before tax or (b)
                     net assets represent 20 per cent. or more of the
                     consolidated profits on ordinary activities before tax of
                     the Group or consolidated net assets of the Group
                     respectively, in each case as calculated by reference to
                     the then latest audited financial statements of such
                     Subsidiary and the then latest audited consolidated
                     financial statements of the Group; provided that in the
                     case of a Subsidiary acquired after the end of the
                     financial period to which the then latest audited
                     consolidated financial statements of the Group relate, the
                     reference to the then latest audited consolidated financial
                     statements of the Group for the purposes of the calculation
                     above shall, until consolidated financial statements for
                     the financial period in which the acquisition is made have
                     been prepared and audited as aforesaid, be deemed to be a
                     reference to such first-mentioned financial statements as
                     if such Subsidiary had been shown in such financial
                     statements by reference to its then latest relevant audited
                     financial statements, adjusted as deemed appropriate by the
                     Auditors after consultation with Scottish Power plc; or

               (ii)  to which is transferred all or substantially all of the
                     business, undertaking and assets of a Subsidiary of
                     Scottish Power plc 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 cease to be
                     a Principal Subsidiary under this sub-paragraph (ii) upon
                     publication of its next audited financial statements but so
                     that such transferor Subsidiary or such transferee
                     Subsidiary may be a Principal Subsidiary of Scottish Power
                     plc on or at any time after the date on which such audited
                     financial statements have been published by virtue of the
                     provisions of sub-paragraph (i) above or before, on or at
                     any time after such date by virtue of the provisions of
                     this sub-paragraph (ii).

         A report by the Directors of Scottish Power plc that, in their opinion,
         a Subsidiary of Scottish Power plc is or is not or was or was not at
         any particular time or throughout any specified period a Principal
         Subsidiary of Scottish Power plc accompanied by a report by the
         Auditors addressed to the Directors of Scottish Power plc and the
         Trustee as to proper extraction of the figures used by the Directors in
         determining the Principal Subsidiaries of Scottish Power plc and
         mathematical accuracy of the calculations shall, in the absence of
         manifest error, be conclusive and binding on the Trustee and the
         Noteholders; and

         in relation to Scottish Power UK plc, "Principal Subsidiary" shall mean
         any one of:

         (a)   SP Distribution Limited (SC189125);

         (b)   SP Transmission Limited (SC189126); or

         (c)   SP Manweb plc (2366937);

         "Procedures Memorandum" means the memorandum (as may be amended from
         time to time) detailing the administrative procedures and guidelines
         relating to the settlement of issues of Notes (other than Syndicated
         Issues);

                                       -4-

<PAGE>

         "Programme Agreement" means the Amended and Restated Programme
         Agreement relating to the Programme dated the date hereof between the
         Issuers, J.P. Morgan Securities Ltd. and the other dealers named in it
         as it may be amended, supplemented or restated from time to time;

         "Programme Limit" means the maximum aggregate principal amount of Notes
         that may be issued and outstanding at any time under the Programme, as
         such limit may be increased pursuant to the Programme Agreement;

         "Receipts" means the receipts for the payment of instalments of
         principal in respect of Bearer Notes of which the principal is
         repayable in instalments or, as the context may require, a specific
         number of them and includes any replacement Receipts issued pursuant to
         the Conditions;

         "Redemption Amount" has the meaning given to it in the Conditions;

         "Register" means the register maintained by the Registrar;

         "Registered Note" means a Note in registered form;

         "Registrar" means the person named as such in the Conditions or any
         Successor Registrar in each case at its specified office;

         "Relevant Issuer" means, in relation to any Tranche, the Issuer which
         has concluded, or is negotiating, an agreement with the Relevant
         Dealer(s) to issue, or which has issued, the Notes of that Tranche;

         "Relevant Subsidiary" has the meaning specified in Condition 6;

         "Restructuring Event" has the meaning specified in Condition 6;

         "Series" means a series of Notes comprising one or more Tranches issued
         by the same Issuer, whether or not issued on the same date, that
         (except in respect of the first payment of interest and their issue
         price) have identical terms on issue and are expressed to have the same
         series number;

         "specified office" means, in relation to a Paying Agent, the Registrar
         or a Transfer Agent the office identified with its name at the end of
         the Conditions or any other office approved by the Trustee and notified
         to Noteholders pursuant to Clause 6.13;

         "Subsidiary" has the meaning specified in Condition 6;

         "Successor" means, in relation to an Agent such other or further person
         as may from time to time be appointed by the Issuers as such Agent with
         the written approval of, and on terms approved in writing by, the
         Trustee and notice of whose appointment is given to Noteholders
         pursuant to Clause 6.13;

         "Talons" mean talons for further Coupons or, as the context may
         require, a specific number of them and includes any replacement Talons
         issued pursuant to the Conditions;

         "TARGET System" means the Trans-European Automated Real-Time Gross
         Settlement Express Transfer (TARGET) System or any successor thereto;

         "temporary Global Note" means a Global Note representing Bearer Notes
         of one or more Tranches of the same Series on issue and which shall be
         substantially in the form set out in Schedule 1 Part A;

                                      -5-

<PAGE>

         "Tranche" means, in relation to a Series, those Notes of that Series
         that are issued on the same date at the same issue price and in respect
         of which the first payment of interest is identical;

         "Transfer Agents" means the persons (including the Registrar) referred
         to as such in the Conditions or any Successor Transfer Agents in each
         case at their specified offices;

         this "Trust Deed" means this amended and restated Trust Deed; and

         "trust corporation" means a trust corporation (as defined in the Law of
         Property Act 1925) or a corporation entitled to act as a trustee
         pursuant to applicable foreign legislation relating to trustees.

1.2      Construction of Certain References: References to:

         1.2.1 costs, charges, remuneration or expenses include any value added,
               turnover or similar tax charged in respect thereof;

         1.2.2 an action, remedy or method of judicial proceedings for the
               enforcement of creditors' rights include references to the
               action, remedy or method of judicial proceedings in jurisdictions
               other than England as shall most nearly approximate thereto;

         1.2.3 words and expressions defined in the Agency Agreement or the
               Programme Agreement or used in the applicable Pricing Supplement
               shall have the same meaning where used herein unless the context
               otherwise requires or unless otherwise stated and provided that,
               in the event of inconsistency between the Agency Agreement or the
               Programme Agreement and this Trust Deed then this Trust Deed
               shall prevail and, in the event of inconsistency between the
               Agency Agreement or the Programme Agreement or this Trust Deed
               and the applicable Pricing Supplement, the applicable Pricing
               Supplement shall prevail; and

         1.2.4 for the purposes of the definition of and references to
               "outstanding" in Clause 2 and Schedule 3 and for the purpose of
               Clause 8.9 and Conditions 9, 10 and 14 receipts issued pursuant
               to Condition 6(f) shall be treated as if they were Notes and for
               the purposes of Schedule 3 the principal amount of the Notes
               represented by each receipt will determine voting entitlement
               thereunder.

1.3      Headings: Headings shall be ignored in construing this Trust Deed.

1.4      Contracts: References in this Trust Deed to this Trust Deed or any
         other document are to this Amended and Restated Trust Deed or those
         documents as amended, supplemented or replaced from time to time in
         relation to the Programme and include any document that amends,
         supplements or replaces them.

1.5      Schedules: The Schedules are part of this Trust Deed and have effect
         accordingly and terms defined there and not in the main body of this
         Trust Deed shall have the meaning given to them there.

1.6      Alternative Clearing System: References in this Trust Deed to Euroclear
         and/or Clearstream, Luxembourg shall, wherever the context so permits,
         be deemed to include reference to any additional or alternative
         clearing system approved by the Relevant Issuer, the Trustee and the
         Issuing and Paying Agent.

                                      -6-

<PAGE>

1.7      Contracts (Rights of Third Parties) Act 1999: A person who is not a
         party to this Trust Deed has no right by virtue of the Contracts
         (Rights of Third Parties) Act 1999 to enforce any term of this Trust
         Deed.

1.8      Issuers' Obligations: The obligations of the Issuers under this Trust
         Deed are several and not joint.

1.9      Amendment and Restatement of Trust Deed: In exercise of its powers of
         modification and being of the opinion that to do so is not materially
         prejudicial to the interests of the Noteholders the Trustee has agreed
         that the Original Trust Deed, as it may have been amended from time to
         time prior to the date hereof, shall for the purposes only of Notes
         issued after the date hereof be amended and restated as set out herein
         and any Notes issued after the date hereof shall be issued subject to
         and with the benefit of this Trust Deed.

2        Issue of Notes and Covenant to pay

2.1      Issue of Notes: Each of the Issuers may from time to time issue Notes
         in Tranches of one or more Series on a continuous basis with no minimum
         issue size in accordance with the Programme Agreement. By not later
         than 3.00 pm (London time) on the second business day in London (which
         for this purpose shall be a day on which commercial banks are open for
         business in London) preceding each proposed issue date, the Relevant
         Issuer shall give written notice or procure that it is given to the
         Trustee of the proposed issue of such Tranche, specifying the details
         to be included in the relevant Pricing Supplement. Upon the issue by
         the Relevant Issuer of any Notes expressed to be constituted by this
         Trust Deed, such Notes shall forthwith be constituted by this Trust
         Deed without any further formality and irrespective of whether or not
         the issue of such debt securities contravenes any covenant or other
         restriction in this Trust Deed or the Programme Limit.

2.2      Separate Series: The provisions of sub-Clauses 2.3, 2.4, 2.5 and 2.6
         and of Clauses 3 to 15 and Schedule 3 (all inclusive) shall apply
         mutatis mutandis separately and independently to the Notes of each
         Series and in such Clauses and Schedule the expressions "Noteholders",
         "Certificates", "Receipts", "Coupons", "Couponholders" and "Talons",
         together with all other terms that relate to Notes or their Conditions,
         shall be construed as referring to those of the particular Series in
         question and not of all Series unless expressly so provided, so that
         each Series shall be constituted by a separate trust pursuant to
         sub-Clause 2.3 and that, unless expressly provided, events affecting
         one Series shall not affect any other.

2.3      Covenant to Pay: The Relevant Issuer shall on any date when any Notes
         become due to be redeemed, in whole or in part, unconditionally pay to
         or to the order of the Trustee in the Contractual Currency, in the case
         of any Contractual Currency other than euro, in the principal financial
         centre for the Contractual Currency and in the case of euro, in a city
         in which banks have access to the TARGET System in same day funds the
         Redemption Amount of the Notes becoming due for redemption on that date
         together with any applicable premium and shall (subject to the
         Conditions) until such payment (both before and after judgment)
         unconditionally so pay to or to the order of the Trustee interest on
         the principal amount of the Notes outstanding as set out in the
         Conditions (subject to sub-Clause 2.6) provided that (1) payment of any
         sum due in respect of the Notes made to the Issuing and Paying Agent as
         provided in the Agency Agreement shall, to that extent, satisfy such
         obligation except to the extent that there is failure in its subsequent
         payment to the relevant Noteholders or Couponholders under the
         Conditions and (2) a payment made

                                      -7-

<PAGE>

         after the due date or as a result of the Note becoming repayable
         following an Event of Default shall be deemed to have been made when
         the full amount due has been received by the Issuing and Paying Agent
         or the Trustee and notice to that effect has been given to the
         Noteholders (if required under Clause 6.11), except to the extent that
         there is failure in its subsequent payment to the relevant Noteholders
         or Couponholders under the Conditions. This covenant shall only have
         effect each time Notes are issued and outstanding, when the Trustee
         shall hold the benefit of this covenant on trust for the Noteholders
         and Couponholders of the relevant Series.

2.4      Discharge: Subject to sub-Clause 2.5, any payment to be made in respect
         of the Notes, Receipts or the Coupons by the Relevant Issuer or the
         Trustee may be made as provided in the Conditions and any payment so
         made shall (subject to sub-Clause 2.5) to that extent be a good
         discharge to the Relevant Issuer or the Trustee, as the case may be.

2.5      Payment after a Default: At any time after an Event of Default or a
         Potential Event of Default has occurred the Trustee may:

         2.5.1    by notice in writing to the Relevant Issuer, the Paying Agents
                  and the Transfer Agents, require the Paying Agents and the
                  Transfer Agents, until notified by the Trustee to the
                  contrary, so far as permitted by applicable law:

                  (i)      to act as Paying Agents and Transfer Agents of the
                           Trustee under this Trust Deed and the Notes on the
                           terms of the Agency Agreement (with consequential
                           amendments as necessary and except that the Trustee's
                           liability for the indemnification, remuneration and
                           expenses of the Paying Agents and the Transfer Agents
                           shall be limited to the amounts for the time being
                           held by the Trustee in respect of the Notes on the
                           terms of this Trust Deed) and thereafter to hold all
                           Notes, Certificates, Receipts, Coupons and Talons and
                           all moneys, documents and records held by them in
                           respect of Notes, Certificates, Receipts, Coupons and
                           Talons to the order of the Trustee; or

                  (ii)     to deliver all Notes, Certificates, Receipts, Coupons
                           and Talons and all moneys, documents and records held
                           by them in respect of the Notes, Certificates,
                           Receipts, Coupons and Talons to the Trustee or as the
                           Trustee directs in such notice save for documents
                           required to be retained by the Agents by law or
                           regulation; and

         2.5.2    by notice in writing to the Relevant Issuer require it to make
                  all subsequent payments in respect of the Notes, Receipts,
                  Coupons and Talons to or to the order of the Trustee and not
                  to the Issuing and Paying Agent.

2.6      Rate of Interest After a Default: If the Notes bear interest at a
         floating or other variable rate and they become immediately payable
         under the Conditions, the rate of interest payable in respect of them
         shall continue to be calculated by the Calculation Agent in accordance
         with the Conditions (with consequential amendments as necessary) except
         that the rates of interest need not be published unless the Trustee
         otherwise requires. The first period in respect of which interest shall
         be so calculable shall commence on the expiry of the Interest Period
         during which the Notes become so repayable.

                                      -8-

<PAGE>

3        Form of the Notes

3.1      The Global Notes: The Notes shall initially be represented by a
         temporary Global Note, a permanent Global Note or one or more
         Certificates in the principal amount of the Tranche being issued.
         Interests in temporary Global Notes shall be exchangeable for
         Definitive Notes, Registered Notes or interests in permanent Global
         Notes as set out in each temporary Global Note. Interests in permanent
         Global Notes shall be exchangeable for Definitive Notes and/or
         Registered Notes as set out in each permanent Global Note.

3.2      The Definitive Notes: The Definitive Notes, Receipts, Coupons and
         Talons shall be security printed and the Certificates shall be printed,
         in each case in accordance with applicable legal and stock exchange
         requirements substantially in the forms set out in Schedule 2. The
         Notes and Certificates (other than Global Certificates) shall be
         endorsed with the Conditions.

3.3      Signature: The Notes, Certificates, Receipts, Coupons and Talons shall
         be signed manually or in facsimile by a Director or an authorised
         signatory of the Relevant Issuer, the Notes shall be authenticated by
         or on behalf of the Issuing and Paying Agent and the Certificates shall
         be authenticated by or on behalf of the Registrar. The Relevant Issuer
         may use the facsimile signature of a person who at the date of this
         Trust Deed is such a Director or an authorised signatory even if at the
         time of issue of any Notes, Certificates, Receipts, Coupons or Talons
         he no longer holds that office. Notes, Certificates, Receipts, Coupons
         and Talons so executed and authenticated shall be or, in the case of
         Certificates, represent binding and valid obligations of the Relevant
         Issuer.

4        Stamp Duties and Taxes

4.1      Stamp Duties: The Relevant Issuer shall pay any stamp, issue,
         documentary or other taxes and duties, including interest and
         penalties, payable in Belgium, Luxembourg, the United Kingdom and the
         country of each Contractual Currency in respect of the creation, issue
         and offering of the Notes, Certificates, Receipts, Coupons and Talons
         and the execution or delivery of this Trust Deed. The Relevant Issuer
         shall also indemnify the Trustee, the Noteholders and the Couponholders
         from and against all stamp, issue, documentary or other taxes paid by
         any of them in any jurisdiction in connection with any action taken by
         or on behalf of the Trustee or, as the case may be, the Noteholders or
         the Couponholders to enforce the Relevant Issuer's obligations under
         this Trust Deed or the Notes, Certificates, Receipts, Coupons or
         Talons.

4.2      Change of Taxing Jurisdiction: If the Relevant Issuer becomes subject
         generally to the taxing jurisdiction of a territory or a taxing
         authority of or in that territory with power to tax other than or in
         addition to the United Kingdom or any such authority of or in such
         territory then the Relevant Issuer shall (unless the Trustee otherwise
         agrees) give the Trustee an undertaking satisfactory to the Trustee in
         terms corresponding to the terms of Condition 8 with the substitution
         for, or (as the case may require) the addition to, the references in
         that Condition to the United Kingdom of references to that other or
         additional territory or authority to whose taxing jurisdiction the
         Relevant Issuer has become so subject. In such event this Trust Deed
         and the Notes, Certificates, Receipts, Coupons and Talons shall be read
         accordingly.

                                      -9-

<PAGE>

5        Application of moneys received by the Trustee

5.1      Declaration of Trust: All moneys received by the Trustee in respect of
         the Notes or amounts payable under this Trust Deed shall, despite any
         appropriation of all or part of them by the Relevant Issuer, be held by
         the Trustee on trust to apply them (subject to Clause 5.2):

                  first, in payment of all costs, charges, expenses and
                  liabilities properly incurred by the Trustee (including
                  remuneration payable to it) in carrying out its functions
                  under this Trust Deed;

                  secondly, in payment of any amounts owing in respect of the
                  Notes, Receipts or Coupons pari passu and rateably; and

                  thirdly, in payment of any balance to the Relevant Issuer for
                  itself.

         If the Trustee holds any moneys in respect of Notes, Receipts or
         Coupons that have become void or in respect of which claims have become
         prescribed, the Trustee shall hold them on these trusts.

5.2      Accumulation: If the amount of the moneys at any time available for
         payment in respect of the Notes under sub-Clause 5.1 is less than 10
         per cent of the principal amount of the Notes then outstanding, the
         Trustee may, at its discretion, invest such moneys. 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 its control and available for such payment, amount
         to at least 10 per cent of the principal amount of the Notes then
         outstanding and then such investments, accumulations and funds (after
         deduction of, or provision for, any applicable taxes) shall be applied
         as specified in sub-Clause 5.1.

5.3      Investment: Moneys held by the Trustee may be invested in its name or
         under its control in any investments or other assets anywhere whether
         or not they produce income or deposited in its name or under its
         control at such bank or other financial institution in such currency as
         the Trustee may, in its absolute discretion, think fit. If that bank or
         institution is the Trustee or a subsidiary, holding or associated
         company of the Trustee, it need only account for an amount of interest
         equal to the largest amount of interest payable by it on such a deposit
         to an independent customer. The Trustee may at any time vary or
         transpose any such investments or assets or convert any moneys so
         deposited into any other currency, and shall not be responsible for any
         resulting loss, whether by depreciation in value, change in exchange
         rates or otherwise.

6        Covenants

         So long as any of the Notes remains outstanding, the Relevant Issuer
         covenants that it shall:

6.1      at all times carry on and conduct its affairs in a proper manner;

6.2      so far as permitted by applicable law, give to the Trustee such
         information as it shall require and in such form as it shall require
         (including without limitation the procurement by the Relevant Issuer of
         all such certificates called for by the Trustee pursuant to Clause 8.3)
         for the purpose of the discharge or exercise of the duties, trusts,
         powers, authorities and discretions vested in it under these presents
         or by operation of law;

                                      -10-

<PAGE>

6.3      cause to be prepared and certified by the Auditors in respect of each
         financial accounting period accounts in such form as will comply with
         all relevant legal and accounting requirements and all requirements for
         the time being of the UK Listing Authority;

6.4      at all times keep and procure its Principal Subsidiaries to keep 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 certifies in
         writing to the Relevant Issuer that it has reasonable grounds to
         believe that an Event of Default or a Potential Event of Default has or
         may have occurred and so far as permitted by applicable law allow and
         procure its Principal Subsidiaries to allow the Trustee and any person
         appointed by the Trustee to whom the Relevant Issuer or the relevant
         Principal Subsidiary (as the case may be) shall have no reasonable
         objection, upon reasonable notice, free access to such books of account
         at all reasonable times during normal business hours for the purpose of
         the discharge or exercise of the duties, trusts, powers, authorities
         and discretions vested in it under these presents or by operation of
         law;

6.5      send to the Trustee (in addition to any copies to which it may be
         entitled as a holder of any securities of the Relevant Issuer) four
         copies in English of every balance sheet, profit and loss account,
         report, circular and notice of general meeting and every other document
         issued or sent to its shareholders together with any of the foregoing,
         and every document issued or sent to its creditors (or any class
         thereof) generally concerning the financial condition of the Relevant
         Issuer and its Subsidiaries, in each case in their capacities as such,
         as soon as practicable after the issue or publication thereof;

6.6      give notice in writing to the Trustee of the occurrence of any Event of
         Default or any Potential Event of Default immediately upon becoming
         aware of the same;

6.7      send to the Trustee (a) within 14 days after demand by the Trustee
         therefor and (b) (without the necessity for any such demand) promptly
         after the publication of its audited accounts in respect of each
         financial period commencing with the financial period ending 31 March
         2002 and in any event not later than 180 days after the end of each
         such financial period a certificate of the Relevant Issuer signed by
         two Directors of such Relevant Issuer to the effect that, to the best
         of the knowledge, information and belief of the Relevant Issuer, as at
         a date not more than seven days before delivering such certificate (the
         "relevant date") there did not exist and had not existed since the
         relevant date of the previous certificate (or in the case of the first
         such certificate the date hereof) any Event of Default or any Potential
         Event of Default (or if such exists or existed specifying the same) and
         that during the period from and including the relevant date of the last
         such certificate (or in the case of the first such certificate the date
         hereof) to and including the relevant date of such certificate the
         Relevant Issuer has complied with all its obligations contained in
         these presents or (if such is not the case) specifying the respects in
         which it has not complied;

6.8      so far as permitted by applicable law, at all times execute and do all
         such further documents, acts and things as may be necessary at any time
         or times in the reasonable opinion of the Trustee to give effect to
         these presents;

6.9      at all times maintain a Principal Paying Agent, a Registrar and a
         Transfer Agent in accordance with the Conditions and, in the case of a
         Principal Paying Agent and a Registrar, so long as any of the Notes or
         Coupons remains liable to prescription;

6.10     use all reasonable endeavours to procure the Principal Paying Agent to
         notify the Trustee forthwith in the event that it does not, on or
         before the due date for any payment in respect

                                      -11-

<PAGE>

         of the Notes or any of them or any of the Coupons, receive
         unconditionally pursuant to the Agency Agreement payment of the full
         amount in the requisite currency of the moneys payable on such due date
         on all such Notes or Coupons as the case may be;

6.11     in the event of the unconditional payment to the Principal Paying Agent
         of any sum due in respect of the Notes or any of them or any of the
         Coupons being made after the due date for payment thereof forthwith
         give or procure to be given notice to the relevant Noteholders in
         accordance with Condition 16 that such payment has been made;

6.12     use all reasonable endeavours to maintain the listing of the Notes on
         the official list maintained by the Financial Services Authority in its
         capacity as UK Listing Authority and the trading of such Notes on the
         market for listed securities of the London Stock Exchange plc or, if it
         is unable to do so having used all reasonable endeavours or if the
         maintenance of such listing or trading is in the reasonable opinion of
         the Relevant Issuer unduly onerous, use all reasonable endeavours to
         obtain and maintain a quotation or listing of the Notes on such other
         stock exchange or exchanges or securities market or markets as the
         Relevant Issuer may (with the prior approval of the Trustee, such
         approval not to be unreasonably withheld or delayed) decide and shall
         also upon obtaining a quotation or listing of the Notes on such other
         stock exchange or exchanges or securities market or markets enter into
         a deed supplemental to this Trust Deed to effect such consequential
         amendments to these presents as the Trustee may require to comply with
         the requirements of any such stock exchange or securities market;

6.13     give notice to the Noteholders in accordance with Condition 16 of any
         appointment, resignation or removal of any Agent after having obtained
         the approval of the Trustee thereto or any change of any Agent's
         specified office and (except as provided by the Agency Agreement) at
         least 30 days prior to such event taking effect; provided always that
         so long as any of the Notes remains outstanding in the case of the
         termination of the appointment of the Registrar or a Transfer Agent or
         so long as any of the Notes or Coupons remains liable to prescription
         in the case of the termination of the appointment of the Principal
         Paying Agent no such termination shall take effect until a new
         Registrar, Transfer Agent or Principal Paying Agent has been appointed
         on terms approved by the Trustee;

6.14     obtain the prior written approval of the Trustee to, and promptly give
         to the Trustee four copies of, the form of every notice given to the
         Noteholders in accordance with Condition 16 (such approval, unless so
         expressed, not to constitute approval for the purposes of Section 21 of
         the Financial Services and Markets Act 2000 of the United Kingdom of
         any such notice which is an invitation or inducement to engage in
         investment activity);

6.15     if the Relevant Issuer shall become subject generally to the taxing
         jurisdiction of any territory or any political sub-division thereof or
         any authority therein or thereof having power to tax other than or in
         addition to the United Kingdom or any such political sub-division
         thereof or any such authority therein or thereof, immediately upon
         becoming aware thereof notify the Trustee of such event and (unless the
         Trustee otherwise agrees) enter forthwith into a Trust Deed
         supplemental to this Trust Deed, giving to the Trustee an undertaking
         or covenant in form and manner satisfactory to the Trustee in terms
         corresponding to the terms of Condition 8 with the substitution for
         (or, as the case may be, the addition to) the references therein to the
         United Kingdom or any political sub-division thereof or any authority
         therein or thereof having power to tax of references to that other or
         additional territory or any political sub-division thereof or any
         authority therein or thereof having power to tax to whose taxing
         jurisdiction the Relevant Issuer shall have become

                                      -12-

<PAGE>

         subject as aforesaid, such Trust Deed also (where applicable) to modify
         Condition 6(c) so that such Condition shall make reference to the other
         or additional territory, any political sub-division thereof and any
         authority therein or thereof having power to tax;

6.16     comply with and perform all its obligations under the Agency Agreement
         and use all reasonable endeavours to procure that the Agents comply
         with and perform all their respective obligations thereunder and not
         make any amendment or modification to the Agency Agreement without the
         prior written approval of the Trustee;

6.17     in order to enable the Trustee to ascertain the principal amount of
         Notes of each Series for the time being outstanding for any of the
         purposes referred to in the proviso to the definition of "outstanding"
         in Clause 1, deliver to the Trustee as soon as reasonably practicable
         after being so requested in writing by the Trustee a certificate in
         writing signed by two Directors, or two authorised signatories, of the
         Relevant Issuer setting out the total number and aggregate principal
         amount of Notes of each series which:

         6.17.1   up to and including the date of such certificate have been
                  purchased by the Relevant Issuer or any other Subsidiary of
                  the Relevant Issuer and cancelled and

         6.17.2   are at the date of such certificate held for the benefit of,
                  or on behalf of, the Relevant Issuer or any other Subsidiary
                  of the Relevant Issuer

6.18     procure its Subsidiaries to comply with all (if any) applicable
         provisions concerning the purchase of Notes of Condition 6(g);

6.19     use all reasonable endeavours to procure that each of the Paying Agents
         makes available for inspection by Noteholders and Couponholders at its
         specified office copies of these presents, the Agency Agreement and, as
         soon as practicable after the date of publication thereof, the then
         latest audited balance sheet and profit and loss account (consolidated
         if applicable) of the Relevant Issuer;

6.20     if, in accordance with the provisions of the Conditions, interest in
         respect of Bearer Securities denominated in U.S. dollars becomes
         payable at the specified office of any Paying Agent in the United
         States of America promptly give notice thereof to the Noteholders in
         accordance with Condition 16;

6.21     give written notice to the Trustee (i) of any designation of any of its
         Subsidiaries as an Excluded Subsidiary and (ii) forthwith upon any such
         Excluded Subsidiary ceasing to be an Excluded Subsidiary for the
         purpose of Condition 6;

6.22     give to the Trustee at the same time as sending to it the certificates
         referred to in Clause 6.7 above and in any event not later than 180
         days after the last day of each financial period of the Relevant
         Issuer, a report by two Directors of the Relevant Issuer listing those
         Subsidiaries of the Relevant Issuer which as at such last day were
         Principal Subsidiaries for the purposes of Condition 10, accompanied by
         a report by the Auditors addressed to the Directors of the Relevant
         Issuer and the Trustee as to the proper extraction of the figures and
         the mathematical accuracy of the calculations based thereon, as used by
         the Directors of the Relevant Issuer in determining those Principal
         Subsidiaries;

6.23     give to the Trustee, as soon as reasonably practicable after the
         acquisition or disposal of any company which thereby becomes or ceases
         to be a Principal Subsidiary of the Relevant Issuer or after any
         transfer is made to any Subsidiary of the Relevant Issuer which thereby
         becomes a Principal Subsidiary, a report by two Directors of the
         Relevant Issuer to such effect, accompanied by a report by the Auditors
         addressed to the Directors

                                      -13-

<PAGE>

         of the Relevant Issuer and the Trustee as to the proper extraction of
         the unaudited or audited (as appropriate) figures and the mathematical
         accuracy of the calculations based thereon as used by the Directors of
         the Relevant Issuer in determining the Principal Subsidiary;

6.24     give to the Trustee as soon as reasonably practicable and, in any
         event, within 14 days of of any request by the Trustee, a report by two
         Directors of the Relevant Issuer as to the amount of Capital and
         Reserves, at any time accompanied by a report by the Auditors addressed
         to the Directors of the Relevant Issuer and the Trustee as to the
         proper extraction of the unaudited or audited (as appropriate) figures
         and the mathematical accuracy of the calculations based thereon used by
         the Directors of the Relevant Issuer;

6.25     upon due surrender in accordance with the Conditions, pay the face
         value of all Coupons (including Coupons issued in exchange for Talons)
         appertaining to all Notes purchased by the Relevant Issuer or any
         Subsidiary of the Relevant Issuer;

6.26     forthwith give notice in writing to the Trustee of:

         6.26.1   the occurrence of any Restructuring Event or of any event (a
                  "Potential Restructuring Event") which, depending on any
                  certification as provided in the definition of "Restructuring
                  Event", may be a Restructuring Event;

         6.26.2   (if at the time any Restructuring Event occurs there are Rated
                  Securities) the occurrence of any Rating Downgrade in respect
                  of that Restructuring Event within the Restructuring Period;
                  and

         6.26.3   (if at the time any Restructuring Event occurs there are no
                  Rated Securities) the obtaining of a rating in accordance with
                  the definition of "Negative Rating Event" or the occurrence of
                  a Negative Rating Event;

6.27     send to the Trustee within fourteen days of any request by the Trustee
         (such request only to be made after consultation with the Relevant
         Issuer or after the Relevant Issuer has failed or refused to be
         consulted) a certificate signed by any two Directors of the Relevant
         Issuer giving their opinion on any matter relating to or on any aspect
         of a Potential Restructuring Event (as defined in Clause 6.25.1 above)
         requested by the Trustee and in forming an opinion on whether the
         Potential Restructuring Event is a Restructuring Event the Trustee
         shall be entitled, but not bound, to rely solely on such certificate
         and if it does so rely, such certificate, and the determination of the
         Trustee (in reliance on such certificate) as to whether or not a
         Restructuring Event has occurred, shall be binding on the Relevant
         Issuer, the Noteholders and the Couponholders and the Trustee shall
         incur no liability to any person for so relying on such certificate;
         and

6.28     procure the delivery of legal opinions addressed to the Trustee dated
         the date of such delivery, in form and content acceptable to the
         Trustee:

         6.28.1   from Linklaters or such other firm of legal advisers as may be
                  agreed between the Issuers and the Trustee as to the laws of
                  England, on each anniversary of this Trust Deed and on the
                  date of any amendment to this Trust Deed;

         6.28.2   from legal advisers, reasonably acceptable to the Trustee as
                  to such law as may reasonably be requested by the Trustee, on
                  the issue date for the Notes in the event of a proposed issue
                  of Notes of such a nature and having such features as might
                  lead the Trustee to conclude that it would be prudent, having
                  regard to such nature and features, to obtain such legal
                  opinion(s) or in the event that the Trustee

                                      -14-

<PAGE>

                  considers it prudent in view of a change (or proposed change)
                  in (or in the interpretation or application of) any applicable
                  law, regulation or circumstance affecting the Relevant Issuer,
                  the Trustee, the Notes, the Certificates, the Receipts, the
                  Coupons, the Talons, this Trust Deed or the Agency Agreement;
                  and

         6.28.3   on each occasion on which a legal opinion is given to any
                  Dealer in relation to any Notes pursuant to the Programme
                  Agreement from the legal adviser giving such opinion.

7        Remuneration and Indemnification of the Trustee

7.1      Normal Remuneration: So long as any Note is outstanding the Relevant
         Issuer shall pay the Trustee as remuneration for its services as
         Trustee such sum on such dates in each case as the Relevant Issuer and
         the Trustee may from time to time agree. Such remuneration shall accrue
         from day to day from the date of this Trust Deed. However, if any
         payment to a Noteholder or Couponholder of moneys due in respect of any
         Note, Receipts or Coupon is improperly withheld or refused, such
         remuneration shall again accrue as from the date of such withholding or
         refusal until payment to such Noteholder or Couponholder is duly made.

7.2      Extra Remuneration: If an Event of Default shall have occurred or if
         the Trustee finds it expedient or necessary or is requested by the
         Relevant Issuer to undertake duties that they both agree to be of an
         exceptional nature or otherwise outside the scope of the Trustee's
         normal duties under this Trust Deed, the Relevant Issuer shall pay such
         additional remuneration as they may agree or, failing agreement as to
         any of the matters in this sub-Clause (or as to such sums referred to
         in sub-Clause 7.1), as determined by an investment bank (acting as an
         expert) selected by the Trustee and approved by the Relevant Issuer or,
         failing such approval, nominated by the President for the time being of
         The Law Society of England and Wales. The expenses involved in such
         nomination and such investment bank's fee shall be shared equally
         between the Trustee and the Relevant Issuer. The determination of such
         investment bank shall be conclusive and binding on the Relevant Issuer,
         the Trustee, the Noteholders and the Couponholders.

7.3      Expenses: Each of the Issuers severally undertakes on demand by the
         Trustee to pay or discharge the full amount of all costs, charges,
         liabilities and expenses properly incurred by the Trustee in the
         preparation and execution of this Trust Deed including, but not limited
         to, legal and travelling expenses. The Relevant Issuer undertakes on
         demand by the Trustee to pay or discharge all reasonable costs,
         charges, liabilities and expenses properly incurred by the Trustee in
         the performance of its functions under this Trust Deed including, but
         not limited to, legal and travelling expenses. For the avoidance of
         doubt, the foregoing costs, charges, liabilities and expenses shall
         only be paid or discharged once in aggregate amount. The Relevant
         Issuer shall also on demand by the Trustee pay or discharge any stamp,
         documentary or other taxes or duties paid by the Trustee in connection
         with any legal proceedings properly brought or contemplated by the
         Trustee against the relevant Issuer to enforce any provision of this
         Trust Deed, the Notes, the Receipts, the Coupons or the Talons. Such
         costs, charges, liabilities and expenses shall:

         7.3.1    in the case of payments made by the Trustee before such
                  demand, carry interest from the date of the demand at the rate
                  of 2 per cent per annum over the base rate of National
                  Westminster Bank PLC on the date on which the Trustee made
                  such payments until reimbursement is received by the Trustee;
                  and

                                      -15-

<PAGE>

         7.3.2    in other cases, carry interest at such rate from 30 days after
                  the date of the demand or (where the demand specifies that
                  payment is to be made on an earlier date) from such earlier
                  date until reimbursement is received by the Trustee.

7.4      Indemnity: Subject to Clause 9, the Relevant Issuer shall indemnify the
         Trustee in respect of all liabilities and expenses properly incurred by
         it or by anyone appointed by it or to whom any of its functions may be
         delegated by it in the carrying out of its functions under this deed
         and against any loss, liability, proper cost, claim, action, demand or
         expense (including, but not limited to, all proper costs, charges and
         expenses paid or incurred in disputing or defending any of the
         foregoing) that any of them may incur or that may be made against any
         of them arising out of or in relation to or in connection with, its
         appointment or the exercise of its functions under this deed.

7.5      Continuing Effect: Sub-clauses 7.3 and 7.4 shall continue in full force
         and effect as regards the Trustee even if it no longer is Trustee.

7.6      Cost Allocation: The Trustee shall be entitled in its absolute
         discretion to determine in respect of which Series of Notes any costs,
         charges, liabilities and expenses incurred under this Trust Deed have
         been incurred or to allocate any such costs, charges, liabilities and
         expenses between the Notes of any two or more Series.

7.7      Auditors' Reports: The Trustee may rely on reports from the Auditors in
         accordance with the Conditions or this Trust Deed whether or not any
         such report or engagement letter or other document entered into by the
         Trustee and the Auditors in connection therewith contains any limit on
         the liability of the Auditors.

8        Provisions supplemental to the Trustee Act 1925 and the Trustee Act
         2000

8.1      Advice: The Trustee may act on the opinion or advice of, or information
         obtained from, any expert and shall not be responsible to anyone for
         any loss occasioned by so acting provided it shall have exercised
         proper care in the selection of such person. Any such opinion, advice
         or information may be sent or obtained by letter, telex or fax and the
         Trustee shall 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.

8.2      Resolutions of Noteholders: The Trustee shall not be responsible for
         having acted in good faith on a resolution purporting to have been
         passed at a meeting of Noteholders in respect of which minutes have
         been made and signed even if it is later found that there was a defect
         in the constitution of the meeting or the passing of the resolution or
         that the resolution was not valid or binding on the Noteholders or
         Couponholders.

8.3      Certificate Signed by Directors: If the Trustee, in the exercise of its
         functions, requires to be satisfied or to have information as to any
         fact or the expediency of any act, it may call for and accept as
         sufficient evidence of that fact or the expediency of that act a
         certificate signed by any two Directors of the Relevant Issuer as to
         that fact or to the effect that, in their opinion, that act is
         expedient and the Trustee need not call for further evidence and shall
         not be responsible for any loss occasioned by acting on such a
         certificate.

8.4      Deposit of Documents: The Trustee may appoint as custodian, on any
         terms, any bank or entity whose business includes the safe custody of
         documents or any lawyer or firm of lawyers believed by it to be of good
         repute and may deposit this Trust Deed and any other

                                      -16-

<PAGE>

         documents with such custodian and pay all sums due in respect thereof.
         The Trustee is not obliged to appoint a custodian if the Trustee
         invests in securities payable to bearer.

8.5      Discretion: The Trustee shall have absolute and uncontrolled discretion
         as to the exercise of its functions and subject to Clause 9 shall not
         be responsible for any loss, liability, cost, claim, action, demand,
         expense or inconvenience that may result from their exercise or
         non-exercise.

8.6      Agents: Whenever it considers it expedient in the interests of the
         Noteholders, the Trustee may, in the conduct of its trust business,
         instead of acting personally, employ and pay an agent selected by it,
         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 all acts required to be done by the Trustee
         (including the receipt and payment of money).

8.7      Delegation: Whenever it considers it expedient in the interests of the
         Noteholders, the Trustee may delegate to any person on any terms
         (including power to sub-delegate) all or any of its functions.

8.8      Nominees: In relation to any asset held by it under this Trust Deed,
         the Trustee may appoint any person to act as its nominee on any terms.

8.9      Forged Notes: The Trustee shall not be liable to the Relevant Issuer or
         any Noteholder or Couponholder by reason of having accepted as valid or
         not having rejected any Note, Certificate, Receipt, Coupon or Talon
         purporting to be such and later found to be forged or not authentic.

8.10     Confidentiality: Unless ordered to do so by a court of competent
         jurisdiction, the Trustee shall not be required to disclose to any
         Noteholder or Couponholder any confidential financial or other
         information made available to the Trustee by any Issuer and no
         Noteholder or Couponholder shall be entitled to take any action to
         obtain such information from the Trustee.

8.11     Determinations Conclusive: As between itself and the Noteholders and
         Couponholders, the Trustee may determine all questions and doubts
         arising in relation to any of the provisions of this Trust Deed. Such
         determinations, whether made upon such a question actually raised or
         implied in the acts or proceedings of the Trustee, shall be conclusive
         and shall bind the Trustee, the Noteholders and the Couponholders.

8.12     Currency Conversion: Where it is necessary or desirable to convert any
         sum from one currency to another, it shall (unless otherwise provided
         hereby or required by law) be converted at such rate or rates, in
         accordance with such method and as at such date as may reasonably be
         specified by the Trustee having consulted the Relevant Issuer (if the
         Trustee reasonably believes such consultation to be in the interests of
         the Noteholders) but having regard to current rates of exchange, if
         available. Any rate, method and date so specified shall be binding on
         the Relevant Issuer, the Noteholders and the Couponholders.

8.13     Events of Default: The Trustee may determine whether or not an Event of
         Default or Potential Event of Default is in its opinion capable of
         remedy and/or materially prejudicial to the interests of the
         Noteholders. Any such determination shall be conclusive and binding on
         the Relevant Issuer, the Noteholders and the Couponholders.

8.14     Payment for and Delivery of Notes: The Trustee shall not be responsible
         for the receipt or application by the Relevant Issuer of the proceeds
         of the issue of the Notes, any exchange of Notes or the delivery of
         Notes to the persons entitled to them.

                                      -17-

<PAGE>

8.15     Legal Opinions: The Trustee shall not be responsible to any person for
         failing to request, require or receive any legal opinion relating to
         any Notes or for checking or commenting upon the content of any such
         legal opinion.

8.16     Notes Held by the Issuer etc.: In the absence of knowledge or express
         notice to the contrary, the Trustee may assume without enquiry (other
         than requesting a certificate under Clause 6.17) that no Notes are for
         the time being held by or on behalf of the Relevant Issuer or any of
         its Subsidiaries.

8.17     Programme Limit: The Trustee shall not be concerned, and need not
         enquire, as to whether or not any Notes are issued in breach of the
         Programme Limit.

8.18     Consent or Approval: Any consent or approval given by the Trustee for
         the purposes of this Trust Deed may be given on such terms and subject
         to such conditions (if any) as the Trustee thinks fit.

8.19     Recitals: With the exception of Recital (B), the Trustee assumes no
         responsibility for the correctness of the recitals to this Trust Deed,
         which shall be taken as statements of each of the Issuers, and shall
         not by the execution of this Trust Deed or any Supplemental Trust Deed
         be deemed to make any representation as to, the adequacy, sufficiency,
         validity or enforceability of this Trust Deed or any Supplemental Trust
         Deed.

8.20     Apportionment: The Trustee may apportion amounts due to it under Clause
         5.1 of this Trust Deed between Notes of different Series as it thinks
         fit.

8.21     Trustee to assume Performance: The Trustee shall not be bound to give
         notice to any person of the execution of any documents comprised in
         these presents or to take any steps to ascertain whether any Event of
         Default, Potential Event of Default, Restructuring Event, Potential
         Restructuring Event (as defined in Clause 6.25) or Negative Rating
         Event has happened and, until it shall have actual knowledge or express
         notice to the contrary, the Trustee shall be entitled to assume that no
         Event of Default, Potential Event of Default, Restructuring Event,
         Potential Restructuring Event (as defined in Clause 6.25) or Negative
         Rating Event has happened and that the Relevant Issuer is observing and
         performing all its obligations under this Trust Deed, the Notes, the
         Receipts, the Coupons and the Talons.

8.22     Responsibility for agents etc.: If the Trustee exercises proper care in
         selecting any custodian, agent, delegate or nominee appointed under
         this clause (an "Appointee"), it will not have any obligation to
         supervise the Appointee or be responsible for any loss, liability,
         cost, claim, action, demand or expense incurred by reason of the
         Appointee's misconduct or default or, where sub-delegation is
         permissible in terms of this Trust Deed, the misconduct or default of
         any sub-delegate. The Trustee shall, as soon as possible after the
         appointment or the removal of any Appointee or the extension or
         termination of any such appointment give written notice thereof to each
         of the Issuers.

8.23     Trustee Act 2000: To the extent that its application can be excluded,
         Section 1 of the Trustee Act 2000 shall not apply to the trust
         constituted by this Trust Deed or any deed supplemental to it.

9        Trustee liable for negligence

         If the Trustee fails to show the degree of care and diligence required
         of it as trustee having regard to the provisions of the Trust Deed
         conferring on it powers, duties and discretions, nothing in this Trust
         Deed shall relieve or indemnify it from or against any liability that

                                      -18-

<PAGE>

         would otherwise attach to it in respect of any negligence, default,
         breach of duty or breach of trust of which it may be guilty.

10       Waiver and proof of default

10.1     Waiver: The Trustee may, without the consent of the Noteholders or
         Couponholders and without prejudice to its rights in respect of any
         subsequent breach, from time to time and at any time, if in its opinion
         the interests of the Noteholders will not be materially prejudiced
         thereby, waive or authorise, on such terms as seem expedient to it, any
         breach or proposed breach by the any of the Issuers of this Trust Deed
         or the Conditions or determine that an Event of Default or Potential
         Event of Default shall not be treated as such provided that the Trustee
         shall not do so in contravention of an express direction given by an
         Extraordinary Resolution or a request made pursuant to Condition 10. No
         such direction or request shall affect a previous waiver, authorisation
         or determination. Any such waiver, authorisation or determination shall
         be binding on the Noteholders and the Couponholders and, if the Trustee
         so requires, shall be notified to the Noteholders as soon as
         practicable.

10.2     Proof of Default: Proof that the Relevant Issuer has failed to pay a
         sum due to the holder of any one Note, Receipt or Coupon shall (unless
         the contrary be proved) be sufficient evidence that it has made the
         same default as regards all other Notes, Receipts or Coupons that are
         then payable.

11       Trustee not precluded from entering into contracts

         The Trustee and any other person, whether or not acting for itself, may
         acquire, hold or dispose of any Note, Receipt, Coupon, Talon or other
         security (or any interest therein) of any Issuer or any other person,
         may enter into or be interested in any contract or transaction with any
         such person and may act on, or as depositary or agent for, any
         committee or body of holders of any securities of any such person in
         each case with the same rights as it would have had if the Trustee were
         not acting as Trustee and need not account for any profit.

12       Modification and Substitution

12.1     Modification: The Trustee may agree without the consent of the
         Noteholders or Couponholders to any modification to this Trust Deed
         which is of a formal, minor or technical nature or to correct a
         manifest error. The Trustee may also so agree to any modification to
         this Trust Deed that is in its opinion not materially prejudicial to
         the interests of the Noteholders, but subject to the provisions of
         Clause 12.2 such power does not extend to any such modification as is
         mentioned in paragraphs 2.2 and 2.8 of Schedule 3.

12.2     Substitution:

         12.2.1   The Trustee may, without the consent of the Noteholders or
                  Couponholders, agree to the substitution of any company (the
                  "Substituted Obligor") in place of the Relevant Issuer (or of
                  any previous substitute under this sub-Clause) as the
                  principal debtor under this Trust Deed, the Notes, the
                  Receipts, the Coupons and the Talons provided that:

                  (i)  a deed is executed or undertaking given by the
                       Substituted Obligor to the Trustee, in form and manner
                       satisfactory to the Trustee, agreeing to be

                                      -19-

<PAGE>

                  bound by this Trust Deed, the Notes, the Receipts, the Coupons
                  and the Talons (with consequential amendments as the Trustee
                  may deem appropriate) as if the Substituted Obligor had been
                  named in this Trust Deed, the Notes, the Certificates, the
                  Receipts, the Coupons and the Talons as the principal debtor
                  in place of the Relevant Issuer;

            (ii)  if the Substituted Obligor is subject generally to the taxing
                  jurisdiction of a territory or any authority of or in that
                  territory with power to tax (the "Substituted Territory")
                  other than the territory to the taxing jurisdiction of which
                  (or to any such authority of or in which) the Relevant Issuer
                  is subject generally (the "Issuer's Territory"), the
                  Substituted Obligor shall (unless the Trustee otherwise
                  agrees) give to the Trustee an undertaking satisfactory to the
                  Trustee in terms corresponding to Condition 8 with the
                  substitution for the references in that Condition to the
                  Issuer's Territory of references to the Substituted Territory,
                  such deed or undertaking also (where applicable) to modify
                  Condition 6(c) so that such Condition shall make reference to
                  the other or additional territory or any political
                  sub-division thereof and any authority therein or thereof
                  having power to tax whereupon the Trust Deed, the Notes, the
                  Certificates, the Receipts, the Coupons and the Talons shall
                  be read accordingly;

            (iii) if any two Directors of the Substituted Obligor certify that
                  it will be solvent immediately after such substitution, the
                  Trustee need not have regard to the Substituted Obligor's
                  financial condition, profits or prospects or compare them with
                  those of the Relevant Issuer;

            (iv)  the Relevant Issuer and the Substituted Obligor comply with
                  such other requirements as the Trustee may direct in the
                  interests of the Noteholders; and

            (v)   (unless the Relevant Issuer's successor in business is the
                  Substituted Obligor) the obligations of the Substituted
                  Obligor as the principal debtor under this Trust Deed, the
                  Notes and the Coupons are guaranteed by the Relevant Issuer to
                  the Trustee's satisfaction.

    12.2.2  Release of Substituted Issuer: An agreement by the Trustee
            pursuant to sub-Clause 12.2 shall, if so expressed, release the
            Relevant Issuer (or a previous substitute) from any or all of its
            obligations under this Trust Deed, the Notes, the Receipts, the
            Coupons and the Talons. Notice of the substitution shall be given to
            the Noteholders within 14 days of the execution of such documents
            and compliance with such requirements.

    12.2.3  Completion of Substitution: On completion of the formalities set
            out in sub-Clause 12.2, the Substituted Obligor shall be deemed to
            be named in this Trust Deed, the Notes, the Certificates, the
            Receipts, the Coupons and the Talons as the principal debtor in
            place of the Relevant Issuer (or of any previous substitute) and
            this Trust Deed, the Notes, the Certificates, the Receipts, the
            Coupons and the Talons shall be deemed to be amended as necessary to
            give effect to the substitution.

                                      -20-

<PAGE>

13       Appointment, Retirement and Removal of the Trustee

13.1     Appointment: The Relevant Issuer has the power of appointing new
         trustees but no-one may be so appointed unless previously approved by
         an Extraordinary Resolution. A trust corporation shall at all times be
         a Trustee and may be the sole Trustee. Any appointment of a new Trustee
         shall be notified by the Relevant Issuer to the Noteholders as soon as
         practicable.

13.2     Retirement and Removal: Any Trustee may retire at any time on giving at
         least 3 months' written notice to the Relevant Issuer without giving
         any reason or being responsible for any costs occasioned by such
         retirement and the Noteholders may by Extraordinary Resolution remove
         any Trustee provided that the retirement or removal of a sole trust
         corporation shall not be effective until a trust corporation is
         appointed as successor Trustee. If a sole trust corporation gives
         notice of retirement or an Extraordinary Resolution is passed for its
         removal, it shall use all reasonable endeavours to procure that another
         trust corporation be appointed as Trustee.

13.3     Co-Trustees: The Trustee may, despite sub-Clause 13.1, by written
         notice to each of the Issuers appoint anyone to act as an additional
         Trustee jointly with the Trustee:

         13.3.1  if the Trustee considers the appointment to be in the interests
                 of the Noteholders and/or the Couponholders;

         13.3.2  to conform with a legal requirement, restriction or condition
                 in a jurisdiction in which a particular act is to be performed;
                 or

         13.3.3  to obtain a judgment or to enforce a judgment or any provision
                 of this Trust Deed in any jurisdiction.

         Subject to the provisions of this Trust Deed the Trustee may confer on
         any person so appointed such functions as it thinks fit. The Trustee
         may by written notice to the Relevant Issuer and that person so remove
         that person. At the Trustee's request, the Relevant Issuer shall
         forthwith do all things as may be required to perfect such appointment
         or removal and it irrevocably appoints the Trustee as its attorney in
         its name and on its behalf to do so.

13.4     Competence of a Majority of Trustees: If there are more than two
         Trustees the majority of them shall be competent to perform the
         Trustee's functions provided the majority includes a trust corporation.

14       Notes held in Clearing Systems and Couponholders

14.1     Notes Held in Clearing Systems: So long as any Global Note is, or any
         Notes represented by a Global Certificate are, held on behalf of a
         clearing system, in considering the interests of Noteholders, the
         Trustee may have regard to any information provided to it by such
         clearing system or its operator as to the identity (either individually
         or by category) of its accountholders or participants with entitlements
         to any such Global Note or the Registered Notes and may consider such
         interests on the basis that such accountholders or participants were
         the holder(s) thereof.

14.2     Couponholders: No notices need be given to Couponholders. They shall be
         deemed to have notice of the contents of any notice given to
         Noteholders. Even if it has express notice to the contrary, in
         exercising any of its functions by reference to the interests of the

                                      -21-

<PAGE>

         Noteholders, the Trustee shall assume that the holder of each Note is
         the holder of all Receipts, Coupons and Talons relating to it.

15       Currency Indemnity

15.1     Currency of Account and Payment: The Contractual Currency is the sole
         currency of account and payment for all sums payable by the Relevant
         Issuer under or in connection with this Trust Deed, the Notes, the
         Receipts and the Coupons, including damages.

15.2     Extent of Discharge: An amount received or recovered in a currency
         other than the Contractual Currency (whether as a result of, or of the
         enforcement of, a judgment or order of a court of any jurisdiction, in
         the winding-up or dissolution of the Relevant Issuer or otherwise), by
         the Trustee or any Noteholder or Couponholder in respect of any sum
         expressed to be due to it from the Relevant Issuer shall only discharge
         the Relevant Issuer to the extent of the Contractual Currency amount
         that the recipient is able to purchase with the amount so received or
         recovered in that other currency on the date of that receipt or
         recovery (or, if it is not practicable to make that purchase on that
         date, on the first date on which it is practicable to do so).

15.3     Indemnity: If that Contractual Currency amount is less than the
         Contractual Currency amount expressed to be due to the recipient under
         this Trust Deed, the Notes, the Receipts or the Coupons, the Relevant
         Issuer shall indemnify it against any loss sustained by it as a result.
         In any event, the Relevant Issuer shall indemnify the recipient against
         the cost of making any such purchase.

15.4     Indemnity Separate: The indemnities in this Clause 15 and in sub-Clause
         7.4 constitute separate and independent obligations from the other
         obligations in this Trust Deed, shall give rise to a separate and
         independent cause of action, shall apply irrespective of any indulgence
         granted by the Trustee and/or any Noteholder or Couponholder and shall
         continue in full force and effect despite any judgment, order, claim or
         proof for a liquidated amount in respect of any sum due under this
         Trust Deed, the Notes, the Receipts and/or the Coupons or any other
         judgment or order.

16       Communications

16.1     Method: Each communication under this Trust Deed shall be made by
         telex, fax or otherwise in writing. Each communication or document to
         be delivered to any party under this Trust Deed shall be sent to that
         party at the telex, fax number or address, and marked for the attention
         of the person (if any), from time to time designated by that party to
         the other party for the purpose of this Trust Deed. The initial
         telephone number, telex number, fax number, address and person so
         designated by the parties under this Trust Deed are set out in the
         Procedures Memorandum.

16.2     Deemed Receipt: Any communication from any party to the other under
         this Trust Deed shall be effective, (if by telex) when a confirmed
         answerback is received at the end of the transmission, (if by fax) when
         good receipt is confirmed by the recipient following enquiry by the
         sender and (if in writing) when delivered, except that a communication
         received outside normal business hours shall be deemed to be received
         on the next business day in the city in which the recipient is located.

                                      -22-

<PAGE>

17       Governing Law and Jurisdiction

17.1     Governing Law: This Trust Deed shall be governed by and construed in
         accordance with English law.

17.2     Jurisdiction: The courts of England are to have jurisdiction to settle
         any disputes that may arise out of or in connection with this Trust
         Deed, the Notes, the Receipts, the Coupons or the Talons and
         accordingly any legal action or proceedings arising out of or in
         connection with this Trust Deed, the Notes, the Receipts, the Coupons
         or the Talons ("Proceedings") may be brought in such courts. Each of
         the Issuers irrevocably submits to the jurisdiction of such courts and
         waives any objections to Proceedings in such courts on the ground of
         venue or on the ground that the Proceedings have been brought in an
         inconvenient forum. This submission is for the benefit of each of the
         Trustee, the Noteholders and the Couponholders and shall not limit the
         right of any of them to take Proceedings in any other court of
         competent jurisdiction nor shall the taking of Proceedings in any one
         or more jurisdictions preclude the taking of Proceedings in any other
         jurisdiction (whether concurrently or not).

17.3     Service of Process: Scottish Power plc shall procure that its London
         office, whose address is at 5th Floor, 30 Cannon Street, London EC4M
         6XH, will act as its agent for service of process in any Proceedings in
         England. Scottish Power UK plc shall procure that Scottish Power plc's
         London office will act as its agent for service of process in any
         Proceedings in England. Such service shall be deemed completed on
         delivery to such process agent (whether or not it is forwarded to and
         received by the relevant Issuer). If for any reason such process agent
         ceases to be able to act as such or no longer has an address in England
         each Issuer irrevocably agrees to appoint a substitute process agent
         acceptable to the Trustee and shall immediately notify the Trustee of
         such appointment. Nothing shall affect the right to serve process in
         any other manner permitted by law.

                                      -23-

<PAGE>

                                   SCHEDULE 1
                                     Part A
                          Form of Temporary Global Note

                               SCOTTISH POWER plc

             (incorporated in Scotland with limited liability under
                            registered number 193794)

                              SCOTTISH POWER UK plc
             (incorporated in Scotland with limited liability under
                            registered number 117120)

                             DEBT ISSUANCE PROGRAMME

                              TEMPORARY GLOBAL NOTE

                          Temporary Global Note No. [.]

This temporary Global Note is issued in respect of the Notes (the "Notes") of
the Tranche and Series specified in the Second Schedule hereto of [Scottish
Power plc/Scottish Power UK plc] (the "Issuer").

Interpretation and Definitions

References in this temporary Global Note to the "Conditions" are to the Terms
and Conditions applicable to the Notes (which are in the form set out in
Schedule 2 Part C to the Trust Deed (as amended or supplemented as at the Issue
Date, the "Trust Deed") dated 20 December 2001 between the Issuer, the other
issuer named therein and The Law Debenture Trust Corporation p.l.c. as trustee,
as such form is supplemented and/or modified and/or superseded by the provisions
of this temporary Global Note (including the supplemental definitions and any
modifications or additions set out in the Second Schedule hereto), which in the
event of any conflict shall prevail). Other capitalised terms used in this
temporary Global Note shall have the meanings given to them in the Conditions or
the Trust Deed. If the Second Schedule hereto specifies that the applicable
TEFRA exemption is either "C Rules" or "not applicable", this temporary Global
Note is a "C Rules Note", otherwise this temporary Global Note is a "D Rules
Note".

Aggregate Principal Amount

The aggregate principal amount from time to time of this temporary Global Note
shall be an amount equal to the aggregate principal amount of the Notes as shall
be shown by the latest entry in the fourth column of the First Schedule hereto,
which shall be completed by or on behalf of the Issuing and Paying Agent upon
(i) the issue of Notes represented hereby, (ii) the exchange of the whole or a
part of this temporary Global Note for a corresponding interest in a permanent
Global Note or, as the case may be, for Definitive Notes or Registered Notes,
(iii) the redemption or purchase and cancellation of Notes represented hereby
and/or (iv) in the case of Partly-paid Notes, the forfeiture of Notes
represented hereby in accordance with the Conditions relating to such
Partly-paid Notes, all as described below.

Promise to Pay

Subject as provided herein, the Issuer, for value received, promises to pay to
the bearer of this temporary Global Note, upon presentation and (when no further
payment is due in respect of this temporary Global Note) surrender of this
temporary Global Note, on the Maturity Date (or on such

                                      -24-

<PAGE>

earlier date as the Redemption Amount may become repayable in accordance with
the Conditions) the Redemption Amount in respect of the aggregate principal
amount of Notes represented by this temporary Global Note and (unless this
temporary Global Note does not bear interest) to pay interest in respect of such
aggregate principal amount of Notes from the Interest Commencement Date in
arrear at the rates, in the amounts and on the dates for payment provided for in
the Conditions together with such other sums and additional amounts (if any) as
may be payable under the Conditions, in accordance with the Conditions.

Exchange

If this temporary Global Note is an Exchangeable Bearer Note, this temporary
Global Note may be exchanged in whole or from time to time in part for one or
more Registered Notes in accordance with the Conditions on or after the Issue
Date but before the Exchange Date referred to below by its presentation to the
Issuing and Paying Agent. On or after the Exchange Date, the outstanding
principal amount of this temporary Global Note may be exchanged for Definitive
Notes and Registered Notes in accordance with the next paragraph.

Subject as provided in the Conditions applicable to Partly-paid Notes, on or
after the first day following the expiry of 40 days after the Issue Date (the
"Exchange Date"), this temporary Global Note may be exchanged (free of charge to
the holder) in whole or from time to time in part by its presentation and, on
exchange in full, surrender to or to the order of the Issuing and Paying Agent
for interests in a permanent Global Note or, if so specified in the Second
Schedule hereto, for Definitive Notes and (if this temporary Global Note is an
Exchangeable Bearer Note), in each case, for Registered Notes in an aggregate
principal amount equal to the principal amount of this temporary Global Note
submitted for exchange provided that, in the case of any part of this temporary
Global Note submitted for exchange for a permanent Global Note or Definitive
Notes, there shall have been Certification with respect to such principal amount
submitted for such exchange dated no earlier than the Exchange Date.

"Certification" means the presentation to the Issuing and Paying Agent of a
certificate or certificates with respect to one or more interests in this
temporary Global Note, signed by Euroclear or Clearstream, Luxembourg,
substantially to the effect set out in Schedule 4 to the Agency Agreement to the
effect that it has received a certificate or certificates substantially to the
effect set out in Schedule 3 to the Agency Agreement with respect thereto and
that no contrary advice as to the contents thereof has been received by
Euroclear or Clearstream, Luxembourg, as the case may be.

Upon the whole or a part of this temporary Global Note being exchanged for a
permanent Global Note, such permanent Global Note shall be exchangeable in
accordance with its terms for Definitive Notes or Registered Notes.

The Definitive Notes or the Certificates representing the Registered Notes for
which this temporary Global Note or a permanent Global Note may be exchangeable
shall be duly executed and authenticated, shall, in the case of Definitive
Notes, have attached to them all Coupons (and, where appropriate, Talons) in
respect of interest, and all Receipts in respect of Instalment Amounts, that
have not already been paid on this temporary Global Note or the permanent Global
Note, as the case may be, shall be security printed or, in the case of
Certificates, printed in accordance with applicable legal and stock exchange
requirements and shall be substantially in the form set out in the Schedules to
the Trust Deed as supplemented and/or modified and/or superseded by the terms of
the Second Schedule hereto. Certificates issued upon exchange for Registered
Notes shall not be Global Certificates unless the holder so requests and
certifies to the

                                      -25-

<PAGE>

Issuing and Paying Agent that it is, or is acting as a nominee for, Clearstream,
Luxembourg, Euroclear and/or any other clearing system.

On any exchange of a part of this temporary Global Note for an equivalent
interest in a permanent Global Note, for Definitive Notes or for Registered
Notes, as the case may be, the portion of the principal amount hereof so
exchanged shall be endorsed by or on behalf of the Issuing and Paying Agent in
Part I of the First Schedule hereto, whereupon the principal amount hereof shall
be reduced for all purposes by the amount so exchanged and endorsed.

Benefit of Conditions

Except as otherwise specified herein, this temporary Global Note is subject to
the Conditions and the Trust Deed and, until the whole of this temporary Global
Note is exchanged for equivalent interests in a permanent Global Note, for
Definitive Notes or for Registered Notes, as the case may be, the holder of this
temporary Global Note shall in all respects be entitled to the same benefits as
if it were the holder of the permanent Global Note (or the relevant part of it)
or the Definitive Notes, as the case may be, for which it may be exchanged as if
such permanent Global Note or Definitive Notes had been issued on the Issue
Date.

Payments

No person shall be entitled to receive any payment in respect of the Notes
represented by this temporary Global Note that falls due on or after the
Exchange Date unless, upon due presentation of this temporary Global Note for
exchange, delivery of (or, in the case of a subsequent exchange, due endorsement
of) a permanent Global Note or delivery of Definitive Notes or Certificates, as
the case may be, is improperly withheld or refused by or on behalf of the
Issuer.

Payments due before the Exchange Date shall only be made in relation to such
principal amount of this temporary Global Note with respect to which there shall
have been Certification dated no earlier than such due date for payment.

Any payments that are made in respect of this temporary Global Note shall be
made to its holder against presentation and (if no further payment falls to be
made on it) surrender of it at the specified office of the Issuing and Paying
Agent or of any other Paying Agent provided for in the Conditions. If any
payment in full of principal is made in respect of any Note represented by this
temporary Global Note, the portion of this temporary Global Note representing
such Note shall be cancelled and the amount so cancelled shall be endorsed by or
on behalf of the Issuing and Paying Agent in the First Schedule hereto (such
endorsement being prima facie evidence that the payment in question has been
made) whereupon the principal amount hereof shall be reduced for all purposes by
the amount so cancelled and endorsed. If any other payments are made in respect
of the Notes represented by this temporary Global Note, a record of each such
payment shall be endorsed by or on behalf of the Issuing and Paying Agent on an
additional schedule hereto (such endorsement being prima facie evidence that the
payment in question has been made).

Cancellation

Cancellation of any Note represented by this temporary Global Note that is
required by the Conditions to be cancelled (other than upon its redemption)
shall be effected by reduction in the principal amount of this temporary Global
Note representing such Note on its presentation to or to the order of the
Issuing and Paying Agent for endorsement in the First Schedule hereto, whereupon
the principal amount hereof shall be reduced for all purposes by the amount so
cancelled and endorsed.

                                      -26-

<PAGE>

Notices

Notices required to be given in respect of the Notes represented by this
temporary Global Note may be given by their being delivered (so long as this
temporary Global Note is held on behalf of Euroclear and Clearstream, Luxembourg
or any other clearing system) to Euroclear, Clearstream, Luxembourg or such
other clearing system, as the case may be, or otherwise to the holder of this
temporary Global Note, rather than by publication as required by the Conditions.

No provision of this temporary Global Note shall alter or impair the obligation
of the Issuer to pay the principal and premium of and interest on the Notes when
due in accordance with the Conditions.

This temporary Global Note shall not be valid or become obligatory for any
purpose until authenticated by or on behalf of the Issuing and Paying Agent.

This temporary Global Note shall be governed by and construed in accordance with
English law.

                                      -27-

<PAGE>

In witness whereof the Issuer has caused this temporary Global Note to be duly
signed on its behalf.

Dated as of the Issue Date.

[SCOTTISH POWER plc/SCOTTISH POWER UK plc]

By:

CERTIFICATE OF AUTHENTICATION

This temporary Global Note is authenticated
by or on behalf of the Issuing and Paying Agent.

CITIBANK, N.A.
as Issuing and Paying Agent

By:

Authorised Signatory
For the purposes of authentication only.
Without recourse, warranty or liability.

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.

                                      -28-

<PAGE>

                               THE FIRST SCHEDULE

       Principal amount of Notes represented by this temporary Global Note

The following (i) issue of Notes initially represented by this temporary Global
Note, (ii) exchanges of the whole or a part of this temporary Global Note for
interests in a permanent Global Note, for Definitive Notes or for Registered
Notes and/or (iii) cancellations or forfeitures of interests in this temporary
Global Note have been made, resulting in the principal amount of this temporary
Global Note specified in the latest entry in the fourth column below:

<TABLE>
<CAPTION>
Date                     Amount of              Reason for            Principal amount     Notation made
                         decrease in            decrease in           of this temporary    by or on behalf
                         principal amount       principal amount      Global Note on       of the Issuing
                         of this temporary      of this temporary     issue or             and Paying
                         Global Note            Global Note           following such       Agent
                                                (exchange,            decrease
                                                cancellation or
                                                forfeiture)
<S>                      <C>                    <C>                    <C>                 <C>
Issue Date               not applicable         not applicable
</TABLE>

[Insert the provisions of the relevant Pricing Supplement that relate to the
Conditions or the Global Notes as the Second Schedule]

                                      -29-

<PAGE>

                                   SCHEDULE 1
                                     Part B
                          Form of Permanent Global Note

                               SCOTTISH POWER plc

             (incorporated in Scotland with limited liability under
                            registered number 193794)

                              SCOTTISH POWER UK plc

             (incorporated in Scotland with limited liability under
                            registered number 117120)

                             DEBT ISSUANCE PROGRAMME

                          Permanent Global Note No. [.]

This permanent Global Note is issued in respect of the Notes (the "Notes") of
the Tranche(s) and Series specified in the Third Schedule hereto of [Scottish
Power plc/Scottish Power UK plc] (the "Issuer").

Interpretation and Definitions

References in this permanent Global Note to the "Conditions" are to the Terms
and Conditions applicable to the Notes (which are in the form set out in
Schedule 2 Part C to the Trust Deed (as amended or supplemented as at the Issue
Date, the "Trust Deed") dated 20 December 2001 between the Issuer, the other
issuer named therein and The Law Debenture Trust Corporation p.l.c. as trustee,
as such form is supplemented and/or modified and/or superseded by the provisions
of this permanent Global Note (including the supplemental definitions and any
modifications or additions set out in the Third Schedule hereto), which in the
event of any conflict shall prevail). Other capitalised terms used in this
permanent Global Note shall have the meanings given to them in the Conditions or
the Trust Deed.

Aggregate Principal Amount

The aggregate principal amount from time to time of this permanent Global Note
shall be an amount equal to the aggregate principal amount of the Notes as shall
be shown by the latest entry in the fourth column of the First Schedule hereto,
which shall be completed by or on behalf of the Issuing and Paying Agent upon
(i) the exchange of the whole or a part of the temporary Global Note initially
representing the Notes for a corresponding interest herein (in the case of Notes
represented by a temporary Global Note upon issue), (ii) the issue of the Notes
represented hereby (in the case of Notes represented by this permanent Global
Note upon issue), (iii) the exchange of the whole or, where the limited
circumstances so permit, a part of this permanent Global Note for Definitive
Notes or Registered Notes, (iv) the redemption or purchase and cancellation of
Notes represented hereby and/or (v) in the case of Partly-paid Notes, the
forfeiture of Notes represented hereby in accordance with the Conditions
relating to such Partly-paid Notes, all as described below.

Promise to Pay

Subject as provided herein, the Issuer, for value received, hereby promises to
pay to the bearer of this permanent Global Note, upon presentation and (when no
further payment is due in respect of this permanent Global Note) surrender of
this permanent Global Note, on the Maturity Date (or on such earlier date as the
Redemption Amount may become repayable in accordance with the

                                      -30-

<PAGE>

Conditions) the Redemption Amount in respect of the aggregate principal amount
of Notes represented by this permanent Global Note and (unless this permanent
Global Note does not bear interest) to pay interest in respect of such aggregate
principal amount of Notes from the Interest Commencement Date in arrear at the
rates, in the amounts and on the dates for payment provided for in the
Conditions together with such other sums and additional amounts (if any) as may
be payable under the Conditions, in accordance with the Conditions.

Exchange

This permanent Global Note is exchangeable (free of charge to the holder) on or
after the Exchange Date in whole but not, except as provided in the next
paragraph, in part for the Definitive Notes or (if this permanent Global Note is
an Exchangeable Bearer Note) Registered Notes represented by the Certificates
described below:

     (i)   by the Issuer giving notice to the Issuing and Paying Agent and the
           Noteholders of its intention to effect such exchange

     (ii)  if the Third Schedule hereto provides that this permanent Global Note
           is exchangeable for Definitive Notes at the request of the holder, by
           such holder giving notice to the Issuing and Paying Agent of its
           election for such exchange

     (iii) if this permanent Global Note is an Exchangeable Bearer Note, by the
           holder hereof giving notice to the Issuing and Paying Agent of its
           election to exchange the whole or a part of this permanent Global
           Note for Registered Notes or

     (iv)  otherwise, if this permanent Global Note is held on behalf of
           Euroclear or Clearstream, Luxembourg or any other clearing system (an
           "Alternative Clearing System") and any such clearing system is closed
           for business for a continuous period of 14 days (other than by reason
           of holidays, statutory or otherwise) or announces an intention
           permanently to cease business or does in fact do so.

This permanent Global Note is exchangeable in part (provided, however, that if
this permanent Global Note is held by or on behalf of Euroclear and/or
Clearstream, Luxembourg, the rules of Euroclear and/or Clearstream, Luxembourg,
as the case may be, so permit) (i) if this permanent Global Note is an
Exchangeable Bearer Note and the part hereof submitted for exchange is to be
exchanged for Registered Notes or (ii) if so provided, and in accordance with,
the Conditions relating to Partly-paid Notes.

"Exchange Date" means a day falling not less than 60 days, or in the case of an
exchange for Registered Notes 5 days, after that on which the notice requiring
exchange is given and on which banks are open for business in the city in which
the specified office of the Issuing and Paying Agent is located and, except in
the case of exchange pursuant to (iv) above, in the cities in which Euroclear
and Clearstream, Luxembourg or, if relevant, the Alternative Clearing System,
are located.

Subject as provided in the Conditions applicable to Partly-paid Notes, any such
exchange may be effected on or after an Exchange Date by the holder of this
permanent Global Note surrendering this permanent Global Note or, in the case of
a partial exchange, presenting it for endorsement to or to the order of the
Issuing and Paying Agent. In exchange for this permanent Global Note, or part
thereof to be exchanged, the Issuer shall deliver, or procure the delivery of,
duly executed and authenticated Definitive Notes and/or (if this permanent
Global Note is an Exchangeable Bearer

                                      -31-

<PAGE>

Note) Certificates in an aggregate principal amount equal to the principal
amount of this permanent Global Note submitted for exchange (if appropriate,
having attached to them all Coupons (and, where appropriate, Talons) in respect
of interest, and all Receipts in respect of Instalment Amounts, that have not
already been paid on this permanent Global Note), security printed or, in the
case of Certificates, printed in accordance with any applicable legal and stock
exchange requirements and substantially in the form set out in Schedule 2 to the
Trust Deed as supplemented and/or modified and/or superseded by the terms of the
Third Schedule hereto. Certificates issued upon exchange for Registered Notes
shall not be Global Certificates unless the holder so requests and certifies to
the Issuing and Paying Agent that it is, or is acting as a nominee for,
Clearstream, Luxembourg, Euroclear and/or an Alternative Clearing System.

On any exchange of a part of this permanent Global Note the portion of the
principal amount hereof so exchanged shall be endorsed by or on behalf of the
Issuing and Paying Agent in the First Schedule hereto, whereupon the principal
amount hereof shall be reduced for all purposes by the amount so exchanged and
endorsed.

Benefit of Conditions

Except as otherwise specified herein, this permanent Global Note is subject to
the Conditions and the Trust Deed and, until the whole of this permanent Global
Note is exchanged for Definitive Notes or Registered Notes, the holder of this
permanent Global Note shall in all respects be entitled to the same benefits as
if it were the holder of the Definitive Notes for which it may be exchanged and
as if such Definitive Notes had been issued on the Issue Date.

Payments

No person shall be entitled to receive any payment in respect of the Notes
represented by this permanent Global Note that falls due after an Exchange Date
for such Notes, unless upon due presentation of this permanent Global Note for
exchange, delivery of Definitive Notes or Certificates is improperly withheld or
refused by or on behalf of the Issuer or the Issuer does not perform or comply
with any one or more of what are expressed to be its obligations under any
Definitive Notes.

Payments in respect of this permanent Global Note shall be made to its holder
against presentation and (if no further payment falls to be made on it)
surrender of it at the specified office of the Issuing and Paying Agent or of
any other Paying Agent provided for in the Conditions. A record of each such
payment shall be endorsed on the First or Second Schedule hereto, as
appropriate, by the Issuing and Paying Agent or by the relevant Paying Agent,
for and on behalf of the Issuing and Paying Agent, which endorsement shall
(until the contrary is proved) be prima facie evidence that the payment in
question has been made.

Prescription

Claims in respect of principal and interest (as each is defined in the
Conditions) in respect of this permanent Global Note shall become void unless it
is presented for payment within a period of 10 years (in the case of principal)
and 5 years (in the case of interest) from the appropriate Relevant Date.

Meetings

The holder of this permanent Global Note shall be treated at any meeting of
Noteholders, as having one vote in respect of each principal amount of Notes
equal to the minimum Denomination of the Notes for which this permanent Global
Note may be exchanged.

                                      -32-

<PAGE>

Cancellation

Cancellation of any Note represented by this permanent Global Note that is
required by the Conditions to be cancelled (other than upon its redemption)
shall be effected by reduction in the principal amount of this permanent Global
Note representing such Note on its presentation to or to the order of the
Issuing and Paying Agent for endorsement in the First Schedule hereto, whereupon
the principal amount hereof shall be reduced for all purposes by the amount so
cancelled and endorsed.

Purchase

Notes may only be purchased by the Issuer or any of its subsidiaries if they are
purchased together with the right to receive all future payments of interest and
Instalment Amounts (if any) thereon.

Issuer's Options

Any option of the Issuer provided for in the Conditions shall be exercised by
the Issuer giving notice to the Noteholders within the time limits set out in
and containing the information required by the Conditions, except that the
notice shall not be required to contain the serial numbers of Notes drawn in the
case of a partial exercise of an option and accordingly no drawing of Notes
shall be required.

Noteholders' Options

Any option of the Noteholders provided for in the Conditions may be exercised by
the holder of this permanent Global Note giving notice to the Issuing and Paying
Agent within the time limits relating to the deposit of Notes with a Paying
Agent set out in the Conditions substantially in the form of the notice
available from any Paying Agent, except that the notice shall not be required to
contain the certificate numbers of the Notes in respect of which the option has
been exercised, and stating the principal amount of Notes in respect of which
the option is exercised and at the same time presenting this permanent Global
Note to the Issuing and Paying Agent, or to a Paying Agent acting on behalf of
the Issuing and Paying Agent, for notation accordingly in the Fourth Schedule
hereto.

Notices

Notices required to be given in respect of the Notes represented by this
permanent Global Note may be given by their being delivered (so long as this
permanent Global Note is held on behalf of Euroclear, Clearstream, Luxembourg or
any other clearing system) to Euroclear, Clearstream, Luxembourg or such other
clearing system, as the case may be, or otherwise to the holder of this
permanent Global Note, rather than by publication as required by the Conditions.

Negotiability

This permanent Global Note is a bearer document and negotiable and accordingly:

          (i)  is freely transferable by delivery and such transfer shall
               operate to confer upon the transferee all rights and benefits
               appertaining hereto and to bind the transferee with all
               obligations appertaining hereto pursuant to the Conditions

          (ii) the holder of this permanent Global Note is and shall be
               absolutely entitled as against all previous holders to receive
               all amounts by way of Redemption Amount interest or otherwise
               payable in respect of this permanent Global Note and the Issuer
               has waived against such holder and

                                      -33-

<PAGE>

           any previous holder of this permanent Global Note all rights of
           set-off or counterclaim that would or might otherwise be available to
           it in respect of the obligations evidenced by this Global Note and

     (iii) payment upon due presentation of this permanent Global Note as
           provided herein shall operate as a good discharge against such holder
           and all previous holders of this permanent Global Note.

No provision of this permanent Global Note shall alter or impair the obligation
of the Issuer to pay the principal and premium of and interest on the Notes when
due in accordance with the Conditions.

This permanent Global Note shall not be valid or become obligatory for any
purpose until authenticated by or on behalf of the Issuing and Paying Agent.

This permanent Global Note shall be governed by and construed in accordance with
English law.

                                      -34-

<PAGE>

In witness whereof the Issuer has caused this permanent Global Note to be duly
signed on its behalf.

Dated as of the Issue Date.

[SCOTTISH POWER plc/SCOTTISH POWER UK plc]

By:

CERTIFICATE OF AUTHENTICATION

This permanent Global Note is authenticated
by or on behalf of the Issuing and Paying Agent.

CITIBANK, N.A.

as Issuing and Paying Agent

By:

Authorised Signatory
For the purposes of authentication only.
Without recourse, warranty or liability.

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.

                                      -35-

<PAGE>

                               THE FIRST SCHEDULE

       Principal amount of Notes represented by this permanent Global Note

The following (i) issues of Notes initially represented by this permanent Global
Note, (ii) exchanges of interests in a temporary Global Note for interests in
this permanent Global Note, (iii) exchanges of the whole or a part of this
permanent Global Note for Definitive Notes or for Registered Notes, (iv)
cancellations or forfeitures of interests in this permanent Global Note and/or
(v) payments of Redemption Amount in respect of this permanent Global Note have
been made, resulting in the principal amount of this permanent Global Note
specified in the latest entry in the fourth column:

<TABLE>
<CAPTION>
Date                  Amount of                Reason for              Principal amount     Notation made
                      increase/decrease        increase/decrease       of this permanent    by or on behalf
                      in principal             in principal            Global Note          of the Issuing
                      amount of this           amount of this          following such       and Paying
                      permanent Global         permanent Global        increase/decrease    Agent
                      Note                     Note (initial issue,
                                               exchange,
                                               cancellation,
                                               forfeiture or
                                               payment, stating
                                               amount of
                                               payment made)
<S>                   <C>                      <C>                      <C>                 <C>
</TABLE>

                                      -36-

<PAGE>

                               THE SECOND SCHEDULE

                              Payments of Interest

The following payments of interest or Interest Amount in respect of this
Permanent Global Note have been made:

<TABLE>
<CAPTION>
Due date of payment      Date of payment        Amount of interest       Notation made by or on
                                                                         behalf of the Issuing and
                                                                         Paying Agent
<S>                      <C>                    <C>                      <C>
</TABLE>

[Insert the provisions of the relevant Pricing Supplement that relate to the
Conditions or the Global Notes as the Third Schedule.]

                                      -37-

<PAGE>

                               THE FOURTH SCHEDULE

                         Exercise of Noteholders' Option

The following exercises of the option of the Noteholders provided for in the
Conditions have been made in respect of the stated principal amount of this
permanent Global Note:

<TABLE>
<CAPTION>
Date of exercise               Principal amount of       Date of which         Notation made by or
                               this permanent Global     exercise of such      on behalf of the
                               Note in respect of        option is effective   Issuing and Paying
                               which exercise is made                          Agent

<S>                            <C>                       <C>                   <C>
</TABLE>

                                      -38-

<PAGE>

                                   SCHEDULE 1
                                     Part C
                           Form of Global Certificate

                               SCOTTISH POWER plc

             (incorporated in Scotland with limited liability under
                            registered number 193794)

                              SCOTTISH POWER UK plc

             (incorporated in Scotland with limited liability under
                            registered number 117120)

                             DEBT ISSUANCE PROGRAMME

                               GLOBAL CERTIFICATE

                           Global Certificate No. [.]

Registered Holder:

Address of Registered Holder:

Principal amount of Notes
represented by this Global
Certificate:

This Global Certificate is issued in respect of the principal amount specified
above of the Notes (the "Notes") of the Tranche and Series specified in the
Schedule hereto of [Scottish Power plc/Scottish Power UK plc] (the "Issuer").
This Global Certificate certifies that the Registered Holder (as defined above)
is registered as the holder of such principal amount of the Notes at the date
hereof.

Interpretation and Definitions

References in this Global Certificate to the "Conditions" are to the Terms and
Conditions applicable to the Notes (which are in the form set out in Schedule 2
Part C to the Trust Deed (as amended or supplemented as at the Issue Date, the
"Trust Deed") dated 20 December 2001 between the Issuer, the other issuer named
therein and The Law Debenture Trust Corporation p.l.c. as trustee, as such form
is supplemented and/or modified and/or superseded by the provisions of this
Global Certificate (including the supplemental definitions and any modifications
or additions set out in the Schedule hereto), which in the event of any conflict
shall prevail). Other capitalised terms used in this Global Certificate shall
have the meanings given to them in the Conditions or the Trust Deed.

Promise to Pay

The Issuer, for value received, promises to pay to the holder of the Notes
represented by this Global Certificate upon presentation and (when no further
payment is due in respect of the Notes represented by this Global Certificate)
surrender of this Global Certificate on the Maturity Date (or on such earlier
date as the Redemption Amount may become repayable in accordance with the
Conditions) the Redemption Amount in respect of the Notes represented by this
Global Certificate and (unless the Notes represented by this Certificate do not
bear interest) to pay interest in respect of such Notes from the Interest
Commencement Date in arrear at the rates, in the amounts and on the dates for
payment provided for in the Conditions together with such other sums and

                                      -39-

<PAGE>

additional amounts (if any) as may be payable under the Conditions, in
accordance with the Conditions.

For the purposes of this Global Certificate, (a) the holder of the Notes
represented by this Global Certificate is bound by the provisions of the Agency
Agreement, (b) the Issuer certifies that the Registered Holder is, at the date
hereof, entered in the Register as the holder of the Notes represented by this
Global Certificate, (c) this Global Certificate is evidence of entitlement only,
(d) title to the Notes represented by this Global Certificate passes only on due
registration in the Register, and (e) only the holder of the Notes represented
by this Global Certificate is entitled to payments in respect of the Notes
represented by this Global Certificate.

Transfer of Notes represented by permanent Global Certificates

If the Schedule hereto states that the Notes are to be represented by a
permanent Global Certificate on issue, transfers of the holding of Notes
represented by this Global Certificate pursuant to Condition 2(b) may only be
made in part:

          (i)  if the Notes represented by this Global Certificate are held on
               behalf of Euroclear or Clearstream, Luxembourg or any other
               clearing system (an "Alternative Clearing System") and any such
               clearing system is closed for business for a continuous period of
               14 days (other than by reason of holidays, statutory or
               otherwise) or announces an intention permanently to cease
               business or does in fact do so or

          (ii) with the consent of the Issuer

provided that, in the case of the first transfer of part of a holding pursuant
to (i) above, the holder of the Notes represented by this Global Certificate has
given the Registrar not less than 30 days' notice at its specified office of
such holder's intention to effect such transfer. Where the holding of Notes
represented by this Global Certificate is only transferable in its entirety, the
Certificate issued to the transferee upon transfer of such holding shall be a
Global Certificate. Where transfers are permitted in part, Certificates issued
to transferees shall not be Global Certificates unless the transferee so
requests and certifies to the Registrar that it is, or is acting as a nominee
for, Clearstream, Luxembourg, Euroclear and/or an Alternative Clearing System.

Meetings

The holder of the Notes represented by this Global Certificate shall (unless
this Global Certificate represents only one Note) be treated as two persons for
the purposes of any quorum requirements of a meeting of Noteholders.

This Global Certificate shall not become valid for any purpose until
authenticated by or on behalf of the Registrar.

                                      -40-

<PAGE>

In witness whereof the Issuer has caused this Global Certificate to be signed on
its behalf.

Dated as of the Issue Date.

[SCOTTISH POWER plc/SCOTTISH POWER UK plc]

By:

CERTIFICATE OF AUTHENTICATION

This Global Certificate is authenticated
by or on behalf of the Registrar.

CITIBANK, N.A.

as Registrar

By:

Authorised Signatory
For the purposes of authentication only.
Without recourse, warranty or liability.

                                      -41-

<PAGE>

                                Form of Transfer

For value received the undersigned transfers to

                          ___________________________

                          ___________________________

           (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE)

[.] principal amount of the Notes represented by this Global Certificate, and
all rights under them.

Dated                     ___________________________

Signed _____________________  Certifying Signature

Notes:

          (i)  The signature of the person effecting a transfer shall conform to
               a list of duly authorised specimen signatures supplied by the
               holder of the Notes represented by this Global Certificate or (if
               such signature corresponds with the name as it appears on the
               face of this Global Certificate) be certified by a notary public
               or a recognised bank or be supported by such other evidence as a
               Transfer Agent or the Registrar may reasonably require.

          (ii) A representative of the Noteholder should state the capacity in
               which he signs e.g. executor.

[Insert the provisions of the relevant Pricing Supplement that relate to the
Conditions or the Global Certificate as the Schedule.]

                                      -42-

<PAGE>

                                   SCHEDULE 2
                                     Part A
                               Form of Bearer Note

On the front:

[Denomination]         [ISIN]      [Series]       [Certif. No.]

[Currency and denomination]

                               SCOTTISH POWER plc

             (incorporated in Scotland with limited liability under
                            registered number 193794)

                              SCOTTISH POWER UK plc

             (incorporated in Scotland with limited liability under
                            registered number 117120)

                             DEBT ISSUANCE PROGRAMME

                                 Series No. [.]

                                [Title of issue]

This Note forms one of the Series of Notes referred to above (the "Notes") of
[Scottish Power plc/Scottish Power UK plc] (the "Issuer") designated as
specified in the title hereof. The Notes are subject to the Terms and Conditions
(the "Conditions") endorsed hereon and are issued subject to, and with the
benefit of, the Trust Deed referred to in the Conditions. Expressions defined in
the Conditions have the same meanings in this Note.

The Issuer for value received promises to pay to the bearer of this Note, on
presentation and (when no further payment is due in respect of this Note)
surrender of this Note on the Maturity Date (or on such earlier date as the
Redemption Amount may become repayable in accordance with the Conditions) the
Redemption Amount and (unless this Note does not bear interest) to pay interest
from the Interest Commencement Date in arrear at the rates, in the amounts and
on the dates for payment provided for in the Conditions together with such other
sums and additional amounts (if any) as may be payable under the Conditions, in
accordance with the Conditions.

This Note shall not become valid or obligatory for any purpose until
authenticated by or on behalf of the Issuing and Paying Agent.

                                      -43-

<PAGE>

In witness whereof the Issuer has caused this Note to be signed on its behalf.

Dated as of the Issue Date.

[SCOTTISH POWER plc/SCOTTISH POWER UK plc]

By:

CERTIFICATE OF AUTHENTICATION

This Note is authenticated
by or on behalf of the Issuing and Paying Agent.

CITIBANK, N.A.

as Issuing and Paying Agent

By:

Authorised Signatory
For the purposes of authentication only.
Without recourse, warranty or liability.

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.

                                      -44-

<PAGE>

On the back:

                        Terms and Conditions of the Notes

[The Terms and Conditions that are set out in Schedule 2 Part C to the Trust
Deed as amended by and incorporating any additional provisions forming part of
such Terms and Conditions and set out in the relevant Pricing Supplement shall
be set out here.]

                            ISSUING AND PAYING AGENT

                                 CITIBANK, N.A.
                               5 Carmelite Street
                                     London
                                    EC4Y 0PA

                                  PAYING AGENT

                             CITIBANK AG, FRANKFURT
                             Neue Mainzer Strasse 75
                             60311 Frankfurt am Main

                                      -45-

<PAGE>

                                   SCHEDULE 2
                                     Part B
                               Form of Certificate

On the front:

                               SCOTTISH POWER plc

             (incorporated in Scotland with limited liability under
                            registered number 193794)

                              SCOTTISH POWER UK plc

             (incorporated in Scotland with limited liability under
                            registered number 117120)

                             DEBT ISSUANCE PROGRAMME

                                 Series No. [.]

                                [Title of issue]

This Certificate certifies that [.] of [.] (the "Registered Holder") is, as at
the date hereof, registered as the holder of [principal amount] of Notes of the
Series of Notes referred to above (the "Notes") of [Scottish Power plc/Scottish
Power UK plc] (the "Issuer"), designated as specified in the title hereof. The
Notes are subject to the Terms and Conditions (the "Conditions") endorsed hereon
and are issued subject to, and with the benefit of, the Trust Deed referred to
in the Conditions. Expressions defined in the Conditions have the same meanings
in this Certificate.

The Issuer, for value received, promises to pay to the holder of the Note(s)
represented by this Certificate upon presentation and (when no further payment
is due in respect of the Note(s) represented by this Certificate) surrender of
this Certificate on the Maturity Date (or on such earlier date as the Redemption
Amount may become repayable in accordance with the Conditions) the Redemption
Amount in respect of the Notes represented by this Certificate and (unless the
Note(s) represented by this Certificate do not bear interest) to pay interest in
respect of such Notes from the Interest Commencement Date in arrear at the
rates, in the amounts and on the dates for payment provided for in the
Conditions together with such other sums and additional amounts (if any) as may
be payable under the Conditions, in accordance with the Conditions.

For the purposes of this Certificate, (a) the holder of the Note(s) represented
by this Certificate is bound by the provisions of the Agency Agreement, (b) the
Issuer certifies that the Registered Holder is, at the date hereof, entered in
the Register as the holder of the Note(s) represented by this Certificate, (c)
this Certificate is evidence of entitlement only, (d) title to the Note(s)
represented by this Certificate passes only on due registration in the Register,
and (e) only the holder of the Note(s) represented by this Certificate is
entitled to payments in respect of the Note(s) represented by this Certificate.

This Certificate shall not become valid for any purpose until authenticated by
or on behalf of the Registrar.

                                      -46-

<PAGE>

In witness whereof the Issuer has caused this Certificate to be signed on its
behalf.

Dated as of the Issue Date.

[SCOTTISH POWER plc/SCOTTISH POWER UK plc]

By:

CERTIFICATE OF AUTHENTICATION

This Certificate is authenticated
by or on behalf of the Registrar.

CITIBANK, N.A.

as Registrar

By:

Authorised Signatory
For the purposes of authentication only.
Without recourse, warranty or liability.

                                      -47-

<PAGE>

On the back:

                        Terms and Conditions of the Notes

[The Terms and Conditions that are set out in Schedule 2 Part C to the Trust
Deed as amended by and incorporating any additional provisions forming part of
such Terms and Conditions and set out in the relevant Pricing Supplement shall
be set out here.]

                                Form of Transfer

For value received the undersigned transfers to

                          _____________________________

                          _____________________________

           (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF TRANSFEREE)

[.]  principal amount of the Notes represented by this Certificate, and all
     rights under them.

Dated                     ______________________________

Signed ______________________ Certifying Signature

Notes:

          (i)  The signature of the person effecting a transfer shall conform to
               a list of duly authorised specimen signatures supplied by the
               holder of the Notes represented by this Certificate or (if such
               signature corresponds with the name as it appears on the face of
               this Certificate) be certified by a notary public or a recognised
               bank or be supported by such other evidence as a Transfer Agent
               or the Registrar may reasonably require.

          (ii) A representative of the Noteholder should state the capacity in
               which he signs.

             ISSUING AND PAYING AGENT, TRANSFER AGENT AND REGISTRAR

                                 CITIBANK, N.A.
                               5 Carmelite Street
                                     London
                                    EC4Y 0PA

                         PAYING AGENT AND TRANSFER AGENT

                             CITIBANK AG, FRANKFURT
                             Neue Mainzer Strasse 75
                             60311 Frankfurt am Main

                                      -48-

<PAGE>

                                   SCHEDULE 2
                                     Part C
                       Terms and Conditions of the Notes

The Notes are constituted by an Amended and Restated Trust Deed (as amended or
supplemented as at the date of issue of the Notes (the "Issue Date"), the "Trust
Deed") dated 20th December 2001 between Scottish Power plc, Scottish Power UK
plc 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 Noteholders (as defined below). These
terms and conditions include summaries of, and are subject to, the detailed
provisions of the Trust Deed, which includes the form of the Bearer Notes,
Certificates, Receipts, Coupons and Talons referred to below. An Amended and
Restated Agency Agreement (as amended or supplemented as at the Issue Date, the
"Agency Agreement") dated 20th December 2001 has been entered into in relation
to the Notes between Scottish Power plc. Scottish Power UK plc. the Trustee,
Citibank, N.A., London as initial issuing and paying agent and the other agents
named in it. The issuing and paying agent, the paying agents, the registrar, the
transfer agents and the calculation agent(s) for the time being (if any) are
referred to below respectively as the "Issuing and Paying Agent", the "Paying
Agents" (which expression shall include the Issuing and Paying Agent), the
"Registrar", the "Transfer Agents" (which expression shall include the
Registrar) and the "Calculation Agent(s)". Copies of the relevant pricing
Supplement, Trust Deed and the Agency Agreement are available for inspection
during usual business hours at the registered office of the Trustee (presently
at Fifth Floor, 100 Wood Street, London EC2V 7EX) and at the specified offices
of the Paying Agents and the Transfer Agents.

The Noteholders, the holders of the interest coupons (the "Coupons")
appertaining to interest bearing Notes in bearer form and, where applicable in
the case of such Notes, talons for further Coupons (the "Talons") (the
"Couponholders") and the holders of the receipts for the payment of instalments
of principal (the "Receipts") relating to Notes in bearer form of which the
principal is payable in instalments are entitled to the benefit of, are bound
by, and are deemed to have notice of, all the provisions of the Trust Deed and
the relevant Pricing Supplement and are deemed to have notice of those
provisions applicable to them of the Agency Agreement.

Provisions in square brackets are only applicable to Notes issued by Scottish
Power plc. Provisions in square brackets preceded by an asterisk are only
applicable to Notes issued by Scottish Power UK plc.

1.  Form, Denomination and Title

The Notes are issued in bearer form ("Bearer Notes". which expression includes
Notes that are specified to be Exchangeable Bearer Notes), in registered form
("Registered Notes") or in bearer form exchangeable for Registered Notes
("Exchangeable Bearer Notes") in each case in the Denomination(s) shown thereon

All Registered Notes shall have the same Denomination. Where Exchangeable Bearer
Notes are issued, the Registered Notes for which they are exchangeable shall
have the same Denomination as the lowest denomination of Exchangeable Bearer
Note.

Bearer Notes are serially numbered and are issued with Coupons (and where
appropriate, a Talon) attached, save in the case of Notes that do not bear
interest in which case references to interest (other than in relation to
interest due after the Maturity Date), Coupons and Talons in these Conditions
are not applicable. Any Bearer Note the principal amount of which is redeemable
in instalments is issued with one or more Receipts attached.

Registered Notes are represented by registered ("Certificates") and save as
provided in Condition 2(c), each Certificate shall represent the entire holding
of Registered Notes by the same holder.

Title to the Bearer Notes and the Receipts, Coupons and Talons shall pass by
delivery. Title to the Registered Notes shall pass by registration in the
register that the Issuer shall procure to be kept by the Registrar in accordance
with the provisions of the Agency Agreement (the "Register"). Except as ordered
by a court of competent jurisdiction or as required by law, the holder (as
defined below) of any Note, Receipt, Coupon or Talon shall be deemed to be and
may be treated as its absolute owner for all purposes whether or not it is
overdue and regardless of any notice of ownership, trust or an interest in it,
any writing on it (or on the Certificate representing it) or its theft or loss
(or that of the related Certificate) and no person shall be liable for so
treating the holder.

In these Conditions, "Noteholder" means the bearer of any Bearer Note and the
Receipts relating to it or the person in whose name a Registered Note is
registered (as the case may be), "holder" (in relation to a Note, Receipt,
Coupon or Talon) means the bearer of any Bearer Note, Receipt, Coupon or Talon
or the person in whose name a Registered Note is registered (as the case may be)
and capitalised terms have the meanings given to them hereon, the absence of any
such meaning indicating that such term is not applicable to the Notes.

2.  Exchanges of Exchangeable Bearer Notes and Transfers of Registered Notes

(a) Exchanges of Exchangeable Bearer Notes

Subject as provided in Condition 2(f). Exchangeable Bearer Notes may be
exchanged for the same aggregate Principal amount of Registered Notes at the
request in writing of the relevant Noteholder and upon surrender of each
Exchangeable Bearer Note to be exchanged, together with all unmatured Receipts,
Coupons and Talons relating to it, at the Specified office of any Transfer
Agent; provided, however, that where an Exchangeable Bearer Note is surrendered
for exchange after, the Record Date (as defined in Condition 7(b)) for any
payment of interest, the Coupon in respect of that Payment of interest need not
be surrendered with it. Registered Notes may not be exchanged for Bearer Notes.
Bearer Notes of one Denomination may not be

                                      -49-

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exchanged for Bearer Notes of another Denomination. Bearer Notes that are not
Exchangeable Bearer Notes may not be exchanged for Registered Notes.

(b) Transfer of Registered Notes

One or more Registered Notes may be transferred upon the surrender (at the
specified office of the Registrar or any Transfer Agent) of the Certificate
representing such Registered Notes to be transferred, together with the form of
transfer endorsed on such Certificate duly completed and executed and any other
evidence as the Registrar or Transfer Agent may reasonably require. In the case
of a transfer of part only of a holding of Registered Notes represented by one
Certificate, a new Certificate shall be issued to the transferee in respect of
the part transferred and a further new Certificate in respect of the balance of
the holding not transferred shall be issued to the transferor.

(c) Exercise of Options or Partial Redemption in Respect of Registered Notes

In the case of an exercise of the Issuer's or Noteholders' option in respect of,
or a partial redemption of, a holding of Registered Notes represented by a
single Certificate, a new Certificate shall be issued to the holder to reflect
the exercise of such option or in respect of the balance of the holding not
redeemed. In the case of a partial exercise of an option resulting in Registered
Notes of the same holding having different terms, separate Certificates shall be
issued in respect of those Notes of that holding that have the same terms. New
Certificates shall only be issued against surrender of the existing Certificates
to the Registrar or any Transfer Agent. In the case of a transfer of Registered
Notes to a person who is already a holder of Registered Notes, a new Certificate
representing the enlarged holding shall only be issued against surrender of the
Certificate representing the existing holding.

(d) Delivery of New Certificates

Each new Certificate to be issued pursuant to Conditions 2(a), (b) or (c) shall
be available for delivery within five business days of receipt of the request
for exchange, form of transfer or Exercise Notice or surrender of the
Certificate for exchange. Delivery of the new Certificate(s) shall be made at
the specified office of the Transfer Agent or of the Registrar (as the case may
be) to whom delivery or surrender of such request for exchange, form of
transfer. Exercise Notice or Certificate shall have been made or, at the option
of the holder making such delivery or surrender as aforesaid and as specified in
the relevant request for exchange, form of transfer, Exercise Notice or
otherwise in writing, be mailed by uninsured post at the risk of the holder
entitled to the new Certificate to such address as may be so specified, unless
such holder requests otherwise and pays in advance to the relevant Agent the
costs of such other method of delivery and/or such insurance as it may specify.
In this Condition 2(d), "business day" means a day, other than a Saturday or
Sunday, on which banks are open for business in the place of the specified
office of the relevant Transfer Agent or the Registrar.

(e) Exchange Free of Charge

Exchange and transfer of Notes and Certificates on registration, transfer,
exercise of an option or partial redemption shall be effected without charge by
or on behalf of the Issuer, the Registrar or the Transfer Agents, but upon
payment by a Noteholder of any tax or other governmental charges that may be
imposed in relation to it (or the giving by a Noteholder of such indemnity as
the Registrar or the relevant Transfer Agent may reasonably require).

(f) Closed Periods

No Noteholder may require the transfer of a Registered Note to be registered or
an Exchangeable Bearer Note to be exchanged for one or more Registered Note(s)
(i) during the period of 15 days ending on the due date for redemption of, or
payment of any Instalment Amount in respect of, that Note, (ii) during the
period of 15 days prior to any date on which Notes may be called for redemption
by the Issuer at its option pursuant to Condition 6(d), (iii) after any such
Note has been called for redemption or (iv) during the period of seven days
ending on (and including) any Record Date. An Exchangeable Bearer Note called
for redemption may, however, be exchanged for one or more Registered Note(s) in
respect of which the Certificate is simultaneously surrendered not later than
the relevant Record Date.

3.  Status

The Notes and the Receipts and Coupons constitute (subject to Condition 4)
unsecured obligations of the Issuer and shall at all times rank pari passu and
without any preference among themselves. The payment obligations of the Issuer
under the Notes and the Receipts and Coupons shall, save for such exceptions as
may be provided by applicable legislation and subject to Condition 4, at all
times rank at least equally with all other unsecured and unsubordinated
indebtedness and monetary obligations of the Issuer, present and future.

4. Negative Pledge

So long as any of the Notes remains outstanding (as defined in the Trust Deed)
the Issuer will ensure that no Relevant Indebtedness of the Issuer or any
Negative Pledge Company (as defined in Condition 6) or of any other person and
no guarantee by the Issuer or any Negative Pledge Company of any Relevant
Indebtedness (as defined in Condition 6) of any 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

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or any Negative Pledge Company unless the Issuer shall, before or at the same
time as the creation of the Security Interest, take any and all action necessary
to ensure that.

(i) all amounts payable by it under the Notes, the Receipts, the Coupons and the
Trust Deed are secured equally and rateably with the Relevant Indebtedness or
guarantee, as the case may be, by the Security Interest to the satisfaction of
the Trustee; or

(ii) 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 Notes, the Receipts, the Coupons and the
Trust Deed either (i) as the Trustee shall in its absolute discretion deem not
materially less beneficial to the interests of the Noteholders or (ii) as shall
be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the
Noteholders,

save that the Issuer or any Negative Pledge Company may create or have
outstanding a Security Interest in respect of any Relevant Indebtedness and/or
any guarantees given by the Issuer or any Negative Pledge Company in respect of
any Relevant Indebtedness of any person (without the obligation to provide a
Security Interest or guarantee or other arrangement in respect of the Notes, the
Receipts, the Coupons and the Trust Deed as aforesaid) where (1) such Relevant
Indebtedness has an initial maturity of not less than twenty years and is of a
maximum aggregate amount outstanding at any time not exceeding the greater of
(Pounds)250,000,000 or 20% of the Capital and Reserves (as defined in Condition
6) or (2) such Security Interest is provided in respect of a company becoming a
Subsidiary of the Issuer after the date of the relevant Pricing Supplement and
where such Security Interest existed at the time that company becomes a
Subsidiary of the Issuer (provided that such Security Interest was not created
in contemplation of that company becoming a Subsidiary of the Issuer and the
principal amount secured at the time of that company becoming a Subsidiary of
the Issuer is not subsequently increased).

5.   Interest and Other Calculations

(a)  Interest Rate and Accrual

Each Note bears interest on its outstanding principal amount from the Interest
Commencement Date at the rate per annum (expressed as a percentage) equal to the
Interest Rate, such interest being payable in arrear on each Interest Payment
Date.

Interest shall cease to accrue on each Note on the due date for redemption
unless, upon due presentation, payment of principal is improperly withheld or
refused, in which event interest shall continue to accrue (as well after as
before judgment) at the Interest Rate in the manner provided in this Condition 5
to the Relevant Date (as defined in Condition 8).

(b)  Business Day Convention

If any date referred to in these Conditions that is specified to be subject to
adjustment in accordance with a Business Day Convention would otherwise fall on
a day that is not a Business Day, then, if the Business Day Convention specified
is (i) the Floating Rate Business Day Convention, such date shall be postponed
to the next day that is a Business Day unless it would thereby fall into the
next calendar month, in which event (A) such date shall be brought forward to
the immediately preceding Business Day and (B) each subsequent such date shall
be the last Business Day of the month in which such date would have fallen had
it not been subject to adjustment, (ii) the Following Business Day Convention,
such date shall be postponed to the next day that is a Business Day, (iii) the
Modified Following Business Day Convention, such date shall be postponed to the
next day that is a Business Day unless it would thereby fall into the next
calendar month, in which event such date shall be brought forward to the
immediately preceding Business Day or (iv) the Preceding Business Day
Convention, such date shall be brought forward to the immediately preceding
Business Day.

(c)  Interest Rate on Floating Rate Notes

If the Interest Rate is specified in the Pricing Supplement as being Floating
Rate, the Interest Rate for each Interest Accrual Period shall be determined by
the Calculation Agent at or about the Relevant Time on the Interest
Determination Date in respect of each Interest Accrual Period in accordance with
the following:

(i) if the Primary Source for the Floating Rate is a Page, subject as provided
below, the Interest Rate shall be:

(x) the Relevant Rate (where such Relevant Rate on such Page is a composite
quotation or is customarily supplied by one entity); or

(y) the arithmetic mean of the Relevant Rates of the persons whose Relevant
Rates appear on that Page,

in each case appearing on such Page at the Relevant Time on the Interest
Determination Date

(ii) if the Page specified in the Pricing Supplement as a Primary Source
permanently ceases to quote the Relevant Rate(s) but such quotation(s) is/are
available from another page, section or other part of such information service
selected by the Calculation Agent (the "Replacement Page"), the Replacement Page
shall be substituted as the Primary Source for Interest Rate Quotations and if
no Replacement Page exists but such quotation(s) is/are available from a page,
section or other part of a different information service selected by the
Calculation Agent and approved by the Issuer (the "Secondary Replacement Page"),
the Secondary Replacement Page shall be substituted as the Primary Source for
Interest Rate Quotations

(iii) if the Primary Source for the Floating Rate is Reference Banks (as defined
below) or if sub-paragraph (i)(x) applies and no Relevant Rate appears on the
Page at the Relevant Time on the Interest Determination Date or if sub-paragraph
(i)(y) above applies and fewer than two Relevant Rates appear on the Page at the
Relevant Time on the Interest Determination Date, subject

                                      -51-

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as provided below, the Interest Rate shall be the arithmetic mean of the
Relevant Rates that each of the Reference Banks is quoting to leading banks in
the Relevant Financial Centre at the Relevant Time on the Interest Determination
Date, as determined by the Calculation Agent and

(iv) if paragraph (iii) above applies, and the Calculation Agent determines that
fewer than two Reference Banks are so quoting Relevant Rates, subject as
provided below, the Interest Rate shall be the arithmetic mean of the rates per
annum (expressed as a percentage) that the Calculation Agent determines to be
the rate (being the nearest equivalent to the Benchmark) in respect of a
Representative Amount of the Relevant Currency that at least two out of five
leading banks selected by the Calculation Agent in the principal financial
centre of the country of the Relevant Currency or, if the Relevant Currency is
euro, in the Euro-zone as selected by the Calculation Agent (the "Principal
Financial Centre") are quoting at or about the Relevant Time on the date on
which such banks would customarily quote such rates for a period commencing on
the Effective Date for a period equivalent to the Specified Duration (x) to
leading banks carrying on business in Europe, or (if the Calculation Agent
determines that fewer than two of such banks are so quoting to leading banks in
Europe) (y) to leading banks carrying on business in the Principal Financial
Centre; except that, if fewer than two of such banks are so quoting to leading
banks in the Principal Financial Centre, the Interest Rate shall be the Interest
Rate determined on the previous Interest Determination Date (after readjustment
for any difference between any Margin Rate Multiplier or Maximum or Minimum
Interest Rate applicable to the preceding Interest Accrual Period and to the
relevant Interest Accrual Period).

(d) Interest Rate on Zero Coupon Notes

Where a Note the Interest Rate of which is specified in the Pricing Supplement
to be Zero Coupon is repayable prior to the Maturity Date and is not paid when
due, the amount due and payable prior to the Maturity Date shall be the
Redemption Amount of such Note. As from the Maturity Date, the Interest Rate for
any overdue principal of such a Note shall be a rate per annum (expressed as a
percentage) equal to the Amortisation Yield (as defined in Condition 6(b)).

(e) Margin, Maximum/Minimum Interest Rates, Instalment Amounts and Redemption
Amounts, Rate Multipliers and Rounding

(i) If any Margin or Rate Multiplier is specified in the Pricing Supplement
(either (x) generally, or (y) in relation to one or more Interest Accrual
Periods), an adjustment shall be made to all Interest Rates, in the case of (x),
or the Interest Rates for the specified Interest Accrual Periods, in the case of
(y), calculated in accordance with Condition 5(c) above by adding (if a positive
number) or subtracting the absolute value (if a negative number) of such Margin
or multiplying by such Rate Multiplier, subject always to the next paragraph.

(ii) If any Maximum or Minimum Interest Rate, Instalment Amount or Redemption
Amount is specified in the Pricing Supplement, then any Interest Rate,
Instalment Amount or Redemption Amount shall be subject to such maximum or
minimum, as the case may be.

(iii) For the purposes of any calculations required pursuant to these Conditions
(unless otherwise specified in the Pricing Supplement), (x) all percentages
resulting from such calculations shall be rounded, if necessary, to the nearest
one hundred-thousandth of a percentage point (with halves being rounded up). (y)
all figures shall be rounded to seven significant figures (with halves being
rounded up) and (z) all currency amounts that fall due and payable shall be
rounded to the nearest unit of such currency (with halves being rounded up),
save in the case of yen, which shall be rounded down to the nearest yen. For
these purposes "unit" means the lowest amount of such currency that is available
as legal tender in the country(ies) of such currency and, with respect to euro,
means 0.01 euro.

(f) Calculations

The amount of interest payable in respect of my Note for any period shall be
calculated by multiplying the product of the Interest Rate and the outstanding
principal amount of such Note by the Day Count Fraction, unless an Interest
Amount (or a formula for its calculation) is specified in respect of such
period, in which case the amount of interest payable in respect of such Note for
such period shall equal such Interest Amount (or be calculated in accordance
with such formula). Where any Interest Period comprises two or more Interest
Accrual Periods, the amount of interest payable in respect of such Interest
Period shall be the sum of the amounts of interest payable in respect of each of
those Interest Accrual Periods.

(g) Determination and Publication of Interest Rates, Interest Amounts,
Redemption Amounts and Instalment Amounts

As soon as practicable after the Relevant Time on each Interest Determination
Date or such other time on such date as the Calculation Agent may be required to
calculate any Redemption Amount or Instalment Amount, obtain any quote or make
any determination or calculation, it shall determine the interest Rate and
calculate the amount of interest payable (the "Interest Amounts") in respect of
each Denomination of the Notes for the relevant Interest Accrual Period,
calculate the Redemption Amount or Instalment Amount, obtain such quote or make
such determination or calculation, as the case may be, and cause the Interest
Rate and the Interest Amounts for each Interest Period and the relevant Interest
Payment Date and, if required to be calculated, the Redemption Amount or any
Instalment Amount to be notified to the Trustee, the Issuer, each of the Paying
Agents, the Noteholders, any other Calculation Agent appointed in respect of the
Notes that is to make a further calculation upon receipt of such information
and, if the Notes are listed on a stock exchange and the rules of such exchange
or other relevant authority so require, such exchange or other relevant
authority as soon as possible after their determination but in no

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event later than (i) the commencement of the relevant Interest Period, if
determined prior to such time, in the case of notification to such exchange of
an Interest Rate and Interest Amount, or (ii) in all other cases, the fourth
Business Day after such determination. Where any Interest Payment Date or
Interest Period Date is subject to adjustment pursuant to Condition 5(b), the
Interest Amounts and the Interest Payment Date so published may subsequently be
amended (or appropriate alternative arrangements made with the consent of the
Trustee by way of adjustment) without notice in the event of an extension or
shortening of the Interest Period. If the Notes become due and payable under
Condition 10, the accrued interest and the Interest Rate payable in respect of
the Notes shall nevertheless continue to be calculated as previously in
accordance with this Condition but no publication of the Interest Rate or the
Interest Amount so calculated need be made unless the Trustee otherwise
requires. The determination of each Interest Rate, Interest Amount, Redemption
Amount and Instalment Amount, the obtaining of each quote and the making of each
determination or calculation by the Calculation Agent(s) shall (in the absence
of manifest error) be final and binding upon all parties.

(h)   Determination or Calculation by Trustee

If the Calculation Agent does not at any time for any reason determine or
calculate the Interest Rate for an Interest Period or any Interest Amount,
Instalment Amount or Redemption Amount, the Trustee shall do so (or shall
appoint an agent on its behalf to do so) and such determination or calculation
shall be deemed to have been made by the Calculation Agent. In doing so, the
Trustee shall apply the foregoing provisions of this Condition, with any
necessary consequential amendments, to the extent that in its opinion, it can do
so, and, in all other respects it shall do so in such manner as it shall deem
fair and reasonable in all the circumstances.

(i)   Definitions

In these Conditions, unless the context otherwise requires, the following
defined terms shall have the meanings set out below:

"Business Day" means:

(i)   in the case of a specified currency other than euro, a day (other than a
Saturday or Sunday) on which commercial banks and foreign exchange markets
settle payments in the principal financial centre for that currency; and/or

(ii)  in the case of euro, a day on which the TARGET system is operating (a
"TARGET Business Day"); and/or

(iii) in the case of a specified currency with one or more financial centres, a
day (other than a Saturday or Sunday) on which commercial banks and foreign
exchange markets settle payments in the specified currency in the specified
financial center or, if no financial centre is specified, generally in each of
such financial centres.

"Day Count Fraction" means, in respect of the calculation of an amount of
interest on any Note for any period of time (from and including the first day of
such period to but excluding the last) (whether or not constituting an Interest
Period, the "Calculation Period"):

(i)   if "Actual/365" or "Actual/Actual-ISDA" is specified in the Pricing
Supplement, the actual number of days in the Calculation Period divided by 365
(or, if any portion of that Calculation Period falls in a leap year, the sum of
(A) the actual number of days in that portion of the Calculation Period falling
in a leap year divided by 366 and (B) the actual number of days in that portion
of the Calculation Period falling in a non-leap year divided by 365);

(ii)  if "Actual/365 (Fixed)" is specified in the Pricing Supplement, the actual
number of days in the Calculation Period divided by 365;

(iii) if "Actual/360" is specified in the Pricing Supplement, the actual number
of days in the Calculation Period divided by 360;

(iv)  if "30/360", "360/360" or "Bond Basis" is specified in the Pricing
Supplement, the number of days in the Calculation Period divided by 360 (the
number of days to be calculated on the basis of a year of 360 days with
12 30-day months (unless (a) the last day of the Calculation Period is the 31st
day of a month but the first day of the Calculation Period is a day other than
the 30th or 31st day of a month, in which case the month that includes that last
day shall not be considered to be shortened to a 30-day month, or (b) the last
day of the Calculation Period is the last day of the month of February, in which
case the month of February shall not be considered to be lengthened to a 30-day
month)); and

(v)   if "30F/360" or "Eurobond Basis" is specified in the Pricing Supplement,
the number of days in the Calculation Period divided by 360 (the number of days
to be calculated on the basis of a year of 360 days with 12 30-day months,
without regard to the date of the first day or last day of the Calculation
Period unless, in the case of a Calculation Period ending on the Maturity Date,
the Maturity Date is the last day of the month of February in which case the
month of February shall not be considered to be lengthened to a 30-day month);
and

(vi)  if "Actual/Actual-ISMA" is specified hereon:

(a)   if the Calculation Period is equal to or shorter than the Determination
Period during which it falls, the number of days in the Calculation Period
divided by the product of (x) the number of days in such Determination Period
and (y) the number of Determination Periods normally ending in any year; and

(b)   if the Calculation Period is longer than one Determination Period, the sum
of:

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(x) the number of days in such Calculation Period falling in the Determination
Period in which it begins divided by the product of (1) the number of days in
such Determination Period and (2) the number of Determination Periods normally
ending in any year; and

(y) the number of days in such Calculation Period falling in the next
Determination Period divided by the product of (1) the number of days in such
Determination Period and (2) the number of Determination Periods normally ending
in any year

where:

"Determination Period" means the period from and including a Determination Date
in any year to but excluding the next Determination Date.

"Effective Date" means, with respect to any Floating Rate to be determined on an
Interest Determination Date, the date specified as such in the Pricing
Supplement or, if none is so specified, the first day of the Interest Accrual
Period to which such Interest Determination Date relates.

"Euro-zone" means the region comprised of member states of the European Union
that adopt the single currency in accordance with the Treaty establishing the
European Community, as amended.

"Interest Accrual Period" means the period beginning on (and including) the
Interest Commencement Date and ending on (but excluding) the first Interest
Period Date and each successive period beginning on (and including) an Interest
Period Date and ending on (but excluding) the next succeeding Interest Period
Date.

"Interest Commencement Date" means the Issue Date or such other date as may be
specified in the Pricing Supplement.

"Interest Determination Date" means, with respect to an Interest Rate and
Interest Accrual Period, the date specified as such in the Pricing Supplement
or, if none is so specified and the Relevant Currency is not euro, (i) the first
day of such Interest Accrual Period if the Relevant Currency is Sterling or (ii)
the day falling two Business Days in London for the Relevant Currency prior to
the first day of such Interest Accrual Period if the Relevant Currency is
neither Sterling nor euro or (iii) the day falling two TARGET Business Days
prior to the first day of such Interest Accrual Period if the Relevant Currency
is euro.

"Interest Period" means the period beginning on (and including) the Interest
Commencement Date and ending on (but excluding) the first Interest Payment Date
and each successive period beginning on (and including) an Interest Payment Date
and ending on (but excluding) the next succeeding Interest Payment Date.

"Interest Period Date" means each Interest Payment Date unless otherwise
specified in the Pricing Supplement.

"Interest Rate" means the rate of interest payable from time to time in respect
of this Note and that is either specified or calculated in accordance with the
provisions in the Pricing Supplement.

"Page" means such page, section, caption, column or other part of a particular
information service (including, but not limited to, Reuters Markets 3000
("Reuters") and Bridge/Telerate ("Telerate")) as may be specified for the
purpose of providing a Relevant Rate, or such other page, section, caption,
column or other part as may replace it on that information service or on such
other information service, in each case as may be nominated by the person or
organisation providing or sponsoring the information appearing there for the
purpose of displaying rates or prices comparable to that Relevant Rate.

"Reference Banks" means the institutions specified as such in the Pricing
Supplement or, if none, four (or, if the Relevant Financial Centre is Helsinki,
five) major banks selected by the Calculation Agent in the interbank market (or,
if appropriate, money, swap or over-the-counter index options market) that is
most closely connected with the Benchmark which, if EURIBOR is the relevant
Benchmark, shall be the Euro-zone.

"Relevant Currency" means the currency specified in the Pricing Supplement or,
if none is specified, the currency in which the Notes are denominated.

"Relevant Financial Centre" means, with respect to any Floating Rate to be
determined on an Interest Determination Date, the financial centre as may be
specified as such in the Pricing Supplement or, if none is so specified, the
financial centre with which the relevant Benchmark is most closely connected
(which, in the case of EURIBOR, shall be the Euro-zone) or, if none is so
connected, London.

"Relevant Rate" means the Benchmark for a Representative Amount of the Relevant
Currency for a period (if applicable or appropriate to the Benchmark) equal to
the Specified Duration commencing on the Effective Date.

"Relevant Rate" means the Benchmark for a Representative Amount of the Relevant
Currency for a period (if applicable or appropriate to the Benchmark) equal to
the Specified Duration commencing on the Effective Date.

"Relevant Time" means, with respect to any Interest Determination Date, if the
Relevant Currency is not euro, the local time in the Relevant Financial Centre
specified in the Pricing Supplement or, if none is specified, the local time in
the Relevant Financial Centre at which it is customary to determine bid and
offered rates in respect of deposits in the Relevant Currency in the interbank
market in the Relevant Financial Centre and for this purpose "local time" means,
with respect to the Euro-zone as a Relevant Financial Centre, Central European
Time.

"Representative Amount" means, with respect to any Floating Rate to be
determined on an Interest Determination Date the amount specified as such in the
Pricing Supplement or, if none is specified, an amount that is representative
for a single transaction in the relevant market at the time.

                                      -54-

<PAGE>

"Specified Duration" means, with respect to any Floating Rate to be determined
on an Interest Determination Date, the duration specified in the Pricing
Supplement or, if none is specified, a period of time equal to the relative
Interest Accrual Period, ignoring any adjustment pursuant to Condition 5(b).

"TARGET System" means the Trans-European Automated Real-Time Gross Settlement
Express Transfer (TARGET) system or any successor thereto.

(j)   Calculation Agent and Reference Banks

The Issuer shall procure that there shall at all times be four Reference Banks
(or such other number as may be required) with offices in the Relevant Financial
Centre and one or more Calculation Agents if provision is made for them in the
Pricing Supplement and for so long as any Note is outstanding (as defined in the
Trust Deed). If any Reference Bank (acting through its relevant office) is
unable or unwilling to continue to act as a Reference Bank, then the Issuer
shall (with the prior approval of the Trustee) appoint another Reference Bank
with an office in the Relevant Financial Centre to act as such in its place.
Where more than one Calculation Agent is appointed in respect of the Notes,
references in these Conditions to the Calculation Agent shall be construed as
each Calculation Agent performing its respective duties under the Conditions. If
the Calculation Agent is unable or unwilling to act as such or if the
Calculation Agent fails duly to establish the Interest Rate for an Interest
Period or Interest Accrual Period or to calculate any Interest Amount,
Instalment Amount or the Redemption Amount or to comply with any other
requirement, the Issuer shall (with the prior approval of the Trustee) appoint a
leading bank or investment banking firm engaged in the interbank market (or, if
appropriate, money, swap or over-the-counter index options market) that is most
closely connected with the calculation or determination to be made by the
Calculation Agent (acting through its principal London office or any other
office actively involved in such market) to act as such in its place. The
Calculation Agent may not resign its duties without a successor having been
appointed as aforesaid.

(k)   Certificates to be Final

All certificates, communications, opinions, determinations, calculations,
quotations and decisions given, expressed, made or obtained for the purposes of
the provisions of this Condition 5, whether by the Calculation Agent or the
Trustee, shall (in the absence of wilful default, bad faith or manifest error)
be binding on the Issuer, the Calculation Agent, the Trustee, the other Paying
Agents and all Noteholders, Receiptholders and Couponholders and (in the absence
as aforesaid) no liability to the Issuer, the Noteholders, the Receiptholders or
the Couponholders shall attach to the Calculation Agent or the Trustee in
connection with the exercise or non-exercise by them of their powers, duties and
discretions pursuant to such provisions.

6.    Redemption, Purchase and Options

(a)   Redemption by Instalments and Final Redemption

(i)   Unless previously redeemed, purchased and cancelled as provided in this
Condition 6 or the relevant Instalment Date (being one of the dates so specified
hereon) is extended pursuant to the Issuer's or any Noteholder's option in
accordance with Condition 6(d) or 6(e), each Note that provides for Instalment
Dates and Instalment Amounts shall be partially redeemed on each Instalment Date
at the related Instalment Amount specified in the Pricing Supplement. The
outstanding principal amount of each such Note shall be reduced by the
Instalment Amount [or, if such Instalment Amount is calculated by reference to a
proportion of the principal amount of such Note, such proportion) for all
purposes with effect from the related Instalment Date, unless payment of the
Instalment Amount is improperly withheld or refused on presentation of the
related Receipt, in which case, such amount shall remain outstanding until the
Relevant Date relating to such Instalment Amount.

(ii)  Unless previously redeemed, purchased and cancelled as provided below or
its maturity is extended pursuant to the Issuer's or any Noteholder's option in
accordance with Condition 6(d) or 6(e), each Note shall be finally redeemed on
the Maturity Date specified in the Pricing Supplement at its Redemption Amount
(which, unless otherwise provided in the Pricing Supplement, is its principal
amount) or, in the case of a Note falling within paragraph (i) above, its final
Instalment Amount.

(b)   Early Redemption of Zero Coupon Notes:

(i)   The Redemption Amount payable in respect of any Note that does not bear
interest prior to the Maturity Date, the Redemption Amount of which is not
linked to an index and/or a formula, upon redemption of such Note pursuant to
Condition 6(c) or 6(f) or upon it becoming due and payable as provided in
Condition 10 shall be the Amortised Face Amount (calculated as provided below)
of such Note.

(ii)  Subject to the provisions of sub-paragraph (iii) below, the
Amortised Face Amount of any such Note shall be the scheduled Redemption Amount
of such Note on the Maturity Date discounted at a rate per annum (expressed as a
percentage) equal to the Amortisation Yield (which, if none is shown in the
Pricing Supplement, shall be such rate as would produce an Amortised Face
Amount equal to the issue price of the Notes if they were discounted back to
their issue price on the Issue Date) compounded annually. Where such calculation
is to be made for a period of less than one year, it shall be made on the basis
of the Day Count Fraction shown hereon.

(iii) If the Redemption Amount payable in respect of any such Note upon its
redemption pursuant to Condition 6(c) or 6(f) or upon it becoming due and
payable as provided in Condition 10 is not paid when due, the Redemption Amount
due and payable in respect of such Note shall be the Amortised Fact Amount of
such Note as defined in sub-paragraph (ii) above, except that such sub-paragraph
shall have effect as though the reference therein to the date on which the Note
becomes due and payable

                                       -55-

<PAGE>

were replaced by a reference to the Relevant Date. The calculation of the
Amortised Face Amount in accordance with this sub-paragraph shall continue to be
made (as well after as before judgment) until the Relevant Date, unless the
Relevant Date falls on or after the Maturity Date, in which case the amount due
and payable shall be the scheduled Redemption Amount of such Note on the
Maturity Date together with any interest that may accrue in accordance with
Condition 5(d).

(c) Redemption for Taxation Reasons

If, as a result of any amendment to or change in the laws or regulations of the
United Kingdom or of any political subdivision thereof or any authority therein
or thereof having power to tax or any change in the official or generally
accepted interpretation or application of such laws or regulations which becomes
effective on or after the date of the agreement to issue the first Tranche of
the Notes, the Issuer has or will become obliged to pay any additional amounts
as described in Condition 8 (and such amendment or change has been evidenced by
the delivery by the Issuer to the Trustee (who shall 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
requirement cannot be avoided by the Issuer, taking reasonable measures
available to it and (ii) an opinion of independent legal advisers of recognised
standing to the effect that such amendment or change has occurred (irrespective
of whether such amendment or change is then effective)), the Issuer may (having
given not less than 30 nor more than 90 days notice to the Trustee and to the
holders in accordance with Condition 16) redeem all, but not some only, of the
Notes (other than Notes in respect of which the Issuer shall have given a notice
of redemption pursuant to Condition 6(d) or in respect of which a Noteholder
shall have given a Put Event Notice in accordance with Condition 6(f), in each
case prior to any notice being given under this Condition 6(c)) at their
Redemption Amount, together with accrued interest to the date fixed for such
redemption, provided that no such notice of redemption shall be given earlier
than 90 days prior to the earliest date on which the Issuer would be required to
pay such additional amounts were a payment in respect of the Notes then due.

(d) Redemption at the Option of the Issuer and Exercise of Issuer's Options

If so provided in the Pricing Supplement, the Issuer may, on giving irrevocable
notice to the Noteholders falling within the Issuer's Option Period, redeem, or
exercise the Issuer's option in relation to, all or, if so provided, some of the
Notes (other than Notes in respect of which the Issuer shall have given a notice
of redemption pursuant to Condition 6(c) or in respect of which a Noteholder
shall have given a Put Event Notice in accordance with Condition 6(f), in each
case prior to any notice being given under this Condition 6(d)) in the principal
amount or integral multiples thereof and on the date or dates so provided. Any
such redemption of Notes shall be at their Redemption Amount together with
interest accrued to the date fixed for redemption.

All Notes in respect of which any such notice is given shall be redeemed, or the
Issuer's option shall be exercised, on the date specified in such notice in
accordance with this Condition.

In the case of a partial redemption or a partial exercise of the Issuer's
option, the notice to Noteholders shall also contain the certificate numbers of
the Notes to be redeemed or in respect of which such option has been exercised,
which shall have been drawn in such place as the Trustee may approve and in such
manner as it deems appropriate, subject to compliance with any applicable laws
and stock exchange or other relevant authority requirements. So long as the
Notes are listed on the Official List and are admitted to trading on the London
Stock Exchange's market for listed securities or any other stock exchange and
the rules of the relevant stock exchange or other relevant authority so require,
the Issuer shall, once in each year in which there has been a partial redemption
of the Notes, cause to be published in a leading newspaper of general
circulation in the United Kingdom or as specified by such other stock exchange
or other relevant authority, a notice specifying the aggregate principal amount
of Notes outstanding and a list of the Notes drawn for redemption but not
surrendered.

(e) Redemption at the Option of Noteholders and Exercise of Noteholders' Options

If so provided in the Pricing Supplement, the Issue shall, at the option of the
holder of any such Note, redeem such Note on the date or dates so provided at
its Redemption Amount together with interest accrued to the date fixed for
redemption.

To exercise such option or any other Noteholders option that may be set out
hereon the holder must deposit (in the case of Bearer Notes) such Note (together
with all unmatured Receipts and Coupons and unexchanged Talons) with any Paying
Agent or (in the case of Registered Notes) the Certificate representing such
Note(s) with the Registrar or any Transfer Agent at its specified office,
together with a duly completed option exercise notice ("Exercise Notice" which
expression shall include any Put Notice (as defined below)) in the form
obtainable from any Paying Agent, the Registrar or any Transfer Agent (as
applicable) within the Noteholder's Option Period (which expression shall, in
the case of the exercise of the option referred to in Condition 6(f) below, mean
the Put Period (as defined below)). No Note or Certificate so deposited and
option may be withdrawn without the prior consent of the Issuer, except that
such Note or Certificate will be returned to the relevant Noteholder by the
Paying Agent, the Registrar or Transfer Agent with which it has been deposited
if, prior to the due date for its redemption or the exercise of the option, the
Note becomes immediately due and payable or if upon due presentation payment of
the redemption moneys is not made or exercise of the option is denied.

(f) Redemption at the Option of the Noteholders' on a Put Event

If this Condition 6(f) is specified in the Pricing Supplement as being
applicable, then if, at any time while any of the Notes remains outstanding, a
Restructuring Event occurs and prior to the commencement of or during the
Restructuring Period an

                                      -56-

<PAGE>

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 Noteholders, the following provisions of
this Condition 6(f) shall cease to have any further effect in relation to such
Restructuring Event.

If, at any time while any of the Notes remains outstanding, a Restructuring
Event occurs and (subject to this Condition 6(f)) 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

an Independent Financial Adviser shall have certified in writing to the Trustee
that such Restructuring Event is, in its opinion, materially prejudicial to the
interests of the Noteholders (a "Negative Certification"), then, unless at any
time the Issuer shall have given a notice under Condition 6(c) or 6(d), the
holder of each Note will, upon the giving of a Put Event Notice (as defined
below), have the option (the "Put Option") to require the Issuer to redeem or,
at the option of the Issuer, purchase (or procure the purchase of) that Note on
the Put Date (as defined below), 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.

An event shall be deemed not to be a Restructuring Event if, notwithstanding the
occurrence of a Rating Downgrade or a Negative Rating Event, the rating assigned
to the Rated Securities by any Rating Agency is subsequently increased to, or,
as the case may be, there is assigned to the Notes or other unsecured and
unsubordinated debt of the Issuer or a Relevant Subsidiary (or of any Subsidiary
of the Issuer which is guaranteed on an unsecured and unsubordinated basis by
the Issuer or a Relevant Subsidiary) having an initial maturity of five years or
more by any Rating Agency, an investment grade rating (BBB-/Baa3 or their
respective equivalents for the time being) or better prior to any Negative
Certification being issued.

Any certification by an Independent Financial Adviser as aforesaid as to whether
or not, in its opinion any Restructuring Event is materially prejudicial to the
interests of the Noteholders shall, in the absence of manifest error, be
conclusive and binding on the Trustee, the Issuer and the Noteholders.

Promptly upon, and in any event within 14 days after, the Issuer becoming aware
that a Put Event has occurred, the Issuer 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 Notes then
outstanding shall, give notice (a "Put Event Notice") to the Noteholders in
accordance with Condition 16 specifying the nature of the Put Event and the
procedure for exercising the Put Option.

To exercise the Put Option, the holder of a Note must deposit (in the case of a
Bearer Note) such Note with any Paying Agent or (in the case of Registered
Notes) the Certificate representing such Note(s) with the Registrar or any
Transfer Agent at its specified office, on a day which is a Business Day in the
City of London and in the place of such specified office falling within the
period (the "Put Period") of 45 days after that on which a Put Event Notice is
given, 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, the Registrar or any Transfer Agent (as applicable) (a "Put Notice") and
in which the holder may specify a bank account to which payment is to be made
under this Condition 6. Where any Bearer Note is delivered without all Coupons
relating to it which mature after the day (the "Put Date") being the fifteenth
day after the date of expiry of the Put Period, the exercise of the Put Option
in respect of such Note shall be subject to the provision of such indemnity as
the Issuer may reasonably require. The Paying Agent to which such Note and Put
Notice or, as the case may be, the Registrar or Transfer Agent to which the
Certificate and Put Notice are delivered shall issue to the Noteholder concerned
a non-transferable receipt in respect of the Note so delivered. Payment in
respect of any Note so delivered shall be made, if the holder duly specifies in
the Put Notice an account with a bank 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 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. A Put
Notice, once given, shall be irrevocable. For the purposes of Conditions 9, 10,
11, 12, 14, 16 and 17 and for certain other purposes specified in the Trust
Deed, receipts issued pursuant to this Condition 6(f), shall be treated as if
they were Notes. The Issuer shall redeem or, at the option of the Issuer.
purchase (or procure the purchase of) the relevant Note on the applicable Put
Date unless previously redeemed or purchased.

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 6(f) 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 pursuant to
the Trust Deed to the contrary the Trustee may assume that no Restructuring
Event, Negative Rating Event or such other event has occurred. The Trust Deed
also provides that in determining whether or not a Restructuring Event has
occurred, the Trustee may rely solely on an opinion given in a certificate
signed by two directors of the Issuer.

                                       -57-

<PAGE>

In these Conditions:

"Balancing and Settlement Code" means the BSC, as provided for in the NGC
Transmission Licence; and references to the Balancing and Settlement Code
include the Balancing and Settlement Code as given contractual force and effect
by the Framework Agreement;

"Business Day" means, in relation to any place, a day on which commercial banks
and foreign exchange markets generally settle payments in that place;

"Capital and Reserves" means the aggregate of:

(i) the amount paid up or credited as paid up on the share capital of the
Issuer; and

(ii) the total of the reserves of the Group, including any share premium
account, revaluation reserve, capital redemption reserve, merger reserve and the
balance on the profit and loss account, but excluding amounts attributable to
minority interests, all as shown in the then latest audited consolidated balance
sheet of the Group prepared in accordance with generally accepted accounting
principles in the United Kingdom, but adjusted as may be necessary in respect of
any variation in the paid up share capital or share premium account of the
Issuer 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 and/or as the Directors of the
Issuer may consider appropriate. A report by the Directors of the Issuer as to
the amount of Capital and Reserves at any given time accompanied by a report by
the Auditors (as defined in the Trust Deed) addressed to the Directors of the
Issuer and the Trustee as to proper extraction of the figures used by the
Directors of the Issuer in determining Capital and Reserves at any given time
and mathematical accuracy of the calculations shall, in the absence of manifest
error, be conclusive and binding on the Trustee and the Noteholders. For the
avoidance of doubt, the Auditors in their report will not comment on, and will
have no responsibility to consider whether the adjustments made by the Directors
of the Issuer are appropriate or complete;

"Distribution Licence" means the electricity distribution licence granted or
treated as granted to SP Distribution Limited (SC189125) under Section 6(l)(c)
of the Electricity Act as modified and in force from time to time;

"Electricity Act" means the Electricity Act 1989 as amended or re-enacted from
time to time and all subordinate legislation made pursuant thereto;

"Excluded Subsidiary" means:

(i) Southern Water plc;

(ii) any Subsidiary of Southern Water plc;

(iii) Thus plc; and

(iv) any Subsidiary of the Issuer:

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

(b) 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 such
Subsidiary or another Excluded Subsidiary) in respect of the repayment thereof,
except as expressly referred to in sub-paragraph (ii) of the definition of
Project Finance Indebtedness; and

(c) which has been designated as such by the Issuer by written notice to the
Trustee, provided that the Issuer 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;

"Framework Agreement" shall have the meaning ascribed to BSC Framework Agreement
in the NGC Transmission Licence;

"Gas and Electricity Markets Authority" means the authority so named and
established under Section 1 of the Utilities Act 2000;

"Generation Licence" means the electricity generation licence granted or treated
as granted to Scottish Power Generation Limited (SC189124) under Section 6(1)(a)
of the Electricity Act as modified and in force from time to time;

["Group" means Scottish Power plc and its Subsidiary Undertakings and "member of
the Group" shall be construed accordingly;]

*["Group" means Scottish Power UK plc and its Subsidiary Undertakings and
"member of the Group" shall be construed accordingly;]

"indebtedbness 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 or
acceptance credit, or (iii) any notes, bonds, debentures, debenture stock, loan
stock or other securities offered, issued or distributed

                                      -58-

<PAGE>

whether by way of public offer, private placing, acquisition consideration or
otherwise and whether issued for cash or in whole or in part or for a
consideration other than cash;

"Independent Financial Adviser" means a financial adviser appointed by the
Issuer and approved by the Trustee (such approval not to be unreasonably
withheld or delayed) or, if the Issuer shall not have appointed such an adviser
within 21 days after 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 Issuer;

"Manweb Licence" means the electricity distribution licence granted or treated
as granted to SP Manweb plc (2366937) under Section 6(l)(c) of the Electricity
Act as modified and in force from time to time;

"Negative Pledge Company" means each of SP Distribution Limited (SC189125), SP
Transmission Limited (SCl89126) and Scottish Power Generation Limited
(SCl89124);

A "Negative Rating Event" shall be deemed to have occurred if (A) the Issuer
does not, either prior to or not later than 14 days after the date of a Negative
Certification in respect of the revelant Restructuring Event, seek, and
thereupon use all reasonable endeavours to obtain, a rating of the Notes or any
other unsecured and unsubordinated debt of the Issuer or a Relevant Subsidiary
(or of any Subsidiary of the Issuer which is guaranteed on an unsecured and
unsubordinated basis by the Issuer or a Relevant Subsidiary) having an initial
maturity of five years or more from a Rating Agency or (B) if it does so seek
and use such endeavours, it is unable, as a result of such Restructuring Event,
to obtain such a rating of at least investment grade (BBB-/Baa3, or their
respective equivalents for the time being);

"NGC Transmission Licence" means the licence granted to The National Grid
Company plc under Section 6(l)(b) of the Electricity Act;

["Principal Subsidiary" at any time shall mean:

(A) any Relevant Subsidiary; or

(B) any Subsidiary of the Issuer (not being an Excluded Subsidiary or any other
Subsidiary of the Issuer 90% in principal amount of whose indebtedness for
borrowed money is Project Finance Indebtedness):

(i) whose (a) profits on ordinary activities before tax or (b) net assets
represent 20% or more of the consolidated profits on ordinary activities before
tax of the Group or consolidated net assets of the Group respectively, in each
case as calculated by reference to the then latest audited financial statements
of such Subsidiary and the then latest audited consolidated financial statements
of the Group; or

(ii) to which is transferred all or substantially all of the business,
undertaking and assets of a Subsidiary of the Issuer 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 cease to be a Principal Subsidiary under the provisions of
this sub-paragraph (ii) (but without prejudice to the provisions of
sub-paragraph (i) above), upon publication of its next audited financial
statements,

all as more fully defined in the Trust Deed.

A report by the Directors of the Issuer that, in their opinion, a Subsidiary of
the Issuer is or is not or was or was not at any particular time or throughout
any specified period a Principal Subsidiary, accompanied by a report by the
Auditors addressed to the Directors of the Issuer and the Trustee as to proper
extraction of the figures used by the Directors of the issuer in determining the
Principal Subsidiaries of the Issuer and mathematical accuracy of the
calculations shall, in the absence of manifest error, be conclusive and binding
on the Trustee and the Noteholders;]

*["Principal Subsidiary" means any one of SP Distribution Limited (SCl89125), SP
Transmission Limited (SC189126) or SP Manweb plc (2366937);]

"Project Finance Indebtedness" means any present or future indebtedness incurred
to finance the ownership, acquisition, development and/or operation of an asset,
whether or not an asset of a member or the Group

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

(ii) in respect of which the person or persons to whom any such indebtedness is
or may be owned by the relevant borrower (whether or not a member of the Group)
has or have no recourse whatsoever to any member of the Group (other than an
Excluded Subsidiary) for the repayment thereof other than:

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

(B) recourse for the purpose only of enabling amounts to be claimmed in respect
of such indebtedness in an enforcement of any encumbrance given by such borrower
over such asset or the income, cash flow or other proceeds, deriving therefrom
(or given by any shareholder or the like in the borrower over its shares or the
like in the capital of the borrower) to secure such indebtedness, provided that
(aa) the extent of such recourse is limited solely to the amount of any
recoveries made on any such enforcement, and (bb) such person or persons is/are
not entitled, by virtue of any right or claim arising out of or in connection
with such indebtedness, to commence proceedings for the winding up or
dissolution of any member of the Group (other than

                                       -59-

<PAGE>

an Excluded Subsidiary) or to appoint or procure the appointment of any
receiver, trustee or similar person or officer in respect of any member of the
Group (other than an Excluded Subsidiary) or any of its assets (save for the
assets the subject of such encumbrance); and/or

(C) recourse under any form of assurance, undertaking or support, which recourse
is limited to a claim for damages (other than liquidated damages and damages
required to be calculated in a specified way) for breach of an obligation (not
being a payment obligation or on obligation to procure payment by another or an
indemnity in respect thereof or any obligation to comply or to procure
compliance by another with any financial ratios or other tests of financial
condition) by any member of the Group (other than an Excluded Subsidiary);

A "Put Event" occurs on the date of the last to occur of (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;

"Rated Securities" means the Notes, if at any time and for so long as they have
a rating from a Rating Agency, and otherwise any other unsecured and
unsubordinated debt of the Issuer or a Relevant Subsidiary (or of any Subsidiary
of the Issuer which is guaranteed on an unsecured and unsubordinated basis by
the Issuer or a Relevant Subsidiary) having an initial maturity of five years or
more which is rated by a Rating Agency;

"Rating Agency" means Standard & Poor's Rating Services, a division of the
McGraw-Hill Companies, Inc. or any of its Subsidiary Undertakings and their
successors or Moody's Investors Service, Inc. or any of its Subsidiary
Undertakings and their successors or Fitch Ratings Ltd. or any of its Subsidiary
Undertakings and their successors or any rating agency substituted for any of
them (or any permitted substitute of them) by the Issuer from time to time with
the prior written approval of the Trustee (such approval not to be unreasonably
withheld or delayed);

A "Rating Downgrade" shall be deemed to have occurred in respect of a
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 Issuer or by its own volition) is withdrawn or reduced from an investment
grade rating (BBB-/Baa3, or their respective equivalents for the time being, or
better) to a non-investment grade rating (BB+/Ba1, or their respective
equivalents for the time being, or worse) or, if the Rating Agency shall then
have already rated the Rated Securities below investment grade (as described
above), the rating is lowered one full rating category (from BB+/Ba1 to BB/Ba2
or such similar lowering);

"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 in any event not include
Project Finance Indebtedness;

["Relevant Licence" means the Generation Licence, the Transmission Licence, the
Distribution Licence, the Manweb Licence or the Supply Licence or, in any such
case, and from time to time, any other licence or licences relating to the
transmission, distribution or supply of electricity in the United Kingdom
granted to the Issuer and/or my Relevant Subsidiary as contemplated pursuant to
paragraph (A) of "Restructuring Event" below and "Relevant Licence" shall be
construed accordingly;]

*["Relevant Licence" means the Distribution Licence, the Transmission Licence or
the Manweb Licence or, in any such case, and from time to time, any other
licence or licences relating to the distribution or transmission of electricity
in the United Kingdom granted to the Issuer and/or any Relevant Subsidiary as
contemplated pursuant to paragraph (A) of "Restructuring Event" below and
"Relevant Licence" shall be construed accordingly;]

["Relevant Subsidiary" means a member of the Group that holds a Relevant
Licence;]

*["Relevant Subsidiary" means any one of SP Distribution Limited
(SC189125), SP Transmission Limited (SC189126) or SP Manweb plc (2366937) or
such other Subsidiary Undertaking of Scottish Power UK plc as may be agreed
between Scottish Power UK plc and the Trustee from time to time;]

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

(A) (aa) the Secretary of State gives the Issuer or any Relevant Subsidiary
written notice of revocation of any Relevant Licence and provided that the
giving of notice pursuant to paragraph 3 of Part I of any Relevant Licence shall
not be deemed to constitute the revocation of the Relevant Licence; or

(bb) the Issuer or any Relevant Subsidiary agrees in writing with the Secretary
of State to any revocation or surrender of any Relevant Licence; or

(cc) any legislation (whether primary or subordinate) is enacted terminating or
revoking any Relevant Licence,

except in any such case in circumstances where a licence or licences on
substantially not less favourable terms is or are granted to the Issuer or one
or more Relevant Subsidiaries or Subsidiary Undertakings (not being an Excluded
Subsidiary) of the Issuer;

(B) any modification (other than a modification which is of a formal, minor or
technical nature) is made to the terms and conditions of any Relevant Licence on
or after the date of the relevant Pricing Supplement, unless two directors of
the Issuer

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have certified in good faith to the Trustee that the modified terms and
conditions are not materially less favourable to the business of the Group and
to the business of the member of the Group holding the Relevant Licence; or

(C) (aa) the Balancing and Settlement Code is terminated and not replaced by one
or more agreements, commercial arrangements or open market mechanisms or
frameworks, in each case on terms which two directors of the Issuer certify in
good faith to the Trustee to be not materially less favourable to the business
of the Group or to the business of the Relevant Subsidiary or Relevant
Subsidiaries party to the Balancing and Settlement Code; or

(bb) any Relevant Subsidiary is given an Expulsion Notice (as defined in the
Balancing and Settlement Code) pursuant to Section A.5.2.4 ("Expulsion") of the
Balancing and Settlement Code requiring it to cease to be a party thereto; or

(cc) where there shall have occurred a Default (as defined in the Balancing and
Settlement Code) under Section H.3.1.1 ("Default") Of the Balancing and
Settlement Code in relation to any Relevant Subsidiary and such default remains
unremedied or unwaived; or

(dd) any Relevant Subsidiary ceases to be a party to the Balancing and
Settlement Code for any reason (other than pursuant to (bb) and (cc) above)
except where a licence or licences is or are granted to one or more Subsidiaries
as contemplated by sub-paragraph (A) above and at or about the same time all
rights and obligations of the Relevant Subsidiary pursuant to the Balancing and
Settlement Code which are attributable to such licence(s) are assigned and
transferred to such Subsidiary and/or Subsidiaries in such manner as the Trustee
may approve (such approval not to be unreasonably withheld or delayed) or such
Subsidiary or Subsidiaries enters or enter into one or more agreements,
commercial arrangements or open market mechanisms or frameworks in relation to
such licence(s) which the directors of the Issuer certify to be not materially
less favourable to the business of the Group; 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 functions or duties of the Secretary of State and/or the
Gas and Electricity Markets Authority under the Electricity Act unless two
directors of the Issuer have certified in good faith to the Trustee that such
removal, qualification or amendment is unlikely to have materially adverse
effect on the financial condition of the Group or any Relevant Subsidiary;

"Restructuring Period" means:

(A) if at any 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 Issuer shall seek to obtain a rating as contemplated in the definition
of Negative Rating prior to the expiry of the 14 days referred to in that
definition and (bb) the date on which a Negative Certification shall have been
given to the Issuer in respect of that Restructuring Event;

"Secretary of State" means the Secretary of State for Trade and Industry (or any
successor) or, as the case may be, the Secretary of State for Scotland (or any
successor);

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

"Subsidiary Undertaking" shall have the meaning given to it by Section 258 of
the Companies Act 1985 (but, in relation to the Issuer, shall exclude any
undertaking (as defined in the Companies Act 1985) whose accounts are not
included in the then latest published audited consolidated accounts of the
Issuer, or (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 not have been so included or consolidated if it
had become so on or before that date);

"Supply Licence" means the electricity supply licence granted or treated as
granted to ScottishPower Energy Retail Limited (SC190287) under Section 6(1)(d)
of the Electricity Act as modified and in force from time to time; and

"Transmission Licence" means the electricity transmission licence granted or
treated as granted to SP Transmission Limited (SC189126) under Section 6(1)(b)
of the Electricity Act as modified and in force from time to time.

Any reference to an obligation being guaranteed shall include a reference to an
indemnity being given in respect of the obligation.

(g) Purchases

The Issuer and any of its Subsidiaries may to the extent permitted by applicable
law, at any time purchase Notes (provided that all unmatured Receipts and
Coupons and unexchanged Talons relating thereto are attached thereto or
surrendered therewith) in the open market or otherwise at any price.

(h) Cancellation

All Notes purchased by or on behalf of the Issuer or any of its Subsidiaries
shall be surrendered for cancellation, in the case of Bearer Notes, by
surrendering each such Note together with all unmatured Receipts and Coupons and
all unexchanged Talons to the Issuing and Paying Agent and, in the case of
Registered Notes, by surrendering the Certificate representing such Notes

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to the Registrar and, in each case if so surrendered, shall, together with all
Notes redeemed by the Issuer, be cancelled forthwith (together with all
unmatured Receipts and Coupons and unexchanged Talons attached thereto or
surrendered therewith). Any Notes so surrendered for cancellation may not be
reissued or resold.

7.  Payments and Talons

(a) Bearer Notes

Payments of principal and interest in respect of Bearer Notes shall, subject as
mentioned below, be made against presentation and surrender of the relevant
Receipts (in the case of payments of Instalment Amounts other than on the due
date for redemption and provided that the Receipt is presented for payment
together with its relative Note), Notes (in the case of all other payments of
principal and, in the case of interest, as specified in Condition 7(f)(vi)) or
Coupons (in the case of interest, save as specified in Condition 7 (f)(ii)), as
the case may be, at the specified office of any Paying Agent outside the United
States by a cheque payable in the currency in which such payment is due drawn
on, or at the option of the holder, by transfer to an account denominated in
that currency with, a bank in the principal financial centre for that currency
or, in the case of payment in euro, at the option of the holder by transfer to,
or cheque drawn on, a euro account (or any other account to which euro may be
transferred) specified by the holder.

(b) Registered Notes

(i) Payments of principal (which for the purposes of this Condition 7(be shall
include final Instalment Amounts but not other Instalment Amounts) in respect of
Registered Notes shall be made against presentation and surrender of the
relevant Certificates at the specified office of any of the Transfer Agents or
of the Registrar and in the manner provided in paragraph (ii) below.

(ii) Interest (which for the purpose of this Condition 7(b) shall include all
Instalment Amounts other than final Instalment Amounts) on Registered Notes
shall be paid to the person shown on the Register at the close of business on
the fifteenth day before the due date for payment thereof (the "Record Date").
Payments of interest on each Registered Note shall be made in the currency in
which such payments are due by cheque drawn on a bank in the principal financial
centre of the country of the currency concerned and mailed to the holder (or to
the first named of joint holders) of such Note at its address appearing in the
Register. Upon application by the holder to the specified office of the
Registrar or any Transfer Agent before the Record Date and subject as provided
in Condition 7(a) above, such payment of interest may be made by transfer to an
account in the relevant currency maintained by the payee with a bank in the
principal financial centre of the country of that currency or, in the case of
payment in euro, by transfer to a euro account (or any other account to which
euro may be transferred) specified by the holder.

(c) Payments in the United States

Notwithstanding the foregoing, if any Bearer Notes are denominated in US
dollars, payments in respect thereof may be made at the specified office of any
Paying Agent in New York City in the same manner as aforesaid if (i) the Issuer
shall have appointed Paying Agents with specified offices outside the United
States with the reasonable expectation that such Paying Agents would be able to
make payment of the amounts on the Notes in the manner provided above when due,
(ii) payment in full of such amounts at all such offices is illegal or
effectively precluded by exchange controls or other similar restrictions on
payment or receipt of such amounts and (iii) such payment is then permitted by
United States law, without involving, in the opinion of the Issuer, any adverse
tax consequence to the Issuer.

(d) Payments Subject to Fiscal Laws

Al1 payments are subject in all cases to any applicable fiscal or other laws,
regulations and directives, but without prejudice to the provisions of Condition
8. No commission or expenses shall be charged to the Noteholders or
Couponholders in respect of such payments.

(e) Appointment of Agents

The Issuing and Paying Agent, the Paying Agents, the Registrar and the Transfer
Agents annually appointed by the Issuer and their respective specified offices
are listed below. The Issuing and Paying Agent, the Paying Agents, the
Registrar, the Transfer Agents and the Calculation Agent act solely as agents of
the Issuer and do not assume any obligation or relationship of agency or trust
for or with any Noteholder or Couponholder. The Issuer reserves the right at any
time with the approval of the Trustee to vary or terminate the appointment of
the Issuing and Paying Agent, any other Paying Agent, the Registrar, any
Transfer Agent or the Calculation Agent and to appoint additional or other
Paying Agents or Transfer Agents, provided that the Issuer shall at all times
maintain (i) an Issuing and Paying Agent, (ii) a Registrar in relation to
Registered Notes, (iii) a Transfer Agent in relation to Registered Notes, (iv)
one or more Calculation Agent(s) where the Conditions so require, (v) Paying
Agents having specified offices in at least two major European Cities (including
London, so long as the Notes are listed on the Official List and admitted to
trading on the London Stock Exchange's market for listed securities), (vi) such
other agents as may be required by any other stock exchange on which the Notes
may be listed, in each case, as approved by the Trustee and (vii) if any
European Union Directive on the taxation of savings implementing the conclusions
of the ECOFIN Council meeting of 26th-27th November 2000 or any law
implementing or complying with, or introduced in order to conform to such
Directive is introduced, a Paying Agent and a Transfer Agent with a specified
office in a European Union member state that

                                       -62-

<PAGE>

will not be obliged to withhold or deduct tax pursuant to such Directive or law
if there is any such European Union member state.

In addition, the Issuer shall forthwith appoint a Paying Agent in New York City
in respect of any Bearer Notes denominated in US dollars in the circumstances
described in paragraph (c) above.

Notice of any such change or any change of any specified office shall promptly
be given to the Noteholders.

(f)   Unmatured Coupons and Receipts and Unexchanged Talons

(i)   Unless the Pricing Supplement provides that the relative Coupons are to
become void upon the due date for redemption of those Notes, Bearer Notes should
be surrendered for payment together with all unmatured Coupons (if any)
appertaining thereto, failing which an amount equal to the face value of each
missing unmatured Coupon (or, in the case of payment not being made in full,
that proportion of the amount of such missing unmatured Coupon that the sum of
principal so paid bears to the total principal due) shall be deducted from the
Redemption Amount due for payment. Any amount so deducted shall be paid in the
manner mentioned above against surrender of such missing Coupon within a period
of 10 years from the Relevant Date for the payment of such principal (whether or
not such Coupon has become void pursuant to Condition 9).

(ii)  If the Pricing Supplement so provides, upon the due date for redemption of
any Bearer Note, unmatured Coupons relating to such Note (whether or not
attached) shall become void and no payment shall be made in respect of them.

(iii) Upon the due date for redemption of any Bearer Note, any unexchanged Talon
relating to such Note (whether or not attached) shall become void and no Coupon
shall be delivered in respect of such Talon.

(iv)  Upon the due date for redemption of any Bearer Note that is redeemable in
instalments, all Receipts relating to such Note having an Instalment Date
falling on or after such due date (whether or not attached) shall become void
and no payment shall be made in respect of them.

(v)   Where any Bearer Note that provides that the relative unmatured Coupons
are to become void upon the due date for redemption of those Notes is presented
for redemption without all unmatured Coupons and any unexchanged Talon relating
to it, and where any Bearer Note is presented for redemption without all
unmatured Coupons and any unexchanged Talon relating to it, redemption shall be
made only against the provision of such indemnity as the Issuer may require.

(vi)  If the due date for redemption of any Note is not a due date for payment
of interest, interest accrued from the preceding due date for payment of
interest or the Interest Commencement Date, as the case may be, shall only be
payable against presentation (and surrender if appropriate) of the relevant
Bearer Note or Certificate representing it, as the case may be. Interest accrued
on a Note that only bears interest after its Maturity Date shall be payable on
redemption of such Note against presentation of the relevant Note or Certificate
representing it, as the case may be.

(g)   Talons

On or after the Interest Payment Date for the final Coupon forming part of a
Coupon sheet issued in respect of any Bearer Note, the Talon forming part of
such Coupon sheet may be surrendered at the specified office of the Issuing and
Paying Agent in exchange for a further Coupon sheet (and if necessary another
Talon for a further Coupon sheet)(but excluding any Coupons that may have become
void pursuant to Condition 9).

(h)   Non-Business Days

If any date for payment in respect of any Note, Receipt or Coupon is not a
business day, the holder shall not be entitled to payment until the next
following business day nor to any interest or other sum in respect of such
postponed payment. In this paragaph, "business day" means a day (other than a
Saturday or a Sunday) on which banks and foreign exchange markets are open for
business in the relevant place of presentation, in such jurisdictions as shall
be specified as "Business Day Jurisdictions" hereon and:

(i)  (in the case of a payment in a currency other than euro) where payment is
to be made by transfer to an account maintained with a bank in the relevant
currency, on which foreign exchange transactions may be carried on in the
relevant currency in the principal financial centre of the country of such
currency or

(ii) (in the case of a payment in euro) which is a TARGET Business Day.

8.    Taxation

All payments of principal and interest by or on behalf of the Issuer in respect
of the Notes, the Receipts and the Coupons shall be made free and clear of, and
without withholding or deduction for, any taxes, duties, assessments or
governmental charges of whatever nature imposed, levied, collected, withheld or
assessed by or within the United Kingdom or any authority therein or thereof
having power to tax, unless such withholding or deduction is required by law. In
the event of such a withholding or deduction required by law, the Issuer shall
pay such additional amounts as shall result in receipt by the Noteholders and
Couponholders of such amounts as would have been received by them had no such
withholding or deduction been required, except that no such additional amounts
shall be payable with respect to any Note, Receipt or Coupon:

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<PAGE>

a)   to, or to a third party on behalf of, a holder who is liable to such taxes,
duties, assessments or governmental charges in respect of such Note. Receipt or
Coupon by reason of his having some connection with the United Kingdom other
than the mere holding of the Note, Receipt or Coupon; or

(b)  presented (or in respect of which the Cetificate representing it is
presented) for payment more than 30 days after the Relevant Date except to the
extent that the holder of it would have been entitled to such additional amounts
on presenting it for payment on the thirtieth day; or

(c)  where such withholding or deduction is imposed on a payment to an
individual and is required to be made pursuant to any European Union Directive
on the taxation of savings implementing the conclusions of the ECOFIN Council
meeting of 26th-27th November 2000 or any law implementing or complying with, or
introduced in order to conform to, such Directive; or

(d)  presented for payment by or on behalf of a Noteholder or a Couponholder who
would have been able to avoid such withholding or deduction by presenting the
relevant Note, Receipt or Coupon to another Paying Agent in a Member State of
the European Union.

As used in these Conditions, "Relevant Date" in respect of any Note, Receipt or
Coupon means the date on which payment in respect of it first becomes due or (if
any amount of the money payable is improperly withheld or refused) the date on
which payment in full of the amount outstanding is made or (if earlier) the date
seven days after that on which notice is duly given to the Noteholders that,
upon further presentation of the Note (or relative Certificate), Receipt or
Coupon being made in accordance with the Conditions, such payment will be made,
provided that payment is in fact made upon such presentation. References in
these Conditions to (i) "principal" shall be deemed to include any premium
payable in respect of the Notes, all Instalment Amounts, Redemption Amounts,
Amortised Face Amounts and all other amounts in the nature of principal payable
pursuant to Condition 6 or any amendment or supplement to it, (ii) "interest"
shall be deemed to include all Interest Amounts and all other amounts payable
pursuant to Condition 5 or any amendment or supplement to it and (iii)
"principal" and/or "interest" shall be deemed to include any additional amounts
that may be payable under this Condition or any undertaking given in addition to
or in substitution for it under the Trust Deed.

9.   Prescription

Claims against the Issuer for payment in respect of the Notes, Receipts and
Coupons (which, for this purpose, shall not include Talons) shall be prescribed
and become void unless made within 10 years (in the case of principal) or five
years (in the case of interest) from the appropriate Relevant Date in respect of
them.

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 Notes then outstanding or if
so directed by an Extraordinary Resolution of the Noteholders shall, subject to
being indemnified to its satisfaction, (but, in the case of the happening of any
of the events mentioned in sub-paragraphs (b), (c), (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
Noteholders), give notice to the Issuer that the Notes 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 14 days or more in the payment of any
principal or the purchase price due in respect of the Notes or any of them
pursuant to Condition 6 or 21 days or more in the payment of any interest due in
respect of the Notes or any of them; or

(b)  if the Issuer fails to perform or observe any of its other obligations
under the Notes 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
60 days (or such longer period as the Trustee may in its absolute discretion
permit) next following the service by the Trustee of notice on the Issuer
requiring the same to be remedied; or

(c)  if (i) any other indebtedness for borrowed money of the Issuer or any
Principal Subsidiary becomes due and repayable prior to its stated maturity by
reason of an event of default 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 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 or any Principal Subsidiary for any
indebtedness for borrowed money of any person or for 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 (Pounds)20,000,000 or its equivalent in
other currencies (as determined by the Trustee) or 2% of Capital and Reserves,
and for the purposes of this sub-paragraph (c), "indebtedness for borrowed
money" shall exclude Project Finance Indebtedness; or

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(d)  if any order shall be made by any competent court or any resolution shall
be passed for the winding up or dissolutian of the Issuer, save for the purpose
of amalgamation, merger, consolidation, reorganisation, reconstruction or other
similar arrangement on terms previously approved in writing by the Trustee (such
approval not to be unreasonably withheld or delayed having regard to the
interests of the Noteholders) or by an Extraordinary Resolution of the
Noteholders; 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 (A) 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 Issuer or any of its
other Subsidiaries (other than an Excluded Subsidiary) or (B) the terms of which
have previously been approved in writing by the Trustee (such approval not to be
unreasonably withheld or delayed having regard to the interests of Noteholders)
or by an Extraordinary Resolution of the Noteholders; or

(f)  if the Issuer or any Principal Subsidiary shall cease to carry on the whole
or substantially the whole of its business (which, for the avoidance of doubt,
is, in the case of the Issuer, its operation as a holding company), save:

(i)  in each case for the purpose of amalgamation, merger, consolidation,
reorganisation, reconstruction or other similar arrangement (A) not involving or
arising out of the insolvency of the Issuer or such Principal Subsidiary and
under which all or substantially all of its assets are transferred to another
member or members of the Group (other than an Excluded Subsidiary) or to a
transferee or transferees which is or are, or immediately upon such transfer
become(s), a member or members of the Group (other than an Excluded Subsidiary),
or (B) the terms of which have previously been approved in writing by the
Trustee or by an Extraordinary Resolution of the Noteholders; or

[(ii)in each case where there is a disposal of Scottish Power UK plc or a
Principal Subsidiary or the business of any Principal Subsidiary 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 or a member or
members of the Group (other than an Excluded Subsidiary) on an arm's length
basis.]

*[(ii) in each case where there is a disposal of a Principal Subsidiary or the
business of any Pincipal Subsidiary 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 or a member or members of the Group (other
than an Excluded Subsidiary) on an arm's length basis,]

provided that if neither the Issuer nor any Subsidiary Undertaking holds a
Relevant Licence, the Issuer shall be deemed to have ceased to carry on the
whole or substantially the whole of its business (and neither of exceptions
(i)(A) or (ii) shall apply); or

(g)  if the Issuer or any Principal Subsidiary shal1 suspend or announce its
intention to suspend payment of its debts generally or shall be declared or
adjudicated by a competent court to be unable, or shall adimt in writing its
inability, to pay its debts generally (within the meaning of Section 123(l) 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 generally 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 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 any 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 90 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 "(Pounds)750" there was substituted
"(Pounds)500,000". Neither the Issuer 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(l)(a) of the Insolvency Act
1986 is being contested in good faith by the Issuer or the relevant Principal
Subsidiary 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 this Condition.

11.  Meetings of Noteholders, Modification, Waiver and Substitution

(a)  Meetings of Noteholders

The Trust Deed contains provisions for convening meetings of Noteholders to
consider matters affecting their interests, including the modification of any of
the terms and conditions of the Notes or any provisions of the Trust Deed. Any
such modification may be made if sanctioned by an Extraordinary Resolution
(which as provided in the Trust Deed may be passed by written resolution by or
on behalf of the holders of not less than 75 percent in principal amount of the
Notes, as well as at a meeting of Noteholders). The quorum for any meeting
convened to consider an Extraordinary Resolution will be one or more persons
holding or representing a clear majority in principal amount of the Notes for
the time being outstanding, or at any adjourned meeting, one or more persons
being or representing Noteholders whatever the principal amount of the Notes
held or represented, unless the business of such meeting includes consideration
of proposals, inter alia (i) to postpone the maturity or redemption of the
Notes, any Instalment Date or any date for payment of any interest or Interest
Amount on the Notes, (ii) to reduce or cancel the principal amount of, or any
Instalment Amount of, or any premium payable on redemption of, the Notes, (iii)
to reduce the rate or rates of interest in respect of the Notes or to vary the
method or basis of calculating the rate or rates or

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amount of interest or the basis for calculating any Interest Amount in respect
of the Notes, (iv) If a Minimum and/or a Maximum Interest Rate. Instalment
Amount or Redemption Amount is shown hereon, to reduce any such Minimum and/or
Maximum, (v) to vary any method of, or basis for, calculating the Redemption
Amount, including the method of calculating the Amortised Face Amount, (vi) to
vary the currency or currencies of payment or denomination of the Notes, (vii)
to take any steps that as specified hereon may only be taken following approval
by an Extraordinary Resolution to which the special quorum provisions apply, or
(viii) to modify the provisions concerning the quorum required at any meeting of
Noteholders or the majority required to pass the Extraordinary Resolution, in
which case the neccessary quorum shall be one or more persons holding or
representing not less than two-thirds, or at any adjourned meeting not less than
one-third, in principal amount of the Notes for the time being outstanding. Any
Extraordinary Resolution duly passed shall be binding on Noteholders (whether or
not they were present at the meeting at which such resolution was passed) and on
all Couponholders.

These Conditions may be amended, modified or varied in relation to any Series of
Notes by the terms of the relevant Pricing Supplement in relation to such
Series.

(b) Modification of the Trust Deed

The Trustee may agree, without the consent of the Noteholders or Couponholders,
to (i) any modification of any of the provisions of the Trust Deed, the Notes or
the Coupons that is of a formal, minor or technical nature or is made to correct
a manifest error, and (ii) any other modification (except as mentioned in the
Trust Deed), and any waiver or authorisation of any breach or proposed breach,
of any of the provisions of the Trust Deed that is in the opinion of the Trustee
not materially prejudicial to the interests of the Noteholders. Any such
modification, authorisation or waiver shall be binding on the Noteholders and
the Couponholders and, if the Trustee so requires, such modification shall be
notified to the Noteholders as soon as practicable.

(c) Substitution

The Trust Deed contains provisions permitting the Trustee to agree, subject to
such amendment of the Trust Deed and such other conditions as the Trustee may
require, but without the consent of the Noteholders or the Couponholders, to the
substitution of any other company in place of the Issuer, or of any previous
substituted company, as principal debtor under the Trust Deed and the Notes. In
the case of such a substitution the Trustee may agree, without the consent of
the Noteholders or the Couponholders, to a change of the law governing the
Notes, the Receipts, the Coupons, the Talons and/or the Trust Deed provided that
such change would not in the opinion of the Trustee be materially prejudicial to
the interests of the Noteholders.

(d) Entitlement of the Trustee

In connection with the exercise of its functions (including but not limited to
those referred to in this Condition) the Trustee shall have regard to the
interests of the Noteholders as a class and shall not have regard to the
consequences of such exercise for individual Noteholders or Couponholders and
the Trustee shall not be entitled to require, nor shall any Noteholder or
Couponholder be entitled to claim, from the Issuer any indemnification or
payment in respect of any tax consequence of any such exercise upon individual
Noteholders or Couponholders.

12. Replacement of Notes, Certificates, Receipts, Coupons and Talons

If a Note, Certificate, Receipt, Coupon or Talon is lost, stolen, mutilated,
defaced or destroyed, it may be replaced, subject to applicable laws,
regulations and stock exchange or other applicable authority regulations, at the
specified office of the Issuing and Paying Agent (in the case of Bearer Notes,
Receipts, Coupons or Talons) and of the Registrar (in the case of Certificates)
or such other Paying Agent or Transfer Agent, as the case may be, as may from
time to time be designated by the Issuer for the purpose and notice of whose
designation is given to Noteholders, in each case on payment by the claimant of
the fees and costs incurred in connection therewith and on such terms as to
evidence, security and indemnity (which may provide, inter alia, that if the
allegedly lost, stolen or destroyed Note, Certificate, Receipt, Coupon or Talon
is subsequently presented for payment or, as the case may be, for exchange for
further Coupons, there shall be paid to the Issuer on demand the amount payable
by the Issuer in respect of such Notes, Certificates, Receipts, Coupons or
further Coupons) and otherwise as the Issuer may reasonably require. Mutilated
or defaced Notes, Certificates, Receipts, Coupons or Talons must be surrendered
before replacements will be issued.

13. Further Issues

The Issuer may from time to time without the consent of the Noteholders or
Couponholders create and issue further securities either having the same terms
and conditions as the Notes in all respects (or in all respects except for the
first payment of interest on them) and so that such further issue shall be
consolidated and form a single series with the outstanding securities of any
series (including the Notes) or upon such terms as the Issuer may determine at
the time of their issue. References in these Conditions to the Notes include
(unless the context requires otherwise) any other securities issued pursuant to
this Condition and forming a single series with the Notes. Any further
securities forming a single series with the outstanding securities of any series
(including the Notes) constituted by the Trust Deed or any deed supplemental to
it shall, and any other securities may (with the consent of the Trustee), be
constituted by the Trust Deed. The Trust Deed contains provisions for convening
a single meeting of the Noteholders and the holders of securities of other
series where the Trustee so decides.

                                      -66-

<PAGE>

14. Enforcement

At any time after the Notes become due and payable, the Trustee may, at its
discretion and without further notice, institute such proceedings against the
Issuer as it may think fit to enforce the terms of the Trust Deed, but it need
not take any such proceedings unless (a) it shall have been so directed by an
Extraordinary Resolution or so requested in writing by holders of at least
one-fifth in principal amount of the Notes outstanding, and (b) it shall have
been indemnified to its satisfaction. No Noteholder, Receiptholder or
Couponholder may proceed directly against the Issuer unless the Trustee, having
become bound so to proceed fails to do so within a reasonable time and such
failure is continuing.

15. Indemnification of the Trustee

The Trust Deed contains provisions for the indemnification of the Trustee and
for its relief from responsibility. The Trustee is entitled to enter into
business transactions with the Issuer and any entity related to the Issuer
without accounting for any profit. The Trustee shall be entitled to rely on any
report of the Auditors notwithstanding that the liability of the Auditors in
relation thereto may, by the terms of the same or by any engagement letter (or
any other document), be limited and whether by reference to a monetary cap or
otherwise.

16. Notices

Notices to the holders of Registered Notes shall be mailed to them at their
respective addresses in the Register and deemed to have been given on the fourth
weekday (being a day other than a Saturday or a Sunday) after the date of
mailing. Notices to the holders of Bearer Notes shall be valid if published in
a daily newspaper of general circulation in the United Kingdom (which is
expected to be the Financial Times). The Issuer shall also ensure that notices
are duly published in a manner which complies with the rules and regulations of
any other stock exchange on which the Notes are, for the time being, listed or
other applicable authority to which it is subject. Any such notice shall be
deemed to have been given on the date of such publication or, if published more
than once or on different dates, on the first date on which publication is
made, as provided above.

Couponholders shall be deemed for all purposes to have notice of the contents of
any notice given to the holders of Bearer Notes in accordance with this
Condition.

17. Contracts (Rights of Third Parties) Act 1999

No person shall have any right to enforce any term or condition of the Notes,
the Receipts, the Coupons or the Talons under the Contracts (Rights of Third
Parties) Act 1999.

18. Governing Law and Jurisdiction

(a) Governing Law

The Trust Deed, the Notes, the Receipts, the Coupons and the Talons are governed
by, and shall be construed in accordance with, English law.

(b) Jurisdiction

The courts of England are to have jurisdiction to settle any disputes that may
arise out of or in connection with any Notes, Receipts, Coupons or Talons and
accordingly any legal action or proceedings arising out of or in connection with
any Notes, Receipts, Coupons or Talons ("Proceedings") may be brought in such
courts. The Issuer has in the Trust Deed irrevocably submitted to the
jurisdiction of such courts.

(c) Service of Process

[The Issuer, in accordance with the Trust Deed, will appoint its London office,
whose address is 5th Floor, 30 Cannon Street, London EC4M 6XH to act as its
agent in England to receive, for it and on its behalf, service of process in any
Proceedings in England.]

* [The Issuer, in accordance with the Trust Deed, will procure the appointment
of Scottish Power plc's London office, whose address is 5th Floor, 30 Cannon
Street, London EC4M 6XH to act as its agent in England to receive, for it and on
its behalf, service of process in any Proceedings in England.]

                                      -67-

<PAGE>

                                   SCHEDULE 2
                                     Part D
                                 Form of Coupon

On the front:

SCOTTISH POWER plc

SCOTTISH POWER UK plc

DEBT ISSUANCE PROGRAMME

Series No. [.]

[Title of issue]

Coupon for [[set out amount due, if known]/the amount] due on [the Interest
Payment Date falling in]* [.], [.].

[Coupon relating to Note in the principal amount of [.]]**

This Coupon is payable to bearer (subject to the Conditions endorsed on the Note
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 Note) at the
specified offices of the Issuing and Paying Agent and the Paying Agents set out
on the reverse hereof (or any other Issuing and Paying Agent or further or other
Paying Agents or specified offices duly appointed or nominated and notified to
the Noteholders).

[If the Note to which this Coupon relates shall have become due and payable
before the maturity date of this Coupon, this Coupon shall become void and no
payment shall be made in respect of it.]***

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.

[SCOTTISH POWER plc/SCOTTISH POWER UK plc]

By:

[Cp. No.]     [Denomination]       [ISIN]        [Series]      [Certif. No.]

                                      -68-

<PAGE>

On the back:

CITIBANK, N.A.
5 Carmelite Street
London
EC4Y 0PA

PAYING AGENT
CITIBANK AG, FRANKFURT
Neue Mainzer Strasse 75
60311 Frankfurt am Main

[*Only necessary where Interest Payment Dates are subject to adjustment in
accordance with a Business Day Convention otherwise the particular Interest
Payment Date should be specified.]

[**Only required for Coupons relating to Floating Rate or Variable Coupon Amount
Notes that are issued in more than one denomination.]

[***Delete if Coupons are not to become void upon early redemption of Note.]

                                      -69-

<PAGE>

                                   SCHEDULE 2
                                     Part E
                                  Form of Talon

On the front:

SCOTTISH POWER plc

SCOTTISH POWER UK plc

DEBT ISSUANCE PROGRAMME

Series No. [.]

[Title of issue]

Talon for further Coupons falling due on [the Interest Payment Dates falling
in]*[.] [.].

[Talon relating to Note in the principal amount of [.]]**

After all the Coupons relating to the Note to which this Talon relates have
matured, further Coupons (including if appropriate a Talon for further Coupons)
shall be issued at the specified office of the Issuing and Paying Agent set out
on the reverse hereof (or any other Issuing and Paying Agent or specified office
duly appointed or nominated and notified to the Noteholders) upon production and
surrender of this Talon.

If the Note to which this Talon relates shall have become due and payable before
the original due date for exchange of this Talon, this Talon shall become void
and no exchange shall be made in respect of it.

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.

[SCOTTISH POWER plc/SCOTTISH POWER UK plc]

By:

[Talon No.]          [ISIN]        [Series]             [Certif. No.]

On the back:

ISSUING AND PAYING AGENT
CITIBANK, N.A.
5 Carmelite Street
London
EC4Y 0PA

                                      -70-

<PAGE>

PAYING AGENT
CITIBANK AG, FRANKFURT
Neue Mainzer Strasse 75
60311 Frankfurt am Main

[* The maturity dates of the relevant Coupons should be set out if known,
otherwise reference should be made to the months and years in which the Interest
Payment Dates fall due.]

[** Only required where the Series comprises Notes of more than one
denomination.]

                                      -71-

<PAGE>

                                   SCHEDULE 2
                                     Part F
                                 Form of Receipt

SCOTTISH POWER plc

SCOTTISH POWER UK plc

DEBT ISSUANCE PROGRAMME

Series No. [.]

Receipt for the sum of [.] being the instalment of principal payable in
accordance with the Terms and Conditions endorsed on the Note to which this
Receipt relates (the "Conditions") on [.].

This Receipt is issued subject to and in accordance with the Conditions which
shall be binding upon the holder of this Receipt (whether or not it is for the
time being attached to such Note) and is payable at the specified office of any
of the Paying Agents set out on the reverse of the Note to which this Receipt
relates (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 Noteholders).

This Receipt must be presented for payment together with the Note to which it
relates. If the Note to which this Receipt appertains shall have become due and
payable on or before the maturity date of this Receipt, this Receipt shall
become void and no payment shall be made in respect of it. The Issuer shall have
no obligation in respect of this Receipt if it is presented without the Note to
which it relates.

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.

[SCOTTISH POWER plc/SCOTTISH POWER UK plc]

By:

                                      -72-

<PAGE>

                                   SCHEDULE 3
                     Provisions for Meetings of Noteholders

     Interpretation

1    In this Schedule:

1.1  references to a meeting are to a meeting of Noteholders of a single series
     of Notes and include, unless the context otherwise requires, any
     adjournment

1.2  references to "Notes" and "Noteholders" are only to the Notes of the Series
     in respect of which a meeting has been, or is to be, called, and to the
     holders of these Notes, respectively

1.3  "agent" means a holder of a voting certificate or a proxy for, or
     representative of, a Noteholder

1.4  "block voting instruction" means an instruction issued in accordance with
     paragraphs 8 to 14

1.5  "Extraordinary Resolution" means a resolution passed at a meeting duly
     convened and held in accordance with this Trust Deed by a majority of at
     least 75 per cent. of the votes cast. A resolution in writing signed by or
     (to the satisfaction of the Trustee) on behalf of the holders of not less
     than 75 per cent. in principal amount of the Notes who for the time being
     are entitled to receive notice of a meeting in accordance with the
     provisions herein contained shall for all purposes be as valid and
     effectual as, and shall take effect as, an Extraordinary Resolution passed
     at a meeting of such Noteholders duly convened and held in accordance with
     the provisions herein contained. Such resolution in writing may be
     contained in one document or in several documents in like form each signed
     by or on behalf of one or more of the relevant Noteholders

1.6  "voting certificate" means a certificate issued in accordance with
     paragraphs 5, 6, 7 and 14 and

1.7  references to persons representing a proportion of the Notes are to
     Noteholders or agents holding or representing in the aggregate at least
     that proportion in principal amount of the Notes for the time being
     outstanding.

     Powers of meetings

2    A meeting shall, subject to the Conditions and without prejudice to any
     powers conferred on other persons by this Trust Deed, have power by
     Extraordinary Resolution:

2.1  to sanction any proposal by the Relevant Issuer or the Trustee for any
     modification, abrogation, variation or compromise of, or arrangement in
     respect of, the rights of the Noteholders and/or the Couponholders against
     the Relevant Issuer, whether or not those rights arise under this Trust
     Deed

2.2  to sanction the exchange or substitution for the Notes of, or the
     conversion of the Notes into, shares, bonds or other obligations or
     securities of the Relevant Issuer or any other entity

2.3  to assent to any modification of this Trust Deed, the Notes, the Receipts,
     the Talons or the Coupons proposed by the Relevant Issuer or the Trustee

                                      -73-

<PAGE>

2.4  to authorise anyone to concur in and do anything necessary to carry out and
     give effect to an Extraordinary Resolution

2.5  to give any authority, direction or sanction required to be given by
     Extraordinary Resolution

2.6  to appoint any persons (whether Noteholders or not) as a committee or
     committees to represent the Noteholders' interests and to confer on them
     any powers or discretions which the Noteholders could themselves exercise
     by Extraordinary Resolution

2.7  to approve a proposed new Trustee and to remove a Trustee

2.8  to approve the substitution of any entity for the Relevant Issuer (or any
     previous substitute) as principal debtor or guarantor under this Trust Deed
     and

2.9  to discharge or exonerate the Trustee from any liability in respect of any
     act or omission for which it may become responsible under this Trust Deed,
     the Notes, the Receipts, the Talons or the Coupons

provided that the special quorum provisions in paragraph 19 shall apply to any
Extraordinary Resolution (a "special quorum resolution") for the purpose of
sub-paragraph 2.2 or 2.8, any of the proposals listed in Condition 11(a) or any
amendment to this proviso save where such Extraordinary Resolution is passed as
a resolution in writing.

     Convening a meeting

3    The Relevant Issuer or the Trustee may at any time convene a meeting. If it
     receives a written request by Noteholders holding at least 10 per cent in
     principal amount of the Notes of any Series for the time being outstanding
     and is indemnified to its satisfaction against all costs and expenses, the
     Trustee shall convene a meeting of the Noteholders of that Series. Every
     meeting shall be held at a time and place approved by the Trustee.

4    At least 21 days' notice (exclusive of the day on which the notice is given
     and of the day of the meeting) shall be given to the Noteholders. A copy of
     the notice shall be given by the party convening the meeting to the other
     parties. The notice shall specify the day, time and place of meeting and,
     unless the Trustee otherwise agrees, the nature of the resolutions to be
     proposed and shall explain how Noteholders may appoint proxies or
     representatives, obtain voting certificates and use block voting
     instructions and the details of the time limits applicable.

     Arrangements for voting

5    If a holder of a Bearer Note wishes to obtain a voting certificate in
     respect of it for a meeting, he must deposit such Bearer Note for that
     purpose at least 48 hours before the time fixed for the meeting with a
     Paying Agent or to the order of a Paying Agent with a bank or other
     depositary nominated by the Paying Agent for the purpose. The Paying Agent
     shall then issue a voting certificate in respect of it.

6    A voting certificate shall:

6.1  be a document in the English language

6.2  be dated

6.3  specify the meeting concerned and the serial numbers of the Notes deposited
     and

                                      -74-

<PAGE>

6.4  entitle, and state that it entitles, its bearer to attend and vote at that
     meeting in respect of those Notes.

7    Once a Paying Agent has issued a voting certificate for a meeting in
     respect of a Note, it shall not release the Note until either:

7.1  the meeting has been concluded or

7.2  the voting certificate has been surrendered to the Paying Agent.

8    If a holder of a Bearer Note wishes the votes attributable to it to be
     included in a block voting instruction for a meeting, then, at least 48
     hours before the time fixed for the meeting, (i) he must deposit the Note
     for that purpose with a Paying Agent or to the order of a Paying Agent with
     a bank or other depositary nominated by the Paying Agent for the purpose
     and (ii) he or a duly authorised person on his behalf must direct the
     Paying Agent how those votes are to be cast. The Paying Agent shall issue a
     block voting instruction in respect of the votes attributable to all Notes
     so deposited.

9    A block voting instruction shall:

9.1  be a document in the English language

9.2  be dated

9.3  specify the meeting concerned

9.4  list the total number and serial numbers of the Notes deposited,
     distinguishing with regard to each resolution between those voting for and
     those voting against it

9.5  certify that such list is in accordance with Notes deposited and directions
     received as provided in paragraphs 8, 11 and 14 and

9.6  appoint a named person (a "proxy") to vote at that meeting in respect of
     those Notes and in accordance with that list.

     A proxy need not be a Noteholder.

10   Once a Paying Agent has issued a block voting instruction for a meeting in
     respect of the votes attributable to any Notes:

10.1 it shall not release the Notes, except as provided in paragraph 11, until
     the meeting has been concluded and

10.2 the directions to which it gives effect may not be revoked or altered
     during the 48 hours before the time fixed for the meeting.

11   If the receipt for a Note deposited with a Paying Agent in accordance with
     paragraph 8 is surrendered to the Paying Agent at least 48 hours before the
     time fixed for the meeting, the Paying Agent shall release the Note and
     exclude the votes attributable to it from the block voting instruction.

12   Each block voting instruction shall be deposited at least 24 hours before
     the time fixed for the meeting at such place as the Trustee shall designate
     or approve, and in default it shall not be valid unless the chairman of the
     meeting decides otherwise before the meeting proceeds to business. If the
     Trustee requires, a notarially certified copy of each block voting
     instruction shall be produced by the proxy at the meeting but the Trustee
     need not investigate or be concerned with the validity of the proxy's
     appointment.

                                      -75-

<PAGE>

13   A vote cast in accordance with a block voting instruction shall be valid
     even if it or any of the Noteholders' instructions pursuant to which it was
     executed has previously been revoked or amended, unless written intimation
     of such revocation or amendment is received from the relevant Paying Agent
     by the Relevant Issuer or the Trustee at its registered office or by the
     chairman of the meeting in each case at least 24 hours before the time
     fixed for the meeting.

14   No Note may be deposited with or to the order of a Paying Agent at the same
     time for the purposes of both paragraph 5 and paragraph 8 for the same
     meeting.

15.1 A holder of a Registered Note may, by an instrument in writing in the form
     available from the specified office of a Transfer Agent in the English
     language executed by or on behalf of the holder and delivered to the
     Transfer Agent at least 24 hours before the time fixed for a meeting,
     appoint any person (a "proxy") to act on his behalf in connection with that
     meeting. A proxy need not be a Noteholder.

15.2 A corporation which holds a Registered Note may by delivering to a Transfer
     Agent at least 24 hours before the time fixed for a meeting a certified
     copy of a resolution of its directors or other governing body (with, if it
     is not in English, a certified translation into English) authorise any
     person to act as its representative (a "representative") in connection with
     that meeting.

     Chairman

16   The chairman of a meeting shall be such person as the Trustee may nominate
     in writing, but if no such nomination is made or if the person nominated is
     not present within 15 minutes after the time fixed for the meeting the
     Noteholders or agents present shall choose one of their number to be
     chairman, failing which the Relevant Issuer may appoint a chairman. The
     chairman need not be a Noteholder or agent. The chairman of an adjourned
     meeting need not be the same person as the chairman of the original
     meeting.

     Attendance

17   The following may attend and speak at a meeting:

17.1 Noteholders and agents

17.2 the chairman

17.3 the Relevant Issuer and the Trustee (through their respective
     representatives) and their respective financial and legal advisers

17.4 the Dealers and their advisers.

     No-one else may attend or speak.

     Quorum and Adjournment

18   No business (except choosing a chairman) shall be transacted at a meeting
     unless a quorum is present at the commencement of business. If a quorum is
     not present within 15 minutes from the time initially fixed for the
     meeting, it shall, if convened on the requisition of Noteholders or if the
     Relevant Issuer and the Trustee agree, be dissolved. In any other case it
     shall be adjourned until such date, not less than 14 nor more than 42 days
     later,

                                      -76-

<PAGE>

     and time and place as the chairman may decide. If a quorum is not present
     within 15 minutes from the time fixed for a meeting so adjourned, the
     meeting shall be dissolved.

19   One or more Noteholders or agents present in person shall be a quorum:

19.1 in the cases marked "No minimum proportion" in the table below, whatever
     the proportion of the Notes which they represent

19.2 in any other case, only if they represent the proportion of the Notes shown
     by the table below.

<TABLE>
<CAPTION>
     -------------------------------------------------------------------------------------------------
      COLUMN 1                           COLUMN 2                         COLUMN 3
     -------------------------------------------------------------------------------------------------
     <S>                                 <C>                              <C>
      Purpose of meeting                 Any meeting except one           Meeting previously
                                         referred to in column 3          adjourned through want of a
                                         _______________________          quorum

                                         Required proportion              ____________________________

                                                                          Required proportion
     -------------------------------------------------------------------------------------------------
     To pass a special quorum            2/3                              1/3
     resolution
     ------------------------------------------------------------------------------------------------
     To pass any other                   A clear majority                 No minimum proportion
     Extraordinary Resolution
     -------------------------------------------------------------------------------------------------
     Any other purpose                   10 per cent                      No minimum proportion
     ------------------------------------------------------------------------------------------------
</TABLE>

20   The chairman may with the consent of (and shall if directed by) a meeting
     adjourn the meeting from time to time and from place to place. Only
     business which could have been transacted at the original meeting may be
     transacted at a meeting adjourned in accordance with this paragraph or
     paragraph 18.

21   At least 10 days' notice of a meeting adjourned through want of a quorum
     shall be given in the same manner as for an original meeting and that
     notice shall state the quorum required at the adjourned meeting. No notice
     need, however, otherwise be given of an adjourned meeting.

     Voting

22   Each question submitted to a meeting shall be decided by a show of hands
     unless a poll is (before, or on the declaration of the result of, the show
     of hands) demanded by the chairman, the Relevant Issuer, the Trustee or one
     or more persons representing 2 per cent of the Notes.

23   Unless a poll is demanded a declaration by the chairman that a resolution
     has or has not been passed shall be conclusive evidence of the fact without
     proof of the number or proportion of the votes cast in favour of or against
     it.

24   If a poll is demanded, it shall be taken in such manner and (subject as
     provided below) either at once or after such adjournment as the chairman
     directs. The result of the poll shall be deemed to be the resolution of the
     meeting at which it was demanded as at the date it

                                      -77-

<PAGE>

     was taken. A demand for a poll shall not prevent the meeting continuing for
     the transaction of business other than the question on which it has been
     demanded.

25   A poll demanded on the election of a chairman or on a question of
     adjournment shall be taken at once.

26   On a show of hands every person who is present in person and who produces a
     Bearer Note, a Certificate of which he is the registered holder or a voting
     certificate or is a proxy or representative has one vote. On a poll every
     such person has one vote in respect of each principal amount equal to the
     minimum denomination of such Series of Notes so produced or represented by
     the voting certificate so produced or for which he is a proxy or
     representative. Without prejudice to the obligations of proxies, a person
     entitled to more than one vote need not use them all or cast them all in
     the same way.

27   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 any other votes which he may
     have.

     Effect and Publication of an Extraordinary Resolution

28   An Extraordinary Resolution shall be binding on all the Noteholders,
     whether or not present at the meeting, and on all the Couponholders and
     each of them shall be bound to give effect to it accordingly. The passing
     of such a resolution shall be conclusive evidence that the circumstances
     justify its being passed. The Relevant Issuer shall give notice of the
     passing of an Extraordinary Resolution to Noteholders within 14 days but
     failure to do so shall not invalidate the resolution.

     Minutes

29   Minutes shall be made of all resolutions and proceedings at every meeting
     and, if purporting to be signed by the chairman of that meeting or of the
     next succeeding meeting, shall be conclusive evidence of the matters in
     them. Until the contrary is proved every meeting for 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.

     Trustee's Power to Prescribe Regulations

30   Subject to all other provisions in this Trust Deed the Trustee may without
     the consent of the Noteholders prescribe such further regulations regarding
     the holding of meetings and attendance and voting at them as it in its sole
     discretion determines including (without limitation) such requirements as
     the Trustee thinks reasonable to satisfy itself that the persons who
     purport to make any requisition in accordance with this Trust Deed are
     entitled to do so and as to the form of voting certificates or block voting
     instructions so as to satisfy itself that persons who purport to attend or
     vote at a meeting are entitled to do so.

31   The holder of a Global Note or Global Certificate shall (unless such Global
     Note or Global Certificate represents only one Note) be treated as 2
     persons for the purposes of any quorum requirements of a meeting of
     Noteholders.

32   The foregoing provisions of this Schedule shall have effect subject to the
     following provisions:

                                      -78-

<PAGE>

32.1 Meetings of Noteholders of separate Series will normally be held
     separately. However, the Trustee may from time to time determine that
     meetings of Noteholders of separate Series shall be held together

32.2 A resolution that in the opinion of the Trustee affects one Series alone
     shall be deemed to have been duly passed if passed at a separate meeting of
     the Noteholders of the Series concerned

32.3 A resolution that in the opinion of the Trustee affects the Noteholders of
     more than one Series but does not give rise to a conflict of interest
     between the Noteholders of the different Series concerned shall be deemed
     to have been duly passed if passed at a single meeting of the Noteholders
     of the relevant Series provided that for the purposes of determining the
     votes a Noteholder is entitled to cast pursuant to paragraph 26, each
     Noteholder shall have one vote in respect of each U.S.$1,000 principal
     amount of Notes held, converted, if such Notes are not denominated in U.S.
     dollars, in accordance with sub-Clause 8.12

32.4 A resolution that in the opinion of the Trustee affects the Noteholders of
     more than one Series and gives or may give rise to a conflict of interest
     between the Noteholders of the different Series concerned shall be deemed
     to have been duly passed only if it shall be duly passed at separate
     meetings of the Noteholders of the relevant Series

32.5 To all such meetings as aforesaid all the preceding provisions of this
     Schedule shall mutatis mutandis apply as though references therein to Notes
     and to Noteholders were references to the Notes and Noteholders of the
     Series concerned.

                                      -79-

<PAGE>

In witness whereof this Trust Deed has been executed as a deed on the date
stated at the beginning.

SCOTTISH POWER plc

By:  ADRIAN COATES                      By: DONALD WRIGHT

SCOTTISH POWER UK plc

By:  ADRIAN COATES                      By: DONALD WRIGHT

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

CLIVE RAKESTROW                                       TRUDI ELKINGTON-POOLE

Authorised Signatory                                  Authorised Signatory

                                      -80-<PAGE>

                                                                    Exhibit 4.10

                                                                  --------------
                                                                  CONFORMED COPY
                                                                  --------------

                                  8 March 2002

                              Scottish Power UK plc

                               First Aqua Limited

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

                                    AGREEMENT
                  for the sale and purchase of the issued share
                           capital of Aspen 4 Limited

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

<PAGE>

THIS SALE AND PURCHASE AGREEMENT is made on 8 March 2002

Between:

(1)  SCOTTISH POWER UK plc, a company registered in Scotland whose registered
     office is at 1 Atlantic Quay, Glasgow, G2 8SP (the vendor); and

(2)  FIRST AQUA LIMITED, a company incorporated under the laws of England and
     Wales whose registered office is at 200 Aldersgate Street, London EClA 4JJ
     (the Purchaser).

Whereas:

(A)  Aspen 4 Limited (the Company) is a private company limited by shares
incorporated in Scotland. Further details of the Company are set out in Part 1
of Schedule 2.

(B)  The companies of which details are set out in Part 2 of Schedule 2 (the
Subsidiaries) are subsidiaries of the Company.

(C)  The Vendor has agreed to sell all of the issued shares in the capital of
the Company (the Shares) to the Purchaser for the consideration and upon the
terms set out in this Agreement.

(D)  The Vendor has further agreed to assign, or procure the assignment of, the
Intra Group Debt (as defined in Schedule 1) to the Purchaser for the
consideration and upon the terms set out in this Agreement.

(E)  The Purchaser has agreed to procure at Completion the repayment of the
Aspen 4 Amount (as defined in Schedule 1).

(F)  The Purchaser has at the date of this Agreement deposited not less than
(Pounds)20 million in escrow against any claims the Vendor may bring under this
Agreement.

It Is Agreed as follows:

DEFINITIONS AND INTERPRETATION

1.1  Words and expressions used in this Agreement shall have the meanings set
out in Schedule 1, unless the context requires otherwise.

1.2  The Schedules comprise schedules to this Agreement and form part of this
Agreement.

SALE OF THE SHARES AND INTRA GROUP DEBT

2.1  The Vendor agrees to sell, or procure the sale of, and the Purchaser agrees
to purchase, the Shares, on terms that the same covenants shall be deemed to be
given by the Vendor on Completion in relation to the Shares as are implied under
Part I of the Law of Property (Miscellaneous Provisions) Act 1994 where a
disposition is

                                                                          Page 1

<PAGE>

expressed to be made with full title guarantee. The Shares shall be sold free
from all Encumbrances, together with all rights attaching to them.

2.2  The total price payable by the Purchaser to the Vendor for the Shares shall
be the sum of (Pounds)2,050,000,000, less the aggregate of the Net Financial
Debt Amount and the Aspen 4 Amount, subject to any adjustments made in
accordance with clause 7 (the Share Purchase Price).

2.3  The Vendor agrees to assign, or procure the assignment of, and the
Purchaser agrees to take an assignment of, the Intra Group Debt as at the
Completion Date free from all Encumbrances. The Vendor agrees to procure that,
as at the Completion Date, each intra group indebtedness forming part of the
Intra Group Debt shall be evidenced by the issue of a document or documents in
the form of Schedule 12 (such document or documents to be held in escrow until
Completion in accordance with clause 5.2) but for the avoidance of doubt in each
case on the same commercial terms as the relevant existing intra-group
indebtedness.

2.4  The total price payable by the Purchaser to the Vendor for the Intra Group
Debt shall be the amount of such debt as at the Completion Date as shown in the
Net Debt Statement (the Debt Purchase Price).

2.5  If any payment is made by the Vendor to the Purchaser, whether pursuant to
a claim made by the Purchaser (including, without limitation, any Claim) or
otherwise under this Agreement (but excluding any payment under clause 7.2), the
payment shall so far as possible be made by way of reduction of the Share
Purchase Price and the Share Purchase Price shall accordingly be deemed to have
been reduced by the amount of such payment.

2.6  The Purchaser agrees to procure repayment of the Aspen 4 Amount on
Completion and the Vendor agrees to such repayment.

CONDITIONS TO COMPLETION AND COOPERATION

Conditions to Completion

3.1  Completion of the sale and purchase of the Shares shall take place in
accordance with and subject to clause 5 and simultaneously with it becoming
certain that on or prior to the Initial Termination Date, the events set out in
clauses 3.1 (a) and 3.1 (b) will not occur provided at that time the event
referred to in clause 3.1 (c) is not subsisting:

(a)  the Resolution is not passed by the shareholders of Scottish Power plc;

(b)  to the extent that the arrangements contemplated by this Agreement (the
     Merger) constitute a concentration with a Community dimension within the
     scope of Council Regulation (EEC) 4064/89 (as amended by Council Regulation
     (EC) 1310/97) (the Regulation) either:

     (i)  the Commission does not adopt:

                                                                          Page 2

<PAGE>

          (aa) a decision under Article 6(l)(a) of the Regulation that the
               Merger is not within the scope of the Regulation; or

          (bb) a decision under Article 6(l)(b) (or having been deemed to have
               made a decision under Article l0(6)) of the Regulation declaring
               the Merger to be compatible with the common market, with or
               without any conditions, obligations, undertakings or
               modifications attached to the decision; or

     (ii) in the event that a request under Article 9(2) of the Regulation has
          been made by a Member State, the Commission does not adopt:

          (aa) a decision under Article 9(3)(b) of the Regulation (or having
               been deemed under Article 9(5) of the Regulation to have adopted
               such a decision) to refer the Merger in whole or part to the OFT;
               and

          (bb) if such decision is of a type referred to in clause 3.1
               (b)(ii)(aa) above relates to part only of the Merger, a decision
               referred to in sub-clause (i)(bb) above in respect of the part of
               the Merger not so referred to the OFT;

(c)  the Finance Conditions are not satisfied in accordance with their terms.

Facility Agreements

3.2  To enable it to perform its obligations under clause 5, the Purchaser shall
use its best endeavours to satisfy the Finance Condition relating to illegality.

3.3  The Purchaser warrants and undertakes that it has disclosed to the Vendor
in writing prior to the date of this Agreement full details of the conditions
and termination rights under the Facility Agreements and any other term of or
connected with the Facility Agreements which may impact the ability of the
Purchaser to draw down in full thereunder in order to comply with its
obligations under clauses 5.6 and 5.7. The Purchaser shall not prior to the
earlier of(i) the actual receipt in cash by the Vendor of the amounts referred
to in clause 5.6 and (ii) termination of this Agreement in accordance with its
terms, agree any variation to the terms of the Facility Agreements to the extent
such variations could affect the Purchaser's ability to complete the transaction
contemplated by this Agreement or to comply with clauses 5.6 and 5.7.

ECMR

3.4  The Purchaser shall prepare a notification in accordance with Commission
Regulation (EC) No. 447/98, which it will submit to the Commission in final form
as soon as possible after the execution of this Agreement and in any event
submit to the Commission a substantially complete draft notification within 7
days of the date of this Agreement.

                                                                          Page 3

<PAGE>

3.5  The Purchaser undertakes to use its reasonable endeavours to ensure that
the events in clause 3.1(b) do not occur.

3.6  If it becomes reasonably apparent that the Commission will only adopt a
decision of the kind referred to in any of clauses 3.l(b)(i)(aa) or (bb) or
3.l(b)(ii)(aa) or (bb) subject to conditions, obligations, undertakings and/or
modifications (each a Relevant Stipulation) which may include, for the avoidance
of doubt, any Relevant Stipulation that relates in any manner whatsoever to (i)
any undertaking or business, activities or assets of any undertaking that is
controlled (for the purposes of Article 3(3) and 3(4) of the Regulation) by the
Purchaser or any member of the Purchaser's Group at any time before the
Commission adopts or is deemed to have adopted a decision under Articles 6(l)(b)
or 9(3) of the Regulation as the case may be, or (ii) to any undertaking or
business, activities or assets of the Company:

(a)  without prejudice to sub-clause 3.6(b) below, the Purchaser shall offer,
     accept and agree to any such Relevant Stipulation (which shall not, without
     the prior written approval of the Vendor, include any amendment, variation
     or modification of the terms of this Agreement in such a way as to affect
     adversely the value to the Vendor of the transactions contemplated by this
     Agreement) as may be necessary to obtain approval for the Merger as rapidly
     as possible by avoiding a decision by the Commission to open proceedings
     under Article 6(l)(c) of the Regulation;

(b)  to the extent that any Relevant Stipulation relates to the business, assets
     or activities of any member of the Retained Group, the Purchaser shall not
     offer, accept or agree to such Relevant Stipulation without the prior
     written approval of the Vendor.

Co-operation by the Vendor in respect of the ECMR

3.7  The Vendor shall and shall procure that its advisers and each Group Company
shall co-operate with the Purchaser in providing to the Purchaser upon request
such assistance as is reasonably necessary and it is reasonably able to provide
and to provide to the Commission upon request such information as is reasonably
necessary and it is reasonably able to provide to ensure that:

(a)  the Merger is validly and promptly notified to the Commission under the
     ECMR and Commission Regulation No. 447/98; and

(b)  any request for information from the Commission is fulfilled promptly and
     in any event in accordance with any relevant time limit, and that, where
     practicable, it provides copies of any proposed communication with the
     Commission in relation to the Merger to the Purchaser and that (acting
     reasonably) it takes due consideration of any reasonable comments that the
     Purchaser or its advisers may have in relation to such proposed
     communication, provided that the Vendor shall not be required to provide
     the Purchaser with any confidential information or business secrets
     relating to the Retained Group.

                                                                          Page 4

<PAGE>

Confidentiality

3.8  The Vendor shall procure that:

(a)  all members of the Retained Group and (until Completion) each Group Company
     shall, subject to clause 26.3 (insofar as such clause applies to the
     Vendor), keep confidential any information supplied pursuant to clauses
     3.4, 3.6 and 3.11, and which is confidential to any of the Purchaser or any
     direct or indirect investor in or financier of the Purchaser;

(b)  as soon as reasonably practicable following the earlier of (i) Completion
     and (ii) the termination of this Agreement, all members of the Retained
     Group (and, in the case of termination of this Agreement, each Group
     Company) destroy and procure the destruction by their respective advisers
     of all documents (whether in paper, electronic (other than from back-up
     systems) or any other form) provided by or on behalf of the Purchaser to
     the Vendor, any member of the Retained Group (and, in the case of
     termination of this Agreement, each Group Company) and their respective
     advisers pursuant to clauses 3.4, 3.6 and 3.11.

3.9  [Intentionally left blank].

Shareholder Resolution

3.10 The Vendor undertakes to the Purchaser to procure that Scottish Power plc
will post a circular to its shareholders on or before 30 March 2002 convening an
extraordinary general meeting of Scottish Power plc to be held on or before
16 April 2002 for the purpose of considering a resolution for the sale of the
Company in the agreed form (the Resolution) and that, unless in the reasonable
opinion of the board of Scottish Power plc it is not consistent with its
fiduciary duties to do so, the board of Scottish Power plc will:

(a)  include in such circular their recommendation that the shareholders of
     Scottish Power plc vote in favour of the Resolution and a statement that
     they consider the transaction to be in the best interests of the
     shareholders of Scottish Power plc as a whole; and

(b)  procure that the Resolution is put to such meeting with its recommendation.

Communications with Regulatory Authorities

3.11 The Purchaser shall notify the Vendor sufficiently in advance (for the
purposes referred to below in this clause) of any notification, submission,
response or other communication (in each case whether in writing or otherwise)
(excluding communications of an administrative nature) which it proposes to make
or submit to any Regulatory Authority. Further, the Purchaser shall at the same
time provide the Vendor with copies thereof and any supporting documentation or
information reasonably requested by the Vendor, provided that the Purchaser
shall not be required to provide the Vendor with any confidential information or
business secrets. The Purchaser undertakes to take due consideration of any
reasonable comments which

                                                                          Page 5

<PAGE>

the Vendor may have in relation to any such notification, submission,
communication or response to a request for further information prior to making
the relevant notification, submission, communication or response (as the case
may be) provided that these have been communicated by the Vendor to the
Purchaser in a timely fashion. The Purchaser further agrees to keep the Vendor
informed as to the material progress of any such notification, submission,
communication or response (as the case may be) (excluding communications of an
administrative nature) made to any Regulatory Authority. The Purchaser shall
inform the Vendor in a timely fashion of all meetings between the Purchaser and
any Regulatory Authority. Where requested by the Vendor, the Purchaser shall
permit (and the Purchaser undertakes to the Vendor to procure that JVCo and any
shareholder of JVCo shall permit) the Vendor and/or its advisors to attend all
such meetings provided that the Vendor may be excluded from such parts of such
meetings where business secrets or confidential information of the Purchaser,
JVCo or any shareholder of JVCo are discussed. Where the context allows, the
Purchaser shall mean for the purpose of this clause 3.11, the Purchaser, JVCo
and any shareholder of JVCo.

3.12 The Vendor shall notify the Purchaser sufficiently in advance of any
notification, submission, response or communication (in each case whether in
writing or otherwise) (excluding communications of an administrative nature)
which any member of the Retained Group or, if prior to Completion, any Group
Company proposes to make or submit to any Regulatory Authority in relation to
the transactions contemplated by this Agreement or, to the extent reasonably
practicable, in relation to the Group or any part of its business. Further, the
Vendor shall at the same time provide the Purchaser with copies thereof and any
supporting documentation or information reasonably requested by the Purchaser,
provided that the Vendor shall not be required to provide to the Purchaser any
confidential information or business secrets. The Vendor undertakes to take, and
shall procure that the relevant member of the Retained Group or Group Company
takes, due consideration of any reasonable comments which the Purchaser may have
in relation to any such notification, submission, communication or response (as
the case may be) provided that these have been communicated by the Purchaser to
the Vendor in a timely manner. The Vendor further agrees to keep the Purchaser
informed as to the material progress of any such notification, submission,
communication or response (as the case may be) made to any Regulatory Authority.

PRE-COMPLETION UNDERTAKINGS

4.1 Pending Completion and subject to clauses 4.2 and 4.3, the Vendor shall
procure that, without, in the case of clauses 4.1(a) and (h), the prior written
consent of the Purchaser:

(a) save as expressly referred to in the Budget:

          (i)  each Group Company shall carry on its business in the ordinary
               course and shall only make payments in the ordinary course;

          (ii) each Group Company shall take all reasonable steps to preserve
               and protect its assets including, without limitation, the
               goodwill of its business;

                                                                          Page 6

<PAGE>

         (iii) save pursuant to arrangements the existence and material terms
               of which are summarised in the Disclosure Letter, no new
               transactions shall be entered into by any Group Company with any
               member of the Retained Group and all new transactions between
               each Group Company and any other person shall be on arm's length
               terms;

(b)  subject to the terms of the Confidentiality Agreement, the Purchaser's
     Representatives shall be allowed, upon 24 hours' written notice to the
     Vendor and during normal business hours, reasonable access to the books and
     records of each Group Company and reasonable access to the sites owned,
     used or occupied by any Group Company and reasonable access to the
     management of each Group Company and the Vendor shall promptly upon request
     supply or procure the supply of any information and copies of any books and
     records in each case reasonably required by the Purchaser relating to any
     Group Company and its business and affairs (save in each case to the extent
     they relate to the capital restructuring announced by Scottish Power plc on
     7 November 2001 or the preparations therefor), in each case for the purpose
     only of monitoring the management of the business of the Group or procuring
     compliance with clauses 3.6, 3.7, 3.11, 3.12 and 4.6 or obtaining
     information required by the Purchaser's Group to put insurances in place on
     Completion;

(c)  no dividend or other distribution (within the meaning of section 209 of the
     Taxes Act) shall be declared, paid or made by any Group Company;

(d)  save as provided in clause 2.3, no share or loan capital shall be allotted,
     issued, redeemed or repurchased or agreed to be allotted, issued, redeemed
     or repurchased by any Group Company and no Encumbrances shall be created or
     agreed to be created over the shares in the capital of any Group Company;

(e)  Southern Water Services Limited shall in all material respects carry on its
     business functions as a water and sewerage undertaking in accordance with
     its Instrument of Appointment and the Water Industry Act 1991 (as amended)
     and, save as disclosed in the Disclosure Letter (at Exhibit Document
     Numbers AD.304, AD.306 and AD.373), will not agree with the DGWS to any
     modification of the terms of such Instrument of Appointment without the
     prior written consent of the Purchaser;

(f)  all insurance policies normally kept in force for the benefit of the Group
     Companies shall be maintained;

(g)  no Group Company shall resolve to be voluntarily wound up;

(h)  each Group Company shall use its reasonable endeavours to operate the
     business of the Group in all material respects in accordance with the
     Forecast until 31 March 2002 and thereafter in accordance with the Budget;

(i)  all management fees to members of the Retained Group shall be paid in an
     amount and manner consistent with the terms of the Instrument of
     Appointment and the requirements of the DGWS (to the extent such fees are
     subject to the same) and, subject thereto, in the ordinary course
     consistent with

                                                                          Page 7

<PAGE>

     each Group Company's practice in the period of 12 months prior to entering
     into this Agreement (excluding exceptional items); and

(j)  subject to the Purchaser and the Purchaser's Group providing the Vendor
     with sufficient information, each Group Company shall comply with any
     binding obligations it may have to inform and consult employees, trade
     unions and any employee representative body pursuant to any information or
     consultation agreement or arrangement with its employees, their
     representatives or any trade union prior to Completion in connection with
     the transaction contemplated under this Agreement.

4.2  Pending Completion and without prejudice to clause 4.1, the Vendor shall
(i) ensure that the Company for itself and on behalf of the other Group
Companies consults fully with the Purchaser in relation to any matters which
will or may reasonably be expected to have a material adverse effect on the
Group and (ii) subject to clauses 4.4 and 4.6 procure that, without the prior
written consent of the Purchaser, no Group Company shall:

(a)  save as expressly referred to in the Budget and other than in the ordinary
     course of business:

         (i)   enter into any Material Contract;

         (ii)  enter into any other agreement, contract, arrangement,
               transaction or commitment (whether or not legally binding) (or
               make a bid or offer which may lead to such a contract or
               commitment) which, save as contemplated in the Capital Programme,
               either (x) has a value or involves expenditure in excess of
               (Pounds)2,000,000 or (Pounds)10,000,000 in aggregate or (y)
               involves an obligation of a material nature or which may result
               in any material change in the nature or scope of the operations
               of the Group (Arrangements, provided that where this term is used
               outside this clause 4.2(a)(ii) it shall exclude Arrangements
               which are only Arrangements by virtue of aggregation); or

         (iii) exercise any material discretion or grant any material waiver or
               material consent or material approval under or agree to any
               material variation or material extension of any existing Material
               Contract or any Arrangement,

     nor fail to take such steps as are reasonable and appropriate from time to
     time in the circumstances to enforce and preserve the rights and interests
     under any such Material Contracts or Arrangements to which such Group
     Company is a party;

(b)  agree to any termination of any existing Material Contract or Arrangement
     to which that Group Company is a party (whether entered into before or
     after the date of this Agreement) provided that this shall not apply to
     expiry by the effluxion of time;

                                                                          Page 8

<PAGE>

(c)  other than any arrangement and related liabilities which will be discharged
     at or before Completion, grant any loans or other financial facilities or
     credit arrangements (other than trade credit in the ordinary course) to or,
     save in the ordinary course of business, any guarantees or indemnities for
     the benefit of any person other than a Group Company;

(d)  agree or effect any variation of any of the terms of the SWSF Bonds or,
     subject to clause 4.4(c), the EIB Loans;

(e)  acquire or agree to acquire, or dispose of or agree to dispose of, or
     create any Encumbrance or agree to create any Encumbrance over, all or any
     substantial part of the business or assets of any company, other than in
     the ordinary course of business and in each case involving consideration,
     expenditure or the assumption of liabilities in excess of (Pounds)l million
     in any one event or (Pounds)10 million in aggregate, nor acquire or dispose
     of or create any Encumbrance over any business, company, assets or stock
     other than on arms' length terms;

(f)  remove from any Property any equipment, plant and machinery, computer
     hardware, spares or other moveable items owned by any Group Company other
     than in the ordinary course of business;

(g)  save as disclosed in the Disclosure Letter (generally against warranties
     11.4, 11.11, 11.12 and 11.16), dismiss any Employee (other than for a
     reason set out in sections 98(1) or (2) of the Employment Rights Act 1996
     provided that the dismissal does not fall within Regulation 8(1) of the
     Transfer of Undertakings (Protection of Employment) Regulations 1981) or
     solicit any Employee to be engaged or continue to be engaged by the Vendor
     before or after Completion;

(h)  engage or appoint any additional employees (other than the individuals
     listed in Schedule 11 (Employees)) other than (i) in the ordinary course of
     business or (ii) to replace or substitute any Employee who leaves or
     retires from any of the Group Companies;

(i)  save for bona fide adjustments in remuneration in the ordinary course and
     in a manner consistent with past practice of the Group, vary any contract
     of employment of any Senior Employee nor make any change in terms of
     employment, including pension commitments, by any Group Company (other than
     those required by law) which would increase the total staff costs of the
     Group by more than 3 per cent. per annum and in respect of any Senior
     Employee, save as disclosed in the Disclosure Letter (at Exhibit Document
     Number AD.177 and generally against warranty 11.9) (and save for the
     retention or bonus arrangements agreed for the purposes of the transactions
     contemplated by the Transaction Documents, provided that full details of
     such retention or bonus arrangements are provided to the Purchaser prior to
     the date of this Agreement), by more than 10 per cent. per annum;

(j)  save as disclosed in the Disclosure Letter (at Exhibit Document Number
     AD.177 and generally against warranty 11.1(b)) (and save for the retention
     or bonus arrangements agreed for the purposes of the transactions
     contemplated by the Transaction Documents, provided that full details of
     such retention or

                                                                          Page 9

<PAGE>

     bonus arrangements are provided to the Purchaser prior to the date of this
     Agreement), adopt any new employee share scheme, bonus scheme or other
     incentive or benefit scheme in respect of any Employees or, except in the
     ordinary course of business and in a manner consistent with past practice,
     vary or terminate any such scheme which has been adopted as at the date of
     this Agreement;

(k)  except in the ordinary course of business and in a manner consistent with
     past practice and except in respect of the Scottish Power plc Employee
     Share Ownership Plan, grant further share options or awards to any Relevant
     Employee under any of the Schemes or participate in any grant under any
     share incentive, share option or other incentive implemented by the
     Retained Group;

(l)  fail to manage the rights and liabilities under the Construction Contracts
     and the Material Contracts in accordance in all material respects with the
     RPO Standard;

(m)  except in the ordinary course of business and in all material respects in
     accordance with the RPO Standard (unless in any case a material adverse
     effect on the Group would or would be likely to result, in which case this
     exception shall not apply) seek, agree to or acquiesce in (i) the variation
     of any of the licences (including for the avoidance of doubt and without
     limitation Environmental Licences), permissions, authorisations or consents
     required for the carrying on of its business as presently carried on or
     (ii) the creation of any new such licence, permission, authorisation or
     consent;

(n)  in the case of any dormant Group Company shown in Schedule 2, carry on any
     business or incur any new obligation or liability;

(o)  in the case of the Specified Subsidiaries, carry out any activities other
     than those currently carried on in the ordinary course;

(p)  materially amend any insurance contract, fail to notify any insurance claim
     in excess of [***] (having become aware of the same) in accordance with the
     provisions of the relevant policy or apply any proceeds of any insurance
     policy received by the Vendor or any Group Company insofar as they relate
     to the repair and/or restoration of any physical loss and/or damage to any
     assets caused during the period between the date of this Agreement and
     Completion other than to the repair and/or restoration of any physical loss
     and/or damage to such assets or if such repairs have been carried out to
     reimburse the costs of such repairs;

(q)  make any change to its accounting practices, bases or policies (save as may
     be required to comply with any changes to applicable generally accepted
     accounting principles and standards) or make any alteration to its
     memorandum or articles of association, or make any material alteration to
     any shareholder or joint venture agreement or other similar agreements
     relating to it or its constitution or management or restricting the scope
     of its activities;

                                                                         Page 10

<PAGE>

(r)  enter into any joint venture, partnership or arrangement for the sharing of
     profits or assets, liabilities or losses;

(s)  acquire or agree to acquire any share or other interest in any new or
     existing company, partnership or other venture or create any branch or
     place of business in any jurisdiction;

(t)  incur any additional borrowings or other indebtedness otherwise than in the
     ordinary course of business, nor, where in the ordinary course of business,
     incur any additional borrowings or other indebtedness, the terms of which
     contain penalties which would apply in the event the Purchaser wishes to
     repay or restructure such borrowings or indebtedness after Completion;

(u)  commence (save to the extent required to preserve the rights of any Group
     Company), compromise or discontinue (otherwise than in relation to the
     [***] Claim) any material legal or arbitration proceedings in a way which
     could reasonably be expected to have a material adverse effect on the
     Group;

(v)  notwithstanding any other provision of clause 4.1 or this clause 4.2,
     create any Encumbrance or lease over, or dispose of, any of the Properties
     or, in each case otherwise than in the ordinary course of business, create
     any licence, tenancy, easement or other third party right over any of the
     Properties; or

(w)  enter into any agreement or obligation to do anything prohibited by any of
     the foregoing sub-paragraphs of this clause 4.2.

4.3  Pending Completion, each of the K3 Contracts shall be operated (including
in respect of any alterations or variations thereto) by the relevant Group
Company at all times and in all material respects in accordance with the RPO
Standard and each relevant Group Company shall use its reasonable endeavours to
ensure that each such K3 Contract shall be operated at all times and in all
material respects in a manner:

(a)  consistent with achieving the efficiency targets relating to the K3
     Contracts set out in the Budget; and

(b)  which will not cause or result in any expenditure under the K3 Contracts
     that would not be allowable for the purposes of determining the Regulatory
     Capital Value at the next regulatory price review following the date of
     this Agreement.

4.4  Notwithstanding clauses 4.1, 4.2 and 4.3, a Group Company or, in the case
of clause 4.4(c) below, the Vendor shall, without the Purchaser's prior written
consent, be entitled (but not obliged) to:

(a)  carry out and complete the Disposal Scheme on arm's length terms so long as
     (i) any disposa1s are not to the Vendor or parties connected with it and
     (ii) all proceeds are retained within the relevant Group Company;

                                                                         Page 11

<PAGE>

(b)  tender for or enter into the contracts and agreements in relation to the
     schemes set out in Schedule 7 consistent with the terms of the K3
     Contracts;

(c)  repay, prepay or novate, and pay any prepayment or cancellation fees in
     respect of and, thereafter, cancel the EIB Loans and obtain any waiver in
     respect thereof; and

(d)  repay or prepay any Intra Group Debt;

provided that the Vendor shall nonetheless be obliged to consult the Purchaser
and keep it informed in reasonable detail of all material developments in
relation to any of the foregoing.

4.5  Pending the earlier of:

(a)  Completion; and

(b)  termination of this Agreement,

the Vendor shall not and shall procure that Southern Water Services Limited
shall not effect the capital restructuring announced by Scottish Power plc on
7 November 2001 and shall not and shall procure that no Group Company shall
effect any other Refinancing Proposal. For the avoidance of doubt, all external
costs and expenses (excluding VAT, but only to the extent that such VAT is
considered to be recoverable) incurred by any Group Company in relation to the
capital restructuring announced on 7 November 2001 shall be for the account of
the Vendor and shall, to the extent due and outstanding as at the Completion
Date, be included in the calculation of Third Party Debt; provided that to the
extent that VAT on any such costs and expenses (whether or not outstanding at
Completion) which was considered to be recoverable is not recoverable or that
any such costs and expenses (whether or not outstanding at Completion) are not
deductible for corporation tax purposes, in either case within three years after
the Completion Date, the Purchaser shall be entitled to claim from the Vendor
the amount of such irrecoverable VAT or the amount of corporation tax that would
not have arisen had such costs and expenses been deductible for corporation tax
purposes (as the case may be) and the Vendor shall pay such amount within 10
Business Days of presentation by the Purchaser to the Vendor of an auditor's
certificate together with reasonable supporting information in respect thereof;
but provided further that the Purchaser shall (and shall procure that each
member of the Purchaser's Group shall) use all reasonable endeavours after
Completion to recover such VAT and to procure that such costs and expenses are
deductible for corporation tax purposes in each case within three years after
Completion.

4.6  Prior to Completion, the Vendor shall procure that Southern Water plc
transfers all the issued shares in ScottishPower Group Money Purchase Pension
Scheme Limited to the Vendor or such other member of the Retained Group as the
Vendor may specify.

4.7  Pending Completion, the Purchaser shall not and shall procure that no
member of the Purchaser's Group shall, without the prior written consent of the
Vendor (such

                                                                         Page 12

<PAGE>

consent not to be unreasonably withheld) enter into any commitment (whether or
not legally binding and whether conditional or unconditional) relating to any
acquisition or proposal for the acquisition by the Purchaser or any member of
the Purchaser's Group of any water and/or sewerage undertaker or the whole or
any material part of its assets and undertakings which in any case could
reasonably be expected to adversely affect Completion or the receipt by the
Vendor in cash of the amounts referred to in clause 5.6(or make any announcement
or public statement, or any statement to any Regulatory Authority, indicating an
intention to do so).

4.8  Pending Completion, the Vendor shall not and shall procure that no member
of the Retained Group or the Group shall, without the prior written consent of
the Purchaser, (such consent not to be unreasonably withheld) enter into any
commitment (whether or not legally binding and whether conditional or
unconditional) relating to any acquisition or proposal for the acquisition by
the Vendor or any member of the Retained Group or the Group of any water and/or
sewerage undertaker or the whole or any material part of its assets and
undertakings which in any case could reasonably be expected to adversely affect
Completion (or make any announcement or public statement, or any statement to
any Regulatory Authority, indicating an intention to do so).

4.9  Prior to Completion, the Vendor shall use its reasonable endeavours to
procure that:

(a)  the individuals listed in Part A of Schedule 11 (Employees) agree to
     transfer to the employment of Southern Water plc on the same terms and
     conditions of employment as they are employed by the Vendor (or any other
     member of the Retained Group) at the date of this Agreement; and

(b)  the individuals listed in Part B of Schedule 11 (Employees) are offered
     employment by Southern Water plc on the same terms and conditions of
     employment as they are employed by the Vendor (or any other member of the
     Retained Group) at the date of this Agreement;

and the Purchaser shall use its reasonable endeavours to co-operate with the
Vendor in persuading such individuals to agree to such change of employer.

4.10 To the extent that any of the individuals to which clause 4.9(a) and (b)
refers does not accept employment with Southern Water plc as described in clause
4.9 by Completion, the Vendor (or other member of the Retained Group employing
such individual) shall terminate the employment of such individual and the
Purchaser shall procure that Southern Water plc shall make an offer of
employment with effect from Completion to such individual on the same terms and
conditions of employment as they are employed by the Vendor (or any other member
of the Retained Group) at the date of this Agreement (including as to pensions)
and with (as far as possible) continuity of employment preserved to the same
extent as would apply if the Transfer of Undertakings (Protection of Employment)
Regulations 1981 applied to the sale of the Group and those individuals.

                                                                         Page 13

<PAGE>

COMPLETION

5.1(a) Completion shall take place simultaneously with it becoming certain that
       neither of the events set out in clauses 3.1(a) and (b) shall occur on
       or prior to the Initial Termination Date (the time at which it becomes so
       certain being the Relevant Time), unless:

          (i)  prior to the Relevant Time or, if a Vendor Termination Notice has
               been served prior to the Relevant Time, the date on which
               Completion would otherwise occur under clause 5.1(c)(i), a
               Purchaser Termination Notice (as defined in the Escrow Deed) has
               been served in accordance with the terms of the Escrow Deed; or

          (ii) prior to the Relevant Time a Vendor Termination Notice has been
               served within the period allowed in clause 8.8 and a valid
               Dispute Notice has not yet been served in accordance with clause
               8.9 or a valid Dispute Notice has been served in accordance with
               clause 8.9 and is pending determination by the Expert in
               accordance with clause 8.9;

       and further provided that no Blocking Order shall have been made (and not
       revoked or varied so as to permit Completion to take place and the Vendor
       to be paid in cash the amounts referred to in clause 5.6).

(b)    In the event that a Blocking Order is made prior to the Relevant Time or,
       if a Vendor Termination Notice has been served prior to the Relevant
       Time, the date on which Completion would otherwise occur in accordance
       with clause 5.1(c)(i), the Purchaser shall use all reasonable endeavours
       to take such steps or provide such undertakings as would result in the
       Blocking Order being revoked or varied so as to permit Completion to take
       place and the Vendor to be paid in cash the amounts referred to in clause
       5.6 PROVIDED THAT such reasonable endeavours shall not require the
       Purchaser to make or procure to be made any alteration or variation to
       the terms of the arrangements relating to, or terms of, the preference
       shares to be issued in the capital of JVCo (including, without
       limitation, the terms of the put and call options entered into in respect
       of such preference shares) provided that fair summaries of such
       arrangements have been disclosed to the Vendor in writing prior to the
       date of this Agreement. If a Blocking Order has not been revoked or
       varied so as to permit Completion to take place and the Vendor to be paid
       the amounts referred to in clause 5.6 prior to the Initial Termination
       Date, the Vendor may elect by written notice to the Purchaser before the
       Initial Termination Date (with a copy to the Escrow Agent in accordance
       with the Escrow Deed) to extend this Agreement to the Final Termination
       Date and such reasonable endeavours obligation relating to the Blocking
       Order referred to above shall apply until the Final Termination Date.

(c)    In the event that:

          (i)  a Vendor Termination Notice was served prior to the Relevant Time
               (or, if Completion has not previously taken place, after the
               Relevant Time), Completion shall take place simultaneously upon
               the Expert

                                                                         Page 14

<PAGE>

                determining in accordance with the relevant provisions of clause
                8.9 that such Vendor Termination Notice is not valid or the
                Purchaser and the Vendor agreeing that such Vendor Termination
                Notice is not valid unless at that time the circumstance in
                clause 5.l(c)(ii) is subsisting or a subsequent Vendor
                Termination Notice has been served and is outstanding; or

          (ii)  a Blocking Order has been made prior to the Relevant Time or, if
                a Vendor Termination Notice was served prior to the Relevant
                Time (or, if Completion has not previously taken place, after
                the Relevant Time), the date on which Completion would otherwise
                occur in accordance with clause 5.1 (c)(i), Completion shall
                take place simultaneously with the Secretary of State ordering
                or announcing a revocation or variation of or to such Blocking
                Order which would permit Completion to take place and the Vendor
                to be paid the amounts referred to in clause 5.6 unless at that
                time the circumstance in clause 5.1(c)(i) is subsisting,

       provided in each case that Completion shall not be capable of occurring
       after the Initial Termination Date or, if an election is made under
       clause 5.1(b), the Final Termination Date.

(d)    In the event that:

          (i)   a Blocking Order is made prior to the Relevant Time or, if a
                Vendor Termination Notice has been served prior to the Relevant
                Time (or, if Completion has not previously taken place, after
                the Relevant Time), the date on which Completion would otherwise
                occur in accordance with clause 5.1 (c)(i) and such Blocking
                Order is not revoked or varied prior to the Initial Termination
                Date (or, if an election is made under clause 5.1 (b), revoked
                or varied prior to the Final Termination Date) so as to permit
                Completion to take place and the Vendor to be paid the amounts
                referred to in clause 5.6; or

          (ii)  clause 5.1 (a)(i) applies;

          (iii) clause 5.l(a)(ii) applies and the Purchaser has not served a
                valid Dispute Notice within the time specified in clause 8.9 or
                a valid Dispute Notice has been served within such time and it
                has been determined or agreed in accordance with clause 8.9 that
                such Vendor Termination Notice is valid or such Vendor
                Termination Notice is deemed to be valid under clause 8.11; or

          (iv)  it becomes certain on or prior to the Initial Termination Date
                that either of the events set out in clause 3.1 (a) and (b)
                shall occur prior to the Initial Termination Date;

       this Agreement shall automatically terminate with immediate effect (save
       as provided in clause 28).

                                                                         Page 15

<PAGE>

(e)  If a Purchaser Termination Notice has been served under clause 3.1 of the
     Escrow Deed prior to the time at which Completion would otherwise occur
     under this clause 5.1, the event referred to in clause 3.1(c) shall for the
     purposes of this Agreement be conclusively deemed to be subsisting (without
     prejudice to any claim the Vendor may have under clause 3.1 of the Escrow
     Deed). If a Purchaser Termination Notice has not been served prior to
     Completion, the event referred to in clause 3.1(c) shall be conclusively
     deemed to be not subsisting.

5.2  In order to facilitate Completion, upon signature of this Agreement:

(a)  the Vendor and the Purchaser shall execute and deliver to the Escrow Agent
     the Escrow Deed;

(b)  the Vendor shall execute or procure that the relevant Group Company
     executes all such documents as are referred to in clauses 5.4 and 5.5 and
     deliver the same to the Escrow Agent;

(c)  the Purchaser shall execute all such documents as are referred to in clause
     5.6(d) and deliver the same to the Escrow Agent;

(d)  the Purchaser shall procure that the Letters of Credit are delivered to the
     Escrow Agent,

on the basis that all documents so delivered to the Escrow Agent shall be held
in, and released from, escrow in accordance with the Escrow Deed.

5.3  In accordance with the terms of the Escrow Deed, at Completion:

(a)  the documents referred to in clause 5.2 above shall be delivered and/or
     issued and become effective and legally binding on the relevant parties at
     Completion (with the exception of the Assignments of Intra Group Debt which
     shall become effective immediately thereafter) without the requirement for
     any further act to be done by any person and shall (except for the Letters
     of Credit, which shall be dated the date hereof) be dated the Completion
     Date by the Escrow Agent in accordance with the Escrow Deed; and

(b)  the release from escrow at Completion of the Letters of Credit shall
     subject to clause 3.2, satisfy the obligations of the Purchaser under
     clauses 5.6(a), (b) and (c) below.

5.4  The Vendor shall deliver (or cause to be delivered) to the Purchaser:

(a)  duly executed transfers into the name of the Purchaser or its nominee in
     respect of all of the Shares, together with the relative share
     certificates;

(b)  share certificates in respect of all of the issued shares in the capital of
     each other Group Company, together with duly executed transfers into the
     name of the Purchaser or its nominee in respect of any shares in such Group
     Companies not held in the name of a Group Company;

                                                                         Page 16

<PAGE>

(c)  a letter from PwC to the Company confirming that they will resign as the
     auditors of each Group Company on the earlier of (a) the date on which they
     deliver their audit opinion in respect of the accounts for the year to 31
     March 2002 of each Group Company whose accounts are required to be audited
     and the consolidation thereof, and (b) 30 June 2002.

(d)  a letter of resignation in the agreed form duly executed as a deed by each
     of the Resigning Directors;

(e)  a letter of resignation in the agreed form duly executed as a deed by the
     secretary of any Group Company who is to resign with effect from Completion
     (as notified by the Purchaser to the Vendor in writing prior to the date of
     this Agreement);

(f)  documents substantially in the form set out in Schedule 12 in respect of
     all intra group indebtedness comprising the Intra Group Debt referred to in
     clause 2.3 (the Intra Group Debentures);

(g)  assignments in the agreed form of all intra group indebtedness comprising
     the Intra Group Debt executed by the Vendor in each case as a deed together
     with the relevant notices and acknowledgements required to be delivered
     thereunder executed by the relevant Group Companies (Assignments of Intra
     Group Debt);

(h)  the Transitional Services Agreement executed by the Vendor and Southern
     Water Services Limited;

(i)  an assignment in the agreed form to a Group Company (as specified by the
     Purchaser) from and on behalf of the Vendor and each and every member of
     the Retained Group of all their rights, title and interest in:

          (i)  the SOUTHERN WATER and SOUTHERN WATER SERVICES trade marks
               (whether registered or unregistered) (the Marks); and

          (ii) any other trade marks, service marks, trading names, get-ups or
               logos incorporating either or both of the Marks, whether
               registered or unregistered (with the exception of the
               UK-registered device and word mark "SOUTHERN WATER A
               SCOTTISHPOWER COMPANY" registration no. 2188028)

     together with all associated goodwill and reputation;

(j)  appropriate documentation and executed UK Trade Mark Forms (Forms TM22 and
     Authorisation of Agent) in the agreed form to enable the Purchaser to file
     and record the surrender of the Vendor's trademark registration no. 2188028
     for the device and word mark "SOUTHERN WATER A SCOTTISHPOWER COMPANY", and
     a written undertaking to do all such acts or things and take all necessary
     steps to assist the relevant Group Company in any application made at any
     Trade Mark Registry or equivalent for registration of the marks referred to
     in paragraph (i) above; and

                                                                         Page 17

<PAGE>

(k)  a power of attorney in the agreed form in relation to the voting rights of
     the Shares after Completion executed by the Vendor; and

(1)  the Company Car Leasing Agreement executed by the Vendor and Southern Water
     Services Limited.

5.5  The Vendor shall procure that on or before the date of this Agreement the
resolutions of the board of directors of each Group Company are passed
(conditional upon Completion having occurred) by which:

(a)  in the case of the Company, the registration (subject to their being duly
     stamped) of the transfers in respect of the Shares referred to in clause
     5.5(a) is approved;

(b)  the resignations of the Resigning Directors and the secretary (if
     applicable) of such Group Company are accepted, Anthony Nelson and Stuart
     Derwent (in the case of the Company) are appointed as directors of such
     Group Company and Kevin Hall is appointed as secretary of such Group
     Company;

(c)  where relevant, the execution of and performance of obligations under any
     documents to be executed by such Group Company pursuant to this Agreement
     is authorised; and

(d)  to the extent requested by the Purchaser, revoking all existing authorities
     to bankers in respect of the operation of its bank accounts and giving
     authority in favour of such persons as the Purchaser may nominate to
     operate such accounts.

5.6  The Purchaser shall:

(a)  pay, or cause to be paid, to the Vendor an amount equal to the Initial
     Share Purchase Price on account of the Share Purchase Price;

(b)  pay, or cause to be paid, to the Vendor, an amount equal to the Estimated
     Intra Group Debt on account of the Debt Purchase Price;

(c)  procure the repayment to the Vendor by or on behalf of the Company of the
     Aspen 4 Amount; and

(d)  deliver to the Vendor Assignments of Intra Group Debt executed by the
     Purchaser in each case as a deed.

5.7  If Completion shall have taken place in accordance with clause 5.1(a) and
the Vendor has not received payment in cash for value equal to the full amount
of such Letters of Credit within 10 Business Days, then to the extent the Vendor
has not received such payment the Purchaser shall, as soon as possible (and in
any event within 2 Business Days) thereafter, pay or cause to be paid to the
Vendor the amounts referred to in clause 5.6 including, without limitation, by
exercising and enforcing its rights under the Facility Agreements to draw down
the funds available to it thereunder and paying the relevant amount to the
Vendor SAVE to the extent that, but then only

                                                                         Page 18

<PAGE>

for so long as, any such payment under the Letters of Credit or under this
clause 5.7 or the exercising or enforcing of such rights is prohibited by a
Blocking Order, but in such event the Purchaser shall use all reasonable
endeavours to take such steps or provide such undertakings as are described in
clause 5.1(b) (subject always to the proviso thereto) as would result in the
Blocking Order being revoked or varied so as to permit the Vendor to be paid the
amounts referred to in clause 5.6. The Vendor shall not be entitled to make any
demand with respect to the Letters of Credit to the extent that the Vendor has
otherwise received the amounts referred to in clause 5.6 and, to that extent,
upon any revocation or variation of the Blocking Order which permits the same,
the Letters of Credit shall be released to their respective issues.

5.8  If and to the extent that any Intra Group Debt arising during the period
from the date of this Agreement to Completion has not been provided for in the
Intra Group Debentures or Assignments of Intra Group Debt delivered to the
Escrow Agent pursuant to clause 5.2, as soon as practicable after Completion and
in respect of such Intra Group Debt:

(a)  the Vendor shall deliver (or cause to be delivered) to the Purchaser
     documents in the form set out in Schedule 12 and assignments in the same
     form as the Assignments of Intra Group Debt together with the relevant
     notices and acknowledgements required to be delivered thereunder; and

(b)  the Purchaser shall deliver to the Vendor the assignments referred to in
     (a) above counter-signed by the Purchaser.

5.9  With effect from Completion:

(a)  the Vendor shall procure that the Resigning Directors shall, to the extent
     permitted by law, waive all of their rights to take any action or make any
     claim against the Company or any other Group Company of which they were
     directors at any time prior to Completion without compensation being
     payable;

(b)  the Vendor shall procure that each member of the Retained Group shall, to
     the extent permitted by law, waive all of their rights to take any action
     or make any claim against any Resigning Director for which any Group
     Company would be directly or indirectly liable;

(c)  the Purchaser shall, and shall procure that the Company and any other Group
     Company of which the Resigning Directors were directors at any time prior
     to Completion and any other member of the Purchaser's Group shall, to the
     extent permitted by law, waive all of its rights to take any action or make
     any claim against the Resigning Directors in respect of any act or thing
     done by them as directors or officers of the Company or any other such
     Group Company;

(d)  the Vendor shall procure that the Resigning Directors together with those
     other directors of the Group Companies who have retired during the Vendor's
     ownership of such companies shall be insured, and the Purchaser shall
     procure that other past directors shall continue to be insured, on no less
     favourable

                                                                         Page 19

<PAGE>

        terms than under the directors and officers insurance policy of the
        Company or of any other Group Company of which they were directors at
        any time prior to Completion for a period of six years after Completion.

5.10    The Resigning Directors may enforce the terms of clauses 5.9(c) and (d)
under the Contracts (Rights of Third Parties) Act 1999.

5.11(a) Subject to Clause 5.11(b), the Vendor shall use reasonable endeavours
from the date hereof until Completion to obtain the licences, permits, consents
and approvals necessary for it to provide from Completion the Vendor Services
(as defined in the Transitional Services Agreement).

(b)     If the Vendor is required from the date hereof until Completion to pay a
fee or to incur any other cost or expense in relation to obtaining a licence,
permit, consent or approval necessary to provide the Vendor Services to the
Group which is incremental to that which would have been borne by the Vendor in
providing the same or similar services to other members of the Retained Group,
having used all reasonable endeavours to avoid incurring any such fee, cost or
expense, the Vendor shall notify as soon as reasonably practicable the Company
and, if the Purchaser wishes the relevant Vendor Service to be provided in
accordance with the Transitional Services Agreement, the Purchaser shall pay
such fee, cost or expense.

5.12    As soon as practicable after Completion, the Vendor shall deliver (or
cause to be delivered) to the Purchaser (or as it may direct) the certificates
of incorporation, common seal, share register and share certificate book (with
any unissued share certificates) and all minute books and other statutory
registers (which shall be written-up to but not including Completion) of the
Company and of each other Group Company.

5.13    The Vendor shall use reasonable endeavours from the date hereof to
obtain at the expense of the Purchaser such consent as may be necessary to
novate, assign or transfer to the Purchaser, or relevant member of the Group,
with effect from Completion that part of the Fuel Agreement that Southern Water
Services Limited received the benefit, and had the burden of, prior to the date
hereof (Company Fuel Service).

5.14    Subject to clause 5.16(c), from Completion the Purchaser shall:

(a)     procure that the relevant Group Company performs all the Vendor's
        obligations from the date of Completion in respect of the Company Fuel
        Service in accordance with the terms of the Fuel Agreement; and

(b)     indemnify, and keep indemnified, the Vendor against each loss, liability
        and costs which the Vendor incurs as a result of the relevant Group
        Company's performance of or default under the Vendor's obligations under
        the Company Fuel Service from the date of Completion (as referred to in
        clause 5.14(a)) to the extent that the loss, liability or cost is
        attributable to the relevant Group Company's act or omission from the
        date of Completion (including, without limitation, each loss, liability
        and cost incurred as a result of defending or setting a claim alleging
        such liability).

                                                                         Page 20

<PAGE>

5.15    The Vendor shall indemnify, and keep indemnified, the Purchaser (for
itself and on behalf of each relevant Group Company) against each loss,
liability and cost which the Purchaser, or relevant Group Company, incurs as a
result of the Vendor's performance of its obligations under the Fuel Agreement
to the extent that the loss, liability or cost is attributable to the Vendor's
act or omission whether before or after Completion (including, without
limitation, each loss, liability and cost incurred as a result of defending or
settling a claim alleging such a liability).

5.16    To the extent that the consent referred to in clause 5.13 has not been
obtained prior to Completion:

(a)     the Vendor shall continue to use reasonable endeavours to obtain such
        consent at the expense of the Purchaser;

(b)     the Vendor shall declare itself trustee for the Purchaser, or relevant
        Group Company, in respect of the Company Fuel Service and the Vendor
        shall act under the direction of the Purchaser and as its agent in all
        matters relating to the Company Fuel Service; and

(c)     the Vendor shall, at the Purchaser's sole cost, do each act and thing
        reasonably requested of it by the Purchaser to enable performance of the
        Company Fuel Service and to provide for the Purchaser, or relevant Group
        Company, the benefits of the Company Fuel Service (including, without
        limitation, enforcement of a right of the Vendor against the other party
        to the Fuel Agreement arising out of its termination by the other party
        or otherwise); and

(d)     the Purchaser shall provide, or procure the provision of, any
        information or guarantees as are required in order to obtain such
        consent, unless the Purchaser notifies the Vendor in writing that it is
        released and discharged from its obligations under clauses 15.13 to
        15.16.

5.17    The Purchaser shall, from the date of Completion, procure that the Group
Companies perform any and all of their obligations under the Fuel Agreement to
the extent that the novation, assignment or transfer of the Fuel Agreement has
not been completed.

5.18    No effect shall be given to clause 5.16, if there is a material risk
that the Fuel Agreement would be treated as repudiated by the third party, or if
the Vendor would be in breach of its obligations to any third party under the
Fuel Agreement. If any necessary consent is not obtained within 6 months after
Completion or is refused and the procedure set out in clause 5.16 does not
enable the full benefit of Company Fuel Service to be enjoyed by the Purchaser,
or the relevant Group Company after Completion, the parties shall, at the
Purchaser's sole cost, use reasonable endeavours to achieve an alternative
solution pursuant to which the Purchaser, or the relevant Group Company, shall
both receive the full benefits of the Company Fuel Service and assume the
associated obligations.

5.19    The Vendor shall use reasonable endeavours from the date hereof until
Completion to assist the Purchaser, at the expense of the Purchaser, and as the
Purchaser reasonably requires in procuring that any agreement to which the
Purchaser

                                                                         Page 21

<PAGE>

or any Group Company is a party which allows for a third party to terminate such
agreement on a change of the control of the Group Company is not terminated on
the sale of the Shares.

NET DEBT STATEMENT

6.1   The Vendor and the Purchaser shall use all reasonable endeavours to
procure that a Net Debt Statement is prepared in accordance with the provisions
of this clause 6. The Net Debt Statement shall be prepared on the basis of the
accounting policies and procedures set out in Schedule 8.

6.2   The Vendor shall at its cost arrange for a draft Net Debt Statement (the
Draft Net Debt Statement) to be prepared by the Vendor in consultation with the
Vendor's Accountants and delivered to the Purchaser together with such
supporting information as may reasonably be required by the Purchaser (with a
copy to the Purchaser's Accountants) within 20 Business Days of Completion. The
Vendor shall instruct the Vendor's Accountants to report that in their opinion
the Draft Net Debt Statement has been drawn up in accordance with Schedule 8 of
this Agreement.

6.3   The Purchaser shall notify the Vendor within 20 Business Days of receipt
of the Draft Net Debt Statement whether or not it accepts it for the purposes of
this Agreement.

6.4   If the Purchaser notifies the Vendor within the period specified in clause
6.3 that it does not accept the Draft Net Debt Statement:

(a)   it shall set out in such notice its reasons for such non-acceptance
      (together with such supporting information as may be reasonably necessary
      to support the reasons stated) and specify the adjustments which, in its
      opinion, should be made to the Draft Net Debt Statement in order to comply
      with the requirements of this Agreement; and

(b)   the parties shall (in conjunction with the Purchaser's Accountants and the
      Vendor's Accountants) meet and discuss the objections of the Vendor and
      use all reasonable endeavours to reach agreement upon the adjustments (if
      any) required to be made to the Draft Net Debt Statement within 20
      Business Days following receipt of the notice referred to in clause 6.3.

6.5   If the Purchaser is satisfied with the Draft Net Debt Statement (either as
originally submitted or after adjustments agreed between the Purchaser and the
Vendor) or if the Purchaser fails to notify the Vendor of its non-acceptance of
the Draft Net Debt Statement within the 20 Business Day period referred to in
clause 6.3, then the Draft Net Debt Statement (incorporating any agreed
adjustments) shall constitute the Net Debt Statement for the purposes of this
Agreement.

6.6   If the Purchaser and the Vendor do not reach agreement within 20 Business
Days of the Purchaser's notice of non-acceptance under clause 6.4, then the
matters in dispute shall be referred, on the application of either party, for
determination by an independent firm of internationally recognised chartered
accountants (the Accounting Expert) to be agreed upon by the Vendor and the
Purchaser or, failing agreement

                                                                         Page 22

<PAGE>

within 20 Business Days, to be selected by the President for the time being of
the Institute of Chartered Accountants in England and Wales.

6.7   The following terms of reference shall apply for the appointment of the
Accounting Expert:

(a)   the Purchaser or the Purchaser's Accountants and the Vendor or the
      Vendor's Accountants shall each promptly (and in any event within 20
      Business Days) of a relevant appointment submit a written statement on the
      matters in dispute (together with the relevant documents) to the
      Accounting Expert for determination;

(b)   at the same time as the Purchaser (or the Purchaser's Accountants) and the
      Vendor (or the Vendor's Accountants) submit their respective written
      statements on the matters in dispute to the Accounting Expert for
      determination, each shall deliver to the other a copy of their submissions
      (with all relevant supporting documents);

(c)   following delivery of their respective submissions, the Purchaser and the
      Vendor shall have the opportunity to comment once only (provided that
      nothing in this paragraph (c) shall prevent the parties from responding to
      any requests from the Accounting Expert under clause 6.8) on the other
      party's submissions by written comment delivered to the Accounting Expert
      not later than 20 Business Days (the Last Comments Date) after the written
      statement was first submitted to the Accounting Expert and copied to the
      other party pursuant to clause 6.7(b);

(d)   in giving its determination (which shall be in writing), the Accounting
      Expert shall state what adjustments (if any) are necessary to the Draft
      Net Debt Statement in respect of the matters in dispute in order to comply
      with the requirements of this Agreement;

(e)   the Accounting Expert shall act as an expert (and not as an arbitrator) in
      making any such determination which shall be final and binding on the
      parties in the absence of manifest error (when the relevant part of their
      determination shall be void and the matter shall be resubmitted to the
      Accounting Expert by either party for determination as soon as reasonably
      practicable);

(f)   the charges and expenses of any such determination by the Accounting
      Expert shall be borne between the Vendor and the Purchaser equally;

(g)   the Accounting Expert shall be engaged jointly by the parties on the terms
      set out in this clause 6 and otherwise on such terms as shall be agreed;
      provided that neither party shall unreasonably (having regard, inter alia,
      to the provisions of this clause 6) refuse its agreement to terms proposed
      by the Accounting Expert or by the other party. If the terms of engagement
      of the Accounting Expert have not been settled within 45 days of their
      identity having been determined (or such longer period as the parties may
      agree) then, unless one party is unreasonably refusing to its agreement to
      those terms, that expert shall be deemed never to have become the
      Accounting Expert and a

                                                                         Page 23

<PAGE>

      new Accounting Expert shall be selected in accordance with the provisions
      of this Agreement.

6.8   The Accounting Expert shall be instructed to reach its determination
within 20 Business Days of the Last Comments Date or as soon thereafter as is
reasonably possible: The Purchaser and the Vendor shall promptly give the
Accounting Expert such co-operation and information as the Accounting Expert may
reasonably request for the purposes of reaching its determination.

6.9   If the Vendor and the Purchaser reach (or pursuant to clause 6.5 are
deemed to reach) agreement on the Draft Net Debt Statement or the Draft Net Debt
Statement is finally determined at any stage in the procedures set out in this
clause 6:

(a)   the Draft Net Debt Statement as so agreed or determined shall be the Net
      Debt Statement for the purposes of this Agreement and shall be final and
      binding on the parties; and

(b)   the Net Financial Debt Amount shall be as set out in the Net Debt
      Statement.

6.10  The Purchaser shall use all reasonable endeavours to ensure that, in the
period following delivery of the Draft Net Debt Statement to the Vendor and
until the Net Debt Statement is agreed or determined in accordance with this
clause 6, the Vendor's Accountants are provided with such access to the
employees, accounts, working papers and other financial information of the
relevant Group Company as is reasonably necessary for the purposes of this
clause 6. Each party shall similarly use all reasonable endeavours during the
same period to ensure that the Purchaser's Accountants and the Vendor's
Accountants each have such access to all employees, relevant working and other
papers of the other as is reasonably necessary for the purposes of this clause
6.

6.11  Except to the extent that the parties agree otherwise, the Accounting
Expert shall determine its own procedure but:

(a)   apart from procedural matters and as otherwise set out in this Agreement
      shall determine only:

            (i)   whether any of the arguments for an alteration to the Draft
                  Net Debt Statement put forward in the Vendor's notice of
                  non-acceptance under clause 6.4 is correct in whole or in
                  part; and

            (ii)  if so, what alterations should be made to the Draft Net Debt
                  Statement in order to correct the relevant inaccuracy in it;
                  and

(b)   for the avoidance of doubt, the Accounting Expert shall not be entitled to
      determine the scope of its own jurisdiction.

6.12  The parties shall co-operate with the Accounting Expert and comply with
its reasonable requests made in connection with the carrying out of its duties
under this Agreement.

                                                                         Page 24

<PAGE>

6.13  Subject to clause 6.14, nothing in this clause 6 shall entitle a party or
the Accounting Expert access to any information or document which is protected
by legal professional privilege or which has been prepared by the other party or
its accountants and other professional advisers with a view to assessing the
merits of any claim or argument.

6.14  A party shall not be entitled by reason of clause 6.13 to refuse to supply
such part or parts of documents as contain only the facts on which the relevant
claim or argument is based.

6.15  Each party and the Accounting Expert shall, and shall procure that its
accountants and other advisers shall, keep all information and documents
provided to them pursuant to this clause 6 confidential and shall not use the
same for any purpose, except for disclosure or use in connection with the
preparation of the Net Debt Statement, the proceedings of the Accounting Expert
or another matter arising out of this Agreement or in defending any claim or
argument or alleged claim or argument relating to this Agreement or its subject
matter.

PURCHASE PRICE AND INTRA GROUP DEBT ADJUSTMENTS

7.1   If the Net Financial Debt Amount as at the Completion Date, as determined
in accordance with clause 6, is:

(a)   less than the Estimated Net Financial Debt Amount, then the Purchaser
      shall pay to the Vendor an amount equal to the difference; or

(b)   more than the Estimated Net Financial Debt Amount, then the Vendor shall
      pay to the Purchaser an amount equal to the difference.

7.2   If the value of the Intra Group Debt as at the Completion Date (as
computed for the purposes of determining the Net Financial Debt Amount as at the
Completion Date in accordance with clause 6) is:

(a)   less than the Estimated Intra Group Debt, then the Vendor shall pay to the
      Purchaser an amount equal to the difference; or

(b)   more than the Estimated Intra Group Debt, then the Purchaser shall pay to
      the Vendor an amount equal to the difference.

7.3   Any payment due under clause 7.1 or 7.2 shall be made in cash in pounds
sterling within 5 Business Days of the agreement or determination of the Net
Debt Statement in accordance with clause 6, in the case of payment by the
Purchaser under clause 7.1 or under clause 7.2 to the Vendor's Account and, in
the case of payment by the Vendor under clause 7.1 or clause 7.2, to the
Purchaser's Account, together with an amount equal to interest on the amount of
such payment at the Agreed Rate (accrued daily) for the period from the
Completion Date to the date of payment. Any payment under this clause shall
constitute an adjustment to the price payable by the Purchaser for the Shares,
save insofar as it is made under clause 7.2 in which case it shall constitute an
adjustment to the price payable by the Purchaser for the Intra Group Debt.

                                                                         Page 25

<PAGE>

7.4   After all payments have been made under clauses 5.6(b) and (c), 7.1 and
7.2, the Vendor shall procure that all amounts accrued or due in respect of the
period to Completion from any Group Company to any member of the Retained Group
(excluding any Intra Group Trading Debt but including management fees) shall be
waived save to the extent taken into account in the Net Debt Statement and shall
procure that no sums will remain owing at Completion from the Retained Group to
any Group Company (other than in respect of Intra Group Trading Debt).

7.5   In the event that the Relevant Interest Rate at the close of business on
the Completion Date exceeds 5.41 per cent. by more than 20 basis points., the
Vendor shall pay to the Purchaser an amount equal to (Pounds)1.6 million in
respect of each basis point of such excess over 20 basis points (and a pro rata
amount for each part basis point of such excess) and any such payment shall be
and shall be deemed to be a reduction in the purchase price for the Shares. Such
payment shall be made within 5 Business Days of Completion.

7.6   In the event that the Relevant Interest Rate at the close of business on
the Completion Date is less than 5.41 per cent. by more than 20 basis points.,
the Purchaser shall pay to the Vendor an amount equal to (Pounds)l.6 million in
respect of each basis point of such shortfall over 20 basis points (and a pro
rata amount for each part basis point of such shortfall) and any such payment
shall be and shall be deemed to be an increase in the purchase price for the
Shares. Such payment shall be made within 5 Business Days of Completion.

7.7   Any amounts due and payable from one party to the other under clauses 7.1,
7.2, 7.5 and 7.6 shall be set-off on a pound for pound basis against any amounts
due and payable to that first party from the other party under such clauses.

7.8   As set out in Schedule 8, the Net Debt Statement shall include an amount
being a calculation of the estimate of the anticipated reasonable external costs
and expenses of redemption of the SWSF Bonds (including Spens formula payments
and accrued interest up to, but not in respect of any time after, the Completion
Date but (i) excluding the principal amount of the SWSF Bonds, (ii) excluding
VAT in respect of such costs and expenses, but only to the extent that such VAT
is considered to be recoverable and (iii) to the extent that such costs or
expenses are considered to be deductible for corporation tax purposes, net of
corporation tax that has been or will be saved in respect of such costs and
expenses) (Anticipated Bond Redemption Costs) provided that:

(a)   to the extent that VAT on such costs and expenses which was considered to
      be recoverable but is not recoverable or that such costs and expenses
      which were considered to be deductible but are not deductible for
      corporation tax purposes, in either case within three years after the date
      of redemption of the SWSF Bonds, the Purchaser shall be entitled to claim
      from the Vendor an amount equal to the amount of such irrecoverable VAT or
      to the amount of corporation tax that would not have arisen had such costs
      and expenses been deductible for corporation tax purposes (as the case may
      be); and

(b)   to the extent that VAT on such costs and expenses which was considered to
      be irrecoverable but is recoverable or that such costs and expenses which
      were

                                                                         Page 26

<PAGE>

      considered to be not deductible but are deductible for corporation tax
      purposes, in either case within three years after the date of redemption
      of the SWSF Bonds, the Vendor shall be entitled to claim from the
      Purchaser an amount equal to the amount of such recoverable VAT or to the
      amount of corporation tax saved as a result of such costs and expenses
      being deductible for corporation tax purposes (as the case may be),

but provided further that the Purchaser shall (and shall procure that each
relevant member of the Purchaser's Group shall) use all reasonable endeavours
after Completion to recover such VAT and to procure that such costs and expenses
are deductible for corporation tax purposes within 3 years after the date of
redemption of the SWSF Bonds.

Subject to the SWSF Bonds being redeemed prior to the first anniversary of the
Completion Date, to the extent that the reasonable actual costs and expenses of
redemption (including Spens formula payments and accrued interest up to, but not
in respect of any time after, the Completion Date) of the SWSF Bonds are more or
less than the Anticipated Bond Redemption Costs net of VAT and any corporation
tax saving then the Vendor shall pay to the Purchaser (in the case of such costs
being more than such estimate) or the Purchaser shall pay to the Vendor (in the
case of such costs being less than such estimate) an amount equal to the
difference between the actual costs and expenses of redemption and the
Anticipated Bond Redemption Costs net of VAT and any corporation tax saving. If
the SWSF Bonds are not redeemed prior to the first anniversary of the Completion
Date, the Purchaser shall pay to the Vendor an amount equal to the Anticipated
Bond Redemption Costs net of VAT and any corporation tax saving. Such payments
shall be made in cash in pounds sterling within 5 Business Days of notification
of such actual costs by the Purchaser to the Vendor (such notification to be
made as soon as reasonably possible after redemption of the SWSF Bonds) (or, in
the event that the SWSF Bonds are not redeemed prior to the first anniversary of
the Completion Date, on the first anniversary of the Completion Date, as
relevant) to either the Purchaser's Account or the Vendor's Account as the case
may be.

VENDOR WARRANTIES

8.1   The Vendor warrants to the Purchaser in the terms of the Vendor Warranties
and acknowledges that the Purchaser is entering into this Agreement in reliance
upon each of the Vendor Warranties which will be given as at the date of this
Agreement and (in the case of the Repeated Warranties) as at Completion and for
which purposes where there is any express or implied reference in a warranty
(including in a definition used in a warranty) to the date of this Agreement,
that reference is to be construed as a reference to both the date of this
Agreement and to the Completion Date (and, in respect of any Repeated Warranty
qualified by awareness, such warranty shall be deemed to be given by reference
to the Vendor's awareness (as defined in Schedule 1) at Completion regardless of
whether or not any further enquiry is actually made before Completion, it being
acknowledged that the Vendor is not under an obligation to make such enquiry)
and subject to:

                                                                         Page 27

<PAGE>

(a)   any matter fairly disclosed in the Disclosure Letter (including the
      attachments listed in the schedule thereto);

(b)   the limitations and qualifications set out in clause 9;

(c)   those matters of which the Purchaser is deemed to have full knowledge
      pursuant to clause 8.4; and

(d)   any matters disclosed in the Purchaser Due Diligence Reports.

8.2   The Purchaser shall have no right to claim under the Warranties in
relation to circumstances arising from actions by or on the part of any member
of the Retained Group or any Group Company after the date of this Agreement to
the extent such actions are expressly permitted or expressly required under
clauses 4.1 or 4.2.

8.3   Any matter fairly disclosed in the Disclosure Letter (including the
attachments listed in the schedule thereto) is, subject to the fair disclosure
requirement, to be treated as a disclosure in respect of each and every Vendor
Warranty and not solely in respect of any particular Vendor Warranty.

8.4   Without prejudice to the generality of clause 8.1, the Purchaser shall be
deemed to have full knowledge of:

(a)   all matters fairly disclosed in correspondence, replies to enquiries,
      documents and other information in each case listed in Schedule 3 to the
      Disclosure Letter;

(b)   any information which would be fairly disclosed upon an inspection
      (whether or not made) of the microfiche files which may be inspected by
      the public maintained by the Registrar of Companies in England and Wales
      in respect of any of the Subsidiaries as at the date two Business Days
      prior to signing of this Agreement;

(c)   any information which would be fairly disclosed upon an inspection or
      search (whether or not made) conducted using the name of any of the
      Subsidiaries or any of the Group IPR of any register (electronic or
      otherwise) which may be inspected by the public and maintained by, the UK
      Trade Marks Registry or the Patent Office, the Data Protection Register or
      the domain name search facility at "Uwhois.com" as at the second Business
      Day prior to the date of this Agreement;

(d)   any matter fairly disclosed or provided for in this Agreement, the
      Transitional Services Agreement or the Company Car Leasing Agreement;

(e)   any matter which would be fairly disclosed by an inspection (whether or
      not made) of the minute books and board papers of each of Southern Water
      plc and Southern Water Services Limited and the minutes and committee
      papers of the Southern Water Management Team (formerly known as the Chief
      Executive's Committee) and the Investment Committee of Southern Water
      Services Limited, in each case as listed in Schedule 4 to the Disclosure
      Letter

                                                                         Page 28

<PAGE>

      provided that in the case of the board papers and committee papers
      referred to above which are dated prior to January 1998 and after the date
      of the Vendor's acquisition of the Group, the Vendor agrees that these are
      only deemed disclosed in respect of the Environmental Warranties and they
      shall not be deemed disclosed against any other Vendor Warranty;

(f)   any document or information published by OFWAT or the OFT on their
      respective websites and which would be available on the relevant website
      two Business Days prior to the date of this Agreement.

8.5   The Vendor shall prior to Completion promptly disclose in writing to the
Purchaser any matter or thing which becomes actually known to the Vendor after
the date hereof and before Completion which is inconsistent with any of the
Vendor Warranties or which is a breach of clause 4.

8.6   The Vendor undertakes to and for the benefit of the Purchaser that it
shall not (and shall procure that no member of the Retained Group shall) make or
pursue any claim or action howsoever arising against the Company, any of the
Subsidiaries or any of their directors or the Employees in respect of any loss
or liability which the Vendor or any member of the Retained Group may incur
pursuant to this Agreement (or any other document referred to herein) or
otherwise in connection with the sale of the Shares to the Purchaser or the
preparation of the Disclosure Letter. This clause 8.6 shall not prevent the
Vendor or any member of the Retained Group making or pursuing any claim or
action in relation to fraud or dishonesty.

8.7   The Vendor agrees to indemnify the Purchaser and each member of the
Purchaser's Group in terms set out in paragraph 24 of Schedule 5 (Pensions
Indemnity) and Schedule 9 [***].

8.8   If on or prior to Completion:

(a)   as a result of a matter outside the Vendor's reasonable control, a fact or
      circumstance has arisen between the date of this Agreement and Completion
      which would cause a Termination Repeated Warranty to be untrue when
      repeated as at Completion in accordance with clause 8.1; and

(b)   the liability of the Vendor with respect to a Claim or Claims in respect
      of such fact or circumstance would exceed [***] (disregarding for this
      purpose the limitations set out in clause 9 other than those contained in
      clauses 9.5 and 9.6) in aggregate (a Vendor Termination Event),

(but not otherwise) the Vendor may by written notice to the Purchaser give
notice of its intention to terminate this Agreement (a Vendor Termination
Notice).

8.9   In the event that the Vendor serves a Vendor Termination Notice under
clause 8.8 and the Purchaser serves notice (a Dispute Notice) on the Vendor
within 5 Business Days of the service of the Vendor Termination Notice stating
that the Purchaser disputes the fact that a Vendor Termination Event has
occurred, the parties shall within 2 Business Days refer the matter to the
Expert with instructions to the Expert (acting as expert and not arbitrator) to
determine whether the Vendor

                                                                         Page 29

<PAGE>

Termination Event has occurred and to deliver notice of such to the Vendor and
the Purchaser within 3 Business Days of the matter being referred to him. Such
determination of the Expert shall be final and binding (save in the event of
manifest error) as to whether the Vendor has served a valid Vendor Termination
Notice but, for the avoidance of doubt, shall be without prejudice to the
determination by a Court as to the liability for and the quantum of any Claim.
The Purchaser and the Vendor shall promptly give the Expert such cooperation and
information as the Expert may reasonably request for the purposes of reaching
his determination. In the event that the Expert determines that no Vendor
Termination Event has occurred and, accordingly, that the Vendor Termination
Notice is not valid, the Vendor Termination Notice shall lapse forthwith and
clause 5.1(c)(i) shall apply. In the event that the Expert determines that a
Vendor Termination Event has occurred and accordingly that the Vendor
Termination Notice is valid, the provisions of clause 5.1 (d) shall apply.

8.10 For the purposes of clause 8.9, the parties shall endeavour to agree within
10 Business Days of the date of this Agreement upon the appointment of a Queen's
Counsel, mutually acceptable to each of them, to act as an expert for the
purposes of determining the matters referred to in clause 8.9. Failing agreement
as to such appointment within 10 Business Days of the date of this Agreement, at
any time thereafter either party may refer such appointment to the Chairman for
the time being of Bar Council who shall be requested to appoint a Queen's
Counsel, with appropriate experience, within 5 Business Days of such reference.
Such Queen's Counsel so appointed by agreement of the parties or by the Chairman
of the Bar Council shall be the "Expert" for the purposes of clause 8.9. The
costs of any determination by the Expert shall be borne by the parties equally
unless the Expert determines otherwise.

8.11 In the event that the Vendor serves a Vendor Termination Notice and the
Purchaser does not serve a Dispute Notice in accordance with clause 8.9 within
the time specified therein (and unless clause 8.12 applies), the Vendor
Termination Notice shall be conclusively deemed to be valid and the provisions
of clause 5.1(d) shall apply.

8.12 If a Vendor Termination Notice is served in circumstances where it would
not be possible for the Dispute Notice procedure set out in clause 8.9 to be
completed before the Initial Termination Date (or the Final Termination Date if
the Vendor has made an election under clause 5.1 (b)) and Completion does not
take place as a result notwithstanding any provision to the contrary in clause
28, the Purchaser shall be entitled to bring a claim after termination against
the Vendor for breach of clause 8.8 of this Agreement if the Purchaser disputes
the validity of such Vendor Termination Notice by written notice to the Vendor
within one month after the termination of this Agreement. The Vendor shall only
be liable for damages if a court determines that its Vendor Termination Notice
was not valid and Completion did not take place as a result. The Purchaser's
liability with respect to any such claim shall not exceed

8.13 For the avoidance of doubt, notwithstanding the Vendor's termination right
under clause 8.8, Completion shall not prevent the Purchaser from bringing any
Claim against the Vendor in accordance with, and subject to, the terms of this
Agreement.

                                                                         Page 30

<PAGE>

8.14 Subject to the terms of this clause 8, the Vendor may serve more than one
Vendor Termination Notice.

LIMITATIONS ON CLAIMS

9.1  The provisions of this clause 9 shall operate to limit or reduce the
liability of the Vendor in respect of Claims.

9.2  The Vendor shall not be liable for any Claim unless it shall have received
from the Purchaser written notice containing details of the Claim, including
(where applicable) the Purchaser's estimate of the amount thereof:

(a)  in the case of a Claim in respect of any of the Environmental Warranties or
     the Property Warranties, on or before the date which is five years from the
     date of Completion;

(b)  in the case of a Claim in respect of any of the Tax Warranties or pursuant
     to the Tax Covenant, on or before the date which is seven years from the
     date of Completion; and

(c)  in the case of any other Claim, on or before the date which is two years
     from the date of Completion.

9.3  Any Claim shall (if it has not been previously satisfied, settled or
withdrawn) be deemed to have been withdrawn unless legal proceedings in respect
of it have been commenced by both being issued and served:

(a)  within nine months of notification to the Vendor pursuant to clause 9.2,
     provided that in the event that any claim is made (i) against a third party
     under clause 9.10, then such period shall be extended to expire at the end
     of 30 days following final judgment or settlement of such claim) or (ii)
     with respect to a Claim or Claims relating to one or more Construction
     Contracts in circumstances where clause 9.34 applies, then such period
     shall be extended to expire at the end of 90 days from determination of the
     aggregate outturn spend on all Construction Contracts under the Capital
     Programme; or

(b)  in the case of a Claim which is contingent only or otherwise not capable of
     being quantified, within twelve months of that Claim ceasing to be
     contingent or becoming capable of being quantified and in any event within
     12 months of the last date for notification to the Vendor pursuant to
     clause 9.2.

9.4  The Vendor shall be entitled to require the Purchaser or any Group Company
at the expense of the Vendor to take all such steps or proceedings as the Vendor
acting reasonably may consider necessary in order to mitigate any Claim for
which the Vendor (subject to the limitations contained in this clause 9) accepts
liability (but not necessarily quantum) and the Purchaser shall procure that any
Group Company shall act in accordance with any such reasonable requirements,
subject to the Purchaser and/or any Group Company being fully indemnified on
demand to its/their reasonable satisfaction by the Vendor in respect of all
costs and expenses or other liabilities incurred (excluding, for the avoidance
of doubt, the Claim itself) in taking

                                                                         Page 31

<PAGE>

such action (provided that, to the extent the Purchaser knows that it will incur
any of the same and any consultation shall be reasonably practicable, it shall
consult with the Vendor in advance and have regard to the Vendor's reasonable
views and provided that the Purchaser shall be released from any obligation to
take any steps, proceedings or effect any mitigation under this clause 9.4 or
otherwise in so far as the Vendor indicates to the Purchaser on a timely basis
that it should not take any such steps or proceedings or effect any mitigation).
Without prejudice to the Purchaser's common law duty of mitigation neither the
Purchaser nor any Group Company shall be required by virtue of this clause 9.4
to take any action which could reasonably be expected materially to damage its
goodwill or relationships with any Regulatory Authority.

For the purpose of enabling the Vendor to remedy a breach or to mitigate or
otherwise determine the amount of any Claim or to decide what steps or
proceedings should be taken in order to mitigate any Claim, the Purchaser shall:

(a)     (whether before or after Completion) give notice to the Vendor promptly
        and in any event within no more than 15 Business Days of the Purchaser
        or (after Completion) the directors of Southern Water Services Limited
        or the Company or any executive or investment committee thereof (or any
        substitute thereof) becoming actually aware of any breach or
        circumstances giving or likely to give rise to a breach of any of the
        Vendor Warranties or other term of this Agreement;

(b)     after Completion, make or procure to be made available to the Vendor or
        its duly authorised representatives all relevant books of account,
        records and correspondence of the relevant Group Company and permit the
        Vendor to ascertain or extract any relevant information therefrom
        subject to the Vendor and all those acting for it undertaking to treat
        all relevant information in strict confidence; provided that nothing in
        this clause 9.4(b) shall oblige the Purchaser to make available to the
        Vendor or its duly authorised representatives any information or
        document which is protected by legal privilege or which has been
        prepared by the Purchaser or its accountants and other professional
        advisers with a view to assessing the merits of any claim or dispute
        against the Vendor.

9.5(a)  Save in respect of any Claim arising under clauses 4.1(a), (c), (d),
        (e), (f), (g) and (i) and clause 4.2 (other than clause 4.2(o)), the
        Vendor shall have no liability in respect of any Claim unless the
        liability of the Vendor as finally determined in respect of such Claim
        exceeds [***] in which case the Vendor shall only be liable for the
        excess.

(b)     For the avoidance of doubt, amounts for which the Vendor has no
        liability, or by which the Vendor's liability is reduced, as a
        consequence of the operation of this clause 9 shall not be capable of
        constituting a Claim or increasing the amount thereof for the purpose of
        this clause 9.5 PROVIDED THAT (other than in relation to Claims under
        Environmental Warranties, in respect of which clause 9.5(c) below shall
        apply) the Vendor agrees and acknowledges that the value of any Claims
        arising from or as a result of the same or related matters

                                                                         Page 32

<PAGE>

        or circumstances, or related losses, or, to the extent that they can
        properly be regarded as a class or series of breaches of a particular
        warranty, similar matters or circumstances attributable to a common
        cause, may be aggregated and treated as a single Claim for the purposes
        of this clause 9.5.

(c)     For the purposes of calculating whether the financial thresholds in
        clause 9.5(a) or 9.6 have been reached in relation to a Claim under the
        Environmental Warranties, in the event that there are a series of
        breaches of a particular statement comprised within the Environmental
        Warranties each breach of which individually concerns both the same
        subject matter and the same location, then the Vendor agrees that in
        such event but only in such event the losses resulting from such
        breaches may be aggregated. For the avoidance of doubt: (i) only
        breaches which individually amount to a Material Environmental Effect
        may be aggregated under the provisions of this clause 9.5(c); and (ii)
        this clause 9.5(c) shall not exclude the aggregation of a series of
        losses resulting from a single breach or a series of breaches of a
        particular statement comprised within the Environmental Warranties
        provided that where there are a series of such breaches each breach in
        that series concerns both the same subject matter and the same location.

9.6     Save in respect of any Claim arising under clauses 4.1(a), (c), (d),
(e), (f), (g) and (i) and clause 4.2 (other than clause 4.2(o)), no liability
shall attach to the Vendor in respect of any Claim unless the aggregate amount
of the liability of the Vendor to the Purchaser in respect of all Claims shall
exceed [***] in which event the Vendor shall be liable (subject always to the
other provisions of this clause 9) only for the excess over [***] For the
avoidance of any doubt, save as provided in clause 9.5(c) above in relation to
the Environmental Warranties, amounts for which the Vendor has no liability, or
by which the Vendor's liability is reduced, as a consequence of the operation of
this clause 9 shall not be capable of being aggregated as a Claim or part
thereof with other Claims for the purposes of this clause 9.6.

9.7     (a) Save as provided in clause 9.7(b) and (c), the total aggregate
liability of the Vendor in respect of all Claims and all other claims under or
in connection with this Agreement or any Transaction Document shall not exceed
[***]

(b)     Clause 9.7 (a) shall not apply in respect of any Claims pursuant to
paragraph 2.1 (a)(v) or 2.7 of the Tax Covenant.

(c)     Save to the extent recovered under clause [***] 9.7(b), any Claims under
clause 11.8 shall be limited to the amount equal to less the Third Party Debt
Amount. The amount referred to in clause 9.7(a) shall be decreased by the
aggregate amount of any claims paid under clause 11.8.

9.8     The Vendor shall not be liable for any Claim in respect of any matter to
the extent that:

(a)     allowance, provision or reserve has been made for such matter in the
        Consolidated SW plc Accounts save to the extent superseded by the
        December 2001 Consolidated SW plc Accounts (in which case the allowance,
        provision

                                                                         Page 33

<PAGE>

        or reserve contained in the December 2001 Consolidated SW plc Accounts
        shall prevail); or

(b)     such Claim arises or, such Claim otherwise having arisen, is increased
        as a result of any change made after Completion in any accounting or
        taxation policies or practice of any Group Company, the Purchaser or any
        other member of the Purchaser's Group save to the extent that any such
        change is required to bring the accounting or taxation policies or
        practice of that company into line with generally accepted accounting or
        taxation practice (as the case may be) as at the Completion Date; or

(c)     such matter has been taken into account in the Net Debt Statement or the
        Purchaser has been compensated in respect of that matter by an
        adjustment to the price pursuant to clause 7 (Purchase Price
        Adjustments) and where a matter arises prior to the determination of the
        Net Debt Statement and may be so taken into account or so compensated,
        payment of any Claim relating to that matter (or any part thereof which
        shall not have been so taken into account or so compensated) shall be
        deferred until after the determination of the Net Debt Statement;

(d)     such Claim is attributable to works procured under any Construction
        Contract prior to the Completion Date but carried out after the
        Completion Date if and to the extent only that the Purchaser and each
        relevant Group Company has not taken all reasonable steps after the
        Completion Date consistent with the way in which the Group's business is
        operated as at the date of this Agreement and with the RPO Standard to
        minimise the costs and liabilities to the Group under such Construction
        Contract in respect of the matter giving rise to the Claim; or

(e)     the relevant loss or liability resulting from the matter giving rise to
        the Claim has been discharged by a payment that has already been made
        prior to Completion by any Group Company in respect of the subject
        matter of such Claim.

9.9     In calculating the liability of the Vendor in respect of any Claim, any
depletion in the assets of any Group Company or increase in its liabilities by
virtue of the subject matter of such Claim shall be reduced by any amount
recovered in respect of any debt written off (or 50% of such amount in the case
of debts of Coastal Wastewater Consultants Limited) in the SW plc Accounts, the
Consolidated SW plc Accounts or any previous accounts of Southern Water plc or
the Group (excluding the Company) save to the extent it has been written back in
any subsequent accounts of Southern Water plc or the Group (excluding the
Company) prior to Completion.

9.10    Where a Group Company or the Purchaser is entitled (whether by reason of
insurance or payment discount or otherwise) to recover from some other person
any liability, loss or damage the subject of a Claim against the Vendor or for
which a Claim could be made (and whether before or after the Vendor has made
payment hereunder) (other than a Claim in respect of tax in respect of which
paragraph 11 of Schedule 6 shall apply) the Purchaser shall promptly notify the
Vendor and provide such information as it may reasonably require relating to
such liability, loss or

                                                                         Page 34

<PAGE>

damage and the steps taken or to be taken by the Purchaser or the Group Company
in connection with it and, if so required by the Vendor and at the Vendor's cost
and expense and on the Vendor providing indemnities satisfactory to the
Purchaser (acting reasonably) in respect of all costs and expenses to be
incurred, the Purchaser shall, and shall procure that any Group Company shall,
before seeking to recover any amount from the Vendor under this Agreement, first
but without prejudice to any right to make any Claim against the Vendor and the
Vendor's liability in respect of such Claim, take such reasonable steps (whether
by way of a claim against its insurers or otherwise) including, but without
limitation, proceedings as the Vendor may reasonably require to enforce such
recovery provided that (without prejudice to the Purchaser's common law duty to
mitigate) neither the Purchaser nor any Group Company shall be required by
virtue of this clause 9.10 to take any action which could reasonably be expected
materially to damage its goodwill or relationship with any Regulatory Authority
and shall keep the Vendor informed of the progress of any action taken and
thereafter any Claim against the Vendor shall be limited (in addition to the
limitations on the liability of the Vendor referred to in this clause) to the
amount by which the loss or damage suffered by the Purchaser or the relevant
Group Company as a result of such breach shall exceed the amount so recovered.

9.11    If the Vendor pays to the Purchaser an amount in discharge of a Claim
(other than a Claim in respect of tax in respect of which paragraph 11 of
Schedule 6 shall apply) and the Purchaser or any Group Company subsequently
recovers (whether by payment, discount, credit, relief, allowance by the DGWS
with respect to Regulatory Capital Value (provided specifically and identifiably
referable to the subject matter of the Claim) or otherwise) from a third party a
sum which is referable to the circumstances giving rise to the Claim, the
Purchaser shall (or, as appropriate, shall procure that such Group Company
shall) forthwith repay to the Vendor:

(a)     an amount equal to the sum recovered from the third party (or, in
        respect of any allowance by the DGWS with respect to Regulatory Capital
        Value, the sum equal to the discounted cash flow value of such allowance
        as initially determined by the auditors or, if such initial
        determination is disputed by the Vendor, by an independent firm of
        accountants experienced in the UK water industry) less any reasonable
        out-of-pocket costs and expenses incurred by the Purchaser or the Group
        Company in recovering the same and not otherwise indemnified or paid by
        the Vendor (provided that any amount retained by the Purchaser against
        any indemnification obligations shall to the same extent discharge such
        indemnification obligations); or

(b)     if the figure resulting under paragraph (a) above is greater than the
        amount paid by the Vendor to the Purchaser or the Group Company in
        respect of such Claim, such lesser amount as shall have been so paid by
        the Vendor;

so as to leave the Purchaser (taking into account the amounts received from the
third party and from the Vendor and those payable to the Vendor under this
clause) in no better or worse position than it would have been in (subject
always to the other provisions of clause 9.11) had the Claim not arisen.

                                                                         Page 35

<PAGE>

9.12    If any Claim shall arise by reason of some liability which at the time
that the Claim is notified to the Vendor is contingent only, the Vendor shall
not be under any obligation to make any payment to the Purchaser thereunder
until such time as such contingent liability ceases to be so contingent save as
otherwise expressly provided in clause 9.32(b).

9.13    The Vendor shall not be liable in respect of any Claim to the extent
that the Vendor can demonstrate that the amount of such Claim would have been
recovered from insurers had the Purchaser procured and maintained policies of
insurance for the benefit of Group Companies the benefits of which were no less
favourable than those existing at the date hereof.

9.14    Upon any Claim being made, the Purchaser shall, and shall co-operate to
procure that each Group Company shall, make available to accountants and others
appointed by the Vendor upon reasonable notice during normal business hours such
relevant records and information as the Vendor reasonably requests in connection
with such Claim (including the position under the provisions contained in clause
9.8) and the Purchaser shall, and shall co-operate to procure that each Group
Company shall, use all reasonable endeavours to procure that the auditors (both
past and then current) of the Group make available to the Vendor and to
accountants and others appointed by the Vendor their audit working papers in
respect of audit of any Group Company's accounts for any relevant accounting
period in connection with the Claim subject to the Vendor agreeing to procure
that any such information be kept confidential and that such information will
not be used other than for the purposes of this clause 9.

9.15    The Vendor shall not be liable in respect of any Claim to the extent
that such Claim would not have arisen but for a voluntary act, omission or
transaction carried out after the date hereof by the Purchaser or its directors,
employees or agents or, after Completion, by a Group Company or its directors,
employees or agents which the Purchaser or Group Company (as the case may be)
knew or ought reasonably to have known would give rise to a Claim otherwise than
any act, omission or transaction in the ordinary and usual course of business or
required by law or regulation and other than any act, omission or transaction
which arises as a result of any breach of Warranty or undertaking by the Vendor
under this Agreement (provided that such act, omission or transaction is not
inconsistent with the Purchaser's common law duty to mitigate).

9.16    The Vendor shall not be liable in respect of any Claim to the extent
that such Claim is attributable to, or such Claim otherwise having arisen, is
increased as a result of any legislation not in force or binding at the date
hereof or to any change of law (or the interpretation thereof) or administrative
practice (including but not limited to extra-statutory concessions of the Inland
Revenue) which takes effect retroactively.

9.17    Subject to clause 16, the Vendor Warranties and the Tax Covenant shall
be actionable only by the Purchaser and no other party shall be entitled to make
any claim or take any action whatsoever against the Vendor under or arising out
of or in connection with the Vendor Warranties and the Tax Covenant.

                                                                         Page 36

<PAGE>

9.18    A breach of this Agreement which is capable of remedy shall not entitle
the Purchaser to compensation unless the Vendor is given written notice (the
Purchaser's Remedy Notice) of such breach and, if the Vendor elects by written
notice to the Purchaser (the Vendor Remedy Notice) to step in and remedy the
circumstances which gave rise to the Claim, within 30 Business Days after the
date on which the Purchaser's Remedy Notice is served on the Vendor:

(a)     the Vendor has not remedied such breach to the reasonable satisfaction
        of the Purchaser; or

(b)     the parties have not agreed a remediation plan which is in the course of
        being implemented to the reasonable satisfaction of the Purchaser. The
        parties shall co-operate in good faith and use their reasonable
        endeavours to agree a reasonable remediation plan as soon as reasonably
        practicable and in any event within 15 Business Days after the Vendor
        Remedy Notice. The Vendor shall pay to the Purchaser all reasonable out
        of pocket costs and expenses suffered by the Purchaser and/or any Group
        Company in agreeing, and all reasonable costs and expenses (including
        out of pocket expenses) suffered by the Purchaser and/or any Group
        Company in implementing, any such agreed remediation plan.

To the extent that circumstances which gave rise to the Claim have been remedied
at the cost of the Vendor, the related loss shall be disregarded for the
purposes of the aggregate amount referred to in clause 9.6 and the aggregation
provisions of clause 9.5.

9.19    The Purchaser hereby agrees for itself and on behalf of each Group
Company with the Vendor that in respect of any Claim where the Vendor may be
liable to the Purchaser under the Vendor Warranties and which may also give rise
to a liability under the Tax Covenant the Vendor shall not be obliged to meet
any such liability more than once and any recovery by the Purchaser in respect
of any such Claim under the Vendor Warranties shall be deemed to be a recovery
by all the relevant parties under the Tax Covenant and any recovery by any party
under the Tax Covenant shall be deemed to be a recovery by the Purchaser under
this Agreement for breach of the Vendor Warranties (as the case may be) in each
case to the extent only of the actual recovery made and a recovery by the
Purchaser or any Group Company shall be deemed to be a recovery by each of them.

9.20    The Purchaser shall have no right to injunction or specific performance
for any breach under clause 4 of this Agreement.

9.21    Subject to clauses 5.1(d) and 8.9, neither the Vendor nor the Purchaser
shall be entitled to rescind or terminate this Agreement in any circumstances
whatsoever, other than in respect of fraudulent misrepresentation.

9.22    The Purchaser shall not be entitled to recover more than once under this
Agreement and the other Transaction Documents in respect of the same loss
arising from the same matter or circumstance (whatever the measure of loss).

                                                                         Page 37

<PAGE>

9.23    Neither the Vendor nor any member of the Retained Group nor any of their
respective employees, officers and directors shall be liable for any claim
(without prejudice to the Purchaser's right to bring a Claim against the Vendor
under this Agreement) whether in contract, tort or otherwise in respect of loss
or damage suffered by any Group Company as a result of services rendered prior
to Completion to any Group Company by any of the same (including, but not
limited to, the Vendor's legal treasury, tax or insurance departments) and save
for any claims in respect of fraud or dishonesty.

9.24    Clauses 9.3, 9.4, 9.5, 9.6, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13, 9.14,
9.15, 9.16 and 9.18 shall not apply to any Claim made pursuant to the Tax
Covenant (in which circumstances the relevant provisions of Schedule 6 shall
apply) and clauses 9.6, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13, 9.14, 9.15 and 9.16
shall not apply to any Claim made in respect of a breach of any of the Tax
Warranties (in which circumstances the relevant provisions of Schedule 6 shall
apply).

9.25    The only warranties which shall apply in respect of real estate are
those contained in paragraphs 7.1(b) (Group's Assets), 7.3 (Fixed Assets), 7.4
(Health & Safety), 13 (Insurance), 15 (Property) and 18 (Environment) of
Schedule 3. For the avoidance of doubt, to the extent that the Material
Contracts or the Construction Contracts pertain to real estate the Purchaser
shall not be precluded from making a Claim under the warranties contained in
paragraphs 8 and 15 of Schedule 3.

9.26    The only warranties which shall apply in respect of Environmental
Matters are the Environmental Warranties and those contained in paragraphs 8.9
(Government Grants) and 13 (other than paragraph 13.4(b)) (Insurance) of
Schedule 3.

9.27    The only warranties which shall apply in respect of any Construction
Contract are those contained in paragraphs 5 (Accounts), 6 (Position since
Accounts Date), 7.4 (Health and Safety), 8.1, 8.3, 8.7, 8.8, 8.10 to 8.12
(Contracts), 8.14 to 8.19 (Construction Contracts), 9.1, 9.3(b) to (d)
(Litigation and Regulatory Matters), 12.11 and 12.12 (VAT) and 13 (Insurance) of
Schedule 3.

9.28    The only warranties which will apply in respect of directors and
employees are those contained in paragraphs 7.4 (Health and Safety), 11
(Directors and Employees), 12 (Tax), 13 (Insurance), 14 (Pensions), and 17
(Intellectual Property) of Schedule 3.

9.29    The only warranties which shall apply in respect of pensions are those
contained in paragraphs 11 (Directors and Employees) and 14 (Pensions) of
Schedule 3.

9.30    Save as otherwise expressly provided, nothing in this clause 9 shall in
any way restrict or limit the general obligation at law of the Purchaser to
mitigate (including where relevant by seeking any interim determination of
Regulatory Capital Value from the DGWS in respect thereof) any loss or damage
which it may suffer in consequence of any breach by the Vendor of the terms of
this Agreement but so that all costs of mitigation shall, for the avoidance of
doubt, be paid by the Vendor to the Purchaser if and to the extent required by
law.

                                                                         Page 38

<PAGE>

9.31    Without prejudice to the provisions of the remainder of this clause 9,
the Vendor shall not be liable in respect of any Claim in respect of a breach of
any of the Environmental Warranties and the warranties contained in paragraphs
8.9 and 13 of Schedule 3 (excluding the warranty in 13.4(b)) to the extent that
a claim relates to any Environmental Matter to the extent that the Claim results
from or is increased by any of the following:

(a)     the giving or submission of any information to any Competent Authority
        or third party by the Purchaser or any member of the Purchaser's Group
        or, after Completion, any Group Company or any of their respective
        employees, officers, directors, contractors or agents on their behalf (a
        Relevant Person) of any information other than where it is given or
        submitted by the Relevant Person:

          (i)  in response to or in compliance with a legal requirement or
               obligation which necessitates disclosure under Environmental Law
               or Environmental Licences;

          (ii) with the prior consent of the Vendor (such consent not to be
               unreasonably withheld or delayed);

          (iii) to any Competent Authority or third party after Completion in
               circumstances where information concerning the same specific
               circumstance and subject matter was given or submitted to that
               Competent Authority or third party with respect to the relevant
               location or property prior to Completion; or

          (iv) in an Emergency provided that the Purchaser or Group Company had
               used its reasonable endeavours to obtain the Vendor's consent
               prior to disclosing (such consent not to be unreasonably withheld
               or delayed) and to the extent that it was reasonable to do so in
               the circumstances;

(b)     the undertaking of any inspections, investigations, audits or sampling
        in relation to Hazardous Materials at, on or under any Property by a
        Relevant Person after Completion (except where required under
        Environmental Law or Environmental Licences or by a Regulatory
        Authority's demand or in connection with development that is allowed
        under sub-clause (i) and (ii) of clause 9.31(c) or in the case of an
        Emergency and provided in each case that the undertaking of such
        inspections, investigations, audits or sampling was necessary in the
        circumstances);

(c)     the partial or total cessation of operations or the change of use of any
        Property or the undertaking of any Development (including
        decommissioning, demolition, removal, alteration or construction of any
        plant, equipment, building or structure or any part thereof) at any
        Property by a Relevant Person after Completion excluding:

          (i)  any minor changes to the use of any ancillary buildings or
               equipment, which are necessary or practicable in order to
               continue operating the same business as at Completion;

                                                                         Page 39

<PAGE>

        (ii) any development specifically required to be undertaken at a
             particular Property in compliance with a specific requirement
             under Environmental Law or an Environmental Licence in force at
             Completion:

     but including any change or development which leads to the requirement to
     apply for an Environmental Licence. For the avoidance of doubt the
     Purchaser is not precluded from making any Claim where any change in
     operations or use or the undertaking of any Development reveals the
     presence of contamination where a failure to remove, treat or abate such
     contamination would more than likely result in a requirement being lawfully
     imposed by a Regulatory Authority properly exercising its powers under
     Environmental Law or where it is reasonable to expect such a requirement
     would be imposed were any Regulatory Authority aware of the full facts and
     circumstances of the contamination. Provided always that such a Claim can
     only be made (i) if and to the extent that the requirement by a Regulatory
     Authority aforesaid would, but for the Development in question, have arisen
     and been recoverable during the relevant warranty period; and (ii) no Claim
     shall include any sums with respect to any delay or other disruption to the
     works subject to the Development including (but not limited to) site costs,
     supervision, contract price variation due to delay or disruption or
     otherwise;

(d)  the carrying out of any works or the failure to carry out any works
     (including maintenance works) by a Relevant Person at any Property after
     Completion where the carrying out of such works or the failure to carry out
     such works is otherwise than in accordance with the standards of a person
     exercising that degree of skill, diligence, prudence and foresight which
     would reasonably and ordinarily be expected from either a skilled and
     experienced operator in respect of the conduct and management of a business
     of the nature of the business of the Group Companies or, where such works
     relate or would have related to services supplied by a person who is not
     related to the business of the Group Companies, a skilled and experienced
     contractor, supplier, specialist or agent as the case may be;

(e)  other than with the consent of the Vendor, the sale or disposal of all or
     any part of the Properties after Completion or any change in control in
     relation to the Company or any Group Company which owns or occupies all or
     any part of any Property after Completion, and for the avoidance of doubt
     where a transfer of Property after Completion or change of control in
     relation to the Company or Group Company which owns or occupies all or any
     part of any Property is a transfer to or change of control within the Group
     or Purchaser's Group (an Intra-Group Transfer; and the term Transferor
     refers to the transferor of the Property or the person in control prior to
     the Intra-Group Transfer as the case may be) then where and to the extent
     only that, the Transferor would have had the Claim but for the Intra-Group
     Transfer then, to that extent, the Claim shall not be considered to have
     resulted from or been increased by any transfer of Property after
     Completion or change of control in relation to the Company or Group Company
     which owns or occupies all or any part of any Property;

                                                                         Page 40

<PAGE>

(f)  any changes in law, including Environmental Law, after the date of this
     Agreement;

(g)  the failure of a Relevant Person to take all reasonable steps to minimise
     and mitigate any losses for which a claim may be made in respect of a
     breach of any of the Environmental Warranties (which for the avoidance of
     doubt does not require the Purchaser or Group Company to incur material
     cost or liability);

(h)  a Relevant Person (or any person acting on a specific request of the
     Purchaser or Group Company) provoking a third party to commence proceedings
     for the sole purpose of satisfying the trigger condition set out in clause
     9.32;

(i)  any negligent or reckless act or omission of a Relevant Person where the
     Person knew or ought reasonably to have known that such an act or omission
     would result in or increase the amount of a Claim;

(j)  the costs of carrying out any works resulting from a Claim under the
     Environmental Warranties being higher than that necessary to satisfy the
     minimum standards required under Environmental Law provided that the
     Purchaser may only incur those costs that are reasonable to achieve such
     standards;

(k)  any development or change of use for a use that is more environmentally
     sensitive than that carried out at Completion; or

(l)  any loss of profits, loss of sales, loss of production, business
     interruption, reduction in value of any asset or shares or any other
     indirect or consequential loss or damage and incurred or suffered by the
     Purchaser or any member of the Purchaser's Group and for the avoidance of
     doubt this clause shall not preclude such losses of the types described
     above in this sub-clause 9.31(l) from constituting losses where they are
     recovered by a third party against the Purchaser or member of the
     Purchaser's Group in any Environmental Proceedings but only to the extent
     that such Environmental Proceedings are finally determined (either by final
     and binding judicial order or other settlement) including determination of
     any appeals.

9.32 The Vendor shall not be liable in respect of any Claim under the warranties
in paragraphs 18.1, 18.2, 18.8 and 18.9 of Schedule 3 unless:

(a)  a criminal, civil, judicial, administrative or regulatory proceedings suit
     or action is brought or taken or expressly threatened in writing by a
     Regulatory Authority or other third party in respect of the relevant
     subject matter of the particular warranty under which the Claim is made; or

(b)  it is reasonable to expect that a Regulatory Authority would more than
     likely take action in the period during which a Claim may be notified in
     accordance with 9.2 were it aware of the full facts and circumstances that
     might reasonably be expected to give rise to a Claim.

                                                                         Page 41

<PAGE>

9.33 Notwithstanding any other provision of this Agreement, for the avoidance of
doubt in calculating or determining the extent or measure of any loss or damage
suffered by the Purchaser in respect of a Claim, no account shall be taken of
the earnings of any Group Company or any multiple thereof.

9.34 Notwithstanding any other provision of this Agreement, to the extent that
any Claim arises from the outturn spend on a Construction Contract exceeding
the budgeted expenditure for such Construction Contract shown in the Capital
Programme then the Purchaser shall not be entitled to effect a recovery with
respect to such a Claim unless or until the aggregate outturn spend on all
Construction Contracts exceeds by more than the aggregate budgeted expenditure
shown on the Capital Programme provided that this clause 9.34 shall not prevent
the Purchaser from notifying any such Claim prior to the determination of the
aggregate outturn spend on all Construction Contracts and the provisions of
9.3(a)(ii) shall apply to any such Claim.

9.35 The Environmental Warranties shall not apply to any loss or liability to
the extent that such loss or liability is provided for in the Slindon Indemnity.

PURCHASER WARRANTIES

10.1 The Purchaser represents and warrants to the Vendor in the terms of the
Purchaser Warranties.

10.2 The Purchaser acknowledges that the Vendor has entered into this Agreement
in reliance on the Purchaser Warranties.

POST COMPLETION UNDERTAKINGS

11.1 Following Completion, the Purchaser undertakes (on behalf of each and every
member of the Purchaser's Group) to the Vendor:

(a)  without prejudice to the temporary use of marks, designs, names or logo and
     signage provided for under clauses 11.1(b) and 11.1(c), to procure that no
     member of the Purchaser's Group shall at any time after Completion,
     represent or hold itself out as being part of the Retained Group;

(b)  to procure that the Group Companies shall cease in any manner to:

          (A)  use or display the words "ScottishPower" or the "powermark
               diamond" device mark (registration number 1447663) or the
               strapline containing either of the same or any confusingly
               similar mark, design, name or logo:

          (i)  from 1 month after the Completion Date, on all stationery and
               other printed material used by any Group Company;

          (ii) from 6 months after the Completion Date, on all Property and any
               land and buildings comprising or on such Property;

                                                                         Page 42

<PAGE>

       (iii) from 3 months after the Completion Date, on all cars and other
             vehicles used in the business of any Group Company;

       (iv)  from 2 weeks after the Completion Date, on the website of any Group
             Company; and

       (B)   with respect to the use by any Group Company of any of the Group's
             trading names from time to time (including, but not limited to,
             "Southern Water" and "Southern Water Services") use the existing
             font or any font which is the same as or confusingly similar to it
             at any time after the first to occur of (i) a change of control of
             the Purchaser or any sale of the Company by the Purchaser and (ii)
             the expiry of a period of 12 months from the Completion Date; and

(c)  to procure that as soon as reasonably practicable, and in any event within
     one month after Completion, change the name of any relevant Group Company
     so as to omit the words "ScottishPower" or "Aspen" or any confusingly
     similar words, names or logos and that all necessary registrations in
     connection with the change of name are made.

11.2 Following Completion, the Vendor undertakes (on behalf of each and every
member of the Retained Group) to the Purchaser:

(a)  to procure that no member of the Retained Group shall, save as permitted
     under clause 11.2(b), at any time after Completion, represent or hold
     itself out as being an owner of any Group Company or otherwise connected as
     a member of the same group of companies; and

(b)  to procure that each member of the Retained Group shall cease in any manner
     to:

       (A)   use or display any of the Group's names from time to time
             (including, but not limited to, the words "Southern Water" or
             "Southern Water Services"):

       (i)   from 1 month after the Completion Date, on all stationery and
             other printed material used by any member of the Retained Group;

       (ii)  from 6 months after the Completion Date, on all property and any
             land and buildings comprising or on such property;

       (iii) from 3 months after the Completion Date, on all cars and other
             vehicles used in the business of any member of the Retained
             Group;

       (iv)  from 2 weeks after the Completion Date, on the website of any
             member of the Retained Group; and

       (B)   from 1 month after the Completion Date, retain, copy or make use of
             any customer list of any Group Company or any database including
             such information in whatever medium it is stored except to the
             extent

                                                                         Page 43

<PAGE>

          that any list or data concerning customers or former customers of a
          Group Company has prior to the date of this Agreement been absorbed in
          databases of any member of the Retained Group and save as required for
          the purposes of the Transitional Services Agreement.

11.3 Following Completion, the Vendor shall ensure that any pre-existing rights
held by the Employees at Completion in any of the Schemes are treated in
accordance with the rules of those Schemes.

11.4 The parties agree that the burden (and to the extent that there is any, the
benefit) of any settlement arrangement or judgment in respect of the [XXX] Claim
shall inure to and be the responsibility of the Vendor. The Purchaser undertakes
to procure that the Company shall provide all reasonable advice and cooperation
with respect to the conduct of the [XXX] Claim and any settlement proceedings in
relation thereto (which conduct and proceedings shall be at the direction of the
Vendor) and shall procure that any proceeds from the [XXX] Claim shall be
assigned to the Vendor (or as it may direct). The Vendor shall indemnify the
Purchaser and each Group Company against any liabilities to the defendant or any
third party by reference to or in the proceedings relating to the [XXX] Claim,
together with any third party costs or expenses incurred by the Purchaser or any
Group Company in connection with the [XXX] Claim at the direction of the Vendor.

11.5 The Vendor shall not (and shall procure that each other member of the
Retained Group shall not) within a period of twelve months after Completion,
directly or indirectly, solicit or endeavour to entice away from any Group
Company any Senior Employee, except with the prior written consent of the
Purchaser.

11.6 It is agreed in relation to the Schemes and any share award or share
option granted under the Schemes that:

(a)  to the extent that the Vendor has the ability to withhold a sufficient
     number of Shares when any such share award is released or any such share
     option is exercised and is able to sell such shares, the Vendor shall pay
     from the sale proceeds to the Inland Revenue Collector of Taxes an amount
     equal (to the extent possible up to the value of such sale proceeds) to any
     liability on any member of the Purchaser's Group to account for any
     employees' national insurance contributions or income tax liability arising
     after the date of Completion in respect of any such share award or share
     option which was granted before the date of Completion to any Relevant
     Employee;

(b)  the Vendor will pay to the Purchaser an amount equal to any interest or
     penalties which any member of the Purchaser's Group is required to pay as a
     result of a failure by the Vendor to pay any amount referred to in clause
     11.6(a), within 10 Business Days of the liability to interest or penalties
     arising or if shorter 5 Business Days before the date such liability is
     payable by the Purchaser;

(c)  the Vendor will provide the Purchaser with all information reasonably
     required by the Purchaser relating to the calculation of any amount payable

                                                                         Page 44

<PAGE>

           under clause 11.6(a) within 10 Business Days of the payment having
           been made; and

     (d)   neither the Vendor nor any member of the Retained Group shall be
           liable to pay any secondary (employer's) national insurance
           contributions which arise after the date of Completion in respect of
           any such share award or such share option, whether upon the exercise
           or release of such share award or such share option or otherwise.

     11.7  To the extent that the EIB Loans have not been repaid or prepaid or
     novated to, a person other than a Group Company prior to Completion, no
     later than 5 Business Days following Completion, the Vendor shall procure
     that the EIB Loans are repaid in full. The Vendor agrees to indemnify the
     Purchaser on demand (for itself and on behalf of each member of the
     Purchaser's Group) for and against any and all losses, liabilities, costs
     or expenses which any member of the Purchaser's Group may suffer or incur
     after Completion in connection with the EIB Loans.

     11.8  The Vendor agrees to indemnify and keep indemnified the Purchaser
     (for itself and on behalf of each member of the Purchaser's Group) on an
     after tax basis from and against any and all losses, liabilities, costs or
     expenses which the Purchaser or any member of the Purchaser's Group may
     suffer or incur (other than in respect of any liabilities for tax in which
     case the relevant provisions of the Tax Covenant shall apply) arising out
     of or in connection with:

     (a)   the Reorganisation; and

     (b)   any activities of the Company prior to Completion including, without
           limitation, failure to comply with applicable law or regulation,

     save to the extent such losses, liabilities costs or expenses would not
     have arisen but for a voluntary act, omission or transaction carried out
     after the date hereof by the Purchaser or its directors, employees or
     agents or, after Completion, by a Group Company or its directors, employees
     or agents in each case which the Purchaser or Group Company (as the case
     may be) knew or ought reasonably to have known would give rise to such
     losses, liabilities, costs or expenses and other than any act, omission or
     transaction in the ordinary and usual course of business or required by law
     or regulation.

     11.9  The Vendor shall indemnify the Purchaser (for itself and on behalf of
     each member of the Purchaser's Group) against any liability to make payment
     or confer benefits under the bonus and other arrangements (full particulars
     of which (in the form of copy letters executed by the relevant Directors)
     have been delivered to the Purchaser prior to the date of this Agreement)
     to the extent that such liability is in excess of the higher of an
     employee's entitlement to payment of benefits or bonuses pursuant to (i)
     his contract of service as at the date of this Agreement or (ii) the
     arrangements effected by the Purchaser (or on behalf of the Purchaser) with
     effect from the Completion Date.

     11.10 The Purchaser shall indemnify the Vendor (for itself and on behalf of
     each member of the Retained Group) against any liability to make payments
     or confer

                                                                         Page 45

<PAGE>

benefits under the retention and incentivisation arrangements put in place by
the Purchaser for directors (full particulars of which (in the form of copy
letters executed by the relevant directors) have been delivered to the Vendor
prior to the date of this Agreement).

11.11  The Purchaser shall, following Completion, procure that no Group Company
dismisses PricewaterhouseCoopers as auditors of any Group Company prior to 30
June 2002 (other than for cause). The Purchaser shall procure that each Group
Company shall provide to the Retained Group and the Vendor's Accountants in a
form consistent with the audit for the year to 31 March 2001 such financial
information relating to the year to 31 March 2002 as Scottish Power plc or the
Vendor may reasonably require for the purposes of preparing the Net Debt
Statement in accordance with clause 6 and preparing the consolidated accounts of
Scottish Power plc and shall use reasonable endeavours to provide such
information in a timely manner consistent with the preparation of Scottish Power
plc's consolidated accounts for the year to 31 March 2002 in accordance with its
legal and regulatory requirements and its usual reporting dates.

INSURANCE

12.1 Where insurance cover under the Vendor Group Policies and Third Party
Insurance Policies is provided on an "incidents occurring" basis, the Vendor
shall procure that, with respect to incidents occurring prior to (but excluding)
Completion, each Group Company is named and endorsed on each of such Vendor
Group Policies and Third Party Insurance Policies as a separate named insured.

12.2 The Vendor acknowledges that in respect of claims made under policies
falling within clause 12.1 above against a Group Company following Completion in
relation to any incidents occurring prior to Completion, each Group Company will
have direct access to insurers under the Vendor Group Policies and Third Party
Insurance Policies.

12.3 In respect of any claim whether on an "incidents occurring" or "claims
made" basis under any Vendor Group Policy or Third Party Insurance Policy which
is made prior to Completion, the Vendor shall promptly notify the Purchaser in
writing of the claim and make and pursue any such claim under the relevant
policy at the Group's cost as the Purchaser shall reasonably request. The Vendor
shall:

       (i)   keep the Purchaser informed on a regular basis of the progress of
             any such claim;

       (ii)  following Completion at the Group's cost take all such action,
             institute such proceedings and provide such information as the
             Purchaser may reasonably request in respect of the handling of such
             claim against the insurer;

       (iii) promptly on receipt pay to the relevant Group Company all proceeds
             recovered from insurers in respect of such claim without any
             set-off or counterclaim or other deduction,

                                                                         Page 46

<PAGE>

save to the extent that a Group Company is able to pursue any claim directly and
receive the proceeds of any such claim directly.

12.4 The Purchaser undertakes that, if it or any Group Company receives returns
of premiums originally paid by a member of the Retained Group from insurers
under either the Vendor Group Policies or Third Party Insurance Policies as a
result of the sale by the Vendor of all of the issued shares of the Company to
the Purchaser, it will promptly upon receipt of such returns of insurance
premiums pay these amounts in full to the member of the Retained Group entitled
to it.

PENSIONS

13.  The provisions of Schedule 5 shall apply in respect of pensions applicable
to the Employees.

ENTIRE AGREEMENT

14.1 This Agreement and the other Transaction Documents set out the entire
agreement and understanding between the parties to this Agreement and those
documents in respect of the transactions contemplated by this Agreement.

14.2 It is agreed that:

(a)  the parties have not entered into this Agreement in reliance upon any
     representation, warranty or undertaking of any other party or any of its
     Connected Persons except as set out in this Agreement or any of the other
     Transaction Documents;

(b)  the Purchaser may claim in contract for breach of a Vendor Warranty under
     this Agreement and the Vendor may claim in contract for breach of a
     Purchaser Warranty under this Agreement but each party shall have no claim
     or remedy under this Agreement in respect of misrepresentation (whether
     negligent or otherwise, and whether made prior to, and/or in, this
     Agreement) or untrue statement made by the other party or its Connected
     Persons;

(c)  this clause shall not exclude any liability for, or remedy in respect of,
     fraudulent misrepresentation; and

(d)  save as expressly set out in this Agreement or any other Transaction
     Documents, no party or Connected Person shall owe any duty of care to any
     other party or Connected Person.

14.3 Each party contracts in clause 14.2 on its own behalf and as agent for each
of its Connected Persons. Each Connected Person which contracts through the
agency of a party may enforce clause 14.2 directly against each other party and
Connected Person.

14.4 The Vendor and the Purchaser acknowledge and agree that (without prejudice
to any Intra Group Trading Debt) all existing contractual or other arrangements
for the management or other provision of services between the Retained Group and
the

                                                                         Page 47

<PAGE>

Group Companies will terminate on Completion save as provided in the Transaction
Documents.

VARIATION

15.  No variation of this Agreement (or of any of the documents referred to in
this Agreement) shall be valid unless it is expressed to constitute a variation
of this Agreement and is in writing and signed by or on behalf of each of the
parties to it.

ASSIGNMENT

16.1 Neither party shall nor shall it purport to assign, transfer, charge or
otherwise deal with all or any of its rights or obligations under this Agreement
nor grant, declare, create or dispose of any right or interest in this Agreement
without the prior written consent of the other party provided that either party
(an Assignor) may assign or transfer in whole or in part all or any of its
rights under this Agreement to any other member of the Retained Group (in the
case of the Vendor) or the Purchaser's Group (in the case of the Purchaser) (in
each case, a Permitted Assignee).

16.2 Notwithstanding any other provision of this Agreement (including, without
limitation, clause 16.1), the Purchaser may create security (whether by way of
assignment by way of security, charge or otherwise) over all or any of its
rights under this Agreement in favour of any person in connection with any debt
or equity financing or refinancing (whether direct or indirect) provided to the
Purchaser or any member of the Purchaser's Group relating to the purchase of the
Shares and all matters supplemental or ancillary thereto and no provision of
this Agreement shall in any way restrict or prohibit the enforcement of any such
security.

16.3 If the benefit of the whole or any part of this Agreement is assigned by an
Assignor to any Permitted Assignee in accordance with clause 16.1 (but not, for
the avoidance of doubt, in accordance with clause 16.2), where any such
Permitted Assignee will cease to be a member of the Retained Group or the
Purchaser's Group (as the case may be) the Assignor shall procure that, before
it so ceases, the Permitted Assignee shall assign that benefit to the Assignor
or to another continuing member of the Retained Group or the Purchaser's Group
(as the case may be).

16.4 The parties acknowledge and agree that if an Assignor assigns the benefit
of this Agreement in whole or in part to any Permitted Assignee or any other
person with the prior written consent of the other party in accordance with
clause 16.1 (but not, for the avoidance of doubt, in accordance with clause
16.2), the liabilities of the other party under this Agreement to the Permitted
Assignee or such person shall be no greater than such liabilities would have
been had the assignment not occurred.

16.5 Immediately after any assignment in accordance with clause 16.1 or 16.3,
the Assignor will give written notice of the assignment to the other party
containing details of the assignment including the identity of the assignor and
assignee.

16.6 Any purported assignment in contravention of this clause 16 shall be void.

                                                                         Page 48

<PAGE>

TAX COVENANT

17.  The provisions of Schedule 6 shall have effect on and from Completion.

ANNOUNCEMENTS

18.  Except as required by law or by any recognised stock exchange or
governmental department or agency or other regulatory or supervisory body or
Competent Authority having jurisdiction to whose rules the party making the
announcement or disclosure is subject, whether or not having the force of law
(but, if not having the force of law, compliance with which is in accordance
with general practice of persons subject thereto), no announcement or circular
or disclosure in connection with the existence or subject matter of this
Agreement or any of the Transaction Documents shall be made or issued by or on
behalf of the Vendor or the Retained Group or the Purchaser or the Purchaser's
Group (save for the Announcements and save in respect of the issue of bonds or
other securities in connection with the financing or refinancing of the
transaction contemplated by this Agreement or in connection with a sale of any
member of the Purchaser's Group) without the prior written approval of the other
party to this Agreement (such approval not to be unreasonably withheld or
delayed).

COSTS

19.1 Subject to clause 19.2, each of the parties shall pay its own legal and
other advisers' costs incurred in connection with the negotiation, preparation
and implementation of this Agreement.

19.2 The Vendor shall pay the legal and other advisers' costs incurred by any of
the Group Companies in connection with the negotiation, preparation and
implementation of this Agreement.

19.3 The Purchaser shall bear all stamp duty or stamp duty reserve tax (or
similar or equivalent transfer taxes) payable in relation to the Transaction
Documents.

SEVERABILITY

20.  If any provision of this Agreement is held to be invalid or unenforceable,
then such provision shall (so far as it is invalid or unenforceable disregarding
any period of invalidity or unenforceability during which the Purchaser is under
a reasonable endeavours obligation to remove the cause thereof pursuant to
clause 5.1(b)) be given no effect and shall be deemed not to be included in
this Agreement but without invalidating any of the remaining provisions of this
Agreement.

FURTHER ASSURANCE

21.1 The Vendor agrees to perform (or procure the performance of) all further
acts and things, and execute and deliver (or procure the execution and delivery
of) such further documents, as may be required by law or as the Purchaser may
reasonably require, whether on or after Completion, to implement or give effect
to this Agreement and the transaction contemplated by it and for the purpose of
vesting in

                                                                         Page 49

<PAGE>

the Purchaser the full benefit of the assets, rights and benefits to be
transferred to the Purchaser under this Agreement.

21.2 The Vendor shall, if so requested by the Purchaser, after Completion
instruct any of the Vendor's employees, consultants or advisers (if any) who
possess the requisite knowledge to make any statutory declarations or statements
reasonably required in connection with proving title to or rights over any of
the Properties and use their reasonable endeavours to assist the Purchaser and
any member of the Purchaser's Group in that regard.

COUNTERPARTS

22.  This Agreement may be executed in any number of counterparts and by the
parties to it on separate counterparts, each of which is an original but all of
which together constitute one and the same instrument.

NOTICES

23.1 Any notice or other communication to be given by one party to the other
under or in connection with this Agreement shall be in writing and signed by or
on behalf of the party giving it. It shall be served by sending it by fax to the
number set out in clause 23.2, or delivering it by hand, or sending it by
pre-paid recorded delivery, special delivery or registered post, to the address
set out in clause 23.2 and in each case marked for the attention of the relevant
party set out in clause 23.2 (or as otherwise notified from time to time in
accordance with the provisions of this clause 23). Any notice so served by hand,
fax or post shall be deemed to have been duly given:

(a)  in the case of delivery by hand, when delivered;

(b)  in the case of fax, at the time of transmission;

(c)  in the case of prepaid recorded delivery, special delivery or registered
     post, at l0 am on the second Business Day following the date of posting,

provided that in each case where delivery by hand or by fax occurs after 6 pm on
a Business Day or on a day which is not a Business Day, service shall be deemed
to occur at 9 am on the next following Business Day. References to time in this
clause are to local time in the country of the addressee.

23.2 The addresses and fax numbers of the parties for the purpose of clause 23.1
are as follows:

                                                                         Page 50

<PAGE>

Vendor:

Address:                 1 Atlantic Quay
                         Glasgow G2 8SP
                         Scotland

Fax:                     0141 248 8300

For the attention of:    The Company Secretary

With a copy to:          James Stanley, Group Legal Director

Fax:                     0141 636 4568

And:                     Freshfields Bruckhaus Deringer
                         65 Fleet Street
                         London EC4Y 1HS
                         (Ref: MPN-J)

Fax:                     020 7832 7001

Purchaser:

Address:                 200 Aldersgate Street
                         London EC1A 4JJ
                         (Ref: MRL)

Fax:                     020 7600 5555

For the attention of:    The Directors
                         c/o Clifford Chance Secretaries Limited

With a copy to:          Clifford Chance LLP
                         200 Aldersgate Street
                         London EC1A 4JJ
                         (Ref: MRL)

Fax:                     020 7600 5555

23.3 A party may notify the other party to this Agreement of a change to its
name, relevant addressee, address or fax number for the purposes of this clause
23, provided that such notice shall only be effective on:

                                                                         Page 51

<PAGE>

(a)  the date specified in the notice as the date on which the change is to take
place; or

(b)  if no date is specified or the date specified is less than five Business
Days after the date on which notice is given, the date following five Business
Days after notice of any change has been given.

NO RIGHTS UNDER CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

24.1 The Resigning Directors shall have the right under the Contracts (Rights of
Third Parties) Act 1999 pursuant to clause 5.10 to enforce clauses 5.9(c) and
(d) (but no other clauses).

24.2 Subject to clause 16 and clause 24.1, a person who is not a party to this
Agreement shall have no right under the Contracts (Rights of Third Parties) Act
1999 to enforce any of its terms.

SET-OFF

25.  Without the prior written consent of the other, no party may deduct and set
off against any amounts of whatsoever nature which are due and payable by it
under or in connection with this Agreement or any other of the Transaction
Documents, any amounts due and payable by the other party to it under or in
connection with this Agreement, any other of the Transaction Documents or any
other agreement.

CONFIDENTIALITY

26.1 Subject to clauses 18 and 26.3, the Vendor shall procure that each member
of the Retained Group:

(a)  shall treat as strictly confidential:

       (i)    the provisions of the Transaction Documents and the process of
              their negotiation;

       (ii)   all information about the Purchaser and any member of the
              Purchaser's Group obtained or received by it as a result of
              negotiating, entering into or performing its obligations under
              this Agreement or the performance by the other parties of their
              obligations under this Agreement (including, for the avoidance of
              doubt, information received under clause 3.11); and

       (iii)  all information used in or otherwise relating to the Group's
              business, customers or financial or other affairs,

together, the Purchaser Confidential Information; and

(b)  shall not, except with the prior written consent of the Purchaser (which
     shall not be unreasonably withheld or delayed), publish or otherwise
     disclose to any person any Purchaser Confidential Information.

                                                                         Page 52

<PAGE>

26.2 Subject to clauses 18 and 26.3, the Purchaser shall procure that each
member of the Purchaser's Group:

(a)  shall treat as strictly confidential:

       (i)    the provisions of the Transaction Documents and the process of
              their negotiation; and

       (ii)   all information about the Vendor and any member of the Retained
              Group obtained or received by it as a result of negotiating,
              entering into or performing its obligations under this Agreement
              or the performance by the other parties of their obligations
              under this Agreement (including, for the avoidance of doubt,
              information received under clause 3.12),

together, the Vendor Confidential Information; and

(b)  shall not, except with the prior written consent of the Vendor (which shall
     not be unreasonably withheld or delayed), publish or otherwise disclose to
     any person any Vendor Confidential Information.

26.3 Clauses 26.1, 26.2 and 3.8 shall not apply if and to the extent that the
Vendor or the Purchaser (as appropriate) can demonstrate that:

(a)  such disclosure is required by law or by any securities exchange or
     regulatory or governmental or antitrust body having jurisdiction over it
     (including but not limited to the London Stock Exchange, the Financial
     Services Authority, the Panel on Take-overs and Mergers and the Serious
     Fraud Office) and whether or not the requirement has the force of law; or

(b)  the Purchaser Confidential Information or the Vendor Confidential
     Information (together, the Confidential Information) concerned was lawfully
     in its possession (as evidenced by written records) prior to its being
     obtained or received as described in clauses 26.1 (a)(ii) or 26.2(a)(ii);
     or

(c)  the Confidential Information concerned has come into the public domain
     other than through its fault or the fault of any person to whom such
     Confidential Information has been disclosed in accordance with clauses
     26.1(b) or 26.2(b); or

(d)  such disclosure is made to any Regulatory Authority for the purposes of
     clauses 3.1 to 3.12 inclusive; or

(e)  subject to the Confidentiality Agreement, such disclosure is made by the
     Purchaser to:

       (i)    the Purchaser's Group;

       (ii)   the Group;

       (iii)  the Purchaser's Representatives;

                                                                         Page 53

<PAGE>

       (iv)   any party providing financing or refinancing directly or
              indirectly by means of debt or equity to any member of the
              Purchaser's Group in connection with the transaction to which
              this Agreement relates or underwriting or arranging the same or
              providing monoline commitment or trustee services or rating
              services in relation to the same or any other person to whom it
              is necessary or desirable to disclose Confidential Information in
              connection with the raising or implementation of financing or
              refinancing; or

       (v)    any person entering into an option or arrangement (details of
              which have been disclosed in writing to the Vendor prior to the
              date of this Agreement) to acquire shares in any member of the
              Purchaser's Group or any officers, employees or professional
              advisers of such person or any member of such person's group; and

(f)  the Confidential Information is at any time after the date of this
     Agreement lawfully acquired on a non-confidential basis from a third party
     who, as far as the Vendor or Purchaser (as the case may be) is aware, does
     not owe the other party or any of its Connected Persons an obligation of
     confidence in relation to it.

26.4 The restrictions contained in this clause 26 shall survive Completion or
termination of this Agreement for any reason and shall continue for a period of
four years.

26.5 Forthwith upon any termination of this Agreement, howsoever caused, each
party shall discontinue all use of any Confidential Information received from
any other party and shall, upon the request of such other party within 15 days
of termination and at its expense, surrender and deliver to such other party or
destroy (including by expunging information from any systems, other than back-up
systems) all such Confidential Information received from such other party
including any and all copies and extracts thereof and shall execute and deliver
to such other party a certificate signed by a duly authorised officer of the
first party certifying compliance with this clause 26.5.

AGREEMENT SURVIVES COMPLETION

27.  The Purchaser Warranties, the Vendor Warranties and all other provisions of
this Agreement, insofar as the same shall not have been performed at Completion,
shall remain in full force and effect at Completion.

CONSEQUENCES OF TERMINATION

28.1 If this Agreement is terminated in accordance with its terms:

(a)  Clause 1 (Definitions and Interpretation), Clause 8 (Vendor Warranties),
     Clause 14 (Entire Agreement), Clause 15 (Variation), Clause 16
     (Assignment), Clause 18 (Announcements), Clause 19 (Costs), Clause 20
     (Severability), Clause 23 (Notices), Clause 24 (No Rights....). Clause 26

                                                                         Page 54

<PAGE>

     (Confidentiality), Clause 28 (Consequences of Termination) and Clause 29
     (Governing Law and Jurisdiction) shall survive termination of this
     Agreement;

(b)  the parties' further rights and obligations (including, but not limited to,
     the Purchaser's obligation to acquire the Shares) will cease immediately on
     such termination, although, subject to clause 28.2, termination will not
     affect the parties' accrued rights and obligations at the date of
     termination, including without limitation, under clause 8.12.

28.2 If this Agreement is terminated in accordance with its terms

(a)  the Vendor shall have no liability in respect of any breaches of clause 4,
     any breach of any warranty given under under this Agreement or any breach
     of any indemnity given under this Agreement;

(b)  the Purchaser shall have no liability for any breach of the Purchaser
     Warranties or under any indemnity given under this Agreement

and the Vendor and/or Purchaser shall irrevocably waive any and all claims in
respect of the foregoing.

GOVERNING LAW AND JURISDICTION

29.1 This Agreement and the relationship between the parties shall be governed
by, and interpreted in accordance with, English law.

29.2 The parties agree that the courts of England are to have exclusive
jurisdiction to settle any disputes (including claims for set-off and
counterclaims) which may arise in connection with the creation, validity,
effect, interpretation or performance of, or the legal relationships established
by, this Agreement or otherwise arising in connection with this Agreement, and
for such purposes irrevocably submit to the jurisdiction of the English courts.

TIME OF THE ESSENCE

30. Time shall be of the essence of this Agreement, both as regards the times,
dates and periods mentioned herein and as to any times, dates and periods which
may, by agreement in writing between or on behalf of the parties, be substituted
for them.

                                                                         Page 55

<PAGE>

                                   SCHEDULE 1

                                 Interpretation

Definitions

1.1    In this Agreement, the following expressions shall have the following
meanings:

Accounting Expert has the meaning ascribed to it in clause 6.6;

Accounts Date means 31 March 2001;

Agreed Rate means 150 basis points over Three Month LIBOR;

Announcements means the announcement to be made by each of the parties
concerning the transaction contemplated by this Agreement on or after the date
of this Agreement, in each case in the agreed form;

Anticipated Bond Redemption Costs is defined in clause 7.8;

Aspen 4 Amount means the debt of (Pounds)1,050,000,000 owed by the Company to
the Vendor arising and remaining outstanding as at Completion pursuant to the
Reorganisation;

Assignments of Intra Group Debt has the meaning ascribed to it in clause 5.4(g);

Blocking Order means an order pursuant to section 74 of the Fair Trading Act
1973 precluding the doing of things which in the opinion of the Secretary of
State might prejudice a relevant Competition Commission reference or impede the
taking of any action under the Fair Trading Act 1973 which may be warranted by
the Competition Commission's report on such a reference and which are required
to be done to facilitate or effect Completion or the actual receipt by the
Vendor of the cash amounts referred to in clause 5.6;

the meaning ascribed to it in clause 5.1(a);

Budget means the budget for the Group for the financial year ending 31 March
2003, a copy of each of which is annexed to the Disclosure Letter at document
AD371;

Business Day means any day which is not a Saturday, Sunday or a bank or public
holiday in England and Wales;

Capital Programme means the Capital Programme of Southern Water Services Limited
from 2000 to 2005 dated May 2001 annexed to the Disclosure Letter at document
SINV2.1.1;

Claim means any claim by the Purchaser:

(i)    in respect of any breach of a Vendor Warranty;

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(ii)   under the Tax Covenant; or

(iii)  in respect of any breach of clause 4 by the Vendor;

provided that (without prejudice to the proviso to clause 9.5(b) and clause
9.5(c)), for the avoidance of doubt, for the purposes of clauses 9.5 and 9.6 no
Claim may relate to or result from more than one unrelated matter or
circumstance but subject thereto may relate to a breach of one or more Vendor
Warranties or a series of events arising from the same matter or circumstances;

Commission means the Commission of the European Communities;

Companies Act means the Companies Act 1985, as amended from time to time;

Company means Aspen 4 Limited;

Company Car Leasing Agreement means the company car leasing agreement to be
entered into at Completion in the agreed form;

Competent Authority means any legislative, judicial, regulatory or
administrative body or agency (or any subdivision of any of them) of the United
Kingdom or the European Union, any relevant stock exchange on which the shares
or other securities of any member of the Retained Group or the Purchaser's Group
are from time to time listed, or any supranational body which has rulemaking
power or whose directives, decisions, instructions, rulings, laws or regulations
are directly enforceable against the Vendor or the Purchaser;

Completion means completion of the sale and purchase of the Shares in accordance
with clause 5.1;

Completion Date means the date on which Completion occurs;

Confidential Information has the meaning ascribed to it in clause 26.3(b);

Confidentiality Agreement means the confidentiality agreement dated 14 February
2002 between the Vendor and Citibank, N.A.;

Connected Person means (a) a party's officers, employees, group undertakings,
agents and advisers; (b) officers, employees, agents and advisers of a party's
group undertakings; and (c) officers, employees and partners of any such agent
or adviser or of any group undertaking of such agent or adviser;

Consolidated SW plc Accounts means:

(a)    the unaudited consolidated balance sheet of Southern Water plc and its
       subsidiary undertakings as at the Accounts Date; and

(b)    the unaudited consolidated profit and loss account of Southern Water plc
       and its subsidiary undertakings in respect of the financial year ended on
       the Accounts Date,

                                                                         Page 57

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in each case as extracted from the Hyperion Consolidation Reporting Package;

Construction Contracts means any contract or arrangement for the procurement of
construction in relation to civil engineering works and/or the supply,
installation and commission of any mechanical, electrical and electronic plant
and equipment in each case in relation to any project in the Capital Programme
(excluding repair and maintenance services, renewals and works of a minor
nature) which has been entered into by any Group Company and under which
currently (as at the date of this Agreement or as at Completion) any work
remains to be carried out, any sum to be paid or any claim to be settled,
including without limitation the K3 Contracts;

Debt Purchase Price has the meaning ascribed to it in clause 2.4;

December 2001 Consolidated SW plc Accounts means:

(a)  the unaudited consolidated balance sheet of Southern Water plc and its
     subsidiary undertakings as at 31 December 2001; and

(b)  the unaudited consolidated profit and loss account of Southern Water plc
     and its subsidiary undertakings in respect of the period from 1 April 2001
     to 31 December 2001,

in each case as extracted from the Hyperion Consolidation Reporting Package;

December 2001 SWS Accounts means the unaudited accounts of Southern Water
Services Limited prepared in respect of the period from the Accounts Date to 31
December 2001 attached to the Disclosure Letter at Exhibit Document AD.293;

Development means in relation to any Property any development as defined by
section 55 of the Town and Country Planning Act 1990 and regulations made
thereunder now or in future in force;

DGFT means the Director General of Fair Trading;

DGWS means the Director General of Water Services;

Disclosure Letter means the letter in the agreed form from the Vendor to the
Purchaser executed and delivered immediately before the signing of this
Agreement;

Disposal Scheme means the property disposal programme by any relevant Group
Company, details of which are set out in the documents annexed to the Disclosure
Letter at document AD262;

Dispute Notice has the meaning ascribed to it in clause 8.9;

Draft Net Debt Statement has the meaning ascribed to it in clause 6.2;

ECMR means Council Regulation (EEC) 4064/89 (as amended by Council Regulation
(EC) 1310/97);

EIB means European Investment Bank;

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EIB Loans means:

(a)  the Southern Water Project III - B FI No 1.8556 Finance Contract between
     EIB, the Vendor (formerly Scottish Power plc) and Southern Water Services
     Limited dated 12 March 1996 and 18 March 1996, amended and restated with
     effect from 26 January 1998 by a Deed of Novation dated 26 January 1998 and
     2 February 1998 between EIB, the Vendor (formerly Scottish Power plc),
     Southern Water plc and Southern Water Services Limited;

(b)  the Southern Water Project III - A FI No 1.7007 Finance Contract between
     EIB, the Vendor (formerly Scottish Power plc) and Southern Water Services
     Limited dated 8 December 1993 amended and restated with effect from 26
     January 1998 by a Deed of Novation dated 26 January 1998 and 2 February
     1998 between EIB, the Vendor (formerly Scottish Power plc), Southern Water
     plc and Southern Water Services Limited;

(c)  the Southern Water Project II - B FI No 1.600 Finance Contract between EIB,
     the Vendor (formerly Scottish Power plc) and Southern Water Services
     Limited dated 10 June 1992 and 15 June 1992 amended and restated with
     effect from 26 January 1998 by a Deed of Novation dated 26 January 1998 and
     2 February 1998 between EIB, the Vendor (formerly Scottish Power plc),
     Southern Water plc and Southern Water Services Limited;

(d)  the Southern Water Project II - A FI No 1.5512 Finance Contract between
     EIB, the Vendor (formerly Scottish Power plc) and Southern Water Services
     Limited dated 30 October 1991 and 4 November 1991 amended and restated
     with effect from 26 January 1998 by a Deed of Novation dated 26 January
     1998 and 2 February 1998 between EIB, the Vendor (formerly Scottish Power
     plc), Southern Water plc and Southern Water Services Limited;

(e)  the Southern Water Project - B FI No 1.5168A Finance Contract between EIB,
     the Vendor (formerly Scottish Power plc) and Southern Water Services
     Limited dated 11 April 1991 and 15 April 1991 amended and restated with
     effect from 26 January 1998 by a Deed of Novation dated 26 January 1998 and
     2 February 1998 between EIB, the Vendor (formerly Scottish Power plc),
     Southern Water plc and Southern Water Services Limited;

(f)  the Southern Water Project - A FI No 1.4780 Finance Contract between EIB,
     the Vendor (formerly Scottish Power plc) and Southern Water Services
     Limited dated 11 September 1990 amended and restated with effect from 26
     January 1998 by a Deed of Novation dated 26 January 1998 and 2 February
     1998 between EIB, the Vendor (formerly Scottish Power plc), Southern Water
     plc and Southern Water Services Limited;

(g)  Parent Company Guarantee and Indemnity from Scottish Power plc in respect
     of the payment obligations of the Vendor (formerly Scottish Power plc) and
     the non-financial obligations of Southern Water Services Limited under the
     amended and restated loans referred to in paragraphs (a) - (f) above; and

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(h)  Waiver and Amendment Letter relating to the amended and restated loans and
the parent company guarantee referred to in paragraphs (a) -(g) above entered
into between EIB, Scottish Power plc, Scottish Power UK plc and Southern Water
Services Limited dated 5 March 2002;

Emergency (for the purposes only of the Environmental Warranties) means:

(a)  a fire, explosion, act of God, flood or other sudden catastrophic event or
     any other circumstance or state of affairs where in each case immediate
     action is necessary in order to avert an imminent risk of significant
     danger or harm to the Environment; or

(b)  any circumstance involving significant damage or harm to the Environment in
     respect of which a failure to take immediate and urgent action would
     materially increase, exacerbate or cause losses or contamination and in
     either case would result in a material breach of Environmental Law by the
     Purchaser or any member of the Purchaser's Group;

Employees means all persons employed by a Group Company as at the date of this
Agreement and such of the individuals listed in Schedule 11 (Employees) as
accept employment with a Group Company by Completion;

Employer means any Group Company that employs Employees as at the date of this
Agreement or, in respect of the individuals listed in Schedule 11 (Employees),
employs any such individuals at Completion;

Encumbrance means any claim, charge, mortgage, security, lien, option, equity,
power of sale, hypothecation or other third party rights, retention of title,
right of preemption, right of first refusal or security interest of any kind;

Environment means air, water (including surface and groundwater) and land and
any living organisms or systems supported by those media;

Environmental Law means all or any applicable European Community, national or
local legislation, subordinate legislation, statutory notices or statutory
guidance, or common law which relates to Environmental Matters (except
legislation, subordinate legislation, statutory notices or statutory guidance,
or common law relating to town and country planning or health and safety) and is
in force and binding at or prior to the date of this Agreement;

Environmental Licences means material authorisations, permits and consents
required and necessary under Environmental Laws for the operation of the
business of the Group Company as carried on at the date of this Agreement;

Environmental Matters means the pollution or protection of the Environment and
human health (except town and country planning and worker or occupational health
and safety), nature conservation, the discharge or abstraction of water, the
creation of any noise or vibration, radiation, or the production, disposal,
release, use, storage, spillage, deposit, escape, discharge, leak, emission,
recovery, transport of or radiation

                                                                         Page 60

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from any Hazardous Material or Waste or sewage sludge and, in the case of sewage
sludge, limited to its effect or potential effect on the Environment;

Environmental Warranties means the Vendor Warranties contained in paragraph 18
of Schedule 3;

Escrow Agent has the meaning ascribed to it in the Escrow Deed;

Escrow Deed means the deed to be signed on or before the date of this Agreement
between the Vendor, the Purchaser, Citibank, N.A., The Royal Bank of Scotland
plc, National Westminster Bank plc and the Escrow Agent, relating to Completion;

Estimated Intra Group Debt means the estimated amount of the Intra Group Debt at
Completion, being (Pounds)776,500,000;

Estimated Net Financial Debt Amount means the estimated Net Financial Debt
Amount at Completion, being (Pounds)882,800,000;

Expert means the person appointed as such in accordance with clause 8.10;

Facility Agreements means:

(a)  the (Pounds)1,900,000,000 term, revolving and capex facilities agreement
     dated on or about the date of this Agreement and made between JVCo as
     parent, original guarantor, The Royal Bank of Scotland plc as arranger,
     agent and security trustee and the banks referred to therein; and

(b)  the preference share subscription agreement dated on or about the date of
     this Agreement between JVCo and the Preference Share Investor (as defined
     therein);

Final Termination Date means 14 June 2002;

Finance Conditions means the conditions to funds drawdown in the Facility
Agreements in the agreed form;

Forecast means the full year forecast for the year ending 31 March 2002
contained in the finance director's report to the February 2002 Southern Water
plc Board;

Fuel Agreement means the agreement between Shell UK Limited and the Vendor dated
1 August 1999;

Government Grant has the meaning ascribed to it in paragraph 8.9 of Schedule 3;

Group means the Company and the Subsidiaries (other than ScottishPower Group
Money Purchase Pension Scheme Limited);

Group Company means any one of the Company or the Subsidiaries (other than
ScottishPower Group Money Purchase Pension Scheme Limited);

Group IPR means the registered Intellectual Property Rights owned by the Group;

                                                                         Page 61

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group undertaking shall be construed in accordance with section 259 of the
Companies Act;

Hardware means computer equipment used by a Group Company immediately prior to
Completion including parts of computer equipment such as firmware, screens,
terminals, keyboards, cabling and other peripheral electronic equipment, but
excluding software;

Hazardous Material means any pollutant or any hazardous, toxic, radioactive,
noxious, corrosive or caustic substance or any other natural or artificial
substance (in each case whether in solid, liquid or gaseous form) which alone or
in combination with others is capable of causing significant harm to human
health or significant harm to or pollution of the Environment;

holding company shall be construed in accordance with sections 736 and 736A of
the Companies Act;

Hyperion Consolidation Reporting Package means, together, profit and loss
accounts, balance sheet and cashflow and other supporting data in relation to
the Group used in the preparation of the consolidated group accounts of Scottish
Power plc from time to time;

Information Technology Systems means material computer systems, communication
systems, software, Hardware and data owned, used or licensed to any Group
Company;

Initial Share Purchase Price means an amount equal to (Pounds)2,050,000,000 less
(i) the Estimated Net Financial Debt Amount and (ii) the Aspen 4 Amount;

Initial Termination Date means 15 May 2002;

Instrument of Appointment means the Instrument of Appointment by the Secretary
of State for the Environment of Southern Water Services Limited as a water and
sewerage undertaker under sections 11 and 14 of the Water Act 1989 (now sections
6, 7, 11 and 12 of the Water Industry Act 1991) as from time to time prior to
the date of this Agreement (as disclosed under Exhibit Document Number AD 375
and as further amended as set out under Exhibit Document Number AD 373) or, with
the consent of the Purchaser in accordance with clause 4.1(e), prior to
Completion modified by the DGWS under sections 11 to 17 of the Water Industry
Act 1991;

Intellectual Property Rights means patents, trade marks, service marks, logos,
get-up, and rights protecting goodwill and reputation, trade or business names,
internet domain names, rights in designs, copyright (including rights in
computer software and topography rights), utility models, rights in know-how
(including secret formulae, processes and all other proprietary confidential
knowledge, information and data), database rights and other intellectual
property rights, in each case whether registered or unregistered and including
applications for registration, and all rights or forms of protection having
equivalent or similar effect anywhere in the world;

                                                                         Page 62

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Intellectual Property Licences means all material agreements between a Group
Company and third parties which relate to Intellectual Property Rights owned or
used by the Group Companies and which are listed in the Disclosure Letter at
Exhibits Document Number AD.347;

Intra Group Debentures is defined in clause 5.4(f);

Intra Group Debt means:

(a)  the amount of all interest-bearing or non interest bearing loans or debt
     securities and all interest-bearing or non interest bearing finance leases
     or equivalent accrued or due from, and all accrued but unpaid interest on
     such debt and all accrued but unpaid dividends payable by members of the
     Group to members of the Retained Group;

(b)  all amounts owed by any member of the Group to any member of the Retained
     Group in respect of the Vendor's group payment arrangement in respect of
     corporation tax (Group Payment Tax Debt); and

(c)  any trading debt due from any member of the Group to any member of the
     Retained Group which is past its due date at Completion (other than in
     accordance with the Group's normal payment practices and policies in the
     last 12 months);

including, for the avoidance of doubt, any intra group indebtedness attributable
to the EIB Loans or management fees, but excluding (i) any taxes or amounts in
respect of tax (other than as taken into account in paragraph (b) above), (ii)
Intra Group Trading Debt, (iii) the Intra Group Tax Debt and (iv) the Aspen 4
Amount;

Intra Group Tax Debt means all amounts owing between members of the Group and
members of the Retained Group at Completion in respect of tax other than any
Group Payment Tax Debt;

Intra Group Trading Debt means the amount of all debts accrued or due between
members of the Group and members of the Retained Group at Completion in respect
of trading activities save for any amount past its due date included in Intra
Group Debt;

JVCo means First Aqua (JVCo) Limited, a company incorporated in the Cayman
Islands with registered number 112330 and registered office at PO Box 301,
Ugland House, South Church Street, Georgetown, Grand Cayman, Cayman Islands,
British West Indies;

K3 Contracts means (1) the contract between Southern Water Services Limited and
the Black & Veatch/Costain/ Paterson Candy Consortia dated 8 November 2001
relating to, inter alia, those schemes listed in parts 1 to 3 of Schedule 7 and
(2) the contract between Southern Water Services Limited and the Morrison
Construction/ Brown & Root Services Consortia dated 8 November 2001 relating to,
inter alia, those schemes listed in parts 4 to 6 of Schedule 7, signed copies of
which are annexed as

                                                                         Page 63

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exhibit AD 315 to the Disclosure Letter together with the technical
specifications thereto annexed as Exhibit AD 374;

K3 Periodic Review means the last periodic review for the regulatory pricing
period 2000-2005;

Last Comments Date is defined in clause 6.7(c);

Letters of credit means the letters of credit from the lenders to the Purchaser
in the agreed form;

Management Accounts means the management accounts of Southern Water Services
Limited in respect of each financial month from the Accounts Date to the end of
the January 2002 financial month, true copies of which are annexed to the
Disclosure Letter at document AD 370;

Material Contract means any contract or other commitment to which any Group
Company is party which is material in the context of the business of the Group
taken as a whole and under which there is currently (as at the date of this
Agreement or as at Completion) any material obligation or liability outstanding
and which shall include without limitation those contracts or commitments
described in Schedule 10 or, in the case of the Construction Contracts, those
and only those listed in Schedule 10 or referred to in paragraph 8.1(a) of
Schedule 3 but which shall not include Intra Group Debt, the EIB Loans or the
SWSF Bonds;

Material Environmental Effect means a liability of or cost to the operation of
the business of the Group and which in respect of each individual circumstance
might amount to a breach of the Environmental Warranties in paragraphs 18.1,
18.2, 18.3, 18.4 or 18.7 of Schedule 3 and which exceeds or is likely to exceed
(Pounds)300,000 over and above any amount budgeted or provided for in respect of
the subject matter;

Material Properties means those Properties shown edged red for the purpose of
identification only and named on the plans referred to in Schedule 3 paragraph
15.15;

Merger has the meaning ascribed to it in clause 3.1(b);

Net Debt Statement means the statement of the Net Financial Debt Amount as at
Completion with supporting notes, to be prepared in accordance with clause 6 and
Schedule 8;

Net Financial Debt Amount means the total amount of:

(a)  the Intra Group Debt;

(b)  the Third Party Debt;

(c)  external dividends declared but unpaid (other than dividends due to a Group
     Company or a member of the Retained Group); and

(d)  the Tax Amount;

                                                                         Page 64

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less:

cash (in hand and in the bank) held by the Group at Completion as specified in
the Group's QSP financial ledger as at the Completion Date,

in each case, as extracted from the Hyperion Consolidation Reporting Package for
the Group (excluding the Company) drawn up as at the Completion Date, save to
the extent otherwise specifically directed in this Agreement;

No Termination Repeated Warranties means the Vendor Warranties contained in the
paragraphs of Schedule 3 which are listed in Part B of Schedule 13;

Non Repeated Warranties means the Vendor Warranties contained in the paragraphs
of Schedule 3 which are listed in Part A of Schedule 13;

OFT means the Office of Fair Trading;

OFWAT means the Office of Water Services;

Properties means all or any part or parts of the properties owned, leased,
controlled, occupied or used by any Group Company and Property shall be
construed accordingly;

Property Warranties means the Vendor Warranties contained in paragraph 15 of
Schedule 3;

Purchaser's Account means the account of the Purchaser as shall be notified in
writing by the Purchaser to the Vendor from time to time;

Purchaser's Accountants means Ernst & Young, Compass House, 80 Newmarket Road,
Cambridge CB5 8DZ;

Purchaser Confidential Information has the meaning ascribed to it in clause
26.1(a);

Purchaser Due Diligence Reports means the respective due diligence reports
provided to the Purchaser or any member of the Purchaser's Group by Clifford
Chance LLP (dated 6 March 2002), Simmons & Simmons (dated 7 March 2002), AON
(dated 6 March 2002), Ernst & Young (dated 4 March 2002), WS Atkins (dated 5
March 2002) and William M Mercer (dated 4 March 2002);

Purchaser's Group means the Purchaser, any holding company from time to time of
the Purchaser, any subsidiary from time to time of the Purchaser or of any
holding company and, after Completion, shall include the Group Companies for so
long as they remain subsidiaries of the Purchaser or of any holding company of
the Purchaser;

Purchaser's Representatives means any directors, employees or professional
advisers of the Purchaser and/or any member of the Purchaser's Group;

Purchaser Termination Notice is defined in the Escrow Deed;

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Purchaser Warranties means the representations and warranties on the part of the
Purchaser set out in Schedule 4;

Refinancing Proposal means any proposal to securitise any assets of, or
otherwise refinance and/or extract cash from, the Group;

Regulation has the meaning ascribed to it in clause 3.1(b);

Regulatory Authority means each of the Commission, the DGFT, the OFT, the DGWS,
OFWAT, the Competition Commission, the Secretary of State, the Department for
Trade and Industry, the Department for the Environment, Food and Rural Affairs,
the Environment Agency, the Drinking Water Inspectorate or any other
governmental department or regulatory authority;

Regulatory Capital Value means the value of the capital base of Southern Water
Services Limited as determined by the DGWS at a final determination or interim
determination from time to time for the purposes of setting price limits for
Southern Water Services Limited for a regulatory pricing period;

Relevant Employee means any past or present employee of any Group Company;

Relevant Interest Rate means a rate of interest equal to the mean of the bid and
offer swap rates for pounds sterling denominated fixed/floating interest rate
swap transactions with a term equal to 20 years which appear on Reuters page
ICAP2 (or such other page as may replace that page on that service for the
purpose of displaying rates or prices comparable to the Relevant Interest Rate)
under the heading GBP Swaps at 11.00 a.m. (London time) on the date of
Completion provided that if the Relevant Interest Rate cannot be determined as
aforesaid, then the Relevant Interest Rate shall be the arithmetic mean of the
bid and offer swap rates (mid rates) quoted by five major dealers active in the
pounds sterling interest rate swap market in London, selected by the Purchaser,
as applying at approximately 11.00 a.m. (London time) on the date of Completion
for a pounds sterling interest rate swap where payments on the fixed leg are
made semi-annually and the floating leg is Six Month LIBOR with semi-annual
payments, where interest is calculated on an Act/365 basis for the fixed leg and
Act/365 basis for the floating leg and the swap has a term equal to 20 years. If
five London dealers provide quotations as requested, the Relevant Interest Rate
will be calculated by eliminating the highest mid rate (or, in the event of
equality, one of the highest) and the lowest mid rate (or, in the event of
equality, one of the lowest) and taking the arithmetic mean of the dealers'
remaining quotations. If at least three, but fewer than five, London dealers
provide mid rates, the Relevant Interest Rate will be the arithmetic mean of the
quotations. If fewer than three quotations are provided as requested, the
Relevant Interest Rate shall be agreed between the Purchaser and the Vendor;

Relevant Person has the meaning ascribed to it in clause 9.31(a);

Relevant Time is defined in clause 5.1;

Reorganisation means the intra group reorganisation effected by the Vendor prior
to the date of this Agreement whereby the Vendor transferred its shares in
Southern

                                                                         Page 66

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Water plc to the Company in consideration of (Pounds) 1,225,000,000 of debt left
outstanding on inter-company account and the subsequent capitalisation of part
of such debt, details of which are annexed to the Disclosure Letter at Exhibit
Document Nos A.D.316, A.D.317, A.D.318 and A.D.319 and S.A.D.l;

Resigning Directors means Rupert James Stanley and Ronnie Edward Mercer and any
other director of any Group Company who resigns or is required (as notified by
the Purchaser to the Vendor prior to the date of this Agreement) to resign
before or with effect from Completion and, for the purposes of clause 5.9 only,
shall include Ian Simon MacGregor Russell;

Repeated Warranties means the Termination Repeated Warranties and the No
Termination Repeated Warranties;

Resolution has the meaning ascribed to it in clause 3.10;

Retained Group means the Vendor, any holding company from time to time of the
Vendor and any subsidiary from time to time of the Vendor or of any such holding
company (but excluding any Group Company);

RPO Standard means the exercise of the degree of skill and prudence of an
experienced operator in the UK engaged in the same type of undertaking under the
same or similar circumstances having regard to the nature of the asset or
contract concerned and the current regulatory regime for the UK water and
sewerage industry and the levels of regulatory allowances from time to time and
on the assumption that such operator wished to operate its undertaking as a
going concern;

Schemes means the Scottish Power Deferred Share Plan, the Scottish Power
Executive Share Option Plans, the Scottish Power plc Employee Share Ownership
Plan, the Scottish Power Long Term Incentive Plans, the Scottish Power Sharesave
Schemes and the Southern Water Sharesave Scheme;

Scottish Power Deferred Share Plan means the deferred share plan established by
Scottish Power plc on 25 April 2000;

Scottish Power Executive Share Option Plan 2001 means the executive share option
plan established by Scottish Power plc on 27 July 2001;

Scottish Power Executive Share Option Plans means the executive share option
scheme established by Scottish Power plc on 3 May 1991 and the Scottish Power
Executive Share Option Plan 2001;

Scottish Power Long Term Incentive Plans means the long term incentive plan
established by Scottish Power plc on 8 August 1996 and the long term incentive
plan established by Scottish Power plc on 28 July 2000;

Scottish Power plc Employee Share Ownership Plan means the employee share
ownership plan established by Scottish Power plc under a trust deed date 24
October 2000;

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Scottish Power Sharesave Schemes means the sharesave schemes established by
Scottish Power plc or a subsidiary of Scottish Power plc on 24 April 1991, 29
April 1999 and 28 July 2000;

Secretary of State means the Secretary of State for Trade and Industry;

Senior Employee means any Employee of an Employer whose basic annual salary is
(Pounds)50,000 or more;

Share Purchase Price is defined in clause 2.2;

Shares has the meaning ascribed to it in Recital (C);

Simon-Hartley Claim means the High Court proceedings brought by Southern Water
Services Limited against (1) Simon-Hartley Limited and (2) Simon Group plc and
the arbitration proceedings between Southern Water Services Limited and
Simon-Hartley Limited and, in each case, including the subject matter thereof
(particulars of which are set out in the Disclosure Letter);

Six Month LIBOR means for the purpose of determining the Relevant Interest Rate
the percentage rate per annum equal to the offered quotation which appears in
the page of the TeleRate Screen which displays the British Bankers Association
Interest Settlement Rate for sterling for the period of six months as of 11.00
am on the day three Business Days prior to the due date for payment of the
relevant sum (or, if no quotation is displayed, the arithmetic mean (rounded
upwards to four decimal places) of the rates at which each of The Royal Bank of
Scotland plc, Barclays Bank Plc and HSBC Bank plc were offering to prime banks
in the London interbank market deposits in sterling and for a six month period
as of 11.00 am on the day three Business Days prior to the due date for payment
of the relevant sum);

Southern Water Sharesave Scheme means the sharesave scheme established by the
Company on 19 October 1989;

Specified Subsidiaries means Southern Water Services Finance plc, Southern Water
Pension Trustees Limited, Southern Water Executive Pension Scheme Trustees
Limited, Bowsprit Holdings Limited, Bowsprit Property Development Limited, Monk
Rawling Limited, Taylor Plant Haulage Limited and James Leppard & Sons Limited;

Subsidiaries has the meaning ascribed to it in Recital (B);

subsidiary and subsidiaries shall be construed in accordance with sections 736
and 736A of the Companies Act;

subsidiary undertaking shall be construed in accordance with section 258 of the
Companies Act;

SW plc Accounts means:

(a)  the audited balance sheet of Southern Water plc as at the Accounts Date;
     and

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(b)  the audited profit and loss account of Southern Water plc in respect of the
     financial year ended on the Accounts Date,

together with any notes, reports, statements or documents permitted or required
by the Companies Act to be made thereon or annexed or attached thereto;

SWS Limited Accounts means:

(a)  the audited balance sheet of Southern Water Services Limited as at the
     Accounts Date; and

(b)  the audited profit and loss account of Southern Water Services Limited in
     respect of the financial year ended on the Accounts Date,

together with any notes, reports, statements or documents permitted or required
by the Companies Act to be made thereon or annexed or attached thereto;

SWSF Bonds means the (Pounds)100 million variable rate bonds issued by Southern
Water Services Finance plc and guaranteed by Southern Water Services Limited, as
amended and supplemented from time to time as disclosed to the Purchaser as
document numbers L.2.1, L.2.2, L.2.3, L.2.4, SL.1.3.18.1.5 and AD.143 of the
Disclosure Letter;

tax and tax authority have the meanings ascribed to them in Schedule 6;

Tax Amount is the aggregate of:

(a)  all presently due but unpaid taxes calculated by reference to all company
     tax returns of each Group Company which have been submitted or which any
     Group Company or member of the Retained Group intends to submit as at
     Completion (if any) (which for the avoidance of doubt excludes any amounts
     paid or discharged by or on behalf of any Group Company before Completion)
     for all accounting periods of each Group Company up to and including the
     accounting period ending 31 March 2001; and

(b)  an estimate of the tax payable by each Group Company from 1 April 2001 up
     to and including Completion, and taking into account any relief (as defined
     in Schedule 6 of this Agreement) available to any Group Company, in respect
     of that period (computed in accordance with the principles set out in
     Schedule 8) less any amounts paid or discharged by or on behalf of any
     Group Company before Completion in respect of that period (whether under
     the Vendor's group payment arrangement or otherwise),

and for the avoidance of doubt, the amounts of tax in (a) and (b) above shall
not include any amounts in respect of deferred tax;

Tax Covenant means the covenant relating to tax set out in Schedule 6;

Tax Warranties means those Warranties set out in paragraph 12 of Schedule 3;

Taxes Act means the Income and Corporation Taxes Act 1988;

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Termination Repeated Warranties means the Vendor Warranties contained in the
paragraphs of Schedule 3 which are listed in Part C of Schedule 13;

Third Party Debt means:

(a)  the book value of all interest-bearing or non interest-bearing loans or
     debt securities (including, for the avoidance of doubt, the SWSF Bonds) and
     all interest-bearing or non interest bearing finance leases or equivalent
     of the Group, factored receivables (if any), bank overdrafts (as shown in
     the Group QSP financial ledger as at the Completion Date), accrued but
     unpaid interest in respect of all such debt and the Anticipated Bond
     Redemption Costs as set out in Schedule 8 (excluding any accrued interest
     included in the Anticipated Bond Redemption Amount);

(b)  any trading debt past its contractual due date at Completion (otherwise
     than in accordance with the Group's normal payment practices and policies
     in the last 12 months); and

(c)  external costs and expenses incurred in connection with the capital
     restructuring referred to in clause 4.5 to the extent incurred by the Group
     and unpaid as at the Completion Date;

but excluding (i) any taxes or amounts in respect of tax, (ii) Intra Group Debt,
(iii) Intra Group Trading Debt, (iv) Intra Group Tax Debt, (v) the Aspen 4
Amount, (vi) any other trading indebtedness not included in (b) above and (vii)
the EIB Loans, in each case at Completion;

Third Party Insurance Policies means the policies of insurance between any
member of the Retained Group and third party insurers, brief details of which
are set out in or attached to the Disclosure Letter;

Three Month LIBOR means for the purposes of determining the Agreed Rate, the
percentage rate per annum equal to the offered quotation which appears on the
page of the TeleRate Screen which displays the British Bankers Association
Interest Settlement Rate for sterling for the period of three months as of 11.00
am on the day three Business Days prior to the due date for payment of the
relevant sum (or, if no quotation is displayed, the arithmetic mean (rounded
upwards to four decimal places) of the rates at which each of The Royal Bank of
Scotland plc, Barclays Bank plc and HSBC Bank plc were offering to prime banks
in the London interbank market deposits in sterling and for a three month period
as of 11.00 am on the day three Business Days prior to the due date for payment
of the relevant sum);

Transaction Documents means this Agreement, the Disclosure Letter, the
Confidentiality Agreement, the Transitional Services Agreement and such other
agreements to be entered into pursuant to, or expressly contemplated by, this
Agreement, each as amended, varied, supplemented or modified from time to time;

Transitional Services Agreement means the transitional services agreement to be
entered into at Completion in the agreed form;

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undertaking shall be construed in accordance with section 259 of the Companies
Act;

vendor's Account means the account of the Vendor number 00733493 with The Royal
Bank of Scotland plc (sort code 83-07-06) or such other account as shall be
notified in writing by the Vendor to the Purchaser from time to time;

Vendor's Accountants means PricewaterhouseCoopers, Kintyre House, 209 West
George Street, Glasgow G2 2LW;

Vendor Confidential Information has the meaning ascribed to it in clause
26.2(a);

Vendor Group Policies means the policies of insurance between Scottish Power
Insurance Limited and any member of the Retained Group, brief details of which
are set out in or attached to the Disclosure Letter;

Vendor's Material Pension Scheme means each of:

(a)  the Southern Water Pension Scheme, governed by a definitive trust deed
     dated May 1996, as amended from time to time;

(b)  the Southern Water Executive Pension Scheme, governed by a definitive trust
     deed dated 24 June 1991, as amended from time to time;

(c)  the ScottishPower group Final Salary LifePlan, governed by a definitive
     trust deed dated 21 and 27 December 2000, as amended from time to time; and

(d)  the Money Purchase Scheme (as defined in Schedule 5);

Vendor's Pension Scheme means each of:

(a)  the Vendor's Material Pension Schemes; and

(b)  the Manweb Group of the Electricity Supply Pension Scheme established by a
     resolution dated 1 April 1983, as amended; and

(c)  the Scottish Power Pension Scheme governed by rules adopted on 1 April
     1995, as amended;

Vendor's Solicitors means Freshfields Bruckhaus Deringer, 65 Fleet Street,
London EC4Y 1HS;

Vendor Termination Notice has the meaning ascribed to it in Clause 8.11;

Vendor Warranties means the representations and warranties on the part of the
Vendor set out in Schedule 3, being the Non Repeated Warranties, the No
Termination Repeated Warranties and the Termination Repeated Warranties; and

Waste means any substance or object which falls within the categories set out in
Part II of Schedule 4 of the Waste Management Licensing Regulations 1994 and
which the producer or the person in possession of it discards, or intends or is
required to discard.

1.2  In this Agreement, unless the context otherwise requires:

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(a)  references to persons shall include individuals, bodies corporate (wherever
     incorporated), unincorporated associations and partnerships;

(b)  the headings are inserted for convenience only and shall not affect the
     construction of this Agreement;

(c)  the singular includes the plural and vice versa and references to one
     gender include all genders;

(d)  any reference to an enactment or statutory provision is a reference to it
     as it may have been, or may from time to time be, amended, modified,
     consolidated or re-enacted and includes all instruments or orders made
     under such enactment or statutory provision;

(e)  any references to clauses and schedules are to clauses of, and to the
     schedules to, this Agreement. The schedules comprise schedules to this
     Agreement and form part of this Agreement;

(f)  any reference to a document in the agreed form is to the form of the
     relevant document agreed between the parties and for the purpose of
     identification initialled by each of them or on their behalf (in each case
     with such amendments as may be agreed by or on behalf of the Vendor and the
     Purchaser);

(g)  references to any English legal term for any action, remedy, method of
     judicial proceeding, legal document, legal status, court, official or any
     other legal concept shall, in respect of any jurisdiction other than
     England, be deemed to include the legal concept which most nearly
     approximates in that jurisdiction to the English legal term;

(h)  any reference to business hours means the hours between 9 am and 5:30 pm on
     any Business Day;

(i)  any reference to the awareness or knowledge of the Vendor in this Agreement
     (including in respect of any Vendor Warranty) means (and is limited to) (i)
     all matters of which any director of Southern Water plc or Southern Water
     Services Limited or any other Group Company (but excluding the Company) has
     actual knowledge (but provided always that in the case of James Stanley he
     shall not be required to disclose, nor will the Vendor be liable to the
     extent he does not disclose, any matter or circumstance which is the
     subject of legal professional privilege) and (ii) all matters of which
     Ronnie Edward Mercer has actual knowledge or ought reasonably to have
     actual knowledge having made reasonable enquiry (but no other or further
     enquiries) of each of Eric John Hutchinson (Finance, Intellectual Property
     and Information Technology), Barrie Walter Delacour (Regulatory), Stuart
     Derwent (overall business management (including Health and Safety), Stephen
     Henderson (Insurance), John Stewart (Pensions and Human Resources), Martin
     Baggs (Operations) Anthony James Fegan (Project Delivery), Kevin Hall
     (having made reasonable enquiry of Andrew Williams) (Property), John Spence
     (Environment), Stewart Wood (Tax) and David John Stainthorpe (Customer
     Service and Billing,

                                                                         Page 72

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     including the Intellectual Property and Information Technology relating
     thereto) each with respect only to those areas of the business of the Group
     for which that person is stated to be responsible as aforesaid (and each
     not being required to make any other or further enquiries) save for, in the
     case of environmental matters, having procured that John Spence make
     enquiry (but no other or further enquiries) of Nev James, Chris Stewart,
     Richard Price and Richard Stanley) but with none of them being required to
     make any further or other enquiry. For the avoidance of doubt but without
     prejudice to their actual knowledge (which shall in the case of Ronnie
     Edward Mercer include any actual knowledge he would be deemed to have
     having made the enquiries referred to above), neither Ronnie Edward Mercer
     nor any of the persons referred to above shall be deemed to have actual
     knowledge of any of (neither shall they be required by this Agreement to
     seek out, review and/or verify the contents of) any matters contained in
     any documents in the Data Room, whether or not prepared by consultants or
     advisers of the Retained Group or the Group;

(j)  any express reference to the consent of the Purchaser or to the consent
     of the Vendor being required or similar expression shall be deemed to
     include a statement that such consent may not be unreasonably withheld or
     delayed and that no such consent shall be required in circumstances where
     an emergency situation (involving any danger or threat to health, safety,
     property or the environment) at any of the Properties or in respect of any
     contracts or licences requires the relevant action to be taken immediately.
     For the purposes of the application of this sub-paragraph 1.2(j) to clause
     9.31(a)(iv) of this Agreement, the term emergency where it appears in this
     sub-paragraph shall be taken to mean Emergency as defined in paragraph 1.1
     of this Schedule 1; and for the purposes of the application of this
     sub-paragraph 1.2(j) to paragraph 3.1.4.1 of the Slindon Indemnity
     (contained in Schedule 9), the term emergency where it appears in this
     sub-paragraph shall be taken to mean Emergency as defined in the Slindon
     Indemnity; and the words (involving any danger or threat to health, safety,
     property or the environment) where they appear above in this sub-paragraph
     1.2(j) shall not apply to the aforesaid respective definitions of
     Emergency; and

(k)  if a period of time is specified and dates from, after or before, a given
     day or the day of an act or event, it is to be calculated exclusive of that
     day.

(l)  in determining reasonableness or materiality for the purposes of this
     Agreement, for the avoidance of doubt, any impact or potential impact on
     any post-Completion direct or indirect disposal of all or a substantial
     part of the assets or shares of any member of the Purchaser's Group shall
     be disregarded.

1.3  The principles of construction known as the contra proferentum rule shall
not be applied to the interpretation of this Agreement.

1.4  For the avoidance of doubt, the inclusion of a reference to a specific
Disclosure Document in Schedule 3 shall not imply or infer that reference to a

                                                                         Page 73

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specific Disclosure Document is required in order for disclosure of any
Disclosure Document to be fair.

                                                                         Page 74

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