MIDAMERICAN ENERGY HOLDINGS CO /NEW/ (Form: 10-Q, Received: 11/02/2012 16:17:55)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2012

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ______ to _______



Commission File Number	Exact name of registrant as specified in its charter; State or other jurisdiction of incorporation or organization	IRS Employer Identification No.

001-14881	MIDAMERICAN ENERGY HOLDINGS COMPANY	94-2213782
	(An Iowa Corporation)
	666 Grand Avenue, Suite 500
	Des Moines, Iowa 50309-2580
	515-242-4300

	N/A



(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer o	Accelerated filer o	Non-accelerated filer x	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

All of the shares of common equity of MidAmerican Energy Holdings Company are privately held by a limited group of investors. As of October 31, 2012 , 74,609,001 shares of common stock were outstanding.

TABLE OF CONTENTS

PART I



Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42

PART II



Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	43
Signatures		44
Exhibit Index		45

Definition of Abbreviations and Industry Terms

When used in Part I, Items 2 through 4, and Part II, Items 1 through 6, the following terms have the definitions indicated.



MidAmerican Energy Holdings Company and Related Entities
MEHC		MidAmerican Energy Holdings Company
Company		MidAmerican Energy Holdings Company and its subsidiaries
PacifiCorp		PacifiCorp and its subsidiaries
MidAmerican Funding		MidAmerican Funding, LLC
MidAmerican Energy		MidAmerican Energy Company
Northern Natural Gas		Northern Natural Gas Company
Kern River		Kern River Gas Transmission Company
Northern Powergrid Holdings		Northern Powergrid Holdings Company
MidAmerican Energy Pipeline Group		Consists of Northern Natural Gas and Kern River
MidAmerican Renewables		Consists of MidAmerican Renewables, LLC and CalEnergy Philippines
CE Casecnan		CE Casecnan Water and Energy Company, Inc.
HomeServices		HomeServices of America, Inc. and its subsidiaries
ETT		Electric Transmission Texas, LLC
Utilities		PacifiCorp and MidAmerican Energy Company
Domestic Regulated Businesses		PacifiCorp, MidAmerican Energy Company, Northern Natural Gas Company and Kern River Gas Transmission Company
Berkshire Hathaway		Berkshire Hathaway Inc. and its subsidiaries
Topaz		Topaz Solar Farms LLC
Topaz Project		Topaz Solar Farms LLC's 550-megawatt solar project
Agua Caliente		Agua Caliente Solar, LLC
Agua Caliente Project		Agua Caliente Solar, LLC's 290-megawatt solar project
Bishop Hill		Bishop Hill Energy II, LLC
Bishop Hill Project		Bishop Hill Energy II, LLC's 81-MW wind-powered generating project

Certain Industry Terms
AFUDC		Allowance for Funds Used During Construction
Dodd-Frank Reform Act		Dodd-Frank Wall Street Reform and Consumer Protection Act
EPA		United States Environmental Protection Agency
ERCOT		Electric Reliability Council of Texas
FERC		Federal Energy Regulatory Commission
GHG		Greenhouse Gases
IPUC		Idaho Public Utilities Commission
IUB		Iowa Utilities Board
kV		Kilovolt
MW		Megawatts
OPUC		Oregon Public Utility Commission
REC		Renewable Energy Credit
RPS		Renewable Portfolio Standards
RTO		Regional Transmission Organization
UPSC		Utah Public Service Commission
WPSC		Wyoming Public Service Commission
WUTC		Washington Utilities and Transportation Commission

Forward-Looking Statements

This report contains statements that do not directly or exclusively relate to historical facts. These statements are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can typically be identified by the use of forward-looking words, such as "will," "may," "could," "project," "believe," "anticipate," "expect," "estimate," "continue," "intend," "potential," "plan," "forecast" and similar terms. These statements are based upon the Company's current intentions, assumptions, expectations and beliefs and are subject to risks, uncertainties and other important factors. Many of these factors are outside the control of the Company and could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These factors include, among others:


•	general economic, political and business conditions, as well as changes in laws and regulations affecting the Company's operations or related industries;


•	changes in, and compliance with, environmental laws, regulations, decisions and policies that could, among other items, increase operating and capital costs, reduce facility output, accelerate facility retirements or delay facility construction or acquisition;


•	the outcome of general rate cases and other proceedings conducted by regulatory commissions or other governmental and legal bodies and the Company's ability to recover costs in rates in a timely manner;


•	changes in economic, industry, competition or weather conditions, as well as demographic trends, that could affect customer growth and usage, electricity and natural gas supply or the Company's ability to obtain long-term contracts with customers and suppliers;


•	a high degree of variance between actual and forecasted load that could impact the Company's hedging strategy and the cost of balancing its generation resources with its retail load obligations;


•	performance and availability of the Company's facilities, including the impacts of outages and repairs, transmission constraints, weather and operating conditions;


•	changes in prices, availability and demand for both purchases and sales of wholesale electricity, coal, natural gas, other fuel sources and fuel transportation that could have a significant impact on generating capacity and energy costs;


•	the financial condition and creditworthiness of the Company's significant customers and suppliers;


•	changes in business strategy or development plans;


•	availability, terms and deployment of capital, including reductions in demand for investment-grade commercial paper, debt securities and other sources of debt financing and volatility in the London Interbank Offered Rate, the base interest rate for MEHC's and its subsidiaries' credit facilities;


•	changes in MEHC's and its subsidiaries' credit ratings;


•	risks relating to nuclear generation;


•	the impact of derivative contracts used to mitigate or manage volume, price and interest rate risk, including increased collateral requirements, and changes in commodity prices, interest rates and other conditions that affect the fair value of derivative contracts;


•	the impact of inflation on costs and the Company's ability to recover such costs in regulated rates;


•	increases in employee healthcare costs;


•	the impact of investment performance and changes in interest rates, legislation, healthcare cost trends, mortality and morbidity on pension and other postretirement benefits expense and funding requirements;


•	changes in the residential real estate brokerage and mortgage industries and regulations that could affect brokerage and mortgage transaction levels;


•	unanticipated construction delays, changes in costs, receipt of required permits and authorizations, ability to fund capital projects and other factors that could affect future facilities and infrastructure additions;


•	the availability and price of natural gas in applicable geographic regions and demand for natural gas supply;


•	the impact of new accounting guidance or changes in current accounting estimates and assumptions on the Company's consolidated financial results;


•	the Company's ability to successfully integrate future acquired operations into its business;

iii


•	other risks or unforeseen events, including the effects of storms, floods, fires, explosions, litigation, wars, terrorism, embargoes and other catastrophic events; and


•	other business or investment considerations that may be disclosed from time to time in MEHC's filings with the United States Securities and Exchange Commission or in other publicly disseminated written documents.

Further details of the potential risks and uncertainties affecting the Company are described in MEHC's filings with the United States Securities and Exchange Commission, including Part II, Item 1A and other discussions contained in this Form 10-Q. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing factors should not be construed as exclusive.

PART I


Item 1.	Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

MidAmerican Energy Holdings Company

Des Moines, Iowa

We have reviewed the accompanying consolidated balance sheet of MidAmerican Energy Holdings Company and subsidiaries (the "Company") as of September 30, 2012 , and the related consolidated statements of operations and comprehensive income for the three-month and nine-month periods ended September 30, 2012 and 2011 , and of changes in equity and cash flows for the nine-month periods ended September 30, 2012 and 2011 . These interim financial statements are the responsibility of the Company's management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to such consolidated interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of MidAmerican Energy Holdings Company and subsidiaries as of December 31, 2011 , and the related consolidated statements of operations, cash flows, changes in equity, and comprehensive income for the year then ended (not presented herein); and in our report dated February 27, 2012 , we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2011 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Deloitte & Touche LLP

Des Moines, Iowa

November 2, 2012

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)

(Amounts in millions)



	As of
	September 30,		December 31,
	2012		2011
ASSETS
Current assets:
Cash and cash equivalents	$	1,860	$	286
Trade receivables, net	1,258		1,270
Income taxes receivable	—		456
Inventories	762		690
Other current assets	581		581
Total current assets	4,461		3,283

Property, plant and equipment, net	36,204		34,167
Goodwill	5,033		4,996
Investments and restricted cash and investments	2,076		1,948
Regulatory assets	2,770		2,835
Other assets	566		489

Total assets	$	51,110	$	47,718

The accompanying notes are an integral part of these consolidated financial statements.

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited) (continued)

(Amounts in millions)



	As of
	September 30,			December 31,
	2012			2011
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,055		$	989
Accrued employee expenses	265			155
Accrued interest	327			326
Accrued property, income and other taxes	679			340
Short-term debt	178			865
Current portion of long-term debt	1,181			1,198
Other current liabilities	659			674
Total current liabilities	4,344			4,547

Regulatory liabilities	1,735			1,663
MEHC senior debt	4,621			4,621
Subsidiary debt	15,154			13,253
Deferred income taxes	7,556			7,076
Other long-term liabilities	2,216			2,293
Total liabilities	35,626			33,453

Commitments and contingencies (Note 10)

Equity:
MEHC shareholders' equity:
Common stock - 115 shares authorized, no par value, 75 shares issued and outstanding	—			—
Additional paid-in capital	5,423			5,423
Retained earnings	10,455			9,310
Accumulated other comprehensive loss, net	(565		)	(641		)
Total MEHC shareholders' equity	15,313			14,092
Noncontrolling interests	171			173
Total equity	15,484			14,265

Total liabilities and equity	$	51,110		$	47,718

The accompanying notes are an integral part of these consolidated financial statements.

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

(Amounts in millions)



	Three-Month Periods						Nine-Month Periods
	Ended September 30,						Ended September 30,
	2012			2011			2012			2011

Operating revenue:
Energy	$	2,636		$	2,535		$	7,593		$	7,546
Real estate	372			285			970			764
Total operating revenue	3,008			2,820			8,563			8,310

Operating costs and expenses:
Energy:
Cost of sales	884			897			2,576			2,709
Operating expense	653			604			1,953			1,865
Depreciation and amortization	367			324			1,072			988
Real estate	347			267			921			739
Total operating costs and expenses	2,251			2,092			6,522			6,301

Operating income	757			728			2,041			2,009

Other income (expense):
Interest expense	(298		)	(301		)	(884		)	(907		)
Capitalized interest	15			13			37			31
Interest and dividend income	3			2			8			11
Other, net	35			17			86			63
Total other income (expense)	(245		)	(269		)	(753		)	(802		)

Income before income tax expense and equity income	512			459			1,288			1,207
Income tax expense	47			68			188			255
Equity income	30			28			61			42
Net income	495			419			1,161			994
Net income attributable to noncontrolling interests	7			7			16			15
Net income attributable to MEHC shareholders	$	488		$	412		$	1,145		$	979

The accompanying notes are an integral part of these consolidated financial statements.

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

(Amounts in millions)



	Three-Month Periods						Nine-Month Periods
	Ended September 30,						Ended September 30,
	2012			2011			2012			2011

Net income	$	495		$	419		$	1,161		$	994

Other comprehensive income (loss), net of tax:
Unrecognized amounts on retirement benefits, net of tax of $(2), $7, $1 and $7	(5		)	19			6			19
Foreign currency translation adjustment	84			(79		)	113			(1		)
Unrealized losses on available-for-sale securities, net of tax of $(11), $(143), $(35) and $(323)	(16		)	(216		)	(51		)	(487		)
Unrealized gains on cash flow hedges, net of tax of $7, $2, $5 and $10	11			3			8			15
Total other comprehensive income (loss), net of tax	74			(273		)	76			(454		)

Comprehensive income	569			146			1,237			540
Comprehensive income attributable to noncontrolling interests	7			7			16			15
Comprehensive income attributable to MEHC shareholders	$	562		$	139		$	1,221		$	525

The accompanying notes are an integral part of these consolidated financial statements.

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Unaudited)

(Amounts in millions)



	MEHC Shareholders' Equity
									Accumulated
				Additional					Other
	Common			Paid-in			Retained		Comprehensive			Noncontrolling			Total
	Shares	Stock		Capital			Earnings		Loss, Net			Interests			Equity

Balance at December 31, 2010	75	$	—	$	5,427		$	7,979	$	(174	)	$	176		$	13,408
Net income	—	—		—			979		—			15			994
Other comprehensive loss	—	—		—			—		(454		)	—			(454		)
Distributions	—	—		—			—		—			(19		)	(19		)
Other equity transactions	—	—		(4		)	—		—			1			(3		)
Balance at September 30, 2011	75	$	—	$	5,423		$	8,958	$	(628	)	$	173		$	13,926

Balance at December 31, 2011	75	$	—	$	5,423		$	9,310	$	(641	)	$	173		$	14,265
Net income	—	—		—			1,145		—			16			1,161
Other comprehensive income	—	—		—			—		76			—			76
Distributions	—	—		—			—		—			(18		)	(18		)
Balance at September 30, 2012	75	$	—	$	5,423		$	10,455	$	(565	)	$	171		$	15,484

The accompanying notes are an integral part of these consolidated financial statements.

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Amounts in millions)



	Nine-Month Periods
	Ended September 30,
	2012			2011
Cash flows from operating activities:
Net income	$	1,161		$	994
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	1,086			997
Changes in regulatory assets and liabilities	(26		)	(7		)
Deferred income taxes and amortization of investment tax credits	655			475
Other, net	(55		)	(54		)
Changes in other operating assets and liabilities, net of effects from acquisitions:
Trade receivables and other assets	24			60
Derivative collateral, net	64			32
Contributions to pension and other postretirement benefit plans, net	(107		)	(132		)
Accrued property, income and other taxes	824			395
Accounts payable and other liabilities	56			(43		)
Net cash flows from operating activities	3,682			2,717

Cash flows from investing activities:
Capital expenditures	(2,349		)	(1,912		)
Acquisitions, net of cash acquired	(110		)	—
Purchases of available-for-sale securities	(84		)	(105		)
Proceeds from sales of available-for-sale securities	69			102
Equity method investments	(310		)	(72		)
Increase in restricted cash and investments	(45		)	(7		)
Other, net	12			1
Net cash flows from investing activities	(2,817		)	(1,993		)

Cash flows from financing activities:
Proceeds from subsidiary debt	2,199			790
Repayments of subsidiary debt	(450		)	(601		)
Repayments of MEHC senior and subordinated debt	(272		)	(122		)
Net repayments of short-term debt	(715		)	(320		)
Other, net	(58		)	(36		)
Net cash flows from financing activities	704			(289		)

Effect of exchange rate changes	5			1

Net change in cash and cash equivalents	1,574			436
Cash and cash equivalents at beginning of period	286			470
Cash and cash equivalents at end of period	$	1,860		$	906

The accompanying notes are an integral part of these consolidated financial statements.

MIDAMERICAN ENERGY HOLDINGS COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)


(1)	General

MidAmerican Energy Holdings Company ("MEHC") is a holding company that owns subsidiaries principally engaged in energy businesses (collectively with its subsidiaries, the "Company"). MEHC is a consolidated subsidiary of Berkshire Hathaway Inc. ("Berkshire Hathaway").

The Company's operations are organized and managed as eight distinct platforms: PacifiCorp, MidAmerican Funding, LLC ("MidAmerican Funding") (which primarily consists of MidAmerican Energy Company ("MidAmerican Energy")), Northern Natural Gas Company ("Northern Natural Gas"), Kern River Gas Transmission Company ("Kern River"), Northern Powergrid Holdings Company ("Northern Powergrid Holdings") (which primarily consists of Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc), CalEnergy Philippines (which owns a majority interest in the Casecnan project in the Philippines), MidAmerican Renewables, LLC (which owns interests in independent power projects in the United States), and HomeServices of America, Inc. (collectively with its subsidiaries, "HomeServices"). Through these platforms, the Company owns and operates an electric utility company in the Western United States, an electric and natural gas utility company in the Midwestern United States, two interstate natural gas pipeline companies in the United States, two electricity distribution companies in Great Britain, a diversified portfolio of independent power projects and the second largest residential real estate brokerage firm in the United States. Northern Natural Gas and Kern River have been aggregated in the reportable segment called MidAmerican Energy Pipeline Group, and CalEnergy Philippines and MidAmerican Renewables, LLC have been aggregated in the reportable segment called MidAmerican Renewables.

The unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and the United States Securities and Exchange Commission's rules and regulations for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by GAAP for annual financial statements. Management believes the unaudited Consolidated Financial Statements contain all adjustments (consisting only of normal recurring adjustments) considered necessary for the fair presentation of the Consolidated Financial Statements as of September 30, 2012 and for the three- and nine-month periods ended September 30, 2012 and 2011 . The results of operations for the three- and nine-month periods ended September 30, 2012 are not necessarily indicative of the results to be expected for the full year.

The preparation of the unaudited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenue and expenses during the period. Actual results may differ from the estimates used in preparing the unaudited Consolidated Financial Statements. Note 2 of Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 describes the most significant accounting policies used in the preparation of the Consolidated Financial Statements. There have been no significant changes in the Company's assumptions regarding significant accounting estimates and policies during the nine-month period ended September 30, 2012 .


(2)	New Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2011-11, which amends FASB Accounting Standards Codification ("ASC") Topic 210, "Balance Sheet." The amendments in this guidance require an entity to provide quantitative disclosures about offsetting financial instruments and derivative instruments. Additionally, this guidance requires qualitative and quantitative disclosures about master netting agreements or similar agreements when the financial instruments and derivative instruments are not offset. This guidance is effective for fiscal years beginning on or after January 1, 2013, and for interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this guidance on its disclosures included within Notes to Consolidated Financial Statements.

In June 2011, the FASB issued ASU No. 2011-05, which amends FASB ASC Topic 220, "Comprehensive Income." ASU No. 2011-05 provides an entity with the option to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Regardless of the option chosen, this guidance also requires presentation of items on the face of the financial statements that are reclassified from other comprehensive income to net income. This guidance does not change the items that must be reported in other comprehensive income, when an item of other comprehensive income must be reclassified to net income or how tax effects of each item of other comprehensive income are presented. This guidance is effective for interim and annual reporting periods beginning after December 15, 2011. In December 2011, the FASB issued ASU No. 2011-12, which also amends FASB ASC Topic 220 to defer indefinitely the ASU No. 2011-05 requirement to present items on the face of the financial statements that are reclassified from other comprehensive income to net income. ASU No. 2011-12 is also effective for interim and annual reporting periods beginning after December 15, 2011. The Company adopted this guidance on January 1, 2012 and elected the two separate but consecutive statements option.

In May 2011, the FASB issued ASU No. 2011-04, which amends FASB ASC Topic 820, "Fair Value Measurements and Disclosures." The amendments in this guidance are not intended to result in a change in current accounting. ASU No. 2011-04 requires additional disclosures relating to fair value measurements categorized within Level 3 of the fair value hierarchy, including quantitative information about unobservable inputs, the valuation process used by the entity and the sensitivity of unobservable input measurements. Additionally, entities are required to disclose the level of the fair value hierarchy for assets and liabilities that are not measured at fair value in the balance sheet, but for which disclosure of the fair value is required. This guidance is effective for interim and annual reporting periods beginning after December 15, 2011. The Company adopted ASU No. 2011-04 on January 1, 2012. The adoption of this guidance did not have a material impact on the Company's disclosures included within Notes to Consolidated Financial Statements.


(3)	Property, Plant and Equipment, Net

Property, plant and equipment, net consists of the following (in millions):



		As of
	Depreciable	September 30,			December 31,
	Life	2012			2011
Regulated assets:
Utility generation, distribution and transmission system	5-80 years	$	41,813		$	40,180
Interstate pipeline assets	3-80 years	6,323			6,245
		48,136			46,425
Accumulated depreciation and amortization		(15,125		)	(14,390		)
Regulated assets, net		33,011			32,035

Nonregulated assets:
Independent power plants	5-30 years	677			677
Other assets	3-30 years	452			429
		1,129			1,106
Accumulated depreciation and amortization		(575		)	(533		)
Nonregulated assets, net		554			573

Net operating assets		33,565			32,608
Construction work-in-progress		2,639			1,559
Property, plant and equipment, net		$	36,204		$	34,167

Construction work-in-progress includes $2.0 billion and $1.6 billion as of September 30, 2012 and December 31, 2011 , respectively, related to the construction of regulated assets.

Through October 2012, the Company completed various acquisitions totaling $235 million . The purchase price for each acquisition was allocated to the assets acquired, which relate primarily to development and construction costs for the Topaz solar project ("Topaz Project") and the Bishop Hill II wind-powered generation project ("Bishop Hill Project"), and intangible franchise contracts and goodwill for a real estate brokerage franchise business and several real estate brokerage businesses. There were no material liabilities assumed.

In September 2012, MidAmerican Renewables, through wholly-owned subsidiaries, signed a definitive agreement, subject to conditions precedent, to acquire all of the equity interests in two project companies that own the 168-MW Alta Wind VII and the 132-MW Alta Wind IX wind-powered generation projects ("Alta Wind Projects"), located in California, which are expected to be placed in service in 2012. Once completed, the Alta Wind Projects will sell all of their generation to Southern California Edison pursuant to the terms of power purchase agreements that extend to 2035. These transactions are expected to close in 2012.


(4)	Fair Value Measurements

The carrying value of the Company's cash, certain cash equivalents, receivables, payables, accrued liabilities and short-term borrowings approximates fair value because of the short-term maturity of these instruments. The Company has various financial assets and liabilities that are measured at fair value on the Consolidated Financial Statements using inputs from the three levels of the fair value hierarchy. A financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The three levels are as follows:


•	Level 1 — Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

•

Level 2 — Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).


•	Level 3 — Unobservable inputs reflect the Company's judgments about the assumptions market participants would use in pricing the asset or liability since limited market data exists. The Company develops these inputs based on the best information available, including its own data.

The following table presents the Company's assets and liabilities recognized on the Consolidated Balance Sheets and measured at fair value on a recurring basis (in millions):



	Input Levels for Fair Value Measurements
	Level 1			Level 2			Level 3			Other ⁽¹⁾			Total
As of September 30, 2012
Assets:
Commodity derivatives	$	1		$	82		$	19		$	(69	)	$	33
Money market mutual funds ⁽²⁾	865			—			—			—			865
Debt securities:
United States government obligations	103			—			—			—			103
International government obligations	—			1			—			—			1
Corporate obligations	—			30			—			—			30
Municipal obligations	—			6			—			—			6
Agency, asset and mortgage-backed obligations	—			7			—			—			7
Auction rate securities	—			—			38			—			38
Equity securities:
United States companies	187			—			—			—			187
International companies	394			—			—			—			394
Investment funds	69			—			—			—			69
	$	1,619		$	126		$	57		$	(69	)	$	1,733

Liabilities - commodity derivatives	$	(11	)	$	(360	)	$	(7	)	$	147		$	(231	)



	Input Levels for Fair Value Measurements
	Level 1			Level 2			Level 3			Other ⁽¹⁾			Total
As of December 31, 2011
Assets:
Commodity derivatives	$	1		$	166		$	27		$	(147	)	$	47
Money market mutual funds ⁽²⁾	164			—			—			—			164
Debt securities:
United States government obligations	89			—			—			—			89
International government obligations	—			1			—			—			1
Corporate obligations	—			30			—			—			30
Municipal obligations	—			12			—			—			12
Agency, asset and mortgage-backed obligations	—			7			—			—			7
Auction rate securities	—			—			35			—			35
Equity securities:
United States companies	166			—			—			—			166
International companies	489			—			—			—			489
Investment funds	64			—			—			—			64
	$	973		$	216		$	62		$	(147	)	$	1,104

Liabilities - commodity derivatives	$	(37	)	$	(598	)	$	(4	)	$	303		$	(336	)


(1)	Represents netting under master netting arrangements and a net cash collateral receivable of $78 million and $156 million as of September 30, 2012 and December 31, 2011 , respectively.


(2)	Amounts are included in cash and cash equivalents; current investments and restricted cash and investments; and noncurrent investments and restricted cash and investments on the Consolidated Balance Sheets. The fair value of these money market mutual funds approximates cost.

Derivative contracts are recorded on the Consolidated Balance Sheets as either assets or liabilities and are stated at fair value unless they are designated as normal purchases or normal sales and qualify for the exception afforded by GAAP. When available, the fair value of derivative contracts is estimated using unadjusted quoted prices for identical contracts in the market in which the Company transacts. When quoted prices for identical contracts are not available, the Company uses forward price curves. Forward price curves represent the Company's estimates of the prices at which a buyer or seller could contract today for delivery or settlement at future dates. The Company bases its forward price curves upon market price quotations, when available, or internally developed and commercial models, with internal and external fundamental data inputs. Market price quotations are obtained from independent energy brokers, exchanges, direct communication with market participants and actual transactions executed by the Company. Market price quotations for certain major electricity and natural gas trading hubs are generally readily obtainable for the applicable term of the Company's outstanding derivative contracts; therefore, the Company's forward price curves for those locations and periods reflect observable market quotes. Market price quotations for other electricity and natural gas trading hubs are not as readily obtainable due to the length of the contract. Given that limited market data exists for these contracts, as well as for those contracts that are not actively traded, the Company uses forward price curves derived from internal models based on perceived pricing relationships to major trading hubs that are based on unobservable inputs. The estimated fair value of these derivative contracts is a function of underlying forward commodity prices, interest rates, currency rates, related volatility, counterparty creditworthiness and duration of contracts. Refer to Note 5 for further discussion regarding the Company's risk management and hedging activities.

The Company's investments in money market mutual funds and debt and equity securities are accounted for as available-for-sale securities and are stated at fair value. When available, a readily observable quoted market price or net asset value of an identical security in an active market is used to record the fair value. In the absence of a quoted market price or net asset value of an identical security, the fair value is determined using pricing models or net asset values based on observable market inputs and quoted market prices of securities with similar characteristics. The fair value of the Company's investments in auction rate securities, where there is no current liquid market, is determined using pricing models based on available observable market data and the Company's judgment about the assumptions, including liquidity and nonperformance risks, which market participants would use when pricing the asset.

The following table reconciles the beginning and ending balances of the Company's assets and liabilities measured at fair value on a recurring basis using significant Level 3 inputs (in millions):



	Three-Month Periods					Nine-Month Periods
	Ended September 30,					Ended September 30,
				Auction					Auction
	Commodity			Rate		Commodity			Rate
	Derivatives			Securities		Derivatives			Securities

2012
Beginning balance	$	17		$	36	$	23		$	35
Changes included in earnings ⁽¹⁾	(2		)	—		7			—
Changes in fair value recognized in other comprehensive income	—			2		3			4
Changes in fair value recognized in net regulatory assets	(3		)	—		—			—
Sales	—			—		—			(1		)
Settlements	—			—		(21		)	—
Ending balance	$	12		$	38	$	12		$	38



2011
Beginning balance	$	(233	)	$	37		$	(331	)	$	50
Changes included in earnings ⁽¹⁾	6			—			10			—
Changes in fair value recognized in other comprehensive income	—			(2		)	—			—
Changes in fair value recognized in net regulatory assets	4			—			87			—
Sales	—			—			—			(15		)
Settlements	15			—			26			—
Transfers from Level 2	1			—			1			—
Ending balance	$	(207	)	$	35		$	(207	)	$	35

(1)

Changes included in earnings are reported as operating revenue on the Consolidated Statements of Operations. For commodity derivatives held as of September 30, 2012 and 2011 , net unrealized (losses) gains included in earnings for the three-month periods ended September 30, 2012 and 2011 totaled $(2) million and $4 million , respectively, and for the nine-month periods ended September 30, 2012 and 2011 , totaled $3 million and $5 million , respectively.

The Company's long-term debt is carried at cost on the Consolidated Financial Statements. The fair value of the Company's long-term debt is a Level 2 fair value measurement and has been estimated based upon quoted market prices, where available, or at the present value of future cash flows discounted at rates consistent with comparable maturities with similar credit risks. The carrying value of the Company's variable-rate long-term debt approximates fair value because of the frequent repricing of these instruments at market rates. The following table presents the carrying value and estimated fair value of the Company's long-term debt (in millions):



	As of September 30, 2012				As of December 31, 2011
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value

Long-term debt	$	20,956	$	25,417	$	19,072	$	23,327


(5)	Risk Management and Hedging Activities

The Company is exposed to the impact of market fluctuations in commodity prices, interest rates and foreign currency exchange rates. The Company is principally exposed to electricity, natural gas, coal and fuel oil commodity price risk primarily through MEHC's ownership of the Utilities as they have an obligation to serve retail customer load in their regulated service territories. MidAmerican Energy also provides nonregulated retail electricity and natural gas services in competitive markets. The Utilities' load and generating facilities represent substantial underlying commodity positions. Exposures to commodity prices consist mainly of variations in the price of fuel required to generate electricity, wholesale electricity that is purchased and sold, and natural gas supply for retail customers. Commodity prices are subject to wide price swings as supply and demand are impacted by, among many other unpredictable items, weather, market liquidity, generating facility availability, customer usage, storage, and transmission and transportation constraints. Interest rate risk exists on variable-rate debt and future debt issuances. Additionally, the Company is exposed to foreign currency exchange rate risk from its business operations and investments in Great Britain. The Company does not engage in a material amount of proprietary trading activities.

Each of the Company's business platforms has established a risk management process that is designed to identify, assess, monitor, report, manage and mitigate each of the various types of risk involved in its business. To mitigate a portion of its commodity price risk, the Company uses commodity derivative contracts, which may include forwards, futures, options, swaps and other agreements, to effectively secure future supply or sell future production generally at fixed prices. The Company manages its interest rate risk by limiting its exposure to variable interest rates primarily through the issuance of fixed-rate long-term debt and by monitoring market changes in interest rates. Additionally, the Company may from time to time enter into interest rate derivative contracts, such as interest rate swaps or locks, to mitigate the Company's exposure to interest rate risk. The Company does not hedge all of its commodity price, interest rate and foreign currency exchange rate risks, thereby exposing the unhedged portion to changes in market prices.

There have been no significant changes in the Company's accounting policies related to derivatives. Refer to Note 4 for additional information on derivative contracts.

The following table, which reflects master netting arrangements and excludes contracts that have been designated as normal under the normal purchases or normal sales exception afforded by GAAP, summarizes the fair value of the Company's derivative contracts, on a gross basis, and reconciles those amounts to the amounts presented on a net basis on the Consolidated Balance Sheets (in millions):



	Other						Other			Other
	Current			Other			Current			Long-term
	Assets			Assets			Liabilities			Liabilities			Total
As of September 30, 2012
Not designated as hedging contracts ⁽¹⁾ :
Commodity assets	$	28		$	8		$	48		$	8		$	92
Commodity liabilities	(7		)	(2		)	(206		)	(126		)	(341		)
Total	21			6			(158		)	(118		)	(249		)

Designated as hedging contracts:
Commodity assets	6			—			3			1			10
Commodity liabilities	—			—			(22		)	(15		)	(37		)
Total	6			—			(19		)	(14		)	(27		)

Total derivatives	27			6			(177		)	(132		)	(276		)
Cash collateral (payable) receivable	—			—			71			7			78
Total derivatives - net basis	$	27		$	6		$	(106	)	$	(125	)	$	(198	)



	Other						Other			Other
	Current			Other			Current			Long-term
	Assets			Assets			Liabilities			Liabilities			Total
As of December 31, 2011
Not designated as hedging contracts ⁽¹⁾ :
Commodity assets	$	93		$	14		$	73		$	13		$	193
Commodity liabilities	(47		)	(5		)	(324		)	(216		)	(592		)
Total	46			9			(251		)	(203		)	(399		)

Designated as hedging contracts:
Commodity assets	—			—			1			—			1
Commodity liabilities	(6		)	—			(24		)	(17		)	(47		)
Total	(6		)	—			(23		)	(17		)	(46		)

Total derivatives	40			9			(274		)	(220		)	(445		)
Cash collateral (payable) receivable	(2		)	—			114			44			156
Total derivatives - net basis	$	38		$	9		$	(160	)	$	(176	)	$	(289	)


(1)	The Company's commodity derivatives not designated as hedging contracts are generally included in regulated rates, and as of September 30, 2012 and December 31, 2011 , a net regulatory asset of $249 million and $400 million , respectively, was recorded related to the net derivative liability of $249 million and $399 million , respectively.

Not Designated as Hedging Contracts

The following table reconciles the beginning and ending balances of the Company's net regulatory assets and summarizes the pre-tax gains and losses on commodity derivative contracts recognized in net regulatory assets, as well as amounts reclassified to earnings (in millions):



	Three-Month Periods						Nine-Month Periods
	Ended September 30,						Ended September 30,
	2012			2011			2012			2011

Beginning balance	$	357		$	498		$	400		$	564
Changes in fair value recognized in net regulatory assets	(31		)	81			42			19
Net gains (losses) reclassified to operating revenue	10			(6		)	51			2
Net losses reclassified to cost of sales	(87		)	(56		)	(244		)	(68		)
Ending balance	$	249		$	517		$	249		$	517

Designated as Hedging Contracts

The Company uses derivative contracts accounted for as cash flow hedges to hedge electricity and natural gas commodity prices for delivery to nonregulated customers, spring operational sales, natural gas storage and other transactions.

The following table reconciles the beginning and ending balances of the Company's accumulated other comprehensive loss (pre-tax) and summarizes pre-tax gains and losses on derivative contracts designated and qualifying as cash flow hedges recognized in other comprehensive income ("OCI"), as well as amounts reclassified to earnings (in millions):



	Three-Month Periods						Nine-Month Periods
	Ended September 30,						Ended September 30,
	2012			2011			2012			2011

Beginning balance ⁽¹⁾	$	49		$	15		$	46		$	37
Changes in fair value recognized in OCI	(18		)	(12		)	12			(26		)
Net gains reclassified to operating revenue	—			1			—			2
Net (losses) gains reclassified to cost of sales	(4		)	3			(31		)	(6		)
Ending balance ⁽¹⁾	$	27		$	7		$	27		$	7


(1)	Certain derivative contracts, principally interest rate locks, have settled and the fair value at the date of settlement remains in accumulated other comprehensive income ("AOCI") and is recognized in earnings when the forecasted transactions impact earnings.

Realized gains and losses on hedges and hedge ineffectiveness are recognized in income as operating revenue, cost of sales, operating expense or interest expense depending upon the nature of the item being hedged. For the three- and nine-month periods ended September 30, 2012 and 2011 , hedge ineffectiveness was insignificant . As of September 30, 2012 , the Company had cash flow hedges with expiration dates extending through May 2032 and $19 million of pre-tax net unrealized losses are forecasted to be reclassified from AOCI into earnings over the next twelve months as contracts settle.

Derivative Contract Volumes

The following table summarizes the net notional amounts of outstanding commodity derivative contracts with fixed price terms that comprise the mark-to-market values as of (in millions):



	Unit of	September 30,		December 31,
	Measure	2012		2011
Electricity (sales) purchases	Megawatt hours	(2	)	6
Natural gas purchases	Decatherms	136		183
Fuel purchases	Gallons	4		19

Credit Risk

The Utilities extend unsecured credit to other utilities, energy marketing companies, financial institutions and other market participants in conjunction with their wholesale energy supply and marketing activities. Credit risk relates to the risk of loss that might occur as a result of nonperformance by counterparties on their contractual obligations to make or take delivery of electricity, natural gas or other commodities and to make financial settlements of these obligations. Credit risk may be concentrated to the extent that one or more groups of counterparties have similar economic, industry or other characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in market or other conditions. In addition, credit risk includes not only the risk that a counterparty may default due to circumstances relating directly to it, but also the risk that a counterparty may default due to circumstances involving other market participants that have a direct or indirect relationship with the counterparty.

The Utilities analyze the financial condition of each significant wholesale counterparty before entering into any transactions, establish limits on the amount of unsecured credit to be extended to each counterparty and evaluate the appropriateness of unsecured credit limits on an ongoing basis. To mitigate exposure to the financial risks of wholesale counterparties, the Utilities enter into netting and collateral arrangements that may include margining and cross-product netting agreements and obtain third-party guarantees, letters of credit and cash deposits. Counterparties may be assessed fees for delayed payments. If required, the Utilities exercise rights under these arrangements, including calling on the counterparty's credit support arrangement.

MidAmerican Energy also has potential indirect credit exposure to other market participants in the regional transmission organization ("RTO") markets where it actively participates, including the Midwest Independent Transmission System Operator, Inc. and the PJM Interconnection, L.L.C. In the event of a default by a RTO market participant on its market-related obligations, losses are allocated among all other market participants in proportion to each participant's share of overall market activity during the period of time the loss was incurred, diversifying MidAmerican Energy's exposure to credit losses from individual participants. Transactional activities of MidAmerican Energy and other participants in organized RTO markets are governed by credit policies specified in each respective RTO's governing tariff or related business practices. Credit policies of RTO's, which have been developed through extensive stakeholder participation, generally seek to minimize potential loss in the event of a market participant default without unnecessarily inhibiting access to the marketplace. MidAmerican Energy's share of historical losses from defaults by other RTO market participants has not been material.

Collateral and Contingent Features

In accordance with industry practice, certain wholesale derivative contracts contain provisions that require MEHC's subsidiaries, principally the Utilities, to maintain specific credit ratings from one or more of the major credit rating agencies on their unsecured debt. These derivative contracts may either specifically provide bilateral rights to demand cash or other security if credit exposures on a net basis exceed specified rating-dependent threshold levels ("credit-risk-related contingent features") or provide the right for counterparties to demand "adequate assurance" in the event of a material adverse change in the subsidiary's creditworthiness. These rights can vary by contract and by counterparty. As of September 30, 2012 , these subsidiaries' credit ratings from the three recognized credit rating agencies were investment grade.

The aggregate fair value of the Company's derivative contracts in liability positions with specific credit-risk-related contingent features totaled $344 million and $571 million as of September 30, 2012 and December 31, 2011 , respectively, for which the Company had posted collateral of $68 million and $125 million , respectively, in the form of cash deposits and letters of credit. If all credit-risk-related contingent features for derivative contracts in liability positions had been triggered as of September 30, 2012 and December 31, 2011 , the Company would have been required to post $222 million and $332 million , respectively, of additional collateral. The Company's collateral requirements could fluctuate considerably due to market price volatility, changes in credit ratings, changes in legislation or regulation, or other factors.


(6)	Investments and Restricted Cash and Investments

Investments and restricted cash and investments consists of the following (in millions):



	As of
	September 30,			December 31,
	2012			2011
Investments:
BYD Company Limited common stock	$	392		$	488
Rabbi trusts	308			290
Other	105			99
Total investments	805			877

Equity method investments:
Electric Transmission Texas, LLC	317			221
CE Generation, LLC	248			255
Bridger Coal Company	195			204
Agua Caliente Solar, LLC	62			—
Other	65			52
Total equity method investments	887			732

Restricted cash and investments:
Nuclear decommissioning trust funds	338			308
Other	127			82
Total restricted cash and investments	465			390

Total investments and restricted cash and investments	2,157			1,999
Less current portion	(81		)	(51		)
Noncurrent portion	$	2,076		$	1,948

Investments

MEHC's investment in BYD Company Limited common stock is accounted for as an available-for-sale security with changes in fair value recognized in AOCI. As of September 30, 2012 and December 31, 2011 , the fair value of MEHC's investment in BYD Company Limited common stock was $392 million and $488 million , respectively, which resulted in a pre-tax unrealized gain of $160 million and $256 million as of September 30, 2012 and December 31, 2011 , respectively.

Equity Method Investments

In January 2012, MEHC, through an indirect wholly-owned subsidiary, acquired from NRG Energy, Inc. a 49% equity interest in Agua Caliente Solar, LLC ("Agua Caliente"), the developer and owner of a solar project in Arizona. As of September 30, 2012 , the equity investment is net of investment tax credits totaling $164 million .


(7)	Recent Financing Transactions

Long-Term Debt

In January 2012, PacifiCorp issued $350 million of its 2.95% First Mortgage Bonds due February 2022 and $300 million of its 4.10% First Mortgage Bonds due February 2042 . The net proceeds were used to repay short-term debt, fund capital expenditures and for general corporate purposes. In March 2012, PacifiCorp issued an additional $100 million of its 2.95% First Mortgage Bonds due February 2022 . The net proceeds were used to redeem $84 million of tax-exempt bond obligations prior to scheduled maturity with a weighted average interest rate of 5.7% , repay short-term debt and for general corporate purposes.

In February 2012, Topaz Solar Farms, LLC ("Topaz") issued $850 million of the 5.75% Series A Senior Secured Notes. The principal of the notes amortize beginning September 2015 with a final maturity in September 2039 . The net proceeds will be used to fund the costs and expenses related to the development, construction and financing of the Topaz Project. Any unused amounts will be invested or, in certain circumstances, loaned to MEHC. As of September 30, 2012 , $421 million was loaned to MEHC.

In June 2012, MidAmerican Energy redeemed $275 million of its 5.125% Senior Notes due January 2013 at a redemption price determined in accordance with the terms of the indenture.

In July 2012, Northern Powergrid (Yorkshire) plc issued £150 million of its 4.375% Bonds due July 2032 . The net proceeds will be used for general corporate purposes.

In August 2012, Northern Natural Gas issued $250 million of its 4.10% Senior Bonds due September 2042 . The net proceeds were used to partially repay its $300 million , 5.375% Senior Notes due October 2012 .

In August 2012, Bishop Hill issued $120 million of its 5.125% Senior Secured Fixed Rate Notes. The principal of the notes amortize beginning March 2013 with a final maturity in March 2032 . The net proceeds will be used to fund the costs and expenses related to the development, construction and financing of the Bishop Hill Project.

In conjunction with the construction of wind-powered generating facilities in 2012, MidAmerican Energy has accrued as construction work-in-progress amounts it is not contractually obligated to pay until December 2015 . The amounts ultimately payable are discounted at 1.43% and recognized upon delivery of the equipment as long-term debt. The discount is being amortized as interest expense over the period until payment is due using the effective interest method. As of September 30, 2012 , $306 million of such debt from the 2012 wind-powered generation projects, net of associated discount, was outstanding.

Credit Facilities

In August 2012, Northern Powergrid Holdings replaced its existing £150 million unsecured credit facility expiring in March 2013 with a £150 million unsecured credit facility expiring in August 2017 . The replacement credit facility has a variable interest rate based on the sterling London Interbank Offered Rate ("LIBOR") plus a spread that varies based on its credit ratings. This facility is for general corporate purposes. As of September 30, 2012 , Northern Powergrid Holdings had no borrowings outstanding under this credit facility. The credit facility requires that Northern Powergrid Holdings' ratio of consolidated senior total net debt, including current maturities, to regulated asset value not exceed 0.8 to 1.0 at Northern Powergrid Holdings and 0.65 to 1.0 at Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc as of June 30 and December 31. Additionally, Northern Powergrid Holdings' interest coverage ratio shall not be less than 2.5 to 1.0.

In June 2012, MEHC entered into a $600 million senior unsecured credit facility expiring in June 2017 . The credit facility has a variable interest rate based on LIBOR or a base rate, at MEHC's option, plus a spread that varies based on MEHC's credit ratings for its senior unsecured long-term debt securities. This facility is for general corporate purposes and also supports commercial paper and letters of credit for the benefit of certain subsidiaries and affiliates. As of September 30, 2012 , MEHC had $140 million of commercial paper borrowings outstanding at an average rate of 0.4% . The credit facility requires that MEHC's ratio of consolidated debt, including current maturities, to total capitalization not exceed 0.70 to 1.0 as of the last day of each quarter. This facility, along with its existing $479 million senior unsecured credit facility expiring in July 2013 , supports MEHC's $1 billion commercial paper program.

In June 2012, PacifiCorp replaced its existing $635 million unsecured credit facility expiring in October 2012 with a $600 million unsecured credit facility expiring in June 2017 . The replacement credit facility has a variable interest rate based on LIBOR or a base rate, at PacifiCorp's option, plus a spread that varies based on PacifiCorp's credit ratings for its senior unsecured long-term debt securities. This facility is for general corporate purposes including supporting PacifiCorp's commercial paper program and provides for the issuance of letters of credit. As of September 30, 2012 , PacifiCorp had no borrowings outstanding under this credit facility. The credit facility requires that PacifiCorp's ratio of consolidated debt, including current maturities, to total capitalization not exceed 0.65 to 1.0 as of the last day of each quarter.

In connection with its offering, Topaz entered into a letter of credit and reimbursement facility in an aggregate principal amount of $345 million . Letters of credit issued under the letter of credit facility will be used to (a) provide security under the power purchase agreement and large generator interconnection agreements, (b) fund the debt service reserve requirement and the operation and maintenance debt service reserve requirement, (c) provide security for remediation and mitigation liabilities, and (d) provide security in respect of conditional use permit sales tax obligations. As of September 30, 2012 , Topaz had $56 million of letters of credit issued under this facility.

Pursuant to an equity funding and contribution agreement, MEHC has committed to provide Agua Caliente with funding for (a) base equity contributions of up to an aggregate amount of $303 million for the construction of the Agua Caliente Project, and (b) transmission upgrade costs. In January 2012, MEHC entered into a $303 million letter of credit facility related to its funding commitments. The equity funding and contribution agreement and the letter of credit commitment decreases as equity is contributed to the Agua Caliente Project. As of September 30, 2012 , the balance of the commitment was $169 million .


(8)	Employee Benefit Plans

Domestic Operations

Net periodic benefit cost for the domestic pension and other postretirement benefit plans included the following components (in millions):



	Three-Month Periods						Nine-Month Periods
	Ended September 30,						Ended September 30,
	2012			2011			2012			2011
Pension:
Service cost	$	6		$	6		$	19		$	20
Interest cost	24			26			72			78
Expected return on plan assets	(30		)	(29		)	(89		)	(88		)
Net amortization	10			6			29			15
Net periodic benefit cost	$	10		$	9		$	31		$	25

Other postretirement:
Service cost	$	3		$	3		$	8		$	8
Interest cost	9			10			27			31
Expected return on plan assets	(11		)	(12		)	(32		)	(33		)
Net amortization	1			4			1			12
Net periodic benefit cost	$	2		$	5		$	4		$	18

Employer contributions to the domestic pension and other postretirement benefit plans are expected to be $114 million and $9 million , respectively, during 2012 . As of September 30, 2012 , $111 million and $4 million of contributions had been made to the domestic pension and other postretirement benefit plans, respectively.

Foreign Operations

Net periodic benefit cost for the United Kingdom pension plan included the following components (in millions):



	Three-Month Periods						Nine-Month Periods
	Ended September 30,						Ended September 30,
	2012			2011			2012			2011

Service cost	$	5		$	5		$	15		$	15
Interest cost	21			24			64			70
Expected return on plan assets	(26		)	(29		)	(79		)	(87		)
Net amortization	11			9			33			27
Net periodic benefit cost	$	11		$	9		$	33		$	25

Employer contributions to the United Kingdom pension plan are expected to be £50 million during 2012 . As of September 30, 2012 , £38 million , or $59 million , of contributions had been made to the United Kingdom pension plan.


(9)	Income Taxes

A reconciliation of the federal statutory income tax rate to the effective income tax rate applicable to income before income tax expense is as follows:



	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
	2012		2011		2012		2011

Federal statutory income tax rate	35	%	35	%	35	%	35	%
Federal and state income tax credits	(16	)	(13	)	(13	)	(11	)
State income tax, net of federal income tax benefit	2		2		2		2
Change in United Kingdom corporate income tax rate	(7	)	(9	)	(3	)	(3	)
Income tax effect of foreign income	(3	)	(2	)	(2	)	(2	)
Effects of ratemaking	(2	)	(1	)	(3	)	(1	)
Other, net	—		3		(1	)	1
Effective income tax rate	9	%	15	%	15	%	21	%

Federal and state income tax credits primarily relate to production tax credits at the Utilities. The Utilities' wind-powered generating facilities are eligible for federal renewable electricity production tax credits for 10 years from the date the facilities were placed in service.

In July 2012, the Company recognized $38 million of deferred income tax benefits upon the enactment of a reduction in the United Kingdom corporate income tax rate from 25% to 24% effective April 1, 2012, and a further reduction to 23% effective April 1, 2013. In July 2011, the Company recognized $40 million of deferred income tax benefits upon the enactment of a reduction in the United Kingdom corporate income tax rate from 27% to 26% effective April 1, 2011, and a further reduction to 25% effective April 1, 2012.

Berkshire Hathaway includes the Company in its United States federal income tax return. As of September 30, 2012 , the Company had income taxes payable to Berkshire Hathaway of $341 million and as of December 31, 2011 , the Company had income taxes receivable from Berkshire Hathaway of $456 million .


(10)	Commitments and Contingencies

Legal Matters

The Company is party to a variety of legal actions arising out of the normal course of business. Plaintiffs occasionally seek punitive or exemplary damages. The Company does not believe that such normal and routine litigation will have a material impact on its consolidated financial results. The Company is also involved in other kinds of legal actions, some of which assert or may assert claims or seek to impose fines, penalties and other costs in substantial amounts and are described below.

USA Power

In October 2005, prior to MEHC's ownership of PacifiCorp, PacifiCorp was added as a defendant to a lawsuit originally filed in February 2005 in the Third District Court of Salt Lake County, Utah ("Third District Court") by USA Power, LLC, USA Power Partners, LLC and Spring Canyon Energy, LLC (collectively, the "Plaintiff"). The Plaintiff's complaint alleged that PacifiCorp misappropriated confidential proprietary information in violation of Utah's Uniform Trade Secrets Act and accused PacifiCorp of breach of contract and related claims in regard to the Plaintiff's 2002 and 2003 proposals to build a natural gas-fueled generating facility in Juab County, Utah. In October 2007, the Third District Court granted PacifiCorp's motion for summary judgment on all counts and dismissed the Plaintiff's claims in their entirety. In February 2008, the Plaintiff filed a petition requesting consideration by the Utah Supreme Court on two of its five claims. In May 2010, the Utah Supreme Court remanded the case back to the Third District Court for further consideration, which led to a trial that began in April 2012. On May 21, 2012, the jury reached a verdict in favor of the Plaintiff on both claims. The jury awarded the Plaintiff breach of contract damages of $18 million and unjust enrichment damages of $113 million against PacifiCorp; however, a final judgment has not been rendered on the verdict. On May 24, 2012, the Plaintiff filed a motion seeking exemplary damages. Under the Utah Uniform Trade Secrets law, the judge may award exemplary damages in an additional amount not to exceed twice the original award. The Plaintiff also filed a motion to seek recovery of attorneys' fees in an amount equal to 40% of all amounts ultimately awarded in the case. On October 15, 2012, PacifiCorp filed post-trial motions for a judgment notwithstanding the verdict and a new trial (collectively, "PacifiCorp's post-trial motions"). The trial judge stayed briefing on the Plaintiff's motions, pending resolution of PacifiCorp's post-trial motions. PacifiCorp strongly disagrees with the verdict and will aggressively pursue available options in an effort to vacate or reduce the verdict, including, if necessary, appellate measures. If the judge grants either of PacifiCorp's post-trial motions, then the Plaintiff's motions for exemplary damages and attorneys' fees will be moot. If the judge does not grant either of PacifiCorp's post-trial motions, then the judge will set a schedule for PacifiCorp to respond to the Plaintiff's motions for exemplary damages and attorneys' fees. In the event the judge does not grant either of PacifiCorp's post-trial motions, PacifiCorp expects a decision on the Plaintiff's motions for exemplary damages and attorneys' fees in 2013. PacifiCorp believes there is meritorious basis for such post-trial motions and appeal. PacifiCorp has accrued its estimated liability as of September 30, 2012 , and believes the ultimate outcome of the case will not be material to PacifiCorp's consolidated financial results; however this matter could have a material effect on PacifiCorp's consolidated financial results in the event of an unfavorable outcome. Any payment of damages will be at the end of the appeal process, which could take several years.

Environmental Laws and Regulations

The Company is subject to federal, state, local and foreign laws and regulations regarding air and water quality, renewable portfolio standards, emissions performance standards, climate change, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact the Company's current and future operations. The Company believes it is in material compliance with all applicable laws and regulations.

Hydroelectric Relicensing

PacifiCorp's Klamath hydroelectric system is currently operating under annual licenses with the Federal Energy Regulatory Commission ("FERC"). In February 2010, PacifiCorp, the United States Department of the Interior, the United States Department of Commerce, the State of California, the State of Oregon and various other governmental and non-governmental settlement parties signed the Klamath Hydroelectric Settlement Agreement ("KHSA"). Among other things, the KHSA provides that the United States Department of the Interior conduct scientific and engineering studies to assess whether removal of the Klamath hydroelectric system's mainstem dams is in the public interest and will advance restoration of the Klamath Basin's salmonid fisheries. If it is determined that dam removal should proceed, dam removal is expected to commence no earlier than 2020.

Under the KHSA, PacifiCorp and its customers are protected from uncapped dam removal costs and liabilities. For dam removal to occur, federal legislation consistent with the KHSA must be enacted to provide, among other things, protection for PacifiCorp from all liabilities associated with dam removal activities. If Congress does not enact legislation, then PacifiCorp will resume relicensing with the FERC. In November 2011, bills were introduced in both chambers of the United States Congress that, if passed, would enact the KHSA and a companion agreement that seeks to resolve other water-related conflicts and restore habitat in the Klamath basin.

In addition, the KHSA limits PacifiCorp's contribution to dam removal costs to no more than $200 million , of which up to $184 million would be collected from PacifiCorp's Oregon customers with the remainder to be collected from PacifiCorp's California customers. An additional $250 million for dam removal costs is expected to be raised through a California bond measure or other appropriate State of California financing mechanism. If dam removal costs exceed $200 million and if the State of California is unable to raise the additional funds necessary for dam removal costs, sufficient funds would need to be provided by an entity other than PacifiCorp in order for the KHSA and dam removal to proceed.

PacifiCorp has begun collection of surcharges from Oregon customers for their share of dam removal costs, as approved by the Oregon Public Utility Commission ("OPUC"), and is depositing the proceeds into trust accounts maintained by the OPUC. PacifiCorp has begun collection of surcharges from California customers for their share of dam removal costs, as approved by the California Public Utilities Commission ("CPUC"), and is depositing the proceeds into trust accounts maintained by the CPUC. PacifiCorp is authorized to collect the surcharges through 2019.

As of September 30, 2012 , PacifiCorp's assets included $118 million of costs associated with the Klamath hydroelectric system's mainstem dams and the associated relicensing and settlement costs. PacifiCorp has received approvals from the OPUC, the CPUC and the Wyoming Public Service Commission to depreciate the Klamath hydroelectric system's mainstem dams and the associated relicensing and settlement costs through the expected dam removal date. The depreciation rate changes were effective January 1, 2011 and will allow for full depreciation of the assets by December 2019 for those jurisdictions. PacifiCorp filed for consistent ratemaking treatment in Idaho and Washington general rate cases, which were settled in January 2012 and March 2012, respectively, without a decision on this matter. As part of the September 2012 Utah general rate case order, the Utah Public Service Commission approved recovery of Utah's share of costs associated with the Klamath hydroelectric system's mainstem dams and the associated relicensing and settlement costs through December 31, 2022.

Guarantees

The Company has entered into guarantees as part of the normal course of business and the sale of certain assets. These guarantees are not expected to have a material impact on the Company's consolidated financial results.


(11)	Components of Accumulated Other Comprehensive Loss, Net

The following table shows the change in accumulated other comprehensive loss attributable to MEHC shareholders by each component of other comprehensive income (loss), net of applicable income taxes, for the nine-month period ended September 30, 2012 (in millions):



												Accumulated
							Unrealized					Other
	Unrecognized			Foreign			Gains on			Unrealized		Comprehensive
	Amounts on			Currency			Available-			Gains on		Loss Attributable
	Retirement			Translation			For-Sale			Cash Flow		To MEHC
	Benefits			Adjustment			Securities			Hedges		Shareholders, Net

Balance, December 31, 2011	$	(491	)	$	(307	)	$	142		$	15	$	(641	)
Other comprehensive income (loss)	6			113			(51		)	8		76
Balance, September 30, 2012	$	(485	)	$	(194	)	$	91		$	23	$	(565	)


(12)	Segment Information

Northern Natural Gas and Kern River have been aggregated in the reportable segment called MidAmerican Energy Pipeline Group, and CalEnergy Philippines and MidAmerican Renewables, LLC have been aggregated in the reportable segment called MidAmerican Renewables. Prior year amounts have been changed to conform to the current presentation. The Company's reportable segments with foreign operations include Northern Powergrid Holdings, whose business is principally in Great Britain, and MidAmerican Renewables, whose business includes operations in the Philippines. Intersegment eliminations and adjustments, including the allocation of goodwill, have been made. Information related to the Company's reportable segments is shown below (in millions):



	Three-Month Periods						Nine-Month Periods
	Ended September 30,						Ended September 30,
	2012			2011			2012			2011
Operating revenue:
PacifiCorp	$	1,327		$	1,198		$	3,671		$	3,408
MidAmerican Funding	828			866			2,411			2,650
MidAmerican Energy Pipeline Group	203			202			698			697
Northern Powergrid Holdings	240			237			747			727
MidAmerican Renewables	51			45			112			107
HomeServices	372			285			970			764
MEHC and Other ⁽¹⁾	(13		)	(13		)	(46		)	(43		)
Total operating revenue	$	3,008		$	2,820		$	8,563		$	8,310

Depreciation and amortization:
PacifiCorp	$	164		$	154		$	488		$	465
MidAmerican Funding	107			79			300			248
MidAmerican Energy Pipeline Group	48			44			144			137
Northern Powergrid Holdings	44			42			127			125
MidAmerican Renewables	7			8			22			23
HomeServices	4			3			14			9
MEHC and Other ⁽¹⁾	(3		)	(3		)	(9		)	(10		)
Total depreciation and amortization	$	371		$	327		$	1,086		$	997

Operating income:
PacifiCorp	$	382		$	320		$	917		$	858
MidAmerican Funding	139			148			311			346
MidAmerican Energy Pipeline Group	68			79			322			320
Northern Powergrid Holdings	118			136			406			431
MidAmerican Renewables	34			34			66			67
HomeServices	25			18			49			25
MEHC and Other ⁽¹⁾	(9		)	(7		)	(30		)	(38		)
Total operating income	757			728			2,041			2,009
Interest expense	(298		)	(301		)	(884		)	(907		)
Capitalized interest	15			13			37			31
Interest and dividend income	3			2			8			11
Other, net	35			17			86			63
Total income before income tax expense and equity income	$	512		$	459		$	1,288		$	1,207



	Three-Month Periods				Nine-Month Periods
	Ended September 30,				Ended September 30,
	2012		2011		2012		2011
Interest expense:
PacifiCorp	$	98	$	106	$	294	$	309
MidAmerican Funding	41		45		126		138
MidAmerican Energy Pipeline Group	24		25		70		78
Northern Powergrid Holdings	36		38		103		116
MidAmerican Renewables	21		3		50		13
HomeServices	1		—		1		—
MEHC and Other ⁽¹⁾	77		84		240		253
Total interest expense	$	298	$	301	$	884	$	907



	As of
	September 30,		December 31,
	2012		2011
Total assets:
PacifiCorp	$	22,813	$	22,364
MidAmerican Funding	13,105		12,430
MidAmerican Energy Pipeline Group	5,107		4,854
Northern Powergrid Holdings	6,314		5,690
MidAmerican Renewables	2,089		890
HomeServices	786		649
MEHC and Other ⁽¹⁾	896		841
Total assets	$	51,110	$	47,718


(1)	The remaining differences between the segment amounts and the consolidated amounts described as "MEHC and Other" relate principally to intersegment eliminations for operating revenue and, for the other items presented, to (a) corporate functions, including administrative costs, interest expense, corporate cash and investments and related interest income and (b) intersegment eliminations.

The following table shows the change in the carrying amount of goodwill by reportable segment for the nine-month period ended September 30, 2012 (in millions):



					MidAmerican
					Energy			Northern
			MidAmerican		Pipeline			Powergrid		MidAmerican		Home-
	PacifiCorp		Funding		Group			Holdings		Renewables		Services		Total

Balance, December 31, 2011	$	1,126	$	2,102	$	205		$	1,097	$	71	$	395	$	4,996
Foreign currency translation	—		—		—			33		—		—		33
Other	—		—		(20		)	—		—		24		4
Balance, September 30, 2012	$	1,126	$	2,102	$	185		$	1,130	$	71	$	419	$	5,033


Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is management's discussion and analysis of certain significant factors that have affected the consolidated financial condition and results of operations of the Company during the periods included herein. Explanations include management's best estimate of the impacts of weather, customer growth and other factors. This discussion should be read in conjunction with the Company's historical unaudited Consolidated Financial Statements and Notes to Consolidated Financial Statements in Item 1 of this Form 10-Q. The Company's actual results in the future could differ significantly from the historical results.

The Company's operations are organized and managed as eight distinct platforms: PacifiCorp, MidAmerican Funding (which primarily consists of MidAmerican Energy), Northern Natural Gas, Kern River, Northern Powergrid Holdings (which primarily consists of Northern Powergrid (Northeast) Limited and Northern Powergrid (Yorkshire) plc), CalEnergy Philippines (which owns a majority interest in the Casecnan project in the Philippines), MidAmerican Renewables, LLC (which owns interests in independent power projects in the United States), and HomeServices. Through these platforms, the Company owns and operates an electric utility company in the Western United States, an electric and natural gas utility company in the Midwestern United States, two interstate natural gas pipeline companies in the United States, two electricity distribution companies in Great Britain, a diversified portfolio of independent power projects and the second largest residential real estate brokerage firm in the United States. Northern Natural Gas and Kern River have been aggregated in the reportable segment called MidAmerican Energy Pipeline Group, and CalEnergy Philippines and MidAmerican Renewables, LLC have been aggregated in the reportable segment called MidAmerican Renewables. The reportable segment financial information includes all necessary adjustments and eliminations needed to conform to the Company's significant accounting policies. The differences between the reportable segment amounts and the consolidated amounts, described as "MEHC and Other," relate principally to corporate functions, including administrative costs and intersegment eliminations.

Results of Operations for the Third Quarter and First Nine Months of 2012 and 2011

Overview

Net income attributable to MEHC shareholders for the three-month period ended September 30, 2012, was $488 million, an increase of $76 million, or 18%, compared to 2011. PacifiCorp's net income was $212 million for 2012, an increase of $42 million, or 25%, compared to 2011 as higher retail prices approved by regulators, higher margins from warmer temperatures and lower interest expense were partially offset by the net impact of the Utah rate case settlement in 2011 and higher depreciation and amortization. Net income at MidAmerican Funding was $136 million for 2012, an increase of $32 million, or 31%, compared to 2011 due to income tax benefits from higher production tax credits primarily from additional wind generation placed in service in late 2011 and the effects of ratemaking. Additionally, improvements in regulated electric margins from adjustment clauses and warmer temperatures were more than offset by higher costs associated with the wind assets placed in service. Net income at MidAmerican Energy Pipeline Group was $31 million for 2012, a decrease of $9 million, or 23%, compared to 2011 as higher revenue from Kern River's expansion projects, higher transportation revenue at Northern Natural Gas and a positive litigation settlement were more than offset by higher operating expense and depreciation and lower AFUDC associated with Kern River's expansion projects. Northern Powergrid Holdings' net income was $105 million for 2012, a decrease of $13 million, or 11%, compared to 2011 as higher distribution rates were more than offset by a favorable movement in regulatory provisions in 2011 and higher operating expense. MidAmerican Renewables' net income was $20 million for 2012, a decrease of $18 million, or 47%, compared to 2011 due to lower equity earnings at CE Generation from lower energy rates and higher interest expense related to the Topaz project financing, which was offset by higher equity earnings due to the acquisition of a 49% interest in Agua Caliente in January 2012. HomeServices' net income for 2012 was $18 million, an increase of $5 million, or 38%, compared to 2011 due to higher revenue and margins from higher closed units, partially offset by higher operating expenses. MEHC and Other net loss of $34 million improved $37 million for 2012 compared to 2011 due to the cessation of purchase price pension amortization in 2011, certain income tax benefits and lower interest expense.

Net income attributable to MEHC shareholders for the nine-month period ended September 30, 2012, was $1.145 billion, an increase of $166 million, or 17%, compared to 2011. PacifiCorp's net income was $493 million for 2012, an increase of $67 million, or 16%, compared to 2011 as higher retail prices approved by regulators, higher margins from warmer temperatures, lower interest expense and higher AFUDC were partially offset by higher energy costs, higher operating expense and higher depreciation and amortization. Net income at MidAmerican Funding was $284 million for 2012, an increase of $67 million, or 31%, compared to 2011 due to income tax benefits from higher production tax credits primarily from additional wind-powered generation placed in service in late 2011 and the effects of ratemaking. Additionally, improvements in regulated electric margins, from adjustment clauses and warmer temperatures, and lower interest expense were more than offset by higher costs associated with the wind assets placed in service and lower regulated gas margins. Net income at MidAmerican Energy Pipeline Group was $159 million for 2012, a decrease of $2 million, or 1%, compared to 2011 as higher revenue from Kern River's expansion projects, higher transportation and storage revenue at Northern Natural Gas and a positive litigation settlement were more than offset by higher operating expense and depreciation and lower AFUDC associated with Kern River's expansion projects. Northern Powergrid Holdings' net income was $270 million for 2012, a decrease of $8 million, or 3%, compared to 2011 as higher distribution rates and lower interest expense were more than offset by a favorable movement in regulatory provisions in 2011 and higher operating expense. MidAmerican Renewables' net income was $26 million for 2012, a decrease of $33 million, or 56% compared to 2011 primarily due to higher interest expense related to the Topaz project financing and lower equity earnings at CE Generation from lower energy rates, partially offset by higher equity earnings due to the acquisition of a 49% interest in Agua Caliente in January 2012. HomeServices' net income for 2012 was $38 million, an increase of $18 million, or 90%, compared to 2011 due to higher revenue and margins from higher closed units and average home sale prices, partially offset by higher operating expenses. MEHC and Other net loss of $125 million improved $57 million for 2012 compared to 2011 due to the cessation of purchase price pension amortization in 2011, lower interest expense, certain income tax benefits and higher equity income at ETT.

Reportable Segment Results

Operating revenue and operating income for the Company's reportable segments are summarized as follows (in millions):



	Third Quarter											First Nine Months
	2012			2011			Change					2012			2011			Change
Operating revenue:
PacifiCorp	$	1,327		$	1,198		$	129		11	%	$	3,671		$	3,408		$	263		8	%
MidAmerican Funding	828			866			(38		)	(4	)	2,411			2,650			(239		)	(9	)
MidAmerican Energy Pipeline Group	203			202			1			—		698			697			1			—
Northern Powergrid Holdings	240			237			3			1		747			727			20			3
MidAmerican Renewables	51			45			6			13		112			107			5			5
HomeServices	372			285			87			31		970			764			206			27
MEHC and Other	(13		)	(13		)	—			—		(46		)	(43		)	(3		)	(7	)
Total operating revenue	$	3,008		$	2,820		$	188		7		$	8,563		$	8,310		$	253		3



Operating income:
PacifiCorp	$	382		$	320		$	62		19	%	$	917		$	858		$	59		7	%
MidAmerican Funding	139			148			(9		)	(6	)	311			346			(35		)	(10	)
MidAmerican Energy Pipeline Group	68			79			(11		)	(14	)	322			320			2			1
Northern Powergrid Holdings	118			136			(18		)	(13	)	406			431			(25		)	(6	)
MidAmerican Renewables	34			34			—			—		66			67			(1		)	(1	)
HomeServices	25			18			7			39		49			25			24			96
MEHC and Other	(9		)	(7		)	(2		)	(29	)	(30		)	(38		)	8			21
Total operating income	$	757		$	728		$	29		4		$	2,041		$	2,009		$	32		2

PacifiCorp

Operating revenue increased $129 million for the third quarter of 2012 compared to 2011 due to an increase in retail revenue of $105 million and higher renewable energy credit revenue of $42 million, partially offset by lower electric wholesale revenue of $22 million as a result of lower average prices and volumes. The increase in retail revenue was due to higher prices approved by regulators of $82 million and higher retail customer load totaling $23 million due to the impacts of hot weather in Utah, partially offset by lower industrial customer load in Wyoming and Oregon as certain large customers elected to self-generate their own power. The higher renewable energy credit revenue in 2012 was due to the Utah general rate case settlement in 2011 ("Utah general rate case settlement"), which resulted in a $30 million decrease to operating revenue in 2011. The Utah general rate case settlement provided for a $30 million credit to customers for the refund of renewable energy credit sales that substantially occurred prior to 2011 and that were credited to Utah customer's bills over the period from September 2011 through May 2012 (the "Utah renewable energy credit adjustment").

Operating income increased $62 million for the third quarter of 2012 compared to 2011 due to the higher operating revenue and lower operating expense of $4 million, partially offset by higher energy costs of $61 million and higher depreciation and amortization of $10 million due to higher plant in service. Energy costs increased due to lower deferral of incurred power costs of $54 million and higher net fuel costs of $8 million. The Utah general rate case settlement resulted in lower energy costs of $60 million recognized in 2011 and provided for the recovery of $60 million of previously incurred net power costs in excess of amounts included in base rates to be recovered from Utah customers over a three-year period beginning on June 1, 2012 (the "Utah net power cost recovery adjustment"). The $8 million of higher net fuel costs was due to higher unit coal costs and increased thermal generation, partially offset by lower unit natural gas costs.

Operating revenue increased $263 million for the first nine months of 2012 compared to 2011 due to an increase in retail revenue of $229 million, higher renewable energy credit revenue of $63 million, partially offset by lower electric wholesale revenue of $35 million on lower average prices. The increase in retail revenue was due to higher prices approved by regulators of $191 million and $38 million of higher retail customer load. The increase in customer load is due to the impacts of hot weather in Utah and higher irrigation customer load in Idaho, partially offset by lower industrial customer load in Wyoming and Oregon as certain large customers elected to self-generate their own power and lower residential customer load in Oregon. The Utah general rate case settlement resulted in $50 million of higher renewable energy credit revenue in 2012 as compared to 2011 due to the impact of the Utah renewable energy credit adjustment of $30 million recorded in 2011 and $20 million in amortization of the Utah renewable energy credit adjustment, which was offset in operating revenue through lower rates charged to retail customers.

Operating income increased $59 million for the first nine months of 2012 compared to 2011 due to the higher operating revenue, partially offset by higher energy costs of $156 million, higher operating expense of $24 million and higher depreciation and amortization of $23 million. Energy costs increased due to higher net fuel and purchased electricity costs of $84 million and the impact of the Utah general rate case settlement on deferred power costs of $67 million. The higher net fuel and purchased electricity costs were due to increased thermal generation, higher cost of purchased electricity and the higher unit cost of coal, partially offset by lower unit natural gas costs. The impact of the Utah general rate case settlement on deferred power costs was due to the Utah net power cost recovery adjustment of $60 million recorded in 2011 and $7 million in amortization of the Utah net power cost recovery adjustment, which was offset in operating income through higher rates charged to customers. Operating expense increased due to charges in 2012 related to litigation, damage claims, the impairment of certain pre-construction costs for environmental projects at a coal-fueled generating facility and higher property taxes due to higher plant in service, partially offset by lower thermal generating facility maintenance.

MidAmerican Funding

MidAmerican Funding's operating revenue and operating income are summarized as follows (in millions):



	Third Quarter											First Nine Months
	2012			2011			Change					2012		2011		Change
Operating revenue:
Regulated electric	$	511		$	487		$	24		5	%	$	1,295	$	1,276	$	19		1	%
Regulated natural gas	87			99			(12		)	(12	)	441		562		(121		)	(22	)
Nonregulated and other	230			280			(50		)	(18	)	675		812		(137		)	(17	)
Total operating revenue	$	828		$	866		$	(38	)	(4	)	$	2,411	$	2,650	$	(239	)	(9	)

Operating income:
Regulated electric	$	129		$	133		$	(4	)	(3	)%	$	243	$	248	$	(5	)	(2	)%
Regulated natural gas	(3		)	(1		)	(2		)	*		28		48		(20		)	(42	)
Nonregulated and other	13			16			(3		)	(19	)	40		50		(10		)	(20	)
Total operating income	$	139		$	148		$	(9	)	(6	)	$	311	$	346	$	(35	)	(10	)

* Not meaningful

Regulated electric operating revenue increased $24 million for the third quarter of 2012 compared to 2011 due to higher retail revenue of $28 million, partially offset by lower wholesale and other revenue of $4 million. Retail revenue increased due to new adjustment clauses in Iowa and Illinois totaling $17 million and a 2.5% increase in retail customer load as a result of abnormally hot weather in 2012 and customer growth. Wholesale and other revenue were lower as volumes decreased 7.0%.

Regulated electric operating income decreased $4 million for the third quarter of 2012 compared to 2011 as the higher revenue and lower energy costs of $11 million were more than offset by higher depreciation of $27 million and operating costs of $10 million due to additional wind-powered generation placed in service in late 2011 and higher revenue sharing of $7 million included in depreciation and amortization. Energy costs decreased due to lower purchased power prices and volumes, lower coal generation and the additional wind-powered generation.

Regulated natural gas operating revenue decreased $12 million for the third quarter of 2012 compared to 2011 due to a lower average per-unit cost of gas sold, resulting in lower cost of sales. Regulated natural gas operating income decreased $2 million for the third quarter of 2012 compared to 2011 due to higher operating expense.

Nonregulated and other operating revenue decreased $50 million for the third quarter of 2012 compared to 2011 due to lower electricity prices and volumes and lower natural gas prices, partially offset by higher natural gas volumes. Nonregulated and other operating income decreased $3 million for the third quarter of 2012 compared to 2011 due to lower electric margins.

Regulated electric operating revenue increased $19 million for the first nine months of 2012 compared to 2011 due to higher retail revenue of $37 million, partially offset by lower wholesale and other revenue of $18 million. Retail revenue increased due to new adjustment clauses in Iowa and Illinois totaling $30 million and a 0.5% increase in retail customer load as a result of abnormally hot weather. Wholesale and other revenue was lower due to an 8.7% decrease in average market prices.

Regulated operating income decreased $5 million for the first nine months of 2012 compared to 2011 as the higher revenue and lower energy costs of $38 million were more than offset by higher depreciation of $51 million and operating costs of $11 million due to additional wind-powered generation placed in service in late 2011 and higher revenue sharing of $16 million included in depreciation and amortization. Energy costs decreased due to lower purchased power prices and volumes, the additional wind-powered generation and lower coal generation.

Regulated natural gas operating revenue decreased $121 million for the first nine months of 2012 compared to 2011 due to a lower average per-unit cost of gas sold, resulting in lower cost of sales, and lower volumes from unseasonably warm weather. Regulated natural gas operating income decreased $20 million for the first nine months of 2012 compared to 2011 due to lower volume-related gas margins as a result of unseasonably warm winter and spring temperatures and other usage factors.

Nonregulated and other operating revenue decreased $137 million for the first nine months of 2012 compared to 2011 due to lower electricity and natural gas prices and volumes. Nonregulated and other operating income decreased $10 million for the first nine months of 2012 compared to 2011 due to lower electric margins.

MidAmerican Energy Pipeline Group

Operating revenue increased $1 million for the third quarter of 2012 compared to 2011 due to higher revenue from increased capacity from Kern River's expansion projects of $10 million and higher transportation revenue at Northern Natural Gas of $5 million due to higher Field Area volumes and rates, partially offset by lower sales of gas and condensate liquids totaling $9 million on lower volumes, which are offset in cost of sales. Operating income decreased $11 million for the third quarter of 2012 compared to 2011 as the higher revenue at Kern River and the higher transportation revenue at Northern Natural Gas were more than offset by higher operating expense and depreciation.

Operating revenue increased $1 million for the first nine months of 2012 compared to 2011 as higher revenue from Kern River's expansion projects of $27 million and higher Field Area transportation and storage rates of $5 million at Northern Natural Gas were partially offset by lower sales of gas and condensate liquids of $23 million on lower volumes, which are offset in cost of sales, and contract expirations with capacity sold at lower rates at Kern River. Operating income increased $2 million for the first nine months of 2012 compared to 2011 due to the higher revenue at Kern River and the higher Field Area transportation and storage rates at Northern Natural Gas, partially offset by higher operating expense and depreciation.

Northern Powergrid Holdings

Operating revenue increased $3 million for the third quarter of 2012 compared to 2011 due to higher distribution revenue of $5 million and higher contracting revenue of $3 million, partially offset by the stronger United States dollar totaling $5 million. Distribution revenue increased due to higher tariff rates of $17 million, partially offset by a favorable movement in regulatory provisions in 2011 of $9 million and lower units distributed. Operating income decreased $18 million for the third quarter of 2012 compared to 2011 as the higher distribution revenue was more than offset by higher pension expense of $11 million and higher distribution operating expense of $8 million.

Operating revenue increased $20 million for the first nine months of 2012 compared to 2011 due to higher distribution revenue of $36 million, partially offset by the stronger United States dollar totaling $17 million. Distribution revenue increased due to higher tariff rates of $67 million, partially offset by a favorable movement in regulatory provisions in 2011 of $29 million and lower units distributed. Operating income decreased $25 million for the first nine months of 2012 compared to 2011 as the higher distribution revenue was more than offset by higher pension expense of $33 million, higher distribution operating expense of $18 million and the stronger United States dollar of $9 million.

MidAmerican Renewables

Operating revenue increased $6 million for the third quarter of 2012 compared to 2011 and $5 million for first nine months of 2012 compared to 2011 due to higher variable energy fees earned in 2012 from higher rainfall at the Casecnan project. Operating income was flat for the third quarter and decreased $1 million for first nine months of 2012 compared to 2011 as the higher revenue was offset by higher project evaluation and acquisition costs.

HomeServices

Operating revenue increased $87 million for the third quarter of 2012 compared to 2011 due to an increase from existing businesses totaling $46 million, reflecting a 13.1% increase in closed brokerage units and a 2.7% increase in average home sale prices, and $41 million of revenue from acquired companies. Operating income increased $7 million for the third quarter of 2012 compared to 2011 due to the higher operating revenue, net of commissions, partially offset by higher operating expense at both acquired and existing businesses.

Operating revenue increased $206 million for the first nine months of 2012 compared to 2011 due to an increase from existing businesses totaling $124 million reflecting a 15.4% increase in closed brokerage units and $82 million of revenue from acquired companies. Operating income increased $24 million for the first nine months of 2012 compared to 2011 due to the higher operating revenue, net of commissions, partially offset by higher operating expense of $35 million at both acquired and existing businesses and higher depreciation and amortization at acquired businesses.

MEHC and Other

Operating loss increased $2 million for the third quarter of 2012 compared to 2011 as higher compensation expense was partially offset by the cessation of purchase price pension amortization in 2011.

Operating loss improved by $8 million for the first nine months of 2012 compared to 2011 due to the cessation of purchase price amortization in 2011, partially offset by higher compensation expense.

Consolidated Other Income and Expense Items

Interest Expense

Interest expense is summarized as follows (in millions):



	Third Quarter									First Nine Months
	2012		2011		Change					2012		2011		Change

Subsidiary debt	$	220	$	213	$	7		3	%	$	640	$	638	$	2		—	%
MEHC senior debt and other	78		81		(3		)	(4	)	244		246		(2		)	(1	)
MEHC subordinated debt - Berkshire Hathaway	—		3		(3		)	(100	)	—		12		(12		)	(100	)
MEHC subordinated debt - other	—		4		(4		)	(100	)	—		11		(11		)	(100	)
Total interest expense	$	298	$	301	$	(3	)	(1	)	$	884	$	907	$	(23	)	(3	)

Interest expense decreased $3 million for the third quarter of 2012 compared to 2011 and $23 million for the first nine months of 2012 compared to 2011 due to scheduled maturities and early principal repayments, partially offset by the debt issuances and refinancings at PacifiCorp ($400 million in May 2011, $650 million in January 2012 and $100 million in March 2012), MidAmerican Energy Pipeline Group ($200 million in April 2011 and $250 million in August 2012), Northern Powergrid Holdings (£150 million in July 2012) and MidAmerican Renewables ($850 million in February 2012 and $120 million in August 2012).

Capitalized Interest

Capitalized interest increased $2 million for the third quarter of 2012 compared to 2011 and $6 million for the first nine months of 2012 compared to 2011 due to higher construction in progress balances at Topaz and PacifiCorp, partially offset by lower construction in progress balances at MidAmerican Energy Pipeline Group and MidAmerican Energy.

Other, Net

Other, net increased $18 million for the third quarter of 2012 compared to 2011 and $23 million for the first nine months of 2012 compared to 2011 due to better investment performance and a positive litigation settlement at MidAmerican Energy Pipeline Group.

Income Tax Expense

Income tax expense decreased $21 million for the third quarter of 2012 compared to 2011 and the effective tax rates were 9% for the third quarter of 2012 and 15% for the third quarter of 2011. The decrease in the effective tax rate was due to $25 million of higher income tax benefits related to additional production tax credits at MidAmerican Energy primarily due to wind-powered generation placed in service in late 2011 and the effects of ratemaking.

Income tax expense decreased $67 million for the first nine months of 2012 compared to 2011 and the effective tax rates were 15% for the first nine months of 2012 and 21% for the first nine months of 2011. The decrease in the effective tax rate was due to $45 million of higher income tax benefits related to additional production tax credits at MidAmerican Energy primarily due to wind-powered generation placed in service in late 2011, the effects of ratemaking and the method change for repairs deductions.

Equity Income

Equity income increased $2 million for the third quarter of 2012 compared to 2011 and $19 million for the first nine months of 2012 compared to 2011 due to the acquisition of a 49% interest in Agua Caliente in January 2012 and higher earnings at ETT due to continued investment, partially offset by lower earnings at CE Generation on lower energy rates at the Imperial Valley Projects. Equity income increased for the first nine months of 2012 compared to 2011 due to the reasons stated above, as well as higher earnings at HomeServices' mortgage joint venture due to higher refinancing activity.

Liquidity and Capital Resources

Each of MEHC's direct and indirect subsidiaries is organized as a legal entity separate and apart from MEHC and its other subsidiaries. It should not be assumed that the assets of any subsidiary will be available to satisfy MEHC's obligations or the obligations of its other subsidiaries. However, unrestricted cash or other assets that are available for distribution may, subject to applicable law, regulatory commitments and the terms of financing and ring-fencing arrangements for such parties, be advanced, loaned, paid as dividends or otherwise distributed or contributed to MEHC or affiliates thereof. The long-term debt of subsidiaries may include provisions that allow MEHC's subsidiaries to redeem it in whole or in part at any time. These provisions generally include make-whole premiums. Refer to Note 17 of Notes to Consolidated Financial Statements in Item 8 of the Company's Annual Report on Form 10-K for further discussion regarding the limitation of distributions from MEHC's subsidiaries.

As of September 30, 2012 , the Company's total net liquidity was $6.038 billion and the components are as follows (in millions):



										Northern
							MidAmerican			Powergrid
	MEHC			PacifiCorp			Funding			Holdings			Other			Total

Cash and cash equivalents	$	603		$	175		$	375		$	164		$	543		$	1,860

Credit facilities ⁽¹⁾	1,079			1,230			539			242			95			3,185
Less:
Short-term debt	(140		)	—			—			—			(38		)	(178		)
Tax-exempt bond support and letters of credit	(32		)	(602		)	(195		)	—			—			(829		)
Net credit facilities	907			628			344			242			57			2,178

Net liquidity before Berkshire Equity Commitment	1,510			$	803		$	719		$	406		$	600		4,038
Berkshire Equity Commitment ⁽²⁾	2,000															2,000
Total net liquidity	$	3,510														$	6,038
Credit facilities:
Maturity date	2013, 2017			2013, 2017			2013			2017			2012, 2013
Largest single bank commitment as a % of total credit facilities ⁽³⁾	13		%	14		%	28		%	33		%	53		%


(1)	For further discussion regarding the Company's credit facilities, refer to Note 7 of Notes to Consolidated Financial Statements in Item 1 of this Form 10-Q.

(2)

MEHC has an Equity Commitment Agreement with Berkshire Hathaway (the "Berkshire Equity Commitment") pursuant to which Berkshire Hathaway has agreed to purchase up to $2.0 billion of MEHC's common equity upon any requests authorized from time to time by MEHC's Board of Directors. The proceeds of any such equity contribution shall only be used for the purpose of (a) paying when due MEHC's debt obligations and (b) funding the general corporate purposes and capital requirements of MEHC's regulated subsidiaries. The Berkshire Equity Commitment expires on February 28, 2014.


(3)	An inability of financial institutions to honor their commitments could adversely affect the Company's short-term liquidity and ability to meet long-term commitments.

The above table does not include unused credit facilities and letters of credit for investments that are accounted for under the equity method.

Operating Activities

Net cash flows from operating activities for the nine-month periods ended September 30, 2012 and 2011 were $3.682 billion and $2.717 billion , respectively. The increase was primarily due to higher income tax receipts of $667 million from bonus depreciation, investment tax credits related to renewable projects and production tax credits from additional wind generation placed in service; improved operating results; lower interest payments; benefits from changes in collateral posted for derivative contracts; lower domestic employee benefit plan contributions; and other changes in working capital.

Investing Activities

Net cash flows from investing activities for the nine-month periods ended September 30, 2012 and 2011 were $(2.817) billion and $(1.993) billion , respectively. The change was primarily due to higher capital expenditures, the acquisitions of Topaz and Bishop Hill, and equity contributions to Agua Caliente.

Capital Expenditures

Capital expenditures, which exclude amounts for non-cash equity AFUDC and other non-cash items, by reportable segment for the nine-month periods ended September 30 are summarized as follows (in millions):



	2012		2011
Capital expenditures:
PacifiCorp	$	1,037	$	1,069
MidAmerican Funding	445		398
MidAmerican Energy Pipeline Group	112		218
Northern Powergrid Holdings	310		219
MidAmerican Renewables	439		1
Other	6		7
Total capital expenditures	$	2,349	$	1,912

The Company's capital expenditures relate primarily to the Utilities and consisted mainly of the following for the nine-month periods ended September 30 :

2012 :

•

Transmission system investments totaling $262 million, including construction costs for PacifiCorp's 100-mile high-voltage transmission line being built between the Mona substation in central Utah and the Oquirrh substation in the Salt Lake Valley. A 65-mile segment of the Mona-Oquirrh transmission project will be a single-circuit 500-kV transmission line, while the remaining 35-mile segment will be a double-circuit 345-kV transmission line. The transmission line is expected to be placed in service in 2013.


•	Emissions control equipment on existing generating facilities totaling $196 million for installation or upgrade of sulfur dioxide scrubbers, low nitrogen oxide burners and particulate matter control systems.


•	The development and construction of PacifiCorp's Lake Side 2 637-MW combined-cycle combustion turbine natural gas-fueled generating facility ("Lake Side 2") totaling $177 million, which is expected to be placed in service in 2014.


•	The construction of MidAmerican Energy's 407 MW of wind-powered generating facilities totaling $121 million, excluding $306 million of costs for which payments are due in December 2015. MidAmerican Energy placed in service 214 MW during the third quarter of 2012, and the remaining 193 MW are expected to be placed in service during the fourth quarter of 2012.


•	Distribution, generation, mining and other infrastructure needed to serve existing and expected demand totaling $726 million.

2011 :


•	The construction of MidAmerican Energy's 594 MW of wind-powered generating facilities totaling $182 million, excluding $376 million of costs for which payments are due in December 2013. The wind-powered generating facilities were placed in service in 2011.


•	Emissions control equipment on existing generating facilities totaling $170 million for installation or upgrade of sulfur dioxide scrubbers, low nitrogen oxide burners and particulate matter control systems.


•	Transmission system investments totaling $167 million, including permitting and right-of-way costs for PacifiCorp's Mona-Oquirrh substation and transmission project.


•	The development and construction of Lake Side 2 totaling $123 million.


•	Distribution, generation, mining and other infrastructure needed to serve existing and expected demand totaling $825 million.

Additionally, capital expenditures for the nine-month period ended September 30, 2012 include costs related to MidAmerican Renewables totaling $439 million related to the Topaz and Bishop Hill Projects. Capital expenditures for the nine-month period ended September 30, 2011 include costs related to Kern River's expansion projects totaling $162 million. The r emaining amounts are for ongoing investments in distribution and other infrastructure needed at the other platforms to serve existing and expected demand.

Financing Activities

Net cash flows from financing activities for the nine-month period ended September 30, 2012 was $704 million . Sources of cash totaled $2.199 billion related to proceeds from subsidiary debt. Uses of cash totaled $1.495 billion and consisted mainly of net repayments of short-term debt totaling $715 million, repayments of subsidiary debt totaling $450 million and repayments of MEHC senior and subordinated debt totaling $272 million. For the nine-month period ended September 30, 2012 , subsidiary debt issuances included the following:

•

In January 2012, PacifiCorp issued $350 million of its 2.95% First Mortgage Bonds due February 1, 2022 and $300 million of its 4.10% First Mortgage Bonds due February 1, 2042. The net proceeds were used to repay short-term debt, fund capital expenditures and for general corporate purposes. In March 2012, PacifiCorp issued an additional $100 million of its 2.95% First Mortgage Bonds due February 1, 2022. The net proceeds were used to redeem $84 million of tax-exempt bond obligations prior to scheduled maturity with a weighted average interest rate of 5.7%, to repay short-term debt and for general corporate purposes.

•

In February 2012, Topaz issued $850 million of the 5.75% Series A Senior Secured Notes. The principal of the notes amortize beginning September 2015 with a final maturity in September 2039. The net proceeds will be used to fund the costs and expenses related to the development, construction and financing of the Topaz Project. Any unused amounts will be invested or, in certain circumstances, loaned to MEHC. As of June 30, 2012, $421 million was loaned to MEHC.


•	In July 2012, Northern Powergrid (Yorkshire) plc issued £150 million of its 4.375% Bonds due July 2032. The net proceeds will be used for general corporate purposes.


•	In August 2012, Northern Natural Gas issued $250 million of its 4.10% Senior Bonds due September 2042. The net proceeds were used to partially repay its $300 million, 5.375% Senior Notes due October 2012.


•	In August 2012, Bishop Hill issued $120 million of its 5.125% Senior Secured Fixed Rate Notes. The principal of the notes amortize beginning March 2013 with a final maturity in March 2032. The net proceeds will be used to fund the costs and expenses related to the development, construction and financing of the Bishop Hill Project.

In conjunction with the construction of wind-powered generating facilities in 2012, MidAmerican Energy has accrued as construction work-in-progress amounts it is not contractually obligated to pay until December 2015. The amounts ultimately payable are discounted at 1.43% and recognized upon delivery of the equipment as long-term debt. The discount is being amortized as interest expense over the period until payment is due using the effective interest method. As of September 30, 2012 , $306 million of such debt from the 2012 wind-powered generation projects, net of associated discount, was outstanding.

Net cash flows from financing activities for the nine-month period ended September 30, 2011 was $(289) million . Uses of cash totaled $1.079 billion and consisted mainly of $601 million for repayments of subsidiary debt, net repayments of short-term debt totaling $320 million and repayments of MEHC subordinated debt totaling $122 million. Sources of cash totaled $790 million related to proceeds from subsidiary debt.

Future Uses of Cash

The Company has available a variety of sources of liquidity and capital resources, both internal and external, including net cash flows from operating activities, public and private debt offerings, the issuance of commercial paper, the use of unsecured revolving credit facilities, the issuance of equity and other sources. These sources are expected to provide funds required for current operations, capital expenditures, acquisitions, investments, debt retirements and other capital requirements. The availability and terms under which each subsidiary has access to external financing depends on a variety of factors, including its credit ratings, investors' judgment of risk and conditions in the overall capital market, including the condition of the utility industry and non-recourse project finance market, among other items. Additionally, MEHC has the Berkshire Equity Commitment pursuant to which Berkshire Hathaway has agreed to purchase up to $2.0 billion of MEHC's common equity upon any requests authorized from time to time by MEHC's Board of Directors. The Berkshire Equity Commitment expires on February 28, 2014 and may only be used for the purpose of (a) paying when due MEHC's debt obligations and (b) funding the general corporate purposes and capital requirements of MEHC's regulated subsidiaries. Berkshire Hathaway will have up to 180 days to fund any such request in increments of at least $250 million pursuant to one or more drawings authorized by MEHC's Board of Directors. The funding of any such drawing will be made by means of a cash equity contribution to MEHC in exchange for additional shares of MEHC's common stock.

Capital Expenditures

The Company has significant future capital requirements. Capital expenditure needs are reviewed regularly by management and may change significantly as a result of these reviews, which may consider, among other factors, changes in rules and regulations, including environmental and nuclear; outcomes of regulatory proceedings; changes in income tax laws; general business conditions; load projections; system reliability standards; the cost and efficiency of construction labor, equipment and materials; and the cost and availability of capital. Prudently incurred expenditures for compliance-related items, such as pollution-control technologies, replacement generation, nuclear decommissioning, hydroelectric relicensing, hydroelectric decommissioning and associated operating costs are generally incorporated into MEHC's energy subsidiaries' regulated retail rates.

Forecasted capital expenditures, which exclude amounts for non-cash equity AFUDC and other non-cash items, are approximately $3.3 billion for 2012 and consist mainly of large scale projects at the Utilities and MidAmerican Renewables, including the following:


•	$632 million for the Topaz Project, which is a 550-MW solar project in California that will be completed in 22 blocks through 2015, with an aggregate tested capacity of 586 MW. The Topaz Project expects to place 45 MW in service in 2012.


•	$344 million for transmission system investments, including $262 million for the Energy Gateway Transmission Expansion Program, which includes construction costs for the Mona-Oquirrh transmission line.


•	$264 million for emissions control equipment at the Utilities, which includes equipment to meet air quality and visibility targets, including the reduction of sulfur dioxide, nitrogen oxides and particulate matter emissions. This estimate includes the installation of new or the replacement of existing emissions control equipment at several of the Utilities' coal-fueled generating facilities.


•	$230 million for development and construction of Lake Side 2, which is expected to be placed in service in 2014.


•	$197 million for 407 MW (nominal ratings) of wind-powered generation at MidAmerican Energy, excluding approximately $400 million of payments deferred until December 2015. MidAmerican Energy placed in service 214 MW during the third quarter of 2012, and the remaining 193 MW are expected to be placed in service during the fourth quarter of 2012.


•	$150 million of 81-MW wind-powered generation at the Bishop Hill Project in Illinois that is expected to be placed in service in 2012. In March 2012, MEHC, through a wholly-owned subsidiary, acquired the Bishop Hill Project from Invenergy Wind LLC.

Remaining amounts are for ongoing investments in distribution, generation, mining and other infrastructure needed to serve existing and expected demand.

Equity Investments

Agua Caliente, a company owned 51% by NRG Energy, Inc. and 49% by an indirect subsidiary of MEHC, is constructing the 290-MW Agua Caliente Project in Arizona that will be completed in 12 blocks through 2014. Pursuant to an equity funding and contribution agreement, MEHC has committed to provide Agua Caliente with funding for (a) base equity contributions of up to an aggregate amount of $303 million for the construction of the Agua Caliente Project and (b) transmission upgrade costs. MEHC expects to make equity contributions to Agua Caliente during 2012 of $279 million. The equity funding and contribution agreement and the letter of credit commitment decreases as equity is contributed to the Agua Caliente Project. As of September 30, 2012 , the balance of the commitment was $169 million .

Contractual Obligations

As of September 30, 2012 , there have been no material changes outside the normal course of business in contractual obligations from the information provided in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2011 other than the 2012 debt issuances previously discussed and MidAmerican Energy's redemption of $275 million of its 5.125% senior notes due January 2013. Additionally, refer to the "Capital Expenditures" discussion included in "Liquidity and Capital Resources."

In April 2012, MidAmerican Energy entered into a multi-year coal transportation agreement with BNSF Railway Company, an affiliate of the Company, for long-haul delivery of coal to MidAmerican Energy's generating facilities that are not "captive" to a single railroad. The new contract will provide delivery for the majority of the coal anticipated to be delivered to MidAmerican Energy-operated coal-fueled generating facilities beginning January 1, 2013. While prices for this rail service are significantly higher than those contained in MidAmerican Energy's legacy long-haul rail contract, which expires December 31, 2012, the BNSF Railway Company proposal was the lowest cost and best overall bid.

Regulatory Matters

MEHC's regulated subsidiaries and certain affiliates are subject to comprehensive regulation. The discussion below contains material developments to those matters disclosed in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2011 .

PacifiCorp

Utah

In February 2012, PacifiCorp filed a general rate case with the UPSC requesting a rate increase of $172 million, or an average price increase of 10%. In July 2012, PacifiCorp filed rebuttal testimony that reduced the requested increase to $156 million, or an average price increase of 9%. In September 2012, the UPSC approved a multi-year settlement that provides for an annual increase of $100 million, or an average price increase of 6%, effective October 2012, to be followed by an additional annual increase of $54 million, or an average price increase of 3%, effective September 2013. As part of the general rate case settlement, PacifiCorp indicated that it anticipates retiring the 172-MW Carbon coal-fueled generating facility ("Carbon Facility") in early 2015. Refer to "Environmental Laws and Regulations" for a further discussion regarding the Carbon Facility. The settlement authorizes PacifiCorp to recover the remaining depreciation expense and decommissioning costs for the early retirement of the Carbon Facility through 2020, which is the end of the depreciation life previously used for setting rates in Utah.

In March 2012, PacifiCorp filed its first annual energy balancing account with the UPSC requesting: (a) $9 million for recovery of 70% of the net power costs in excess of amounts included in base rates for the period October 1, 2011 through December 31, 2011 and (b) collection of $20 million of excess net power costs representing the first annual installment of the $60 million of excess net power costs approved for recovery in the September 2011 general rate case settlement. Collection of the $20 million installment began in June 2012. The $9 million is under review and a schedule has been established to receive approval from the UPSC by early 2013 on the final amount to be recovered.

In March 2012, PacifiCorp filed with the UPSC to return $4 million to customers through the REC balancing account. The new rates were effective June 2012 on an interim basis until a final order is issued by the UPSC.

Oregon

In February 2012, PacifiCorp made its initial filing for the annual Transition Adjustment Mechanism with the OPUC for an annual increase of $10 million, or an average price increase of 1%, to recover the anticipated net power costs forecasted for calendar year 2013. In July 2012, PacifiCorp filed updated net power costs reducing the requested increase to $3 million, or an average price increase of less than 1%. The filing will be subject to updates through November 2012 and the new rates will be effective January 2013.

In March 2012, PacifiCorp filed a general rate case with the OPUC requesting an annual increase of $41 million, or an average price increase of 3%. In July 2012, a multiparty partial stipulation was filed with the OPUC resolving most components of the general rate case, including PacifiCorp's requests to include in rates the accelerated depreciation and decommissioning costs for the early retirement of the Carbon Facility. The stipulation provides for an annual increase of $24 million, or an average price increase of 2%. If the stipulation is approved by the OPUC, the new rates will be effective January 2013. The issues that were not settled in the stipulation include the prudence of PacifiCorp's investments in environmental controls at its thermal generating facilities, PacifiCorp's request for a power cost adjustment mechanism and PacifiCorp's proposal to add the Mona-Oquirrh transmission line to its rate base through a separate tariff rider when the line goes into service in 2013. A hearing on the issues not resolved through the stipulation was held in October 2012. Post-hearing briefs and oral arguments are scheduled for November 2012 with a decision from the OPUC expected in December 2012.

Wyoming

In December 2011, PacifiCorp filed a general rate case with the WPSC requesting an annual increase of $63 million, or an average price increase of 10%, for which the outcome is described below.

In March 2012, PacifiCorp made its first annual Wyoming energy cost adjustment mechanism ("ECAM") filing with the WPSC. The filing requested recovery of $29 million, or an average price increase of 5%, for deferred net power costs for the period December 1, 2010 to December 31, 2011. The new rates were effective May 2012 on an interim basis and were revised in July 2012 in anticipation of the general rate case stipulation described below.

In July 2012, the WPSC approved a stipulation that consolidated and resolved the December 2011 general rate case and the March 2012 ECAM filing. The stipulation resulted in a $50 million general rate increase that will be effective in two stages. The first increase of $32 million, or an average price increase of 5%, was effective in October 2012 and the second increase of $18 million, or an average price increase of 3%, will be effective in October 2013. The stipulation also resulted in a reduction of the ECAM surcharge rate increase from $29 million to $27 million and the increase will be collected over three years. The stipulation authorizes PacifiCorp to recover the remaining depreciation expense and decommissioning costs for the early retirement of the Carbon Facility through 2020, which is the end of the depreciation life previously used for setting rates in Wyoming. In addition, PacifiCorp agreed not to file another general rate case in Wyoming prior to March 2014 with the new rates to be effective no earlier than January 2015. PacifiCorp will continue to file its required annual ECAM filings.

In March 2012, PacifiCorp filed its first annual Wyoming REC and Sulfur Dioxide Revenue Adjustment Mechanism ("RRA") application with the WPSC. The RRA tracks the difference between PacifiCorp's actual revenues from the sale of RECs and sulfur dioxide allowances and the amounts credited to customers in current rates. The filing requested a $1 million reduction in the surcredit to $15 million. The new surcredit became effective in May 2012 on an interim basis. In September 2012, the WPSC approved the RRA on a permanent basis with no change to the previously approved interim rate.

In September 2011, PacifiCorp filed with the WPSC an application for a certificate of public convenience and necessity ("CPCN") for pollution control facilities at Naughton Unit No. 3 in Wyoming. In April 2012, PacifiCorp filed testimony modifying its original CPCN application to reflect its current plan to convert the Naughton Unit No. 3 to a natural gas-fueled unit as a result of PacifiCorp's current estimation that conversion is the least cost alternative for meeting air quality and visibility requirements and is in the best interest of customers. In May 2012, PacifiCorp filed a motion to withdraw the CPCN application, which was approved by the WPSC.

Washington

In May 2010, PacifiCorp filed a general rate case with the WUTC requesting an annual increase of $57 million, or an average price increase of 21%. In November 2010, the requested annual increase was reduced to $49 million, or an average price increase of 18%. In March 2011, the WUTC issued an order and clarification letter approving an annual increase of $33 million, or an average price increase of 12%, reduced in the first year by a customer bill credit of $5 million, or 2%, related to the sale of RECs expected during the twelve-month period ended March 31, 2012, as well as requiring PacifiCorp to submit additional information to the WUTC regarding the sales of RECs. The new rates were effective in April 2011. Although both PacifiCorp and the WUTC staff filed petitions for reconsideration of various items in the order, the WUTC denied the petitions for reconsideration. In May 2011, PacifiCorp submitted to the WUTC the additional information required by the March 2011 order regarding PacifiCorp's proceeds from sales of RECs for the period January 1, 2009 forward and a detailed proposal for a tracking mechanism for proceeds of RECs. Intervening parties and WUTC staff proposed that PacifiCorp refund to customers the amount of REC sales in excess of the amount included in base rates since January 1, 2009. Initial and reply briefs from all parties were filed in November 2011. Oral arguments were held before the WUTC in January 2012. In August 2012, the WUTC issued an order requiring PacifiCorp to credit to its customers all proceeds from the sale of RECs attributable to Washington that were booked on or after January 1, 2009, less any amounts already credited to customers. In September 2012, PacifiCorp filed a petition for reconsideration and a petition requesting a stay of the effectiveness of the order. In October 2012, PacifiCorp filed a reply to the intervening parties' and WUTC staff's answers to PacifiCorp's petitions. The WUTC indicated it will act on PacifiCorp's petitions by December 31, 2012. Also in October 2012, PacifiCorp submitted a compliance filing with the WUTC presenting Washington-allocated actual and projected REC sales proceeds from April 2011 through December 2012 and the amount of rate credits provided to customers for the same period.

In July 2011, PacifiCorp filed a general rate case with the WUTC requesting an annual increase of $13 million, or an average price increase of 4%, with an effective date no later than June 1, 2012. In February 2012, the parties to the proceeding filed a settlement agreement with the WUTC reflecting an annual increase of $5 million, or an average price increase of 2%. In March 2012, the WUTC approved the settlement agreement with an effective date of June 2012.

Idaho

In February 2012, PacifiCorp filed an ECAM application with the IPUC requesting recovery of $18 million in deferred net power costs with a $3 million increase to the current ECAM surcharge rate. In March 2012, the IPUC approved the new rates with an effective date of April 2012. In April 2012, Monsanto Company filed a motion for reconsideration of the IPUC order. As a result, the IPUC ordered a workshop to discuss certain aspects of PacifiCorp's ECAM application. In June 2012, the parties filed final comments with the IPUC supporting an increase to the current ECAM surcharge rate that will result in recovery of $18 million in deferred net power costs. In July 2012, the IPUC issued a final order approving the agreement reached by the parties.

MidAmerican Energy

On February 21, 2012, MidAmerican Energy filed an application with the IUB for an interim and final increase in Iowa retail electric rates in the form of two adjustment clauses to be added to customers' bills. The requested adjustment clauses and a modification to current revenue sharing provisions are consistent with a November 2011 settlement agreement between MidAmerican Energy and the Iowa Office of Consumer Advocate ("OCA"), in which the parties agreed to support the proposed changes. The adjustment clauses would recover anticipated increases in retail coal and coal transportation costs and environmental control expenditures subject to an aggregate maximum of $39 million, or 3.4%, for 2012 and an additional $37 million for an aggregate maximum of $76 million for 2013, or a 3.2% increase from 2012. The requested modification to the existing revenue sharing provisions provides for MidAmerican Energy to share with its customers 20% of revenue associated with Iowa electric returns on equity between 10% and 10.5%, 50% of revenue associated with Iowa electric returns on equity between 10.5% and 11.75%, 75% of revenue associated with Iowa electric returns on equity between 11.75% and 13.0% and 83.3% of revenue associated with Iowa electric returns on equity above 13.0%. Such shared amounts would reduce MidAmerican Energy's investment in the Walter Scott, Jr. Energy Center Unit 4. Pursuant to the settlement agreement, MidAmerican Energy is not precluded from seeking interim rate relief in 2013. MidAmerican Energy implemented the adjustment clauses on an interim basis in March 2012. On July 27, 2012, MidAmerican Energy, the OCA and a group of large industrial customers jointly filed a new settlement agreement with the IUB that resolved all issues surrounding the Iowa proceeding. This settlement agreement consolidated the two proposed adjustment clauses into a single clause with a fixed revenue increase of $39 million in 2012 and an additional $37 million in 2013. The new settlement agreement contained the same revenue sharing provisions as the November 2011 settlement agreement. On October 8, 2012, the IUB issued an order approving the July 27, 2012 settlement agreement.

Environmental Laws and Regulations

The Company is subject to federal, state, local and foreign laws and regulations regarding air and water quality, RPS, emissions performance standards, climate change, coal combustion byproduct disposal, hazardous and solid waste disposal, protected species and other environmental matters that have the potential to impact the Company's current and future operations. In addition to imposing continuing compliance obligations, these laws and regulations provide regulators with the authority to levy substantial penalties for noncompliance including fines, injunctive relief and other sanctions. These laws and regulations are administered by the EPA and various other state, local and international agencies. All such laws and regulations are subject to a range of interpretation, which may ultimately be resolved by the courts. Environmental laws and regulations continue to evolve, and the Company is unable to predict the impact of the changing laws and regulations on its operations and consolidated financial results. The Company believes it is in material compliance with all applicable laws and regulations. Refer to "Liquidity and Capital Resources" for discussion of the Company's forecasted environmental-related capital expenditures. The discussion below contains material developments to those matters disclosed in Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2011 .

Clean Air Standards

National Ambient Air Quality Standards

In June 2012, the EPA released a proposal to strengthen the fine particulate matter National Ambient Air Quality Standards, reducing the standard from 15 micrograms per cubic meter to a range of 12 to 13 micrograms per cubic meter while taking comment on a standard of 11 micrograms per cubic meter. The EPA is also proposing a new, separate fine particulate matter standard of either 28 or 30 deciviews or measure of haze, aimed at improving visibility. The public comment period closed August 31, 2012. The EPA is required to finalize the proposal by December 14, 2012. Until the standards are final and attainment designations made, the Company cannot determine the potential impacts of the standards; however, any impacts are not anticipated to be significant.

Mercury and Air Toxics Standards

The Clean Air Mercury Rule ("CAMR"), issued by the EPA in March 2005, was the United States' first attempt to regulate mercury emissions from coal-fueled generating facilities through the use of a market-based cap-and-trade system. The CAMR, which mandated emissions reductions of approximately 70% by 2018, was overturned by the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit") in February 2008. In March 2011, the EPA proposed a new rule that would require coal-fueled generating facilities to reduce mercury emissions and other hazardous air pollutants through the establishment of "Maximum Achievable Control Technology" standards rather than a cap-and-trade system. The final rule, Mercury and Air Toxics Standards ("MATS"), was published in the Federal Register on February 16, 2012, with an effective date of April 16, 2012, and requires that new and existing coal-fueled facilities achieve emission standards for mercury, acid gases and other non-mercury hazardous air pollutants. Existing sources are required to comply with the new standards by April 16, 2015. Individual sources may be granted up to one additional year, at the discretion of the Title V permitting authority, to complete installation of controls or for transmission system reliability reasons. While the final MATS continues to be reviewed by the Company, the Company believes that its emissions reduction projects completed to date or currently permitted or planned for installation, including scrubbers, baghouses and electrostatic precipitators, are consistent with the EPA's MATS and will support the Company's ability to comply with the final rule's standards for acid gases and non-mercury metallic hazardous air pollutants. The Company will be required to take additional actions to reduce mercury emissions through the installation of controls or use of sorbent injection at certain of its coal-fueled generating facilities and otherwise comply with the final rule's standards. The Company is evaluating whether or not to close certain units. As a result of recent testing and evaluation, PacifiCorp currently anticipates that retiring the Carbon Facility in early 2015 will be the least-cost alternative to comply with the MATS and other environmental regulations. PacifiCorp continues to assess compliance alternatives and potential transmission system impacts that could otherwise impact PacifiCorp's ultimate decision with respect to the Carbon Facility, including timing of retirement and decommissioning. Incremental costs to install and maintain emissions control equipment at the Company's coal-fueled generating facilities and any requirement to shut down what have traditionally been low cost coal-fueled generating facilities will likely increase the cost of providing service to customers. In addition, numerous lawsuits are pending against the MATS in the D.C. Circuit, which may have an impact on the Company's compliance obligations and the timing of those obligations.

Cross-State Air Pollution Rule

In August 2012, the United States Court of Appeals for the District of Columbia Circuit ("D.C. Circuit") vacated the Cross-State Air Pollution Rule ("CSAPR") in a 2-1 decision after it determined that the CSAPR exceeded the EPA's statutory authority. The CSAPR was promulgated by the EPA as the replacement rule for the Clean Air Interstate Rule after it was struck down by the D.C. Circuit in July 2008, and was designed to reduce interstate transport of emissions of ozone and fine particulate matter from downwind states in the eastern United States. In a petition filed in October 2012, the EPA sought a full review of the CSAPR ruling by the entire D.C. Circuit. Until such time as the challenges to the CSAPR are resolved or the EPA proposes and adopts a new rule, the Company will continue to operate in compliance with the Clean Air Interstate Rule, which has remained in effect since the D.C. Circuit stayed the CSAPR in December 2011.

Regional Haze

In May 2012, the EPA published in the Federal Register a proposal to partially approve and partially disapprove the Utah regional haze state implementation plan ("SIP"). The EPA's partial approval of the sulfur dioxide portion of the SIP is based on a sulfur dioxide milestone and backstop trading program to reduce emissions. The partial disapproval is based on the EPA's assertion that the Utah Department of Environmental Quality failed to conduct the appropriate five-factor best available retrofit technology analysis for nitrogen oxides and particulate matter. The EPA did not propose to issue a Federal Implementation Plan ("FIP"), but acknowledged the state's ongoing efforts to conduct the required analysis. The public comment period closed on the EPA's proposed action in July 2012 and the Company expects a final decision in the fourth quarter of 2012.

In May 2012, the EPA published in the Federal Register a proposal to approve the Wyoming regional haze SIP for sulfur dioxide. The Wyoming SIP utilizes the same trading program utilized by Utah. The EPA's public comment period closed in July 2012. In addition, the EPA published in the Federal Register a proposal to partially approve and partially disapprove the Wyoming regional haze SIP for nitrogen oxides and particulate matter and issue a FIP for those portions proposed to be disapproved. The EPA action proposed to accelerate the installation of selective catalytic reduction equipment at PacifiCorp's Jim Bridger Units 1 and 2 to 2017 from 2021 and 2022, but agreed to accept comment on maintaining the original schedule as the state proposed. In addition, the EPA proposed to reject the SIP for the Wyodak facility and Dave Johnston Unit 3 and require the installation of selective non-catalytic reduction equipment within five years, as well as requiring the installation of low-nitrogen oxides burners and overfire air systems at Dave Johnston Units 1 and 2. The EPA held public hearings on its proposed disapproval on June 26 and 28, 2012, and the written comment period closed August 3, 2012. Until the EPA takes final action on the SIP or FIP and the appropriate appeal period passes, the Company cannot fully determine the impacts of the EPA's proposal.

In July 2012, the EPA published in the Federal Register a proposal to partially approve and partially disapprove the Arizona regional haze SIP addressing, among others, the Cholla generating facility. PacifiCorp owns 100% of Cholla Unit 4. The Arizona SIP provided for low-nitrogen oxides burners, while the proposed FIP would require installation of selective catalytic reduction equipment within five years after final action. The written comment period closed September 18, 2012. On October 12, 2012, the State of Arizona provided notice of its intent to file a citizen suit under Section 304 of the Clean Air Act for failing to timely act on the SIP for regional haze and for bifurcating its decision on Arizona's state-wide plan into two parts. Until the EPA takes final action on the SIP or FIP or otherwise addresses the potential citizens' suit, the Company cannot fully determine the impacts of the EPA's proposal.

Climate Change

GHG New Source Performance Standards

Under the Clean Air Act, the EPA may establish emissions standards that reflect the degree of emissions reductions achievable through the best technology that has been demonstrated, taking into consideration the cost of achieving those reductions and any non-air quality health and environmental impact and energy requirements. The EPA entered into a settlement agreement with a number of parties, including certain state governments and environmental groups, in December 2010 to promulgate emissions standards covering GHG. In April 2012, the EPA proposed new source performance standards for new fossil-fueled generating facilities that would limit emissions of carbon dioxide to 1,000 pounds per megawatt hour. The proposal exempts simple cycle combustion turbines from meeting the GHG standards. The public comment period closed in June 2012. The EPA indicated in the proposal that it does not have sufficient information to establish GHG new source performance standards for modified or reconstructed units and has not established a schedule for when these units, or other existing sources, will be regulated. Any new fossil-fueled generating facilities constructed by the Company will be required to meet the final GHG new source performance standards, which, if finalized as proposed, will preclude the construction of any coal-fueled generating facilities that do not have carbon capture and sequestration. Additionally, as proposed, it may be difficult even for combined cycle combustion turbines to meet the carbon dioxide emission standard under certain operating scenarios such as simple cycle or low-load operations on a sustained basis. Until any standards for existing, modified or reconstructed units are proposed and finalized, the impact on the Company's existing facilities cannot be determined.

GHG Litigation

In 2007, the United States District Court for the Southern District of Mississippi ("Southern District of Mississippi") dismissed the case of Ned Comer, et al. v. Murphy Oil USA, et al. ("Comer I"). Plaintiffs brought the putative class action lawsuit based on claims that the defendants' GHG emissions contributed to global warming that resulted in a rise in sea level and added to the ferocity of Hurricane Katrina, which caused damage to the plaintiffs' property. Plaintiffs petitioned for a rehearing before the full court of the United States Court for Appeals for the Fifth Circuit ("Fifth Circuit") in March 2010, but in May 2010, the Fifth Circuit dismissed the appeal for failure to have a quorum. The dismissal resulted in the Southern District of Mississippi's decision, holding that property owners did not have standing to sue for climate change and that climate change was a political question for the United States Congress, standing as good law. However, in May 2011, the Comer case was refiled ("Comer II") in the Southern District of Mississippi. In response to the defendants' motions to dismiss in Comer II, the Southern District of Mississippi, in March 2012, granted the motions, dismissing the suit with prejudice. Plaintiffs filed an appeal with the Fifth Circuit in April 2012. The Company was not a party in Comer I and is not a party in Comer II.

In September 2012, the United States Court of Appeals for the Ninth Circuit (“Ninth Circuit”) issued its opinion in Native Village of Kivalina v. ExxonMobil ("Kivalina"), affirming the United States District Court for the Northern District of California's dismissal of the plaintiffs' complaint. MEHC was a named defendant in the Kivalina case. The Ninth Circuit held that the Clean Air Act displaced the plaintiffs' federal common law claims. On October 4, 2012, the plaintiffs filed a petition for a full rehearing by the Ninth Circuit.

Collateral and Contingent Features

Debt of MEHC and debt and preferred securities of certain of its subsidiaries are rated by credit rating agencies. Assigned credit ratings are based on each rating agency's assessment of the rated company's ability to, in general, meet the obligations of its issued debt or preferred securities. The credit ratings are not a recommendation to buy, sell or hold securities, and there is no assurance that a particular credit rating will continue for any given period of time.

MEHC and its subsidiaries have no credit rating downgrade triggers that would accelerate the maturity dates of outstanding debt, and a change in ratings is not an event of default under the applicable debt instruments. The Company's unsecured revolving credit facilities do not require the maintenance of a minimum credit rating level in order to draw upon their availability but, under certain instances, must maintain sufficient covenant tests if ratings drop below a certain level. However, commitment fees and interest rates under the credit facilities are tied to credit ratings and increase or decrease when the ratings change. A ratings downgrade could also increase the future cost of commercial paper, short- and long-term debt issuances or new credit facilities.

In accordance with industry practice, certain wholesale agreements, including derivative contracts, contain provisions that require certain of MEHC's subsidiaries, principally the Utilities, to maintain specific credit ratings on their unsecured debt from one or more of the three recognized credit rating agencies. These agreements may either specifically provide bilateral rights to demand cash or other security if credit exposures on a net basis exceed specified rating-dependent threshold levels ("credit-risk-related contingent features") or provide the right for counterparties to demand "adequate assurance" in the event of a material adverse change in the subsidiary's creditworthiness. These rights can vary by contract and by counterparty. As of September 30, 2012 , these subsidiary's credit ratings from the three recognized credit rating agencies were investment grade. If all credit-risk-related contingent features or adequate assurance provisions for these agreements had been triggered as of September 30, 2012 , the Company would have been required to post $537 million of additional collateral. The Company's collateral requirements could fluctuate considerably due to market price volatility, changes in credit ratings, changes in legislation or regulation, or other factors. Refer to Note 5 of Notes to Consolidated Financial Statements in Item 1 of this Form 10-Q for a discussion of the Company's collateral requirements specific to the Company's derivative contracts.

In accordance with MEHC's equity commitment agreement related to Topaz, if MEHC does not maintain at least an investment grade credit rating from at least two of the three credit ratings agencies, MEHC's obligations under the equity commitment agreement would be supported by cash collateral or a letter of credit issued by a financial institution that meets certain minimum criteria specified in the financing documents. Upon reaching the final commercial operation date of the Topaz Project, MEHC will have no further obligation to make any equity contribution and any unused equity contribution obligations will be canceled.

In July 2010, the President signed into law the Dodd-Frank Reform Act. The Dodd-Frank Reform Act reshapes financial regulation in the United States by creating new regulators, regulating new markets and firms, and providing new enforcement powers to regulators. Virtually all major areas of the Dodd-Frank Reform Act are subject to extensive rulemaking proceedings being conducted both jointly and independently by multiple regulatory agencies, some of which have been completed and others that are expected to be finalized in late 2012 and 2013.

The Company is a party to derivative contracts, including over-the-counter derivative contracts. The Dodd-Frank Reform Act provides for extensive new regulation of over-the-counter derivative contracts and certain market participants, including imposition of mandatory clearing, exchange trading, capital, margin, reporting, recordkeeping, and business conduct requirements primarily for "swap dealers" and "major swap participants." The Dodd-Frank Reform Act provides certain exemptions from these requirements for commercial end-users when using derivatives to hedge or mitigate commercial risk of their businesses. While the Company generally does not enter into over-the-counter derivative contracts for purposes unrelated to hedging or mitigating commercial risk and does not anticipate that it will be considered a swap dealer or major swap participant, the outcome of remaining rulemaking proceedings cannot be predicted and, therefore, the impact of the Dodd-Frank Reform Act on the Company's consolidated financial results cannot be determined at this time.

New Accounting Pronouncements

For a discussion of new accounting pronouncements affecting the Company, refer to Note 2 of Notes to Consolidated Financial Statements in Item 1 of this Form 10-Q.

Critical Accounting Estimates

Certain accounting measurements require management to make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized on the Consolidated Financial Statements based on such estimates involve numerous assumptions subject to varying and potentially significant degrees of judgment and uncertainty and will likely change in the future as additional information becomes available. Estimates are used for, but not limited to, the accounting for the effects of certain types of regulation, derivatives, impairment of long-lived assets and goodwill, pension and other postretirement benefits, income taxes and revenue recognition - unbilled revenue. For additional discussion of the Company's critical accounting estimates, see Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2011 . There have been no significant changes in the Company's assumptions regarding critical accounting estimates since December 31, 2011 .


Item 3.	Quantitative and Qualitative Disclosures About Market Risk

For quantitative and qualitative disclosures about market risk affecting the Company, see Item 7A of the Company's Annual Report on Form 10-K for the year ended December 31, 2011 . The Company's exposure to market risk and its management of such risk has not changed materially since December 31, 2011 . Refer to Note 5 of Notes to Consolidated Financial Statements in Item 1 of this Form 10-Q for disclosure of the Company's derivative positions as of September 30, 2012 .


Item 4.	Controls and Procedures

At the end of the period covered by this Quarterly Report on Form 10-Q, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Chief Executive Officer (principal executive officer) and the Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended). Based upon that evaluation, the Company's management, including the Chief Executive Officer (principal executive officer) and the Chief Financial Officer (principal financial officer), concluded that the Company's disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission's rules and forms, and is accumulated and communicated to management, including the Company's Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There has been no change in the Company's internal control over financial reporting during the quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II


Item 1.	Legal Proceedings

For a description of certain legal proceedings affecting the Company, refer to Note 10 of Notes to Consolidated Financial Statements included in Part I, Item 1 of this Form 10-Q.


Item 1A.	Risk Factors

There has been no material change to the Company's risk factors from those disclosed in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2011 .


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.


Item 3.	Defaults Upon Senior Securities

Not applicable.


Item 4.	Mine Safety Disclosures

Information regarding the Company's mine safety violations and other legal matters disclosed in accordance with Section 1503(a) of the Dodd-Frank Reform Act is included in Exhibit 95 to this Form 10-Q.


Item 5.	Other Information

Not applicable.


Item 6.	Exhibits

The exhibits listed on the accompanying Exhibit Index are filed as part of this Quarterly Report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	MIDAMERICAN ENERGY HOLDINGS COMPANY
	(Registrant)



Date: November 2, 2012	/s/ Patrick J. Goodman
	Patrick J. Goodman
	Executive Vice President and Chief Financial Officer
	(principal financial and accounting officer)

EXHIBIT INDEX


Exhibit No.	Description


4.1	Fiscal Agency Agreement, dated August 27, 2012, by and between Northern Natural Gas Company and The Bank of New York Mellon Trust Company, N.A., Fiscal Agent, relating to the $250,000,000 in principal amount of the 4.10% Senior Bonds due 2042.


10.1	£150,000,000 Facility Agreement, dated August 20, 2012, among Northern Powergrid Holdings Company, as Borrower, and Abbey National Treasury Services plc, Lloyds TSB Bank plc and The Royal Bank of Scotland plc, as Original Lenders.


15	Awareness Letter of Independent Registered Public Accounting Firm.


31.1	Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


31.2	Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


32.1	Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


32.2	Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


95	Mine Safety Disclosures Required by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

101

The following financial information from MidAmerican Energy Holdings Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 , is formatted in XBRL (eXtensible Business Reporting Language) and included herein: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements, tagged in summary and detail.

EXECUTION COPY

FISCAL AGENCY AGREEMENT

Between

NORTHERN NATURAL GAS COMPANY,

as Issuer

and

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Fiscal Agent

__________

Dated as of August 27, 2012

__________

4.10% Senior Bonds due 2042

NY3667693.7



TABLE OF CONTENTS
	Page
1. The Securities	1

(a) General	1
(b) Form of Securities; Denominations of Securities	1
(c) Temporary Securities	4
(d) Legends	4
(e) Book-Entry Provisions	5

2. Fiscal Agent; Other Agents	6

3. Authentication	6

4. Payment and Cancellation	7
(a) Payment	7
(b) Cancellation	7

5. Transfer and Exchange of Securities	8

(a) Transfers of Global Securities as Such	8
(b) Exchanges of Global Securities for Definitive Securities	8
(c) Beneficial Interests	9
(d) Special Provisions Regarding Transfer of Beneficial Interests in a Regulation S Global Security	9
(e) Special Provisions Regarding Transfer of Beneficial Interests in a Rule 144A Global Security	11
(f) Special Provisions Regarding Transfer of Restricted Definitive Securities	14

6. Mutilated, Destroyed, Stolen or Lost Securities	16

7. Register; Record Date for Certain Actions	17

8. Delivery of Certain Information	18

(a) Non-Reporting Issuer	18
(b) Information After One Year	19
(c) Periodic Reports	19

9. Conditions of Fiscal Agent's Obligations	19

(a) Compensation and Indemnity	20
(b) Agency	20
(c) Advice of Counsel	20
(d) Reliance	20
(e) Interest in Securities, etc	21
(f) Certifications	21
(g) No Implied Obligations	21
(h) No Liability	21
(i) No Inquiry	21
(j) Agents	21
(k) Directors, Officers	21

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10. Resignation and Appointment of Successor	21

(a) Fiscal Agent and Paying Agent	22
(b) Resignation	22
(c) Successors	23
(d) Acknowledgment	23
(e) Merger, Consolidation, etc	23

11. Payment of Taxes	23

12. Amendments	24
(a) Approval	24
(b) Binding Nature of Amendments, Notice, Notations, etc.	25
(c) "Outstanding" Defined	25

13. GOVERNING LAW	26

14. Notices	26

15. Defeasance (Legal and Covenant)	26

(a) Issuer's Option to Effect Defeasance or Covenant Defeasance	26
(b) Defeasance and Discharge	26
(c) Covenant Defeasance	27
(d) Conditions to Defeasance and Covenant Defeasance	27
(e) Deposit in Trust; Miscellaneous	29
(f) Reinstatement	29

16. Headings	29

17. Counterparts	29

18. Successors and Assigns	29

19. Separability Clause	30

20. Waiver of Jury Trial	30

21. Force Majeure	30

NY3667693.7 ii

FISCAL AGENCY AGREEMENT (this “ Agreement ”), dated as of August 27, 2012, between NORTHERN NATURAL GAS COMPANY, a corporation duly organized under the laws of the State of Delaware (the “ Issuer ”), and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association, as Fiscal Agent (as defined in Section 2 hereof).

RECITALS OF THE ISSUER

The Issuer has duly authorized the creation of an issue of its 4.10% Senior Bonds due September 15, 2042 (the “ Securities ”) of substantially the tenor and amount hereinafter set forth, and to provide therefor the Issuer has duly authorized the execution and delivery of this Agreement.

All things necessary to make the Securities, when executed by the Issuer and authenticated and delivered hereunder and duly issued by the Issuer, the valid and legally binding obligations of the Issuer, and to make this Agreement a valid and legally binding agreement of the Issuer, in accordance with their and its terms, have been done.

1. The Securities.

(a) General . The initial aggregate principal amount of Securities issued under this Agreement will be $250,000,000. The aggregate principal amount of Securities which may be authenticated and delivered under this Agreement is unlimited, including without limitation, Securities authenticated and delivered upon registration of transfer, or in exchange for, or in lieu of other Securities pursuant to the provisions of this Agreement or the Securities. The Securities and any additional Securities subsequently issued under this Agreement will be treated as a single class for all purposes under this Agreement.

The Securities shall be known and designated as the “4.10% Senior Bonds due 2042” of the Issuer. The Securities will be unsecured, direct, unconditional and general obligations of the Issuer and will rank pari passu with all other unsecured and unsubordinated indebtedness of the Issuer.

(b) Form of Securities; Denominations of Securities . The Securities will be issued in registered form without coupons in substantially the form, and including the terms, provided for herein and on Exhibit A . The Securities shall be executed manually or in facsimile on behalf of the Issuer by its Chairman of the Board, President or a Vice President and by its Secretary or an Assistant Secretary (the “ Authorized Officers ”), notwithstanding that such officers, or any one of them, shall have ceased, for any reason, to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities. The Securities may also have such additional provisions, omissions, variations or substitutions as are not inconsistent with the provisions of this Agreement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with any law or with any rules made pursuant thereto or with the rules of any securities exchange or governmental agency or as may, consistently herewith, be determined by the Authorized Officers of the Issuer executing such Securities, as conclusively evidenced by their execution of such Securities. All of the Securities shall be otherwise substantially identical except as to denominations of Securities and as provided herein.

(i)

Except as otherwise set forth in this Agreement, the Securities offered and sold in their initial resale distribution to a qualified institutional buyer (as defined in Rule 144A (“ Rule 144A ”) under the Securities Act of 1933, as amended (the “ Act ”), each a “ QIB ”) in reliance on Rule 144A (“ Rule 144A Securities ”) shall initially be issued in the form of one or more Global Securities (as defined in Section 1(e) hereof) in definitive, fully registered form, substantially in the form set forth on Exhibit A , with such applicable legends as are provided for herein and on Exhibit A , and in minimum denominations of $2,000 and in integral multiples of $1,000 in excess of $2,000. Such Global Securities shall be duly executed by the Issuer and authenticated by the Fiscal Agent as hereinafter provided, and deposited with the U.S. Depository (as defined in Section 1(e) hereof). Until such time as the Holding Period (as defined below) shall have terminated, each such Security shall be referred to as a “ Rule 144A Global Security .” The aggregate principal amount of any Rule 144A Global Security may be adjusted by endorsements to Schedule A on the reverse thereof in any situation where adjustment is permitted or required by this Agreement or provided for on Exhibit A . Unless the Issuer determines otherwise in accordance with applicable law, the legend setting forth transfer restrictions shall be removed or deemed removed from a Rule 144A Security in accordance with the procedures set forth in Section 1(d) after such time as the applicable Holding Period shall have terminated, and each such Security shall thereafter be held as an unrestricted Security. As used herein, the term “ Holding Period ,” with respect to Rule 144A Securities, means the period referred to in Rule 144(d) under the Act or any successor provision thereto (“ Rule 144(d) ”) and as may be amended or revised from time to time, beginning from the later of (i) the original issue date of such Securities or (ii) the last date on which the Issuer or any affiliate of the Issuer was the beneficial owner of such Securities (or any predecessor thereof).

(ii)

Except as otherwise set forth in this Agreement, Securities offered and sold in reliance on Regulation S under the Act (“ Regulation S ”) will be issued initially in the form of one or more temporary Global Securities in the form provided for herein and on Exhibit A , with such applicable legends as are provided for herein and on Exhibit A , and in minimum denominations of $2,000 and in integral multiples of $1,000 in excess of $2,000 equal to the outstanding principal amount of the Securities initially sold in reliance on Rule 903 of Regulation S under the Act (the “ Regulation S Temporary Global Securities ”). The Regulation S Temporary Global Securities, which will be deposited on behalf of the purchasers of the Securities represented thereby with the Fiscal Agent, as custodian for the U.S. Depository, and registered in the name of the U.S. Depository or the nominee of the U.S. Depository for the accounts of designated agents holding on behalf of Euroclear Bank S.A./N.V., as operator of the Euroclear System (“ Euroclear ”), or Clearstream Banking, S.A. (“ Clearstream ”), shall be duly executed by the Issuer and authenticated by the Fiscal Agent as hereinafter provided. Following the termination of the Distribution Compliance Period (as defined below) and upon the receipt by the Fiscal Agent of:

NY3667693.7 2

a. a written certificate from the U.S. Depository, together with copies of certificates from Euroclear and Clearstream, certifying that they have received certification of non-United States beneficial ownership of 100% of the aggregate principal amount of the Regulation S Temporary Global Securities (except to the extent of any beneficial owners thereof who acquired an interest therein during the Distribution Compliance Period pursuant to another exemption from registration under the Act and who will take delivery of a beneficial ownership interest in a Rule 144A Global Security or a Restricted Definitive Security (as defined below), all as contemplated by Section 5(d) hereof); and

b. a certificate signed by the Authorized Officers (“ Officers' Certificate ”),

beneficial interests in the Regulation S Temporary Global Securities will be exchanged for beneficial interests in a permanent global Security in the form provided for herein and on Exhibit A , issued in a denomination equal to the outstanding principal amount of the Regulation S Temporary Global Securities (the “ Regulation S Permanent Global Securities ”) pursuant to the rules and regulations of the U.S. Depository, Euroclear or Clearstream, as applicable, in each case pertaining to beneficial interests in Global Securities (“ Applicable Procedures ”). Simultaneously with the authentication of the Regulation S Permanent Global Securities, the Fiscal Agent will cancel the Regulation S Temporary Global Securities. As used herein, “ Regulation S Global Securities ” means the Regulation S Temporary Global Securities or the Regulation S Permanent Global Securities, as applicable.

The aggregate principal amount of the Regulation S Temporary Global Securities and the Regulation S Permanent Global Securities may be adjusted by endorsements to Schedule A on the reverse thereof in any situation where adjustment is permitted or required by this Agreement. As used herein, the term “ Distribution Compliance Period ,” with respect to Regulation S Securities, means the period of 40 consecutive days beginning on and including the later of (i) the date on which interests in such Securities are offered to Persons (as defined below) other than distributors (as defined in Regulation S) and (ii) the original issue date of such Securities. Except as otherwise provided in this Agreement, no Regulation S Global Security shall be issued except as provided in this paragraph to evidence Securities offered and sold in reliance on Regulation S. Unless the Issuer determines otherwise in accordance with applicable law, the legend setting forth transfer restrictions shall be removed or deemed removed from a Regulation S Security in accordance with the procedures set forth in Section 1(d) hereof, and each such Security shall thereafter be held as an unrestricted Security. As used herein, “ Person ” means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.

The provisions of the “Operating Procedures of the Euroclear System” and “Terms and Conditions Governing Use of Euroclear” and the “General Terms and Conditions of Clearstream Banking” and “Customer Handbook” of Clearstream will be applicable to transfers of beneficial interests in the Regulation S Temporary Global Securities and the Regulation S Permanent Global Securities that are held by Agent Members (as defined in Section 1(e) ) through Euroclear or Clearstream.

NY3667693.7 3

(iii)

Except as otherwise provided in this Agreement, Securities offered and sold in their initial resale distribution to purchasers who are institutional “accredited investors” as described in Rule 501(a)(1), (2), (3) or (7) under the Act and who are not QIBs shall be issued in the form of fully registered, definitive, physical certificates, substantially in the form set forth herein and on Exhibit A , with such applicable legends as are provided for on Exhibit A , and in minimum denominations of $200,000 and in integral multiples of $1,000 in excess of $200,000 (such securities are herein referred to as “ Restricted Definitive Securities ”). Unless the Issuer determines otherwise in accordance with applicable law, the legend setting forth transfer restrictions shall be removed or deemed removed from a Restricted Definitive Security in accordance with the procedures set forth in Section 1(d) after such time as the applicable Holding Period shall have terminated, and each such Security shall thereafter be held as an unrestricted Security. As used herein, the term “ Holding Period ,” with respect to Restricted Definitive Securities, means the period referred to in Rule 144(d) or any successor provision thereto and as may be amended or revised from time to time, beginning from the later of (i) the original issue date of such Securities or (ii) the last date on which the Issuer or any affiliate of the Issuer was the beneficial owner of such Securities (or any predecessor thereof).

(c) Temporary Securities . Until definitive Securities are prepared, the Issuer may execute, and there shall be authenticated and delivered in accordance with the provisions of Section 3 hereof (in lieu of definitive printed Securities), temporary Securities. Such temporary Securities may be in registered global form. Such temporary Securities shall be subject to the same limitations and conditions and entitled to the same rights and benefits as definitive Securities, except as provided herein or therein. Temporary Securities shall be exchangeable for definitive Securities, when such definitive Securities are available for delivery; and upon the surrender for exchange of such temporary Securities, the Issuer shall execute and there shall be authenticated and delivered, in accordance with the provisions of Sections 6 and 7 hereof, in exchange for such temporary Securities, a like aggregate principal amount of definitive Securities of like tenor. The Issuer shall pay all charges, including (without limitation) stamp and other taxes and governmental charges, incident to any exchange of temporary Securities for definitive Securities. All temporary Securities shall be identified as such and shall describe the right of the holder thereof to effect an exchange for definitive Securities and the manner in which such an exchange may be effected.

(d) Legends . Securities shall be stamped or otherwise be imprinted with the legends set forth on the face of the text of the Securities attached as Exhibit A , including any legend provided for pursuant to Section 1(e) hereof. The legends so provided on the face of the text of the Securities may be removed from any Security, upon written order signed in the name of the Issuer by the Authorized Officers and delivered to the Fiscal Agent (“ Order ”), (i) one year from the later of issuance of the Security or the date such Security (or any predecessor) was last acquired from an “affiliate” of the Issuer within the meaning of Rule 144 (“ Rule 144 ”) under the Act or (ii) in connection with a sale made pursuant to the volume (and other restrictions) of Rule 144 following one year from such time, provided that, if the legend is removed and the Security is subsequently held by such an affiliate of the Issuer, the legend shall be reinstated. Any legends provided pursuant to Section 1(e) hereof may be removed in the event the applicable Global Securities cease to be Global Securities in accordance with Section 5 hereof.

NY3667693.7 4

(e) Book-Entry Provisions . Subject to the other provisions of this Section 1, the Securities may be issued initially in the form of one or more registered global Securities (“ Global Securities ”) deposited with or on behalf of a depository located in the United States, which initially shall be The Depository Trust Company together with its nominee Cede & Co. (the “ U.S. Depository ”), that (i) shall be registered in the name of the U.S. Depository for such Global Security or Securities or the nominee of such U.S. Depository, (ii) shall be delivered by the Fiscal Agent to such U.S. Depository or pursuant to such U.S. Depository's instruction and (iii) shall bear a legend substantially similar to the following:

“THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE FISCAL AGENCY AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE U.S. DEPOSITORY OR A NOMINEE OF THE U.S. DEPOSITORY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE U.S. DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE FISCAL AGENCY AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE U.S. DEPOSITORY TO A NOMINEE OF THE U.S. DEPOSITORY OR BY A NOMINEE OF THE U.S. DEPOSITORY TO THE U.S. DEPOSITORY OR ANOTHER NOMINEE OF THE U.S. DEPOSITORY OR BY THE U.S. DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR U.S. DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR U.S. DEPOSITORY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

UNLESS THIS GLOBAL SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE U.S. DEPOSITORY TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE IS ISSUED IN THE NAME OR NAMES AS DIRECTED IN WRITING BY THE U.S. DEPOSITORY, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL IN AS MUCH AS THE REGISTERED HOLDER HEREOF, THE U.S. DEPOSITORY, HAS AN INTEREST HEREIN.”

Members of, or direct or indirect participants in, the U.S. Depository (“ Agent Members ”) shall have no rights under this Agreement with respect to any Global Security held on their behalf by the U.S. Depository or under the Global Security, and such U.S. Depository may be treated by the Issuer, the Fiscal Agent, and any agent of the Issuer or the Fiscal Agent as the owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Fiscal Agent, or any agent of the Issuer or the Fiscal Agent from giving effect to any written certification, proxy or other authorization furnished by the U.S. Depository or impair, as between the U.S. Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Security.

So long as the U.S. Depository or its nominee is the registered holder of the Securities, the U.S. Depository or such nominee will for all purposes of the Securities and this Agreement be considered the sole owner or holder of such Securities. Until such time as definitive Securities may be issued, beneficial owners of Securities will not be entitled to have Securities registered in their names, will not receive or be entitled to receive physical delivery of Securities in definitive form, and will not be considered the owners or holders thereof under this Agreement for any purpose.

The Issuer initially appoints the Fiscal Agent to serve as custodian for the Global Securities.

This Section 1(e) shall apply only to Global Securities deposited with or on behalf of the U.S. Depository.

NY3667693.7 5

2. Fiscal Agent; Other Agents . The Issuer hereby appoints The Bank of New York Mellon Trust Company, N.A., acting through its corporate trust office in Chicago, Illinois (the “ Corporate Trust Office ”), as fiscal agent of the Issuer in respect of the Securities, upon the terms and subject to the conditions herein set forth, and The Bank of New York Mellon Trust Company, N.A., hereby accepts such appointment. The Bank of New York Mellon Trust Company, N.A., and any successor or successors as such fiscal agent qualified and appointed in accordance with Section 10 hereof, are herein called the “ Fiscal Agent .” The Fiscal Agent shall have the powers and authority granted to and conferred upon it in the Securities and hereby and such further powers and authority to act on behalf of the Issuer as may be mutually agreed upon by the Issuer and the Fiscal Agent. All of the terms and provisions with respect to such powers and authority contained in the Securities are subject to and governed by the terms and provisions hereof.

The Issuer may appoint one or more agents (a “ Paying Agent ” or “ Paying Agents ”) for the payment (subject to applicable laws and regulations) of the principal of and interest on the Securities, and one or more agents (a “ Transfer Agent ” or “ Transfer Agents ”) for the transfer and exchange of securities, at such place or places as the Issuer may determine; provided , however , the Issuer shall at all times maintain a Paying Agent or agent thereof and Transfer Agent or agent thereof in the Borough of Manhattan, The City of New York (which Paying Agent and Transfer Agent may be the Fiscal Agent or any of its affiliates). The Issuer initially appoints the Fiscal Agent, acting through its offices in the Borough of Manhattan, The City of New York, as Paying Agent and Transfer Agent. The Issuer shall promptly notify the Fiscal Agent of the name and address of each Paying Agent and Transfer Agent appointed, and will notify the Fiscal Agent of the resignation or termination of any Paying Agent or Transfer Agent. Subject to the provisions of Section 10(c) hereof, the Issuer may vary or terminate the appointment of any such Paying Agent or Transfer Agent at any time and from time to time upon giving not less than 90 days' notice to such Paying Agent or Transfer Agent, as the case may be, and to the Fiscal Agent.

The Issuer shall cause notice of any resignation, termination or appointment of any Paying Agent or Transfer Agent or of the Fiscal Agent and of any change in the office through which any such Agent will act to be given to registered holders of the Securities.

3. Authentication . The Fiscal Agent is authorized, upon receipt of Securities duly executed on behalf of the Issuer for the purposes of the original issuance of the Securities, (i) to authenticate said Securities in an aggregate principal amount of $250,000,000 and to deliver said Securities in accordance with an Order or Orders and thereafter to authenticate such additional Securities for which it has received subsequent Orders and (ii) thereafter to authenticate and deliver said Securities in accordance with the provisions hereinafter set forth.

The Fiscal Agent may, with the consent of the Issuer, appoint by an instrument or instruments in writing one or more agents (which may include itself) for the authentication of Securities and, with such consent, vary or terminate any such appointment upon written notice and approve any change in the office through which any authenticating agent acts. The Issuer (by written notice to the Fiscal Agent and the authenticating agent whose appointment is to be terminated) may also terminate any such appointment at any time. The Fiscal Agent hereby agrees to acknowledge written acceptances from the entities concerned (in form and substance satisfactory to the Issuer) of such appointments. In its acceptance of such appointment, each such authenticating agent shall agree to act as an authenticating agent pursuant to the terms and conditions of this Agreement.

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4. Payment and Cancellation .

(a) Payment . Subject to the following provisions, the Issuer shall provide to the Fiscal Agent in funds available on or prior to each date on which a payment of principal of or any interest on the Securities shall become due, as set forth in the text of the Securities, such amount, in such coin or currency, as is necessary to make such payment, and the Issuer hereby authorizes and directs the Fiscal Agent from funds so provided to it to make or cause to be made payment of the principal of and interest on, as the case may be, the Securities set forth herein and in the text of the Securities. The Fiscal Agent shall arrange directly with any Paying Agent who may have been appointed pursuant to the provisions of Section 2 hereof for the payment from funds so paid by the Issuer of the principal of and interest on the Securities as set forth herein and in the text of the Securities. Notwithstanding the foregoing, the Issuer may provide directly to a Paying Agent funds for the payment of the principal thereof and premium and interest, if any, payable thereon under an agreement with respect to such funds containing substantially the same terms and conditions set forth in this Section 4(a) and in Section 9(b) hereof; and the Fiscal Agent shall have no responsibility with respect to any funds so provided by the Issuer to any such Paying Agent.

Any interest on the Securities shall be paid, unless otherwise provided in the text of the Securities, to the Persons in whose names such Securities are registered on the register maintained pursuant to Section 7 hereof at the close of business on the record dates designated in the text of the Securities (the “ registered holders ”). Payments of principal of Securities shall be payable against surrender thereof at the Corporate Trust Office or office of an agent of the Fiscal Agent and at the offices of such other Paying Agents as shall have been appointed pursuant to Section 2 hereof. Payments of principal shall be made against surrender of Securities, and payments of interest on Securities shall be made, in accordance with the foregoing and subject to applicable laws and regulations, by check mailed on or before the due date for such payment to the Person entitled thereto at such Person's address appearing on the register of the Securities maintained pursuant to Section 7 hereof, or, in the case of payments of principal, to such other address as the registered holder shall provide in writing at the time of such surrender; provided , however , that such payments may be made, in the case of a registered holder of greater than $1,000,000 aggregate principal amount of Securities, by wire transfer to an account maintained by the payee with a bank if such registered holder so elects by giving notice to the Fiscal Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept at its discretion) prior to the date of the payments to be obtained, of such election and of the account to which payment is to be made.

(b) Cancellation . All Securities delivered to the Fiscal Agent (or any other Agent appointed pursuant to Section 2 hereof) for payment, registration of transfer or exchange as herein or in the Securities provided shall be forwarded to the Fiscal Agent by the Agent to which they are delivered. All such Securities shall be canceled and disposed of by the Fiscal Agent or such other Person as may be jointly designated by the Issuer and the Fiscal Agent, which shall thereupon furnish certificates of such disposal to the Issuer upon the Issuer's request.

NY3667693.7 7

5. Transfer and Exchange of Securities .

(a) Transfers of Global Securities as Such . Except as otherwise expressly set forth in this Agreement or any amendment hereto, a Global Security representing all or a portion of the Securities may not be transferred in global form, except as a whole (i) by the U.S. Depository to a nominee of such U.S. Depository, (ii) by a nominee of such U.S. Depository to such U.S. Depository or another nominee of such U.S. Depository or (iii) by such U.S. Depository or any such nominee to a successor U.S. Depository or a nominee of such successor U.S. Depository.

(b) Exchanges of Global Securities for Definitive Securities . A Global Security shall be exchangeable, in whole but not in part, for definitive Securities if (a) the U.S. Depository notifies the Issuer that it is unwilling or unable to continue to hold book-entry interests in such Global Security or the U.S. Depository at any time ceases to be a “clearing agency” registered as such under the Exchange Act of 1934, as amended (the “ Exchange Act ”), and, in either case, a successor is not appointed by the Issuer within 120 days, (b) while a Global Security is a restricted Security the book-entry interests in such Global Security cease to be eligible for the U.S. Depository's services because the Securities are neither (i) rated in one of the top four categories by a nationally recognized statistical rating organization nor (ii) included within a Self-Regulatory Organization system approved by the Securities and Exchange Commission (the “ Commission ”) for the reporting of quotation and trade information of securities eligible for transfer pursuant to Rule 144A, such as the PORTAL system, (c) the U.S. Depository for Securities notifies the Issuer that it is unwilling or unable to continue as U.S. Depository with respect to such Global Security and no successor is appointed within 120 days or (d) the Issuer in its sole discretion executes and delivers to the Fiscal Agent an Officers' Certificate providing that such Global Security shall be so exchangeable; provided , however , that in no event shall the Regulation S Temporary Global Securities be exchanged by the Issuer for definitive Securities prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Transfer Agent of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Act. Securities so issued in exchange for any such Global Security shall have the same interest rate, if any, and maturity and have the same terms as such Global Security, in authorized denominations and in the aggregate having the same principal amount as such Global Security and registered in such names as the U.S. Depository for such Global Security shall direct. Upon such exchange, the surrendered Global Security shall be cancelled by the Fiscal Agent.

A Global Security shall be exchangeable, in whole or in part, for definitive registered Securities if there shall have occurred and be continuing an event of default (as set forth in paragraph 7 of the Securities) and the registered holder, in such circumstances, shall have requested in writing that all or a part of the Global Security be exchanged for one or more definitive Securities (an “ Optional Definitive Security Request ”), provided , however , that in no event shall the Regulation S Temporary Global Securities be exchanged by the Issuer for definitive registered Securities prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Transfer Agent of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Act. Upon any such surrender, (i) the Issuer shall execute and the Fiscal Agent shall authenticate and deliver without charge to each Person specified by the U.S. Depository, in exchange for such Person's beneficial interest in the Global Security, a new Security or Securities in definitive registered form having the same interest rate, if any, and maturity and having the same terms as such Global Security, in any authorized denomination requested by such Person and in an aggregate principal amount equal to such Person's beneficial interest in the Global Security, and (ii) if the Global Security is being exchanged (x) as a whole, then the surrendered Global Security shall be cancelled by the Fiscal Agent, or (y) in part, then the principal amount of the surrendered Global Security shall be reduced by an endorsement on Schedule A thereto in the appropriate amount.

NY3667693.7 8

Unless otherwise provided by the Issuer, definitive Securities issued in exchange for a Global Security pursuant to this Section 5(b) shall be issued only in registered form and shall be registered in such names and in such authorized denominations as the U.S. Depository for such Global Security, pursuant to instructions of its Agent Members or otherwise, shall instruct the Fiscal Agent. The Fiscal Agent shall deliver such Securities to the Persons in whose names such Securities are so registered.

(c) Beneficial Interests. Subject to the provisions herein, beneficial interests in a Global Security may be transferred in any manner consistent with the Applicable Procedures.

(d) Special Provisions Regarding Transfer of Beneficial Interests in a Regulation S Global Security. The transfer of beneficial interests in a Regulation S Global Security shall be effected in a manner not inconsistent with the following provisions:

(i)

Transfer Through a Rule 144A Global Security . If the holder of a beneficial interest in a Regulation S Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Rule 144A Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(d)(i) , provided , however , that prior to the expiration of the Distribution Compliance Period, transfers of beneficial interests in the Regulation S Temporary Global Securities may not be made to a U.S. person (as defined under Regulation S) or for the account or benefit of a U.S. person (other than an initial purchaser). Upon receipt by the U.S. Depository of the instructions, order and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the U.S. Depository to cause to be credited to a specified Agent Member's account a beneficial interest in the Rule 144A Global Security equal to that of the beneficial interest in the Regulation S Global Security to be so transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Agent Member to be credited with, and the account of the Agent Member held for Euroclear or Clearstream to be debited for, such beneficial interest, and (3) a certificate substantially in the form set forth in or contemplated by Exhibit B given by the transferor of such beneficial interest, the Transfer Agent, shall (A) reduce the principal amount of the Regulation S Global Security, and increase the principal amount of the Rule 144A Global Security, in each case by an amount equal to the principal amount of the beneficial interest in the Regulation S Global Security to be so transferred, as evidenced by appropriate endorsements on Schedule A of the respective Global Securities, and (B) instruct the U.S. Depository, (x) to make corresponding reductions and increases in the amounts represented by the respective Global Securities and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Security having a principal amount equal to the amount by which the principal amount of the Regulation S Global Security was reduced upon such transfer.

Delivery of a beneficial interest in the Regulation S Global Security may not be taken in the form of a beneficial interest in the Rule 144A Global Security if immediately prior to the contemplated transfer no Rule 144A Global Security is then Outstanding (as defined in Section 12(c) hereof).

NY3667693.7 9


(ii)	Interests in Regulation S Global Security Initially to be Held Through Euroclear or Clearstream . Beneficial interests in a Regulation S Temporary Global Security may be held only through Agent Members acting for and on behalf of Euroclear or Clearstream.

(iii)

Transfer Through Restricted Definitive Security . If the holder of a beneficial interest in a Regulation S Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a Restricted Definitive Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(d)(iii) , provided , however , that in no event shall the Regulation S Temporary Global Securities be exchanged by the Issuer for Restricted Definitive Securities prior to (x) the expiration of the Distribution Compliance Period and (y) the receipt by the Transfer Agent of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Act. Upon receipt by the U.S. Depository of the instructions and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the U.S. Depository to cause to be issued a Restricted Definitive Security to such Person in a principal amount equal to that of the beneficial interest in the Global Security to be so transferred and (2) a certificate substantially in the form set forth in or contemplated by Exhibit C given by the transferor of such beneficial interest and, if the transferee is an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), a certificate substantially in the form set forth in or contemplated by Exhibit I given by such transferee, the Transfer Agent shall (A) reduce the principal amount of the Regulation S Global Security by an amount equal to the principal amount of the beneficial interest in the Regulation S Global Security to be so transferred, as evidenced by appropriate endorsement on Schedule A of the Regulation S Global Security and (B) cause to be issued a Restricted Definitive Security to such Person in a principal amount equal to the amount by which the principal amount of the Regulation S Global Security was reduced upon such transfer.

NY3667693.7 10

(iv)

Transfer Through an Unrestricted Global Security . If the holder of a beneficial interest in a Regulation S Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in an unrestricted Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(d)(iv) . Upon receipt by the U.S. Depository of the instructions, order and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the U.S. Depository to cause to be credited to a specified Agent Member's account a beneficial interest in the unrestricted Global Security equal to that of the beneficial interest in the Regulation S Global Security to be so transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Agent Member, and the Euroclear or Clearstream account for which such Agent Member's account is held, to be credited with, and the account of the Agent Members to be debited for, such beneficial interest, and (3) a certificate substantially in the form set forth in or contemplated by Exhibit D given by the transferor of such beneficial interest, the Transfer Agent shall (A) reduce the principal amount of the Regulation S Global Security, and increase the principal amount of the unrestricted Global Security, in each case by an amount equal to the principal amount of the beneficial interest in the Regulation S Global Security to be so transferred, as evidenced by appropriate endorsements on Schedule A of the respective Global Securities and (B) instruct the U.S. Depository, (x) to make corresponding reductions and increases to the transferor's beneficial interests in the respective Global Securities and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the unrestricted Global Security having a principal amount equal to the amount by which the principal amount of the Regulation S Global Security was reduced upon such transfer.

(v)

Beneficial Interests in Regulation S Temporary Global Securities to Definitive Securities . Notwithstanding the foregoing, a beneficial interest in a Regulation S Temporary Global Security may not be exchanged for a definitive Security or transferred to a Person who takes delivery thereof in the form of a definitive Security prior to (A) the expiration of the Distribution Compliance Period and (B) the receipt by the Registrar of any certificates required pursuant to Rule 903(b)(3)(ii)(B) under the Act, except in the case of a transfer pursuant to an exemption from the registration requirements of the Act other than Rule 903 or Rule 904.

(e) Special Provisions Regarding Transfer of Beneficial Interests in a Rule 144A Global Security . The transfer of beneficial interests in a Rule 144A Global Security shall be effected in a manner not inconsistent with the following provisions:

NY3667693.7 11

(i)

Transfer Through a Regulation S Global Security . If the holder of a beneficial interest in a Rule 144A Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Regulation S Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(e)(i) . Upon receipt by the U.S. Depository of the instructions, order and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the U.S. Depository to cause to be credited to a specified Agent Member's account a beneficial interest in the Regulation S Global Security equal to that of the beneficial interest in the Rule 144A Global Security to be so transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Agent Members held for Euroclear to be credited with, and the account of the Agent Members to be debited for, such beneficial interest, and (3) a certificate substantially in the form set forth in or contemplated by Exhibit E given by the transferor of such beneficial interest, the Transfer Agent shall (A) reduce the principal amount of the Rule 144A Global Security, and increase the principal amount of the Regulation S Global Security, in each case by an amount equal to the principal amount of the beneficial interest in the Rule 144A Global Security to be so transferred, as evidenced by appropriate endorsements on Schedule A of the respective Global Securities and (B) instruct the U.S. Depository, (x) to make corresponding reductions and increases to the amounts represented by the respective Global Securities and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Regulation S Global Security having a principal amount equal to the amount by which the principal amount of the Rule 144A Global Security was reduced upon such transfer.

Delivery of a beneficial interest in the Rule 144A Global Security may not be taken in the form of a beneficial interest in the Regulation S Global Security if immediately prior to the contemplated transfer no Regulation S Global Security is then Outstanding.

NY3667693.7 12

(ii)

Transfer Through Restricted Definitive Security . If the holder of a beneficial interest in a Rule 144A Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a Restricted Definitive Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(e)(ii) . Upon receipt by the U.S. Depository of the instructions and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the U.S. Depository to cause to be issued a Restricted Definitive Security to such Person in a principal amount equal to that of the beneficial interest in the Rule 144A Global Security to be so transferred and (2) a certificate substantially in the form set forth in or contemplated by Exhibit F given by the transferor of such beneficial interest and, if the transferee is an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), a certificate substantially in the form set forth in or contemplated by Exhibit I given by such transferee, the Transfer Agent shall (A) reduce the principal amount of the Rule 144A Global Security by an amount equal to the principal amount of the beneficial interest in the Rule 144A Global Security to be so transferred, as evidenced by appropriate endorsement on Schedule A of the Rule 144A Global Security and cause to be issued a Restricted Definitive Security to such Person in a principal amount equal to the amount by which the principal amount of the Rule 144A Global Security was reduced upon such transfer and (B) instruct the U.S. Depository to make a corresponding reduction to the transferor's beneficial interest in the Rule 144A Global Security.

NY3667693.7 13

(iii)

Transfer Through an Unrestricted Global Security . If the holder of a beneficial interest in a Rule 144A Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in an unrestricted Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(e)(iii) . Upon receipt by the U.S. Depository of the instructions, order and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of (1) written instructions given in accordance with the Applicable Procedures from an Agent Member directing the U.S. Depository to cause to be credited to a specified Agent Member's account a beneficial interest in the unrestricted Global Security equal to that of the beneficial interest in the Rule 144A Global Security to be so transferred, (2) a written order given in accordance with the Applicable Procedures containing information regarding the account of the Agent Members to be credited with, and the account of the Agent Members to be debited for, such beneficial interest, and (3) a certificate substantially in the form set forth in or contemplated by Exhibit G given by the transferor of such beneficial interest, the Transfer Agent shall (A) reduce the principal amount of the Rule 144A Global Security, and increase the principal amount of the unrestricted Global Security, in each case by an amount equal to the principal amount of the beneficial interest in the Rule 144A Global Security to be so transferred, as evidenced by appropriate endorsements on Schedule A of the respective Global Securities and (B) instruct the U.S. Depository, (x) to make corresponding reductions and increases to the transferor's beneficial interests in the respective Global Securities and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the unrestricted Global Security having a principal amount equal to the amount by which the principal amount of the Rule 144A Global Security was reduced upon such transfer.

(f) Special Provisions Regarding Transfer of Restricted Definitive Securities . Unless expressly provided otherwise in this Agreement, whenever any Restricted Definitive Security is presented or surrendered for registration of transfer, such Restricted Definitive Security must be accompanied by a certificate in substantially the form set forth in or contemplated by Exhibit H (which may be attached to or set forth in the Restricted Definitive Security), appropriately completed, dated the date of such surrender and signed by the holder of such Restricted Definitive Security, as to compliance with such restrictions on transfer, unless the Issuer shall have notified the Fiscal Agent that there is an effective registration statement under the Act with respect to such Restricted Definitive Security. The Transfer Agent shall not be required to accept for such registration of transfer or exchange any Restricted Definitive Security not so accompanied by a properly completed certificate. The transfer of Restricted Definitive Securities shall be effected in a manner not inconsistent with the following provisions:

NY3667693.7 14

(i)

Transfer Through Regulation S Global Security . If the holder of a Restricted Definitive Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in a Regulation S Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(f)(i) . Upon receipt by the Transfer Agent at the Corporate Trust Office of (1) written instructions from the transferor directing it to cause the U.S. Depository to cause to be credited to such Person a beneficial interest in the Regulation S Global Security in a principal amount equal to that of the Restricted Definitive Security to be so transferred and (2) a certificate substantially in the form set forth in or contemplated by Exhibit H given by the transferor of such Restricted Definitive Security, the Transfer Agent shall (A) increase the principal amount of the Regulation S Global Security by an amount equal to the principal amount of the beneficial interest in the Regulation S Global Security to be received by such Person, as evidenced by appropriate endorsement on Schedule A of the Regulation S Global Security, and cancel such Restricted Definitive Security, and (B) instruct the U.S. Depository, (x) to make corresponding increases in the amount represented by the Regulation S Global Security and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Regulation S Global Security having a principal amount equal to the principal amount of the Restricted Definitive Security that was cancelled.

(ii)

Transfer Through Rule 144A Global Security . If the holder of a Restricted Definitive Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Rule 144A Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(f)(ii) . Upon receipt by the Transfer Agent at the Corporate Trust Office of (1) written instructions from the transferor directing it to cause the U.S. Depository to cause to be credited to such Person a beneficial interest in the Rule 144A Global Security in a principal amount equal to that of the Restricted Definitive Security to be so transferred and (2) a certificate substantially in the form set forth in or contemplated by Exhibit H given by the transferor of such Restricted Definitive Security, the Transfer Agent shall (A) increase the principal amount of the Rule 144A Global Security by an amount equal to the principal amount of the beneficial interest in the Rule 144A Global Security to be received by such Person, as evidenced by appropriate endorsement on Schedule A of the Rule 144A Global Security, and cancel such Restricted Definitive Security, and (B) instruct the U.S. Depository, (x) to make corresponding increases in the amount represented by the Rule 144A Global Security and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Security having a principal amount equal to the principal amount of the Restricted Definitive Security that was cancelled.

NY3667693.7 15

(iii)

Transfer Through Unrestricted Global Security . If the holder of a Restricted Definitive Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in the unrestricted Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(f)(iii) . Upon receipt by the Transfer Agent at the Corporate Trust Office of (1) written instructions from the transferor directing it to cause the U.S. Depository to cause to be credited to such Person a beneficial interest in the unrestricted Global Security in a principal amount equal to that of the Restricted Definitive Security to be so transferred and (2) a certificate substantially in the form set forth in or contemplated by Exhibit H given by the transferor of such Restricted Definitive Security, the Transfer Agent shall (A) increase the principal amount of the unrestricted Global Security by an amount equal to the principal amount of the beneficial interest in the unrestricted Global Security to be received by such Person, as evidenced by appropriate endorsement on Schedule A of the unrestricted Global Security, and cancel such Definitive Security, and (B) instruct the U.S. Depository, (x) to make corresponding increases in the amount represented by the Rule 144A Global Security and (y) to cause to be credited to the account of the Person specified in such instructions a beneficial interest in the unrestricted Global Security having a principal amount equal to the principal amount of the Restricted Definitive Security that was cancelled.

(iv)

Transfer Through Restricted Definitive Security . If the holder of a Restricted Definitive Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of another Restricted Definitive Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Section 5(f)(iv) . Upon receipt by the U.S. Depository of the instructions and certificate set forth below, the U.S. Depository shall promptly forward the same to the Transfer Agent at the Corporate Trust Office. Upon receipt by the Transfer Agent from the U.S. Depository at the Corporate Trust Office of a certificate substantially in the form set forth in or contemplated by Exhibit H given by the transferor of such Restricted Definitive Security and, if the transferee is an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), a certificate substantially in the form set forth in or contemplated by Exhibit I given by such transferee, the Transfer Agent shall register the transfer of such Restricted Definitive Security.

6. Mutilated, Destroyed, Stolen or Lost Securities . The Fiscal Agent, or its agent duly authorized by the Fiscal Agent, is hereby authorized from time to time in accordance with the provisions of the Securities, Section l(e) , Section 5 and of this Section to authenticate and deliver:


(i)	Securities in exchange for or in lieu of Securities of like tenor and of like form which become mutilated, destroyed, stolen or lost; and


(ii)	registered Securities of authorized denominations in exchange for a like aggregate principal amount of Securities of like tenor and of like form.

NY3667693.7 16

The Securities shall be dated the date of their authentication by the Fiscal Agent. Each Security authenticated and delivered upon any transfer or exchange for or in lieu of the whole or any part of any Security shall carry all the rights if any, to interest accrued and unpaid and to accrue which were carried by the whole or such part of such Security.

7. Register; Record Date for Certain Actions . The Fiscal Agent, as agent of the Issuer, shall maintain at its Corporate Trust Office in Chicago, Illinois and at its agent's office in the Borough of Manhattan, The City of New York, a register for the Securities for the registration and registration of transfers of the Securities. Upon presentation for the purpose at the said office of the Fiscal Agent or its agent of any Security, accompanied by a written instrument of transfer in the form approved by the Issuer and the Fiscal Agent (it being understood that, until notice to the contrary is given to holders of Securities, the Issuer and the Fiscal Agent shall each be deemed to have approved the form of instrument of transfer, if any, printed on any definitive Security), executed by the registered holder, in person or by such registered holder's attorney thereunto duly authorized in writing, such Security shall be transferred upon the register for the Securities, and a new Security of like tenor shall be authenticated and issued in the name of the transferee. Transfers and exchanges of Securities shall be subject to Section 1(e) and Section 5 hereof, to such restrictions as shall be set forth in the text of the Securities and to such reasonable regulations as may be prescribed by the Issuer and the Fiscal Agent. Successive registrations and registrations of transfers as aforesaid may be made from time to time as desired and each such registration shall be noted on the Security register. No service charge shall be made for any registration, registration of transfer or exchange of Securities, but, except as otherwise provided herein with respect to the exchange of temporary Securities for definitive Securities, the Fiscal Agent (and any Transfer Agent or authenticating agent appointed pursuant to Section 2 or 3 hereof, respectively) may require payment of a sum sufficient to cover any stamp or other tax or governmental charge in connection therewith and any other amounts required to be paid by the provisions of the Securities.

Any Transfer Agent appointed pursuant to Section 2 hereof shall provide to the Fiscal Agent such information as the Fiscal Agent may reasonably require in connection with the delivery by such Transfer Agent of Securities in exchange for other Securities.

Neither the Fiscal Agent nor any Transfer Agent shall be required to make registrations of transfer or exchange of Securities except as set forth in this Agreement.

NY3667693.7 17

Upon receipt by the Fiscal Agent of any written demand, request or notice with respect to any matter on which the holders of Securities are entitled to act under this Agreement, a record date shall be established for determining registered holders of Outstanding Securities entitled to join in such demand, request or notice, which record date shall be at the close of business on the day the Fiscal Agent receives such demand, request or notice. The holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to join in such demand, request or notice, whether or not such holders remain holders after such record date; provided , however , unless the holders of the requisite principal amount of the Outstanding Securities shall have joined in such demand, request or notice prior to the day which is ninety (90) days after such record date, such demand, request or notice shall automatically and without further action by any holder be cancelled and of no further effect. Nothing in this paragraph shall prevent a holder, or a proxy of a holder, from giving, (i) after expiration of such 90-day period, a new demand, request or notice identical to a demand, request or notice which has been cancelled pursuant to the proviso in the preceding sentence or (ii) during any such 90-day period, a new demand, request or notice contrary to or different from such demand, request or notice, in either of which events a new record date shall be established pursuant to the provisions of this paragraph.

The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Persons entitled to consent to or approve any action or waive any term, provision or condition of any covenant of this Agreement. If a record date is fixed, the holders on such record date, or their duly designated proxies, and only such Persons, shall be entitled to consent to or approve any such action or waive any such term, provision, condition or covenant, whether or not such holders remain holders after such record date; provided , however , that unless such consent, waiver or approval is obtained from the requisite principal amount of holders of Outstanding Securities, or their duly designated proxies, prior to the date which is ninety (90) days after such record date, any such consent, waiver or approval previously given shall automatically and without further action by any holder be cancelled and of no further effect.

8. Delivery of Certain Information .

(a) Non-Reporting Issuer . Subject to Section 8(b) , as long as the Issuer is not subject to Section 13 or 15(d) of the Exchange Act, at any time, upon the request of a holder of a Security who is a QIB or, a prospective investor who is a QIB designated by such holder, the Issuer, or the Fiscal Agent upon request by and at the expense of the Issuer, will promptly furnish or cause to be furnished “Rule 144A Information” (as defined below) with respect to the Issuer to such holder or to a prospective purchaser of such Security designated by such holder in order to permit compliance by such holder with Rule 144A under the Act in connection with the resale of such Security by such holder. “ Rule 144A Information ” with respect to the Issuer shall be such information with respect to it as is specified pursuant to Rule 144A(d)(4)(i) under the Act (or any successor provision thereto) which, at the date of this Agreement, consists of (x) a very brief statement of the nature of the business, products and services of the Issuer, as the case may be, (which statement shall be as of a date within 12 months prior to the date of the intended resale) and (y) the most recent financial statements of the Issuer and its financial statements for the two fiscal years preceding the period covered in the most recent financial statements. Such financial statements of the Issuer shall include its balance sheet (as of a date less than 16 months before the date of the intended resale) and its profit and loss and retained earnings statements (for the twelve-month period preceding the date of such balance sheet and, if the balance sheet is not as of a date less than six months before the date of the intended resale, the most recent profit and loss and retained earnings statements shall be for the period from the date of such balance sheet to a date less than six months before the date of the intended resale) and shall be audited to the extent reasonably available.

NY3667693.7 18

(b) Information After One Year . Neither the Issuer nor the Fiscal Agent shall be required to furnish Rule 144A Information with respect to the Issuer as contemplated by Section 8(a) hereof, (x) to the holder or a prospective purchaser of a Security in connection with any request made on or after the date which is one year from the later of (i) the date such Security (or any predecessor Security) was acquired from the Issuer or (ii) the date such Security (or any predecessor Security) was last acquired from an “affiliate” of the Issuer within the meaning of Rule 144 under the Act or (y) at any time to a prospective purchaser located outside the United States who is not a U.S. person within the meaning of Regulation S under the Act.

(c) Periodic Reports . So long as any Securities are Outstanding, the Issuer, or the Fiscal Agent upon request by and at the expense of the Issuer, will furnish or cause to be furnished to holders of Securities and to the Fiscal Agent, (i) at any time when the Issuer is subject to Section 13 or 15(d) of the Exchange Act, copies of its annual and quarterly reports to stockholders and of each report or definitive proxy statement filed with the Commission under the Exchange Act, such reports or statements to be so furnished within 15 days after the due date for filing with the Commission, and (ii) at any time when the Issuer is not subject to Section 13 or 15(d) of the Exchange Act, (A) its annual financial statements prepared in accordance with generally accepted accounting principles applied consistently (except as otherwise noted therein) with those of the prior years (together with notes thereto and a report thereon by an independent accounting firm of established national reputation), such report to be so furnished as soon as reasonably available and in any event within 120 days after the end of the fiscal year covered thereby, (B) its unaudited comparative financial statements for each of the first three fiscal quarters and the corresponding quarter of the prior year prepared in accordance with generally accepted accounting principles applied consistently (except as otherwise noted therein) with those of the most recent annual financial statements (which unaudited statements and related notes may be condensed to the extent permitted by Form 10-Q under the Exchange Act or any successor form), such statements to be so furnished as soon as reasonably available and in any event within 60 days after the end of the fiscal quarter covered thereby, (C) any other interim reports or financial statements prepared generally for its nonaffiliated investors or lenders, such reports or statements to be so furnished concurrently with their distribution to such investors or lenders, and (D) at each time of delivery of the financial statements in (A), an Officers' Certificate stating whether or not to the best knowledge of the signers thereof the Issuer is in default in the performance and observance of any of the terms, provisions and conditions of the Securities or this Agreement and, if the Issuer shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge; provided that if the Issuer can not reasonably furnish the financial statements specified in clause (i) or (ii) (A) or (B) above within the time periods specified, the Issuer shall have such additional period as required to finish such reports and statements so long as it is diligently pursuing the finishing of such reports and statements.

9. Conditions of Fiscal Agent's Obligations . The Fiscal Agent accepts its obligations herein set forth upon the terms and conditions hereof, including the following, to all of which the Issuer agrees and to all of which the rights of holders from time to time of Securities are subject:

NY3667693.7 19

(a) Compensation and Indemnity . The Fiscal Agent shall be entitled to reasonable compensation as agreed with the Issuer for all services rendered by it, and the Issuer agrees promptly to pay such compensation and to reimburse the Fiscal Agent for the reasonable out-of-pocket expenses (including reasonable counsel fees and expenses) incurred by it or its agents in connection with its services hereunder. The Issuer also agrees to indemnify the Fiscal Agent for, and to hold it harmless against, any loss, liability or expense, including, without limitation, damages, claims, fines, suits, actions, demands, penalties, costs, out-of-pocket or incidental expenses, legal fees and expenses, and the allocated costs and expenses of in-house counsel, incurred without gross negligence or willful misconduct, arising out of or in connection with its acting as Fiscal Agent or in any other capacity hereunder, as well as the reasonable costs and expenses of defending against any claim of liability in the premises. The obligations of the Issuer under this Section 9(a) shall survive payment of all the Securities, the termination of this Agreement or the resignation or removal of the Fiscal Agent.

(b) Agency . In acting under this Agreement and in connection with the Securities, the Fiscal Agent is acting solely as agent of the Issuer and does not assume any responsibility for the correctness of the recitals herein or in the Securities (except for the correctness of the statement in its certificate of authentication on the Securities) or any obligation or relationship of agency or trust, for or with any of the owners or holders of the Securities, except that all funds held by the Fiscal Agent for the payment of principal of, premium, if any, and any interest on the Securities shall be held in trust for such owners or holders, as the case may be, as set forth herein and in the Securities; provided , however , that monies held in respect of the Securities remaining unclaimed at the end of two years after any principal of, premium, if any, or any interest on the Securities shall have become due and payable (whether at maturity or otherwise) and monies sufficient therefor shall have been duly made available for payment shall, together with any interest made available for payment thereon, if any, be repaid to the Issuer upon an Order. Upon such repayment, the aforesaid trust with respect to the Securities shall terminate and all liability of the Fiscal Agent and Paying Agents with respect to such funds shall thereupon cease. In the absence of an Order from the Issuer to return unclaimed funds to the Issuer, the Fiscal Agent shall from time to time deliver all unclaimed funds to or as directed by applicable escheat authorities, as determined by the Fiscal Agent in its sole discretion, in accordance with the customary practices and procedures of the Fiscal Agent.

(c) Advice of Counsel . The Fiscal Agent and any Paying Agent or Transfer Agent appointed by the Issuer pursuant to Section 2 hereof may consult with their respective counsel or other counsel satisfactory to them, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by them hereunder in good faith and without negligence and in accordance with such opinion.

(d) Reliance . The Fiscal Agent and any Paying Agent or Transfer Agent appointed by the Issuer pursuant to Section 2 hereof each may conclusively rely upon and shall be protected and shall incur no liability for or in respect of any action taken or thing suffered by it in reliance upon any Security, notice, direction, consent, certificate, affidavit, statement, or other paper or document believed by it, in good faith and without negligence, to be genuine and to have been passed or signed by the proper party or parties.

NY3667693.7 20

(e) Interest in Securities, etc . The Fiscal Agent, any authenticating agent, and any Paying Agent or Transfer Agent appointed by the Issuer pursuant to Section 2 hereof and their respective officers, directors and employees may become the owners of, or acquire any interest in, any Securities, with the same rights that they would have if they were not the Fiscal Agent, such authenticating agent, such other Paying Agent or Transfer Agent or such Person, and may engage or be interested in any financial or other transaction with the Issuer, and may act on, or as depository, trustee or agent for, any committee or body of holders of Securities or other obligations of the Issuer, as freely as if they were not the Fiscal Agent, such authenticating agent, such other Paying Agent or Transfer Agent or such Person. The provisions of this Section 9(e) shall extend to affiliates of the Fiscal Agent, such authenticating agent, any Paying Agent or any Transfer Agent.

(f) Certifications . Whenever in the administration of this Agreement the Fiscal Agent shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Fiscal Agent (unless other evidence be herein specifically prescribed) may, in the absence of willful misconduct or negligence on its part, request and conclusively rely upon a certificate signed by any Authorized Officer of the Issuer and delivered to the Fiscal Agent.

(g) No Implied Obligations . The duties and obligations of the Fiscal Agent shall be determined solely by the express provisions of this Agreement, and the Fiscal Agent shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Fiscal Agent. In no event shall the Fiscal Agent be liable for any lost profits, lost savings or other special, exemplary, indirect, punitive, consequential or incidental damages.

(h) No Liability . The Fiscal Agent shall not be liable for any interest on any funds held by the Fiscal Agent and shall never be required to use, advance or risk its own funds or otherwise incur financial liability in the performance of its duties hereunder. The Fiscal Agent shall not be liable for any actions taken or not taken hereunder, in the absence of its own negligence or willful misconduct.

(i) No Inquiry . The Fiscal Agent shall not be bound to ascertain or inquire as to the performance or observance of any of the terms, conditions, covenants or agreements of the Securities or other documents on the part of the Issuer or as to the existence of any event of default thereunder.

(j) Agents . The Fiscal Agent may execute any of its trusts or powers or perform any duties under this Agreement either directly or by or through agents or attorneys, may in all cases pay (with reimbursement from the Issuer) such reasonable compensation as it deems proper to all such agents and attorneys reasonably employed or retained by it, and shall not be responsible for any misconduct or negligence of any agent or attorney appointed with due care by it.

(k) Directors, Officers . The protections from liability provided to the Fiscal Agent hereunder, including the right to indemnification, shall extend to its directors, officers, employees and agents.

10. Resignation and Appointment of Successor .

NY3667693.7 21

(a) Fiscal Agent and Paying Agent . The Issuer agrees, for the benefit of the holders from time to time of the Securities, that there shall at all times be a Fiscal Agent hereunder which shall be a bank or trust company organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, in good standing and having an established place of business or agency in the Borough of Manhattan, The City of New York, and authorized under such laws to exercise corporate trust powers until all the Securities authenticated and delivered hereunder (i) shall have been delivered to the Fiscal Agent for cancellation or (ii) become due and payable and monies sufficient to pay the principal of and any interest on the Securities shall have been made available for payment and either paid or returned to the Issuer as provided herein and in such Securities.

(b) Resignation . The Fiscal Agent may at any time resign by giving written notice to the Issuer of such intention on its part, specifying the date on which its desired resignation shall become effective, provided that such date shall not be less than thirty (30) days from the date on which such notice is given, unless the Issuer agrees to accept shorter notice. The Fiscal Agent hereunder may be removed at any time by the filing with it of an instrument in writing signed on behalf of the Issuer and specifying such removal and the date when it shall become effective. Notwithstanding the dates of effectiveness of resignation or removal, as the case may be, to be specified in accordance with the preceding sentences, such resignation or removal shall take effect only upon the appointment by the Issuer of a successor Fiscal Agent (which, to qualify as such, shall be a bank or trust company organized and doing business under the laws of the United States of America, any state thereof or the District of Columbia, in good standing and having and acting through an established place of business or agency in the Borough of Manhattan, The City of New York, authorized under such laws to exercise corporate trust powers and having a combined capital and surplus in excess of U.S. $100,000,000) and the acceptance of such appointment by such successor Fiscal Agent. Upon its resignation or removal, the Fiscal Agent shall be entitled to payment by the Issuer pursuant to Section 9 hereof of compensation for services rendered and to reimbursement of reasonable out-of-pocket expenses incurred or any other amounts due hereunder.

NY3667693.7 22

(c) Successors . In case at any time the Fiscal Agent or any Paying Agent in respect of the Securities (if such Paying Agent is the only Paying Agent located in a place where, by the terms of the Securities or this Agreement, the Issuer is required to maintain a Paying Agent) shall resign, or shall be removed, or shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or shall file a voluntary petition in bankruptcy or make an assignment for the benefit of its creditors or consent to the appointment of a receiver of all or any substantial part of its property, or shall admit in writing its inability to pay or meet its debts as they severally mature, or if a receiver of it or of all or any substantial part of its property shall be appointed, or if an order of any court shall be entered approving any petition filed by or against it under the provisions of the Federal Bankruptcy Act or under the provisions of any similar legislation, or if a receiver of it or its property shall be appointed, or if any public officer shall take charge or control of it or of its property or affairs, for the purpose or rehabilitation, conservation or liquidation, a successor Fiscal Agent or Paying Agent, as the case may be, qualified as aforesaid, shall be appointed by the Issuer by an instrument in writing, filed with the successor Fiscal Agent or Paying Agent, as the case may be, and the predecessor Fiscal Agent or Paying Agent, as the case may be. Upon the appointment as aforesaid of a successor Fiscal Agent or Paying Agent, as the case may be, and acceptance by such successor of such appointment, the Fiscal Agent or Paying Agent, as the case may be, so succeeded shall cease to be Fiscal Agent or Paying Agent, as the case may be, hereunder. If no successor Fiscal Agent or other Paying Agent, as the case may be, shall have been so appointed by the Issuer and shall have accepted appointment as hereinafter provided, and, in the case of such other Paying Agent, if such other Paying Agent is the only Paying Agent located in a place where, by the terms of the Securities or this Agreement, the Issuer is required to maintain a Paying Agent, then any holder of a Security who has been a bona fide holder of a Security for at least six (6) months, on behalf of such holder and all others similarly situated, or the Fiscal Agent may petition any court of competent jurisdiction at the expense of the Issuer for the appointment of a successor agent. The Issuer shall give prompt written notice to each other Paying Agent of the appointment of a successor Fiscal Agent.

(d) Acknowledgment . Any successor Fiscal Agent appointed hereunder shall execute, acknowledge and deliver to its predecessor and to the Issuer an instrument accepting such appointment hereunder, and thereupon such successor Fiscal Agent, without any further act, deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations of such predecessor with like effect as if originally named as Fiscal Agent hereunder, and such predecessor, upon payment of its charges hereunder, including compensation, and reimbursement of its disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor Fiscal Agent shall be entitled to receive, all monies, securities, books, records or other property on deposit with or held by such predecessor as Fiscal Agent hereunder.

(e) Merger, Consolidation, etc. Any corporation into which the Fiscal Agent hereunder may be merged, or any corporation resulting from any merger or consolidation to which the Fiscal Agent shall be a party, or any corporation to which the Fiscal Agent shall sell or otherwise transfer all or substantially all of the corporate trust business of the Fiscal Agent, provided that it shall be qualified as aforesaid, shall be the successor Fiscal Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto.

11. Payment of Taxes . The Issuer will pay all stamp and other duties, if any, which may be imposed by the United States of America or any political subdivision thereof or taxing authority of or in the foregoing with respect to this Agreement or the issuance of the Securities.

NY3667693.7 23

12. Amendments .

(a) Approval . With the written consent of the registered holders of not less than a majority in aggregate principal amount of the Securities then Outstanding (or of such other percentage as may be set forth in the text of the Securities with respect to the action being taken), the Issuer and the Fiscal Agent may modify, amend or supplement the terms of the Securities and this Agreement in any way, and the holders of Securities may make, take or give any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Agreement or the Securities to be made, given or taken by holders of Securities; provided , however , that no such action may, without the consent of the holder of each Security affected thereby, (A) change the due date for the payment of the principal of or any installment of interest on any Security, (B) reduce the principal amount of any Security or the interest rate thereon (C) change the coin or currency in which or the place at which payment with respect to interest or principal in respect of Securities are payable as required by the proviso of the first sentence of the second paragraph of Section 2 hereof, or (D) reduce the proportion of the principal amount of Securities, the consent of the holders of which is necessary to modify, amend or supplement this Agreement or the terms and conditions of the Securities or to make, take or give any request, demand, authorization, direction, notice, consent, waiver or other action provided hereby or thereby to be made, taken or given. The Issuer and the Fiscal Agent may, without the consent of any holder of Securities, amend this Agreement or the Securities for the purpose of (i) adding to the covenants of the Issuer for the benefit of the holders of Securities, (ii) surrendering any right or power conferred upon the Issuer, (iii) securing the Securities pursuant to the requirements of the Securities or otherwise, (iv) evidencing the succession of another corporation to the Issuer and the assumption by any such successor of the covenants and obligations of the Issuer in the Securities or in this Agreement, (v) providing for the issuance of additional Securities in accordance with this Agreement, or (vi) correcting or supplementing any defective provision contained in the Securities or in this Agreement, and in any manner which the Issuer and the Fiscal Agent may determine that shall not be inconsistent with the Securities and shall not adversely affect the interest of any holder of Securities.

It shall not be necessary for the consent of the holders of Securities to approve the particular form of any proposed modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action, but it shall be sufficient if such consent shall approve the substance thereof.

In entering into any amendment hereof, the Fiscal Agent shall receive, and may conclusively rely on, an opinion of counsel that such amendment is authorized or permitted by the terms of this Agreement.

NY3667693.7 24

(b) Binding Nature of Amendments, Notice, Notations, etc. Any instrument given by or on behalf of any holder of a Security in connection with any consent to any such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action will be irrevocable once given and will be conclusive and binding on all subsequent holders of such Security or any Security issued directly or indirectly in exchange or substitution therefor or in lieu thereof. Any such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action will be conclusive and binding on all holders of Securities, whether or not they have given such consent, and whether or not notation of such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action is made upon the Securities. Notice of any modification or amendment of, supplement to, or request, demand, authorization, direction, notice, consent, waiver or other action with respect to the Securities or this Agreement (other than for purposes of curing any ambiguity or of curing, correcting or supplementing any defective provision hereof or thereof) shall be given to each holder of Securities affected thereby.

Securities authenticated and delivered after the effectiveness of any such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action may bear a notation in the form approved by the Fiscal Agent and the Issuer as to any matter provided for in such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action. New Securities modified to conform, in the opinion of the Fiscal Agent and the Issuer, to any such modification, amendment, supplement, request, demand, authorization, direction, notice, consent, waiver or other action may be prepared by the Issuer, authenticated by the Fiscal Agent (or any authenticating agent appointed pursuant to Section 3 hereof) and delivered in exchange for Outstanding Securities.

(c) “Outstanding” Defined . For purposes of the provisions of this Agreement and the Securities, any Security authenticated and delivered pursuant to this Agreement shall, as of any date of determination, be deemed to be “Outstanding,” except :


(i)	Securities theretofore canceled by the Fiscal Agent or delivered to the Fiscal Agent for cancellation or held by the Fiscal Agent for reissuance but not reissued by the Fiscal Agent;


(ii)	Securities which have become due and payable at maturity or otherwise and with respect to which monies sufficient to pay the principal thereof and any interest thereon shall have been made available to the Fiscal Agent;


(iii)	Securities which have been defeased pursuant to Section 15(b) hereof; or


(iv)	Securities in lieu of or in substitution for which other Securities shall have been authenticated and delivered pursuant to this Agreement;

provided , however , that in determining whether the holders of the requisite principal amount of Outstanding Securities have consented to any request, demand, authorization, direction, notice, consent, waiver, amendment, modification or supplement hereunder, Securities owned directly or indirectly by the Issuer or any affiliate of the Issuer shall be disregarded and deemed not to be Outstanding.

NY3667693.7 25

13. GOVERNING LAW . THIS AGREEMENT SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA.

14. Notices . All notices or communications hereunder, except as herein otherwise specifically provided, shall be in writing and if sent to the Fiscal Agent shall be delivered, transmitted by facsimile, telexed or telegraphed to it at 2 N. LaSalle Street, Suite 1020, Chicago, Illinois 60602, Attention: Corporate Trust Administration, facsimile no. (312) 827-8542 or if sent to the Issuer shall be delivered, transmitted by facsimile, telexed or telegraphed to it at 1111 South 103rd Street, Omaha, Nebraska 68124, Attention: General Counsel, facsimile no. (402) 398-7426. The foregoing addresses for notices or communications may be changed by written notice given by the addressee to each party hereto, and the addressee's address shall be deemed changed for all purposes from and after the giving of such notice.

If the Fiscal Agent shall receive any notice or demand addressed to the Issuer by the holder of a Security, the Fiscal Agent shall promptly forward such notice or demand to the Issuer.

15. Defeasance (Legal and Covenant) .

(a) Issuer's Option to Effect Defeasance or Covenant Defeasance . The Issuer may at its option, by an Order of the Issuer delivered to the Fiscal Agent, elect to have either Section 15(b) or Section 15(c) applied to the Outstanding Securities upon compliance with the conditions set forth below in this Section 15 .

(b) Defeasance and Discharge . Upon exercise by the Issuer of the option provided in Section 15(a) applicable to this Section 15(b) , the Issuer shall be deemed to have been discharged from its obligations with respect to the Outstanding Securities on the date the conditions set forth below are satisfied (hereinafter, “ Defeasance ”). For this purpose, such Defeasance means that the Issuer shall be deemed to have paid and discharged the entire Indebtedness represented by the Outstanding Securities and to have satisfied all its other obligations under such Securities and this Agreement insofar as the Securities are concerned (and the Issuer and the Fiscal Agent shall execute proper instruments acknowledging the same), except for the following, which shall survive until otherwise terminated or discharged hereunder: (i) the rights of holders of the Securities to receive, solely from the trust fund described in Section 15(d) and as more fully set forth in such Section, payments in respect of the principal of, premium, if any, and any interest on the Securities when such payments are due, (ii) the Issuer's obligations with respect to the Securities under Sections 1(d) , 2 , 4 , 6 , 7 , 8(a) , 8(b) and 10 of this Agreement and paragraphs 3, 4, 6, 10 (insofar as it relates to Sections 8(a) and 8(b) of this Agreement), 11 and 12 of the Securities and (iii) this Section 15 . Subject to compliance with this Section 15 , the Issuer may exercise its option under this Section 15(b) notwithstanding the prior exercise of its option under Section 15(c) .

NY3667693.7 26

(c) Covenant Defeasance . Upon the Issuer's exercise of the option provided in Section 15(a) applicable to this Section 15(c) , the Issuer shall be released from its obligations under paragraphs 7(iii), 8, and 9(a)(iii) of the Securities on and after the date the conditions set forth below are satisfied (hereinafter, “ Covenant Defeasance ”). For this purpose, such Covenant Defeasance means that the Issuer may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section, whether directly or indirectly by reason of any reference elsewhere herein to any such Section or by reason of any reference in any such Section to any other provision herein or in any other document, but the remainder of the Issuer's obligations shall be unaffected thereby.

(d) Conditions to Defeasance and Covenant Defeasance . The following shall be the conditions to application of either Section 15(b) or Section 15(c) to the then Outstanding Securities:

(i)

The Issuer shall irrevocably have deposited or caused to be deposited with a trustee, who may be the Fiscal Agent and who shall agree to comply with the provisions of this Section 15 applicable to it (the “ Defeasance Trustee ”), as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to, the benefit of the holders of the Securities, (A) money in an amount, or (B) U.S. Government Obligations and/or Eligible Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Defeasance Trustee, to pay and discharge, and which shall be applied by the Defeasance Trustee to pay and discharge, the principal of, premium, if any, and each installment of interest on the Securities not later than one day before the stated maturity of such principal or installment of interest in accordance with the terms of this Agreement and of the Securities. For this purpose: “ U.S. Government Obligations ” means securities that are (x) direct obligations of the United States of America for the payment of which its full faith and credit are pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the issuer thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depository receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depository receipt; and “ Eligible Obligations ” means interest bearing obligations as a result of the deposit of which the Securities are rated in the highest generic long-term debt rating category assigned to legally defeased debt by one or more nationally recognized rating agencies.

NY3667693.7 27

(ii)

In the case of an election under Section 15(b) , the Issuer shall have delivered to the Defeasance Trustee an opinion of counsel stating that (x) the Issuer has received from, or there has been published by, the U.S. Internal Revenue Service a ruling, or (y) since the date of this Agreement there has been a change in the applicable U.S. Federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the holders of the Outstanding Securities will not recognize income, gain or loss for U.S. Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to U.S. Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred.

(iii)

In the case of an election under Section 15(c) , the Issuer shall have delivered to the Defeasance Trustee an opinion of counsel to the effect that the holders of the Outstanding Securities will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and Covenant Defeasance and will be subject to Federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit and Covenant Defeasance had not occurred.

(iv)

No event of default under paragraph 7 of the Securities or event which with notice or lapse of time or both would become such an event of default shall have occurred and be continuing on the date of such deposit or, insofar as paragraphs 7(iv) and (v) of the Securities are concerned, at any time during the period ending on the 121st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period).


(v)	Such Defeasance or Covenant Defeasance shall not result in a breach or violation of or constitute a default under, any other agreement or instrument to which the Issuer is a party or by which it is bound.


(vi)	The Issuer shall have delivered to the Fiscal Agent and the Defeasance Trustee an Officers' Certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to either the Defeasance under Section 15(b) or the Covenant Defeasance under Section 15(c) (as the case may be) have been complied with.


(vii)	Such Defeasance or Covenant Defeasance shall not result in the trust arising from such deposit constituting an investment company as defined in the Investment Company Act of 1940, as amended, or such trust shall be qualified under such act or exempt from regulation thereunder.

NY3667693.7 28

(e) Deposit in Trust; Miscellaneous . All money, U.S. Government Obligations and Eligible Obligations (including the proceeds thereof) deposited with the Defeasance Trustee pursuant to Section 15(d) in respect of the Securities shall be held in trust (which in the case of cash, shall be uninvested) and applied by the Defeasance Trustee, in accordance with the provisions of the Securities and this Agreement, to the payment, either directly or through any Paying Agent as the Defeasance Trustee may determine, to the holders of the Securities, of all sums due and to become due thereon in respect of principal, premium, if any, and any interest, but such money need not be segregated from other funds except to the extent required by law. Any money deposited with the Defeasance Trustee for the payment of the principal of, premium, if any, or any interest on any Security and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall be paid to the Issuer upon an Order; and the holder of such Security shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof and all liability of the Defeasance Trustee with respect to such trust money shall thereupon cease. In the absence of an Order from the Issuer to return unclaimed funds to the Issuer, the Defeasance Trustee shall from time to time deliver all unclaimed funds to or as directed by applicable escheat authorities, as determined by the Defeasance Trustee in its sole discretion, in accordance with the customary practices and procedures of the Defeasance Trustee.

The Issuer shall pay and indemnify the Defeasance Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations or Eligible Obligations deposited pursuant to Section 15(d) or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the holders of the Outstanding Securities.

Anything in this Section 15 to the contrary notwithstanding, the Defeasance Trustee shall deliver or pay to the Issuer from time to time upon the request of the Issuer any money, U.S. Government Obligations or Eligible Obligations held by it as provided in Section 15(d) which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Defeasance Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance.

(f) Reinstatement . If the Defeasance Trustee is unable to apply any money in accordance with Section 15(b) or 15(c) by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuer's obligations under this Agreement and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Section 15 until such time as the Defeasance Trustee is permitted to apply all such money in accordance with Section 15(b) or 15(c) ; provided , however , that if the Issuer makes any payment of principal of, premium, if any, or interest on any Security following the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the holders of such Securities to receive such payment from the money held by the Defeasance Trustee.

16. Headings . The section headings herein are for convenience only and shall not affect the construction hereof.

17. Counterparts . This Agreement may be executed in one or more counterparts, and by each party separately on a separate counterpart, and each such counterpart when executed and delivered shall be deemed to be an original. Such counterparts shall together constitute one and the same instrument.

18. Successors and Assigns . All covenants and agreements in this Agreement by the Issuer shall bind its respective successors and assigns, whether so expressed or not.

NY3667693.7 29

19. Separability Clause . In case any provision in this Agreement or in the Securities shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

20. Waiver of Jury Trial . EACH OF THE ISSUER AND THE FISCAL AGENT HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED HEREBY.

21. Force Majeure . In no event shall the Fiscal Agent be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Fiscal Agent shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

(SIGNATURE PAGE FOLLOWS)

NY3667693.7 30

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.



	NORTHERN NATURAL GAS COMPANY

	By: /s/ Joseph Lillo
	Name: Joseph Lillo
	Title: VP Finance



	THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
	as Fiscal Agent

	By /s/ R. Tarnas
	Name: R. Tarnas
	Title: Vice President

NY3667693.7 31

EXHIBIT A

FORM OF SECURITY

[Form of Face of Security]

[ If this Security is a Global Security, insert -THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE FISCAL AGENCY AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE U.S. DEPOSITORY OR A NOMINEE OF THE U.S. DEPOSITORY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE U.S. DEPOSITORY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE FISCAL AGENCY AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE U.S. DEPOSITORY TO A NOMINEE OF THE U.S. DEPOSITORY OR BY A NOMINEE OF THE U.S. DEPOSITORY TO THE U.S. DEPOSITORY OR ANOTHER NOMINEE OF THE U.S. DEPOSITORY OR BY THE U.S. DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR U.S. DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR U.S. DEPOSITORY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

[ If this Security is a Regulation S Temporary Global Security, insert- THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL SECURITY, AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR DEFINITIVE SECURITIES, ARE AS SPECIFIED IN THE FISCAL AGENCY AGREEMENT (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL SECURITY SHALL BE ENTITLED TO RECEIVE PAYMENT OF INTEREST HEREON.]

[ If this Security is a Regulation S Global Security, insert- THIS BOND (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION ORIGINALLY EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOTE BE TRANSFERRED IN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY U.S. PERSON EXCEPT PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALL APPLICABLE STATE SECURITIES LAWS. TERMS USED ABOVE HAVE THE MEANINGS GIVEN TO THEM IN REGULATION S UNDER THE SECURITIES ACT.]

NY3667693.7 A -1

THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. BY ITS ACQUISITION OF THIS SECURITY OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:

1. REPRESENTS THAT [(A)] IT IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT, [ If this Security is a Restricted Definitive Security, insert- (B) IT IS AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT, OTHER THAN A QUALIFIED INSTITUTIONAL BUYER, (C) [ If this Security is a Regulation S Global Security, insert the following text and delete all other text in this Section 1- IT IS NOT A U.S. PERSON AND IT HAS ACQUIRED THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (D) IT IS AN ACCREDITED INVESTOR WITHIN THE MEANING OF RULE 501 UNDER THE SECURITIES ACT, IN EACH CASE THAT HAS ACQUIRED THE BONDS PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT];

2. AGREES THAT IT WILL OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS ONE YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH NORTHERN NATURAL GAS COMPANY, OR ANY OF ITS AFFILIATES WAS THE HOLDER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO NORTHERN NATURAL GAS COMPANY OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER, AS DEFINED IN RULE 144A, THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ''ACCREDITED INVESTOR'' WITHIN THE MEANING OF RULE 501(A) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF AN INSTITUTIONAL ACCREDITED INVESTOR, AND THAT EXECUTES AND DELIVERS A CERTIFICATE SUBSTANTIALLY IN THE FORM OF EXHIBIT I OF THE FISCAL AGENCY AGREEMENT TO NORTHERN NATURAL GAS AND THE TRUSTEE, (F) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, OR (G) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND, IN EACH OF THE CASES ABOVE, IN ACCORDANCE WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION;

3. AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; AND

NY3667693.7 A -2

4. AGREES THAT, BEFORE THE HOLDER OFFERS, SELLS OR OTHERWISE TRANSFERS THIS SECURITY PURSUANT TO CLAUSES (D), (E) OR (G) OF SECTION 2 ABOVE, NORTHERN NATURAL GAS COMPANY MAY REQUIRE THE HOLDER OF THIS SECURITY TO DELIVER A WRITTEN OPINION OF COUNSEL, CERTIFICATIONS AND/OR OTHER INFORMATION THAT IT REASONABLY REQUIRES TO CONFIRM THAT SUCH PROPOSED TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

AS USED IN THIS SECURITY, THE TERMS “OFFSHORE TRANSACTION,” “U.S. PERSON” AND “UNITED STATES” HAVE THE MEANINGS GIVEN TO THEM WITHIN REGULATION S.

[ If this Security is a Rule 144A Global Security, insert- EACH PURCHASER OF THE SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.]

THE FOREGOING LEGENDS MAY BE REMOVED FROM THE SECURITIES ON THE CONDITIONS SPECIFIED IN THE FISCAL AGENCY AGREEMENT.

NY3667693.7 A -3

NORTHERN NATURAL GAS COMPANY

4.10 % Senior Bonds due 2042

$[______________]

CUSIP No. [______________]

No. ___ [ISIN No. [______________]]

NORTHERN NATURAL GAS COMPANY, a corporation duly organized under the laws of the State of Delaware (herein called the “ Issuer ”), for value received, hereby promises to pay to [name of registered holder or its registered assigns] [ if this Security is a Global Security, insert‑ the Initial Principal Amount specified on Schedule A hereto (such Initial Principal Amount, as it may from time to time be adjusted by endorsement on Schedule A hereto, is hereinafter referred to as the “ Principal Amount ”)] [ if this Security is not a Global Security, insert‑ the principal sum of ________________ Dollars (the “ Principal Amount ”)] on September 15, 2042 and to pay interest thereon from August 27, 2012 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually in arrears on March 15 and September 15 in each year, commencing March 15, 2013 (each an “ Interest Payment Date ”), at the rate of 4.10% per annum, until the principal hereof is paid or made available for payment and (to the extent that the payment of such interest shall be legally enforceable) at the rate per annum equal to the above rate plus 1% per annum on any overdue principal and on any overdue installment of interest. Interest on the Securities shall be computed on the basis of a 360-day year of twelve 30-day months. The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Fiscal Agency Agreement hereinafter referred to, be paid to the person (the “ registered holder ”) in whose name this Security (or one or more predecessor Securities) is registered at the close of business on March 1 or September 1 (whether or not a Business Day), as the case may be (each a “ Regular Record Date ”), next preceding such Interest Payment Date. Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the registered holder on such Regular Record Date and shall be paid to the person in whose name this Security (or one or more predecessor Securities) is registered at the close of business on a special record date for the payment of such interest to be fixed by the Issuer, notice whereof shall be given to registered holders of Securities not less than 10 days prior to such special record date.

[If this Security is a Regulation S Temporary Global Security, insert-- Until this Regulation S Temporary Global Security is exchanged for one or more Regulation S Permanent Global Securities, the holder hereof shall not be entitled to receive payments of interest hereon; until so exchanged in full, this Regulation S Temporary Global Security shall in all other respects be entitled to the same benefits as other Securities under the Fiscal Agency Agreement. ]

NY3667693.7 A -4

Principal of this Security shall be payable against surrender hereof at the corporate trust office or office of an agent of the Fiscal Agent hereinafter referred to or at such other offices or agencies as the Issuer may designate and at the offices of such other Paying Agents as the Issuer shall have appointed pursuant to the Fiscal Agency Agreement. Payments of principal shall be made against surrender of this Security, and payments of interest on this Security shall be made, in accordance with the foregoing and subject to applicable laws and regulations, by check mailed on or before the due date for such payment to the person entitled thereto at such person's address appearing on the aforementioned register or, in the case of payments of principal to such other address as the registered holder may specify upon such surrender; provided , however , that any payments shall be made, in the case of a registered holder of at least $1,000,000 aggregate principal amount of Securities, by transfer to an account maintained by the payee with a bank if such registered holder so elects by giving notice to the Fiscal Agent, not less than 15 days (or such fewer days as the Fiscal Agent may accept at its discretion) prior to the date of the payments to be obtained, of such election and of the account to which payments are to be made. The Issuer covenants that until this Security has been delivered to the Fiscal Agent for cancellation, or monies sufficient to pay the principal of, premium, if any, and interest on this Security have been made available for payment and either paid or returned to the Issuer as provided herein, it will at all times maintain an established place of business or agency in the Borough of Manhattan, The City of New York for the payment of the principal of and interest on the Securities as herein provided.

Reference is hereby made to the further provisions of this Security set forth on the following pages hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by the Fiscal Agent by manual signature, this Security shall not be valid or obligatory for any purpose.

NY3667693.7 A -5

IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.



Date:_______________	NORTHERN NATURAL GAS COMPANY

	By: ____________________________________
	Name:
	Title:



Attest:

By: _______________________
Name:
Title:

NY3667693.7 A -6

FISCAL AGENT'S CERTIFICATE OF AUTHENTICATION

This is one of the Securities referred to in the within-mentioned Fiscal Agency Agreement.



	THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
	as Fiscal Agent

	By: ______________________________________


Date of Authentication: ____________________

NY3667693.7 A -7

[Form of reverse of Security]

1. This Security is one of a duly authorized issue of securities of the Issuer designated as its 4.10% Senior Bonds due 2042 (herein called the “ Securities ”), issued in aggregate principal amount of $250,000,000 and to be issued in accordance with a Fiscal Agency Agreement, dated as of August 27, 2012 (herein called the “ Fiscal Agency Agreement ”), between the Issuer and The Bank of New York Mellon Trust Company, N.A., as Fiscal Agent (herein called the “ Fiscal Agent ,” which term includes any successor fiscal agent under the Fiscal Agency Agreement), copies of which Fiscal Agency Agreement are on file and available for inspection at the corporate trust office of the Fiscal Agent which at the date hereof is at 2 N. LaSalle Street, Suite 1020, Chicago, Illinois 60602.

The Securities are unsecured direct, unconditional and general obligations of the Issuer and will rank equally with all other unsecured and unsubordinated indebtedness of the Issuer.

2. [ If this Security is a Global Security, insert -This Security is issuable only in fully registered form, without coupons, in minimum denominations of U.S. $2,000 and integral multiples of $1,000 in excess of $2,000.] [ If this Security is a Restricted Definitive Security, insert -This Security is issuable only in fully registered form, without coupons, in minimum denominations of U.S. $200,000 and integral multiples of $1,000 in excess of $200,000.]

3. The Issuer shall maintain in the Borough of Manhattan, The City of New York, an established place of business or agency where Securities may be surrendered for registration of transfer or exchange. The Issuer has initially appointed the Fiscal Agent acting through its corporate trust office in Chicago, and at its agent's office in the Borough of Manhattan, The City of New York, as its agent for such purpose and the Issuer has agreed to cause to be kept at such offices a register in which, subject to such reasonable regulations as it may prescribe, the Issuer will provide for the registration of Securities and of transfers of Securities. The Issuer reserves the right to vary or terminate the appointment of the Fiscal Agent as security registrar or of any Transfer Agent or to appoint additional or other registrars or Transfer Agents or to approve any change in the office through which any security registrar or any Transfer Agent acts, provided that there will at all times be a security registrar or agent thereof in the Borough of Manhattan, The City of New York. Registered holders of the Securities will receive notice of any such change.

The transfer of a Security is registrable on the aforementioned register upon surrender of such Security at the corporate trust office of the Fiscal Agent or the office of the agent of the Fiscal Agent or any Transfer Agent duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Fiscal Agent duly executed by, the registered holder thereof or such holder's attorney duly authorized in writing. Upon such surrender of this Security for registration of transfer, the Issuer shall execute, and the Fiscal Agent shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities, dated the date of authentication thereof of any authorized denominations and of a like aggregate principal amount.

NY3667693.7 A -8

At the option of the registered holder upon request confirmed in writing, Securities may be exchanged for Securities of any authorized denominations and of a like tenor, form and aggregate principal amount upon surrender of the Securities to be exchanged at the office of any Transfer Agent or at the corporate trust office of the Fiscal Agent or agent thereof. Whenever any Securities are so surrendered for exchange, the Issuer shall execute, and the Fiscal Agent shall authenticate and deliver, the Securities which the registered holder making the exchange is entitled to receive. Any registration of transfer or exchange will be effected upon the Transfer Agent or the Fiscal Agent, as the case may be, being satisfied with the documents of title and identity of the person making the request and subject to such reasonable regulations as the Issuer may from time to time agree with the Transfer Agent and the Fiscal Agent.

All Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Issuer evidencing the same debt, and entitled to the same benefits, as the Securities surrendered upon such registration of transfer or exchange. No service charge shall be made for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer, the Issuer, the Fiscal Agent and any agent of the Issuer or the Fiscal Agent may treat the person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and neither the Issuer, the Fiscal Agent nor any such agent shall be affected by notice to the contrary.

[If this Security is a Regulation S Temporary Global Security, insert-- This Regulation S Temporary Global Security is exchangeable in whole or in part for one or more Global Securities only (i) on or after the termination of the 40-day Distribution Compliance Period (as defined in Regulation S) and (ii) upon presentation of certificates required by Section 5(d) of the Fiscal Agency Agreement. Upon exchange of this Regulation S Temporary Global Security for one or more Global Securities, the Fiscal Agent shall cancel this Regulation S Temporary Global Security. ]

4. (a) The Issuer shall pay to the Fiscal Agent at its Corporate Trust Office, on or prior to each Interest Payment Date and the maturity date of the Securities, in such amounts sufficient (with any amounts then held by the Fiscal Agent and available for the purpose) to pay the interest on, principal of and premium, if any, on the Securities due and payable on such Interest Payment Date or maturity date, as the case may be, in funds available on such date. The Fiscal Agent shall apply the amounts so paid to it to the payment of such interest and principal in accordance with the terms of the Securities. Any monies paid by the Issuer to the Fiscal Agent for the payment of the principal of, premium, if any, or interest on any Securities and remaining unclaimed at the end of two years after such principal, premium, if any, or interest shall have become due and payable (whether at maturity or otherwise) shall then be repaid to the Issuer upon its written request, and upon such repayment all liability of the Fiscal Agent with respect thereto shall cease, without, however, limiting in any way any obligation the Issuer may have to pay the principal of, premium, if any, and interest on this Security as the same shall become due.

(b) In any case where the due date for the payment of the principal of, premium, if any, or interest on any Security shall be at any place of payment on a day on which banking institutions are authorized or obligated by law to close, then payment of principal, premium, if any, or interest need not be made on such date at such place but may be made on the next succeeding day at such place which is not a day on which banking institutions are authorized or obligated by law to close, with the same force and effect as if made on the date for such payment, and no interest shall accrue for the period after such date.

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5. The Securities are subject to redemption upon not less than 30 or more than 60 days' notice to the registered holders of such Securities, at any time, as a whole or in part, at the election of the Issuer, at a redemption price equal to the greater of: (i) 100% of the Principal Amount of the Securities being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal of and interest on the Securities being redeemed discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at a discount rate equal to the Treasury Yield plus 25 basis points, plus, for (i) or (ii) above, whichever is applicable, accrued interest on the Securities to the Redemption Date.

The Securities are also subject to redemption upon not less than 30 or more than 60 days' notice to the registered holders of such Securities, at any time on or after March 15, 2042 (which is the date that is six months prior to the maturity date of the Securities), as a whole or in part, at the election of the Issuer, at a redemption price equal to 100% of the Principal Amount of the Securities being redeemed, plus accrued and unpaid interest on the Securities to the Redemption Date.

If fewer than all the Securities are to be redeemed, selection of Securities for redemption will be made by the Fiscal Agent in any manner the Fiscal Agent deems fair and appropriate; provided , however , that so long as the Securities are in the form of Global Securities, such selection will be made by the U.S. Depository in accordance with its applicable procedures.

Unless the Issuer defaults in payment of the redemption price, from and after the Redemption Date, the Securities or portions thereof called for redemption will cease to bear interest, and the holders thereof will have no right in respect of such Securities except the right to receive the redemption price thereof.

[ If this Security is a Global Security, insert -In the event of redemption of this Security in part only, the Fiscal Agent will reduce the Principal Amount hereof by endorsement on Schedule A hereto such that the Principal Amount shown on Schedule A after such endorsement will reflect only the unredeemed portion hereof.]

For purposes of the Securities,

“ Business Day ” means any day other than a Saturday, Sunday or a day on which banking institutions in The City of New York or the City of Chicago or at a place of payment are authorized by law, regulation or executive order to remain closed.

“ Comparable Treasury Issue ” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the Securities.

“ Comparable Treasury Price ” means, with respect to any Redemption Date, (i) the average of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) on the third Business Day in New York City preceding such Redemption Date, as set forth in the daily statistical release (or any successor release) published by the Federal Reserve Bank of New York and designated “Composite 3:30 p.m. Quotations for U.S. Government Securities” or (ii) if such release (or any successor release) is not published or does not contain such prices on such Business Day, the Reference Treasury Dealer Quotation for such Redemption Date.

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“ Independent Investment Banker ” means an investment banking institution of international standing appointed by the Issuer.

“ Redemption Date ” means any date on which the Issuer redeems all or any portion of the Securities in accordance with the terms hereof.

“ Reference Treasury Dealer ” means a primary U.S. government securities dealer in the United States appointed by the Issuer.

“ Reference Treasury Dealer Quotation ” means, with respect to the Reference Treasury Dealer and any Redemption Date, the average, as determined by the Issuer, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount and quoted in writing to the Issuer by such Reference Treasury Dealer at 5:00 p.m. on the third Business Day in New York City preceding such Redemption Date).

“ Treasury Yield ” means, with respect to any Redemption Date, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such Redemption Date.

6. The Issuer shall pay all stamp and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority of or in the foregoing with respect to the Fiscal Agency Agreement or the issuance of this Security. Except as otherwise provided in this Security, the Issuer shall not be required to make any payment with respect to any tax, assessment or other governmental charge imposed by any government or any political subdivision or taxing authority thereof or therein.

7. In the event of:

(i) default in the payment of any interest on any Security for a period of 30 days after the date when due; or

(ii) default in the payment of the principal of any Security when due (whether at maturity or otherwise); or

(iii) default in the performance or breach of any other covenant or agreement of the Issuer contained in the Securities or in the Fiscal Agency Agreement for a period of 60 days after the date on which written notice of such default requiring the Issuer to remedy the same and stating that such notice is a “Notice of Default” shall first have been given to the Issuer and the Fiscal Agent by the holders of at least 25% in principal amount of the Securities at the time Outstanding (as defined in the Fiscal Agency Agreement); or

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(iv) the entry by a court having jurisdiction in the premises of (1) a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (2) a decree or order adjudging the Issuer bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or of any substantial part of the property of the Issuer, or ordering the winding up or liquidation of the affairs of the Issuer, and any such decree or order for relief or any such other decree or order shall continue unstayed and in effect for a period of 60 consecutive days; or

(v) commencement by the Issuer of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by the Issuer to the entry of a decree or order for relief in respect of the Issuer in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against the Issuer, or the filing by the Issuer of a petition or answer or consent seeking reorganization or relief under any such applicable Federal or State law, or the consent by the Issuer to the filing of such petition or to the appointment of or the taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Issuer or of any substantial part of its property, or the making by the Issuer of an assignment for the benefit of creditors, or the taking of action by the Issuer in furtherance of any such action;

the registered holders of this Security may, at such holder's option, declare the principal of this Security and the interest accrued hereon to be due and payable immediately by written notice to the Issuer and the Fiscal Agent at its Corporate Trust Office, and unless all such defaults shall have been cured by the Issuer prior to receipt of such written notice, the principal of the Security and the interest accrued thereon shall become and be immediately due and payable. For purposes of the Securities, “ Subsidiary ” of the Issuer means a corporation all of the outstanding voting stock of which is owned, directly or indirectly, by the Issuer and/or one or more Subsidiaries of the Issuer. For the purposes of this definition, “ voting stock ” means stock which ordinarily has voting power for the election of directors, whether at all times or only so long as no senior class of stock has such voting power by reason of any contingency.

8. So long as any of the Securities are Outstanding, the Issuer will not pledge, mortgage or hypothecate, or permit to exist, and will not cause, suffer or permit any Subsidiary of it to pledge, mortgage or hypothecate, or permit to exist, except in favor of the Issuer or any Subsidiary of it, any mortgage, pledge or other lien upon, any Principal Property (as hereinafter defined) at any time owned by it, to secure any Indebtedness (as hereinafter defined) of it, without making effective provision whereby the Outstanding Securities shall be equally and ratably secured with any and all such Indebtedness of the Issuer and with any other Indebtedness of it similarly entitled to be equally and ratably secured; provided , however , that this restriction shall not apply to or prevent the creation or existence of:

(i) undetermined or inchoate liens and charges incidental to construction, maintenance, development or operation;

(ii) any liens of taxes and assessments for the then current year;

(iii) any liens of taxes and assessments not at the time delinquent;

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(iv) any liens of specified taxes and assessments which are delinquent but the validity of which is being contested in good faith at the time by the Issuer or any Subsidiary of it;

(v) any liens reserved in leases for rent and for compliance with the terms of the lease in the case of leasehold estates;

(vi) any obligations or duties, affecting the property of the Issuer or any Subsidiary of it, to any municipality or public authority with respect to any franchise, grant, license, permit or similar arrangement;

(vii) the liens of any judgments or attachments in an aggregate amount not in excess of $10,000,000, or the lien of any judgment or attachment the execution or enforcement of which has been stayed or which has been appealed and secured, if necessary, by the filing of an appeal bond;

(viii) any mortgage, pledge, lien or encumbrance on any property held or used by the Issuer or any Subsidiary of it in connection with the exploration for, development of or production of oil, gas, natural gas (including liquefied gas and storage gas), other hydrocarbons, helium, coal, metals, minerals, steam, timber, geothermal or other natural resources or synthetic fuels, such properties to include, but not be limited to, the interest of the Issuer or such Subsidiary in any mineral fee interests, oil, gas or other mineral leases, royalty, overriding royalty or net profits interests, production payments and other similar interests, wellhead production equipment, tanks, field gathering lines, leasehold or field separation and processing facilities, compression facilities and other similar personal property and fixtures;

(ix) any mortgage, pledge, lien or encumbrance on oil, gas, natural gas (including liquefied gas and storage gas), and other hydrocarbons, helium, coal, metals, minerals, steam, timber, geothermal or other natural resources or synthetic fuels produced or recovered from any property, an interest in which is owned or leased by the Issuer or any Subsidiary of it;

(x) mortgages, pledges, liens or encumbrances upon any property heretofore or hereafter acquired, created at the time of acquisition or within 365 days thereafter to secure all or a portion of the purchase price thereof, or existing thereon at the date of acquisition, whether or not assumed by the Issuer or any Subsidiary of it, provided that every such mortgage, pledge, lien or encumbrance shall apply only to the property so acquired and fixed improvements thereon;

(xi) any extension, renewal or refunding, in whole or in part, of any mortgage, pledge, lien or encumbrance permitted by Section (x) above, if limited to the same property or any portion thereof subject to, and securing not more than the amount secured by, the mortgage, pledge, lien or encumbrance extended, renewed or refunded;

(xii) mortgages, pledges, liens or encumbrances upon any property heretofore or hereafter acquired by any corporation that is or becomes such a Subsidiary of the Issuer after the date of the Fiscal Agency Agreement (“ Acquired Entity ”), provided that every such mortgage, pledge, lien or encumbrance (1) shall either (a) exist prior to the time the Acquired Entity becomes such a Subsidiary or (b) be created at the time the Acquired Entity becomes such a Subsidiary or within 365 days thereafter to secure all or a portion of the acquisition price thereof and (2) shall only apply to those properties owned by the Acquired Entity at the time it becomes such a Subsidiary or thereafter acquired by it from sources other than the Issuer or any other Subsidiary of it;

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(xiii) the pledge of current assets, in the ordinary course of business, to secure current liabilities;

(xiv) mechanics' or materialmen's liens, any liens or charges arising by reason of pledges or deposits to secure payment of workmen's compensation or other insurance, good faith deposits in connection with tenders, leases of real estate, bids or contracts (other than contracts for the payment of money), deposits to secure duties or public or statutory obligations, deposits to secure, or in lieu of, surety, stay or appeal bonds, and deposits as security for the payment of taxes or assessments or similar charges;

(xv) any lien arising by reason of deposits with, or the giving of any form of security to, any governmental agency or any body created or approved by law or governmental regulation for any purpose at any time in connection with the financing of the acquisition or construction of property to be used in the business of the Issuer or any Subsidiary of it or as required by law or governmental regulation as a condition to the transaction of any business or the exercise of any privilege or license, or to enable the Issuer or any such Subsidiary to maintain self-insurance or to participate in any funds established to cover any insurance risks or in connection with workmen's compensation, unemployment insurance, old age pensions or other social security, or to share in the privileges or benefits required for companies participating in such arrangements;

(xvi) any lien to secure Indebtedness of the Issuer other than Funded Debt (as hereinafter defined);

(xvii) any mortgage, pledge, lien or encumbrance of or upon any office equipment, data processing equipment (including, without limitation, computer and computer peripheral equipment), or transportation equipment (including without limitation, motor vehicles, tractors, trailers, marine vessels, barges, towboats, rolling stock and aircraft);

(xviii) any mortgage, pledge, lien or encumbrance created or assumed by the Issuer or any Subsidiary of it in connection with the issuance of debt securities the interest on which is excludable from gross income of the holder of such security pursuant to the Internal Revenue Code of 1986, as amended, for the purpose of financing, in whole or in part, the acquisition or construction of property to be used by the Issuer or any such Subsidiary;

(xix) the pledge or assignment of accounts receivable, or the pledge or assignment of conditional sales contracts or chattel mortgages and evidences of indebtedness secured thereby, received in connection with the sale by the Issuer or any Subsidiary of it of goods or merchandise to customers of the Issuer or any Subsidiary;

(xx) mortgages, pledges, liens or encumbrances upon any property (i) arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business (provided such Indebtedness is extinguished within five business days of its incurrence), and (ii) in favor of banking institutions arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

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(xxi) mortgages, pledges, liens or encumbrances upon any property arising out of conditional sale, title retention, consignment or similar arrangements for the sale or purchase of goods or services or arrangements for the treatment, separation or processing of gas liquids entered into by us or any Subsidiary in the ordinary course of business; or

(xxii) rights reserved to or vested in any Government Authority to use, control or regulate any property of us or any of our Subsidiaries.

In case the Issuer or any Subsidiary of it shall propose to pledge, mortgage or hypothecate any Principal Property at any time owned by it to secure any of its Indebtedness, other than as permitted by subdivisions (i) to (xxii) , inclusive, of this Paragraph 8 , the Issuer will prior thereto give written notice thereof to the Fiscal Agent, and the Issuer will, or will cause such Subsidiary to, prior to or simultaneously with such pledge, mortgage or hypothecation, effectively secure all the Securities equally and ratably with such Indebtedness.

Notwithstanding the foregoing provisions of this Paragraph 8 , the Issuer or any Subsidiary of it may incur, assume or guarantee indebtedness secured by a mortgage which would otherwise be subject to the foregoing restrictions in an aggregate amount which, together with all other Indebtedness of the Issuer or a Subsidiary of it secured by a mortgage which (if originally issued, assumed or guaranteed at such time) would otherwise be subject to the foregoing restrictions (not including Indebtedness permitted to be secured under clauses (i) through (xix) above), does not at the time exceed 10% of the Consolidated Net Tangible Assets of the Issuer as shown on its audited consolidated financial statements as of the end of the fiscal year preceding the date of determination.

For purposes of the Securities,

“ Consolidated Net Tangible Assets ” of any corporation means total assets less (a) total current liabilities (excluding Indebtedness due within 365 days) and (b) goodwill, patents and trademarks, all as reflected in such corporation's audited consolidated balance sheet preceding the date of a determination under the immediately preceding paragraph of this Paragraph 8 .

“ Funded Debt ” as applied to any corporation means all Indebtedness incurred, created, assumed or guaranteed by such corporation, or upon which it customarily pays interest charges; provided , however , that the term “Funded Debt” shall not include (i) Indebtedness incurred in the ordinary course of business representing borrowings, regardless of when payable, of such corporation from time to time against, but not in excess of the face amount of, its installment accounts receivable for the sale of appliances and equipment sold in the regular course of business or (ii) advances for construction and security deposits received by such corporation in the ordinary course of business.

“ Government Authority ” means any nation or government, any state, province, territory or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative function of or pertaining to government.

“ Indebtedness ” as applied to any corporation, means bonds, debentures, notes and other instruments representing obligations created or assumed by any such corporation for the repayment of money borrowed (other than unamortized debt discount or premium). All Indebtedness secured by a lien upon property owned by any corporation and upon which Indebtedness any such corporation customarily pays interest, although any such corporation has not assumed or become liable for the payment of such Indebtedness, shall for all purposes of the Securities be deemed to be Indebtedness of any such corporation.

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All indebtedness for money borrowed or incurred by other persons which is directly guaranteed as to payment of principal by any corporation shall for all purposes of the Securities be deemed to be Indebtedness of such corporation, but no other contingent obligation of such corporation in respect of Indebtedness incurred by other persons shall for any purpose be deemed Indebtedness of such corporation. Indebtedness of any corporation shall not include: (i) amounts which are payable only out of all or a portion of the oil, gas, natural gas, helium, coal, metal, mineral, steam, timber, hydrocarbons, or geothermal or other natural resources produced, derived or extracted from properties owned or developed by such corporation; (ii) any amount representing capitalized lease obligations; (iii) any indebtedness incurred to finance oil, gas, natural gas, helium, coal, metals, minerals, steam, timber, hydrocarbons or geothermal or other natural resources or synthetic fuel exploration or development, payable with respect to principal and interest, solely out of proceeds of oil, gas, natural gas, helium, coal, metals, minerals, steam, timber, hydrocarbons or geothermal or other natural resources or synthetic fuel to be produced, sold and/or delivered by any such corporation; (iv) indirect guarantees or other contingent obligations in connection with the Indebtedness of others, including agreements, contingent or otherwise, with such other persons or with third persons with respect to, or to permit or ensure the payment of, obligations of such other persons, including, without limitation, agreements to purchase or repurchase obligations of such other persons, agreements to advance or supply funds to or to invest in such other persons, or agreements to pay for property, products or services of such other persons (whether or not conferred, delivered or rendered), and any demand charge, throughput, take-or-pay, keep-well, make-whole, cash deficiency, maintenance of working capital or earnings or similar agreements; and (v) any guarantees with respect to lease or other similar periodic payments to be made by other persons.

“ Principal Property ” of the Issuer means any oil or gas pipeline, gas processing plant or chemical plant located in the United States, except any such pipeline, facility, station or plant that in the opinion of the Board of Directors of the Issuer is not of material importance to the total business conducted by the Issuer or its Subsidiaries. “Principal Property” shall not include any oil or gas property or the production or any proceeds of production from an oil or gas producing property or the production or any proceeds of production of gas processing plants or oil or gas or petroleum products in any pipeline. “Principal Property” shall also include any gas storage facility or gas compressor station located in the United States, except any such facility or station that in the opinion of the Board of Directors of the Issuer is not of material importance to the total business conducted by the Issuer or its Subsidiaries, and “Principal Property” shall not include any liquefied natural gas plants and related storage facilities or any natural gas liquids processing plants.

9. (a) The Issuer shall not consolidate with or merge into any other person or convey, transfer or lease its properties and assets substantially as an entirety to any person, and the Issuer shall not permit any person to consolidate with or merge into the Issuer or convey, transfer or lease its properties and assets substantially as an entirety to the Issuer unless:

(i) in case the Issuer shall consolidate with or merge into another person or convey, transfer or lease its properties and assets substantially as an entirety to any person, the person formed by such consolidation or into which the Issuer is merged or the person which acquires by conveyance or transfer, or which leases, the properties and assets of the Issuer substantially as an entirety shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia (the “ Successor Person ”) and shall expressly assume, by amendment to the Fiscal Agency Agreement signed by the Issuer and such Successor Person and delivered to the Fiscal Agent, the due and punctual payment of the principal of and interest on at the Securities and the performance or observance of every covenant hereof and of the Fiscal Agency Agreement on the part of the Issuer to be performed or observed;

NY3667693.7 A -16

(ii) immediately after giving effect to such transaction and treating any indebtedness which becomes an obligation of the Issuer or any Subsidiary of it as a result of such transaction as having been incurred by the Issuer or any such Subsidiary at the time of such transaction, no event of default (as set forth in Paragraph 7 ), and no event which, with notice or lapse of time or both, would become such an event of default, shall have happened and be continuing;

(iii) if, as a result of any such consolidation or merger or such conveyance, transfer or lease, properties or assets of the Issuer or any Subsidiary of it would become subject to a mortgage, pledge, lien, security interest or other encumbrance which would not be permitted by Paragraph 8 hereof, the Issuer, or the Successor Person, as the case may be, shall take such steps as shall be necessary effectively to secure the Securities equally and ratably with (or prior to) all Indebtedness secured by such mortgage, pledge, lien, security interest or other encumbrance; and

(iv) the Issuer has delivered to the Fiscal Agent an Officers' Certificate and a written opinion or opinions of counsel satisfactory to the Fiscal Agent (who may be counsel to the Issuer), stating that such consolidation, merger, conveyance, transfer or lease and such amendment to the Fiscal Agency Agreement comply with this Paragraph 9 and that all conditions precedent herein provided for relating to such transaction have been complied with.

(b) Upon any such consolidation or merger, or any conveyance, transfer or lease of the properties and assets of the Issuer substantially as an entirety in accordance with Paragraph 9(a) , the Successor Person shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under the Fiscal Agency Agreement and the Securities with the same effect as if the Successor Person had been named as the Issuer in the Fiscal Agency Agreement and the Securities, and thereafter the Issuer, except in the case of a lease of its properties and assets, shall be released from its liability as obligor on any of the Securities and under the Fiscal Agency Agreement.

10. Section 8 of the Fiscal Agency Agreement, which requires the Issuer to provide registered holders of Securities or, in the case of clauses (a) and (b) thereof, designated prospective purchasers of Securities with certain information and an Officers' Certificate, is hereby incorporated mutatis mutandis by reference herein.

11. Until the date that is one year from the date of original issuance of the Securities, the Issuer will not, and will not permit any of its “affiliates” (as defined under Rule 144 under the Act or any successor provision thereto) to, resell any Securities which constitute “restricted securities” under Rule 144 that have been reacquired by any of them.

12. If any mutilated Security is surrendered to the Fiscal Agent, the Issuer shall execute, and the Fiscal Agent shall authenticate and deliver in exchange therefor, a new Security of like tenor and principal amount, bearing a number not contemporaneously outstanding.

If there be delivered to the Issuer and the Fiscal Agent (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them and any agent of each of them harmless, then, in the absence of notice to the Issuer or the Fiscal Agent that such Security has been acquired by a bona fide purchaser, the Issuer shall execute, and upon its written request the Fiscal Agent shall authenticate and deliver in lieu of any such destroyed, lost or stolen Security a new Security of like tenor and principal amount and bearing a number not contemporaneously outstanding.

NY3667693.7 A -17

Upon the issuance of any new Security under this Paragraph 12 , the Issuer may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and the expenses of the Fiscal Agent) connected therewith.

Every new Security issued pursuant to this Paragraph 12 in lieu of any destroyed, lost or stolen Security, shall constitute an original additional contractual obligation of the Issuer, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone.

Any new Security delivered pursuant to this Paragraph 12 shall be so dated that neither gain nor loss in interest shall result from such exchange.

The provisions of this Paragraph 12 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

13. Section 12 of the Fiscal Agency Agreement, which Section is hereby incorporated mutatis mutandis by reference herein, provides that, with certain exceptions as therein provided and by written consent of a majority in the principal amount of all Outstanding Securities, the Issuer and the Fiscal Agent may modify, amend or supplement the Fiscal Agency Agreement or the terms of the Securities or may give consents or waivers or take other actions with respect thereto. Any such modification, amendment, supplement, consent, waiver or other action shall be conclusive and binding on the holder of this Security and on all future holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange heretofore or in lieu hereof, whether or not notation thereof is made upon this Security. The Fiscal Agency Agreement and the terms of the Securities may be modified or amended by the Issuer and the Fiscal Agent, without the consent of any holders of Securities, for the purpose of (i) adding to the covenants of the Issuer for the benefit of the holders of Securities, or (ii) surrendering any right or power conferred upon the Issuer, or (iii) securing the Securities pursuant to the requirements of the Securities or otherwise, or (iv) evidencing the succession of another corporation to the Issuer and the assumption by any such successor of the covenants and obligations of the Issuer in the Securities or in the Fiscal Agency Agreement pursuant to Paragraph 9 hereof, (v) providing for the issuance of additional Securities in accordance with the Fiscal Agency Agreement, or (vi) correcting or supplementing any defective provision contained in the Securities or in the Fiscal Agency Agreement, to all of which each holder of any Security, by acceptance thereof, consents.

14. No reference herein to the Fiscal Agency Agreement and no provision of this Security or of the Fiscal Agency Agreement shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

15. This Security is subject to the provisions of Section 15 of the Fiscal Agency Agreement (which are incorporated mutatis mutandis by reference herein) which provide for the defeasance at any time of (i) the entire indebtedness of this Security or (ii) certain covenants and events of default, in each case upon compliance with certain conditions set forth therein.

16. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures (“ CUSIP ”), the Issuer will cause CUSIP numbers to be printed on the Securities as a convenience to the holders of the Securities. This Security will also bear an ISIN number. No representation is made as to the accuracy of such numbers as printed on the Securities and reliance may be placed only on the other identification numbers printed hereon.

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17. THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

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[IF THIS SECURITY IS A GLOBAL SECURITY, INSERT AS A SEPARATE PAGE]

Schedule A

SCHEDULE OF ADJUSTMENTS

Initial Principal Amount: U.S. $___________________



Date adjustment made	Principal amount increase	Principal amount decrease	Principal amount following adjustment	Notation made on behalf of the Transfer Agent

NY3667693.7 A-1

EXHIBIT B

FORM OF TRANSFER CERTIFICATE

FOR TRANSFER OR EXCHANGE FROM REGULATION S

GLOBAL SECURITY TO RULE 144A GLOBAL SECURITY

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration


Re :	NORTHERN NATURAL GAS COMPANY

4.10% Senior BONDS due 2042

Reference is hereby made to the Fiscal Agency Agreement, dated as of August 27, 2012 (the “ Fiscal Agency Agreement ”), between Northern Natural Gas Company and The Bank of New York Mellon Trust Company, N.A., as Fiscal Agent. Capitalized terms used but not defined herein shall have the meanings given to them in the Fiscal Agency Agreement.

This letter relates to U.S. $_________ principal amount of Securities which are evidenced by one or more Regulation S Global Securities in fully registered form (CUSIP No. U66480 AG6; ISIN No. [ ]) and held with the U.S. Depository by means of a book-entry interest through Euroclear or Clearstream in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in the Regulation S Global Security to a Person that will take delivery thereof (the “ Transferee ”) in the form of any equal principal amount of Securities evidenced by one or more Rule 144A Global Securities (CUSIP No. 665501 AK8).

In connection with such request and in respect of such Securities, the Transferor does hereby certify that the interests in the Regulation S Global Security are being transferred pursuant to and in accordance with Rule 144A under United States Securities Act of 1933, as amended (the “ Act ”), and, accordingly, the Transferor does hereby further certify that the interests in the Regulation S Global Security are being transferred to a Person that the Transferor reasonably believes is purchasing the Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States.

NY3667693.7 B-1

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and the underwriters and initial purchasers of the Securities being transferred.



	[Insert Name of Transferor]

	By: ___________________________________
	Name:
	Title:
Dated: _____________

cc: NORTHERN NATURAL GAS COMPANY

Signature Guaranty: ___________________

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Transfer Agent, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“ STAMP ”) or such other “signature guarantee program” as may be determined by the Transfer Agent in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

NY3667693.7 B-2

EXHIBIT C

FORM OF TRANSFER CERTIFICATE FOR

TRANSFER OR EXCHANGE FROM REGULATION S GLOBAL

SECURITY TO RESTRICTED DEFINITIVE SECURITY

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration

Re : NORTHERN NATURAL GAS COMPANY

4.10% SENIOR BONDS DUE 2042

This letter relates to U.S. $___________ principal amount of Securities which are evidenced by one or more Regulation S Global Securities in fully registered form (CUSIP No. U66480 AG6; ISIN No. [ ]) and held with the U.S. Depository by means of a book-entry interest through Euroclear or Clearstream in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in the Regulation S Global Security to a Person that will take delivery thereof (the “ Transferee ”) in the form of an equal principal amount of Securities evidenced by a Restricted Definitive Security.

In connection with such request and in respect of such Securities, the Transferor does hereby certify that the interests in the Regulation S Global Security are being transferred to a Person that the Transferor reasonably believes is purchasing the Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is an institutional “accredited investor” as described in Rule 501(a)(1), (2), (3) or (7) under the Unites States Securities Act of 1933, as amended (the “ Act ”), and is purchasing such Securities for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Act, in a transaction in accordance with any applicable securities laws of the United States or any state thereof.

NY3667693.7 C-1

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and the underwriters and initial purchasers of the Securities being transferred.



	[Insert Name of Transferor]


	By: ____________________________________
	Name:
	Title:
Dated: _________________

cc: NORTHERN NATURAL GAS COMPANY

NY3667693.7 C-2

EXHIBIT D

FORM OF TRANSFER CERTIFICATE

FOR EXCHANGE OR TRANSFER FROM REGULATION S GLOBAL

SECURITY TO UNRESTRICTED GLOBAL SECURITY

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration

Re: NORTHERN NATURAL GAS COMPANY

4.10% Senior Bonds due 2042

This letter relates to U.S.$ _________ principal amount of Securities which are evidenced by one or more Regulation S Global Securities (CUSIP No. U66480 AG6; ISIN No. [ ]) and held with the U.S. Depository by means of a book-entry interest through Euroclear or Clearstream in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in the Securities to a Person who will take delivery thereof in the form of an equal principal amount of Securities evidenced by one or more unrestricted Global Securities (CUSIP No. _____________).

In connection with such request and in respect of such Securities, the Transferor does hereby certify that such transfer has been effected pursuant to and in accordance with either Rule 903, Rule 904 or Rule 144 under the Unites States Securities Act of 1933, as amended (the “ Act ”), and accordingly the Transferor does hereby further certify that:

(1) if the transfer has been effected pursuant to Rule 903 or Rule 904:

(a) the offer of the Securities was not made to a Person in the United States;

(b) either:

(i) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any Person acting on its behalf reasonably believed that the transferee was outside the United States, or

(ii) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States;

(c) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and

NY3667693.7 D-1

(d) the transaction is not part of a plan or scheme to evade the registration requirements of the Act; or

(2) if the transfer has been effected pursuant to Rule 144, the Securities have been transferred in a transaction permitted by Rule 144.

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and the underwriters and initial purchasers, if any, of the Securities being transferred. Terms used in this certificate and not otherwise defined in the Fiscal Agency Agreement have the meanings set forth in Regulation S under the Act.



	[Insert Name of Transferor]

	By: _____________________________________
	Name:
	Title:
Dated: __________________

cc: NORTHERN NATURAL GAS COMPANY

NY3667693.7 D-2

EXHIBIT E

FORM OF TRANSFER CERTIFICATE

FOR EXCHANGE OR TRANSFER FROM RULE 144A GLOBAL

SECURITY TO REGULATION S GLOBAL SECURITY

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration

Re: NORTHERN NATURAL GAS COMPANY

4.10% SENIOR BONDS DUE 2042

This letter relates to U.S.$ ________ principal amount of Securities which are evidenced by one or more Rule 144A Global Securities (CUSIP No. 665501 AK8) and held through the U.S. Depository in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in the Securities to a non-U.S. person who will take delivery thereof in the form of an equal principal amount of Securities evidenced by one or more Regulation S Global Securities (CUSIP No. U66480 AG6; ISIN No. [ ]), which amount, immediately after such transfer, is to be held with the U.S. Depository through Euroclear or Clearstream (Common Code _______).

In connection with such request and in respect of such Securities, the Transferor does hereby certify that such transfer has been effected pursuant to and in accordance with Rule 903 or Rule 904 under the Unites States Securities Act of 1933, as amended (the “ Act ”), and accordingly the Transferor does hereby further certify that:

(1) the offer of the Securities was not made to a Person in the United States;

(2) either:

(a) at the time the buy order was originated, the transferee was outside the United States or the Transferor and any Person acting on its behalf reasonably believed that the transferee was outside the United States, or

(b) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any Person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States;

(3) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable;

NY3667693.7 E-1

(4) the transaction is not part of a plan or scheme to evade the registration requirements of the Act; and

(5) upon completion of the transaction, the beneficial interest being transferred as described above is to be held with the U.S. Depository through Euroclear or Clearstream (Common Code ___________).

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and the underwriters or initial purchasers, if any, of the initial offering of such Securities being transferred. Terms used in this certificate and not otherwise defined in the Fiscal Agency Agreement have the meanings set forth in Regulation S under the Act.



	[Insert Name of Transfer]

	By: _________________________________
	Name:
	Title:
Dated: __________________

cc: NORTHERN NATURAL GAS COMPANY

Signature Guaranty: _____________________

NY3667693.7 E-2

EXHIBIT F

FORM OF TRANSFER CERTIFICATE

FOR EXCHANGE OR TRANSFER FROM RULE 144A GLOBAL

SECURITY TO RESTRICTED DEFINITIVE SECURITY

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration

Re: NORTHERN NATURAL GAS COMPANY

4.10% SENIOR BONDS DUE 2042

This letter relates to U.S.$ _________ principal amount of Securities which are evidenced by one or more Rule 144A Global Securities (CUSIP No. 665501 AK8) and held through the U.S. Depository in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such beneficial interest in the Securities to a Person who will take delivery thereof in the form of an equal principal amount of Securities evidenced by a Restricted Definitive Security.

In connection with such request and in respect of such Securities, the Transferor does hereby certify that the interests in the Rule 144A Global Security are being transferred to a Person that the Transferor reasonably believes is purchasing the Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is an institutional “accredited investor” as described in Rule 501(a)(1), (2), (3) or (7) under the Unites States Securities Act of 1933, as amended (the “ Act ”), and is purchasing such Securities for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Act, in a transaction in accordance with any applicable securities laws of the United States or any state thereof.

NY3667693.7 F-1

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and the underwriters and initial purchasers, if any, of the Securities being transferred.



	[Insert Name of Transferor]

	By: ___________________________________
	Name:
	Title:

Dated: ___________________

cc: NORTHERN NATURAL GAS COMPANY

NY3667693.7 F-2

EXHIBIT G

FORM OF TRANSFER CERTIFICATE

FOR EXCHANGE OR TRANSFER FROM RULE 144A GLOBAL

SECURITY TO UNRESTRICTED GLOBAL SECURITY

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration

Re: NORTHERN NATURAL GAS COMPANY

4.10% SENIOR BONDS DUE 2042

(1) if the transfer has been effected pursuant to Rule 903 or Rule 904:

(a) the offer of the Securities was not made to a Person in the United States;

(b) either:

(c) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and

NY3667693.7 G-1

(d) the transaction is not part of a plan or scheme to evade the registration requirements of the Act; or

(2) if the transfer has been effected pursuant to Rule 144, the Securities have been transferred in a transaction permitted by Rule 144.



	[Insert Name of Transferor]

	By: ____________________________________
	Name:
	Title:
Dated: _________________

cc: NORTHERN NATURAL GAS COMPANY

NY3667693.7 G-2

EXHIBIT H

FORM OF TRANSFER CERTIFICATE

FOR TRANSFER AND EXCHANGE OF RESTRICTED DEFINITIVE SECURITIES

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration

Re: NORTHERN NATURAL GAS COMPANY

4.10% SENIOR BONDS DUE 2042

This letter relates to U.S. $________________ principal amount of Securities presented or surrendered on the date hereof (the “ Surrendered Securities ”) which are registered in the name of [insert name of transferor] (the “ Transferor ”). The Transferor has requested a transfer of such Surrendered Securities registered in the name of a Person (the “ Transferee ”) other than the Transferor (each such transaction being referred to herein as a “transfer”).

In connection with such request and in respect of such Surrendered Securities, the Transferor does hereby certify that:

[CHECK ONE]



(1)	the Surrendered Securities are being transferred to the Issuer or an Affiliate thereof;
(2)	the Surrendered Securities are being transferred pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the “ Act ”) and, accordingly, the Transferor does hereby further certify that the Surrendered Securities are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States;
(3)	the Surrendered Securities are being transferred to a Person that the Transferor reasonably believes is purchasing the Surrendered Securities for its own account or for one or more accounts with respect to which such Person exercise sole investment discretion, and such Person and each such account is an institutional “accredited investor” as described in Rule 501(a)(1), (2), (3) or (7) under the Act and is purchasing such Surrendered Securities for investment purposes and not with a view to, or for offer or sale in connection with, any distribution in violation of the Act in a transaction in accordance with any applicable securities laws of the United States or any state thereof;
(4)	the Surrendered Securities are being transferred pursuant to and in accordance with Regulation S and:

(a) the offer of the Surrendered Securities was not made to a Person in the United States;

NY3667693.7 H-1

(b) either:

(c) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or 904(b) of Regulation S, as applicable; and

(d) the transaction is not part of a plan or scheme to evade the registration requirements of the Act;



(5)	the Surrendered Securities are being transferred in a transaction permitted by Rule 144.

NY3667693.7 H-2

This certificate and the statements contained herein are made for your benefit and the benefit of the Issuer and the underwriters and initial purchasers of the Securities being transferred.



	[Insert Name of Transferor]

	By: ______________________________________
	Name:
	Title:
Dated: ________________

cc: NORTHERN NATURAL GAS COMPANY

Signature Guaranty: _______________________

NY3667693.7 H-3

EXHIBIT I

FORM OF CERTIFICATE FROM

ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR

The Bank of New York Mellon Trust Company, N.A.

2 N. LaSalle Street

Suite 1020

Chicago, Illinois 60602

Attention: Corporate Trust Administration

Re: NORTHERN NATURAL GAS COMPANY

4.10% SENIOR BONDS DUE 2042

Reference is hereby made to the Fiscal Agency Agreement, dated as of August 27, 2012 (the “ Fiscal Agency Agreement ”), between Northern Natural Gas Company (the “ Company ”) and The Bank of New York Mellon Trust Company, N.A., as Fiscal Agent (the “ Fiscal Agent ”). Capitalized terms used but not defined herein shall have the meanings given to them in the Fiscal Agency Agreement.

In connection with our proposed purchase of $____________ aggregate principal amount of the Company's 4.10% Senior Bonds due 2042 (the “ Bonds ”) we confirm that:

1. We will take delivery of the entire aggregate principal amount of Bonds we are acquiring only in the form of a Restrictive Definitive Security.

2. We understand that any subsequent transfer of the Bonds or any interest therein is subject to certain restrictions and conditions set forth in the Fiscal Agency Agreement and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Bonds or any interest therein except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the “ Securities Act ”).

NY3667693.7 I-1

3. We understand that the offer and sale of the Bonds have not been registered under the Securities Act, and that the Bonds and any interest therein may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell the securities we are acquiring or any interest therein prior to the date which is one year after the later of the original issue date of the Bonds and the last date on which Northern Natural Gas Company, or any of its affiliates, was the holder of such securities (or any predecessor securities thereof), such sales will be made only (A) to Northern Natural Gas Company or any of its Subsidiaries, (B) pursuant to a registration statement that has been declared effective under the Securities Act, (C) for so long as the securities are eligible for resale pursuant to Rule 144, to a person reasonably believed to be a qualified institutional buyer (as defined in Rule 144A) that purchases for its own account or for the account of a qualified institutional buyer to whom notice is given that the transfer is being made in reliance on Rule 144A, (D) in a transaction meeting the requirements of Rule 144 under the Securities Act, (E) to an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of an institutional accredited investor, and that executes and delivers a certificate substantially in the form of this certificate, (F) pursuant to offers and sales that occur outside the United States in an offshore transaction in accordance with Rule 904 under the Securities Act, or (G) pursuant to any other available exemption from the registration requirements of the Securities Act and, in each of the cases above, in accordance with the applicable Securities laws of any state of the United States or any other applicable jurisdiction, and, for so long as the Bonds we are acquiring are represented by a Restricted Definitive Security, we further agree to provide (i) to any Person purchasing the Restrictive Definitive Security or a beneficial interest in a Global Security from us in a transaction meeting the requirements of clauses (A) or (C) through (G) of this paragraph a notice advising such purchaser that resales thereof are restricted as stated herein and (ii) to the Fiscal Agent and the Company, a duly completed certificate in the form of Exhibit H to the Fiscal Agency Agreement.

4. We understand that, on any proposed resale of the Bonds or beneficial interest therein, we will be required to furnish to you and the Company such certifications, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Bonds purchased by us will bear a legend to the foregoing effect.

5. We are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Bonds, and we and any accounts for which we are acting are each able to bear the economic risk of our or its investment.

6. We are acquiring the Bonds purchased by us for our own account or for one or more accounts (each of which is an institutional “accredited investor”) as to each of which we exercise sole investment discretion.

You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.

NY3667693.7 I-2



	__________________________________________
	[Insert Name of Accredited Investor]

	By: ______________________________________
	Name:
	Title:
Dated: ____________________

NY3667693.7 I-3

CLIFFORD CLIFFORD CHANCE LLP

CHANCE

EXECUTION VERSION

£150,000,000

FACILITY AGREEMENT

DATED 20 AUGUST 2012

FOR

NORTHERN POWERGRID HOLDINGS COMPANY

WITH

ABBEY NATIONAL TREASURY SERVICS PLC

LLOYDS TSB BANK PLC

THE ROYAL BANK OF SCOTLAND PLC

AND

LLOYDS TSB BANK PLC

ACTING AS AGENT

____________________________________________________

MULTICURRENCY REVOLVING FACILITY

AGREEMENT

___________________________________________________



CONTENTS
Clause	Page

1. Definitions and Interpretation	1
2. The Facility	18
3. Purpose	20
4. Conditions of Utilisation	20
5. Utilisation	24
6. Optional Currencies	25
7. Repayment	27
8. Prepayment and cancellation	28
9. Interest	32
10. Interest Periods	33
11. Changes to the calculation of interest	33
12. Fees	34
13. Tax Gross Up and Indemnities	36
14. Increased costs	45
15. Other indemnities	46
16. Mitigation by the Lenders	47
17. Costs and expenses	47
18. Guarantee and indemnity	49
19. Representations	52
20. Information undertakings	55
21. Financial Covenants	59
22. General undertakings	64
23. Events of Default	66
24. Changes to the Parties	71
25. Role of the Agent and the Arranger	77
26. Conduct of business by the Finance Parties	84
27. Sharing among the Finance Parties	84
28. Payment mechanics	87
29. Set-off	90
30. Notices	91
31. Calculations and certificates	93
32. Partial invalidity	93
33. Remedies and waivers	93
34. Amendments and waivers	94
35. Confidentiality	96
36. Counterparts	100
37. Governing law	101
38. Enforcement	101



Schedule 1 The Parties	102
Part I The Obligors	102
Part II The Original Lenders	103
Schedule 2 Conditions Precedent	104
Schedule 3 Requests	106
Schedule 4 Mandatory Cost Formulae	107
Schedule 5 Form of Transfer Certificate	110
Schedule 6 Conversion Notices	112
Part I Form of Preliminary Conversion Notice	112
Part II Form of Secondary Conversion Notice	113
Schedule 7 Form of Compliance Certificate	114
Schedule 8 LMA Form of Confidentiality Undertaking	116
Schedule 9 Timetables	121
Schedule 10 Form of Increase Confirmation	122

THIS AGREEMENT is dated 20 August 2012 and made between:


(1)	NORTHERN POWERGRID HOLDINGS COMPANY (the " Company " and the " Guarantor ");


(2)	THE SUBSIDIARIES of the Company listed in Part I of Schedule 1 ( The Original Parties ) as borrowers (together with the Company the " Borrowers ");


(3)	ABBEY NATIONAL TREASURY SERVICES PLC, LLOYDS TSB BANK PLC and THE ROYAL BANK OF SCOTLAND PLC as mandated lead arranger(s) (whether acting individually or together the " Arranger ");


(4)	THE FINANCIAL INSTITUTIONS listed in Part II of Schedule 1 ( The Original Parties ) as lenders (the " Original Lenders "); and


(5)	LLOYDS TSB BANK PLC as agent of the other Finance Parties (the " Agent ").

IT IS AGREED as follows:

SECTION 1

INTERPRETATION


1.	Definitions and Interpretation


1.1	Definitions

In this Agreement:

" Acceptable Bank " means a Lender or bank or financial institution which has a rating for its long-term unsecured and non credit-enhanced debt obligations of A+ or higher by Standard & Poor's Rating Services or Fitch Ratings Ltd or A1 or higher by Moody's Investor Services Limited or a comparable rating from an internationally recognised credit rating agency.

" Additional Cost Rate " has the meaning given to it in Schedule 4 ( Mandatory Cost formulae ).

" Affiliate " means, in relation to any person, a Subsidiary of that person or a Holding Company of that person or any other Subsidiary of that Holding Company. For the purposes of The Royal Bank of Scotland plc, " Affiliates " shall include The Royal Bank of Scotland N.V. and any of its Affiliates but shall not include: (i) the UK government or any member or instrumentality thereof, including Her Majesty's Treasury and UK Financial Investments Limited (or any directors, officers, employees or entities thereof); or (ii) any persons or entities controlled by or under common control with the UK government or any member or instrumentality thereof (including Her Majesty's Treasury and UK Financial Investments Limited) and which are not part of The Royal Bank of Scotland Group plc and its subsidiary or subsidiary undertakings.

" Agent's Spot Rate of Exchange " means the Agent's spot rate of exchange for the purchase of the relevant currency with the Base Currency in the London foreign exchange market at or about 11:00 a.m. on a particular day.

" Aggregate RAV " means the aggregate of Northeast RAV and Yorkshire RAV.

93954-4-1-v3.0 -1 - 70-40529536

" Assignment Agreement " means an agreement in the form agreed between the relevant assignor and assignee.

" Authorisation " means an authorisation, consent, approval, resolution, licence, exemption, filing, notarisation or registration.

" Authority " means the Gas and Electricity Markets Authority (including Ofgem).

" Availability Period " means the period from and including the date of this Agreement to and including one Month prior to the Termination Date.

" Available Tranche A Commitment " means a Lender's Tranche A Commitment minus:


(a)	the Base Currency Amount of its participation in any outstanding Tranche A Loans; and


(b)	in relation to any proposed Utilisation, the Base Currency Amount of its participation in any Tranche A Loans that are due to be made on or before the proposed Utilisation Date,

other than that Lender's participation in any Tranche A Loans that are due to be repaid or prepaid on or before the proposed Utilisation Date.

" Available Tranche A Facility " means the aggregate for the time being of each Lender's Available Tranche A Commitment.

" Available Tranche B Commitment " means a Lender's Tranche B Commitment minus:


(a)	the Base Currency Amount of its participation in any outstanding Tranche B Loans; and


(b)	in relation to any proposed Utilisation, the Base Currency Amount of its participation in any Tranche B Loans that are due to be made on or before the proposed Utilisation Date,

other than that Lender's participation in any Tranche B Loans that are due to be repaid or prepaid on or before the proposed Utilisation Date.

" Available Tranche B Facility " means the aggregate for the time being of each Lender's Available Tranche B Commitment.

" Available Tranche C Commitment " means a Lender's Tranche C Commitment minus:


(a)	the Base Currency Amount of its participation in any outstanding Tranche C Loans; and


(b)	in relation to any proposed Utilisation, the Base Currency Amount of its participation in any Tranche C Loans that are due to be made on or before the proposed Utilisation Date,

other than that Lender's participation in any Tranche C Loans that are due to be repaid or prepaid on or before the proposed Utilisation Date.

" Available Tranche C Facility " means the aggregate for the time being of each Lender's Available Tranche C Commitment.

" Base Currency " means sterling.

93954-4-1-v3.0 -2 - 70-40529536

" Base Currency Amount " means, in relation to a Loan, the amount specified in the Utilisation Request delivered by a Borrower for that Loan (or, if the amount requested is not denominated in the Base Currency, that amount converted into the Base Currency at the Agent's Spot Rate of Exchange on the date which is three Business Days before the Utilisation Date or, if later, on the date the Agent receives the Utilisation Request) adjusted to reflect any repayment or prepayment of the Loan.

" Break Costs " means the amount (if any) by which:


(a)	the interest which a Lender should have received for the period from the date of receipt of all or any part of its participation in a Loan or Unpaid Sum to the last day of the current Interest Period in respect of that Loan or Unpaid Sum, had the principal amount or Unpaid Sum received been paid on the last day of that Interest Period;

exceeds:


(b)	the amount which that Lender would be able to obtain by placing an amount equal to the principal amount or Unpaid Sum received by it on deposit with a leading bank in the Relevant Interbank Market for a period starting on the Business Day following receipt or recovery and ending on the last day of the current Interest Period.

" Business Day " means a day (other than a Saturday or Sunday) on which banks are open for general business in London and:


(a)	(in relation to any date for payment or purchase of a currency other than euro) the principal financial centre of the country of that currency; or


(b)	(in relation to any date for payment or purchase of euro) any TARGET Day.

" Cash Equivalent Investments " means at any time investments in sterling demand or time deposits, UK Government Stock, certificates of deposit and short term debt obligations (including commercial paper), synthetic sterling deposits, shares in money market liquidity funds and guaranteed investment contracts, provided that in all cases such investments have a maturity of no longer than nine months from the date of their acquisition.

" Code " means, at any date, the US Internal Revenue Code of 1986 (or any successor legislation thereto) as amended from time to time and the regulations promulgated and the judicial and administrative decisions rendered under it, all as the same may be in effect at such date.

" Commitment " means the aggregate for the time being of each Lender's Tranche A Commitment, Tranche B Commitment and Tranche C Commitment.

" Commitment Fee Percentage " means in respect of any Borrower on any day, 40 per cent. of the Margin applicable to that Borrower on such day (or that would have been applicable had such Borrower drawn a Loan on such day).

" Compliance Certificate " means a certificate substantially in the form set out in Schedule 7 ( Form of Compliance Certificate ).

93954-4-1-v3.0 -3 - 70-40529536

" Competition Act " means the Competition Act 1998.

" Confidential Information " means all information relating to the Company, any Obligor, the Group, the Finance Documents or the Facility of which a Finance Party becomes aware in its capacity as, or for the purpose of becoming, a Finance Party or which is received by a Finance Party in relation to, or for the purpose of becoming a Finance Party under, the Finance Documents or the Facility from either:


(a)	any member of the Group or any of its advisers; or


(b)	another Finance Party, if the information was obtained by that Finance Party directly or indirectly from any member of the Group or any of its advisers,

in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:


(i)	is or becomes public information other than as a direct or indirect result of any breach by that Finance Party of Clause 35 ( Confidentiality ); or


(ii)	is identified in writing at the time of delivery as non-confidential by any member of the Group or any of its advisers; or

(iii)

is known by that Finance Party before the date the information is disclosed to it in accordance with paragraphs (a) or (b) above or is lawfully obtained by that Finance Party after that date, from a source which is, as far as that Finance Party is aware, unconnected with the Group and which, in either case, as far as that Finance Party is aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality.

" Confidentiality Undertaking " means a confidentiality undertaking substantially in a recommended form of the LMA as set out in Schedule 8 ( LMA Form of Confidentiality Undertaking ) or in any other form agreed between the Company and the Agent.

" Contribution Notice " means a contribution notice issued by the Pensions Regulator under section 38 or section 47 of the Pensions Act 2004.

" CTA " means the Corporation Tax Act 2009.

" Default " means an Event of Default or any event or circumstance specified in Clause 23 ( Events of Default ) which would (with the expiry of a grace period, the giving of notice, the making of any determination under the Finance Documents or any combination of any of the foregoing) be an Event of Default.

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" Defaulting Lender " means any Lender:


(a)	which has failed to make its participation in a Loan available or has notified the Agent or the Company (which has notified the Agent) that it will not make its participation in a Loan available by the Utilisation Date of that Loan in accordance with Clause 5.4 ( Lenders' participation );


(b)	which has otherwise rescinded or repudiated a Finance Document; or


(c)	with respect to which an Insolvency Event has occurred and is continuing,

unless, in the case of paragraph (a) above:


(i)	its failure to pay is caused by:


(A)	administrative or technical error; or


(B)	a Disruption Event; and,

payment is made within 5 Business Days of its due date; or


(ii)	the Lender is disputing in good faith whether it is contractually obliged to make the payment in question.

" Disruption Event " means either or both of:


(a)	a material disruption to those payment or communications systems or to those financial markets which are, in each case, required to operate in order for payments to be made in connection with the Facility (or otherwise in order for the transactions contemplated by the Finance Documents to be carried out) which disruption is not caused by, and is beyond the control of, any of the Parties; or


(b)	the occurrence of any other event which results in a disruption (of a technical or systems-related nature) to the treasury or payments operations of a Party preventing that, or any other Party:


(i)	from performing its payment obligations under the Finance Documents; or


(ii)	from communicating with other Parties in accordance with the terms of the Finance Documents,

(and which (in either such case)) is not caused by, and is beyond the control of, the Party whose operations are disrupted.

" DNO Licence " means in relation to each Regulated Borrower the distribution licence as amended from time to time, granted or treated as granted to it by the Authority under section 6(1)(c) of the Electricity Act.

" Electricity Act " means the Electricity Act 1989.

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" Enterprise Act " means the Enterprise Act 2002.

" Environmental Claim " means any claim, proceeding or investigation by any person in respect of any Environmental Law.

" Environmental Law " means any applicable law in any jurisdiction in which any member of the Group conducts business which relates to the pollution or protection of the environment or harm to or the protection of human health or the health of animals or plants.

" Environmental Permits " means any permit, licence, consent, approval and other authorisation and the filing of any notification, report or assessment required under any Environmental Law for the operation of the business of any member of the Group conducted on or from the properties owned or used by the relevant member of the Group.

" EURIBOR " means, in relation to any Loan in euro:


(a)	the applicable Screen Rate; or


(b)	(if no Screen Rate is available for the Interest Period of that Loan) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent at its request quoted by the Reference Banks to leading banks in the European interbank market,

as of the Specified Time on the Quotation Day for the offering of deposits in euro for a period comparable to the Interest Period of the relevant Loan.

" Event of Default " means any event or circumstance specified as such in Clause 23 ( Events of Default ).

" Existing Facility " means the £150,000,000 revolving loan facility made available pursuant to a facility agreement dated 26 March 2010 (as amended from time to time) for CE Electric UK Funding Company arranged by Abbey National Treasury Services plc, Lloyds TSB Bank plc and The Royal Bank of Scotland plc with Lloyds TSB Bank plc acting as agent.

" Facility " means the revolving loan facility made available under this Agreement as described in Clause 2 ( The Facility ).

" Facility Office " means the office or offices notified by a Lender to the Agent in writing on or before the date it becomes a Lender (or, following that date, by not less than five Business Days' written notice) as the office or offices through which it will perform its obligations under this Agreement.

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" FATCA " means:


(a)	sections 1471 to 1474 of the Code or any associated regulations or other official guidance;


(b)	any treaty, law, regulation or other official guidance enacted in any other jurisdiction, or relating to an intergovernmental agreement between the United States of America and any other jurisdiction, which (in either case) facilitates the implementation of the Code; or


(c)	any agreement pursuant to the implementation of paragraphs (a) or (b) above with the United States Internal Revenue Service, the United States government or any governmental or taxation authority in any other jurisdiction.

" FATCA Application Date " means:


(a)	in relation to a "withholdable payment" described in section 1473(1)(A)(i) of the Code (which relates to payments of interest and certain other payments from sources within the United States), 1 January 2014;


(b)	in relation to a "withholdable payment" described in section 1473(1)(A)(ii) of the Code (which relates to "gross proceeds" from the disposition of property of a type that can produce interest from sources within the United States), 1 January 2015; or


(c)	in relation to a "passthru payment" described in section 1471(d)(7) of the Code not falling within paragraphs (a) or (b) above, 1 January 2017,

or, in each case, such other date from which such payment may become subject to a deduction or withholding required by FATCA as a result of any change in FATCA after the date of this Agreement.

" FATCA Exempt Party " means a Party that is entitled to receive payments free from any FATCA Withholding Tax.

" FATCA FFI " means a foreign financial institution as defined as at the date hereof in section 1471(d)(4) of the Code which, if any Finance Party is not a FATCA Exempt Party, could be required to apply a FATCA Withholding Tax.

" FATCA Withholding Tax " means a deduction or withholding from a payment under or in connection with a Finance Document pursuant to FATCA.

" Fee Letter " means any letter or letters dated on or about the date of this Agreement between the Arranger and the Company (or the Agent and the Company) setting out any of the fees referred to in Clause 12 ( Fees ) .

" Finance Document " means this Agreement, any Fee Letter and any other document designated as such by the Agent and the Company.

" Finance Party " means the Agent, the Arranger or a Lender.

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" Financial Indebtedness " means any indebtedness for or in respect of


(a)	moneys borrowed;


(b)	any amount raised by acceptance under any acceptance credit facility or dematerialised equivalent;


(c)	any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;


(d)	the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with IFRS, be treated as a finance or capital lease;


(e)	receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);


(f)	any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing;


(g)	any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price (and, when calculating the value of any derivative transaction, only the marked to market value shall be taken into account);


(h)	any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution;


(i)	any amount raised by the issue of redeemable shares which are by their terms capable of redemption before the Termination Date; and


(j)	without double counting) the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (a) to (i) above.

" Financial Support Direction " means a financial support direction issued by the Pensions Regulator under section 43 of the Pensions Act 2004.

" Group " means the Company and its Subsidiaries for the time being.

" Holding Company " means, in relation to a company or corporation, any other company or corporation in respect of which it is a Subsidiary.

" IFRS " means the international accounting standards within the meaning of the IAS Regulation 1606/2002.

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" Impaired Agent " means the Agent at any time when:


(a)	it has failed to make (or has notified a Party that it will not make) a payment required to be made by it under the Finance Documents by the due date for payment;


(b)	the Agent otherwise rescinds or repudiates a Finance Document;


(c)	(if the Agent is also a Lender) it is a Defaulting Lender under paragraph (a) or (b) of the definition of "Defaulting Lender"; or


(d)	an Insolvency Event has occurred and is continuing with respect to the Agent;

unless, in the case of paragraph (a) above:


(i)	its failure to pay is caused by:


(A)	administrative or technical error; or

(B) a Disruption Event; and

payment is made within 5 Business Days of its due date; or


(ii)	the Agent is disputing in good faith whether it is contractually obliged to make the payment in question.

" Increase Confirmation " means a confirmation substantially in the form set out in Schedule 10 ( Form of Increase Confirmation ).

" Increase Lender " has the meaning given to that term in Clause 2.2 ( Increase ).

" Insolvency Event " means in relation to a Finance Party:


(a)	any receiver, administrative receiver, administrator, liquidator, compulsory manager or other similar officer is appointed in respect of that Finance Party or all or substantially all of its assets;


(b)	that Finance Party is subject to any event which has an analogous effect to any of the events specified in paragraph (a) above under the applicable laws of any jurisdiction; or


(c)	that Finance Party suspends making payments on all or substantially all of its debts or publicly announces an intention to do so.

" Interest Period " means, in relation to a Loan, each period determined in accordance with Clause 10 ( Interest Periods ) and in relation to an Unpaid Sum, each period determined in accordance with Clause 9.3 ( Default interest ).

" ITA " means the Income Tax Act 2007.

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" Lender " means:


(a)	any Original Lender; and


(b)	any bank, financial institution, trust, fund or other entity which has become a Party in accordance with Clause 2.2 ( Increase ) or Clause 24 ( Changes to the Lenders ),

which in each case has not ceased to be a Party in accordance with the terms of this Agreement.

" LIBOR " means, in relation to any Loan:


(a)	the applicable Screen Rate; or


(b)	(if no Screen Rate is available for the currency or Interest Period of that Loan) the arithmetic mean of the rates (rounded upwards to four decimal places) as supplied to the Agent at its request quoted by the Reference Banks to leading banks in the London interbank market,

as of the Specified Time on the Quotation Day for the offering of deposits in the currency of that Loan and for a period comparable to the Interest Period for that Loan.

" LMA " means the Loan Market Association.

" Loan " means a Tranche A Loan, a Tranche B Loan or a Tranche C Loan.

" Majority Lenders " means:


(a)	if there are no Loans then outstanding, a Lender or Lenders whose Commitments aggregate more than 66 ² / ₃ % of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 66 ² / ₃ % of the Total Commitments immediately prior to the reduction); or


(b)	at any other time, a Lender or Lenders whose participations in the Loans then outstanding aggregate more than 66 ² / ₃ % of all the Loans then outstanding.

" Mandatory Cost " means the percentage rate per annum calculated by the Agent in accordance with Schedule 4 ( Mandatory Cost formulae ).

" Margin " for a Loan shall be determined on the basis of the Moody's Rating and/or S&P Rating of the relevant Borrower of that Loan as set out in the following grid:



Moody's Rating/S&P Rating	Margin (bps. per annum)
A2/A or above	100
A3/A-	125
Baa1/BBB+	150
Baa2/BBB	200
Baa3/BBB-	250
Ba1/BB+ or below	300

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If the Moody's Rating and the S&P Rating in respect of a Borrower differ, the Margin for each Loan borrowed by that Borrower shall be determined on the basis of the higher of the two ratings and, while a Default is continuing or while no Moody's Rating or S&P Rating is assigned in respect of that Borrower, the Margin for each Loan borrowed by that Borrower shall be the percentage per annum set out above based on the assumption that the Moody's Rating and the S&P Rating were Ba1 or BB+ or below. If a rating has been assigned by either Moody's or S&P but not both then the Margin shall be determined on the basis of that rating. The changes to the Margin for a Loan as set out above shall take effect 5 Business Days after the Agent has received written notice in accordance with paragraph (b) of Clause 20.4 ( Information: miscellaneous ).

" Material Adverse Effect " means a material adverse effect on:


(a)	the business, operations, property or condition (financial or otherwise) of the Group taken as a whole;


(b)	the ability of an Obligor to perform its payment obligations and comply with the requirements of Clause 21 ( Financial Covenants ) under the Finance Documents; or


(c)	the validity or enforceability of the Finance Documents or the rights or remedies of any Finance Party under the Finance Documents.

" Month " means a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that:


(a)	(subject to paragraph (c) below) if the numerically corresponding day is not a Business Day, that period shall end on the next Business Day in that calendar month in which that period is to end if there is one, or if there is not, on the immediately preceding Business Day;


(b)	if there is no numerically corresponding day in the calendar month in which that period is to end, that period shall end on the last Business Day in that calendar month; and


(c)	if an Interest Period begins on the last Business Day of a calendar month, that Interest Period shall end on the last Business Day in the calendar month in which that Interest Period is to end.

The above rules will only apply to the last Month of any period.

" Moody's " means Moody's Investors Service, Inc.

" Moody's Rating " means, in respect of each Borrower, the senior unsecured debt rating of that Borrower assigned by Moody's from time to time.

" Northeast " means Northern Powergrid (Northeast) Limited (formerly known as Northern Electric Distribution Limited).

" Northeast RAV " means at any date, the regulatory asset base of Northeast for such date as last determined and notified to Northeast by OFGEM (interpolated as necessary and adjusted for additions to the regulatory asset value and adjusted as appropriate for out-turn inflation/ regulatory depreciation).

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" Obligor " means a Borrower or the Guarantor.

" Ofgem " means the Office of Gas and Electricity Markets operating under the direction and governance of the Authority.

" Optional Currency " means a currency (other than the Base Currency) which complies with the conditions set out in Clause 4.3 ( Conditions relating to Optional Currencies ).

" Original Financial Statements " means:


(a)	in relation to the Company, the audited consolidated financial statements of the Group for the financial year ended 31 December 2011; and


(b)	in relation to each Borrower, its audited financial statements for its financial year ended 31 December 2011.

" Participating Member State " means any member state of the European Union that adopts or has adopted and continues to use the euro as its lawful currency in accordance with legislation of the European Union relating to Economic and Monetary Union.

" Party " means a party to this Agreement.

" Pensions Regulator " means the body corporate called the Pensions Regulator established under Part I of the Pensions Act 2004.

" Preliminary Conversion Date " means the date specified as such in the Preliminary Conversion Notice.

" Preliminary Conversion Notice " means a notice substantially in the form set out in Part I of Schedule 6 ( Form of Preliminary Conversion Notice ).

" Project Finance Borrowings " has the meaning given to it in Clause 21.1 ( Financial definitions ).

" Qualifying Lender " has the meaning given to it in Clause 13 ( Tax gross-up and indemnities ).

" Quotation Day " means, in relation to any period for which an interest rate is to be determined:


(a)	(if the currency is domestic sterling) the first day of that period;


(b)	(if the currency is euro) two TARGET Days before the first day of that period; or


(c)	(for any other currency) two Business Days before the first day of that period,

unless market practice differs in the Relevant Interbank Market for a currency, in which case the Quotation Day for that currency will be determined by the Agent in accordance with market practice in the Relevant Interbank Market (and if quotations would normally be given by leading banks in the Relevant Interbank Market on more than one day, the Quotation Day will be the last of those days).

" Regulated Borrower " means each of Yorkshire and Northeast.

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" Reference Banks " means, in relation to LIBOR and Mandatory Cost the principal London offices of Lloyds TSB Bank plc and The Royal Bank of Scotland plc and, in relation to EURIBOR, the principal office in London of Lloyds TSB Bank plc and The Royal Bank of Scotland plc or such other banks as may be appointed by the Agent in consultation with the Company.

" Relevant Interbank Market " means in relation to euro, the European interbank market, and, in relation to any other currency, the London interbank market.

" Repeating Representations " means each of the representations set out in sub-paragraphs (a) and (b) of Clause 19.1 ( Status ), Clauses 19.2 ( Binding obligations ) to 19.6 ( Governing law and enforcement ) (inclusive), Clause 19.9 ( No default ), sub-paragraph (a) of Clause 19.10 ( No misleading information ), Clause 19.12 ( Pari passu ranking ), Clause 19.13 ( No proceedings pending or threatened ), Clause 19.14 ( Environmental compliance ) and Clause 19.15 ( Environmental Claims ).

" Representative " means any delegate, agent, manager, administrator, nominee, attorney, trustee or custodian.

" Rollover Loan " means one or more Loans:


(a)	made or to be made on the same day that a maturing Loan is due to be repaid;


(b)	the aggregate amount of which is equal to or less than the amount of the maturing Loan;


(c)	in the same currency as the maturing Loan (unless it arose as a result of the operation of Clause 6.2 ( Unavailability of a currency )); and


(d)	made or to be made to the same Borrower for the purpose of refinancing a maturing Loan.

" Screen Rate " means:


(a)	in relation to LIBOR, the British Bankers' Association Interest Settlement Rate for the relevant currency and period; and


(b)	in relation to EURIBOR, the percentage rate per annum determined by the Banking Federation of the European Union for the relevant period,

displayed on the appropriate page of the Reuters screen. If the agreed page is replaced or service ceases to be available, the Agent may specify another page or service displaying the appropriate rate after consultation with the Company and the Lenders.

" Secondary Conversion Date " means the date specified as such in the Secondary Conversion Notice.

" Secondary Conversion Notice " means a notice substantially in the form set out in Part II of Schedule 6 ( Form of Secondary Conversion Notice ).

" Security " means a mortgage, charge, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.

" Separate Loan " has the meaning given to that term in Clause 7.1(c) ( Repayment of Loans ).

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" S&P " means Standard & Poor's Rating Group, a division of McGraw Hill Inc., a New York corporation.

" S&P Rating " means in respect of each Borrower, the senior, unsecured debt rating of that Borrower assigned by S&P from time to time.

" Specified Time " means a time determined in accordance with Schedule 9 ( Timetables ).

" Subsidiary " means a subsidiary undertaking within the meaning of section 1162 of the Companies Act 2006.

" TARGET2 " means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007.

" TARGET Day " means any day on which TARGET2 is open for the settlement of payments in euro.

" Tax " means any tax, levy, impost, duty or other charge or withholding of a similar nature (including any penalty or interest payable in connection with any failure to pay or any delay in paying any of the same).

" Taxes Act " means the Income and Corporation Taxes Act 1988.

" Termination Date " means the date falling 60 Months after the date of this Agreement.

" Total Commitments " means the aggregate of the Commitments being £150,000,000 at the date of this Agreement.

" Tranche " means Tranche A, Tranche B or Tranche C.

" Tranche A " has the meaning ascribed to it in paragraph (a) of Clause 2.1 ( The Facility ).

" Tranche A Commitment " means:

(a)

in relation to an Original Lender, the amount in the Base Currency set opposite its name under the heading " Tranche A Commitment " in Part II of Schedule 1 ( The Original Parties ) and the amount of any other Tranche A Commitment transferred to it under this Agreement or assumed by it in accordance with Clause 2.2 ( Increase ) or to be transferred to it following delivery of a Secondary Conversion Notice; and


(b)	in relation to any other Lender, the amount in the Base Currency of any Tranche A Commitment transferred to it under this Agreement or assumed by it in accordance with Clause 2.2 ( Increase ),

to the extent not cancelled, reduced or transferred by it under this Agreement (or to be reduced or transferred by it following delivery of a Preliminary Conversion Notice or a Secondary Conversion Notice).

" Tranche A Loan " means a loan made under Tranche A or the principal amount outstanding for the

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time being of that loan.

" Tranche B " has the meaning ascribed to it in paragraph (b) of Clause 2.1 ( The Facility ).

" Tranche B Commitment " means:

(a)

in relation to an Original Lender, the amount in the Base Currency set opposite its name under the heading " Tranche B Commitment " in Part II of Schedule 1 ( The Original Parties) and the amount of any other Tranche B Commitment transferred to it under this Agreement or assumed by it in accordance with Clause 2.2 ( Increase ) or to be transferred to it following delivery of a Preliminary Conversion Notice or a Secondary Conversion Notice; and


(b)	in relation to any other Lender, the amount in the Base Currency of any Tranche B Commitment transferred to it under this Agreement or assumed by it in accordance with Clause 2.2 ( Increase ),

" Tranche B Loan " means a loan made under Tranche B or the principal amount outstanding for the time being of that loan.

" Tranche C " has the meaning ascribed to it in paragraph (c) of Clause 2.1 ( The Facility ).

" Tranche C Commitment " means:

(a)

in relation to an Original Lender, the amount in the Base Currency set opposite its name under the heading " Tranche C Commitment " in Part II of Schedule 1 ( The Original Parties) and the amount of any other Tranche C Commitment transferred to it under this Agreement or assumed by it in accordance with Clause 2.2 ( Increase ) or to be transferred to it following delivery of a Preliminary Conversion Notice or a Secondary Conversion Notice; and


(b)	in relation to any other Lender, the amount in the Base Currency of any Tranche C Commitment transferred to it under this Agreement or assumed by it in accordance with Clause 2.2 ( Increase ),

" Tranche C Loan " means a loan made under Tranche C or the principal amount outstanding for the time being of that loan.

" Transfer Certificate " means a certificate substantially in the form set out in Schedule 5 ( Form of Transfer Certificate ) or any other form agreed between the Agent and the Company.

" Transfer Date " means, in relation to an assignment or a transfer, the later of:

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(a)	the proposed Transfer Date specified in the Transfer Certificate or Assignment Agreement; and


(b)	the date on which the Agent executes the Transfer Certificate or Assignment Agreement.

" Unpaid Sum " means any sum due and payable but unpaid by an Obligor under the Finance Documents.

" US Tax Obligor " means:


(a)	a Borrower which is resident for tax purposes in the United States of America; or


(b)	an Obligor some or all of whose payments under the Finance Documents are from sources within the United States for United States federal income tax purposes,

in each case, as defined and interpreted as at the date hereof.

" Utilisation " means a utilisation of the Facility.

" Utilisation Date " means the date of a Utilisation, being the date on which the relevant Loan is to be made.

" Utilisation Request " means a notice substantially in the form set out in Schedule 3 ( Requests ).

" VAT " means value added tax as provided for in the Value Added Tax Act 1994 and any other tax of a similar nature.

" Yorkshire " means Northern Powergrid (Yorkshire) plc (formerly known as Yorkshire Electricity Distribution plc).

" Yorkshire RAV " means at any date, the regulatory asset base of Yorkshire for such date as last determined and notified to Yorkshire by OFGEM (interpolated as necessary and adjusted for additions to the regulatory asset value and adjusted as appropriate for out-turn inflation/ regulatory depreciation).


1.2	Construction


(a)	Unless a contrary indication appears any reference in this Agreement to:


(i)	the " Agent ", the " Arranger ", any " Finance Party ", any " Lender ", any " Obligor " or any " Party " shall be construed so as to include its successors in title, permitted assigns and permitted transferees;


(ii)	" assets " includes present and future properties, revenues and rights of every description;

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(iii)	a " Finance Document " or any other agreement or instrument is a reference to that Finance Document or other agreement or instrument as amended, novated, supplemented, extended or restated;


(iv)	" indebtedness " includes any obligation (whether incurred as principal or as surety) for the payment or repayment of money, whether present or future, actual or contingent;


(v)	a " person " includes any individual, firm, company, corporation, government, state or agency of a state or any association, trust, joint venture, consortium or partnership (whether or not having separate legal personality);


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


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


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


(b)	Section, Clause and Schedule headings are for ease of reference only.


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


(d)	A Default (other than an Event of Default) is " continuing " if it has not been remedied or waived and an Event of Default is " continuing " if it has not been remedied or waived.


1.3	Currency Symbols and Definitions

" $ " and " dollars " denote the lawful currency of the United States of America, " £ " and " sterling " denote the lawful currency of the United Kingdom and " EUR " and " euro " denote the single currency unit of the Participating Member States.


1.4	Third party rights


a.	Unless expressly provided to the contrary in a Finance Document, a person who is not a Party has no right under the Contracts (Rights of Third Parties) Act 1999 (the " Third Parties Act ") to enforce or to enjoy the benefit of any term of this Agreement.


b.	Notwithstanding any term of any Finance Document, the consent of any person who is not a Party is not required to rescind or vary this Agreement at any time.

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SECTION 2

THE FACILITY


2.	The Facility


2.1	The Facility

Subject to the terms of this Agreement (including, without limitation, Clause 4.5 ( Reallocation ), the Lenders make available a multicurrency revolving loan facility in an aggregate amount equal to the Total Commitments in three tranches in maximum principal amounts as follows:


(a)	to the Company, Loans in an aggregate amount equal to the Tranche A Commitments (" Tranche A ");


(b)	to Yorkshire, Loans in an aggregate amount equal to the Tranche B Commitments (" Tranche B "); and


(c)	to Northeast, Loans in an aggregate amount equal to the Tranche C Commitments (" Tranche C ").


2.2	Increase


(a)	The relevant Obligor may by giving prior notice to the Agent after the effective date of a cancellation of:


(i)	the Available Tranche A Commitments, the Available Tranche B Commitments or the Available Tranche C Commitments (as appropriate) of a Defaulting Lender in accordance with paragraph (g) of Clause 8.5 ( Right of replacement, repayment and cancellation in relation to a single Lender ); or


(ii)	the Commitments of a Lender in accordance with:


(A)	Clause 8.1 ( Illegality ); or


(B)	paragraph (a) of Clause 8.5 ( Right of replacement, repayment and cancellation in relation to a single Lender ),

request that the Total Commitments and the relevant Tranche A Commitments, Tranche B Commitments and/or Tranche C Commitments be increased (and the Total Commitments and the relevant Commitments under that Facility shall be so increased) in an aggregate amount in the Base Currency of up to the amount of the Available Tranche A Commitments, the Available Tranche B Commitments and the Available Tranche C Commitments or Commitments so cancelled as follows:

(iii)

the increased Commitments will be assumed by one or more Lenders or other banks, financial institutions, trusts, funds or other entities (each an " Increase Lender ") selected by the relevant Obligor (each of which shall not be a member of the Group) and each of which confirms its willingness to assume and does assume all the obligations of a Lender corresponding to that part of the increased Commitments which it is to assume, as if it had been an Original Lender;

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(iv)	each of the Obligors and any Increase Lender shall assume obligations towards one another and/or acquire rights against one another as the Obligors and the Increase Lender would have assumed and/or acquired had the Increase Lender been an Original Lender;


(v)	any Increase Lender which is not a Lender immediately prior to the relevant increase shall become a Party as a "Lender" and any Increase Lender and each of the other Finance Parties shall assume obligations towards one another and acquire rights against one another as that Increase Lender and those Finance Parties would have assumed and/or acquired had the Increase Lender been an Original Lender;


(vi)	the Commitments of the other Lenders shall continue in full force and effect; and


(vii)	any increase in the Total Commitments and the relevant Commitment shall take effect on the date specified by the relevant Obligor in the notice referred to above or any later date on which the conditions set out in paragraph (b) below are satisfied.


(b)	An increase in the Total Commitments and the relevant Commitment will only be effective on:


(i)	the execution by the Agent of an Increase Confirmation from the relevant Increase Lender;

(ii)

in relation to an Increase Lender which is not a Lender immediately prior to the relevant increase, the performance by the Agent of all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to the assumption of the increased Commitments by that Increase Lender, the completion of which the Agent shall promptly notify to the Obligors and the Increase Lender.


(c)	Each Increase Lender, by executing the Increase Confirmation, confirms (for the avoidance of doubt) that the Agent has authority to execute on its behalf any amendment or waiver that has been approved by or on behalf of the requisite Lender or Lenders in accordance with this Agreement on or prior to the date on which the increase becomes effective.

(d)

Unless the Agent otherwise agrees or the increased Commitment is assumed by an existing Lender, the relevant Obligor shall, on the date upon which the increase takes effect, pay to the Agent (for its own account) a fee of £1,500 and the Company shall promptly on demand pay the Agent the amount of all costs and expenses (including legal fees) reasonably incurred by it in connection with any increase in Commitments under this Clause 2.2.


(e)	The relevant Obligor may pay to the Increase Lender a fee in the amount and at the times agreed between the relevant Obligor and the Increase Lender in a letter between the relevant Obligor and the Increase Lender setting out that fee. A reference in this Agreement to a Fee Letter shall include any letter referred to in this paragraph.


(f)	Clause 24.4 ( Limitation of responsibility of Existing Lenders ) shall apply mutatis mutandis in this Clause 2.2 in relation to an Increase Lender as if references in that Clause to:

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(i)	an "Existing Lender" were references to all the Lenders immediately prior to the relevant increase;


(ii)	the "New Lender" were references to that "Increase Lender"; and


(iii)	a "re-transfer" and "re-assignment" were references to respectively a "transfer" and "assignment".


2.3	Finance Parties' rights and obligations


(a)	The obligations of each Finance Party under the Finance Documents are several. Failure by a Finance Party to perform its obligations under the Finance Documents does not affect the obligations of any other Party under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents.


(b)	The rights of each Finance Party under or in connection with the Finance Documents are separate and independent rights and any debt arising under the Finance Documents to a Finance Party from an Obligor shall be a separate and independent debt.


(c)	A Finance Party may, except as otherwise stated in the Finance Documents, separately enforce its rights under the Finance Documents.


3.	PURPOSE


3.1	Purpose

Each Borrower shall apply all amounts borrowed by it under the Facility firstly towards refinancing the Existing Facility and thereafter towards its general corporate purposes.


3.2	Monitoring

No Finance Party is bound to monitor or verify the application of any amount borrowed pursuant to this Agreement.


4.	CONDITIONS OF UTILISATION

4.1 Initial conditions precedent

No Borrower may deliver a Utilisation Request unless the Agent has received all of the documents and other evidence listed in Schedule 2 ( Conditions precedent ) in form and substance satisfactory to the Agent. The Agent shall notify the Company and the Lenders promptly upon being so satisfied.


4.2	Further conditions precedent

The Lenders will only be obliged to comply with Clause 5.4 ( Lenders' participation ) if on the date of the Utilisation Request and on the proposed Utilisation Date:

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(a)	in the case of a Rollover Loan, no Event of Default is continuing or would result from the proposed Loan, and, in the case of any other Loan, no Default is continuing or would result from the proposed Loan; and


(b)	the Repeating Representations to be made by each Obligor are true in all material respects.


4.3	Conditions relating to Optional Currencies


(a)	A currency will constitute an Optional Currency in relation to a Loan if:


(i)	it is readily available in the amount required and freely convertible into the Base Currency in the Relevant Interbank Market on the Quotation Day and the Utilisation Date for that Loan; and


(ii)	it is dollars or euro or has been approved by the Agent (acting on the instructions of all the Lenders) on or prior to receipt by the Agent of the relevant Utilisation Request for that Loan.


(b)	If the Agent has received a written request from the Company for a currency to be approved under paragraph (a)(ii) above, the Agent will confirm to the Company by the Specified Time:


(i)	whether or not the Lenders have granted their approval; and


(ii)	if approval has been granted, the minimum amount for any subsequent Utilisation in that currency.


4.4	Maximum number of Loans


(a)	A Borrower may not deliver a Utilisation Request if as a result of the proposed Utilisation eleven or more Loans would be outstanding.


(b)	Any Loan made by a single Lender under Clause 6.2 ( Unavailability of a currency ) shall not be taken into account in this Clause 4.4.


(c)	Any Separate Loan shall not be taken into account in this Clause 4.4.


4.5	Reallocation

(a)

Subject to paragraph (b) below, the Company may not less than 5 Business Days prior to the Preliminary Conversion Date (as defined below) and thereafter on each anniversary of such Preliminary Conversion Date, deliver a Preliminary Conversion Notice to the Agent requesting that a Base Currency amount of up to £25,000,000 be reallocated between Tranche A, Tranche B and/or Tranche C in the proportions specified in the Preliminary Conversion Notice on the date (the " Preliminary Conversion Date ") determined in accordance with paragraph (d) below.

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(b)	At no time during the subsistence of this Agreement may the Tranche A Commitments exceed £25,000,000.


(c)	Upon delivery of a Preliminary Conversion Notice, the Agent shall promptly notify the Lenders and on the Preliminary Conversion Date:


(i)	each Lender's Commitments under a relevant Tranche (a " Reducing Tranche ") shall be cancelled on a pro rata basis in an aggregate amount equal to the amount specified in the Preliminary Conversion Notice (the " Reduced Amount "); and


(ii)	each Lender's Tranche A Commitment, Tranche B Commitment and/or Tranche C Commitment (as applicable) under a relevant Tranche (an " Increasing Tranche ") shall be increased on a pro rata basis by an amount equal to the amount specified in the Preliminary Conversion Notice.


(d)	If the Reduced Amount under a Reducing Tranche:

(i)

exceeds the Available Tranche A Commitments, Available Tranche B Commitments or Available Tranche C Commitments (as applicable) under that Reducing Tranche, the Preliminary Conversion Date shall (if there is only one Loan outstanding under the relevant Tranche) be the last day of the Interest Period for the Loan under that Reducing Tranche outstanding on the date of the Preliminary Conversion Notice and (otherwise) shall be the last day of the Interest Period for a Loan outstanding under that Reducing Tranche which has a maturity date falling after the maturity date of any other Interest Period for Loans under that Reducing Tranche outstanding on the date of the Preliminary Conversion Notice (and prior to the Preliminary Conversion Date each subsequent Interest Period for a Loan under that Reducing Tranche shall be of such duration that it ends on or before the Preliminary Conversion Date);


(ii)	is equal to or less than the Available Tranche A Commitments, Available Tranche B Commitments or Available Tranche C Commitments (as applicable) under that Reducing Tranche, the Preliminary Conversion Date shall be the date falling 5 Business Days after the date of the Preliminary Conversion Notice.


(e)	The Company may not less than 5 Business Days prior to the Secondary Conversion Date (as defined below), deliver a Secondary Conversion Notice to the Agent, requesting that:


(i)	all or part of the Tranche A Commitments (the " Converted Amount ") shall be cancelled; and


(ii)	simultaneously the Tranche B Commitments and/or the Tranche C Commitments shall be increased in an aggregate amount equal to the Converted Amount (and as between Tranche B and Tranche C in such proportions as the Company shall specify in the Secondary Conversion Notice),

in each case on the date (the " Secondary Conversion Date ") determined in accordance with paragraph (f) below.

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(f)	If the Converted Amount:

(i)

exceeds the Available Tranche A Commitments, the Secondary Conversion Date shall (if there is only one Tranche A Loan outstanding) be the last day of the Interest Period for the Tranche A Loan outstanding on the date of the Secondary Conversion Notice and (otherwise) shall be the last day of the Interest Period for a Tranche A Loan outstanding on the date of the Secondary Conversion Notice which has a maturity date falling after the maturity date of any other Interest Period for Tranche A Loans outstanding on the date of the Secondary Conversion Notice (and prior to the Secondary Conversion Date each subsequent Interest Period for a Tranche A Loan shall be of such duration that it ends on or before the Secondary Conversion Date);


(ii)	is equal to or less than the Available Tranche A Commitments, the Secondary Conversion Date shall be the date falling 5 Business Days after the date of the Secondary Conversion Notice.


(g)	Upon delivery of a Secondary Conversion Notice, the Agent shall promptly notify the Lenders and on the Secondary Conversion Date:


(i)	each Lender's Tranche A Commitment shall be cancelled on a pro rata basis in an aggregate amount equal to the Converted Amount; and


(ii)	each Lender's Tranche B Commitment and/or Tranche C Commitment shall be increased on a pro rata basis in an aggregate amount equal to the Converted Amount to be allocated between Tranche B and/or Tranche C in the proportions specified in the Secondary Conversion Notice.

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SECTION 3

UTILISATION


5.	UTILISATION


5.1	Delivery of a Utilisation Request

A Borrower may utilise the Facility by delivery to the Agent of a duly completed Utilisation Request not later than the Specified Time.


5.2	Completion of a Utilisation Request


(a)	Each Utilisation Request is irrevocable and will not be regarded as having been duly completed unless:


(i)	the proposed Utilisation Date is a Business Day within the Availability Period;


(ii)	the Borrower which has delivered the Utilisation Request is permitted by the terms of this Agreement to borrow the amount requested therein;


(iii)	the currency and amount of the Utilisation comply with Clause 5.3 ( Currency and amount ); and


(iv)	the proposed Interest Period complies with Clause 10 ( Interest Periods ).


(b)	Only one Loan may be requested in each Utilisation Request.


5.3	Currency and amount


(a)	The currency specified in a Utilisation Request must be the Base Currency or an Optional Currency.


(b)	The amount of the proposed Loan must be:


(i)	if the currency selected is the Base Currency, a minimum of £1,000,000 or if less, the Available Tranche A Facility, Available Tranche B Facility or Available Tranche C Facility (as applicable); or


(ii)	if the currency selected is dollars or euros, a minimum of $1,000,000 or EUR1,000,000 respectively or if less, the Available Tranche A Facility, Available Tranche B Facility or Available Tranche C Facility (as applicable); or


(iii)	if the currency selected is an Optional Currency, the minimum amount specified by the Agent pursuant to paragraph (b) (ii) of Clause 4.3 ( Conditions relating to Optional Currencies ) or, if less, the Available Tranche A Facility, Available Tranche B Facility or Available Tranche C Facility (as applicable); and

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(iv)	in any event such that its Base Currency Amount is less than or equal to the Available Tranche A Facility, Available Tranche B Facility or Available Tranche C Facility (as applicable).


5.4	Lenders' participation


(a)	If the conditions set out in this Agreement have been met, and subject to Clause 7.1 ( Repayment of Loans ), each Lender shall make its participation in each Loan available by the Utilisation Date through its Facility Office.


(b)	The amount of each Lender's participation in each Tranche A Loan will be equal to the proportion borne by its Available Tranche A Commitment to the Available Tranche A Facility immediately prior to making the Loan.


(c)	The amount of each Lender's participation in each Tranche B Loan will be equal to the proportion borne by its Available Tranche B Commitment to the Available Tranche B Facility immediately prior to making the Loan.


(d)	The amount of each Lender's participation in each Tranche C Loan will be equal to the proportion borne by its Available Tranche C Commitment to the Available Tranche C Facility immediately prior to making the Loan.


(e)	The Agent shall determine the Base Currency Amount of each Loan which is to be made in an Optional Currency and shall notify each Lender of the amount, currency and the Base Currency Amount of each Loan and the amount of its participation in that Loan and, if different, the amount of that participation to be made available in cash, in each case by the Specified Time.


5.5	Cancellation of Commitment

The Commitments which, at that time, are unutilised shall be immediately cancelled at the end of the Availability Period.


6.	OPTIONAL CURRENCIES


6.1	Selection of currency

A Borrower shall select the currency of a Loan in a Utilisation Request.


6.2	Unavailability of a currency

If before the Specified Time on any Quotation Day:


(a)	a Lender notifies the Agent that the Optional Currency requested is not readily available to it in the amount required; or

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(b)	a Lender notifies the Agent that compliance with its obligation to participate in a Loan in the proposed Optional Currency would contravene a law or regulation applicable to it,

the Agent will give notice to the relevant Borrower to that effect by the Specified Time on that day. In this event, any Lender that gives notice pursuant to this Clause 6.2 will be required to participate in the Loan in the Base Currency (in an amount equal to that Lender's proportion of the Base Currency Amount or, in respect of a Rollover Loan, an amount equal to that Lender's proportion of the Base Currency Amount of the Rollover Loan that is due to be made) and its participation will be treated as a separate Loan denominated in the Base Currency during that Interest Period.


6.3	Participation in a Loan

Each Lender's participation in a Loan will be determined in accordance with paragraph (b) of Clause 5.4 ( Lenders' participation).

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SECTION 4

REPAYMENT, PREPAYMENT AND CANCELLATION


7.	REPAYMENT


7.1	Repayment of Loans


(a)	Subject to paragraph (b) below, each Borrower which has drawn a Loan shall repay that Loan on the last day of its Interest Period.


(b)	Without prejudice to each Borrower's obligation under paragraph (a) above, if one or more Loans are to be made available to a Borrower under a particular Tranche (a " new Loan "):


(i)	on the same day that a maturing Loan made under the same Tranche (a " maturing Loan ") is due to be repaid by that Borrower;


(ii)	in the same currency as the maturing Loan (unless it arose as a result of the operation of Clause 6.2 (Unavailability of a currency ));


(iii)	in whole or in part for the purpose of refinancing the maturing Loan; and


(iv)	the proportion borne by each Lender's participation in the maturing Loan to the amount of that maturing Loan is the same as the proportion borne by that Lender's participation in the new Loans to the aggregate amount of those new Loans,

the aggregate amount of the new Loans shall, unless a Borrower notifies the Agent to the contrary in the relevant Utilisation Request, be treated as if applied in or towards repayment of the maturing Loan so that:


(A)	if the amount of the maturing Loan exceeds the aggregate amount of the new Loans:


(1)	the relevant Borrower will only be required to pay an amount in cash in the relevant currency equal to that excess; and


(2)	each Lender's participation (if any) in the new Loans shall be treated as having been made available and applied by the Borrower in or towards repayment of that Lender's participation (if any) in the maturing Loan and that Lender will not be required to make its participation in the new Loans available in cash; and


(B)	if the amount of the maturing Loan is equal to or less than the aggregate amount of the new Loans:


(1)	the relevant Borrower will not be required to make any payment in cash; and

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(2)

each Lender will be required to make its participation in the new Loans available in cash only to the extent that its participation (if any) in the new Loans exceeds that Lender's participation (if any) in the maturing Loan and the remainder of that Lender's participation in the new Loans shall be treated as having been made available and applied by the Borrower in or towards repayment of that Lender's participation in the maturing Loan.


(c)	At any time when a Lender becomes a Defaulting Lender, the maturity date of each of the participations of that Lender in the Loans then outstanding will be automatically extended to the Termination Date and will be treated as separate Loans (the " Separate Loans ") denominated in the currency in which the relevant participations are outstanding.


(d)	A Borrower to whom a Separate Loan is outstanding may prepay that Loan by giving 3 Business Days' prior notice to the Agent. The Agent will forward a copy of a prepayment notice received in accordance with this paragraph (d) to the Defaulting Lender concerned as soon as practicable on receipt.


(e)	Interest in respect of a Separate Loan will accrue for successive Interest Periods selected by the Borrower by the time and date specified by the Agent (acting reasonably) and will be payable by that Borrower to the Agent (for the account of the Defaulting Lender) on the last day of each Interest Period of that Loan.


(f)	The terms of this Agreement relating to Loans generally shall continue to apply to Separate Loans other than to the extent inconsistent with paragraphs (c) to (e) above, in which case those paragraphs shall prevail in respect of any Separate Loan.


8.	PREPAYMENT AND CANCELLATION


8.1	Illegality

If, at any time, it is or will become unlawful in any applicable jurisdiction for a Lender to perform any of its obligations as contemplated by this Agreement or to fund or maintain its participation in any Loan:


(a)	that Lender shall promptly notify the Agent upon becoming aware of that event;


(b)	upon the Agent notifying the Company, the Commitment of that Lender will be immediately cancelled; and


(c)	each Borrower shall repay that Lender's participation in the Loans made to that Borrower on the last day of the Interest Period for each Loan occurring after the Agent has notified the Company or, if earlier, the date specified by the Lender in the notice delivered to the Agent (being no earlier than the last day of any applicable grace period permitted by law).

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8.2	Change of control


(a)	If a Change of Control occurs:


(i)	the Company shall promptly notify the Agent upon becoming aware of that event; and

(ii)

if a Lender so requires, the Agent shall, by notifying each Borrower and the Company not more than 30 days after the date on which it received notification from the Company in accordance with paragraph (a)(i) above, cancel the Commitment of that Lender and declare the participation of that Lender in all outstanding Loans, together with accrued interest and all other amounts accrued under the Finance Documents due and payable, whereupon the Commitment of that Lender will be cancelled and all such outstanding amounts will become immediately due and payable on the date specified in such notice.


(b)	For the purposes of paragraph (a) above, a " Change of Control " shall occur if:


(i)	MidAmerican Energy Holdings Company ceases to own, directly or indirectly, the entire issued share capital of the Company; or


(ii)	the Company ceases to own directly or indirectly the entire issued share capital of each Regulated Borrower.


8.3	Voluntary cancellation


(a)	The Company may, if it gives the Agent not less than 5 Business Days' (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (being a minimum amount of £5,000,000) of the Available Tranche A Facility. Any cancellation under this paragraph (a) shall reduce the Tranche A Commitments of the Lenders rateably.


(b)	The Borrower under Tranche B may, if it gives the Agent not less than 5 Business Days (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (being a minimum amount of £5,000,000) of the Available Tranche B Facility. Any cancellation under this paragraph (b) shall reduce the Tranche B Commitments of the Lenders rateably.


(c)	The Borrower under Tranche C may, if it gives the Agent not less than 5 Business Days (or such shorter period as the Majority Lenders may agree) prior notice, cancel the whole or any part (being a minimum amount of £5,000,000) of the Available Tranche C Facility. Any cancellation under this paragraph (c) shall reduce the Tranche C Commitments of the Lenders rateably.


8.4	Voluntary prepayment of Loans

The Borrower to which a Loan has been made may, if it gives the Agent not less than 5 Business Days' (or such shorter period as the Majority Lenders may agree) prior notice, prepay the whole or any part of a Loan (but, if in part, being an amount that reduces the Base Currency Amount of the Loan by a minimum amount of £1,000,000).

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8.5	Right of replacement, repayment and cancellation in relation to a single Lender


(a)	If:


(i)	any sum payable to any Lender by an Obligor is required to be increased under paragraph (c) of Clause 13.2 ( Tax gross-up ); or


(ii)	any Lender claims indemnification from an Obligor under Clause 13.3 ( Tax indemnity ) or Clause 14.1 ( Increased costs ); or


(iii)	at any time on or after the date which is six months before the earliest FATCA Application Date for any payment by a Party to a Lender, that Lender is not, or has ceased to be, a FATCA Exempt Party,

the relevant Obligor may, whilst the circumstance giving rise to the requirement or indemnification continues or that Lender continues not to be a FATCA Exempt Party, give the Agent notice of cancellation of the Commitment of that Lender and its intention to procure the repayment of that Lender's participation in the Loans.


(b)	On receipt of a notice referred to in paragraph (a) above, the Commitment of that Lender shall immediately be reduced to zero.


(c)	On the last day of each Interest Period which ends after the relevant Obligor has given notice under paragraph (a) above (or, if earlier, the date specified by the Obligor in that notice), each Borrower to which a Loan is outstanding shall repay that Lender's participation in that Loan.

(d)

The relevant Obligor may, in the circumstances set out in paragraph (a) above, on 10 Business Days' prior notice to the Agent and that Lender, replace that Lender by requiring that Lender to (and to the extent permitted by law, that Lender shall) transfer pursuant to Clause 24 ( Changes to the Lenders ) all (and not part only) of its rights and obligations under this Agreement to a Lender or other bank, financial institution, trust, fund or other entity selected by the relevant Obligor which confirms its willingness to assume and does assume all the obligations of the transferring Lender in accordance with Clause 24 ( Changes to the Lenders ) for a purchase price in cash or other cash payment payable at the time of the transfer equal to the outstanding principal amount of such Lender's participation in the outstanding Loans and all accrued interest (to the extent that the Agent has not given a notification under Clause 24.9 ( Pro rata interest settlement ), Break Costs and other amounts payable in relation thereto under the Finance Documents.


(e)	The replacement of a Lender pursuant to paragraph (d) above shall be subject to the following conditions:


(i)	the relevant Obligor shall have no right to replace the Agent;


(ii)	neither the Agent nor any Lender shall have any obligation to find a replacement Lender;

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(iii)	in no event shall the Lender replaced under paragraph (d) above be required to pay or surrender any of the fees received by such Lender pursuant to the Finance Documents; and


(iv)	the Lender shall only be obliged to transfer its rights and obligations pursuant to paragraph (d) above once it is satisfied that it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to that transfer.


(f)	A Lender shall perform the checks described in paragraph (e)(iv) above as soon as reasonably practicable following delivery of a notice referred to in paragraph (d) above and shall notify the Agent and the Company when it is satisfied that it has complied with those checks.


(g)


(i)	If any Lender becomes a Defaulting Lender, the relevant Obligor may, at any time whilst the Lender continues to be a Defaulting Lender, give the Agent 5 Business Days' notice of cancellation of the Available Tranche A Commitment, the Available Tranche B Commitment and the Available Tranche C Commitment of that Lender.


(ii)	On the notice referred to in paragraph (g)(i) above becoming effective, the Available Tranche A Commitment, the Available Tranche B Commitment and/or the Available Tranche C Commitment, as applicable, of the Defaulting Lender shall immediately be reduced to zero.


(iii)	The Agent shall as soon as practicable after receipt of a notice referred to in paragraph (f)(i) above, notify all the Lenders.


8.6	Restrictions


(a)	Any notice of cancellation or prepayment given by any Party under this Clause 8 shall be irrevocable and, unless a contrary indication appears in this Agreement, shall specify the date or dates upon which the relevant cancellation or prepayment is to be made and the amount of that cancellation or prepayment.


(b)	Any prepayment under this Agreement shall be made together with accrued interest on the amount prepaid and, subject to any Break Costs, without premium or penalty.


(c)	Unless a contrary indication appears in this Agreement any part of the Facility which is prepaid may be reborrowed in accordance with the terms of this Agreement.


(d)	The Borrowers shall not repay or prepay all or any part of the Loans or cancel all or any part of the Commitments except at the times and in the manner expressly provided for in this Agreement.


(e)	Subject to Clause 2.2 ( Increase ) and Clause 4.5 ( Reallocation ) no amount of the Total Commitments cancelled under this Agreement may be subsequently reinstated.


(f)	If the Agent receives a notice under this Clause 8 it shall promptly forward a copy of that notice to either the Company or the affected Lender, as appropriate.

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SECTION 5

COSTS OF UTILISATION


9.	INTEREST


9.1	Calculation of interest

The rate of interest on each Loan for each Interest Period is the percentage rate per annum which is the aggregate of the applicable:


(a)	Margin;


(b)	LIBOR or, in relation to any Loan in euro, EURIBOR; and


(c)	Mandatory Cost, if any.


9.2	Payment of interest

The Borrower to which a Loan has been made shall pay accrued interest on that Loan on the last day of each Interest Period (and, if the Interest Period is longer than six Months, on the dates falling at six Monthly intervals after the first day of the Interest Period).


9.3	Default interest

(a)

If an Obligor fails to pay any amount payable by it under a Finance Document on its due date, interest shall accrue on the overdue amount from the due date up to the date of actual payment (both before and after judgment) at a rate which, subject to paragraph (b) below, is one per cent higher than the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Loan in the currency of the overdue amount for successive Interest Periods, each of a duration selected by the Agent (acting reasonably). Any interest accruing under this Clause 9.3 shall be immediately payable by the Obligor on demand by the Agent.


(b)	If any overdue amount consists of all or part of a Loan which became due on a day which was not the last day of an Interest Period relating to that Loan:


(i)	the first Interest Period for that overdue amount shall have a duration equal to the unexpired portion of the current Interest Period relating to that Loan; and


(ii)	the rate of interest applying to the overdue amount during that first Interest Period shall be one per cent. higher than the rate which would have applied if the overdue amount had not become due.


(c)	Default interest (if unpaid) arising on an overdue amount will be compounded with the overdue amount at the end of each Interest Period applicable to that overdue amount but will remain immediately due and payable.

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9.4	Notification of rates of interest

The Agent shall promptly notify the Lenders and the relevant Borrower of the determination of a rate of interest under this Agreement.


10.	INTEREST PERIODS


10.1	Selection of Interest Periods


(a)	A Borrower may select an Interest Period for a Loan in the Utilisation Request for that Loan.


(b)	Subject to this Clause 10 and to Clause 4.5 ( Reallocation ), a Borrower may select an Interest Period of one, three or six Months or any other period agreed between the relevant Borrower and the Agent (acting on the instructions of all the Lenders).


(c)	An Interest Period for a Loan shall not extend beyond the Termination Date.


(d)	Each Interest Period for a Loan shall start on the Utilisation Date.


(e)	A Loan has one Interest Period only.


10.2	Non-Business Days

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


11.	CHANGES TO THE CALCULATION OF INTEREST


11.1	Absence of quotations

Subject to Clause 11.2 ( Market disruption ), if LIBOR or, if applicable, EURIBOR is to be determined by reference to the Reference Banks but a Reference Bank does not supply a quotation by the Specified Time on the Quotation Day, the applicable LIBOR or EURIBOR shall be determined on the basis of the quotations of the remaining Reference Banks.


11.2	Market disruption


(a)	If a Market Disruption Event occurs in relation to a Loan for any Interest Period, then the rate of interest on each Lender's share of that Loan for the Interest Period shall be the rate per annum which is the sum of:


(i)	the Margin;

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(ii)	the rate notified to the Agent by that Lender as soon as practicable and in any event before interest is due to be paid in respect of that Interest Period, to be that which expresses as a percentage rate per annum the cost to that Lender of funding its participation in that Loan from whatever source it may reasonably select; and


(iii)	the Mandatory Cost, if any, applicable to that Lender's participation in the Loan.


(b)	In this Agreement " Market Disruption Event " means:


(i)	at or about noon on the Quotation Day for the relevant Interest Period the Screen Rate is not available and none or only one of the Reference Banks supplies a rate to the Agent to determine LIBOR or, if applicable, EURIBOR for the relevant currency and the relevant Interest Period; or


(ii)	before close of business in London on the Quotation Day for the relevant Interest Period, the Agent receives notifications from a Lender or Lenders (whose participations in a Loan exceed 35 per cent. of that Loan) that the cost to it of obtaining matching deposits in the Relevant Interbank Market would be in excess of LIBOR or, if applicable, EURIBOR.


11.3	Alternative basis of interest or funding


(a)	If a Market Disruption Event occurs and the Agent or a Borrower so requires, the Agent and that Borrower shall enter into negotiations (for a period of not more than thirty days) with a view to agreeing a substitute basis for determining the rate of interest.


(b)	Any alternative basis agreed pursuant to paragraph (a) above shall, with the prior consent of all the Lenders and the Borrower, be binding on all Parties.


11.4	Break Costs


(a)	Each Borrower shall, within three Business Days of demand by a Finance Party, pay to that Finance Party its Break Costs attributable to all or any part of a Loan or Unpaid Sum being paid by that Borrower on a day other than the last day of an Interest Period for that Loan or Unpaid Sum.


(b)	Each Lender shall, as soon as reasonably practicable after a demand by the Agent, provide a certificate confirming the amount of its Break Costs for any Interest Period in which they accrue.


12.	FEES


12.1	Commitment fee


(a)	The Company shall pay to the Agent (for the account of each Lender) a fee in the Base Currency computed at the rate of the Commitment Fee Percentage applicable to it on the daily amount of that Lender's Available Tranche A Commitment for the Availability Period.

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(b)	Yorkshire shall pay to the Agent (for the account of each Lender) a fee in the Base Currency computed at the rate of the Commitment Fee Percentage applicable to it on the daily amount of that Lender's Available Tranche B Commitment for the Availability Period.


(c)	Northeast shall pay to the Agent (for the account of each Lender) a fee in the Base Currency computed at the rate of the Commitment Fee Percentage applicable to it on the daily amount of that Lender's Available Tranche C Commitment for the Availability Period.


(d)	The accrued commitment fee is payable on the last day of each successive period of three Months which ends during the Availability Period, on the Preliminary Conversion Date, on each Secondary Conversion Date on the last day of the Availability Period and, if cancelled in full, on the cancelled amount of the relevant Lender's Commitment at the time the cancellation is effective.


(e)	No commitment fee is payable to the Agent (for the account of a Lender) on any Available Tranche A Commitment, any Available Tranche B Commitment or any Available Tranche C Commitment of that Lender for any day on which that Lender is a Defaulting Lender.


12.2	Upfront fee

The Company shall pay to the Arranger an upfront fee in the amount and at the times agreed in a Fee Letter.


12.3	Utilisation fee


(a)	The Company shall pay to the Agent (for the account of each Lender) a utilisation fee calculated as follows;


(i)	for any day on which more than 33 per cent. (but less than or equal to 66 per cent.) of the Facility is drawn, computed at a rate of 0.10 per cent. per annum on the Loans outstanding at that time; and


(ii)	for any day on which more than 66 per cent. of the Facility is drawn computed at a rate of 0.30 per cent. per annum on the Loans outstanding at that time.


(b)	The accrued utilisation fee is payable on the last day of each successive period of three Months which ends during the term of the Facility and on the Termination Date.


12.4	Agency fee

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

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SECTION 6

ADDITIONAL PAYMENT OBLIGATIONS


13.	TAX GROSS UP AND INDEMNITIES


13.1	Definitions


(a)	In this Agreement:

" Borrower DTTP Filing " means an HM Revenue & Customs' Form DTTP2 duly completed and filed by the relevant Borrower, which:


(i)	where it relates to a Treaty Lender that is an Original Lender, contains the scheme reference number and jurisdiction of tax residence stated opposite that Lender's name in Part II of Schedule 1 ( The Original Parties ), and is filed with HM Revenue & Customs within 30 Business Days of the date of this Agreement; or

(ii)

where it relates to a Treaty Lender that is a New Lender or an Increase Lender, contains the scheme reference number and jurisdiction of tax residence stated in respect of that Lender in the relevant Transfer Certificate, Assignment Agreement or Increase Confirmation, and is filed with HM Revenue & Customs within 30 days of that Transfer Date or date on which the increase in Commitments described in the relevant Increase Confirmation takes effect.

" Protected Party " means a Finance Party which is or will be subject to any liability, or required to make any payment, for or on account of Tax in relation to a sum received or receivable (or any sum deemed for the purposes of Tax to be received or receivable) under a Finance Document.

" Qualifying Lender " means:


(i)	a Lender which is beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document and is:


(A)	a Lender:


(1)	which is a bank (as defined for the purpose of section 879 of the ITA) making an advance under a Finance Document and is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance or would be within such charge as respects such payments apart from section 18A of the CTA; or


(2)	in respect of an advance made under a Finance Document by a person that was a bank (as defined for the purpose of section 879 of the ITA) at the time that that advance was made and which is within the charge to United Kingdom corporation tax as respects any payments of interest made in respect of that advance; or

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(B)	a Lender which is:


(1)	a company resident in the United Kingdom for United Kingdom tax purposes;


(2)	a partnership each member of which is:


(a)	a company so resident in the United Kingdom; or


(b)	a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or


(3)	a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company; or


(C)	a Treaty Lender; or


(ii)	a Lender which is a building society (as defined for the purpose of section 880 of the ITA) making an advance under a Finance Document.

" Tax Confirmation " means a confirmation by a Lender that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:


(i)	a company resident in the United Kingdom for United Kingdom tax purposes;


(ii)	a partnership each member of which is:


(A)	a company so resident in the United Kingdom; or


(B)	a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or


(iii)	a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company.

" Tax Credit " means a credit against, relief or remission for, or repayment of any Tax.

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" Tax Deduction " means a deduction or withholding for or on account of Tax from a payment under a Finance Document.

" Tax Payment " means either the increase in a payment made by an Obligor to a Finance Party under Clause 13.2 ( Tax gross-up ) or a payment under Clause 13.3 ( Tax indemnity ) or under any indemnity given as referred to in paragraph (c) of Clause 34.2 ( Exceptions ).

" Treaty Lender " means a Lender which:


(i)	is treated as a resident of a Treaty State for the purposes of the Treaty;


(ii)	does not carry on a business in the United Kingdom through a permanent establishment with which that Lender's participation in the Loan is effectively connected; and


(iii)	meets all other conditions in the appropriate double taxation agreement (subject to completion of any procedural formalities) for full exemption from taxation imposed by the United Kingdom on interest which relate to the Lender.

" Treaty State " means a jurisdiction having a double taxation agreement (a " Treaty ") with the United Kingdom which makes provision for full exemption from tax imposed by the United Kingdom on interest.

" UK Non-Bank Lender " means, where a Lender becomes a Party after the day on which this Agreement is entered into, a Lender which gives a Tax Confirmation in the Assignment Agreement, the Transfer Certificate or the Increase Confirmation which it executes on becoming a Party.


(b)	Unless a contrary indication appears, in this Clause 13 a reference to "determines" or "determined" means a determination made in the absolute discretion of the person making the determination.


13.2	Tax gross-up


(a)	Each Obligor shall make all payments to be made by it without any Tax Deduction, unless a Tax Deduction is required by law.


(b)	Each Obligor shall promptly upon becoming aware that it must make a Tax Deduction (or that there is any change in the rate or the basis of a Tax Deduction) notify the Agent accordingly. Similarly, a Lender shall notify the Agent on becoming so aware in respect of a payment payable to that Lender. If the Agent receives such notification from a Lender it shall notify the Company and that Obligor.


(c)	If a Tax Deduction is required by law to be made by an Obligor, the amount of the payment due from that Obligor shall be increased to an amount which (after making any Tax Deduction) leaves an amount equal to the payment which would have been due if no Tax Deduction had been required.


(d)	A payment shall not be increased under paragraph (c) above by reason of a Tax Deduction on account of Tax imposed by the United Kingdom, if on the date on which the payment falls due:

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(i)

the payment could have been made to the relevant Lender without a Tax Deduction if the Lender had been a Qualifying Lender, but on that date that Lender is not or has ceased to be a Qualifying Lender other than as a result of any change after the date it became a Lender under this Agreement in (or in the interpretation, administration, or application of) any law or Treaty, or any published practice or published concession of any relevant taxing authority; or


(ii)	the relevant Lender is a Qualifying Lender solely by virtue of paragraph (i)(B) of the definition of Qualifying Lender; and


(A)	an officer of HM Revenue & Customs has given (and not revoked) a direction (a " Direction ") under section 931 of the ITA which relates to the payment and that Lender has received from the Obligor making the payment or from the Company a certified copy of that Direction; and


(B)	the payment could have been made to the Lender without any Tax Deduction if that Direction had not been made; or


(iii)	the relevant Lender is a Qualifying Lender solely by virtue of paragraph (i)(B) of the definition of Qualifying Lender; and


(A)	the relevant Lender has not given a Tax Confirmation to the Obligors; and


(B)	the payment could have been made to the Lender without any Tax Deduction

if the Lender had given a Tax Confirmation to the Obligors, on the basis that the Tax Confirmation would have enabled the relevant Obligor to have formed a reasonable belief that the payment was an "excepted payment" for the purpose of section 930 of the ITA; or


(iv)	the relevant Lender is a Treaty Lender and the Obligor making the payment is able to demonstrate that the payment could have been made to the Lender without the Tax Deduction had that Lender complied with its obligations under paragraph (g) or (h) (as applicable) below.


(e)	If an Obligor is required to make a Tax Deduction, that Obligor shall make that Tax Deduction and any payment required in connection with that Tax Deduction within the time allowed and in the minimum amount required by law.

(f)

Within thirty days of making either a Tax Deduction or any payment required in connection with that Tax Deduction, the Obligor making that Tax Deduction shall deliver to the Agent for the Finance Party entitled to the payment a statement under Section 975 of the ITA, or other evidence reasonably satisfactory to that Finance Party that the Tax Deduction has been made or (as applicable) any appropriate payment paid to the relevant taxing authority.

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(g)


(i)	Subject to paragraph (ii) below, a Treaty Lender and each Obligor which makes a payment to which that Treaty Lender is entitled shall co-operate in completing any procedural formalities necessary for that Obligor to obtain authorisation to make that payment without a Tax Deduction.


(ii)


(A)	A Treaty Lender which becomes a Party on the day on which this Agreement is entered into that holds a passport under the HMRC DT Treaty Passport scheme, and which wishes that scheme to apply to this Agreement, shall confirm its scheme reference number and its jurisdiction of tax residence opposite its name in Part II of Schedule 1 (The Original Parties); and


(B)	a New Lender or an Increase Lender that is a Treaty Lender that holds a passport under the HMRC DT Treaty Passport scheme, and which wishes that scheme to apply to this Agreement, shall confirm its scheme reference number and its jurisdiction of tax residence in the Transfer Certificate, Assignment Agreement or Increase Confirmation which it executes,

and, having done so, that Lender shall be under no obligation pursuant to paragraph (i) above.


(h)	If a Lender has confirmed its scheme reference number and its jurisdiction of tax residence in accordance with paragraph (g)(ii) above and:


(i)	a Borrower making a payment to that Lender has not made a Borrower DTTP Filing in respect of that Lender; or


(ii)	a Borrower making a payment to that Lender has made a Borrower DTTP Filing in respect of that Lender but:


(A)	that Borrower DTTP Filing has been rejected by HM Revenue & Customs; or


(B)	HM Revenue & Customs has not given the Borrower authority to make payments to that Lender without a Tax Deduction within 60 days of the date of the Borrower DTTP Filing,

and in each case, the Borrower has notified that Lender in writing, that Lender and the Borrower shall co-operate in completing any additional procedural formalities necessary for that Borrower to obtain authorisation to make that payment without a Tax Deduction.


(i)	If a Lender has not confirmed its scheme reference number and jurisdiction of tax residence in accordance with paragraph (g)(ii) above, no Obligor shall make a Borrower DTTP Filing or file any other form relating to the HMRC DT Treaty Passport scheme in respect of that Lender's Commitment or its participation in any Loan unless the Lender otherwise agrees.


(j)	A Borrower shall, promptly on making a Borrower DTTP Filing, deliver a copy of that Borrower DTTP Filing to the Agent for delivery to the relevant Lender.

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(k)	A UK Non-Bank Lender shall promptly notify the Obligors and the Agent if there is any change in the position from that set out in the Tax Confirmation.


(l)	A payment shall not be increased under paragraph (c) above by reason of a Tax Deduction on account of FATCA Withholding Tax if, on the date on which the payment falls due, the Obligor making the payment is able to demonstrate that the payment could have been made to the Lender without the Tax Deduction had that Lender complied with its obligations under Clause 13.8 ( FATCA Information ) below.


13.3	Tax indemnity


(a)	An Obligor shall (within three Business Days of demand by the Agent) pay to a Protected Party an amount equal to the loss, liability or cost which that Protected Party determines will be or has been (directly or indirectly) suffered for or on account of Tax by that Protected Party in respect of a Finance Document.


(b)	Paragraph (a) above shall not apply:


(i)	with respect to any Tax assessed on a Finance Party:


(A)	under the law of the jurisdiction in which that Finance Party is incorporated or, if different, the jurisdiction (or jurisdictions) in which that Finance Party is treated as resident for tax purposes; or


(B)	under the law of the jurisdiction in which that Finance Party's Facility Office is located in respect of amounts received or receivable in that jurisdiction,

if that Tax is imposed on or calculated by reference to the net income received or receivable (but not any sum deemed to be received or receivable) by that Finance Party; or


(ii)	to the extent a loss, liability or cost:


(A)	is compensated for by an increased payment under Clause 13.2 ( Tax gross-up );


(B)	would have been compensated for by an increased payment under Clause 13.2 ( Tax gross-up ) but was not so compensated solely because one of the exclusions in paragraph (d) of Clause 13.2 ( Tax gross-up ) applied; or


(C)	is attributable to FATCA Withholding Tax.


(c)	A Protected Party making, or intending to make a claim under paragraph (a) above shall promptly notify the Agent of the event which will give, or has given, rise to the claim, following which the Agent shall notify the Obligor.


(d)	A Protected Party shall, on receiving a payment from an Obligor under this Clause 13.3, notify the Agent.

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13.4	Tax Credit

If an Obligor makes a Tax Payment and the relevant Finance Party determines that:


(a)	a Tax Credit is attributable to an increased payment of which that Tax Payment forms part, to that Tax Payment or to a Tax Deduction in consequence of which that Tax Payment was required; and


(b)	that Finance Party has obtained, utilised and retained that Tax Credit,

the Finance Party shall pay an amount to the Obligor which that Finance Party determines will leave it (after that payment) in the same after-Tax position as it would have been in had the Tax Payment not been required to be made by the Obligor.


13.5	Lender Status Confirmation

Each Lender which becomes a Party to this Agreement after the date of this Agreement shall indicate, in the Transfer Certificate, Assignment Agreement or Increase Confirmation which it executes on becoming a Party, and for the benefit of the Agent and without liability to any Obligor, which of the following categories it falls in:


(a)	not a Qualifying Lender;


(b)	a Qualifying Lender (other than a Treaty Lender); or


(c)	a Treaty Lender.

If a New Lender or Increase Lender fails to indicate its status in accordance with this Clause 13.5 then such New Lender or Increase Lender shall be treated for the purposes of this Agreement (including by each Obligor) as if it is not a Qualifying Lender until such time as it notifies the Agent which category applies (and the Agent, upon receipt of such notification, shall inform the Obligors). For the avoidance of doubt, a Transfer Certificate, Assignment Agreement or Increase Confirmation shall not be invalidated by any failure of a Lender to comply with this Clause 13.5.


13.6	Stamp taxes

The Company shall pay and, within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability that Finance Party incurs in relation to all stamp duty, registration and other similar Taxes payable in respect of any Finance Document.

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13.7	Value added tax

(a)

All amounts expressed to be payable under a Finance Document by any Party to a Finance Party which (in whole or in part) constitute the consideration for any supply for VAT purposes are deemed to be exclusive of any VAT which is chargeable on that supply and, accordingly, subject to paragraph (b) below, if VAT is or becomes chargeable on any supply made by any Finance Party to any Party under a Finance Document and such Finance Party is required to account to the relevant tax authority for the VAT, that Party must pay to such Finance Party (in addition to and at the same time as paying any other consideration for such supply) an amount equal to the amount of the VAT (and such Finance Party must promptly provide an appropriate VAT invoice to that Party).

(b)

If VAT is or becomes chargeable on any supply made by any Finance Party (the " Supplier ") to any other Finance Party (the " Recipient ") under a Finance Document, and any Party other than the Recipient (the " Relevant Party ") is required by the terms of any Finance Document to pay an amount equal to the consideration for that supply to the Supplier (rather than being required to reimburse or indemnify the Recipient in respect of that consideration):

(i)

(where the Supplier is the person required to account to the relevant tax authority for the VAT) the Relevant Party must also pay to the Supplier (at the same time as paying that amount) an additional amount equal to the amount of the VAT. The Recipient must (where this paragraph (i) applies) promptly pay to the Relevant Party an amount equal to any credit or repayment the Recipient receives from the relevant tax authority which the Recipient reasonably determines relates to the VAT chargeable on that supply; and

(ii)

(where the Recipient is the person required to account to the relevant tax authority for the VAT) the Relevant Party must promptly, following demand from the Recipient, pay to the Recipient an amount equal to the VAT chargeable on that supply but only to the extent that the Recipient reasonably determines that it is not entitled to credit or repayment from the relevant tax authority in respect of that VAT.

(c)

Where a Finance Document requires any Party to reimburse or indemnify a Finance Party for any cost or expense, that Party shall reimburse or indemnify (as the case may be) such Finance Party for the full amount of such cost or expense, including such part thereof as represents VAT, save to the extent that such Finance Party reasonably determines that it is entitled to credit or repayment in respect of such VAT from the relevant tax authority.


(d)	Any reference in this Clause 13.7 to any Party shall, at any time when such Party is treated as a member of a group for VAT purposes, include (where appropriate and unless the context otherwise requires) a reference to the representative member of such group at such time (the term "representative member" to have the same meaning as in the Value Added Tax Act 1994).


(e)	In relation to any supply made by a Finance Party to any Party under a Finance Document, if reasonably requested by such Finance Party, that Party must promptly provide such Finance Party with details of that Party's VAT registration and such other information as is reasonably requested in connection with such Finance Party's VAT reporting requirements in relation to such supply.

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13.8	FATCA Information


(a)	Subject to paragraph (c) below, each Party shall, within ten Business Days of a reasonable request by another Party:


(i)	confirm to that other Party whether it is:


(A)	a FATCA Exempt Party; or


(B)	not a FATCA Exempt Party; and


(ii)	supply to that other Party such forms, documentation and other information relating to its status under FATCA (including its applicable passthru percentage or other information required under the Treasury Regulations or other official guidance including intergovernmental agreements) as that other Party reasonably requests for the purposes of that other Party's compliance with FATCA.


(b)	If a Party confirms to another Party pursuant to 13.8(a)(i) above that it is a FATCA Exempt Party and it subsequently becomes aware that it is not, or has ceased to be a FATCA Exempt Party, that Party shall notify that other Party reasonably promptly.


(c)	Paragraph (a) above shall not oblige any Finance Party to do anything which would or might in its reasonable opinion constitute a breach of:


(i)	any law or regulation;


(ii)	any fiduciary duty; or


(iii)	any duty of confidentiality.


(d)	If a Party fails to confirm its status or to supply forms, documentation or other information requested in accordance with paragraph (a) above (including, for the avoidance of doubt, where paragraph (c) above applies), then:


(i)	if that Party failed to confirm whether it is (and/or remains) a FATCA Exempt Party then such Party shall be treated for the purposes of the Finance Documents as if it is not a FATCA Exempt Party; and


(ii)	if that Party failed to confirm its applicable passthru percentage then such Party shall be treated for the purposes of the Finance Documents (and payments made thereunder) as if its applicable passthru percentage is 100%,

until (in each case) such time as the Party in question provides the requested confirmation, forms, documentation or other information.

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14.	INCREASED COSTS


14.1	Increased costs

(a)

Subject to Clause 14.3 ( Exceptions ) an Obligor shall, within three Business Days of a demand by the Agent, pay for the account of a Finance Party the amount of any Increased Costs incurred by that Finance Party or any of its Affiliates as a result of (i) the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation or (ii) compliance with any law or regulation made after the date of this Agreement.


(b)	In this Agreement " Increased Costs " means:


(i)	a reduction in the rate of return from the Facility or on a Finance Party's (or its Affiliate's) overall capital;


(ii)	an additional or increased cost; or


(iii)	a reduction of any amount due and payable under any Finance Document,

which is incurred or suffered by a Finance Party or any of its Affiliates to the extent that it is attributable to that Finance Party having entered into its Commitment or funding or performing its obligations under any Finance Document.


14.2	Increased cost claims


(a)	A Finance Party intending to make a claim pursuant to Clause 14.1 ( Increased costs ) shall notify the Agent of the event giving rise to the claim, following which the Agent shall promptly notify the relevant Obligor.


(b)	Each Finance Party shall, as soon as practicable after a demand by the Agent, provide a certificate confirming the amount of its Increased Costs.


14.3	Exceptions


(a)	Clause 14.1 ( Increased costs ) does not apply to the extent any Increased Cost is:


(i)	attributable to a Tax Deduction required by law to be made by an Obligor;


(ii)	attributable to a FATCA Withholding Tax;


(iii)	compensated for by Clause 13.3 ( Tax indemnity ) (or would have been compensated for under Clause 13.3 ( Tax indemnity ) but was not so compensated solely because any of the exclusions in paragraph (b) of Clause 13.3 ( Tax indemnity ) applied);


(iv)	compensated for by the payment of the Mandatory Cost; or

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(v)	attributable to the wilful breach by the relevant Finance Party or its Affiliates of any law or regulation.


(b)	In this Clause 14.3, a reference to a " Tax Deduction " has the same meaning given to the term in Clause 13.1 ( Definitions ).


15.	OTHER INDEMNITIES


15.1	Currency indemnity


(a)	If any sum due from an Obligor under the Finance Documents (a " Sum "), or any order, judgment or award given or made in relation to a Sum, has to be converted from the currency (the " First Currency ") in which that Sum is payable into another currency (the " Second Currency ") for the purpose of:


(i)	making or filing a claim or proof against that Obligor;


(ii)	obtaining or enforcing an order, judgment or award in relation to any litigation or arbitration proceedings,

that Obligor shall as an independent obligation, within three Business Days of demand, indemnify each Finance Party to whom that Sum is due against any cost, loss or liability arising out of or as a result of the conversion including any discrepancy between (A) the rate of exchange used to convert that Sum from the First Currency into the Second Currency and (B) the rate or rates of exchange available to that person at the time of its receipt of that Sum.


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


15.2	Other indemnities

An Obligor shall within three Business Days of demand, indemnify each Finance Party against any cost, loss or liability incurred by that Finance Party as a result of:


(a)	the occurrence of any Event of Default;


(b)	a failure by an Obligor to pay any amount due under a Finance Document on its due date, including without limitation, any cost, loss or liability arising as a result of Clause 27 ( Sharing among the Finance Parties );


(c)	funding, or making arrangements to fund, its participation in a Loan requested by a Borrower in a Utilisation Request but not made by reason of the operation of any one or more of the provisions of this Agreement (other than by reason of default or negligence by that Finance Party alone); or


(d)	a Loan (or part of a Loan) not being prepaid in accordance with a notice of prepayment given by a Borrower.

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15.3	Indemnity to the Agent

An Obligor shall promptly indemnify the Agent against any cost, loss or liability incurred by the Agent (acting reasonably) as a result of:


(a)	investigating any event which it reasonably believes is a Default; or


(b)	entering into or performing any foreign exchange contract for the purposes of Clause 6 ( Optional Currencies ); or


(c)	acting or relying on any notice, request or instruction which it reasonably believes to be genuine, correct and appropriately authorised.


16.	MITIGATION BY THE LENDERS


16.1	Mitigation

(a)

Each Finance Party shall, in consultation with the Obligors, take all reasonable steps to mitigate any circumstances which arise and which would result in any amount becoming payable under or pursuant to, or cancelled pursuant to, any of Clause 8.1 ( Illegality ), Clause 13 ( Tax gross-up and indemnities ), Clause 14 ( Increased costs ) or paragraph 3 of Schedule 4 ( Mandatory Cost formulae ) including (but not limited to) transferring its rights and obligations under the Finance Documents to another Affiliate or Facility Office.


(b)	Paragraph (a) above does not in any way limit the obligations of any Obligor under the Finance Documents.


16.2	Limitation of liability


(a)	An Obligor shall indemnify each Finance Party for all costs and expenses reasonably incurred by that Finance Party as a result of steps taken by it under Clause 16.1 ( Mitigation ).


(b)	A Finance Party is not obliged to take any steps under Clause 16.1 ( Mitigation ) if, in the opinion of that Finance Party (acting reasonably), to do so might be prejudicial to it.


17.	COSTS AND EXPENSES


17.1	Transaction expenses

An Obligor shall promptly on demand pay the Agent and the Arranger the amount of all out of pocket costs and expenses (including legal fees up to the amount of any cap agreed in respect thereof) reasonably incurred by any of them in connection with the negotiation, preparation, printing, execution and syndication of:


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


(b)	any other Finance Documents executed after the date of this Agreement.

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17.2	Amendment costs

If (a) an Obligor requests an amendment, waiver or consent or (b) an amendment is required pursuant to Clause 28.10 ( Change of currency ), an Obligor shall, within three Business Days of demand, reimburse the Agent for the amount of all costs and expenses (including legal fees) reasonably incurred by the Agent in responding to, evaluating, negotiating or complying with that request or requirement.


17.3	Enforcement costs

An Obligor shall, within three Business Days of demand, pay to each Finance Party the amount of all costs and expenses (including legal fees) incurred by that Finance Party in connection with the enforcement of, or the preservation of any rights under, any Finance Document.

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SECTION 7

GUARANTEE


18.	GUARANTEE AND INDEMNITY


18.1	Guarantee and indemnity

The Guarantor irrevocably and unconditionally:


(a)	guarantees to each Finance Party punctual performance by each other Borrower of all that Borrower's obligations under the Finance Documents;


(b)	undertakes with each Finance Party that whenever a Borrower does not pay any amount when due under or in connection with any Finance Document, the Guarantor shall immediately on demand pay that amount as if it was the principal obligor; and

(c)

agrees with each Finance Party that if any obligation guaranteed by it is or becomes unenforceable, invalid or illegal it will, as an independent and primary obligation, indemnify that Finance Party immediately on demand against any cost, loss or liability it incurs as a result of a Borrower not paying any amount which would, but for such unenforceability, invalidity or illegality, have been payable by it under any Finance Document on the date when it would have been due. The amount payable by the Guarantor under this indemnity will not exceed the amount it would have had to pay under this Clause 18 if the amount claimed had been recoverable on the basis of a guarantee.


18.2	Continuing guarantee

This guarantee is a continuing guarantee and will extend to the ultimate balance of sums payable by any Obligor under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part.


18.3	Reinstatement

If any discharge, release or arrangement (whether in respect of the obligations of any Obligor or any security for those obligations or otherwise) is made by a Finance Party in whole or in part on the basis of any payment, security or other disposition which is avoided or must be restored in insolvency, liquidation, administration or otherwise, without limitation, then the liability of the Guarantor under this Clause 18 will continue or be reinstated as if the discharge, release or arrangement had not occurred.


18.4	Waiver of defences

The obligations of the Guarantor under this Clause 18 will not be affected by any act, omission, matter or thing which, but for this Clause, would reduce, release or prejudice any of its obligations under this Clause 18 (without limitation and whether or not known to it or any Finance Party) including:


(a)	any time, waiver or consent granted to, or composition with, any Obligor or other person;

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(b)	the release of any other Obligor or any other person under the terms of any composition or arrangement with any creditor of any member of the Group;


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


(d)	any incapacity or lack of power, authority or legal personality of or dissolution or change in the members or status of an Obligor or any other person;


(e)	any amendment, novation, supplement, extension or restatement (however fundamental and whether or not more onerous) or replacement of a Finance Document or any other document or security including without limitation any change in the purpose of, any extension of, or any increase in, any facility or the addition of any new facility under any Finance Document or other document;


(f)	any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security; or


(g)	any insolvency or similar proceedings.


18.5	Immediate recourse

The Guarantor waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from the Guarantor under this Clause 18. This waiver applies irrespective of any law or any provision of a Finance Document to the contrary.


18.6	Appropriations

Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may:


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


b.	hold in an interest-bearing suspense account any moneys received from the Guarantor or on account of the Guarantor's liability under this Clause 18.

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18.7	Deferral of Guarantor's rights

Until all amounts which may be or become payable by the Obligors under or in connection with the Finance Documents have been irrevocably paid in full and unless the Agent otherwise directs, the Guarantor will not exercise any rights which it may have by reason of performance by it of its obligations under the Finance Documents or by reason of any amount being payable, or liability arising, under this Clause 18:


(a)	to be indemnified by an Obligor;


(b)	to claim any contribution from any other guarantor of any Obligor's obligations under the Finance Documents;


(c)	to take the benefit (in whole or in part and whether by way of subrogation or otherwise) of any rights of the Finance Parties under the Finance Documents or of any other guarantee or security taken pursuant to, or in connection with, the Finance Documents by any Finance Party;


(d)	to bring legal or other proceedings for an order requiring any Obligor to make any payment, or perform any obligation, in respect of which the Guarantor has given a guarantee, undertaking or indemnity under Clause 18.1 ( Guarantee and Indemnity );


(e)	to exercise any right of set-off against any Obligor; and/or


(f)	to claim or prove as a creditor of any Obligor in competition with any Finance Party.

If the Guarantor receives any benefit, payment or distribution in relation to such rights it shall hold that benefit, payment or distribution to the extent necessary to enable all amounts which may be or become payable to the Finance Parties by the Obligors under or in connection with the Finance Documents to be repaid in full on trust for the Finance Parties and shall promptly pay or transfer the same to the Agent or as the Agent may direct for application in accordance with Clause 28 ( Payment mechanics ).


18.8	Additional security

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

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SECTION 8

REPRESENTATIONS, UNDERTAKINGS AND EVENTS OF DEFAULT


19.	REPRESENTATIONS

Each Obligor makes the representations and warranties set out in this Clause 19 to each Finance Party on the date of this Agreement.


19.1	Status


(a)	It is a corporation, duly incorporated and validly existing under the law of its jurisdiction of incorporation.


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


(c)	It is not a FATCA FFI or a US Tax Obligor.


19.2	Binding obligations

The obligations expressed to be assumed by it in each Finance Document are, subject to any general principles of law as at the date of this Agreement limiting its obligations which are specifically referred to in any legal opinion delivered pursuant to Clause 4 ( Conditions of Utilisation ), legal, valid, binding and enforceable obligations.


19.3	Non-conflict with other obligations

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


(a)	any law or regulation applicable to it;


(b)	its or any of its Subsidiaries' constitutional documents; or


(c)	any agreement or instrument binding upon it or any of its Subsidiaries or any of its or any of its Subsidiaries' assets to an extent which could reasonably be expected to have a Material Adverse Effect.


19.4	Power and authority

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

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19.5	Validity and admissibility in evidence


(a)	All Authorisations required:


(i)	to enable it lawfully to enter into, exercise its rights and comply with its obligations in the Finance Documents to which it is a party; and


(ii)	to make the Finance Documents to which it is a party admissible in evidence in its jurisdiction of incorporation,

have been obtained or effected and are in full force and effect.


(b)	All material Authorisations (including, without limitation, in the case of each Regulated Borrower pursuant to its DNO Licence) necessary for the conduct of its business, trade and ordinary activities have been obtained and effected and are in full force and effect.


19.6	Governing law and enforcement


(a)	The choice of English law as the governing law of the Finance Documents will be recognised and enforced in its jurisdiction of incorporation.


(b)	Any judgment obtained in England in relation to a Finance Document will be recognised and enforced in its jurisdiction of incorporation.


19.7	Deduction of Tax

It is not required to make any deduction for or on account of Tax from any payment it may make under any Finance Document to a Lender which is:


(a)	a Qualifying Lender:


(i)	falling within paragraph (i)(A) of the definition of Qualifying Lender; or


(ii)	except where a Direction has been given under section 931 of the ITA in relation to the payment concerned, falling within paragraph (i)(B) of the definition of Qualifying Lender; or


(iii)	falling within paragraph (ii) of the definition of Qualifying Lender or;


(b)	a Treaty Lender and the payment is one specified in a direction given by the Commissioners of Revenue & Customs under Regulation 2 of the Double Taxation Relief (Taxes on Income) (General) Regulations 1970 (SI 1970/488).

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19.8	No filing or stamp taxes

Under the law of its jurisdiction of incorporation it is not necessary that the Finance Documents be filed, recorded or enrolled with any court or other authority in that jurisdiction or that any stamp, registration or similar tax be paid on or in relation to the Finance Documents or the transactions contemplated by the Finance Documents.


19.9	No default


(a)	No Event of Default is continuing or might reasonably be expected to result from the making of any Utilisation.


(b)	No other event or circumstance is outstanding which constitutes a default under any other agreement or instrument which is binding on it or any of its Subsidiaries or to which its (or any of its Subsidiaries') assets are subject which might reasonably be expected to have a Material Adverse Effect.


19.10	No misleading information


(a)	Any written factual information provided by any member of the Group (the " Information ") was true and accurate in all material respects as at the date it was provided or as at the date (if any) at which it is stated.


(b)	Any financial projections contained in the Information have been prepared on the basis of recent historical information and on the basis of assumptions believed by it to be reasonable.


(c)	Nothing has occurred or been omitted from the Information and no information has been given or withheld that results in the Information taken as a whole being untrue or misleading in any material respect.


19.11	Financial statements


(a)	Its Original Financial Statements were prepared in accordance with IFRS consistently applied unless expressly disclosed to the Agent in writing to the contrary before the date of this Agreement.


(b)	Its Original Financial Statements fairly represent its financial condition and operations (consolidated in the case of the Company) during the relevant financial year unless expressly disclosed to the Agent in writing to the contrary before the date of this Agreement.


(c)	There has been no material adverse change in its business or financial condition (or the business or consolidated financial condition of the Group, in the case of the Company) since the date of its Original Financial Statements.

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19.12	Pari passu ranking

Its payment obligations under the Finance Documents rank at least pari passu with the claims of all its other unsecured and unsubordinated creditors, except for obligations mandatorily preferred by law applying to companies generally.


19.13	No proceedings pending or threatened

No litigation, arbitration or administrative proceedings of or before any court, arbitral body or agency which, if adversely determined, might reasonably be expected to have a Material Adverse Effect have (to the best of its knowledge and belief) been started or threatened against it or any of its Subsidiaries.


19.14	Environmental compliance

Each member of the Group has performed and observed in all material respects all Environmental Law, Environmental Permits and all other material covenants, conditions, restrictions or agreements directly or indirectly concerned with any contamination, pollution or waste or the release or discharge of any toxic or hazardous substance in connection with any real property which is or was at any time owned, leased or occupied by any member of the Group or on which any member of the Group has conducted any activity where failure to do so might reasonably be expected to have a Material Adverse Effect.


19.15	Environmental Claims

No Environmental Claim has been commenced or (to the best of its knowledge and belief) is threatened against any member of the Group where that claim would be reasonably likely, if determined against that member of the Group to have a Material Adverse Effect.


19.16	Repetition

The Repeating Representations are deemed to be made by each Obligor (by reference to the facts and circumstances then existing) on the date of each Utilisation Request and the first day of each Interest Period.


20.	INFORMATION UNDERTAKINGS

The undertakings in this Clause 20 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.


20.1	Financial statements

The Company shall supply to the Agent in sufficient copies for all the Lenders:


(a)	as soon as the same become available, but in any event within 180 days after the end of each of its financial years:

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(i)	its audited consolidated financial statements for that financial year; and


(ii)	the audited financial statements of each Regulated Borrower for that financial year; and


(b)	as soon as the same become available, but in any event within 90 days after the end of each half of each of its financial years the unaudited consolidated financial statements of the Group for that financial half year.


20.2	Compliance Certificate


(a)	The Company shall supply to the Agent, with each set of financial statements delivered pursuant to paragraph (a)(i) or (b) of Clause 20.1 ( Financial statements ), a Compliance Certificate setting out (in reasonable detail) computations as to compliance with Clause 21 ( Financial covenants ) as at the date as at which those financial statements were drawn up.


(b)	Each Compliance Certificate shall be signed by two directors of the Company (or, failing that, by one director of the Company and the finance director or the treasurer or the investor reporting manager or the financial controller or the company secretary of the Company).


20.3	Requirements as to financial statements


(a)	Each set of financial statements delivered by the Company pursuant to Clause 20.1 ( Financial statements ) shall include a balance sheet, income statement and cashflow statement and shall be certified by a director of the relevant company as fairly representing its financial condition as at the date as at which those financial statements were drawn up.


(b)

(i)

The Company shall procure that each set of financial statements of an Obligor delivered pursuant to Clause 20.1 ( Financial statements ) is prepared using IFRS, and accounting practices and financial reference periods consistent with those applied in the preparation of the Original Financial Statements for that Obligor unless, in relation to any set of financial statements, it notifies the Agent that there has been a change in IFRS, or the accounting practices or reference periods and its auditors (or, if appropriate, the auditors of the Obligor) deliver to the Agent:


(A)	a description of any change necessary for those financial statements to reflect the IFRS, accounting practices and reference periods upon which that Obligor's Original Financial Statements were prepared; and


(B)	sufficient information, in form and substance as may be reasonably required by the Agent, to enable the Lenders to determine whether Clause 21 ( Financial covenants ) has been complied with and make an accurate comparison between the financial position indicated in those financial statements and that Obligor's Original Financial Statements.

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(ii)	If the Company notifies the Agent of a change in accordance with paragraph (i) above then the Company and Agent shall enter into negotiations in good faith with a view to agreeing:


(A)	whether or not the change might result in any material alteration in the commercial effect of any of the terms of this Agreement; and


(B)	if so, any amendments to this Agreement which may be necessary to ensure that the change does not result in any material alteration in the commercial effect of those terms,

and if any amendments are agreed they shall take effect and be binding on each of the Parties in accordance with their terms.

Any reference in this Agreement to those financial statements shall be construed as a reference to those financial statements as adjusted to reflect the basis upon which the Original Financial Statements were prepared.


20.4	Information: miscellaneous

Each Borrower shall supply to the Agent (in sufficient copies for all the Lenders, if the Agent so requests):


(a)	promptly upon becoming aware of them, the details of any litigation, arbitration or administrative proceedings which are current, threatened or pending against any member of the Group, and which might, if adversely determined, have a Material Adverse Effect (other than distribution price control reviews to which all other electricity distribution network operators in Great Britain are subject);


(b)	promptly written notice of each Obligor's Moody's Rating and S&P Rating and any changes thereto;


(c)	promptly upon receipt a copy of each DNO Licence in respect of each Obligor for the period commencing on 1 April 2012; and


(d)	promptly, such further information regarding the financial condition, business and operations of any member of the Group as any Finance Party (through the Agent) may reasonably request.


20.5	Notification of default


(a)	Each Obligor shall notify the Agent of any Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of its occurrence (unless that Obligor is aware that a notification has already been provided by another Obligor).

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(b)

Promptly upon a request by the Agent, an Obligor shall supply to the Agent a certificate signed by two of its directors or senior officers on its behalf certifying that no Default is continuing (or if a Default is continuing, specifying the Default and the steps, if any, being taken to remedy it) save that a Regulated Borrower shall only be required to certify that no Default is continuing in respect of itself.


20.6	Use of websites


(a)	An Obligor may satisfy its obligation under this Agreement to deliver any information in relation to those Lenders ( the " Website Lenders ") who accept this method of communication by posting this information onto an electronic website designated by the Company and the Agent (the " Designated Website ") if:


(i)	the Agent expressly agrees (after consultation with each of the Lenders) that it will accept communication of the information by this method;


(ii)	both the Obligor and the Agent are aware of the address of and any relevant password specifications for the Designated Website; and


(iii)	the information is in a format previously agreed between the Obligor and the Agent.

If any Lender (a " Paper Form Lender ") does not agree to the delivery of information electronically then the Agent shall notify the Obligor accordingly and the Obligor shall supply the information to the Agent (in sufficient copies for each Paper Form Lender) in paper form. In any event the Obligor shall supply the Agent with at least one copy in paper form of any information required to be provided by it.


(b)	The Agent shall supply each Website Lender with the address of and any relevant password specifications for the Designated Website following designation of that website by the Obligor and the Agent.


(c)	The Obligor shall promptly upon becoming aware of its occurrence notify the Agent if:


(i)	the Designated Website cannot be accessed due to technical failure;


(ii)	the password specifications for the Designated Website change;


(iii)	any new information which is required to be provided under this Agreement is posted onto the Designated Website;


(iv)	any existing information which has been provided under this Agreement and posted onto the Designated Website is amended; or


(v)	the Obligor becomes aware that the Designated Website or any information posted onto the Designated Website is or has been infected by any electronic virus or similar software.

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If the Obligor notifies the Agent under paragraph (c)(i) or paragraph (c)(v) above, all information to be provided by the Obligor under this Agreement after the date of that notice shall be supplied in paper form unless and until the Agent and each Website Lender is satisfied that the circumstances giving rise to the notification are no longer continuing.

Any Website Lender may request, through the Agent, one paper copy of any information required to be provided under this Agreement which is posted onto the Designated Website. The Obligor shall comply with any such request within ten Business Days.


20.7	"Know your customer" checks


(a)	If:


(i)	the introduction of or any change in (or in the interpretation, administration or application of) any law or regulation made after the date of this Agreement;


(ii)	any change in the status of an Obligor or the composition of the shareholders of an Obligor after the date of this Agreement; or


(iii)	a proposed assignment or transfer by a Lender of any of its rights and obligations under this Agreement to a party that is not a Lender prior to such assignment or transfer,

obliges the Agent or any Lender (or, in the case of paragraph (iii) above, any prospective new Lender) to comply with "know your customer" or similar identification procedures in circumstances where the necessary information is not already available to it, each Obligor shall promptly upon the request of the Agent or any Lender supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself, or on behalf of any Lender) or any Lender (for itself or, in the case of the event described in paragraph (iii) above, or on behalf of any prospective new Lender) in order for the Agent, such Lender or, in the case of the event described in paragraph (iii) above, any prospective new Lender to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.

(b)

Each Lender shall promptly upon the request of the Agent supply, or procure the supply of, such documentation and other evidence as is reasonably requested by the Agent (for itself) in order for the Agent to carry out and be satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations pursuant to the transactions contemplated in the Finance Documents.


21.	FINANCIAL COVENANTS


21.1	Financial definitions

In this Clause 21:

" Borrowings " means, at any time, the outstanding principal, capital or nominal amount and any fixed or minimum premium payable on prepayment or redemption of any indebtedness for or in respect of:

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(i)	moneys borrowed and debit balances with financial institutions;


(ii)	any amount raised by acceptance under any acceptance credit facility;


(iii)	any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument;


(iv)	the amount of any liability in respect of any lease or hire purchase contract which would, in accordance with IFRS, be treated as a finance or capital lease;


(v)	receivables sold or discounted (other than any receivables to the extent they are sold on a non-recourse basis);


(vi)	any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or documentary letter of credit or any other instrument issued by a bank or financial institution (excluding any given in respect of trade credit arising in the ordinary course of business);


(vii)	any amount raised by the issue of redeemable shares which are redeemable before the Termination Date;


(viii)	any amount raised under any other transaction (including any forward sale or purchase agreement) having the commercial effect of a borrowing; and


(ix)	(without double counting) the amount of any liability in respect of any guarantee or indemnity for any of the items referred to in paragraphs (i) to (viii) above.

" Calculation Date " means each of 30 June and 31 December in any year.

" Consolidated EBIT " means the consolidated profit shown in the consolidated financial statements of the Group on the line entitled "operating profit":


(i)	before taking into account any items treated as exceptional items;


(ii)	after deducting the amount of any profit of any member of the Group which is attributable to minority interests;


(iii)	after adding dividends received from any investment or entity (which is not itself a member of the Group) in which any member of the Group has an ownership interest;


(iv)	before taking into account any realised and unrealised exchange gains and losses including those arising on translation of currency debt;

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(v)	before taking into account any gain or loss arising from an upward or downward revaluation of any asset at any time before the date of the Company's Original Financial Statements,in each case, to the extent added, deducted or taken into account, as the case may be, for the purposes of determining profits of the Group from ordinary activities before taxation (and without double counting).

" Consolidated Net Finance Charges " means, for any Relevant Period, the aggregate amount of net interest paid on Consolidated Senior Total Net Debt included in the consolidated cash flow statement for the Group in respect of that Relevant Period.

" Consolidated Senior Total Net Debt " means, at any time, the aggregate amount of all obligations of the Group for or in respect of Borrowings (other than between members of the Group) which rank at least pari passu with the Loans advanced hereunder but:


(i)	deducting the aggregate amount of all obligations of any member of the Group in respect of Project Finance Borrowings;


(ii)	deducting the aggregate amount of all obligations of any member of the Group in respect of Borrowings to the extent that the repayment or redemption of such Borrowings is provided for by the purchase by a member of the Group of a guaranteed investment contract; and


(iii)	deducting the aggregate amount of freely available cash and Cash Equivalent Investments held by any member of the Group at such time,

and so that no amount shall be excluded more than once.

" Interest Cover " means, in respect of any Relevant Period, the ratio of Consolidated EBIT for that Relevant Period to Consolidated Net Finance Charges for that Relevant Period.

" Northeast Senior Total Net Debt " means, at any time, the aggregate amount of all obligations of Northeast for or in respect of Borrowings which rank at least pari passu with the Loans advanced hereunder but:


(i)	deducting the aggregate amount of all obligations of Northeast in respect of Project Finance Borrowings;


(ii)	deducting the aggregate amount of all obligations of Northeast in respect of Borrowings to the extent that the repayment or redemption of such Borrowings is provided for by the purchase by a member of the Group of a guaranteed investment contract; and


(iii)	deducting the aggregate amount of freely available cash and Cash Equivalent Investments held by Northeast at such time, and so that no amount shall be excluded more than once.

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" Project Finance Borrowings " means any indebtedness to finance or refinance the ownership, acquisition, development, design, engineering, procurement, construction, servicing, management and/or operation of any project or asset:


(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 owed 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 to such member of the Group for amounts limited to the cash flow or net cash flow (other than historic cash flow or historic net cash flow) from, or ownership interests or other investments in, such project or asset; and/or

(b)

recourse to such member of the Group for the purpose only of enabling amounts to be claimed in respect of such indebtedness in an enforcement of any Security given by such member of the Group over such project or asset or the income, cash flow or other proceeds deriving therefrom (or given by any shareholder or the like or other investor in the borrower or in the owner of such project or asset over its shares or the like in the capital of or other investment in the borrower or in the owner of such project or asset) to secure such indebtedness provided that:


(A)	the extent of such recourse to such member of the Group is limited solely to the amount of any recoveries made on any such enforcement; and

(B)

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 an Obligor or to appoint or procure the appointment of any receiver, trustee or similar person or officer in respect of an Obligor or any of its assets (save for the assets the subject of such Security); and/or

(c)

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

For the avoidance of doubt, recourse as permitted by (a), (b) or (c) above shall not be had to the cash flow of a Regulated Borrower other than to the extent of the amount of cash flow derived solely from an investment or investments in the relevant project or asset.

For the purpose of this definition of "Project Finance Borrowings", " Excluded Subsidiary " means any Subsidiary of the Company (other than a Regulated Borrower):

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(a)	in respect of which neither the Company nor any Subsidiary of the Company (other than another Excluded Subsidiary) has undertaken any legal obligation to give any guarantee of any Borrowings (other than in respect of intra-Group Borrowings or pursuant to any statutory obligation) and the Subsidiaries of which are all Excluded Subsidiaries; and


(b)	which has been designated as such by the Company by written notice to the Agent (and the Company has not subsequently delivered written notice to the Agent that such Subsidiary is no longer an Excluded Subsidiary).

" Relevant Period " means each period of twelve months ending on a Calculation Date.

" Yorkshire Senior Total Net Debt " means, at any time, the aggregate amount of all obligations of Yorkshire for or in respect of Borrowings which rank at least pari passu with the Loans advanced hereunder but:


(i)	deducting the aggregate amount of all obligations of Yorkshire in respect of Project Finance Borrowings;


(ii)	deducting the aggregate amount of all obligations of Yorkshire in respect of Borrowings to the extent that the repayment or redemption of such Borrowings is provided for by the purchase by a member of the Group of a guaranteed investment contract; and


(iii)	deducting the aggregate amount of freely available cash and Cash Equivalent Investments held by Yorkshire at such time,

and so that no amount shall be excluded more than once.


21.2	Financial condition

The Company shall ensure that:


(a)	Interest Cover for each Relevant Period shall be not less than 2.50:1;


(b)	Yorkshire Senior Total Net Debt on any Calculation Date shall not exceed 65 per cent. of Yorkshire RAV on such Calculation Date;


(c)	Northeast Senior Total Net Debt on any Calculation Date shall not exceed 65 per cent. of Northeast RAV on such Calculation Date; and


(d)	Consolidated Senior Total Net Debt on any Calculation Date shall not exceed 80 per cent. of Aggregate RAV on such Calculation Date.


21.3	Financial testing

The financial covenants set out in Clause 21.2 ( Financial condition ) shall be tested by reference to each of the financial statements and/or each Compliance Certificate delivered pursuant to Clause 20.2 ( Compliance Certificate ).

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22.	GENERAL UNDERTAKINGS

The undertakings in this Clause 22 remain in force from the date of this Agreement for so long as any amount is outstanding under the Finance Documents or any Commitment is in force.


22.1	Authorisations

Each Obligor shall promptly:


(a)	obtain, comply with and do all that is necessary to maintain in full force and effect; and


(b)	supply certified copies to the Agent of

any Authorisation required under any law or regulation of its jurisdiction of incorporation to enable it to perform its obligations under the Finance Documents and to ensure the legality, validity, enforceability or admissibility in evidence in its jurisdiction of incorporation of any Finance Document.


22.2	Compliance with laws

Each Obligor shall comply in all respects with all laws to which it may be subject, if failure so to comply would materially impair its ability to perform its obligations under the Finance Documents.


22.3	Negative pledge


(a)	No Obligor shall create or permit to subsist any Security over any of its assets.


(b)	No Obligor shall:


(i)	sell, transfer or otherwise dispose of any of its assets on terms whereby they are or may be leased to or re-acquired by an Obligor;


(ii)	sell, transfer or otherwise dispose of any of its receivables on recourse terms;


(iii)	enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off or made subject to a combination of accounts; or


(iv)	enter into any other preferential arrangement having a similar effect,

in circumstances where the arrangement or transaction is entered into primarily as a method of raising Financial Indebtedness or of financing the acquisition of an asset.


(c)	Paragraphs (a) and (b) above do not apply to:


(i)	any netting or set-off arrangement entered into by any Obligor in the ordinary course of its banking arrangements for the purpose of netting debit and credit balances;


(ii)	any lien arising by operation of law and in the ordinary course of trading;

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(iii)	any Security over or affecting (or transaction (" Quasi-Security ") described in paragraph (b) above affecting) any asset acquired by an Obligor after the date of this Agreement if:


(A)	the Security or Quasi-Security was not created in contemplation of the acquisition of that asset by the Obligor;


(B)	the principal amount secured has not been increased in contemplation of, or since the acquisition of that asset by the Obligor; and


(C)	the Security or Quasi-Security is removed or discharged within three months of the date of acquisition of such asset;


(iv)	any Security securing Project Finance Borrowings;


(v)	any Security over the shares of any member of the Group which is not an Obligor provided such Security was required by and forms part of a Project Finance Borrowing arrangement;


(vi)	any Security entered into pursuant to any Finance Document; or


(vii)	any Security or Quasi-Security securing indebtedness the principal amount of which (when aggregated with the principal amount of any other indebtedness which has the benefit of Security or Quasi-Security given by any member of the Group other than any permitted under paragraphs (i) to (vi) above) does not exceed £50,000,000 (or its equivalent in another currency or currencies).


22.4	Disposals

No Obligor shall enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer or otherwise dispose of all or substantially all of its assets.


22.5	Merger

No Obligor shall enter into any amalgamation, demerger, merger or corporate reconstruction, provided that nothing in this Clause 22.5 shall prohibit an Obligor from doing anything in connection with any amalgamation, demerger, merger or corporate reconstruction of any of its subsidiaries which does not involve an amalgamation, demerger, merger or corporate reconstruction of an Obligor.


22.6	Change of business

Each Obligor shall procure that no substantial change is made to the general nature of its business or the business of the Group taken as a whole from that carried on at the date of this Agreement.

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22.7	Insurance

Each Obligor shall maintain insurances on and in relation to its business and assets with reputable underwriters or insurance companies against those risks and to the extent as is consistent with sound business practice.


22.8	Compliance with DNO Licences and duties under the Electricity Act

Each Regulated Borrower shall not (and the Company shall ensure that each Regulated Borrower shall not) breach any of its DNO Licence conditions nor any of its obligations under the Electricity Act, the Competition Act and/or the Enterprise Act where any such breach could reasonably be expected to result in the revocation of its DNO Licence or would materially impair its ability to perform its obligations under the Finance Documents.


23.	EVENTS OF DEFAULT

Each of the events or circumstances set out in this Clause 23 is an Event of Default (save as for Clause 23.14 ( Acceleration )).


23.1	Non-payment

An Obligor does not pay on the due date any amount payable pursuant to a Finance Document at the place at and in the currency in which it is expressed to be payable unless:


(a)	its failure to pay is caused by:


(i)	administrative or technical error; or


(ii)	a Disruption Event; and


(b)	payment is made within 3 Business Days of its due date.


23.2	Financial covenants

Any requirement of Clause 21 ( Financial covenants ) is not satisfied.


23.3	Other obligations


(a)	An Obligor does not comply with any provision of the Finance Documents (other than those referred to in Clause 23.1 ( Non-payment ) and Clause 23.2 ( Financial covenants )).


(b)	No Event of Default under paragraph (a) above will occur if the failure to comply is capable of remedy and is remedied within 20 Business Days of the Agent giving notice to the Company or the Company becoming aware of the failure to comply.

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23.4	Misrepresentation

Any representation or statement made or deemed to be made by an Obligor in the Finance Documents or any other document delivered by or on behalf of any Obligor under or in connection with any Finance Document is or proves to have been incorrect or misleading in any material respect when made or deemed to be made.


23.5	Cross default


(a)	Any Financial Indebtedness of any Obligor is not paid when due nor within any originally applicable grace period.


(b)	Any Financial Indebtedness of any member of any Obligor is declared to be or otherwise becomes due and payable prior to its specified maturity as a result of an event of default (however described).


(c)	Any commitment for any Financial Indebtedness of any member of the Group is cancelled or suspended by a creditor of any member of the Group as a result of an event of default (however described).


(d)	Any creditor of any member of the Group becomes entitled to declare any Financial Indebtedness of any member of the Group due and payable prior to its specified maturity as a result of an event of default (however described).

(e)

No Event of Default will occur under this Clause 23.5 if the aggregate amount of Financial Indebtedness or commitment for Financial Indebtedness falling within paragraphs (a) to (d) above is less than £25,000,000 (or its equivalent in any other currency or currencies) or (save where the same has resulted in recourse to a member of the Group pursuant to paragraph (c) of the definition of " Project Finance Borrowings ") the Financial Indebtedness is Project Finance Borrowing.


23.6	Insolvency


(a)	An Obligor is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.


(b)	The value of the assets of any Obligor is less than its liabilities (taking into account contingent and prospective liabilities).


(c)	A moratorium is declared in respect of any indebtedness of any Obligor.

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23.7	Insolvency proceedings


(a)	Any corporate action, legal proceedings or other procedure or step is taken in relation to:


(i)	the suspension of payments, a moratorium of any indebtedness, winding-up, dissolution, administration or reorganisation (by way of voluntary arrangement, scheme of arrangement or otherwise) of any Obligor;


(ii)	a composition, compromise, assignment or arrangement with any creditor of any Obligor;


(iii)	the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of any Obligor or any of its assets; or


(iv)	enforcement of any Security over any assets of any Obligor,

or any analogous procedure or step is taken in any jurisdiction.


(b)	Paragraph (a) shall not apply to any winding-up petition which is frivolous or vexatious and which is discharged, stayed or dismissed within 21 days of commencement or, if earlier, the date on which it is advertised.


23.8	Creditors' process

Any expropriation, attachment, sequestration, distress or execution affects any asset or assets of the Obligors taken together having an aggregate value of £25,000,000 and is not discharged within 21 days.


23.9	Governmental Intervention

By or under the authority of any government:


(a)	the management of any member of the Group is wholly or substantially displaced or the authority of any member of the Group in the conduct of its business is wholly or substantially curtailed; or


(b)	all or a majority of the issued shares of any Obligor or the whole or any material part of its revenues or assets is seized, nationalised, expropriated or compulsorily acquired.


23.10	Cessation of business

Any Obligor suspends or ceases to carry on (or threatens to suspend or cease to carry on) all or a material part of its business.

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23.11	Unlawfulness

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


23.12	Repudiation

An Obligor repudiates a Finance Document or evidences an intention to repudiate a Finance Document.


23.13	Regulated Borrower Events


(a)	Notice is given to terminate or revoke a Regulated Borrower's DNO Licence.


(b)	A Regulated Borrower is issued with an order by the Authority as a result of the Authority's belief that the Regulated Borrower is in breach (or is likely to be in breach) of a condition in its DNO Licence or its obligations under the Electricity Act and such breach or the issuance of such order could reasonably be expected to have a Material Adverse Effect.


23.14	Acceleration

On and at any time after the occurrence of an Event of Default which is continuing the Agent may, and shall if so directed by the Majority Lenders, by notice to each Obligor:


(a)	cancel the Total Commitments whereupon they shall immediately be cancelled;


(b)	declare that all or part of the Loans, together with accrued interest, and all other amounts accrued or outstanding under the Finance Documents be immediately due and payable, whereupon they shall become immediately due and payable; and/or


(c)	declare that all or part of the Loans be payable on demand, whereupon they shall immediately become payable on demand by the Agent on the instructions of the Majority Lenders.


23.15	Protected Rights of the Regulated Borrowers as holders of a DNO Licence

(a)

Notwithstanding any other provision of any of the Finance Documents, if an Event of Default occurs and such Event of Default has not arisen as a result of any act or omission or state of affairs in existence which, relates to a Regulated Borrower, such Event of Default shall be deemed not to have occurred in relation to that Regulated Borrower and, accordingly, the powers described in paragraphs (a) to (c) of Clause 23.14 ( Acceleration ) shall be deemed not to have arisen as against that Regulated Borrower as regards (a) Loans made to and all sums owed by that Regulated Borrower under the Finance Documents, and (b) the unutilised portion of the applicable Tranche made available to that Regulated Borrower.

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(b)

The provisions of paragraph (a) of this Clause 23.15 shall not operate so as to limit the rights of the Agent to exercise all or any of the powers described in paragraphs (a) to (c) of Clause 23.14 ( Acceleration ) against any Obligor (not being a Regulated Borrower) on or following the occurrence of any Event of Default (including where such Event of Default occurs as a result of any act or omission or state of affairs in existence which in each case relates to a Regulated Borrower) nor shall the provisions of paragraph (a) of this Clause 23.15 qualify the obligation of the Agent to exercise such powers, rights and remedies against any Obligor (not being a Regulated Borrower) if so instructed by the Majority Lenders.

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SECTION 9

CHANGES TO PARTIES


24.	CHANGES TO THE PARTIES


24.1	Assignments and transfers by the Lenders

Subject to this Clause 24, a Lender (the " Existing Lender ") may:


(a)	assign any of its rights; or


(b)	transfer by novation any of its rights and obligations,

to another bank or financial institution or to a trust, fund or other entity which is regularly engaged in or established for the purpose of making, purchasing or investing in loans, securities or other financial assets (the " New Lender ").


24.2	Conditions of assignment or transfer


(a)	The consent of the Company is required for an assignment or transfer by an Existing Lender, unless the assignment or transfer is to another Lender or an Affiliate of a Lender or an Event of Default has occurred and is continuing.


(b)	The consent of the Company to an assignment or transfer must not be unreasonably withheld or delayed. The Company will be deemed to have given its consent five Business Days after the Existing Lender has requested it unless consent is expressly refused by the Company within that time.


(c)	The consent of the Company to an assignment or transfer must not be withheld solely because the assignment or transfer may result in an increase to the Mandatory Cost.


(d)	An assignment will only be effective on:


(i)	receipt by the Agent of written confirmation from the New Lender (in form and substance satisfactory to the Agent) that the New Lender will assume the same obligations to the other Finance Parties as it would have been under if it was an Original Lender; and


(ii)	performance by the Agent of all necessary "know your customer" or other checks relating to any person that it is required to carry out in relation to such assignment to a New Lender, the completion of which the Agent shall promptly notify to the Existing Lender and the New Lender.


(e)	A transfer will only be effective if the procedure set out in Clause 24.5 ( Procedure for transfer ) is complied with.

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(f)	If:


(i)	a Lender assigns or transfers any of its rights or obligations under the Finance Documents or changes its Facility Office; and


(ii)	as a result of circumstances existing at the date the assignment, transfer or change occurs, an Obligor would be obliged to make a payment to the New Lender or Lender acting through its new Facility Office under Clause 13 ( Tax gross-up and indemnities ) or Clause 14 ( Increased costs ),

then the New Lender or Lender acting through its new Facility Office is only entitled to receive payment under those Clauses to the same extent as the Existing Lender or Lender acting through its previous Facility Office would have been if the assignment, transfer or change had not occurred. This paragraph (f) shall not apply:


(iii)	in respect of an assignment or transfer made in the ordinary course of the primary syndication of the Facility; or


(iv)	in relation to Clause 13.2 ( Tax gross-up ), to a Treaty Lender that has included a confirmation of its scheme reference number and its jurisdiction of tax residence in accordance with paragraph (g)(ii)(B) of Clause 13.2 ( Tax gross-up ) if the Obligor making the payment has not made a Borrower DTTP Filing in respect of that Treaty Lender.

(g)

Each New Lender, by executing the relevant Transfer Certificate or Assignment Agreement, confirms, for the avoidance of doubt, that the Agent has authority to execute on its behalf any amendment or waiver that has been approved by or on behalf of the requisite Lender or Lenders in accordance with this Agreement on or prior to the date on which the transfer or assignment becomes effective in accordance with this Agreement and that it is bound by that decision to the same extent as the Existing Lender would have been had it remained a Lender.


(h)	No Existing Lender shall assign or transfer any of its rights and/or obligations under a Tranche to a New Lender without simultaneously assigning and/or transferring on a pro rata basis its rights and/or obligations under the other Tranches to such New Lender.


24.3	Assignment or transfer fee

The New Lender shall, on the date upon which an assignment or transfer takes effect, pay to the Agent (for its own account) a fee of £2,000.


24.4	Limitation of responsibility of Existing Lenders


(a)	Unless expressly agreed to the contrary, an Existing Lender makes no representation or warranty and assumes no responsibility to a New Lender for:


(i)	the legality, validity, effectiveness, adequacy or enforceability of the Finance Documents or any other documents;

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(ii)	the financial condition of any Obligor;


(iii)	the performance and observance by any Obligor of its obligations under the Finance Documents or any other documents; or


(iv)	the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document or any other document,

and any representations or warranties implied by law are excluded.


(b)	Each New Lender confirms to the Existing Lender and the other Finance Parties that it:


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


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


(c)	Nothing in any Finance Document obliges an Existing Lender to:


(i)	accept a re-transfer or re-assignment from a New Lender of any of the rights and obligations assigned or transferred under this Clause 24; or


(ii)	support any losses directly or indirectly incurred by the New Lender by reason of the non-performance by any Obligor of its obligations under the Finance Documents or otherwise.


24.5	Procedure for transfer

(a)

Subject to the conditions set out in Clause 24.2 ( Conditions of assignment or transfer ) a transfer is effected in accordance with paragraph (c) below when the Agent executes an otherwise duly completed Transfer Certificate delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to paragraph (b) below, as soon as reasonably practicable after receipt by it of a duly completed Transfer Certificate appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Transfer Certificate.


(b)	The Agent shall only be obliged to execute a Transfer Certificate delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary all "know your customer" or other similar checks under all applicable laws and regulations in relation to the transfer to such New Lender.

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(c)	Subject to Clause 24.9 ( Pro rata interest settlement ), on the Transfer Date:

(i)

to the extent that in the Transfer Certificate the Existing Lender seeks to transfer by novation its rights and obligations under the Finance Documents each of the Obligors and the Existing Lender shall be released from further obligations towards one another under the Finance Documents and their respective rights against one another under the Finance Documents shall be cancelled (being the " Discharged Rights and Obligations ");


(ii)	each of the Obligors and the New Lender shall assume obligations towards one another and/or acquire rights against one another which differ from the Discharged Rights and Obligations only insofar as that Obligor and the New Lender have assumed and/or acquired the same in place of that Obligor and the Existing Lender;

(iii)

the Agent, the Arranger, the New Lender and other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the New Lender been an Original Lender with the rights and/or obligations acquired or assumed by it as a result of the transfer and to that extent the Agent, the Arranger and the Existing Lender shall each be released from further obligations to each other under the Finance Documents; and


(iv)	the New Lender shall become a Party as a "Lender".


24.6	Procedure for assignment

(a)

Subject to the conditions set out in Clause 24.2 ( Conditions of assignment or transfer ) an assignment may be effected in accordance with paragraph (c) below when the Agent executes an otherwise duly completed Assignment Agreement delivered to it by the Existing Lender and the New Lender. The Agent shall, subject to paragraph (b) below, as soon as reasonably practicable after receipt by it of a duly completed Assignment Agreement appearing on its face to comply with the terms of this Agreement and delivered in accordance with the terms of this Agreement, execute that Assignment Agreement.


(b)	The Agent shall only be obliged to execute an Assignment Agreement delivered to it by the Existing Lender and the New Lender once it is satisfied it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to the assignment to such New Lender.


(c)	Subject to Clause 24.9 ( Pro rata interest settlement ), on the Transfer Date:


(i)	the Existing Lender will assign absolutely to the New Lender the rights under the Finance Documents expressed to be the subject of the assignment in the Assignment Agreement;


(ii)	the Existing Lender will be released by each Obligor and the other Finance Parties from the obligations owed by it (the " Relevant Obligations ") and expressed to be the subject of the release in the Assignment Agreement; and

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(iii)	the New Lender shall become a Party as a "Lender" and will be bound by obligations equivalent to the Relevant Obligations.

(d)

Lenders may utilise procedures other than those set out in this Clause 24.6 to assign their rights under the Finance Documents (but not, without the consent of the relevant Obligor or unless in accordance with Clause 24.5 ( Procedure for transfer ), to obtain a release by that Obligor from the obligations owed to that Obligor by the Lenders nor the assumption of equivalent obligations by a New Lender) provided that they comply with the conditions set out in Clause 24.2 ( Conditions of assignment or transfer ).


24.7	Copy of Transfer Certificate, Assignment Agreement or Increase Confirmation to Company

The Agent shall, as soon as reasonably practicable after it has executed a Transfer Certificate, an Assignment Agreement or an Increase Confirmation, send to the Company a copy of that Transfer Certificate, Assignment Agreement or Increase Confirmation.


24.8	Security over Lenders' rights

In addition to the other rights provided to Lenders under this Clause 24, each Lender may without consulting with or obtaining consent from any Obligor at any time charge, assign or otherwise create Security in or over (whether by way of collateral or otherwise) all or any of its rights under any Finance Document to secure obligations of that Lender including, without limitation:


(a)	any charge, assignment or other Security to secure obligations to a federal reserve or central bank; and


(b)	in the case of any Lender which is a fund, any charge, assignment or other Security granted to any holders (or trustee or representatives of holders) of obligations owed, or securities issued, by that Lender as Security for those obligations or securities,

except that no such charge, assignment or Security shall:


(i)	release a Lender from any of its obligations under the Finance Documents or substitute the beneficiary of the relevant charge, assignment or Security for the Lender as a party to any of the Finance Documents; or


(ii)	require any payments to be made by an Obligor or grant to any person any more extensive rights than those required to be made or granted to the relevant Lender under the Finance Documents.


24.9	Pro rata interest settlement

If the Agent has notified the Lenders that it is able to distribute interest payments on a "pro rata basis" to Existing Lenders and New Lenders then (in respect of any transfer pursuant to Clause 24.5 ( Procedure for transfer ) or any assignment pursuant to Clause 24.6 ( Procedure for assignment ) the Transfer Date of which, in each case, is after the date of such notification and is not on the last day of an Interest Period):

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(a)

any interest or fees in respect of the relevant participation which are expressed to accrue by reference to the lapse of time shall continue to accrue in favour of the Existing Lender up to but excluding the Transfer Date (" Accrued Amounts ") and shall become due and payable to the Existing Lender (without further interest accruing on them) on the last day of the current Interest Period (or, if the Interest Period is longer than six Months, on the next of the dates which falls at six Monthly intervals after the first day of that Interest Period); and


(b)	the rights assigned or transferred by the Existing Lender will not include the right to the Accrued Amounts, so that, for the avoidance of doubt:


(i)	when the Accrued Amounts become payable, those Accrued Amounts will be payable to the Existing Lender; and


(ii)	the amount payable to the New Lender on that date will be the amount which would, but for the application of this Clause 24.9, have been payable to it on that date, but after deduction of the Accrued Amounts.


24.10	Assignments and transfer by Obligors

No Obligor may assign any of its rights or transfer any of its rights or obligations under the Finance Documents.

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SECTION 10

THE FINANCE PARTIES


25.	ROLE OF THE AGENT AND THE ARRANGER


25.1	Appointment of the Agent


(a)	Each other Finance Party appoints the Agent to act as its agent under and in connection with the Finance Documents.


(b)	Each other Finance Party authorises the Agent to exercise the rights, powers, authorities and discretions specifically given to the Agent under or in connection with the Finance Documents together with any other incidental rights, powers, authorities and discretions.


25.2	Duties of the Agent


(a)	Subject to paragraph (b) below, the Agent shall promptly forward to a Party the original or a copy of any document which is delivered to the Agent for that Party by any other Party.


(b)	Without prejudice to Clause 24.7 ( Copy of Transfer Certificate, Assignment Agreement or Increase Confirmation to Company ), paragraph (a) above shall not apply to any Transfer Certificate, any Assignment Agreement or any Increase Confirmation.


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


(d)	If the Agent receives notice from a Party referring to this Agreement, describing a Default and stating that the circumstance described is a Default, it shall promptly notify the other Finance Parties.


(e)	If the Agent is aware of the non-payment of any principal, interest, commitment fee or other fee payable to a Finance Party (other than the Agent or the Arranger) under this Agreement it shall promptly notify the other Finance Parties.

(f)

The Agent shall provide to the Obligors, within 5 Business Days of a request by an Obligor (but no more frequently than once per calendar month), a list (which may be in electronic form) setting out the names of the Lenders as at the date of that request, their respective Commitments, the address and fax number (and the department or officer, if any, for whose attention any communication is to be made) of each Lender for any communication to be made or document to be delivered under or in connection with the Finance Documents, the electronic mail address and/or any other information required to enable the sending and receipt of information by electronic mail or other electronic means to and by each Lender to whom any communication under or in connection with the Finance Documents may be made by that means and the account details of each Lender for any payment to be distributed by the Agent to that Lender under the Finance Documents.

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(g)	The Agent's duties under the Finance Documents are solely mechanical and administrative in nature.


25.3	Role of the Arranger

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


25.4	No fiduciary duties


(a)	Nothing in this Agreement constitutes the Agent or the Arranger as a trustee or fiduciary of any other person.


(b)	Neither the Agent nor the Arranger shall be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account.


25.5	Business with the Group

The Agent and the Arranger may accept deposits from, lend money to and generally engage in any kind of banking or other business with any member of the Group.


25.6	Rights and discretions of the Agent


(a)	The Agent may rely on:


(i)	any representation, notice or document believed by it to be genuine, correct and appropriately authorised; and


(ii)	any statement made by a director, authorised signatory or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify.


(b)	The Agent may assume (unless it has received notice to the contrary in its capacity as agent for the Lenders) that:


(i)	no Default has occurred (unless it has actual knowledge of a Default arising under Clause 23.1 ( Non-payment ));


(ii)	any right, power, authority or discretion vested in any Party or the Majority Lenders has not been exercised; and


(iii)	any notice or request made by the Company (other than a Utilisation Request) is made on behalf of and with the consent and knowledge of all the Obligors.


(c)	The Agent may engage, pay for and rely on the advice or services of any lawyers, accountants, surveyors or other experts.


(d)	The Agent may act in relation to the Finance Documents through its personnel and agents.

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(e)	The Agent may disclose to any other Party any information it reasonably believes it has received as agent under this Agreement.


(f)	Without prejudice to the generality of paragraph (e) above, the Agent may disclose the identity of a Defaulting Lender to the other Finance Parties and the Company and shall as soon as reasonably practicable disclose the same upon the written request of the Company or the Majority Lenders.


(g)	The Agent is not obliged to disclose to any Finance Party any details of the rate notified to the Agent by any Lender or the identity of any such Lender for the purpose of paragraph (a)(ii) of Clause 11.2 ( Market Disruption ).


(h)	Notwithstanding any other provision of any Finance Document to the contrary, neither the Agent nor the Arranger is obliged to do or omit to do anything if it would or might in its reasonable opinion constitute a breach of any law or regulation or a breach of a fiduciary duty or duty of confidentiality.


25.7	Majority Lenders' instructions

(a)

Unless a contrary indication appears in a Finance Document, the Agent shall (i) exercise any right, power, authority or discretion vested in it as Agent in accordance with any instructions given to it by the Majority Lenders (or, if so instructed by the Majority Lenders, refrain from exercising any right, power, authority or discretion vested in it as Agent) and (ii) not be liable for any act (or omission) if it acts (or refrains from taking any action) in accordance with an instruction of the Majority Lenders.


(b)	Unless a contrary indication appears in a Finance Document, any instructions given by the Majority Lenders will be binding on all the Finance Parties.


(c)


(d)	The Agent may refrain from acting in accordance with the instructions of the Majority Lenders (or, if appropriate, the Lenders) until it has received such security as it may require for any cost, loss or liability (together with any associated VAT) which it may incur in complying with the instructions.


(e)	In the absence of instructions from the Majority Lenders, (or, if appropriate, the Lenders) the Agent may act (or refrain from taking action) as it considers to be in the best interest of the Lenders.


(f)	The Agent is not authorised to act on behalf of a Lender (without first obtaining that Lender's consent) in any legal or arbitration proceedings relating to any Finance Document.


25.8	Responsibility for documentation

Neither the Agent nor the Arranger:


(a)	is responsible for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Agent, the Arranger, an Obligor or any other person given in or in connection with any Finance Document;

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(b)	is responsible for the legality, validity, effectiveness, adequacy or enforceability of any Finance Document or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with any Finance Document; or


(c)	is responsible for any determination as to whether any information provided or to be provided to any Finance Party is non-public information the use of which may be regulated or prohibited by applicable law or regulation relating to insider dealing or otherwise.


25.9	Exclusion of liability

(a)

Without limiting paragraph (b) below (and without prejudice to the provisions of paragraph (e) of Clause 28.11 ( Disruption to Payment Systems etc. )), the Agent will not be liable (including, without limitation, for negligence or any other category of liability whatsoever) for any action taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct.

(b)

No Party (other than the Agent) may take any proceedings against any officer, employee or agent of the Agent in respect of any claim it might have against the Agent or in respect of any act or omission of any kind by that officer, employee or agent in relation to any Finance Document and any officer, employee or agent of the Agent may rely on this Clause subject to Clause 1.4 ( Third Party Rights ) and the provisions of the Third Parties Act.


(c)	The Agent will not be liable for any delay (or any related consequences) in crediting an account with an amount required under the Finance Documents to be paid by the Agent if the Agent has taken all necessary steps as soon as reasonably practicable to comply with the regulations or operating procedures of any recognised clearing or settlement system used by the Agent for that purpose.

(d)

Nothing in this Agreement shall oblige the Agent or the Arranger to carry out any "know your customer" or other checks in relation to any person on behalf of any Lender and each Lender confirms to the Agent and the Arranger that it is solely responsible for any such checks it is required to carry out and that it may not rely on any statement in relation to such checks made by the Agent or the Arranger.


25.10	Lenders' indemnity to the Agent

Each Lender shall (in proportion to its share of the Total Commitments or, if the Total Commitments are then zero, to its share of the Total Commitments immediately prior to their reduction to zero) indemnify the Agent, within three Business Days of demand, against any cost, loss or liability (including, without limitation, for negligence or any other category of liability whatsoever) incurred by the Agent (otherwise than by reason of the Agent's gross negligence or wilful misconduct) (or, in the case of any cost, loss or liability pursuant to Clause 28.11 ( Disruption to Payment Systems etc. ) notwithstanding the Agent's negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) in acting as Agent under the Finance Documents (unless the Agent has been reimbursed by an Obligor pursuant to a Finance Document).

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25.11	Resignation of the Agent


(a)	The Agent may resign and appoint one of its Affiliates acting through an office in the United Kingdom as successor by giving notice to the other Finance Parties and the Company.


(b)	Alternatively the Agent may resign by giving 30 days' notice to the other Finance Parties and the Company, in which case the Majority Lenders (after consultation with the Company) may appoint a successor Agent.


(c)	If the Majority Lenders have not appointed a successor Agent in accordance with paragraph (b) above within 30 days after notice of resignation was given, the retiring Agent (after consultation with the Company) may appoint a successor Agent (acting through an office in the United Kingdom).


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


(e)	The Agent's resignation notice shall only take effect upon the appointment of a successor.


(f)	Upon the appointment of a successor, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 25. Its successor and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.


(g)	After consultation with the Company, the Majority Lenders may, by notice to the Agent, require it to resign in accordance with paragraph (b) above. In this event, the Agent shall resign in accordance with paragraph (b) above.


(h)	The Agent shall resign in accordance with paragraph (b) above (and, to the extent applicable, shall use reasonable endeavours to appoint a successor Agent pursuant to paragraph (c) above) if on or after the date which is three months before the earliest FATCA Application Date relating to any payment to the Agent under the Finance Documents, either:


(i)	the Agent fails to respond to a request under Clause 13.8 ( FATCA Information ) and the Company or a Lender reasonably believes that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;


(ii)	the information supplied by the Agent pursuant to Clause 13.8 ( FATCA Information ) indicates that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date; or

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(iii)	the Agent notifies the Company and the Lenders that the Agent will not be (or will have ceased to be) a FATCA Exempt Party on or after that FATCA Application Date;

and (in each case) the Company or a Lender believes that a Party may be required to apply a FATCA Withholding Tax that would not be required if the Agent were a FATCA Exempt Party, and the Company or that Lender, by notice to the Agent, requires it to resign.


25.12	Replacement of the Agent


(a)	After consultation with the Company, the Majority Lenders may, by giving 30 days' notice to the Agent (or, at any time the Agent is an Impaired Agent, by giving any shorter notice determined by the Majority Lenders) replace the Agent by appointing a successor Agent (acting through an office in the United Kingdom).


(b)	The retiring Agent shall (at its own cost if it is an Impaired Agent and otherwise at the expense of the Lenders) make available to the successor Agent such documents and records and provide such assistance as the successor Agent may reasonably request for the purposes of performing its functions as Agent under the Finance Documents.

(c)

The appointment of the successor Agent shall take effect on the date specified in the notice from the Majority Lenders to the retiring Agent. As from this date, the retiring Agent shall be discharged from any further obligation in respect of the Finance Documents but shall remain entitled to the benefit of this Clause 25 (and any agency fees for the account of the retiring Agent shall cease to accrue from (and shall be payable on) that date).


(d)	Any successor Agent and each of the other Parties shall have the same rights and obligations amongst themselves as they would have had if such successor had been an original Party.


25.13	Confidentiality


(a)	In acting as agent for the Finance Parties, the Agent shall be regarded as acting through its agency division which shall be treated as a separate entity from any other of its divisions or departments.


(b)	If information is received by another division or department of the Agent, it may be treated as confidential to that division or department and the Agent shall not be deemed to have notice of it.


25.14	Relationship with the Lenders


a.	Subject to Clause 24.9 ( Pro rata Interest Settlement ), the Agent may treat the person shown in its records as Lender at the opening of business (in the place of the Agent's principal office as notified to the Finance Parties from time to time) as the Lender acting through its Facility Office:


i.	entitled to or liable for any payment due under any Finance Document on that day; and

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ii.	entitled to receive and act upon any notice, request, document or communication or make any decision or determination under any Finance Document made or delivered on that day,

unless it has received not less than five Business Days' prior notice from that Lender to the contrary in accordance with the terms of this Agreement.


b.	Each Lender shall supply the Agent with any information required by the Agent in order to calculate the Mandatory Cost in accordance with Schedule 4 ( Mandatory Cost formulae ).

Any Lender may by notice to the Agent appoint a person to receive on its behalf all notices, communications, information and documents to be made or despatched to that Lender under the Finance Documents. Such notice shall contain the address, fax number and (where communication by electronic mail or other electronic means is permitted under Clause 30.6 ( Electronic communication )) electronic mail address and/or any other information required to enable the sending and receipt of information by that means (and, in each case, the department or officer, if any, for whose attention communication is to be made) and be treated as a notification of a substitute address, fax number, electronic mail address, department and officer by that Lender for the purposes of Clause 30.2 ( Addresses ) and paragraph (a)(iii) of Clause 30.6 ( Electronic communication ) and the Agent shall be entitled to treat such person as the person entitled to receive all such notices, communications, information and documents as though that person were that Lender.


25.15	Credit appraisal by the Lenders

Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Lender confirms to the Agent and the Arranger that it has been, and will continue to be, solely responsible for making its own independent appraisal and investigation of all risks arising under or in connection with any Finance Document including but not limited to:


(a)	the financial condition, creditworthiness, condition, affairs, status and nature of each member of the Group;


(b)	the legality, validity, effectiveness, adequacy or enforceability of any Finance Document and any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document;


(c)	whether that Lender has recourse, and the nature and extent of that recourse, against any Party or any of its respective assets under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document; and

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(d)	the adequacy, accuracy and/or completeness of any information provided by the Agent, any Party or by any other person under or in connection with any Finance Document, the transactions contemplated by the Finance Documents or any other agreement, arrangement or document entered into, made or executed in anticipation of, under or in connection with any Finance Document.


25.16	Reference Banks

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


25.17	Deduction from amounts payable by the Agent

If any Party owes an amount to the Agent under the Finance Documents the Agent may, after giving notice to that Party, deduct an amount not exceeding that amount from any payment to that Party which the Agent would otherwise be obliged to make under the Finance Documents and apply the amount deducted in or towards satisfaction of the amount owed. For the purposes of the Finance Documents that Party shall be regarded as having received any amount so deducted.


26.	CONDUCT OF BUSINESS BY THE FINANCE PARTIES

No provision of this Agreement will:


(a)	interfere with the right of any Finance Party to arrange its affairs (tax or otherwise) in whatever manner it thinks fit;


(b)	oblige any Finance Party to investigate or claim any credit, relief, remission or repayment available to it or the extent, order and manner of any claim; or


(c)	oblige any Finance Party to disclose any information relating to its affairs (tax or otherwise) or any computations in respect of Tax.


27.	SHARING AMONG THE FINANCE PARTIES


27.1	Payments to Finance Parties

If a Finance Party (a " Recovering Finance Party ") receives or recovers any amount from an Obligor other than in accordance with Clause 28 ( Payment mechanics ) and applies that amount to a payment due under the Finance Documents then:


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


(b)	the Agent shall determine whether the receipt or recovery is in excess of the amount the Recovering Finance Party would have been paid had the receipt or recovery been received or made by the Agent and distributed in accordance with Clause 28 ( Payment mechanics ), without taking account of any Tax which would be imposed on the Agent in relation to the receipt, recovery or distribution; and

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(c)	the Recovering Finance Party shall, within three Business Days of demand by the Agent, pay to the Agent an amount (the " Sharing Payment ") equal to such receipt or recovery less any amount which the Agent determines may be retained by the Recovering Finance Party as its share of any payment to be made, in accordance with Clause 28.6 ( Partial payments ).


27.2	Redistribution of payments

The Agent shall treat the Sharing Payment as if it had been paid by the relevant Obligor and distribute it between the Finance Parties (other than the Recovering Finance Party) in accordance with Clause 28.6 ( Partial payments ).


27.3	Recovering Finance Party's rights


(a)	On a distribution by the Agent under Clause 27.2 ( Redistribution of payments ), the Recovering Finance Party will be subrogated to the rights of the Finance Parties which have shared in the redistribution.


(b)	If and to the extent that the Recovering Finance Party is not able to rely on its rights under paragraph (a) above, the relevant Obligor shall be liable to the Recovering Finance Party for a debt equal to the Sharing Payment which is immediately due and payable.


27.4	Reversal of redistribution

If any part of the Sharing Payment received or recovered by a Recovering Finance Party becomes repayable and is repaid by that Recovering Finance Party, then:

(a)

each Finance Party which has received a share of the relevant Sharing Payment pursuant to Clause 27.2 ( Redistribution of payments ) shall, upon request of the Agent, pay to the Agent for account of that Recovering Finance Party an amount equal to the appropriate part of its share of the Sharing Payment (together with an amount as is necessary to reimburse that Recovering Finance Party for its proportion of any interest on the Sharing Payment which that Recovering Finance Party is required to pay); and


(b)	that Recovering Finance Party's rights of subrogation in respect of any reimbursement shall be cancelled and the relevant Obligor will be liable to the reimbursing Finance Party for the amount so reimbursed.

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27.5	Exceptions


(a)	This Clause 27 shall not apply to the extent that the Recovering Finance Party would not, after making any payment pursuant to this Clause, have a valid and enforceable claim against the relevant Obligor.


(b)	A Recovering Finance Party is not obliged to share with any other Finance Party any amount which the Recovering Finance Party has received or recovered as a result of taking legal or arbitration proceedings, if:


(i)	it notified that other Finance Party of the legal or arbitration proceedings; and


(ii)	that other Finance Party had an opportunity to participate in those legal or arbitration proceedings but did not do so as soon as reasonably practicable having received notice and did not take separate legal or arbitration proceedings.

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SECTION 11

ADMINISTRATION


28.	PAYMENT MECHANICS


28.1	Payments to the Agent

(a)

On each date on which an Obligor or a Lender is required to make a payment under a Finance Document, that Obligor or Lender shall make the same available to the Agent (unless a contrary indication appears in a Finance Document) for value on the due date at the time and in such funds specified by the Agent as being customary at the time for settlement of transactions in the relevant currency in the place of payment.


(b)	Payment shall be made to such account in the principal financial centre of the country of that currency (or, in relation to euro, in a principal financial centre in a Participating Member State or London) with such bank as the Agent specifies.


28.2	Distributions by the Agent

Each payment received by the Agent under the Finance Documents for another Party shall, subject to Clause 28.3 ( Distributions to an Obligor ), Clause 28.4 ( Clawback ) and Clause 25.17 ( Deduction from amounts payable by the Agent ) be made available by the Agent as soon as practicable after receipt to the Party entitled to receive payment in accordance with this Agreement (in the case of a Lender, for the account of its Facility Office), to such account as that Party may notify to the Agent by not less than five Business Days' notice with a bank in the principal financial centre of the country of that currency (or, in relation to euro, in the principal financial centre of a Participating Member State or London).


28.3	Distributions to an Obligor

The Agent may (with the consent of the Obligor or in accordance with Clause 29 ( Set-off )) apply any amount received by it for that Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from that Obligor under the Finance Documents or in or towards purchase of any amount of any currency to be so applied.


28.4	Clawback


(a)	Where a sum is to be paid to the Agent under the Finance Documents for another Party, the Agent is not obliged to pay that sum to that other Party (or to enter into or perform any related exchange contract) until it has been able to establish to its satisfaction that it has actually received that sum.

(b)

If the Agent pays an amount to another Party and it proves to be the case that the Agent had not actually received that amount, then the Party to whom that amount (or the proceeds of any related exchange contract) was paid by the Agent shall on demand refund the same to the Agent together with interest on that amount from the date of payment to the date of receipt by the Agent, calculated by the Agent to reflect its cost of funds.

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28.5	Impaired Agent

(a)

If, at any time, the Agent becomes an Impaired Agent, an Obligor or a Lender which is required to make a payment under the Finance Documents to the Agent in accordance with Clause 28.1 ( Payments to the Agent ) may instead either pay that amount direct to the required recipient or pay that amount to an interest-bearing account held with an Acceptable Bank and in relation to which no Insolvency Event has occurred and is continuing, in the name of the Obligor or the Lender making the payment and designated as a trust account for the benefit of the Party or Parties beneficially entitled to that payment under the Finance Documents. In each case such payments must be made on the due date for payment under the Finance Documents.


(b)	All interest accrued on the amount standing to the credit of the trust account shall be for the benefit of the beneficiaries of that trust account pro rata to their respective entitlements.


(c)	A Party which has made a payment in accordance with this Clause 28.5 shall be discharged of the relevant payment obligation under the Finance Documents and shall not take any credit risk with respect to the amounts standing to the credit of the trust account.

(d)

Promptly upon the appointment of a successor Agent in accordance with Clause 25.12 ( Replacement of the Agent ), each Party which has made a payment to a trust account in accordance with this Clause 28.5 shall give all requisite instructions to the bank with whom the trust account is held to transfer the amount (together with any accrued interest) to the successor Agent for distribution in accordance with Clause 28.2 ( Distributions by the Agent ).


28.6	Partial payments


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


(i)	first , in or towards payment pro rata of any unpaid fees, costs and expenses of the

Agent and the Arranger under the Finance Documents;


(ii)	secondly , in or towards payment pro rata of any accrued interest, fee or commission due but unpaid under this Agreement;


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


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


(b)	The Agent shall, if so directed by the Majority Lenders, vary the order set out in paragraphs (a)(ii) to (iv) above.


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

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28.7	No set-off by Obligors

All payments to be made by an Obligor under the Finance Documents shall be calculated and be made without (and free and clear of any deduction for) set-off or counterclaim.


28.8	Business Days


(a)	Any payment which is due to be made on a day that is not a Business Day shall be made on the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not).


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


28.9	Currency of account


(a)	Subject to paragraphs (b) to (e) below, the Base Currency is the currency of account and payment for any sum due from an Obligor under any Finance Document.


(b)	A repayment of a Loan or Unpaid Sum or a part of a Loan or Unpaid Sum shall be made in the currency in which that Loan or Unpaid Sum is denominated on its due date.


(c)	Each payment of interest shall be made in the currency in which the sum in respect of which the interest is payable was denominated when that interest accrued.


(d)	Each payment in respect of costs, expenses or Taxes shall be made in the currency in which the costs, expenses or Taxes are incurred.


(e)	Any amount expressed to be payable in a currency other than the Base Currency shall be paid in that other currency.


28.10	Change of currency


(a)	Unless otherwise prohibited by law, if more than one currency or currency unit are at the same time recognised by the central bank of any country as the lawful currency of that country, then:


(i)	any reference in the Finance Documents to, and any obligations arising under the Finance Documents in, the currency of that country shall be translated into, or paid in, the currency or currency unit of that country designated by the Agent (after consultation with the Company); and


(ii)	any translation from one currency or currency unit to another shall be at the official rate of exchange recognised by the central bank for the conversion of that currency or currency unit into the other, rounded up or down by the Agent (acting reasonably).

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(b)	If a change in any currency of a country occurs, this Agreement will, to the extent the Agent (acting reasonably and after consultation with the Company) specifies to be necessary, be amended to comply with any generally accepted conventions and market practice in the Relevant Interbank Market and otherwise to reflect the change in currency.


28.11	Disruption to Payment Systems etc.

If either the Agent determines (in its discretion) that a Disruption Event has occurred or the Agent is notified by an Obligor that a Disruption Event has occurred:


(a)	the Agent may, and shall if requested to do so by an Obligor, consult with the Obligors with a view to agreeing with the Obligors such changes to the operation or administration of the Facility as the Agent may deem necessary in the circumstances;


(b)	the Agent shall not be obliged to consult with the Obligors in relation to any changes mentioned in paragraph (a) if, in its opinion, it is not practicable to do so in the circumstances and, in any event, shall have no obligation to agree to such changes;


(c)	the Agent may consult with the Finance Parties in relation to any changes mentioned in paragraph (a) but shall not be obliged to do so if, in its opinion, it is not practicable to do so in the circumstances;


(d)	any such changes agreed upon by the Agent and the Obligors shall (whether or not it is finally determined that a Disruption Event has occurred) be binding upon the Parties as an amendment to (or, as the case may be, waiver of) the terms of the Finance Documents notwithstanding the provisions of Clause 34 ( Amendments and Waivers );


(e)	the Agent shall not be liable for any damages, costs or losses whatsoever (including, without limitation for negligence, gross negligence or any other category of liability whatsoever but not including any claim based on the fraud of the Agent) arising as a result of its taking, or failing to take, any actions pursuant to or in connection with this Clause 28.11; and


(f)	the Agent shall notify the Finance Parties of all changes agreed pursuant to paragraph (d) above.


29.	SET-OFF

A Finance Party may set off any matured obligation due from an Obligor under the Finance Documents (to the extent beneficially owned by that Finance Party) against any matured obligation owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off.

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30.	NOTICES


30.1	Communications in writing

Any communication to be made under or in connection with the Finance Documents shall be made in writing and, unless otherwise stated, may be made by fax or letter.


30.2	Addresses

The address and fax number (and the department or officer, if any, for whose attention the communication is to be made) of each Party for any communication or document to be made or delivered under or in connection with the Finance Documents is:


(a)	in the case of the Company, that identified with its name below;


(b)	in the case of each Lender or any other Original Obligor, that notified in writing to the Agent on or prior to the date on which it becomes a Party; and


(c)	in the case of the Agent, that identified with its name below,

or any substitute address or fax number or department or officer as the Party may notify to the Agent (or the Agent may notify to the other Parties, if a change is made by the Agent) by not less than five Business Days' notice.


30.3	Delivery


(a)	Any communication or document made or delivered by one person to another under or in connection with the Finance Documents will only be effective:


(i)	if by way of fax, when received in legible form; or


(ii)	if by way of letter, when it has been left at the relevant address or five Business Days after being deposited in the post postage prepaid in an envelope addressed to it at that address,

and, if a particular department or officer is specified as part of its address details provided under Clause 30.2 ( Addresses ), if addressed to that department or officer.


(b)	Any communication or document to be made or delivered to the Agent will be effective only when actually received by the Agent and then only if it is expressly marked for the attention of the department or officer identified with the Agent's signature below (or any substitute department or officer as the Agent shall specify for this purpose).


(c)	All notices from or to an Obligor shall be sent through the Agent.


(d)	Any communication or document made or delivered to the Company in accordance with this Clause will be deemed to have been made or delivered to each of the Obligors.

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(e)	Any electronic communication which becomes effective, in accordance with paragraphs (a) to (d) above, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following Business Day.


30.4	Notification of address and fax number

Promptly upon receipt of notification of an address and fax number or change of address or fax number pursuant to Clause 30.2 ( Addresses ) or changing its own address or fax number, the Agent shall notify the other Parties.


30.5	Communication when Agent is Impaired Agent

If the Agent is an Impaired Agent the Parties may, instead of communicating with each other through the Agent, communicate with each other directly and (while the Agent is an Impaired Agent) all the provisions of the Finance Documents which require communications to be made or notices to be given to or by the Agent shall be varied so that communications may be made and notices given to or by the relevant Parties directly. This provision shall not operate after a replacement Agent has been appointed.


30.6	Electronic communication


(a)	Any communication to be made between any two Parties under or in connection with the Finance Documents may be made by electronic mail or other electronic means to the extent that the two Parties agree that, unless and until notified to the contrary, this is to be an accepted form of communication and if those two Parties:


(i)	notify each other in writing of their electronic mail address and/or any other information required to enable the sending and receipt of information by that means; and


(ii)	notify each other of any change to their address or any other such information supplied by them by not less than five Business Days' notice.


(b)	Any electronic communication made between those two Parties will be effective only when actually received in readable form and in the case of any electronic communication made by a Party to the Agent only if it is addressed in such a manner as the Agent shall specify for this purpose.


(c)	Any electronic communication which becomes effective, in accordance with paragraph (b) above, after 5.00 p.m. in the place of receipt shall be deemed only to become effective on the following Business Day.

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30.7	English language


(a)	Any notice given under or in connection with any Finance Document must be in English.


(b)	All other documents provided under or in connection with any Finance Document must be:


(i)	in English; or


(ii)	if not in English, and if so required by the Agent, accompanied by a certified English translation and, in this case, the English translation will prevail unless the document is a constitutional, statutory or other official document.


31.	CALCULATIONS AND CERTIFICATES


31.1	Accounts

In any litigation or arbitration proceedings arising out of or in connection with a Finance Document, the entries made in the accounts maintained by a Finance Party are prima facie evidence of the matters to which they relate.


31.2	Certificates and Determinations

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


31.3	Day count convention

Any interest, commission or fee accruing under a Finance Document will accrue from day to day and is calculated on the basis of the actual number of days elapsed and a year of 365 days in respect of amounts payable in Sterling or, in respect of other amounts 360 days or, in any case where the practice in the Relevant Interbank Market differs, in accordance with that market practice.


32.	PARTIAL INVALIDITY

If, at any time, any provision of the Finance Documents is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.


33.	REMEDIES AND WAIVERS

No failure to exercise, nor any delay in exercising, on the part of any Finance Party, any right or remedy under the Finance Documents shall operate as a waiver of any such right or remedy or constitute an election to affirm any of the Finance Documents. No election to affirm any of the Finance Documents on the part of any Finance Party shall be effective unless it is in writing. No single or partial exercise of any right or remedy shall prevent any further or other exercise or the exercise of any other right or remedy. The rights and remedies provided in this Agreement are cumulative and not exclusive of any rights or remedies provided by law.

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34.	AMENDMENTS AND WAIVERS


34.1	Required consents


(a)	Subject to Clause 34.2 ( Exceptions ) any term of the Finance Documents may be amended or waived only with the consent of the Majority Lenders and the Obligors and any such amendment or waiver will be binding on all Parties.


(b)	The Agent may effect, on behalf of any Finance Party, any amendment or waiver permitted by this Clause.


34.2	Exceptions


(a)	An amendment or waiver that has the effect of changing or which relates to:


(i)	the definition of "Majority Lenders" in Clause 1.1 ( Definitions );


(ii)	an extension to the date of payment of any amount under the Finance Documents;


(iii)	a reduction in the Margin or a reduction in the amount of any payment of principal, interest, fees or commission payable;


(iv)	an increase in or an extension of any Commitment other than in accordance with Clause 4.5 ( Reallocation )


(v)	a change to the Borrowers or the Guarantor;


(vi)	any provision which expressly requires the consent of all the Lenders;


(vii)	Clause 2.3 ( Finance Parties' rights and obligations ), Clause 24 ( Changes to the Lenders ) or this Clause 34; or


(viii)	the nature or scope of the guarantee and indemnity granted under Clause 18 ( Guarantee and Indemnity );

shall not be made without the prior consent of all the Lenders.


(b)	An amendment or waiver which relates to the rights or obligations of the Agent or the Arranger may not be effected without the consent of the Agent or the Arranger.

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(c)

From 1 January 2013, the Agent may veto any amendment or waiver of a term under a Finance Document under this Clause 34 ( Amendments and Waivers ) or any change to any Obligor that (in either of these cases) the Agent reasonably determines could constitute a "material modification" within the meaning of Proposed US Treasury regulation Section 1.1471-2(b)(2)(iv) (or any final or successor regulation governing grandfathering under FATCA) which results directly in a FATCA Withholding Tax applying to any payment made by an Obligor unless each relevant Obligor agrees to make the Agent and the Lenders whole for any FATCA Withholding Tax applicable to any payment made by an Obligor to the Agent or a Lender as a result of such amendment, waiver or change in a manner reasonably satisfactory to the Agent, whether in the form of increased payments to the Agent and the Lenders and/or an indemnity.


34.3	Disenfranchisement of Defaulting Lenders

(a)

For so long as a Defaulting Lender has any Available Tranche A Commitment, any Available Tranche B Commitment or any Available Tranche C Commitment in ascertaining the Majority Lenders or whether any given percentage (including, for the avoidance of doubt, unanimity) of the Total Commitments has been obtained to approve any request for a consent, waiver, amendment or other vote under the Finance Documents, that Defaulting Lender's Commitments will be reduced by the amount of its Available Tranche A Commitments, Available Tranche B Commitments and/or Available Tranche A Commitments.


(b)	For the purposes of this Clause 34.3, the Agent may assume that the following Lenders are Defaulting Lenders:


(i)	any Lender which has notified the Agent that it has become a Defaulting Lender;


(ii)	any Lender in relation to which it is aware that any of the events or circumstances referred to in paragraphs (a), (b) or (c) of the definition of "Defaulting Lender" has occurred,

unless it has received notice to the contrary from the Lender concerned (together with any supporting evidence reasonably requested by the Agent) or the Agent is otherwise aware that the Lender has ceased to be a Defaulting Lender.


34.4	Replacement of a Defaulting Lender


(a)	An Obligor may, at any time a Lender has become and continues to be a Defaulting Lender, by giving 5 Business Days' prior written notice to the Agent and such Lender:


(i)	replace such Lender by requiring such Lender to (and to the extent permitted by law such Lender shall) transfer pursuant to Clause 24 ( Changes to the Parties ) all (and not part only) of its rights and obligations under this Agreement;


(ii)	require such Lender to (and to the extent permitted by law such Lender shall) transfer pursuant to Clause 24 ( Changes to the Parties ) all (and not part only) of the undrawn Commitment of the Lender; or

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(iii)

require such Lender to (and to the extent permitted by law such Lender shall) transfer pursuant to Clause 24 ( Changes to the Parties ) all (and not part only) of its rights and obligations in respect of the Facility, to a Lender or other bank, financial institution, trust, fund or other entity (a " Replacement Lender ") selected by the relevant Obligor, and which confirms its willingness to assume and does assume all the obligations or all the relevant obligations of the transferring Lender (including the assumption of the transferring Lender's participations or unfunded participations (as the case may be) on the same basis as the transferring Lender) for a purchase price in cash payable at the time of transfer equal to the outstanding principal amount of such Lender's participation in the outstanding Utilisations and all accrued interest (to the extent that the Agent has not given a notification under Clause 24.9 ( Pro rata interest settlement ), Break Costs and other amounts payable in relation thereto under the Finance Documents.


(b)	Any transfer of rights and obligations of a Defaulting Lender pursuant to this Clause shall be subject to the following conditions:


(i)	the Obligors shall have no right to replace the Agent;


(ii)	neither the Agent nor the Defaulting Lender shall have any obligation to the Obligors to find a Replacement Lender;


(iii)	the transfer must take place no later than 5 days after the notice period referred to in paragraph (a) above;


(iv)	in no event shall the Defaulting Lender be required to pay or surrender to the Replacement Lender any of the fees received by the Defaulting Lender pursuant to the Finance Documents; and


(v)	the Defaulting Lender shall only be obliged to transfer its rights and obligations pursuant to paragraph (a) above once it is satisfied that it has complied with all necessary "know your customer" or other similar checks under all applicable laws and regulations in relation to that transfer to the Replacement Lender.


(c)	The Defaulting Lender shall perform the checks described in paragraph (b)(v) above as soon as reasonably practicable following delivery of a notice referred to in paragraph (a) above and shall notify the Agent and the Company when it is satisfied that it has complied with those checks.


35.	CONFIDENTIALITY


35.1	Confidential Information

Each Finance Party agrees to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by Clause 35.2 ( Disclosure of Confidential Information ) and Clause 35.3 ( Disclosure to numbering service providers ), and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to its own confidential information.

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35.2	Disclosure of Confidential Information

Any Finance Party may disclose:

(a)

to any of its Affiliates and any of its or their officers, directors, employees, professional advisers, auditors, partners and Representatives such Confidential Information as that Finance Party shall consider reasonably necessary if any person to whom the Confidential Information is to be given pursuant to this paragraph (a) is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;


(b)	to any person:


(i)	to (or through) whom it assigns or transfers (or may potentially assign or transfer) all or any of its rights and/or obligations under one or more Finance Documents and to any of that person's Affiliates, Representatives and professional advisers;


(ii)	with (or through) whom it enters into (or may potentially enter into), whether directly or indirectly, any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to, one or more Finance Documents and/or one or more Obligors and to any of that person's Affiliates, Representatives and professional advisers;


(iii)	appointed by any Finance Party or by a person to whom sub paragraph (b)(i) or (ii) above applies to receive communications, notices, information or documents delivered pursuant to the Finance Documents on its behalf (including, without limitation, any person appointed under paragraph (c) of Clause 25.14 ( Relationship with the Lenders ));


(iv)	who invests in or otherwise finances (or may potentially invest in or otherwise finance), directly or indirectly, any transaction referred to in paragraph b(i) or (b)(ii) above;


(v)	to whom information is required or requested to be disclosed by any court of competent jurisdiction or any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation;


(vi)	to whom or for whose benefit that Finance Party charges, assigns or otherwise creates Security (or may do so) pursuant to Clause 24.8 ( Security over Lenders' rights );


(vii)	to whom information is required to be disclosed in connection with, and for the purposes of, any litigation, arbitration, administrative or other investigations, proceedings or disputes;


(viii)	who is a Party;


(ix)	with the consent of the Obligors; and

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(x)	who is an investor or a potential investor in a securitisation (or similar transaction of broadly equivalent economic effect) which involves this Facility,

in each case, such Confidential Information as that Finance Party shall consider appropriate if:


(A)	in relation to paragraphs (b)(i), (b)(ii) and b(iii) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking except that there shall be no requirement for a Confidentiality Undertaking if the recipient is a professional adviser and is subject to professional obligations to maintain the confidentiality of the Confidential Information;


(B)	in relation to paragraph (b)(iv) above, the person to whom the Confidential Information is to be given has entered into a Confidentiality Undertaking or is otherwise bound by requirements of confidentiality in relation to the Confidential Information they receive and is informed that some or all of such Confidential Information may be price-sensitive information;

(C)

in relation to paragraphs (b)(v), (b)(vi), (b)(vii) and b(x) above, the person to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information except that there shall be no requirement to so inform if, in the opinion of that Finance Party, it is not practicable so to do in the circumstances;

(c)

to any person appointed by that Finance Party or by a person to whom paragraph (b)(i) or (b)(ii) above applies to provide administration or settlement services in respect of one or more of the Finance Documents including without limitation, in relation to the trading of participations in respect of the Finance Documents, such Confidential Information as may be required to be disclosed to enable such service provider to provide any of the services referred to in this paragraph (c) if the service provider to whom the Confidential Information is to be given has entered into a confidentiality agreement substantially in the form of the LMA Master Confidentiality Undertaking for Use With Administration/Settlement Service Providers or such other form of confidentiality undertaking agreed between the Company and the relevant Finance Party;

(d)

to any rating agency (including its professional advisers) such Confidential Information as may be required to be disclosed to enable such rating agency to carry out its normal rating activities in relation to the Finance Documents and/or the Obligors if the rating agency to whom the Confidential Information is to be given is informed of its confidential nature and that some or all of such Confidential Information may be price-sensitive information.

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35.3	Disclosure to numbering service providers


(a)	Any Finance Party may disclose to any national or international numbering service provider appointed by that Finance Party to provide identification numbering services in respect of this Agreement, the Facility and/or one or more Obligors the following information:


(i)	names of Obligors;


(ii)	country of domicile of Obligors;


(iii)	place of incorporation of Obligors;


(iv)	date of this Agreement;


(v)	the names of the Agent and the Arranger;


(vi)	date of each amendment and restatement of this Agreement;


(vii)	amount of Commitments and Total Commitments;


(viii)	currencies of the Facility;


(ix)	type of Facility;


(x)	ranking of Facility;


(xi)	Termination Date for Facility;


(xii)	changes to any of the information previously supplied pursuant to paragraphs (i) to (xi) above; and


(xiii)	such other information agreed between such Finance Party and the Obligors,

to enable such numbering service provider to provide its usual syndicated loan numbering identification services.


(b)	The Parties acknowledge and agree that each identification number assigned to this Agreement, the Facility and/or one or more Obligors by a numbering service provider and the information associated with each such number may be disclosed to users of its services in accordance with the standard terms and conditions of that numbering service provider.


(c)	Each Obligor represents that none of the information set out in paragraphs (i) to (xiii) of paragraph (a) above is, nor will at any time be, unpublished price-sensitive information.


(d)	The Agent shall notify the Obligors and the other Finance Parties of:


(i)	the name of any numbering service provider appointed by the Agent in respect of this Agreement, the Facility and/or one or more Obligors; and

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(ii)	the number or, as the case may be, numbers assigned to this Agreement, the Facility and/or one or more Obligors by such numbering service provider.


35.4	Entire agreement

This Clause 35 ( Confidentiality ) constitutes the entire agreement between the Parties in relation to the obligations of the Finance Parties under the Finance Documents regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.


35.5	Inside information

Each of the Finance Parties acknowledges that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and each of the Finance Parties undertakes not to use any Confidential Information for any unlawful purpose.


35.6	Notification of disclosure

Each of the Finance Parties agrees (to the extent permitted by law and regulation) to inform the Obligors:


(a)	of the circumstances of any disclosure of Confidential Information made pursuant to paragraph (b)(v) of Clause 35.2 ( Disclosure of Confidential Information ) except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and


(b)	upon becoming aware that Confidential Information has been disclosed in breach of this Clause 35 ( Confidentiality ).


35.7	Continuing obligations

The obligations in this Clause 35 ( Confidentiality ) are continuing and, in particular, shall survive and remain binding on each Finance Party for a period of twelve months from the earlier of:


(a)	the date on which all amounts payable by the Obligors under or in connection with this Agreement have been paid in full and all Commitments have been cancelled or otherwise cease to be available; and


(b)	the date on which such Finance Party otherwise ceases to be a Finance Party.


36.	COUNTERPARTS

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

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SECTION 12

GOVERNING LAW AND ENFORCEMENT


37.	GOVERNING LAW

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by English law


38.	ENFORCEMENT


38.1	Jurisdiction


(a)	The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Agreement (including a dispute relating to the existence, validity or termination of this Agreement or the consequences of its nullity or any non-contractual obligations arising out of or in connection with this Agreement) (a " Dispute ").


(b)	The Parties agree that the courts of England are the most appropriate and convenient courts to settle Disputes and accordingly no Party will argue to the contrary.


(c)	This Clause 38.1 is for the benefit of the Finance Parties only. As a result, and notwithstanding paragraph (a) of Clause 38.1, any Finance Party may take proceedings relating to a Dispute in any other courts with jurisdiction. To the extent allowed by law, the Finance Parties may take concurrent proceedings in any number of jurisdictions.

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

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SCHEDULE 1

THE PARTIES

PART I

THE OBLIGORS



Name of Borrowers	Registration number (or equivalent, if any)
Northern Powergrid Holdings Company Northern Powergrid (Yorkshire) plc Northern Powergrid (Northeast) Limited	03476201 04112320 02906593




Name of Guarantor	Registration number (or equivalent, if any)
Northern Powergrid Holdings Company	03476201

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PART II

THE ORIGINAL LENDERS



Name of Original Lender	Tranche A Commitment	Tranche B Commitment	Tranche C Commitment
Abbey National Treasury Services Plc	£0	£25,000,000	£25,000,000
Lloyds TSB Bank plc	£0	£25,000,000	£25,000,000
The Royal Bank of Scotland plc	£0	£25,000,000	£25,000,000
	£0	£75,000,000	£75,000,000

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SCHEDULE 2

CONDITIONS PRECEDENT

Conditions Precedent to Initial Utilisation


1.	Obligors


(a)	A copy of the constitutional documents of each Obligor.


(b)	A copy of a resolution of the board of directors of each Obligor:


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


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


(iii)	authorising a specified person or persons, on its behalf, to sign and/or despatch all documents and notices (including, if relevant, any Utilisation Request) to be signed and/or despatched by it under or in connection with the Finance Documents to which it is a party.


(c)	A specimen of the signature of each person authorised by the resolution referred to in paragraph (b) above.


(d)	A certificate of each Obligor (signed by a director) confirming that borrowing the Commitments made available to that Obligor hereunder and in the case of the Guarantor, guaranteeing the Total Commitments, would not cause any borrowing, guaranteeing or similar limit binding on any such Obligor to be exceeded.


(e)	A certificate of an authorised signatory of the relevant Obligor certifying that each copy document relating to it specified in this Schedule 2 is correct, complete and in full force and effect as at a date no earlier than the date of this Agreement.


2.	Legal opinion


(a)	A legal opinion of Clifford Chance Limited Liability Partnership, legal advisers to the Arranger and the Agent in England, substantially in the form distributed to the Original Lenders prior to signing this Agreement.


3.	Other documents and evidence


(a)	A copy of any other Authorisation or other document, opinion or assurance which the Agent considers to be necessary or desirable (if it has notified the Company accordingly) in connection with the entry into and performance of the transactions contemplated by any Finance Document or for the validity and enforceability of any Finance Document.


(b)	The Original Financial Statements of each Original Obligor.

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(c)	Evidence that the fees, costs and expenses then due from the Company pursuant to Clause 12 ( Fees ) and Clause 17 ( Costs and expenses ) have been paid or will be paid by the first Utilisation Date.


(d)	A copy of each DNO Licence.


(e)	Evidence that the Existing Facility will be cancelled in full on or before the date of first Utilisation and the proceeds of such first Utilisation will be applied in repayment of all amounts outstanding under the Existing Facility.

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SCHEDULE 3

REQUESTS

Utilisaton Request

From: [ Borrower ]

To: [ Agent ]

Dated:

Dear Sirs

Northern Powergrid Holdings Company - £150,000,000 Multicurrency Revolving Facility Agreement

dated [ ] (the "Agreement")


1.	We refer to the Agreement. This is a Utilisation Request. Terms defined in the Agreement have the same meaning in this Utilisation Request unless given a different meaning in this Utilisation Request.


2.	We wish to borrow a [Tranche A/Tranche B/Tranche C] Loan on the following terms:



Proposed Utilisation Date:	[ ] (or, if that is not a Business Day, the next Business Day)
Currency of Loan:	[ ]
Amount:	[ ] or, if less, the Available Tranche A Facility, Available Tranche B Facility or Available Tranche C Facility (as applicable)
Interest Period:	[ ]


3.	We confirm that each condition specified in Clause 4.2 ( Further conditions precedent ) is satisfied on the date of this Utilisation Request.


4.	The proceeds of this Loan should be credited to [ account ].


5.	This Utilisation Request is irrevocable.

Yours faithfully

…………………………………

authorised signatory for

[ name of relevant Borrower ]

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SCHEDULE 4

MANDATORY COST FORMULAE


1.	The Mandatory Cost is an addition to the interest rate to compensate Lenders for the cost of compliance with (a) the requirements of the Bank of England and/or the Financial Services Authority (or, in either case, any other authority which replaces all or any of its functions) or (b) the requirements of the European Central Bank.

On the first day of each Interest Period (or as soon as possible thereafter) the Agent shall calculate, as a percentage rate, a rate (the " Additional Cost Rate ") for each Lender, in accordance with the paragraphs set out below. The Mandatory Cost will be calculated by the Agent as a weighted average of the Lenders' Additional Cost Rates (weighted in proportion to the percentage participation of each Lender in the relevant Loan) and will be expressed as a percentage rate per annum.

The Additional Cost Rate for any Lender lending from a Facility Office in a Participating Member State will be the percentage notified by that Lender to the Agent. This percentage will be certified by that Lender in its notice to the Agent to be its reasonable determination of the cost (expressed as a percentage of that Lender's participation in all Loans made from that Facility Office) of complying with the minimum reserve requirements of the European Central Bank in respect of loans made from that Facility Office.


4.	The Additional Cost Rate for any Lender lending from a Facility Office in the United Kingdom will be calculated by the Agent as follows:


(a)	in relation to a sterling Loan:

AB+C(B-D)+E x 0.01

100-(A+C) per cent. per annum


(b)	in relation to a Loan in any currency other than sterling:

E x 0.01

300 per cent. per annum.

Where:


A	is the percentage of Eligible Liabilities (assuming these to be in excess of any stated minimum) which that Lender is from time to time required to maintain as an interest free cash ratio deposit with the Bank of England to comply with cash ratio requirements.


B	is the percentage rate of interest (excluding the Margin and the Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of interest specified in paragraph (a) of Clause 9.3 ( Default interest )) payable for the relevant Interest Period on the Loan.


C	is the percentage (if any) of Eligible Liabilities which that Lender is required from time to time to maintain as interest bearing Special Deposits with the Bank of England.


D	is the percentage rate per annum payable by the Bank of England to the Agent on interest bearing Special Deposits.

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E	is designed to compensate Lenders for amounts payable under the Fees Rules and is calculated by the Agent as being the average of the most recent rates of charge supplied by the Reference Banks to the Agent pursuant to paragraph 7 below and expressed in pounds per £1,000,000.


5.	For the purposes of this Schedule:


(a)	" Eligible Liabilities " and " Special Deposits " have the meanings given to them from time to time under or pursuant to the Bank of England Act 1998 or (as may be appropriate) by the Bank of England;


(b)	" Fees Rules " means the rules on periodic fees contained in the FSA Fees Manual or such other law or regulation as may be in force from time to time in respect of the payment of fees for the acceptance of deposits;


(c)	" Fee Tariffs " means the fee tariffs specified in the Fees Rules under the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero rated fee required pursuant to the Fees Rules but taking into account any applicable discount rate); and


(d)	" Tariff Base " has the meaning given to it in, and will be calculated in accordance with, the Fees Rules.


6.	In application of the above formulae, A, B, C and D will be included in the formulae as percentages (i.e. 5 per cent. will be included in the formula as 5 and not as 0.05). A negative result obtained by subtracting D from B shall be taken as zero. The resulting figures shall be rounded to four decimal places.

If requested by the Agent, each Reference Bank shall, as soon as practicable after publication by the Financial Services Authority, supply to the Agent, the rate of charge payable by that Reference Bank to the Financial Services Authority pursuant to the Fees Rules in respect of the relevant financial year of the Financial Services Authority (calculated for this purpose by that Reference Bank as being the average of the Fee Tariffs applicable to that Reference Bank for that financial year) and expressed in pounds per £1,000,000 of the Tariff Base of that Reference Bank.


8.	Each Lender shall supply any information required by the Agent for the purpose of calculating its Additional Cost Rate. In particular, but without limitation, each Lender shall supply the following information on or prior to the date on which it becomes a Lender:


(a)	the jurisdiction of its Facility Office; and


(b)	any other information that the Agent may reasonably require for such purpose.

Each Lender shall promptly notify the Agent of any change to the information provided by it pursuant to this paragraph.

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The percentages of each Lender for the purpose of A and C above and the rates of charge of each Reference Bank for the purpose of E above shall be determined by the Agent based upon the information supplied to it pursuant to paragraphs 7 and 8 above and on the assumption that, unless a Lender notifies the Agent to the contrary, each Lender's obligations in relation to cash ratio deposits and Special Deposits are the same as those of a typical bank from its jurisdiction of incorporation with a Facility Office in the same jurisdiction as its Facility Office.


10.	The Agent shall have no liability to any person if such determination results in an Additional Cost Rate which over or under compensates any Lender and shall be entitled to assume that the information provided by any Lender or Reference Bank pursuant to paragraphs 3, 7 and 8 above is true and correct in all respects.


11.	The Agent shall distribute the additional amounts received as a result of the Mandatory Cost to the Lenders on the basis of the Additional Cost Rate for each Lender based on the information provided by each Lender and each Reference Bank pursuant to paragraphs 3, 7 and 8 above.


12.	Any determination by the Agent pursuant to this Schedule in relation to a formula, the Mandatory Cost, an Additional Cost Rate or any amount payable to a Lender shall, in the absence of manifest error, be conclusive and binding on all Parties.

13.

The Agent may from time to time, after consultation with the Company and the Lenders, determine and notify to all Parties any amendments which are required to be made to this Schedule in order to comply with any change in law, regulation or any requirements from time to time imposed by the Bank of England, the Financial Services Authority or the European Central Bank (or, in any case, any other authority which replaces all or any of its functions) and any such determination shall, in the absence of manifest error, be conclusive and binding on all Parties.

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SCHEDULE 5

FORM OF TRANSFER CERTIFICATE

To: [ ] as Agent

From: [ The Existing Lender ] (the " Existing Lender ") and [ The New Lender ] (the " New Lender ")

Dated:

Northern Powergrid Holdings Company - £150,000,000 Multicurrency Revolving Facility Agreement

dated [ ] (the "Agreement")


1.	We refer to the Agreement. This is a Transfer Certificate. Terms defined in the Agreement have the same meaning in this Transfer Certificate unless given a different meaning in this Transfer Certificate.


2.	We refer to Clause 24.5 ( Procedure for transfer ):


(a)	The Existing Lender and the New Lender agree to the Existing Lender transferring to the New Lender by novation all or part of the Existing Lender's Commitment, rights and obligations referred to in the Schedule in accordance with Clause 24.5 ( Procedure for transfer ).


(b)	The proposed Transfer Date is [ ].


(c)	The Facility Office and address, fax number and attention details for notices of the New Lender for the purposes of Clause 30.2 ( Addresses ) are set out in the Schedule.


3.	The New Lender expressly acknowledges the limitations on the Existing Lender's obligations set out in paragraph (c) of Clause 24.4 ( Limitation of responsibility of Existing Lenders ).


4.	The New Lender confirms, for the benefit of the Agent and without liability to any Obligor, that it is:


(a)	[a Qualifying Lender (other than a Treaty Lender);]


(b)	[a Treaty Lender;]


(c)	[not a Qualifying Lender]


5.	[The New Lender confirms that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:


(a)	a company resident in the United Kingdom for United Kingdom tax purposes;


(b)	a partnership each member of which is:


(i)	a company so resident in the United Kingdom; or

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(ii)	a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or


(c)	a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company.]

[The New Lender confirms that it holds a passport under the HMRC DT Treaty Passport scheme (reference number [ ]) and is tax resident in [ ] , so that interest payable to it by borrowers is generally subject to full exemption from UK withholding tax, and requests that the Company notify each Borrower which is a Party as a Borrower as at the Transfer Date that it wishes that scheme to apply to the Agreement.]


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


8.	This Transfer Certificate and any non-contractual obligations arising out of or in connection with it are governed by English law.


9.	This Transfer Certificate has been entered into on the date stated at the beginning of this Transfer Certificate.

THE SCHEDULE

Commitment/rights and obligations to be transferred

[ insert relevant details ]

[ Facility Office address, fax number and attention details for notices and account details for payments ]



[Existing Lender]	[New Lender]
By:	By:

This Transfer Certificate is accepted by the Agent and the Transfer Date is confirmed as [ ].

[Agent]

By:

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SCHEDULE 6

CONVERSION NOTICES

PART I

FORM OF PRELIMINARY CONVERSION NOTICE

From: Northern Powergrid Holdings Company

To: [ Agent ]

Dated:

Dear Sirs

Northern Powergrid Holdings Company - £150,000,000 Multicurrency Revolving Facility Agreement

dated [ ] (the "Agreement")


1.	We refer to the Agreement. This is a Preliminary Conversion Notice. Terms defined in the Agreement have the same meaning in this Preliminary Conversion Notice unless given a different meaning in this Preliminary Conversion Notice.


2.	We wish to:


(i)	[increase Tranche A Commitments]/[decrease Tranche A Commitments] in an amount equal to [ ] ^*;


(ii)	[increase Tranche B Commitments]/[decrease Tranche B Commitments] in an amount equal to [ ]; and


(iii)	[increase Tranche C Commitments]/[decrease Tranche C Commitments] in an amount equal to [ ]. ^**

on [insert Preliminary Conversion Date].


3.	This Preliminary Conversion Notice is irrevocable.

Yours faithfully

…………………………………

authorised signatory for

Northern Powergrid Holdings Company

___________________________________

* Amount not to exceed £25,000,000

**Not more than £25,000,000 may be reallocated between Tranches A, B and C

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PART II

FORM OF SECONDARY CONVERSION NOTICE

From: Northern Powergrid Holdings Company

To: [ Agent ]

Dated:

Dear Sirs

Northern Powergrid Holdings Company - £150,000,000 Multicurrency Revolving Facility Agreement

dated [ ] (the "Agreement")


1.	We refer to the Agreement. This is a Secondary Conversion Notice. Terms defined in the Agreement have the same meaning in this Secondary Conversion Notice unless given a different meaning in this Secondary Conversion Notice.


2.	We wish to:


(i)	cancel the Tranche A Commitments in an amount equal to [ ];


(ii)	increase the Tranche B Commitments in an amount equal to [ ]; and


(iii)	increase the Tranche C Commitments in an amount equal to [ ], ^**

on [insert Secondary Conversion Date]


3.	This Secondary Conversion Notice is irrevocable.

Yours faithfully

…………………………………

authorised signatory for

Northern Powergrid Holdings Company

_____________________________________

** The aggregate of the amounts specified in sub-paragraphs (ii) and (iii) should equal the amount specified in sub-paragraph (i)

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SCHEDULE 7

FORM OF COMPLIANCE CERTIFICATE

To: [ ] as Agent

From: Northern Powergrid Holdings Company

Dated:

Dear Sirs

Northern Powergrid Holdings Company - £150,000,000 Multicurrency Revolving Facility Agreement

dated [ ] (the "Agreement")


1.	We refer to the Agreement. This is a Compliance Certificate. Terms defined in the Agreement have the same meaning when used in this Compliance Certificate unless given a different meaning in this Compliance Certificate.


2.	We confirm that:


(a)	as of [ insert most recent Calculation Date ] the provisions of Clause 21.2 ( Financial condition ) [have/have not] been complied with;


(b)	the computations necessary to demonstrate the [compliance/non compliance] referred to in paragraph (a) above are as follows:

Interest Cover


(i)	Consolidated EBIT

[ ]


(ii)	Consolidated Net Finance Charges

[ ]

Yorkshire Debt to Yorkshire RAV


(iii)	Yorkshire Senior Total Net Debt

[ ]


(iv)	Yorkshire RAV

[ ]

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Northeast Debt to Northeast RAV


(v)	Northeast Senior Total Net Debt

[ ]


(vi)	Northeast RAV

[ ]

Consolidated Debt to Aggregate RAV


(vii)	Consolidated Senior Total Net Debt

[ ]


(viii)	Aggregate RAV

[ ]


3.	[We confirm that no Default is continuing.]*



Signed:	…............	…............
	Director	Director
	of	of
	Northern Powergrid Holdings Company	Northern Powergrid Holdings Company

____________________________________________

* If this statement cannot be made, the certificate should identify any Default that is continuing and the steps, if any, being taken to remedy it.

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SCHEDULE 8

LMA FORM OF CONFIDENTIALITY UNDERTAKING

[Letterhead of Seller]

To:



	[insert name of Potential Purchaser]

Re: The Agreement

Compan y: (the " Company ")

Date:

Amount:

Agent:

Dear Sirs

We understand that you are considering acquiring an interest in the Agreement which, subject to the Agreement, may be by way of novation, assignment, the entering into, whether directly or indirectly, of a sub-participation or any other transaction under which payments are to be made or may be made by reference to one or more Finance Documents and/or one or more Obligors or by way of investing in or otherwise financing, directly or indirectly, any such novation, assignment, sub-participation or other transaction (the " Acquisition "). In consideration of us agreeing to make available to you certain information, by your signature of a copy of this letter you agree as follows:


2.	CONFIDENTIALITY UNDERTAKING

You undertake (a) to keep all Confidential Information confidential and not to disclose it to anyone, save to the extent permitted by paragraph 2 below and to ensure that all Confidential Information is protected with security measures and a degree of care that would apply to your own confidential information, and (b) until the Acquisition is completed to use the Confidential Information only for the Permitted Purpose.


3.	PERMITTED DISCLOSURE

We agree that you may disclose:

(a)

to any of your Affiliates and any of your or their officers, directors, employees, professional advisers and auditors such Confidential Information as you shall consider appropriate if any person to whom the Confidential Information is to be given pursuant to this sub-paragraph (a) is informed in writing of its confidential nature and that some or all of such Confidential Information may be price-sensitive information, except that there shall be no such requirement to so inform if the recipient is subject to professional obligations to maintain the confidentiality of the information or is otherwise bound by requirements of confidentiality in relation to the Confidential Information;

93954-4-1-v3.0 -116 - 70-40529536


(b)	subject to the requirements of the Agreement, to any person:

(i)

to (or through) whom you assign or transfer (or may potentially assign or transfer) all or any of your rights and/or obligations which you may acquire under the Agreement such Confidential Information as you shall consider appropriate if the person to whom the Confidential Information is to be given pursuant to this sub-paragraph (i) has delivered a letter to you in equivalent form to this letter;

(ii)

with (or through) whom you enter into (or may potentially enter into) any sub-participation in relation to, or any other transaction under which payments are to be made or may be made by reference to the Agreement or any Obligor such Confidential Information as you shall consider appropriate if the person to whom the Confidential Information is to be given pursuant to this sub-paragraph (ii) has delivered a letter to you in equivalent form to this letter;


(iii)	to whom information is required or requested to be disclosed by any governmental, banking, taxation or other regulatory authority or similar body, the rules of any relevant stock exchange or pursuant to any applicable law or regulation such Confidential Information as you shall consider appropriate; and


(c)	notwithstanding sub-paragraphs (a) and (b) above, Confidential Information to such persons to whom, and on the same terms as, a Finance Party is permitted to disclose Confidential Information under the Agreement, as if such permissions were set out in full in this letter and as if references in those permissions to Finance Party were references to you.


4.	NOTIFICATION OF DISCLOSURE

You agree (to the extent permitted by law and regulation) to inform us:


(a)	of the circumstances of any disclosure of Confidential Information made pursuant to sub-paragraph (b) of paragraph 2 above except where such disclosure is made to any of the persons referred to in that paragraph during the ordinary course of its supervisory or regulatory function; and


(b)	upon becoming aware that Confidential Information has been disclosed in breach of this letter.


5.	RETURN OF COPIES

If you do not enter into the Acquisition and we so request in writing, you shall return or destroy all Confidential Information supplied to you by us and destroy or permanently erase (to the extent technically practicable) all copies of Confidential Information made by you and use your reasonable endeavours to ensure that anyone to whom you have supplied any Confidential Information destroys or permanently erases (to the extent technically practicable) such Confidential Information and any copies made by them, in each case save to the extent that you or the recipients are required to retain any such Confidential Information by any applicable law, rule or regulation or by any competent judicial, governmental, supervisory or regulatory body or in accordance with internal policy, or where the Confidential Information has been disclosed under sub-paragraph (c) of paragraph 2 above.

93954-4-1-v3.0 -117 - 70-40529536


6.	CONTINUING OBLIGATIONS

The obligations in this letter are continuing and, in particular, shall survive and remain binding on you until (a) if you become a party to the Agreement as a lender of record, the date on which you become such a party to the Agreement; (b) if you enter into the Acquisition but it does not result in you becoming a party to the Agreement as a lender of record, the date falling twelve months after the date on which all of your rights and obligations contained in the documentation entered into to implement that Acquisition have terminated ; or (c) in any other case the date falling twelve months after the date of your final receipt (in whatever manner) of any Confidential Information.


7.	NO REPRESENTATION; CONSEQUENCES OF BREACH, ETC

You acknowledge and agree that:

(a)

neither we, nor any member of the Group nor any of our or their respective officers, employees or advisers (each a " Relevant Person ") (i) make any representation or warranty, express or implied, as to, or assume any responsibility for, the accuracy, reliability or completeness of any of the Confidential Information or any other information supplied by us or the assumptions on which it is based or (ii) shall be under any obligation to update or correct any inaccuracy in the Confidential Information or any other information supplied by us or be otherwise liable to you or any other person in respect of the Confidential Information or any such information; and


(b)	we or members of the Group may be irreparably harmed by the breach of the terms of this letter and damages may not be an adequate remedy; each Relevant Person may be granted an injunction or specific performance for any threatened or actual breach of the provisions of this letter by you.


8.	ENTIRE AGREEMENT; NO WAIVER; AMENDMENTS, ETC


(a)	This letter constitutes the entire agreement between us in relation to your obligations regarding Confidential Information and supersedes any previous agreement, whether express or implied, regarding Confidential Information.

(b)

No failure to exercise, nor any delay in exercising, any right or remedy under this letter will operate as a waiver of any such right or remedy or constitute an election to affirm this letter. No election to affirm this letter will be effective unless it is in writing. No single or partial exercise of any right or remedy will prevent any further or other exercise or the exercise of any other right or remedy under this letter.


(c)	The terms of this letter and your obligations under this letter may only be amended or modified by written agreement between us and the Company.


9.	INSIDE INFORMATION

You acknowledge that some or all of the Confidential Information is or may be price-sensitive information and that the use of such information may be regulated or prohibited by applicable legislation including securities law relating to insider dealing and market abuse and you undertake not to use any Confidential Information for any unlawful purpose.

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10.	NATURE OF UNDERTAKINGS

The undertakings given by you under this letter are given to us and are also given for the benefit of the Company and each other member of the Group.


11.	THIRD PARTY RIGHTS


(a)	Subject to this paragraph 10 and to paragraphs 6 and 9, a person who is not a party to this letter has no right under the Contracts (Rights of Third Parties) Act 1999 (the " Third Parties Act ") to enforce or to enjoy the benefit of any term of this letter.


(b)	The Relevant Persons may enjoy the benefit of the terms of paragraphs 6 and 9 subject to and in accordance with this paragraph 10 and the provisions of the Third Parties Act.


(c)	Notwithstanding any provisions of this letter, the parties to this letter do not require the consent of any Relevant Person to rescind or vary this letter at any time.


12.	GOVERNING LAW AND JURISDICTION


(a)	This letter and the agreement constituted by your acknowledgement of its terms (the " Letter ") and any non-contractual obligations arising out of or in connection with it (including any non-contractual obligations arising out of the negotiation of the transaction contemplated by this Letter) are governed by English law.


(b)	The courts of England have non-exclusive jurisdiction to settle any dispute arising out of or in connection with this Letter (including a dispute relating to any non-contractual obligation arising out of or in connection with either this Letter or the negotiation of the transaction contemplated by this Letter).


13.	DEFINITIONS

In this letter (including the acknowledgement set out below) terms defined in the Agreement shall, unless the context otherwise requires, have the same meaning and:

" Confidential Information " means all information relating to the Company, any Obligor, the Group, the Finance Documents, the Facility and/or the Acquisition which is provided to you in relation to the Finance Documents or the Facility by us or any of our affiliates or advisers, in whatever form, and includes information given orally and any document, electronic file or any other way of representing or recording information which contains or is derived or copied from such information but excludes information that:


(a)	is or becomes public information other than as a direct or indirect result of any breach by you of this letter; or


(b)	is identified in writing at the time of delivery as non-confidential by us or our advisers; or


(c)	is known by you before the date the information is disclosed to you by us or any of our affiliates or advisers or is lawfully obtained by you after that date, from a source which is, as far as you are aware, unconnected with the Group and which, in either case, as far as you are aware, has not been obtained in breach of, and is not otherwise subject to, any obligation of confidentiality.

93954-4-1-v3.0 -119 - 70-40529536

" Group " means the Company and its subsidiaries for the time being (as such term is defined in the Companies Act 2006).

" Permitted Purpose " means considering and evaluating whether to enter into the Acquisition.

Please acknowledge your agreement to the above by signing and returning the enclosed copy.

Yours faithfully

…................................

For and on behalf of

[Seller]

To: [Seller]

The Company and each other member of the Group

We acknowledge and agree to the above:

…................................

For and on behalf of

[Potential Purchaser]

93954-4-1-v3.0 -120 - 70-40529536

SCHEDULE 9

TIMETABLES



	Loans in US dollars or euro	Loans in sterling	Loans in other currencies
Request for approval as an Optional Currency (Clause 4.3 ( Conditions relating to Optional Currencies ))	N/A	N/A	U-4 (10.00am)
Agent notifies the Company if a currency is approved as an Optional Currency in accordance with Clause 4.3 ( Conditions relating to Optional Currencies )	N/A	N/A	U-3 (4.00pm)
Delivery of a duly completed Utilisation Request (Clause 5.1 ( Delivery of a Utilisation Request )	U-3 (9.00am)	U-1 (10.00am)	U-3 (9.00am)
Agent determines (in relation to a Utilisation) the Base Currency Amount of the Loan, if required under Clause 5.4 ( Lenders' participation ) and notifies the Lenders of the Loan in accordance with Clause 5.4 ( Lenders' participation )	U-3 (3.00pm)	U-1 (3.00pm)	U-2 (2.00pm)
Agent receives a notification from a Lender under Clause 6.2 ( Unavailability of a currency )	U-2 (9.30am)	N/A	U-2 (9.30am)
Agent gives notice in accordance with Clause 6.2 ( Unavailability of a currency )	U-2 (10.30am)	N/A	U-2 (10.30am)
LIBOR or EURIBOR is fixed	Quotation Day as of 11.00am London time in respect of LIBOR and as of 11.00am (Brussels time) in respect of EURIBOR	Quotation Day as of 11.00am	Quotation Day as of 11.00am

"U" = date of utilisation

"U - X" = X Business Days prior to date of utilisation

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SCHEDULE 10

FORM OF INCREASE CONFIRMATION

To: [ ] as Agent and Northern Powergrid Holdings Company as Company, for and on behalf of each Obligor

From: [the Increase Lender] (the " Increase Lender ")

Dated:

Dear Sirs

Northern Powergrid Holdings Company - £150,000,000 Multicurrency Revolving Facility Agreement

dated [ ] (the "Agreement")


1.	We refer to the Agreement. This is an Increase Confirmation. Terms defined in the Agreement have the same meaning in this Increase Confirmation unless given a different meaning in this Increase Confirmation.


2.	We refer to Clause 2.2 ( Increase ).


3.	The Increase Lender agrees to assume and will assume all of the obligations corresponding to the Commitment specified in the Schedule (the " Relevant Commitment ") as if it was an Original Lender under the Agreement.


4.	The proposed date on which the increase in relation to the Increase Lender and the Relevant Commitment is to take effect (the " Increase Date ") is [ ].


5.	On the Increase Date, the Increase Lender becomes party to the Finance Documents as a Lender.


6.	The Facility Office and address, fax number and attention details for notices to the Increase Lender for the purposes of Clause 30.2 ( Addresses ) are set out in the Schedule.


7.	The Increase Lender expressly acknowledges the limitations on the Lenders' obligations referred to in paragraph (f) of Clause 2.2 ( Increase ).


8.	The Increase Lender confirms, for the benefit of the Agent and without liability to any Obligor, that it is:


(a)	[a Qualifying Lender (other than a Treaty Lender);]


(b)	[a Treaty Lender;]


(c)	[not a Qualifying Lender].

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9.	[The Increase Lender confirms that the person beneficially entitled to interest payable to that Lender in respect of an advance under a Finance Document is either:


(a)	a company resident in the United Kingdom for United Kingdom tax purposes; or


(b)	a partnership each member of which is:


(i)	a company so resident in the United Kingdom; or


(ii)	a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account in computing its chargeable profits (within the meaning of section 19 of the CTA) the whole of any share of interest payable in respect of that advance that falls to it by reason of Part 17 of the CTA; or


(c)	a company not so resident in the United Kingdom which carries on a trade in the United Kingdom through a permanent establishment and which brings into account interest payable in respect of that advance in computing the chargeable profits (within the meaning of section 19 of the CTA) of that company.]

10.

[The Increase Lender confirms that it holds a passport under the HMRC DT Treaty Passport scheme (reference number [ ]) and is tax resident in [ ] , so that interest payable to it by borrowers is generally subject to full exemption from UK withholding tax, and requests that the Company notify each Borrower which is a Party as a Borrower as at Increase Date that it wishes that scheme to apply to the Agreement.]


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


12.	This Increase Confirmation and any non-contractual obligations arising out of or in connection with it are governed by English law.


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

THE SCHEDULE

Relevant Commitment/rights and obligations to be assumed by the Increase Lender

[ insert relevant details ]

[ Facility office address, fax number and attention details for notices and account details for

payments ]

[Increase Lender]

By:

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This Increase Confirmation is accepted as an Increase Confirmation for the purposes of the Agreement by the Agent and the Increase Date is confirmed as [ ].

Agent

By:

Security Agent

By:

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SIGNATURES

THE COMPANY



NORTHERN POWERGRID HOLDINGS COMPANY

By: /s/ Phil A. Jones
Phil A. Jones
Address: Lloyds Court 78 Grey Street Newcastle Upon Tyne NEI 6AF
Fax: 0191 223 5132

THE BORROWERS



NORTHERN POWERGRID HOLDINGS COMPANY

By: /s/ Phil A. Jones
Phil A. Jones



NORTHERN POWERGRID (YORKSHIRE) PLC

By: /s/ Phil A. Jones
Phil A. Jones



NORTHERN POWERGRID (NORTHEAST) LIMITED

By: /s/ Phil A. Jones
Phil A. Jones



THE GUARANTOR
NORHTERN POWERGRID HOLDINGS COMPANY

By: /s/ Phil A. Jones
Phil A. Jones



THE ARRANGER
ABBEY NATIONAL TREASURY SERVICES PLC

By:/s / K.J. Aston
K.J. Aston
Relationship Director

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Address: 2 Triton Square Regent's Place London NWI 3AN

Fax: 020 7756 5816



LLOYDS TSB BANK PLC

By: /s/ Gordon Milnes
Gordon Milnes
Address: 3rd Floor 10 Gresham Street London EC2V 7AE

Fax: 020 7158 3251



THE ROYAL BANK OF SCOTLAND PLC

By: /s/ Jaron Stallard
Jaron Stallard
Address: 135 Bishopsgate London EC2M 3UR

Fax: 0207 672 6403



THE AGENT
LLOYDS TSB BANK PLC

By: /s/ Gordon Milnes
Gordon Milnes

For administrative matters:

Address: Wholesale Loans Servicing Level 1 Citymark 150 Fountainbridge Edinburgh EH3 9PE
Fax: 020 7158 3204
Attention: Agency Operations

For Credit Matters:

Address: Wholesale Loans Agency 10 Gresham Street London EC2V 7AE

Fax: 020 7158 3198

Attention: Wholesale Loans Agency

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THE ORIGINAL LENDERS
ABBEY NATIONAL TREASURY SERVICES PLC

By: /s/ K.J. Aston
K.J. Aston
Relationship Director

Address: 2 Triton Square Regent's Place London NW1 3AN

Fax: 020 7756 5816



LLOYDS TSB BANK PLC

By: /s/ Gordon Milnes
Gordon Milnes
Address: 10 Gresham Street London EC2V 7AE



THE ROYAL BANK OF SCOTLAND PLC

By: /s/ Jaron Stallard
Jaron Stallard
Address: 135 Bishopgate London EC2M 3UR
Fax: 0207 672 6403

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EXHIBIT 15

AWARENESS LETTER OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

MidAmerican Energy Holdings Company

Des Moines, Iowa

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited consolidated interim financial information of MidAmerican Energy Holdings Company and subsidiaries for the periods ended September 30, 2012 and 2011 , as indicated in our report dated November 2, 2012 ; because we did not perform an audit, we expressed no opinion on that information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended September 30, 2012 , is incorporated by reference in Registration Statement No. 333-147957 on Form S-8.

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/ Deloitte & Touche LLP

Des Moines, Iowa

November 2, 2012

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Gregory E. Abel, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of MidAmerican Energy Holdings Company;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: November 2, 2012	/s/ Gregory E. Abel
	Gregory E. Abel
	Chairman, President and Chief Executive Officer
	(principal executive officer)

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE

SARBANES-OXLEY ACT OF 2002

I, Patrick J. Goodman, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of MidAmerican Energy Holdings Company;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date: November 2, 2012	/s/ Patrick J. Goodman
	Patrick J. Goodman
	Executive Vice President and Chief Financial Officer
	(principal financial officer)

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Gregory E. Abel, Chairman, President and Chief Executive Officer of MidAmerican Energy Holdings Company (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2012 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.



Date: November 2, 2012	/s/ Gregory E. Abel
	Gregory E. Abel
	Chairman, President and Chief Executive Officer
	(principal executive officer)

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

I, Patrick J. Goodman, Executive Vice President and Chief Financial Officer of MidAmerican Energy Holdings Company (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:


(1)	the Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2012 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.



Date: November 2, 2012	/s/ Patrick J. Goodman
	Patrick J. Goodman
	Executive Vice President and Chief Financial Officer
	(principal financial officer)

EXHIBIT 95

MINE SAFETY VIOLATIONS AND OTHER LEGAL MATTER DISCLOSURES

PURSUANT TO SECTION 1503(a) OF THE DODD-FRANK WALL STREET

REFORM AND CONSUMER PROTECTION ACT

PacifiCorp and its subsidiaries operate certain coal mines and coal processing facilities (collectively, the "mining facilities") that are regulated by the Federal Mine Safety and Health Administration ("MSHA") under the Federal Mine Safety and Health Act of 1977 (the "Mine Safety Act"). MSHA inspects PacifiCorp's mining facilities on a regular basis. The total number of reportable Mine Safety Act citations, orders, assessments and legal actions for the three-month period ended September 30, 2012 are summarized in the table below and are subject to contest and appeal. The severity and assessment of penalties may be reduced or, in some cases, dismissed through the contest and appeal process. Amounts are reported regardless of whether PacifiCorp has challenged or appealed the matter. Coal reserves that are not yet mined and mines that are closed or idled are not included in the information below as no reportable events occurred at those locations during the three-month period ended September 30, 2012 . There were no mining-related fatalities during the three-month period ended September 30, 2012 . PacifiCorp has not received any notice of a pattern, or notice of the potential to have a pattern, of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to the cause and effect of coal or other mine health or safety hazards under Section 104(e) of the Mine Safety Act during the three-month period ended September 30, 2012 .



	Mine Safety Act							Legal Actions
						Total
	Section 104				Section	Value of
	Significant		Section		107(a)	Proposed		Pending
	and	Section	104(d)	Section	Imminent	MSHA		as of Last	Instituted	Resolved
	Substantial	104(b)	Citations/	110(b)(2)	Danger	Assessments		Day of	During	During
Mining Facilities	Citations ⁽¹⁾	Orders ⁽²⁾	Orders ⁽³⁾	Violations ⁽⁴⁾	Orders ⁽⁵⁾	(in thousands)		Period ⁽⁶⁾	Period	Period

Deer Creek	2	—	—	—	—	$	10	5	3	6
Bridger (surface)	2	—	—	—	—	1		3	1	—
Bridger (underground)	20	—	3	—	—	65		25	6	1
Cottonwood Preparatory Plant	—	—	—	—	—	—		—	—	—
Wyodak Coal Crushing Facility	—	—	—	—	—	—		—	—	—


(1)	Citations for alleged violations of mandatory health and safety standards that could significantly or substantially contribute to the cause and effect of a safety or health hazard under Section 104 of the Mine Safety Act.


(2)	For alleged failure to totally abate the subject matter of a Mine Safety Act Section 104(a) citation within the period specified in the citation.


(3)	For an alleged unwarrantable failure (i.e., aggravated conduct constituting more than ordinary negligence) to comply with a mandatory health or safety standard.


(4)	For alleged flagrant violations (i.e., reckless or repeated failure to make reasonable efforts to eliminate a known violation of a mandatory health or safety standard that substantially and proximately caused, or reasonably could have been expected to cause, death or serious bodily injury).


(5)	For the existence of any condition or practice in a coal or other mine which could reasonably be expected to cause death or serious physical harm before such condition or practice can be abated.


(6)	Amounts include contests of 28 proposed penalties under Subpart C and contests of five citations or orders under Subpart B of the Federal Mine Safety and Health Review Commission's procedural rules. The pending legal actions are not exclusive to citations, notices, orders and penalties assessed by MSHA during the reporting period.