PARAGRAPH 11
to the
CREDIT SUPPORT ANNEX

to the Schedule to the ISDA Master Agreement

dated as of _________________, 2001

between
Enron Capital & Trade Resources International Corp. , a corporation organised under the laws of the state of  Delaware (“Party A”), and	_____________________________________, a _____________ organized under the laws of ____________ (“Party B”)	

Paragraph 11.  Elections and Variables.

(a)	Base Currency and Eligible Currency.

(i)	“Base Currency” means U.S. Dollar.

(ii)	“Eligible Currency” means the Base Currency and each other currency specified here: [(i) Sterling; and (ii) Euro].

(b)	Credit Support Obligations.

(i)  Delivery Amount, Return Amount, and Credit Support Amount.

(A) “Delivery Amount” has the meaning specified in Paragraph 2(a).

(B) “Return Amount” has the meaning specified in Paragraph 2(b).

(C) “Credit Support Amount” has the meaning specified in Paragraph 10.

(ii) Eligible Credit Support and Other Eligible Credit Support

(A) Eligible Credit Support.  The following items will qualify as “Eligible Credit Support” for the party specified.

Party A	
Party B	Valuation
Percentage
	
(1)	Cash in an Eligible Currency
	[X]	[X]	100%	
(2)	Other:	None

(B) Other Eligible Credit Support.  The following item will qualify as “Other Eligible Credit Support” for the party specified:

Party A
	
Party B
	Valuation
Percentage
	
Letters of Credit	[_]	[_]	100% of the Value of the Other Eligible Credit Support unless (i) a Letter of Credit Default shall apply with respect to such Letter of Credit or (ii) twenty (20) or fewer Local Business Days remain prior to the expiration of such Letter of Credit, in which case the Valuation Percentage shall be 0.	

(iii)  Thresholds.

(A)  	“Independent Amount” means with respect to Party A:  nil.

“Independent Amount” means with respect to Party B:  nil.

[(A)  “Independent Amount” means with respect to Party A, the amount specified as such for Party A in each Confirmation, or if no amount is specified, zero, and means with respect to Party B, the amount calculated as follows: on any Business Day, Party A shall have the right to adjust the Independent Amount due from Party B due to changes in the volatility of relevant markets or of Party B’s portfolio of transactions with Party A (“Party B’s Portfolio”).  Party A will calculate such Independent Amount based on its internal Value at Risk (“VAR”) calculation for up to ten (10) days of VAR with respect to Party B’s Portfolio, provided, however, that in no event shall Party B’s Independent Amount be less than $250,000 if there are any outstanding Transactions.]

(B)  [“Threshold” means with respect to Party A, U.S. $________ and with respect to Party B, U.S. $____; provided, however, that the Threshold for a party shall be zero upon the occurrence and during the continuance of a Material Adverse Change or an Event of Default or Potential Event of Default with respect to such party.]

[“Threshold” means, with respect to a party (a) the amount set forth opposite the highest Credit Rating for the party (or [in the case of Party B, ____________ and] in the case of Party A, Enron Corp.) on the relevant date of determination; or (b) zero if on the relevant date of determination (i) the party does not have a Credit Rating from [either S&P or Moody's][both S&P and Moody’s], or (ii)  Event of Default or Potential Event of Default with respect to such party has occurred and is continuing [or (iii) with respect to Party B, a Material Adverse Change has occurred and is continuing]4:

THRESHOLD	S&P CREDIT RATING
	MOODY'S CREDIT RATING
	
U.S. $ ______________	AA (or above)	Aa2 (or above)	
U.S. $ ______________	AA- to A-	Aa3 to A3	
U.S. $ ______________	BBB+ and BBB	Baa1 and Baa2	
U.S. $ _____________	BBB-	Baa3	
U.S. $ 0	Below BBB-	Below Baa3]	

(C)  “Minimum Transfer Amount” means with respect to Party A:  U.S. $0.

“Minimum Transfer Amount” means with respect to Party B:  U.S. $0.

(D)  Rounding.  The Delivery Amount will be rounded up to the nearest integral multiple of U.S. $____ and the Return Amount will be rounded down to the nearest integral multiple of U.S. $____.

(c)  Valuation and Timing.
(i)  “Valuation Agent” means, for purposes of Paragraph 2, the party making the demand under Paragraph 2; for purposes of Paragraph 3(c), the Transferee for purposes of calculating the Value of the New Credit Support and Original Credit Support involved in the exchange; for purposes of Paragraph 4, the Transferee; and for purposes of Paragraph 5(c), the Transferee receiving or deemed to receive the Distributions or the Interest Amount, as applicable; provided, however, that in all cases, if an Event of Default or Potential Event of Default or Specified Condition has occurred and is continuing with respect to the party designated as the Valuation Agent, then in such case, and for so long as the Event of Default or Potential Event of Default or Specified Condition continues, the other party shall be the Valuation Agent.

(ii)  “Valuation Date” means any Local Business Day.

(iii)  “Valuation Time” means:

[  ]	the close of business in the city of the Valuation Agent on the Valuation Date or date of calculation, as applicable;

[X]	the close of business in the city of the Valuation Agent on the Local Business Day before the 	Valuation Date or date of calculation, as applicable;

provided that the calculations of Value and Exposure will be made as of approximately the same time on the same date.

(iv)  “Notification Time” means 11:00 a.m., London time, on a Local Business Day.

	(v)  Specified Condition.  The following Termination Event(s) will be a “Specified Condition” for the party specified (that party being the Affected Party if the Termination Event occurs with respect to that party):

	Specified Condition			Party A	Party B

	Illegality				   [X]		   [X]

	Tax Event				   [X]		   [X]

	Tax Event Upon Merger		   [X]		   [X]

	Credit Event Upon Merger		   [X]		   [X]

	Additional Termination Events:	  None		  None        

(d)  Exchange Date. “Exchange Date” has the meaning specified in Paragraph 3(c)(ii).

(e)  Dispute Resolution.

(i)  “Resolution Time” means 1:00 p.m., London time, on the third Local Business Day following the date on which notice of the dispute is given under Paragraph 4.

(ii)  Value.  For the purpose of Paragraphs 4(a)(4)(i)(C) and 4(a)(4)(ii), the Value of the outstanding Credit Support Balance or of any transfer of Eligible Credit Support or Equivalent Credit Support, as the case may be, will be calculated as follows:

(A)  with respect to cash, the face amount thereof multiplied by the applicable Valuation Percentage, if any; and

(B) with respect to a Letter of Credit, the stated amount under the Letter of Credit then available to be unconditionally drawn by the Transferee thereof multiplied by the applicable Valuation Percentage, if any.

(iii)  Alternative.  The provisions of Paragraph 4 will apply except to the following extent: pending the resolution of a dispute, Transfer of the undisputed Value of Eligible Credit Support or Other Eligible Credit Support involved in the relevant demand will be due as provided in Paragraph 4 if the demand is given by the Notification Time but will be due on the second Local Business Day after the demand if the demand is given after the Notification Time.

	[(iv)  The provisions of Paragraph 4(a)(4)(i)(B) are hereby amended by inserting the following immediately before the word “and” in line 6 thereof:

	and further provided that if no quotation from a Reference Market-maker is available for such Transaction then quotations of rates or prices from one or more leading participants in the relevant market (selected in good faith) may be use for such Transaction;]

(f)	Distributions and Interest Amount.

(i)  Interest Rate.  The “Interest Rate” in relation to each Eligible Currency will be: (i) the Federal Funds Overnight Rate as from time to time in effect for the Base Currency; (ii) [One Week LIBOR as from time to time in effect for Sterling; and (iii) EURIBOR as from time to time in effect for EURO].

(ii)  Transfer of Interest Amount.  The Transfer of the Interest Amount will be made on the last Local Business Day of each calendar month and on any Local Business Day that a Return Amount consisting wholly or partly of cash is transferred to the Transferor pursuant to Paragraph 2(b).

(iii)  Alternative to Interest Amount.  The provisions of Paragraph 5(c)(ii) will apply except that if Transfer of an Interest Amount (or any portion thereof) to a Transferor on any day would result in, or increase, a Delivery Amount (treating the day as a Valuation Day, as provided in Paragraph 5(c)(ii)), but the Transferor would nonetheless have no obligation to make a Transfer pursuant to Paragraph 2(a) on that day if it were a Valuation Day (because the Delivery Amount is lower than the Transferor’s Minimum Transfer Amount or otherwise), the Transferee will be required to Transfer that Interest Amount (or portion thereof) to the Transferor, notwithstanding anything to the contrary in Paragraph 5(c)(ii).

(g)	Addresses for Transfers.

Party A:	To be provided in notice requesting delivery/return of Eligible Credit Support, Other Eligible Credit Support, Equivalent Credit Support or Other Equivalent Credit Support.

Party B:	To be provided in notice requesting delivery/return of Eligible Credit Support, Other Eligible Credit Support, Equivalent Credit Support or Other Equivalent Credit Support.

(h)	Other Provisions.

(i)  Paragraph 5(c)(i) is hereby amended by adding the following sentence:

“Subject to Paragraph 4 and only to the extent contemplated in the previous sentence, if a Transferee receives or is deemed to receive Distributions on a day that is not a Local Business Day, or after its close of business on a Local Business Day, it will transfer Distributions to the Transferor on the second following Local Business Day.”
	
	(ii) Paragraph 10 is hereby amended by:
(A) adding at the end of the definition of Local Business Day the following Subparagraph (v):
			
“(v)	in relation to a transfer of a Letter of Credit, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) in London and New York.”;
(B) adding, in their alphabetic order, the following:

“Credit Rating” means with respect to a party (or its Credit Support Provider, as the case may be) or  entity, on any date of determination, the respective ratings then assigned to such party’s (or its Credit Support Provider’s as the case may be) or entity’s unsecured, senior long-term debt or deposit obligations (not supported by third party credit enhancement) by S&P, Moody’s or the other specified rating agency or agencies. [If such ratings are not available, then Credit Rating shall mean the S&P Issuer Credit Rating].

[“EURIBOR” means, for the relevant determination date, the Euro overnight composite (London) deposit mid-market daily rate at 6:00 p.m. London time under the heading “EUDRIT”, or any successor heading, as published by Bloomberg, or any successor publication.  The interest calculated at the rate referred to above shall be compounded on a daily basis.]
“Federal Funds Overnight Rate” means, for the relevant determination date the rate opposite the caption “Federal Funds (Effective)” as set forth in the weekly statistical release designated as H.15 (519), or any successor publication, published by the Board of Governors of the Federal Reserve System.

“Issuer” means a major United Kingdom commercial bank or foreign bank with a branch office in the United Kingdom and with a Credit Rating of at least “A-” by S&P or “A3” by Moody’s which issues a Letter of Credit. 

“Letter of Credit” means an irrevocable, standby letter of credit or bank guarantee, issued by an Issuer utilizing, as appropriate, the form set forth in Schedule 1, with such changes to the terms in that form as that Issuer may require and as may be acceptable to the Transferee.

“Material Adverse Change” means ________________________________________.

“Moody’s” means Moody’s Investors Service, Inc. or its successor.

[“One Week LIBOR” means, for the relevant determination date a rate equal to the London Interbank Offered Rate (“LIBOR”) at the rate for one week LIBOR quoted on the Telerate Screen Pages 3750 or 3740, as appropriate, (or any successor page(s) thereto) at or about 11 a.m. (London-time).  If such rate does not appear on the Telerate Screen Page 3750 or 3740, as appropriate, (or on any successor page thereto) on the relevant day or days, the rate will be determined as if the parties had specified the rate as being the arithmetic mean of the rates at which deposits in Sterling are offered by four major banks in the London Interbank market for a period of one week.  The interest calculated at the rate or rates referred to above shall be compounded on a daily basis.]
“Other Eligible Credit Support” means, with respect to a party, the items, if any, specified as such for that party in Paragraph 11(b)(ii)(B).

“Other Equivalent Credit Support” means, in relation to any Other Eligible Credit Support comprised in the Credit Support Balance, Other Eligible Credit Support of the same type, nominal value, description and amount as that Other Eligible Credit Support.

“S&P” means the Standard & Poor's Rating Group (a division of McGraw-Hill, Inc.) or its successor.

[(iii)  Paragraph 2(b) is hereby amended by adding the following after the phrase “(rounded pursuant to Paragraph 11(b)(iii)(D))” in the fifth line thereof:

“; provided, however, that the Transferee will, upon the Transferor’s request, transfer to the Transferor all Equivalent Credit Support comprised in the Transferor’s Credit Support Balance if the amount of such Equivalent Credit Support is material and if the Transferor’s Credit Support Amount is zero,”]

(i)	Other Eligible Credit Support and Other Equivalent Credit Support

(i) Any reference in the Annex to “Eligible Credit Support” or “Equivalent Credit Support” shall be deemed to include a reference to “Other Eligible Credit Support” or “Other Equivalent Credit Support” as appropriate when used in Paragraphs 2,3 and 4, and the definitions of “Credit Support Balance”, “Valuation Percentage” and Subparagraph (ii) of “Value” in Paragraph 10.

(ii) Transfer of Other Eligible Credit Support and Other Equivalent Credit Support. All transfers under this Annex of Other Eligible Credit Support and Other Equivalent Credit Support shall be made as follows: the Transferor shall give written instructions (including, for the avoidance of doubt, instructions given by telex, facsimile transmission or electronic messaging system) to the issuer of a Letter of Credit (the “Issuer”) to issue a Letter of Credit to the Transferee. Such transfer shall be deemed effective on receipt by the Transferee from the Issuer of the issued Letter of Credit. A Letter of Credit will be deemed transferred back to the Transferor on surrender by the Transferee of the Letter of Credit to the Transferor.

(iii) Default for the purposes of Other Eligible Credit Support and Other Equivalent Credit Support. The occurrence at any time with respect to a Letter of Credit of any of the following events shall constitute a Letter of Credit Default (“Letter of Credit Default”) with respect to such Letter of Credit:
(A)	the Issuer fails to maintain a Credit Rating of at least “A-” by S&P or “A3” by Moody’s;
(B)	the Issuer fails to comply with or perform its obligations under such Letter of Credit and such failure continues after the lapse of any applicable grace period;
(C)	the Issuer disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of such Letter of Credit;
(D)	any event analogous to an event specified in Section 5(a)(vii) of the Agreement occurs with respect to the Issuer;
(E)	the Letter of Credit fails or ceases to be in full force and effect; or
(F)	the Letter of Credit expires or terminates in accordance with the terms within the next twenty (20) Local Business Days.

(iv) Default. For the purposes of Paragraph 6 of the Annex, the Value of Other Eligible Credit Support and/or Other Equivalent Credit Support shall be excluded from the calculation of the Value of the Credit Support Balance. To the extent the Transferee draws under any Letter of Credit the Transferor’s obligations to the Transferee shall be discharged in an amount equal to such drawings.

(v) Value. The definition of “Value” in Paragraph 10 is amended by inserting at the end thereof the following Subparagraph (iii):

“(iii)	items that are comprised in the Credit Support Balance that are Other Eligible Credit Support, the stated amount thereunder then available to be unconditionally drawn by the Transferee, multiplied by the applicable Valuation Percentage.”

(vi) Letters of Credit shall be issued and maintained in accordance with the provisions set forth in Exhibit A and Schedule 1 attached hereto.

(vii) Each party represents and covenants to the other party (which representation and covenant will be deemed to be repeated as of each date on which it, as the Transferor, transfers Other Eligible Credit Support (or, in the case of after-acquired Other Eligible Credit Support, at the time the other party or its agent acquires rights therein), and which covenant will be deemed to apply at all times) that with respect to the issuance, renewal, substitution, or increase (as the case may be) of a Letter of Credit, such Letter of Credit is the legal, valid, and binding obligation of the Issuer thereof, enforceable in accordance with its terms.

EXHIBIT A
to Paragraph 11
of Annex A

LETTER OF CREDIT PROVISIONS

Other Eligible Credit Support or Other Equivalent Credit Support provided by one party (“X”) for the benefit of the other (“Y”) in the form of a Letter of Credit shall be subject to the following provisions.

(a)	Any Letter of Credit shall be delivered by X or the Issuer to such address as Y shall specify and shall be maintained for the benefit of Y or its designee.  X or the Issuer of the Letter of Credit shall:
(i)	renew or cause the renewal of each outstanding Letter of Credit on a timely basis as provided in the relevant Letter of Credit; 
(ii)	if the Issuer of an outstanding Letter of Credit has indicated its intent not to renew such Letter of Credit, provide either a substitute Letter of Credit or other Eligible Credit Support, in each case at least twenty (20) Local Business Days prior to the expiration of the outstanding Letter of Credit; and 
(iii)	if the Issuer shall fail to honour Y’s properly documented request to draw on an outstanding Letter of Credit, provide for the benefit of Y a substitute Letter of Credit issued by an Issuer acceptable to Y or other Eligible Credit Support, in each case within two (2) Local Business Days after such refusal.

(b)	Upon the occurrence of a Letter of Credit Default, X agrees to cause a substitute Letter of Credit to be issued to Y or to deliver other Eligible Credit Support to Y on or before the second Local Business Day after the occurrence thereof (or on or before the fifth Local Business Day after the occurrence thereof if only Paragraph 11(i)(iii)(A) applies).

(c)	As one method of providing additional Other Eligible Credit Support or Other Equivalent Credit Support, X may increase the amount of an outstanding Letter of Credit, or establish one or more additional Letters of Credit.

(a)	(d)(i)		Upon or at any time after the occurrence of an Event of Default with respect to X, Y may draw on the entire, undrawn portion of any outstanding Letter of Credit upon submission to the Issuer of such Letter of Credit of one or more certificates in accordance with the specific requirements of such Letter of Credit.  Cash proceeds received from drawing upon the Letter of Credit shall be deemed Eligible Credit Support and shall either be (y) applied against all amounts that are due and owing from X but have not been paid to Y within the time allowed for such payments under this Agreement or (z) be maintained in accordance with this Annex.  Notwithstanding Y’s receipt of cash under the Letter of Credit, X shall remain liable to Y for any failure to transfer sufficient Eligible Credit Support or Other Eligible Credit Support to Y in accordance with the terms of this Annex.  In addition, X shall remain liable for any amounts owing to Y and remaining unpaid after the application of the amounts so drawn by Y.

 (ii) Upon or at any time after the occurrence or deemed occurrence of an Early Termination Date as a result of a Termination Event and the failure of X to make all payments due and owing to Y in accordance with the terms of this Agreement, Y may draw on any outstanding Letter of Credit in an amount equal to such amounts owing to it upon submission to the Issuer of one or more certificates in accordance with the specific requirements of the Letter of Credit.  X shall remain liable for any amounts owing to Y and remaining unpaid after the application of the amounts so drawn by Y.    

(e)   If a party’s Credit Support Provider shall cause a Letter of Credit to be issued hereunder, the amount otherwise required under such Letter of Credit may at the option of such Credit Support Provider be reduced by the amount of any Letter of Credit established by such party (but only for such time as such party’s Letter of Credit shall be in effect).  In the event a party shall cause a Letter of Credit to be issued hereunder, the amount otherwise required under such Letter of Credit may at the option of such party be reduced by the amount of any Letter of Credit established by such party’s Credit Support Provider (but only for such time as such Credit Support Provider’s Letter of Credit shall be in effect).

(f)   The provisions of this Exhibit A shall constitute an agreement for all purposes of this Agreement and this Annex, including Section 5(a)(iii) of this Agreement.

SCHEDULE 1

IRREVOCABLE STANDBY LETTER OF CREDIT FORMAT
DATE OF ISSUANCE:  			

[Address]

	Re:  Credit No. _______________

	We hereby establish our irrevocable standby letter of credit in your favour for the account of _______________________ (the “Account Party”), for the aggregate amount not exceeding ______________________ United States Dollars ($___________), available to you at sight upon demand at our counters at (Location) on or before the expiration hereof against presentation to us of the following statement, dated and signed by a representative of the beneficiary:

1.  “An Event of Default (as defined in the ISDA Master Agreement dated as of _____________, 19___, between beneficiary and Account Party, as the same may have been amended (the “Master Agreement”)) has occurred and is continuing with respect to Account Party under the Master Agreement.  Wherefore, the undersigned does hereby demand payment of the entire undrawn amount of the Letter of Credit”; or.
2.  “An Early Termination date (as defined in the Master Agreement) has occurred as a result of a Termination Event (as defined in the Master Agreement) and Account Party has failed to make all payments in an aggregate amount of $____________ due and owing to beneficiary in accordance with the terms of the Master Agreement.  Wherefore, the undersigned does hereby demand payment of $_____________.”

	The amount which may be drawn by you under this letter of credit shall be automatically reduced by the amount of any drawings honoured by us.  Multiple drawings are permitted hereunder.

	This Letter of Credit shall expire ________________ (____) days from the date of issuance, but shall automatically extend without amendment for additional _____________ (_____)‑day periods from such expiration date and from subsequent expiration dates, if you, as beneficiary, and the Account Party have not received due notice of our intention not to renew ninety (90) days prior to any such expiration date.

	We hereby agree with you that documents drawn under and in compliance with the terms of this Letter of Credit shall be duly honored upon presentation as specified.

	This Letter of Credit shall be governed by the Uniform Customs and Practices for Documentary Credits, 1993 Revision, International Chamber of Commerce Publication No. 500 (the “UCP”), except to the extent that the terms hereof are inconsistent with the provisions of the UCP, including but not limited to Articles 13(b) and 17 of the UCP, in which case the terms of this Letter of Credit shall govern.

	With respect to Article 13(b) of the UCP, the Issuing Bank shall have a reasonable amount of time, not to exceed three (3) banking days following the date of its receipt of documents from the beneficiary, to examing the documents and determine whether to take up or refuse the documents and to inform the beneficiary accordingly.

	In the event of an Act of God, riot, civil commotion, insurrection, war or any other cause beyond our control that interrupts our business (collectively, an “Interruption Event”) and causes the place for presentation of this Letter of Credit to be closed for business on the last day for presentation, the expiry date of this Letter of Credit will be automatically extended without amendment to a date thirty (30) calendar days after the place for presentation reopens for business.

	This Letter of Credit is irrevocable.

[BANK SIGNATURE]