[B&P Draft 10/11/00 11/3/00]

	CREDIT AGREEMENT

	Between

	ENOVATE L.L.C.
	as the Borrower

	and

	ENRON NORTH AMERICA CORP.
	as the Lender

	$50,000,000

	[effective date]

	TABLE OF CONTENTS

Page

ARTICLE 1.	DEFINITIONS AND ACCOUNTING TERMS	1
1.1	Certain Defined Terms	1
1.2	Computation of Time Periods	7
1.3	Accounting Terms; Preparation of Financials	7
1.4	Interpretation	8 7

ARTICLE 2.	CREDIT FACILITIES	8
2.1	Loan Facility	8
2.2	Fees	9 8
2.3	Interest	9
2.4	Payment Procedures and Computations	10
2.5	Taxes	11

ARTICLE 3.	CONDITIONS PRECEDENT	11
3.1	Conditions Precedent to Initial Extensions of Credit	11
3.2	Conditions Precedent to Each Extension of Credit	11

ARTICLE 4.	REPRESENTATIONS AND WARRANTIES	12
4.1	Organization	12
4.2	Authorization	12
4.3	Enforceability	12
4.4	Absence of Conflicts and Approvals	12
4.5	Investment Companies	12
4.6	Public Utilities	13 12
4.7	Financial Condition	13 12
4.8	Condition of Assets	13
4.9	Litigation	13
4.10	Subsidiaries	14 13
4.11	Laws and Regulations	14 13
4.12	Environmental Compliance	14 13
4.13	ERISA	14
4.14	Taxes	14
4.15	True and Complete Disclosure	14

ARTICLE 5.	COVENANTS	15 14
5.1	Organization	15 14
5.2	Reporting	15 14
5.3	Inspection	16 15
5.4	Use of Proceeds	16 15
 5.5 Financial Covenants 17
5.6	Debt	17 15
5.7	Liens	17 15
5.8	Other Obligations	17 15
5.9	Corporate Transactions	17 15
5.10	Distributions	17 15
5.11	Transactions with Affiliates	18 16
5.12	Insurance	18 16
5.13	Investments; Acquisitions; Capital Expenditures	18 16
5.14	Lines of Business; Distribution	18 16
5.15	Compliance with Laws	18 16
5.16	Environmental Compliance	18 16
5.17	ERISA Compliance	19 16
5.18	Payment of Taxes and Claims	19 17
5.19	Subsidiaries	19 17
5.20	Third Party Payments to Accounts	19 17

ARTICLE 6.	DEFAULT AND REMEDIES	19 17
6.1	Events of Default	19 17
6.2	Termination of Commitments	21 18
6.3	Acceleration of Credit Obligations	21 18
6.4	Default Interest	21 19
6.6	Right of Setoff	21 19
6.5	Actions Under Credit Documents	21 19
6.6	Remedies Cumulative	22 19
6.7	Application of Payments	22 19

ARTICLE 7.	MISCELLANEOUS	22 19
7.1	Expenses	22 19
7.2	Indemnification	22 20
7.3	Modifications, Waivers, and Consents	23 20
7.4	Survival of Agreements	23 20
7.5	Successors and Assigns	23 20
7.6	Notice	23 20
7.7	Choice of Law	23 21
7.8	Arbitration	24 21
7.9	Limitation on Damages	24 21
7.10	Counterparts	24 22
7.11	No Further Agreements	24 22

EXHIBITS

EXHIBITS

Exhibit A - Form of Compliance Certificate
Exhibit B -
Exhibit A	Closing Documents List

CREDIT AGREEMENT

This Credit Agreement dated as of [effective date], is between ENOVATE L.L.C.,  a Delaware limited liability company ("Borrower"), and ENRON NORTH AMERICA CORP., a Delaware an Oregon corporation ("Lender").

The parties hereto agree as follows:

ARTICLE 1.	DEFINITIONS AND ACCOUNTING TERMS.

1.1	Certain Defined Terms.  As used in this Agreement, the following terms shall have the following meanings (unless otherwise indicated, such meanings to be equally applicable to both the singular and plural forms of the terms defined):

"Account" means the Borrower’s operating Account Number _____30426563 with the Account Bank.

"Account Bank" means [Citibank, N.A.]

"Advance" means any principal advanced under the Loan facility created in Section 2.1.

"Affiliate" means, as to any Person, any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person or any Subsidiary of such Person.  The term "control" (including the terms "controlled by" or "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership, by contract, or otherwise.

"Agreement" means this Credit Agreement.

"Applicable Lending Office" means, with respect to the Lender and for any particular type of transaction, the office of the Lender at 1400 Smith Street, Houston, Texas, or such other office of the Lender as the Lender may from time to time specify in writing to the Borrower for such particular type of transaction.

"Borrower" means Enovate L.L.C., a Delaware limited liability company, formerly known as Midwest Energy Hub L.L.C.

"Business Day" means any Monday through Friday during which commercial banks are open for business in New York, New York, Houston, Texas and Chicago, Illinois, and, if the applicable Business Day relates to the date of determination of the LIBOR for the applicable month, on which dealings are carried on in the London interbank market.
"Capital Leases" means, for any Person, any lease of any property by such Person which would, in accordance with generally accepted accounting principles, be required to be classified and accounted for as a capital lease on the balance sheet of such Person.

"Code" means the Internal Revenue Code of 1986, as amended, or any successor statute.

"Commitment" means $50,000,000.
"Compliance Certificate" means a certificate executed by the Managing Member of the Borrower in substantially the form of Exhibit A.

"Credit Documents" means this Agreement, the Note, the Peoples Guaranty, [the Intercreditor Agreement,] and each other agreement, instrument, or document executed at any time in connection with this Agreement.

"Credit Obligations" means all principal, interest, fees, reimbursements, indemnifications, and other amounts now or hereafter owed by the Borrower to the Lender under the Credit Documents and any increases, extensions, and rearrangements of those obligations under any amendments, supplements, and other modifications of the documents and agreements creating those obligations.

"Credit Parties" means the Borrower and Peoples.

"Daily Required Account Balance" has the meaning specified in Section 2.1(b).

"Debt" means, with respect to any Person and as of any date of its determination, without duplication, (a) indebtedness of such Person for borrowed money, (b) obligations of such Person evidenced by notes, bonds, debentures, or other similar instruments, (c) obligations of such Person as lessee under Capital Leases capital leases, (d) obligations of such Person to pay the deferred purchase price of property or services (other than trade debt and current operating liabilities incurred in the ordinary course of business), (e) obligations of such Person under or relating to letters of credit, guaranties, note purchase agreements, investment agreements, and other obligations of such Person which support the repayment of the types of indebtedness and obligations of others referred to in parts (a) through (d) of this definition, and (f) nonrecourse indebtedness or obligations of others of the kinds referred to in parts (a) through (e) of this definition secured by any Lien on or in respect of any property of such Person.  For the purposes of determining the amount of any Debt, the amount of any Debt described in clause (e) of the definition of Debt shall be valued at the full amount of the contingent liability thereunder and the amount of any Debt described in clause (f) shall be valued at the lesser of the amount of the Debt secured or the value of the property securing such Debt.

"Default" means (a) an(a) an Event of Default or (b) any(b) any event or condition which with notice or lapse of time would, unless cured or waived, become an Event of Default.

"Default Rate" means, with respect to any amount due hereunder, a per annum interest rate equal to (a) if such amount is either outstanding principal accruing interest based upon a rate established elsewhere in this Agreement or accrued but unpaid interest thereon, the sum of (i) the interest rate established elsewhere in this Agreement from time to time for such principal amount, plus (ii) [3.00% 2.00% per annum ] or (b) in all other cases, the Prime Rate in effect from time to time [plus 3.00% 2.00% per annum]. 

"Dollars or $" means lawful money of the United States of America.

"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.

"Environmental Law" means all federal, state, and local laws, rules, regulations, ordinances, orders, decisions, agreements, and other requirements now or hereafter in effect relating to the pollution, destruction, loss, or injury of the environment, the presence of any contaminant in the environment, the protection, cleanup, remediation, or restoration of the environment, the creation, handling, transportation, use, or disposal of any waste product in the environment, exposure of persons to any contaminant, waste, or hazardous substance in the environment, and the health and safety of employees in relation to their environment.

"Event of Default" has the meaning specified in Section 6.1 Section 6.1.

"Financial Statements" means the financial statements of the Borrower referred to in Section 4.7(a).

"Hazardous Materials" means any substance or material identified as a hazardous substance pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended and as now or hereafter in effect; any substance or material regulated as a hazardous waste pursuant to the Resource Conservation and Recovery Act of 1976, as amended and as now or hereafter in effect; and any substance or material designated as a hazardous substance or hazardous waste pursuant to any Environmental Law.

"Highest Lawful Rate" means the maximum lawful interest rate, if any, that at any time or from time to time may be contracted for, charged, or received under the laws applicable to the Lender which are presently in effect or, to the extent allowed by law, under such applicable laws which may hereafter be in effect and which allow a higher maximum nonusurious interest rate than applicable laws now allow.

"Intangible Assets" means, with respect to any Person and as of any date of its determination, the goodwill, patents, trade names, trade marks, copyrights, franchises, experimental expense, organization expense, unamortized debt discount and expense, deferred assets (other than prepaid insurance and prepaid taxes), the excess of cost of shares acquired over book value of related assets, and such other assets of such Person as are properly classified as "intangible assets" in accordance with generally accepted accounting principles.

["Intercreditor Agreement" means the Intercreditor and Indemnification Agreement dated as of [effective date], between the Lender and Peoples providing for ratable advances by the parties and the ratable sharing of payments [and for certain agreements with respect to the exercise of remedies.]]

"Interest Period" means the period commencing on the date of this Agreement and ending on December 31, 2000, and each one month period thereafter commencing on the first day of each succeeding month and ending on the last day thereof.

"LLC Agreement " means the Limited Liability Company Agreement of the Borrower dated as of April 26, 2000.

"Lender" means Enron North America Corp., a Delaware corporation. Corp., an Oregon corporation.

	"LIBOR" means, for any Advance and for any Interest Period, an interest rate per annum equal to the rate per annum reported two Business Days prior to the start of the Interest Period, on Telerate Access Service Page 3750 (British Bankers Association Interest Settlement Rates) provided by Telerate Systems Incorporated (or, if such Telerate Page shall cease to be publicly available, as reported by Reuters or any publicly available source of similar market data reasonably selected by the Lender), as the London Interbank Offered Rate for U.S. dollar deposits having a term of one month and in an amount equal to $1,000,000.

"Lien" means any mortgage, lien, pledge, charge, deed of trust, security interest, encumbrance, or other type of preferential arrangement to secure or provide for the payment of any obligation of any Person, whether arising by contract, operation of law, or otherwise (including any title retention for such purposes under any conditional sale agreement, any Capital Lease, or any other title transfer or retention agreement).

"Loan" means the aggregate outstanding principal amount of the Advances.

"Material Adverse Change" means any material adverse change in the business, operations, or financial condition of the Borrower since the date of the Financial Statements or this Agreement, including any change which results in or could reasonably be expected to result in any damages, liabilities, costs, or expenses of $[250,000] $250,000 or greater.

"Maturity Date" means [____], 2001.

	"Monitor" means [___________].

"Note" means the $50,000,000 Promissory Note (Revolving Credit) dated as of [effective date], made by the Borrower payable to the order of the Lender evidencing the indebtedness of the Borrower to the Lender resulting from Advances made by the Lender to the Borrower.

"Peoples" means Peoples Energy Corp., a _____an Illinois corporation

"Peoples Credit Agreement" means the Credit Agreement dated as of [effective date], between the Borrower and Peoples, but without any amendments, modifications, or supplements thereto after the date hereof without the approval of the Lender. 

"Peoples Guaranty" means the Guaranty dated as of [effective date], made by Peoples in favor of the Lender guaranteeing the [Credit Obligations].

"Permitted Debt" means all of the following Debt:

(a)	Debt in the form of the Credit Obligations;

(b)	Debt in the form of "Credit Obligations" as defined in the Peoples Credit Agreement; and

(c)	Loans made by the members of the Borrower pursuant to Section 4.3 of the LLC Agreement[Note to ENA: Do you wish for such member loans to be pari passu with the revolver or subordinated?];[Debt in the form of purchase money indebtedness in an aggregate outstanding amount not to exceed $[________]; provided, however, that the Borrower may not incur such purchase money indebtedness if a Default or Event of Default is continuing or if entering into such purchase money indebtedness would cause a Default or Event of Default; and][Debt in the form of Subordinated Debt approved by the Lender in writing.]

"Permitted Investments" means all of the following investments:

(a)	investments in the form of loans, guaranties, open accounts, and other extensions of trade credit in the ordinary course of business; 

[
(b)	investments in direct obligations of the United States, or investments in any Person which investments are guaranteed by the full faith and credit of the United States, in either case maturing in twelve months or less from the date of acquisition thereof and repurchase agreements having a term of less than one year and fully collateralized by such obligations which are entered into with Lenders or trust companies described in clause (e) below;

(c)	investments in commercial paper and bankers' acceptances maturing in twelve months or less from the date of issuance and which, at the time of acquisition are rated A-2 or better by Standard & Poor's Corporation and P-2 or better by Moody's Investors Services, Inc;

(d)	investments in time deposits or certificates of deposit maturing within one year from the date such investment is made, issued by a Lender or trust company organized under the laws of the United States or any state thereof having capital, surplus, and undivided profits aggregating at least $250,000,000 or a foreign branch thereof and whose long-term certificates of deposit are, at the time of acquisition thereof, rated A-2 by Standard & Poor's Corporation or P-2 by Moody's Investors Services, Inc.;

(e)	investments in money market funds which invest solely in the types of investments described in paragraphs (b) through (d) above.]; and

(f)	investments permitted under the Services Agreement.

"Permitted Liens" means all of the following Liens:  

(a)	Liens securing the Credit Obligations;

(b)	Liens securing the “Credit Obligations” under the Peoples Agreement; and
(c)	[Liens securing purchase money debt permitted under clause (b) of the definition of Permitted Debt, provided that each such Lien secures only the purchase money debt incurred in connection with the acquisition of the assets purchased in connection with the incurrence of such purchase money debt and each such Lien encumbers only the assets purchased or leased in connection with the incurrence of such purchase money debt; and]

(c)	Liens arising in the ordinary course of business which are not incurred in connection with the borrowing of money or the obtaining of advances or credit and which do not materially detract from the value of the Borrower's assets or materially interfere with the Borrower's business, including (i) Liens for taxes, assessments, or other governmental charges or levies which are not yet due and payable or which are being contested in accordance with the terms of this Agreement; (ii) Liens in connection with worker's compensation, unemployment insurance, or other social security, old age pension, or public liability obligations; (iii) Liens in the form of legal or equitable encumbrances deemed to exist by reason of negative pledge covenants and other covenants or undertakings of like nature; (iv) Liens in the form of vendors', carriers', warehousemen's, repairmen's, mechanics', workmen's, materialmen's, construction, or other like Liens arising by operation of law in the ordinary course of business or incident to the construction or improvement of any property in respect of obligations which are not yet due and payable or which are being contested in accordance with this Agreement; and (v) Liens in the form of zoning restrictions, easements, licenses, and other restrictions on the use of real property or minor irregularities in title thereto which do not materially impair the use of such property in the operation of the business of the Borrower or the value of such property.

"Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company, or other entity, or a government or any political subdivision or agency thereof, or any trustee, receiver, custodian, or similar official.

"Plan" means any (a) employee medical benefit plan under Section 3(1) of ERISA, (b) defined benefit plan under Section 3(35) of ERISA, (c) multiemployer plan under Section 4001(a)(3) of ERISA, or (d) account benefit plan defined in Section 3(34) of ERISA.

"Prime Rate" means a fluctuating per annum interest rate in effect from time to time equal to the rate of interest publicly announced by [the Account Bank ] as its prime rate, whether or not the Borrower has notice thereof.

"Related Parties" means, with respect to any Person, such Person's stockholders, members, directors, officers, employees, agents, Affiliates, successors, and assigns, and their respective stockholders, directors, officers, employees, and agents, and, with respect to any Person that is an individual, such Person's family relations and heirs.

"Required Minimum Account Balance" has the meaning specified in Section 2.1(b).

"Services Agreement" means the Services Agreement dated as of _____, 2000, between the Borrower and Enron North America Corp.["Subordinated Debt" means, with respect to the Borrower and as of any date of its determination, any indebtedness for money borrowed for which the Borrower is directly and primarily obligated that arises after the date of this Agreement, does not have any stated maturity before the latest maturity of any of the Credit Obligations, and is subordinated, upon terms satisfactory to the Lender, to the payment and collection of the Credit Obligations.]

"Subsidiary" means, with respect to any Person, any other Person 50% or more of whose outstanding Voting Securities (other than directors' qualifying shares) shall at any time be owned by such Person or one or more Subsidiaries of such Person.
"Then-Due Amount" has the meaning specified in Section 2.1(b).

"Voting Securities" means (a) with respect to any corporation, any capital stock of the corporation having general voting power under ordinary circumstances to elect directors of such corporation, (b) with respect to any partnership, any partnership interest having general voting power under ordinary circumstances to elect the general partner or other management of the partnership, and (c) with respect to any other Person, such ownership interests in such Person having general voting power under ordinary circumstances to elect the management of such Person, in each case irrespective of whether at the time any other class of stock, partnership interests, or other ownership interest might have special voting power or rights by reason of the happening of any contingency.

1.2	Computation of Time Periods.  In this Agreement in the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding."

1.3	Accounting Terms; Preparation of Financials.  All accounting terms, definitions, ratios, and other tests described herein shall be construed in accordance with United States generally accepted accounting principles applied on a consistent basis with those applied in the preparation of the financial statements of the Borrower, except as expressly set forth in this Agreement.  The Borrower shall prepare its respective financial statements in accordance with United States generally accepted accounting principles applied on a consistent basis with those applied in the preparation of the Financial Statements, unless required to conform to changes in United States generally accepted accounting principles or approved by the Lender in writing.

1.4	Interpretation.  Article, Section, Schedule, and Exhibit references are to this Agreement, unless otherwise specified.  All references to instruments, documents, contracts, and agreements are references to such instruments, documents, contracts, and agreements as the same may be amended, supplemented, and otherwise modified from time to time, unless otherwise specified.  The word "including" shall mean "including but not limited to."  The word "or" shall mean "and/or" wherever necessary to prevent interpretation of any provision against the Lender.  Whenever the Borrower has an obligation under this Agreement and the Credit Documents the expense of complying with that obligation shall be an expense of the Borrower unless otherwise specified.  Whenever any determination is to be made by the Lender, such determination shall be in the Lender's sole discretion unless otherwise specified in this Agreement.  If any provision in this Agreement and the Credit Documents is held to be illegal, invalid, not binding, or unenforceable, such provision shall be fully severable and this Agreement and the Credit Documents shall be construed and enforced as if such illegal, invalid, not binding, or unenforceable provision had never comprised a part of this Agreement and the Credit Documents, and the remaining provisions shall remain in full force and effect.  This Agreement and the Credit Documents have been reviewed and negotiated by sophisticated parties with access to legal counsel and shall not be construed against the drafter.  In the event of a conflict between this Agreement and the Credit Documents, this Agreement shall control.

ARTICLE 2.	CREDIT FACILITIES.

2.1	Facility.

(a)	Commitment.	The Lender agrees, on the terms and conditions set forth in this Agreement and for the purposes set forth in Section 5.4, to make Advances to the Borrower from time to time on any Business Day until the Maturity Date provided that the amount of  the Loan shall not exceed the Commitment.  Within the limits expressed in this Agreement and in accordance with the borrowing provisions set forth in this Section 2.1, Advances shall from time to time be borrowed, prepaid, and reborrowed.  The indebtedness of the Borrower to the Lender resulting from the Advances made by the Lender shall be evidenced by the Note.

(b)	Method of Advancing.  If [at the close of business] as of [_____] a.m. (Houston, Texas, time) on any Business Day the [Account Bank] notifies the Lender Monitor determines that the projected cash balance of the Account is less than the aggregate for such day (as determined by the Monitor in its sole discretion) is less than the sum (the “Daily Required Account Balance”) of (i) the aggregate projected amount payable by the Borrower [on the immediately succeeding Business Day] for such day (as determined by the Monitor in its sole discretion) with respect to the obligations described in Section 5.4, as rounded up to the nearest $100.00 (the "Then-Due Amount"), and provided $1,000 and (ii) the Required Minimum Account Balance, the Monitor shall promptly notify the Borrower and the Lender of the amount of such shortfall.  Provided that all conditions precedent to the making of an Advance hereunder are satisfied, the Borrower shall be deemed to have requested an Advance, and the Lender shall make an Advance to the Borrower in an amount such that following such Advance and a concurrent equal advance by Peoples under the Peoples Credit Agreement, the balance of the Account is equal to the Then-Due Amount, in an amount equal to the Lender’s ratable share of such shortfall, unless such an Advance would violate the limitations set forth in paragraph (a) above, in which case such Advance shall be limited to and made in the greatest amount available that would not violate such limitations.  Subject to such terms, the Lender shall make such Advance to the Borrower as of the close of business on such date [_____] a.m. (Houston, Texas, time) on the Business Day immediately succeeding such date, in immediately available funds, at the Account.

(c)	Prepayment. If [at the close of business] as of [_____] a.m. (Houston, Texas, time) on any Business Day the Monitor determines that the projected cash balance of the Account is greater than [$20,000] (after giving effect to payment of the Then-Due Amount), the for such day (as determined by the Monitor in its sole discretion) exceeds the Daily Required Account Balance for such day by greater than $100,000, the Monitor shall promptly notify the Borrower and the Lender of the amount of such excess.  The Borrower shall cause the Account Bank to apply funds from the Account in excess of the Then-Due Amount, to the extent of such excess as rounded down to the nearest $1,000, to the prepayment of the Loan, ratably with the concurrent prepayment of the loan under the Peoples Credit Agreement, such application to be made as of the close of business on[_____] a.m. (Houston, Texas, time) on the Business Day immediately succeeding such date.

(d)	Repayment.  The Borrower shall pay to the Lender the outstanding amount of the Loan on the Maturity Date.

2.2	Fees.

(a)	Commitment Fee.  The Borrower shall pay to the Lender a commitment fee equal to [___]% per annum on the average daily amount by which the Commitment exceeds the amount of the Loan.  The commitment fee shall be due and payable quarterly in arrears on the last day of each calendar quarter and on the Maturity Date.

(b)	[Upfront Fee.] [Note to ENA: Will there be an upfront fee?]

2.3	Interest. 

		(a)	The Loan shall, subject to the provisions of Section 2.3(b), bear interest during each Interest Period at a per annum interest rate equal to the Prime Rate sum of the LIBOR for such Interest Period [plus ______%] per annum based upon a 365/366 360 day year for the actual number of days elapsed.  The Borrower shall pay to the Lender all accrued but unpaid interest on the last day of each calendar quarter, when required upon prepayment as specified elsewhere in this Agreement, Interest Period and on the Maturity Date.

		(b)	If the Lender determines that quotations of interest rates for the relevant deposits referred to in the definition of "LIBOR" are not being provided, and as a result thereof the Lender is unable to determine the rate of interest referred to in the definition of "LIBOR,” then the Loan shall bear interest based upon the Prime Rate as of the end of each applicable Interest Period, and shall bear interest at the Prime Rate thereafter until the first day of the first Interest Period beginning after the necessary quotations are again provided.

(c)(a)	Prevention of Usury.

(i)	If the effective rate of interest contracted for by the Lender with the Borrower under the Credit Documents, including the stated rates of interest contracted for hereunder and any other amounts contracted for under the Credit Documents which are deemed to be interest, at any time exceeds the Highest Lawful Rate, then the outstanding principal amount of the loans made by the Lender to the Borrower hereunder shall bear interest at a rate which would make the effective rate of interest on the loans made by the Lender to the Borrower under the Credit Documents equal the Highest Lawful Rate until the difference between the amounts which would have been due by the Borrower to the Lender at the stated rates and the amounts which were due by the Borrower to the Lender at the Highest Lawful Rate (such difference being the "Lost Interest") has been recaptured by the Lender.  If, when the loans made hereunder are repaid in full, the Lost Interest has not been fully recaptured by the Lender pursuant to the preceding sentence, then, to the extent permitted by law, the interest rates charged by the Lender to the Borrower under Sections 2.3 and 6.4 hereunder shall be retroactively increased such that the effective rate of interest on the loans made by the Lender to the Borrower under the Credit Documents was at the Highest Lawful Rate since the effectiveness of this Agreement to the extent necessary to recapture the Lost Interest not recaptured pursuant to the preceding sentence and, to the extent allowed by law, the Borrower shall pay to the Lender the amount of the Lost Interest remaining to be recaptured by the Lender.

(ii)	In calculating all sums paid or agreed to be paid to the Lender by the Borrower for the use, forbearance, or detention of money under the Credit Documents, such amounts shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread in equal parts throughout the term of the Credit Documents.

(iii)	NOTWITHSTANDING THE FOREGOING OR ANY OTHER TERM IN THIS AGREEMENT AND THE CREDIT DOCUMENTS TO THE CONTRARY, it is the intention of the Lender and the Borrower to conform strictly to any applicable usury laws.  Accordingly, if the Lender contracts for, charges, or receives any consideration from the Borrower which constitutes interest in excess of the Highest Lawful Rate, then any such excess shall be canceled automatically and, if previously paid, shall at the Lender's option be applied to the outstanding amount of the loans made hereunder by the Lender to the Borrower or be refunded to the Borrower.

2.4	Payment Procedures and Computations.

(a)		Payment Procedures.  Time is of the essence in this Agreement and the Credit Documents.  All payment hereunder shall be made in Dollars.  The Borrower shall make each payment under this Agreement and under the Note (other than prepayments which shall be made in accordance with Section 2.1(c)) not later than 2:00 p.m. (local time at the Applicable Lending Office) on the day when due to the Lender at its Applicable Lending Office in immediately available funds.  All payments by the Borrower hereunder shall be made without any offset, abatement, withholding, or reduction.  
(b)	Authority to Charge Accounts. The Lender, if and to the extent payment owed to the Lender is not made when due, may charge from time to time against any account of the Borrower with the Lender any amount so due. The Lender agrees promptly to notify the Borrower after any such charge and application made by the Lender provided that the failure to give such notice shall not affect the validity of such charge and application. 

(b)		Interest and Fees.  Unless expressly provided for in this Agreement, (i) all computations of interest based on the LIBOR shall be made on the basis of a 360 day year, (ii) all computations of interest based on the Prime Rate shall be made on the basis of a 365/366 day year, as the case may be, and (ii)(iii) all computations of fees shall be made on the basis of a 360 day year, in each case for the actual number of days (including the first day, but excluding the last day) occurring in the period for which such interest or fees are payable.  Each determination by the Lender of an interest rate or fee shall be conclusive and binding for all purposes, absent manifest error. 

(c)		Payment Dates.  Whenever any payment shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest or fees, as the case may be.  If the time for payment for an amount payable is not specified in this Agreement or in any other Credit Document, the payment shall be due and payable on demand by the Lender. 

(d)		Ratable Repayments. All Advancing and Payments.  All Advances agreed to be made by the Lender under Section 2.1 hereof shall be made ratably with the corresponding advances agreed to be made by Peoples under Section 2.1 of the Peoples Credit Agreement.  In addition, prepayments and repayments of principal due under this Agreement and under the Peoples Credit Agreement and all payments of interest and fees due under this Agreement and the Peoples Credit Agreement shall be made ratably to each of the Lender and Peoples so that each of the Lender and Peoples receives an equal amount for payment of the Borrower’s obligations to such Person under its respective credit agreement with the Borrower.  In the event the payments are not made ratably by the Borrower or if either of the Lender or Peoples should receive any payment against the Borrower’s obligations under this Agreement or the Peoples Credit Agreement, as applicable, in excess of the ratable payment received by the other Person (whether by realization upon security, exercise of the right of setoff, counterclaim or cross action, enforcement of any right under this Agreement or the Peoples Credit Agreement, or otherwise), then the Person receiving less than its ratable share of the applicable payment (the "underpaid lender") shall sell to the other Person (the "overpaid lender"), and the underpaid lender shall purchase from the overpaid lender, for cash without recourse, such payments in the obligations of the Borrower to the underpaid lender as shall result in a ratable sharing of the payments received by the other Person; provided, that if all or any portion of any excess payment is thereafter recovered from the overpaid lender, such purchases of payment obligations of the Borrower shall be rescinded and the purchase price restored to the extent of such recovery.

2.5	Taxes. The Borrower agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges, or similar levies which arise from any payment made or from the execution, delivery, or registration of, or otherwise with respect to, this Agreement or the other Credit Documents.

ARTICLE 3.	CONDITIONS PRECEDENT.

3.1	Conditions Precedent to Initial Extension of Credit.  The obligation of the Lender to make the initial Advance shall be subject to the condition precedent that the Borrower shall have delivered or shall have caused to be delivered the documents and other items listed on Exhibit B, together with any other documents requested by the Lender to document the agreements and intent of the Credit Documents, each in form and with substance satisfactory to the Lender.

3.2	Conditions Precedent to Each Extension of Credit.  The obligation of the Lender to make any extension of credit under this Agreement shall be subject to the further conditions precedent that: 

(a)	Representations and Warranties.  As of the date of the making of any extension of credit hereunder, the representations and warranties contained in this Agreement shall be true and correct in all material respects as of such date (and the Borrower's deemed request for the making of any extension of credit hereunder when the balance of the Account is less than the Then-Due Amount pursuant to Section 2.1(b) shall be deemed to be a restatement, representation, and additional warranty of the representations and warranties contained in this Agreement);

(b)	Default.  As of the date of the making of any extension of credit hereunder, there shall exist no Default or Event of Default, and the making of the extension of credit would not cause or be reasonably expected to cause a Default or Event of Default; and

(c)	Material Adverse Change.  There shall not have occurred any Material Adverse Change.

ARTICLE 4.	REPRESENTATIONS AND WARRANTIES.  The Borrower represents and warrants to the Lender, and with each deemed request for any extension of credit hereunder when the balance of the Account is less than the Then-Due Amount pursuant to Section 2.1(b), again represents and warrants to the Lender, as follows:  

4.1	Organization.  As of the date of this Agreement, the Borrower is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization and is duly licensed, qualified to do business, and in good standing in each jurisdiction in which it owns property or conducts operations and which requires such licensing or qualification and where failure to be so licensed, qualified, or in good standing could reasonably be expected to cause a Material Adverse Change.

4.2	Authorization.  The execution, delivery, and performance by the Borrower of the Credit Documents to which it is a party and the consummation of the transactions contemplated thereby (a) do not contravene the organizational documents of the Borrower, (b) have been duly authorized by all necessary corporate action of the Borrower, and (c) are within its corporate powers.

4.3	Enforceability.  Each Credit Document to which the Borrower is a party has been duly executed and delivered by the Borrower and constitutes the legal, valid, and binding obligation of the Borrower, enforceable against the Borrower in accordance with such Credit Document's terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, or similar laws at the time in effect affecting the rights of creditors generally and subject to the availability of equitable remedies.

4.4	Absence of Conflicts and Approvals.   The execution, delivery, and performance by the Borrower of the Credit Documents to which it is a party and the consummation of the transactions contemplated thereby (a) do not result in any violation or breach of any provisions of, or constitute a default under, any note, indenture, credit agreement, security agreement, credit support agreement, or other similar agreement to which the Borrower is a party or any other material contract or agreement to which the Borrower is a party, (b) do not violate any law or regulation binding on or affecting the Borrower, (c) do not require any authorization, approval, or other action by, or any notice to or filing with, any governmental authority, and (d) do not result in or require the creation or imposition of any Lien prohibited by this Agreement.

4.5	Investment Companies.  Neither the Borrower nor any Affiliate thereof is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended.

4.6	Public Utilities.  Assuming that either (a) none of Enron Corp., Peoples, or any of their Subsidiaries is a "holding company" or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended, or (b) such Persons are exempt from regulation thereunder, neither the Borrower nor any Affiliate thereof is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended, or such Persons are exempt from regulation thereunder. Neither the Borrower [nor any Affiliate thereof] is The Borrower is not a regulated public utility.

4.7	Financial Condition.

(a)		The Borrower has delivered to the Lender the financial statements of the Borrower dated as of [June September 30, 2000], including therein the balance sheet of the Borrower as of such date and the statements of income, members' equity, and cash flows for the Borrower for the period ending on such date.  These financial statements are accurate and complete in all material respects and present fairly the financial condition of the Borrower and as of such date in accordance with generally accepted accounting principles.

(b)		As of the dates of the Financial Statements, there was no material contingent obligations, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses of the Borrower, except as disclosed in the Financial Statements, and adequate reserves for such items have been made in accordance with generally accepted accounting principles.  No Material Adverse Change has occurred.  No Default exists.

4.8	Condition of Assets.  The Borrower has good and indefeasible title to all of its owned property and valid leasehold rights in all of its leased property, as reflected in the financial statements most recently provided to the Lender,  free and clear of all Liens except Permitted Liens.  The Borrower possesses all permits, licenses, patents, patent rights or licenses, trademarks, trademark rights, trade names rights, and copyrights which are useful in the conduct of its business and which the failure to possess could reasonably be expected to cause a Material Adverse Change.  The material properties used or to be used in the continuing its operations are in good repair, working order, and condition, normal wear and tear excepted.  The properties of the Borrower have not been adversely affected as a result of any fire, explosion, earthquake, flood, drought, windstorm, accident, strike or other labor disturbance, embargo, requisition or taking of property or cancellation of contracts, permits, or concessions by a governmental authority, riot, activities of armed forces, or acts of God or of any public enemy in any manner which could reasonably be expected to cause a Material Adverse Change.

4.9	Litigation.  There are no actions, suits, or proceedings pending or, to the knowledge of the Borrower, threatened against the Borrower at law, in equity, or in admiralty, or by or before any governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, or any arbitrator which could reasonably be expected to cause a Material Adverse Change.

4.10	Subsidiaries. As of the date of this Agreement, the Borrower has no Subsidiaries.

4.11	Laws and Regulations. The Borrower has been and is in compliance with all federal, state, and local laws and regulations which are applicable to its operations and property and which the failure to comply with could reasonably be expected to cause a Material Adverse Change.

4.12	Environmental Compliance.  The Borrower (a) has been and is in compliance with all Environmental Laws and has obtained and is in compliance with all related permits necessary for the ownership and operation of its properties unless the failure to be in compliance could not reasonably be expected to cause a Material Adverse Change, (b) has never received notice of and has never been investigated for any violation or alleged violation of any Environmental Law in connection with its presently or previously owned properties which threaten action or suggest liabilities which could reasonably be expected to cause a Material Adverse Change, (c) does not and has not created, handled, transported, used, or disposed of any Hazardous Materials on or about its properties (nor have the its properties been used for those purposes) except in compliance with all Environmental Laws and related permits, (d) has never been responsible for the release of any Hazardous Materials into the environment in connection with the its operations, has not contaminated any properties with Hazardous Materials, and does not and has not owned any properties contaminated by any Hazardous Materials in any manner which could reasonably be expected to cause a Material Adverse Change.

4.13	ERISA.  [The Borrower participates in no Plans or similar employee welfare or benefit plans other than those made available by the Lender under the Services Agreement dated as of _____, 2000, between the Borrower and the Lender.]

4.14	Taxes.  The Borrower has filed all United States federal, state, and local income tax returns and all other domestic and foreign tax returns which are required to be filed by the Borrower and has paid, or provided for the payment before the same became delinquent of, all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower.  The charges, accruals, and reserves on the books of the Borrower in respect of taxes are adequate in accordance with generally accepted accounting principles.

4.15	True and Complete Disclosure.  All factual information furnished by or on behalf of the Borrower in writing to the Lender in connection with the Credit Documents and the transactions contemplated thereby is true and accurate in all material respects on the date as of which such information was dated or certified and does not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements contained therein not misleading.  All projections, estimates, and pro forma financial information furnished by the Borrower were prepared on the basis of assumptions, data, information, tests, or conditions believed to be reasonable at the time such projections, estimates, and pro forma financial information were furnished.

ARTICLE 5.	COVENANTS.  Until the Lender receives irrevocable payment of the Credit Obligations and the commitments of the Lender under this Agreement and each other Credit Document have been terminated, the Borrower shall comply with and cause compliance with the following covenants:

5.1	Organization.  The Borrower shall maintain itself as an entity duly organized and validly existing under the laws of its jurisdiction of organization and be duly licensed, qualified to do business, and in good standing in each jurisdiction in which it owns property, or conducts operations and which requires such licensing or qualification and where failure to be so licensed, qualified, or in good standing could reasonably be expected to cause a Material Adverse Change.

5.2	Reporting.  The Borrower shall furnish to the Lender all of the following:

(a)	[Annual Financial Reports.  As soon as available and in any event not later than 120 days after the end of each fiscal year of the Borrower, (i) a copy of the unaudited annual audit report for such fiscal year for the Borrower, including therein the consolidated balance sheets of the Borrower as of the end of such fiscal year and the consolidated statements of income, members' equity, and cash flows for the Borrower for such fiscal year, setting forth the consolidated financial position and results of the Borrower for such fiscal year and certified, without any qualification or limit of the scope of the examination of matters relevant to the financial statements, by a nationally recognized certified public accounting firm; and (ii) a completed Compliance Certificate duly certified by the Managing Member of the Borrower;];

(d) [Quarterly Financial Reports. As soon as available and in any event not later than 45 days after the end of each fiscal quarter, (i) a copy of the internally prepared consolidated financial statements of the Borrower for such fiscal quarter and for the fiscal year to date period ending on the last day of such fiscal quarter, including therein the consolidated balance sheets of the Borrower as of the end of such fiscal quarter and the consolidated statements of income, and cash flows for such fiscal quarter and for such fiscal year to date period, setting forth the consolidated financial position and results of the Borrower for such fiscal quarter and fiscal year to date period, all in reasonable detail and duly certified by the Managing Member of the Borrower as having been prepared in accordance with generally accepted accounting principles, and (ii) a completed Compliance Certificate duly certified by the Managing Member of the Borrower;] [Note to ENA: What sort of financial information will be available?]

(c)
(b)	Defaults.  Promptly, but in any event within five Business Days after the discovery thereof, a notice of any facts known to the Borrower which constitute a Default, together with a statement of the Managing Member of the Borrower setting forth the details of such facts and the actions which the Borrower has taken and proposes to take with respect thereto; and(d) Litigation. Promptly after the commencement thereof, notice of all actions, suits, and proceedings before any court or governmental department, commission, board, bureau, agency, or instrumentality, domestic or foreign, affecting the Borrower which, if determined adversely, could reasonably be expected to cause a Material Adverse Change;

(e) Material Liabilities. Promptly after acquiring knowledge thereof, notice of the incurrence of any actual or contingent liabilities that could reasonably be expected to cause a Material Adverse Change;

(f) Material Debt Defaults. Promptly after obtaining knowledge thereof, notice of any breach by the Borrower of any agreement or instrument related to Debt of the Borrower if the aggregate amount of such Debt so in breach exceeds [$100,000];

(g) Material Agreement Defaults. Promptly after obtaining knowledge thereof, notice of any breach by the Borrower of any contract or agreement which breach could reasonably be expected to cause a Material Adverse Change;

(h) Material Changes. Promptly after obtaining knowledge thereof, notice of any condition or event not described above of which the Borrower has knowledge, which condition or event could reasonably be expected to cause a Material Adverse Change; and

(i)
(c)	Other Information.  Promptly upon request, such other information respecting the business operations or property of the Borrower, financial or otherwise, as the Lender may from time to time reasonably request.

5.3	Inspection.  The Borrower shall permit the Lender to visit and inspect any of its properties, to examine all of its books of account, records, reports, and other papers(provided that the Lender may inspect such financial materials only if an Event of Default has occurred), to make copies and extracts therefrom, and to discuss the Borrower’s affairs, finances, and accounts with the Borrower’s officers, and employees, and independent public accountants all at such reasonable times and as often as may be reasonably requested provided that the Borrower is given at least one Business Day advance notice thereof and reasonable opportunity to be present when independent public accounts or other third parties are contacted.

5.4	Use of Proceeds.  The proceeds of the Advances shall be used by the Borrower only for payment of its obligations in connection with the provision of the Midstream Services, Balancing Services, Hub Services, and similar services permitted under the LLC Agreement and with respect to its natural gas trading and arbitrage activities, for [payment of interest and fees due under this Agreement and the Peoples Credit Agreement], and for [payment of fees (including NSF fees) charged by the Account Bank in connection with the Account], and not for general corporate or working capital purposes.  The Borrower shall not, directly or indirectly, use any part of such proceeds for any purpose which violates, or is inconsistent with, Regulations T, U, or X of the Board of Governors of the Federal Reserve System.[Note to ENA: Please confirm.]

5.5	Financial Covenants. [Note to ENA: Please provide]

(a) 

(b) 

5.6 Debt.  The Borrower shall not create, assume, incur, suffer to exist, or in any manner become liable, directly, indirectly, or contingently in respect of, any Debt other than Permitted Debt.

[Note to ENA: Please see definition of “Permitted Debt.” What Debt is to be allowed?]

5.7
5.6	Liens.  The Borrower shall not create, assume, incur, or suffer to exist any Lien on any of its real or personal property whether now owned or hereafter acquired, or assign any right to receive its income, except for Permitted Liens.  If the Borrower grants any Lien to Peoples, the Borrower shall grant a ratable Lien to the Lender.

[Note to ENA: Please see definition of “Permitted Liens. ” What Liens are to be allowed?]

5.8
5.7	Other Obligations.  

(a) The Borrower shall not create, incur, assume, or suffer to exist trade payables or other current operating liabilities more than 90 days past due unless the same are being contested in good faith by appropriate proceedings and adequate reserves therefor have been established and reflected in its financial statements in accordance with generally accepted accounting principles.

(b) The Borrower shall not create, incur, assume, or suffer to exist any obligations with respect to unfunded vested benefits under any Plan or deferred compensation agreement.

(c) The Borrower shall not create, incur, assume, or suffer to exist any obligations with respect to guaranties or like assurances of payment or performance other than those incurred in the ordinary course of business and those described in clause (e) of the definition of Debt..

5.9
5.8	Corporate Transactions.  The Borrower shall not (1) merge or consolidate with or be a party to a merger or consolidation with any other Person, or (2) assign, sell, lease, dispose of, or otherwise transfer any assets outside of the ordinary course of business.

5.10
5.9	Distributions.	The Borrower shall not (a) declare or pay any distribution; (b) purchase, redeem, retire, or otherwise acquire for value any membership interest in the Borrower now or hereafter outstanding; or make any distribution of assets to any member of the Borrower as such, whether in cash, assets, or in obligations of the Borrower; (c) allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption, or retirement of, membership interest in the Borrower, or (d) make any other distribution by reduction of capital or otherwise in respect of any membership interests in the Borrower, provided that the Borrower may _______. [Note to ENA: Let’s discuss distributions:  Distributions from any accrued surplus in the Account to be discussed.]

5.11
5.10	Transactions with Affiliates.  The Borrower shall not enter into any transaction directly or indirectly with or for the benefit of an Affiliate except transactions with an Affiliate for the leasing of property, the rendering or receipt of services, or the purchase or sale of inventory or other assets in the ordinary course of business if the monetary or business consideration arising from such a transaction would be substantially as advantageous to it as the monetary or business consideration which it would obtain in a comparable arm's length transaction. contemplated or permitted under the LLC Agreement or the Services Agreement.

5.12
5.11	Insurance.  The Borrower shall maintain insurance with responsible and reputable insurance companies or associations reasonably acceptable to the Lender in such amounts and covering such risks as are usually carried by companies engaged in similar businesses and owning similar properties in the same general areas in which it operate. Without limiting the foregoing, the Borrower shall terminate any type of insurance coverage now in force without establishing contingency plans or self insurance plans acceptable to the Lender. The Borrower shall deliver to the Lender certificates evidencing such policies or copies of such policies at the Lender's request. operates.

5.13
5.12	Investments; Acquisitions; Capital Expenditures.	The Borrower shall not make or hold any direct or indirect investment in any Person, including capital contributions to the Person, investments in the debt or equity securities of the Person, and loans, guaranties, trade credit, or other extensions of credit to the Person, except for Permitted Investments.

[Note to ENA: Please see definition of “Permitted Investments.” What Investments are to be allowed?]

5.14
	5.13	Lines of Business; Distribution.  The Borrower shall change the character of its business as conducted on the date of this Agreement, or engage in any type of business not reasonably related to such business as presently and normally conducted.  

5.15
5.14	Compliance with Laws.  The Borrower shall comply with all federal, state, and local laws and regulations which are applicable to its operations and property unless the noncompliance could not reasonably be expected to cause a Material Adverse Change.

5.16
5.15	Environmental Compliance.  The Borrower shall (a) comply with all Environmental Laws and obtain and comply with all related permits necessary for the ownership and operation of its properties unless the same could not reasonably be expected to cause a Material Adverse Change, (b) promptly disclose to the Lender any notice to or investigation of itself for any violation or alleged violation of any Environmental Law in connection with its presently or previously owned properties, (c) not create, handle, transport, use, or dispose of any Hazardous Materials on or about its properties except in compliance with all Environmental Laws and related permits, and (d) not release any Hazardous Materials into the environment, contaminate any properties with Hazardous Materials, or own properties contaminated by any Hazardous Materials if the same could reasonably be expected to cause a Material Adverse Change.

5.17
5.16	ERISA Compliance.  [The Borrower shall not participate in any Plan or similar employee welfare or benefits plans other than those made available by the Lender under Services Agreement dated as of _______, 2000, between the Borrower and the Lender.]

5.18
5.17	Payment of Taxes and Claims.  The Borrower shall pay and discharge, before the same shall become delinquent, (a) all taxes, assessments, levies, and like charges imposed upon it or upon its income, profits, or property by authorities having competent jurisdiction prior to the date on which penalties attach thereto and (b) all lawful claims which, if unpaid, would by law become a Lien upon its property.

5.19
5.18	Subsidiaries.  The Borrower shall not form or acquire any Subsidiary.

5.20	Third Party Payments to Account.  The Borrower shall instruct all parties to the agreements governing the obligations described in Section 5.4 to remit all payments to be made by such parties under such agreements to the Account.

ARTICLE 6.	DEFAULT AND REMEDIES.

6.1	Events of Default.  The occurrence of any of the following shall be an "Event of Default" for the purposes of this Agreement and the Credit Documents:

(a)		Payment Failure.  The Borrower (i) fails to pay any principal amount when due under this Agreement or (ii) fails to pay any fees, reimbursements, indemnifications, or other amounts due under this Agreement or any other Credit Document, and such failure is not cured within 5 Business Days;

(b)		False Representation.  Any written representation or warranty made by any Credit Party or the Managing Member, the Borrower or any authorized officer thereof in this Agreement or in any other Credit Document proves to have been materially false or erroneous at the time it was made or deemed made;

(c)		Breach of Covenant.  (i) Any breach by the Borrower of any of the covenants contained in Section 5.1, 5.12, 5.14, 5.15, or 5.16 of this Agreement or any other Credit Document, and such breach is not cured within 30 days of the earlier of knowledge of such breach by the Borrower or the receipt of written notice thereof from the Lender, or (ii) any breach by the Borrower of any of the other covenant contained in this Agreement or any other Credit Document;

(d)		Material Debt Default.  (i) Any(i) Any principal, interest, fees, or other amounts due on any Debt of any Credit Party the Borrower is not paid when due, whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise, and such failure is not cured within the applicable grace period, if any, and the aggregate amount of all such Debt so in default exceeds $[250,000] with respect to the Borrower and $[____] with respect to $250,000; (ii) any other Credit Party; (ii) any other event shall occur or condition shall exist under any agreement or instrument relating to any Debt of any Credit Party the Borrower the effect of which is to accelerate or to permit the acceleration of the maturity of any such Debt, whether or not any such Debt is actually accelerated, and the aggregate amount of such Debt so in default exceeds $[250,000] with respect to the Borrower and $[____] with respect to $250,000; or (iii) any other Credit Party; or (iii) any Debt of the Borrower shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled prepayment) prior to the stated maturity thereof, and the aggregate amount of all such Debt so accelerated exceeds $[250,000] with respect to the Borrower and $[____] with respect to any other Credit Party; $250,000;

(e)		Material Agreement Default.  There shall occur any breach by any Credit Party the Borrower of any contract or agreement which breach could reasonably be expected to cause a Material Adverse Change and such breach is not cured within the applicable grace period, if any;

(f)		Adverse Judgment.  The aggregate outstanding amount of unpaid, final judgments against the Borrower not discharged or stayed pending appeal or other court action within 30 days following entry is greater than $[250,000] $250,000; 

(g)		Peoples Credit Agreement.  There shall occur any default or event of default, however denominated, under the Peoples Credit Agreement; 

(h)		Peoples Guaranty.  (i) the Peoples Guaranty shall at any time and for any reason cease to be in full force and effect or shall be contested by Peoples, or Peoples shall deny it has any further liability or obligation thereunder, (ii) any breach by Peoples of any of the covenants contained in Sections 1.1 or 1.2 of the Guaranty, or (iii) or any breach by Peoples of any other covenants contained in the material covenant contained in the Peoples Guaranty or any other Credit Document and such breach is not cured within 30 days following the earlier of knowledge of such breach by Peoples or the receipt of written notice thereof from the Lender; 

(i)		Dissolution of Borrower.  The Borrower shall for any reason dissolve or its members shall have voted or consented to the dissolution of the Borrower; 

(j)		LLC Agreement. The LLC Agreement shall cease for any reason to be in full force and effect; or

(k)		Bankruptcy and Insolvency.  (i) there shall have been filed against any Credit Party or any of such Person's properties, without such Person's consent, any petition or other request for relief seeking an arrangement, receivership, reorganization, liquidation, or similar relief under Bankruptcy or other laws for the relief of debtors and such request for relief (A) remains in effect for 60 or more days, whether or not consecutive, or (B) is approved by a final  nonappealable order, or (ii) any Credit Party consents to or files any petition or other request for relief of the type described in clause (i) above seeking relief from creditors, makes any assignment for the benefit of creditors or other arrangement with creditors, or admits in writing the inability to pay debts as they become due (the occurrence of any of the foregoing in clause (i) or clause (ii) being a "Bankruptcy Event of Default). 
(l)	[Note to ENA: Currently, if the Lender’s affiliate ceases to be a member of the Borrower (e.g. via Peoples’ exercise of the purchase option of the LLC Agreement), it does not by itself constitute an Event of Default. Please confirm.]

6.2	Termination of Commitments.  Upon the occurrence of any Bankruptcy Event of Default, all of the commitments of the Lender hereunder shall terminate.  During the existence of any Event of Default, the Lender may declare by written notice to the Borrower all of the commitments of the Lender hereunder terminated, whereupon the same shall immediately terminate.

6.3	Acceleration of Credit Obligations.  Upon the occurrence of any Bankruptcy Event of Default, the aggregate outstanding principal amount of all loans made hereunder, all accrued interest thereon, and all other Credit Obligations shall immediately and automatically become due and payable.  During the existence of any Event of Default, the Lender may declare by written notice to the Borrower the aggregate outstanding principal amount of all loans made hereunder, all accrued interest thereon, and all other Credit Obligations to be immediately due and payable.  In connection with the foregoing, except for the notice provided for above, the Borrower waives notice of intent to demand, demand, presentment for payment, notice of nonpayment, protest, notice of protest, grace, notice of dishonor, notice of intent to accelerate, notice of acceleration, and all other notices.

6.4	Default Interest.  If any Event of Default exists, the Lender may declare by written notice to the Borrower that the Credit Obligations specified in such notice shall bear interest beginning on the date specified in such notice until paid in full at the applicable Default Rate for such Credit Obligations, and the Borrower shall pay such interest to the Lender upon demand.

6.4	Right of Setoff.  During the existence of an Event of Default, the Lender is hereby authorized at any time, to the fullest extent permitted by law, to set off and apply any indebtedness owed by the Lender to the Borrower against any and all of the obligations of the Borrower under this Agreement and the Credit Documents, irrespective of whether or not the Lender shall have made any demand under this Agreement or the Credit Documents and although such obligations may be contingent and unmatured.  The Lender agrees promptly to notify the Borrower after any such setoff and application made by the Lender provided that the failure to give such notice shall not affect the validity of such setoff and application.

6.5	Actions Under Credit Documents.  Following an Event of Default, the Lender may take any and all actions permitted under the other Credit Documents.

6.6	Remedies Cumulative.  No right, power, or remedy conferred to the Lender in this Agreement and the Credit Documents, or now or hereafter existing at law, in equity, by statute, or otherwise, shall be exclusive, and each such right, power, or remedy shall to the full extent permitted by law be cumulative and in addition to every other such right, power, or remedy.  No course of dealing and no delay in exercising any right, power, or remedy conferred to the Lender in this Agreement and the Credit Documents, or now or hereafter existing at law, in equity, by statute, or otherwise, shall operate as a waiver of or otherwise prejudice any such right, power, or remedy.  No notice to or demand upon the Borrower shall entitle the Borrower to similar notices or demands in the future.

6.7	Application of Payments. Prior to an Event of Default, all payments made hereunder shall be applied to the Credit Obligations as directed by the Borrower, subject to the rules regarding the application of payments to certain Credit Obligations provided for hereunder and in the Credit Documents.  During the existence of an Event of Default, all payments and collections shall be applied to the Credit Obligations in the order determined by the Lender[, subject to the sharing provisions of the Intercreditor Agreement].

ARTICLE 7.	MISCELLANEOUS.

7.1	Expenses.  The Borrower shall pay on demand (a) all reasonable costs and expenses of the Lender in connection with the preparation, execution, delivery, administration, modification, and amendment of this Agreement and the other Credit Documents and (b) all costs and expenses of the Lender in connection with the preservation or enforcement of its respective rights under this Agreement and the other Credit Documents, whether through negotiations, legal proceedings, or otherwise, including in each case fees and expenses of counsel for the Lender.  The provisions of this paragraph shall survive the repayment and termination of the credit provided for under this Agreement and any purported termination of this Agreement which does not expressly refer to this paragraph.

7.2	Indemnification.  The Borrower agrees to protect, defend, indemnify, and hold harmless the Lender and its Related Parties (for the purposes of this Section 7.2, collectively, the "Indemnified Parties") from and against all demands, claims, actions, suits, damages, judgments, fines, penalties, liabilities, and costs and expenses, including costs of attorneys and related costs of experts such as accountants (collectively, the "Indemnified Liabilities"), actually incurred by any Indemnified Party which are related to this Agreement, the Credit Documents, or the transactions contemplated thereunder, INCLUDING ANY INDEMNIFIED LIABILITIES CAUSED BY ANY INDEMNIFIED PARTY'S OWN NEGLIGENCE, but not Indemnified Liabilities which are a result of any Indemnified Party's gross negligence or willful misconduct. The provisions of this paragraph shall survive the repayment and termination of the credit provided for under this Agreement and any purported termination of this Agreement which does not expressly refer to this paragraph.

7.3	Modifications, Waivers, and Consents.  No modification or waiver of any provision of this Agreement or the Note, nor any consent required under this Agreement or the Note, shall be effective unless the same shall be in writing and signed by the party against whom enforcement is sought, and then such modification, waiver, or consent shall be effective only in the specific instance and for the specific purpose for which given.  The Lender shall not modify or waive the provisions of this Agreement without prior written notice to Peoples and, in the case of any modification that would increase or decrease the Lender’s Commitment, modify the Maturity Date, alter any provision of Article 2, or make any covenant more restrictive, without the prior written consent of Peoples, which shall not be unreasonably withheld.

7.4	Survival of Agreements.  All representations, warranties, and covenants of the Borrower in this Agreement and the Note shall survive the execution of this Agreement and the Note and any other document or agreement.

7.5	Successors and Assigns.  This Agreement and the Credit Documents shall bind and inure to the benefit of the Borrower and its respective successors and assigns and the Lender and its respective successors and assigns.  The Borrower may not assign its rights or delegate its duties under this Agreement or the Note.  The Lender may assign its rights and delegate its duties under this Agreement or the Note[, subject to the provisions of the Intercreditor Agreement].

7.6	Notice.  Unless otherwise specified, all notices and other communications provided for in this Agreement and the Note shall be in writing, including telecopy, and delivered or transmitted to the addresses set forth below, or to such other address as shall be designated by the Borrower or the Lender in written notice to the other party.  Notice sent by telecopy shall be deemed to be given and received when receipt of such transmission is acknowledged, and delivered notice shall be deemed to be given and received when receipted for by, or actually received by, an authorized officer of the Borrower or the Lender, as the case may be.

If to the Borrower:

ENOVATE L.L.C.
Attn:  [______] Gregg Penman
[address]
telephone:	[	]
telecopier:	[	]

If to the Lender:

Enron North America Corp.
Attn: [______]
1400 Smith Street
Houston, Texas  77002
telephone:	[	]
telecopier:	[	]

7.7	Choice of Law.  This Agreement and the Note have been prepared, are being executed and delivered, and are intended to be performed in the State of Texas, and the The substantive laws of the State of Texas New York and the applicable federal laws of the United States shall govern the validity, construction, enforcement, and interpretation of this Agreement and the Note (without regard to any applicable conflicts of law). 

7.8	Arbitration.  Any action, dispute, claim, or controversy of any kind arising under the Credit Documents (a "Dispute") shall be resolved by binding arbitration in accordance with the terms hereof.  Any party may, by summary proceedings, bring an action in court to compel arbitration of any Dispute.  Any arbitration shall be administered by the American Arbitration Association (the "AAA") in accordance with the terms of this Section, the Commercial Arbitration Rules of the AAA, and, to the maximum extent applicable, the Federal Arbitration Act.  Judgment on any award rendered by an arbitrator may be entered in any court having jurisdiction.  Any arbitration shall be conducted by one arbitrator.  If the parties fail to designate an arbitrator within ten (10) days after the filing of the Dispute with the AAA, such arbitrator shall be appointed in the manner prescribed by the AAA.  The arbitration proceedings shall be conducted in Houston, Texas[New York, New York], and shall be concluded within 180 days 180 days of the filing of the Dispute with the AAA.  The arbitrator shall be empowered to award sanctions and to take such other actions as he or she deems necessary, to the same extent a judge could impose sanctions or take such other actions pursuant to the Federal Rules of Civil Procedure and applicable law.  No award by the arbitrator shall assess damages of the type excluded below, but may assess actual costs and expenses and interest on unpaid amounts in a manner deemed equitable.  The arbitrator shall make specific written findings of fact and conclusions of law.  The decision of the arbitrator shall be final and binding on each party.

7.9	Limitation on Damages.  EXCEPT AS EXPRESSLY SET FORTH IN THE CREDIT DOCUMENTS, IN NO EVENT SHALL ANY PARTY HERETO BE LIABLE TO ANY OTHER PARTY HERETO FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE, OR EXEMPLARY DAMAGES, INCLUDING WITHOUT LIMITATION, LOST PROFITS OR SAVINGS, REGARDLESS OF THE FORM OF ACTION GIVING RISE TO SUCH A CLAIM FOR SUCH DAMAGES, WHETHER IN CONTRACT OR TORT, INCLUDING NEGLIGENCE, EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 

7.10	Intended Third Party Beneficiary.  The Lender agrees and acknowledges that the provisions of this Agreement which involve the ratable making of Advances, sharing of certain payments, and modifications hereof, are intended to benefit Peoples, and Peoples is an intended third party beneficiary of such provisions of this Agreement.

7.11	Counterparts.  This Agreement may be executed in multiple counterparts which together shall constitute one and the same instrument.

7.11
7.12	No Further Agreements.  THIS WRITTEN AGREEMENT AND THE CREDIT DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

(Signature pages follow.)
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

EXECUTED as of the date first above written.

BORROWER:

ENOVATE L.L.C.
By: Enron MW, LLC, its Managing Member
						By:  Enron North America Corp., its Sole Member

By: 						
Name: 						
Title: 						

LENDER:

ENRON NORTH AMERICA CORP. 

By: 						
Name: 						
Title: 						

1173477

1173477.2

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