IN RE ENRON CORP., (Bankr.N.D.N.Y. 2001)

ARTHUR J. GONZALEZ, U.S. Bankruptcy Judge.

Upon the motion (the " Motion"), dated December 3, 2001, of Enron Corp. (" Enron" or the " Borrower") and its affiliated debtors (such affiliates collectively, the " Guarantors"), each as Debtor and Debtor-in-Possession (all such entities collectively, the " Debtors"), pursuant to sections 105, 361, 362, 363 (c)(2), 364 (c)(1), 364 (c)(2), 364 (c)(3) and 364 (d)(1) of the United States Bankruptcy Code, 11 U.S.C. § 101, et seq. (the " Bankruptcy Code"), and Rules 2002, 4001 and 9014 of the Federal Rules of Bankruptcy Procedure (the " Bankruptcy Rules"), seeking, among other things:

The "affiliated debtors" are all debtors in addition to the Borrower that are, or that in the future may become, the subject of these jointly administered chapter 11 proceedings, including, without limitation: BAM Lease Company, Enron Broadband Services, Inc., Enron Energy Services, Inc., Enron Energy Services, L.L.C., Enron Energy Services Operations, Inc., Enron Energy Marketing Corp., Enron Gas Liquids, Inc., Enron North America Corp., Enron Power Marketing, Inc., ENA Asset Holdings, L.P., Smith Street Land Company, Enron Transportation Services Company, Enron Metals Commodity Corp., PBOG Corp., and at such time, if any, as they may become debtors subject to these chapter 11 proceedings, Transwestern Pipeline Company, Enron Freight Markets Corp., Enron Engineering Construction Co. and Enron Engineering Operational Service Co.

Under the DIP Credit Agreement (as defined below), in certain events, one or more of the affiliated debtors may become a Borrower. In such event, each such affiliated debtor shall be deemed a Borrower thereunder and hereunder.

(1) authorization to obtain post-petition financing (the " Financing"), and for the Guarantors to guaranty the payment of such obligations, up to the principal amount of $1,500,000,000.00 (the actual available principal amount at any time being subject to conditions precedent as set forth in the DIP Credit Agreement), from JP Morgan Chase Bank (" JPMCB") and Citicorp USA, Inc. (" Citicorp"), as co-Administrative Agents, JPMCB as Collateral Agent and Citicorp as Paying Agent (collectively, the " Agents"), acting as Agents for themselves and a syndicate of financial institutions (together with the Agents, the " DIP Lenders") to be arranged by JPMorgan Securities Inc. and Salomon Smith Barney, Inc.;

(2) pursuant to Bankruptcy Rule 4001, that an interim hearing (the " Interim Hearing") on the Motion be held for this Court to consider entry of the proposed interim order annexed to the Motion (the " Interim Order") authorizing the Borrower, on an interim basis, to forthwith borrow or obtain letters of credit from the DIP Lenders under the Documents (as defined below) up to an aggregate of $250,000,000.00;

(3) requesting that this Court schedule a final hearing (the " Final Hearing") to be held within 30 days of the entry of the Interim Order to consider entry of a final order authorizing the balance of the borrowings under the Documents on a final basis, and authorizing the repayment of certain amounts outstanding under the TW Credit

Agreement , all under and as set forth in the Motion and the Documents filed with this Court and as disclosed on the record at the Interim hearing;

Due and appropriate notice under the circumstances of the Motion, of the relief requested therein and of the Interim Hearing having been served by the Debtors upon the twenty largest unsecured creditors of each of the Debtors and the United States Trustee for the Southern District of New York; and

The Interim Hearing having been held on December 3, 2001; and

Upon the record made by the Debtors at the Interim Hearing, and after due deliberation and consideration and sufficient cause appearing therefor;

IT IS HEREBY FOUND, DETERMINED, ORDERED AND ADJUDGED, that:

1. Jurisdiction. This Court has core jurisdiction over these proceedings and the parties and property affected hereby pursuant to 28 U.S.C. § 157 (b) and 1334.

2. Notice. Under the circumstances, the notice given by the Debtors of the Motion and the Interim Hearing constitutes due and sufficient notice thereof

3. Findings Regarding the Financing.

(a) The Debtors have an immediate need to obtain post-petition financing as provided for in the Documents (the " Financing") in order to permit, among other things, the orderly continuation of the operation of their businesses, to maintain business relationships with vendors and suppliers, to make capital expenditures and to satisfy other working capital needs. The ability of the Debtors to obtain sufficient working capital and liquidity through the incurrence of new indebtedness for borrowed money and other financial accommodations is vital to the preservation and maintenance of the going concern values of the Debtors and a successful reorganization of the Debtors.

(b) The Debtors are unable to obtain adequate unsecured credit allowable under section 503 (b)(1) of the Bankruptcy Code as an administrative expense, and a credit facility in the amount and on the terms provided by the Financing is unavailable to the Debtors without the Debtors granting to the Agents and the DIP Lenders (subject to the Carve-Out, as defined below) the Superpriority Claims and the DIP Liens (each as defined below).

(c) The terms of the Financing are fair and reasonable, reflect the Debtors' exercise of prudent business judgment consistent with their fiduciary duty and are supported by reasonably equivalent value and fair consideration.

(d) The Financing has been negotiated in good faith and at arm's-length between the Debtors and the Agents, and any credit extended, letters of credit issued for the account of and loans made to the Debtors by the DIP Lenders pursuant to the Revolving Credit and Guaranty Agreement attached as Exhibit A to the Motion, as such agreement has been modified as of the date hereof (the " DIP Credit Agreement"), and any credit extended in respect of overdrafts referred to in the DIP Credit Agreement, shall be deemed to have been extended by the DIP Lenders in good faith, as that term is used in section 364 (e) of the Bankruptcy Code.

(e) The Debtors have requested immediate entry of this Order pursuant to Bankruptcy Rules 4001(b)(2) and 4001(c)(2). Absent entry of this Order, the Debtors' estates will be immediately and irreparably harmed. Consummation of the Financing in accordance with this Order and the Documents is therefore in the best interest of the Debtors' estates.

4. Authorization of the Financing and the Documents.

(a) The Borrower is hereby authorized to borrow or obtain letters of credit pursuant to the DIP Credit Agreement, and the Guarantors are hereby authorized to guaranty such borrowings, up to an aggregate of $250,000,000, in accordance with the terms of the DIP Credit Agreement, which shall be used for the purpose of providing working capital for the Borrower and the Guarantors. In addition, the Debtors are hereby authorized to incur overdrafts and related liabilities arising from treasury, depository and cash management services or in connection with any automated clearing house fund transfers provided to or for the benefit of the Debtors by JPMCB, Citicorp or any of their affiliates (in addition to the amount of borrowings and letters of credit obtained pursuant to the DIP Credit Agreement).

(b) In furtherance of the foregoing, each Debtor is authorized and directed to do and perform all acts, to make, execute and deliver all instruments and documents (including, without limitation, security agreements, mortgages and financing statements), and to pay all fees, that may be reasonably required or necessary for the Debtors' performance of the Financing, including, without limitation:

(i) the execution, delivery and performance of the Loan Documents (as defined in the DIP Credit Agreement) and any exhibits attached thereto, including, without limitation, the DIP Credit Agreement, the Security and Pledge Agreement (substantially in the forms attached to the Motion), and the mortgages contemplated thereby (collectively, and together with the letter agreement referred to in clause (iv) below, the " Documents"),

(ii) causing the Guarantors (as defined in the DIP Credit Agreement) to execute, deliver and perform the Documents,

(iii) the execution and delivery of one or more amendments to the DIP Credit Agreement for, among other things, the purpose of adding additional financial institutions as DIP Lenders and reallocating the commitments for the Financing among the DIP Lenders in each case in such form as the Debtors, the Agents and the DIP Lenders may agree (it being understood that no further approval of the Court shall be required for amendments to the DIP Credit Agreement that do not shorten the maturity of the extensions of credit thereunder or increase either the commitments or the rate of interest payable thereunder),

(iv) the non-refundable payment to the Agents or the DIP Lenders, as the case may be, of the fees referred to in the DIP Credit Agreement (and in the separate letter agreement dated December 3, 2001 between the Borrower and the Agents referred to in the DIP Credit Agreement) and such Letter of Credit Fees, Commitment Fees and reasonable costs and expenses as may be due from time to time, including, without limitation, fees and disbursements of the professionals retained as provided in the Documents, all as such terms are defined in the Documents, and

(v) performance of all other acts required under or in connection with the Documents.

(c) Upon execution and delivery of the Documents, the Documents shall constitute valid and binding obligations of the Debtors, enforceable against each Debtor party thereto in accordance with their terms. No obligation, payment or transfer under the Documents shall be stayed, restrained, voidable, or recoverable under the Bankruptcy Code or under any applicable law, or subject to any defense, reduction, offset or counterclaim.

5. Superpriority Claims.

(a) Pursuant to section 364 (c)(1) of the Bankruptcy Code, all of the Debtors' obligations and indebtedness arising under or in respect of the Financing and the Documents (including, without limitation, in respect of overdrafts referred to in Section 6.03 (iv) of the DIP Credit Agreement) (the " DIP Obligations") shall constitute obligations of the Debtors with priority over any and all administrative expenses of the kind specified in sections 503 (b) and 507 (b) of the Bankruptcy Code, and over any and all administrative expenses or other claims under sections 105, 326, 328, 506 (c) or 507 (a) of the Bankruptcy Code (the " Superpriority Claims"), subject only in the event of the occurrence of a Default or an Event of Default (each as defined in the DIP Credit Agreement) to the payment of the Carve Out (as hereinafter defined).

(b) For purposes hereof, the " Carve Out" means (i) all fees required to be paid to the Clerk of the Bankruptcy Court and to the Office of the United States Trustee under Section 1930 (a) of title 28 of the United States Code and (ii) an amount not exceeding $12,500,000 in the aggregate, which amount may be used after the occurrence and during the continuance of an Event of Default, to pay fees or expenses incurred by the Borrowers and any statutory committees appointed in the cases (each, a " Committee") in respect of (A) allowances of compensation for services rendered or reimbursement or expenses awarded by the Bankruptcy Court to the Debtors' or any Committee's professionals and (B) the reimbursement of expenses allowed by the Bankruptcy Court incurred by Committee members in the performance of their duties (but excluding fees and expenses of third-party professionals employed by such members); provided, however, that such dollar limitation on fees and disbursements shall not be reduced by the amount of any compensation and reimbursement of expenses paid prior to the occurrence of an Event of Default in respect of which the Carve-Out is invoked or any fees, expenses, indemnities or other amounts paid to the Administrative Agent, the DIP Lenders and their respective attorneys and agents under this Agreement or otherwise; and provided, further, that nothing herein shall be construed to impair the ability of any party to object to any of the fees, expenses, reimbursement or compensation described in clauses (A) and (B) above.

6. DIP Liens. As security for the DIP Obligations, effective upon the date of this Order and without the necessity of the execution by the Debtors of mortgages, security agreements or otherwise, the following security interests and liens are hereby granted to the Agents and the DIP Lenders (all property identified in clauses (a), (b)and (c) below being collectively referred to as the " Collateral," and such security interests and liens being collectively referred to as the " DIP Liens") subject, in the event of the occurrence of a Default or an Event of Default, only to the payment of the Carve-Out:

(a) First Lien on Cash Balances and Unencumbered Property. Pursuant to section 364 (c)(2) of the Bankruptcy Code, the Agents and the DIP Lenders are hereby granted a perfected first priority senior security interest in and lien upon all cash, including, but not limited to, the Excess Cash From Existing Trading Operations (as defined in the DIP Credit Agreement) of the Borrowers and the Guarantors (whether maintained with the Agents or otherwise) and any investment of the funds contained therein, and upon all other pre- and post-petition property of the Debtors, whether existing on the Petition Date or thereafter acquired, that, on or as of the Petition Date is not subject to valid, perfected and non-avoidable liens (collectively, " Unencumbered Property"), including, without limitation, cash collateral, inventory, accounts receivable, other rights to payment whether arising before or after the Filing Date, contracts, property, plant, equipment, general intangibles, documents, instruments, interests in leaseholds, real property, patents, copyrights, trademarks, trade names, other intellectual property, capital stock of subsidiaries, and the proceeds of all the foregoing. Unencumbered Property shall exclude the Debtors' claims and causes of action under sections 502 (d), 544, 545, 547, 548, 549, 550 or 551 of the Bankruptcy Code, or any other avoidance actions under the Bankruptcy Code (collectively, " Avoidance Actions").

(b) Liens Junior to Certain Other Liens. Pursuant to section 364 (c)(3) of the Bankruptcy Code, the Agents and the DIP Lenders are hereby granted a perfected junior priority security interest in and lien upon all pre- and post-petition property of the Debtors, whether now existing or hereafter acquired, that is subject to valid, perfected and unavoidable liens in existence immediately prior to the Petition Date or to valid and unavoidable liens in existence immediately prior to the Petition Date that are perfected subsequent to the Petition Date as permitted by section 546 (b) of the Bankruptcy Code, junior to such valid, perfected and unavoidable liens.

(c) Liens Senior to Certain Other Liens. The DIP Liens shall not be subject or subordinate to (i) any lien or security interest that is avoided and preserved for the benefit of the Debtors and their estates under section 551 of the Bankruptcy Code or (ii) any liens arising after the Petition Date including, without limitation, any liens or security interests granted in favor of any federal, state, municipal, or other governmental unit, commission, board or court for any liability of the Debtors.

7. Protection of DIP Lenders' Rights.

(a) Automatic Stay and Certain Remedies. Subject only to the provisions of the DIP Credit Agreement, the automatic stay provisions of section 362 of the Bankruptcy Code are vacated and modified to the extent necessary to permit the Agents and the DIP Lenders to exercise, upon the occurrence of an Event of Default and the giving of the five business days' prior written notice provided for in the DIP Credit Agreement, all rights and remedies against the Collateral provided for in the Documents (including, without limitation, the right to setoff monies of the Debtors in accounts maintained with the Agents or any DIP Lender). In any hearing after the giving of the aforementioned notice, the only issue that may be raised by any party in opposition thereto shall be whether, in fact, an Event of Default has occurred and is continuing, and the Debtors hereby waive their right to seek reliet including, without limitation, under section 105 of the Bankruptcy Code, to the extent such relief would in any way impair or restrict the rights and remedies of the Agents set forth in this Order or the Documents. In no event shall the Agents be subject to the equitable doctrine of "marshaling" or any similar doctrine with respect to the Collateral.

(b) Distribution of Net Proceeds. The Debtors are authorized and directed to pay to the Agents, for the benefit of the DIP Lenders, any Net Proceeds (as defined in and contemplated by the DIP Credit Agreement).

(c) No exercise of Option. The Debtors shall take all necessary steps to ensure that a subsidiary, Enron Northwest Assets, LLC, does not exercise any of its rights under the Option Agreement dated as of May 7, 2001 with Enron, including, without limitation, the right to purchase any shares of common stock of Portland General Electric Corporation.

8. Perfection of DIP Liens. The Agents and the DIP Lenders that have been granted security interests and liens hereunder shall not be required to file or record financing statements, mortgages, notices of lien or similar instruments in any jurisdiction or take any other action in order to validate and perfect the security interests and liens granted to them pursuant to this Order. If the Agents on behalf of the DIP Lenders shall, in their sole discretion, choose to file such financing statements, mortgages, notices of lien or similar instruments or otherwise confirm perfection of such security interests and liens, the liens and security interests granted herein shall be deemed perfected at the time and on the date of entry of this Order.

9. Preservation of Rights Granted Under the Order.

(a) No claim having a priority superior to or pari passu with that granted by this Order to the Agents and the DIP Lenders shall be granted while any portion of the Financing (or any refinancing thereof) or the commitment thereunder, remains outstanding, and the security interests and liens granted to the Agents on behalf of the DIP Lenders hereunder shall not be (i) subject or junior to any lien or security interest that is avoided and preserved for the benefit of the Debtors' estates under section 551 of the Bankruptcy Code or (ii) subordinated to or made pari passu with any other lien or security interest under section 364 (d) of the Bankruptcy Code or otherwise.

(b) Unless all obligations and indebtedness owing to the Agents and the DIP Lenders under the DIP Credit Agreement shall theretofore have been paid in full, the Debtors shall not seek, and it shall constitute an Event of Default if any of the Debtors seek, or if there is entered, an order dismissing any of the Cases. If an order dismissing any of the Cases under section 1112 of the Bankruptcy Code or otherwise is at any time entered, such order shall provide (in accordance with sections 105 and 349 of the Bankruptcy Code) that (i) the superpriority claims, liens and security interests granted to the Agents and the DIP Lenders pursuant to this Order shall continue in full force and effect and shall maintain their priorities as provided in this Order until all obligations in respect thereof shall have been paid and satisfied in full (and that such superpriority claims, priming liens and replacement liens, shall, notwithstanding such dismissal, remain binding on all parties in interest) and (ii) this Court shall retain jurisdiction, notwithstanding such dismissal, for the purposes of enforcing the claims, liens and security interests referred to in (i) above.

(c) If any or all of the provisions of this Order are hereafter reversed, modified, vacated or stayed, such reversal, stay, modification or vacation shall not affect (i) the validity of any obligation, indebtedness or liability incurred by the Debtors to the DIP Lenders prior to written notice to the Agents of the effective date of such reversal, stay, modification or vacation or (ii) the validity and enforceability of any lien or priority authorized or created hereby or pursuant to the DIP Credit Agreement with respect to any such obligation, indebtedness or liability. Notwithstanding any such reversal, stay, modification or vacation, any indebtedness, obligation or liability incurred by the Debtors to the DIP Lenders prior to the actual receipt of written notice by the Agents of the effective date of such reversal, stay, modification or vacation shall be governed in all respects by the original provisions of this Order, and the Agents and DIP Lenders shall be entitled to all the rights, remedies, privileges and benefits granted in this Order and/or pursuant to the DIP Credit Agreement with respect to all and such indebtedness, obligation or liability.

(d) The obligations of the Debtors under this Order and the Documents shall not be discharged by the entry of an order confirming a plan of reorganization in any of the Cases and, pursuant to section 1141 (d)(4) of the Bankruptcy Code, the Debtors have waived such discharge.

10. Limitation on Use of Financing Proceeds and Collateral.

Notwithstanding anything herein to the contrary, no borrowings, letters of credit, Collateral or the Carve-Out (collectively, the " Designated Assets") may be used to (a) object, contest or raise any defense to, the validity, perfection, priority, extent or enforceability of any amount due under the Documents, or the liens granted under this Order, (b) assert any claims, counterclaims, defenses or causes of action against the Agents or the DIP Lenders or their respective affiliates, (c) prevent, hinder or otherwise delay the Agents' assertion, enforcement or realization on the Collateral in accordance with the Documents or this Order or (d) seek to modify any of the rights granted to the Agents or the DIP Lenders hereunder or under the Documents, in each of the foregoing cases without such parties' prior written consent.

11. Order Governs. In the event of any inconsistency between the provisions of this Order and of the Documents, the provisions of this Order shall govern.

12. Successors and Assigns. The Documents and the provisions of this Order shall be binding upon the Agents, the DIP Lenders and the Debtors and their respective successors and assigns (including any chapter 7 or chapter 11 trustee hereinafter appointed or elected for the estate of any of the Debtors) and inure to the benefit of the Agents, the DIP Lenders and the Debtors and (except with respect to any trustee hereinafter appointed or elected for the estate of any of the Debtors) their respective successors and assigns.

13. Additional Debtors. In the event any affiliate of the Borrower that is not a Debtor on the date of this Order (including, without limitation, Transwestern) shall become a Debtor in cases consolidated with the cases of the Debtors, all provisions of this Order, including, without limitation, those pertaining to the liens and the priority of the Financing, shall automatically and without further action of the Court become applicable to such affiliate and its pre- and post-petition property as a Debtor herein, and, to the extent such affiliate has guaranteed the Financing or granted any liens securing the Financing, or has borrowed since the Borrower's Petition Date any funds from the Borrower, all such Affiliate's obligations in respect of such guaranty and such borrowings shall be deemed secured and shall have priority in respect of such affiliate as Debtor and its pre- and post-petition property identical to the liens and priorities applicable to the Financing.

14. Covenant Addendum and Final Hearing. The Covenant Addendum (as defined in the DIP Credit Agreement), which contains certain additional provisions of the DIP Credit Agreement, shall be filed with the Court no later than 5 calendar days prior to the Final Hearing. The Final Hearing on the Motion shall be held on January 7, 2002 at 2:00 p.m. in Room 523 of the United States Bankruptcy Court, One Bowling Green, New York, New York. The Debtors shall mail copies of the Motion, this Order and the proposed Final Order (a) within five days hereof, to the parties having been given notice of the Interim Hearing, and to any other party that has filed a request for notices with this Court and to any Committee after the same has been appointed, or Committee counsel, if the same shall have been appointed and (b) within seven days hereof, to the twenty largest unsecured creditors of Transwestern. Any party in interest objecting to the relief sought at the Final Hearing shall serve and file written objections; which objections shall be served upon (a) Weil, Gotshal Manges LLP, 767 Fifth Avenue, New York, New York, 10153, Attention: Martin Bienenstock Esq. and Brian S. Rosen (Facsimile: 212-310-8007), Attorneys for the Debtors; (b) Davis, Polk Wardwell, 450 Lexington Avenue, New York, New York 10017, Attention: Donald S. Bernstein, Esq. and Marshall S. Huebner, Esq. (Facsimile: 212-450-3800), Attorneys for JPMCB, as Agent; (c) Shearman Sterling, 599 Lexington Avenue, New York, New York 10022, Attention: Douglas Bartner, Esq. and Fredric Sosnick, Esq. (Facsimile: 212-848-7179), Attorneys for Citicorp, as Agent and (d) the Office of the United States Trustee for the Southern District of New York, and shall be filed with the Clerk of the United States Bankruptcy Court, Southern District of New York, in each case to allow actual receipt by the foregoing no later than January 3, 2002 at 5:00 pm, New York City time.