Subject: National Bank of Canada (NBC)
From: [email-masked]
To: [email-masked], [email-masked]
Cc: [email-masked], [email-masked]
Date: Mon, 26 Nov 2001 12:15:14 -0800 (PST)

Louise and Bill,

As you are aware, NBC has sent us notification of an event of default under the ISDA due to our failure to post collateral (in the form of an LC).  To date, NBC has resisted all of our commercial solutions to this issue.  At the close of business today, our cure period for the event of default will expire, and NBC will be able to draw on the $1.4MM LC posted and terminate the contract. Today we have seen a bit of movement in their position.  They are now willing to accept cash as collateral if Enron will agree to reduce its collateral threshold to some agreed upon amount.  Bill Bonnell, their credit manager, has suggested $4MM as the appropriate level. This would entail Enron posting $3MM in addition to the $500K collateral call for a total of $3.5MM.  I believe we could more than likely negotiate the threshold to $5MM if we are willing to post the cash.  A $5MM level would require an additional posting of $2MM which is what we originally forecasted to try to buy down the position exposure.  As we must have a resolution today to forestall further action on the part of NBC, please advise as to management's willingness to use cash for the purpose of preventing termination of this contract.

Thanks,
Tanya