AMENDMENT TO
AGREEMENT AND PLAN OF MERGER

THIS AMENDMENT (the “Amendment”) dated as of November 26, 2001, is by and among Dynegy Inc., an Illinois corporation (“Dynegy”), Stanford, Inc., a Delaware corporation and wholly owned subsidiary of Dynegy (“Newco”), Sorin, Inc., an Oregon corporation and wholly owned subsidiary of Newco (“Enron Merger Sub”), Badin, Inc., an Illinois corporation and wholly owned subsidiary of Newco (“Dynegy Merger Sub”), and Enron Corp., an Oregon corporation (“Enron”). 
RECITALS

WHEREAS, Dynegy, Newco, Enron Merger Sub, Dynegy Merger Sub and Enron are parties to an Agreement and Plan of Merger dated as of November 9, 2001 (the “Merger Agreement”); 

WHEREAS, Dynegy, Newco, Enron Merger Sub, Dynegy Merger Sub and Enron wish to amend the Merger Agreement pursuant to Section 10.5 thereto, and the respective Boards of Directors of Dynegy, Newco, Enron Merger Sub, Dynegy Merger Sub and Enron have approved and adopted this Amendment; and

WHEREAS, the parties intend that this Amendment be effective only upon the satisfaction of the condition set forth in Section 1 hereof;

NOW, THEREFORE, the parties agree to amend the Merger Agreement as follows:

Section 1.		Condition to Effectiveness of this Amendment.  This Amendment shall become effective only if (i) Enron and/or its subsidiaries receive $500 million in cash substantially on the terms contemplated by the joint press release issued by Enron and Dynegy on November 26, 2001 or on such other terms as Enron and Dynegy reasonable agree (the “Transwestern Funding”) and (ii) Dynegy and Enron receive the consent of Chevron U.S.A. Inc. to the execution of this Amendment for purposes of the Shareholder Agreement dated November 9, 2001 among Dynegy, Enron and Chevron U.S.A. Inc.  This Amendment shall become effective without further act upon receipt of the Transwestern Funding and such consent.  If either of the Transwestern Funding or such consent is not received prior to December 14, 2001, this Amendment shall be null and void and of no effect.
Section 2.		Amendment to Enron Merger Ratio.  The first sentence of Section 4.1(a) of the Merger Agreement is amended and restated in its entirety to read as follows: 
The “Enron Merger Ratio” shall equal 0.12, subject to adjustment as provided in this Section 4.1.
The figure “0.2685” in Recital A to the Merger Agreement shall correspondingly be changed to “0.12”.
Section 3.		Amendments to Section 7.1(f) of the Merger Agreement.  Section 7.1(f) of the Merger Agreement is amended by deleting the text beginning with “in excess of $2.0 billion” and ending with “for all such issuances and sales” and replacing that text with “except as consented to in writing by Dynegy in its sole discretion”.
Section 4.		Consent Pursuant to Section 7.1 of the Merger Agreement.  Pursuant to Section 7.1 of the Merger Agreement, Dynegy hereby consents to Enron’s execution, delivery and performance of the documents providing for the Transwestern Funding and the payment of dividends on the preferred stock constituting part of the Transwestern Funding as provided for therein.
Section 5.		Amendment to the Merger Agreement Relating to the LMP.  Section 8.3 of the Merger Agreement is amended by adding a new subsection (d) to read as follows:
 	(d)	The terms of a comprehensive liability management plan (the “LMP”) (i) dealing with the senior debt, off balance sheet obligations, prepaid liabilities and SFAS 140 liabilities of Enron and its subsidiaries, and (ii) addressing the debt and equity requirements of Newco after the Closing and (iii) containing such other terms as Enron and Dynegy may agree shall have been agreed to by Enron and Enron’s lenders and any other necessary parties, in a manner that enables Newco to havinghave, immediately following the Effective Time, credit ratings no worse than Dynegy’s credit ratings immediately prior to the date of this Amendment, with a stable or positive outlook; the LMP shall be in full force and effect; Enron shall have complied in all material repects with its obligations under the LMP; and any conditions to the effectiveness of the LMP (other than the consummation of the Mergers) shall have been satisfied.
Section 6.		Transition Team.  Promptly after the execution and delivery of this Amendment, Enron and Dynegy shall each designate representatives to a transition committee (the “Transition Committee”).  The Transition Committee shall, to the extent permitted by applicable law, review the actions by Enron (i) permitted under Section 7.1(i) and Section 7.1(n) of the Merger Agreement, (ii) with respect to cash management and working capital, and (iii) with respect to wholesale trading of natural gas and electricity in North America and Europe. 
Section 7.		Amendment to Definition of Enron Material Adverse Effect and Section 5.9(i).  Section 5.9(i) of the Merger Agreement is amended by deleting the text “described in clause (1) of the definition of Enron Material Adverse Effect”.  The parties acknowledge their intent and hereby agree that, for purposes of determining whether an Enron Material Adverse Effect has occurred or whether the representation and warranty in Section 5.9(i) is true and correct:
(a)	the disclosure of any item pursuant to the Enron Disclosure Letter or in any Enron Filed Report shall not affect the interpretation of the last sentence of definition of Enron Material Adverse Effect contained in Section 10.9(c) of the Merger Agreement (dealing with litigation matters) and shall be disregarded with respect to such last sentence; and
(b)	the historical facts disclosed in Enron’s quarterly report on Form 10-Q for the quarter ended September 30, 2001, as filed with the Securities and Exchange Commission on November 19, 2001, but not any forward-looking items or matters disclosed as possibly occuring, likely to occur or that might occur, shall be deemed included in the Enron Disclosure Letter.
Section 8.		Additional Representations of Enron.	 Enron represents and warrants to Dynegy, Newco, Dynegy Merger Sub and Enron Merger Sub that:
(a)	The execution and delivery of this Amendment and the consummation by Enron of the transactions contemplated hereby has been duly authorized by the Board of Directors of Enron by unanimous vote of the directors present.
(b)	On or prior to December 1, 2001, the Board of Directors of Enron will  receive an opinion of The BlackgroupBlackstone Group LP to the effect that, as of the date of this Amendment, the Enron Merger Ratio (as amended by this Amendment) is fair, from a financial point of view, to the holders of Enron Common Stock.  Section 5.17 of the Merger Agreement is hereby amended to reflect the retention of The Blackstone Group LP as a financial advisor to Enron on terms disclosed to Dynegy prior to the execution of this Amendment.
Section 9.		Additional Representations of Dynegy.  Dynegy represents and warrants to Enron that:
(a)	The execution and delivery of this Amendment and the consummation by Dynegy of the transactions contemplated hereby has been duly authorized by the Board of Directors of Dynegy by unanimous vote of the directors present.
(b)	The Board of Directors of Dynegy has received the opinion of Lehman Brothers Inc. to the effect that, as of the date of this Agreement, from a financial point of view the Dynegy Merger Ratio is fair to the holders of Dynegy Class A Common Stock in light of the Enron Merger Ratio (as amended by this Amendment).
Section 10.		Miscellaneous.
(a)	Except as expressly set forth herein, all the provisions of the Merger Agreement are hereby ratified and confirmed by the parties and shall remain in full force and effect.  All references in the Merger Agreement to “this Agreement” shall be read as references to the Merger Agreement, as amended by this Amendment, but references to the date of the Agreement shall remain references to November 9, 2001.
(b)	This Amendment shall be governed by and construed in accordance with the laws of the State of Texas, without regard to its rules of conflicts of laws, except to the extent the laws of the State of Illinois are required to be applicable to the Dynegy Merger or the laws of the State of Oregon are required to be applicable to the Enron Merger. 
(c)	This Amendment may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.  Each counterpart may consist of a number of copies hereof each signed by less than all, but together signed by all of the parties hereto.
(d)	Headings of the Sections of this Amendment are for the convenience of the parties only, and shall be given no substantive or interpretative effect whatsoever.
		IN WITNESS WHEREOF, the parties have executed this Amendment and caused the same to be duly delivered on their behalf on the day and year first written above.

DYNEGY INC.

By:	     					
	Charles L. Watson
	Chairman of the Board and Chief
	Executive Officer

STANFORD, INC.

By:	     					
	Charles L. Watson
	President

SORIN, INC.

By:	     					
	Charles L. Watson	
	President

BADIN, INC.

By:	     					
	Charles L. Watson
	President

ENRON CORP.

By:	                              			
	Kenneth L. Lay
	Chairman of the Board and Chief
	Executive Officer

Document comparison done by DeltaView on Monday, November 26, 2001 11:54:36
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Document 2	pcdocs://HOU03/814785/6 	
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