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DRAFT OF 02/09/2001 08/27/2001

SCHEDULE
to the
MASTER AGREEMENT
(Multicurrency-Cross Border)
dated as of _________________, 2001
between
ENRON NORTH AMERICA CORP., a corporation organized under the law of the State of Delaware (“Party A”), and	CITY OF GLENDALE, a _____________municipal corporation organized under the law of the State of California (“Party B”)
	
Part 1. Termination Provisions.
(a)	“Specified Entity” means in relation to Party A, none; and in relation to Party B, none.
(b)	The “Cross Default” provisions of Section 5(a)(vi) will apply to Party A, and will apply to Party B.
“Threshold Amount” means:  with respect to Party A, U.S. $100,000,000 (or its equivalent in another currency); with respect to Party A’s Credit Support Provider, U.S. $100,000,000 (or its equivalent in another currency); and with respect to Party B, U.S. $10,000,000 (or its equivalent in another currency); provided, that, such Threshold Amount shall apply individually and not collectively with respect to each entity set forth above notwithstanding anything to the contrary set forth in Section 5(a)(vi) of the Master Agreement.
(c)	Section 5(a)(vii) is hereby amended by deleting Subparagraph (6) thereof in its entirety and replacing it with the following:
“(6)(A) seeks or becomes subject to the appointment of any administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for substantially all its assets or (B) in the case of Party B, (i) there is appointed or designated with respect to it any entity such as an organization, board, commission, authority, agency or body to monitor, review, oversee, recommend or declare a financial emergency or similar state of financial distress with respect to it or (ii) there is declared or introduced or proposed for consideration by it or by any legislative or regulatory body with competent jurisdiction over it the existence of a state of financial emergency or similar state of financial distress in respect of it;”
(d)	Section 5(a)(viii) is hereby amended by:  (i) deleting the introductory paragraph in its entirety and replacing it with the following:
“(viii)  Merger Without Assumption.  The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, or reorganizes, incorporates, reincorporates, reconstitutes or reforms into or as, another entity (or, without limiting the foregoing, in the case of Party B, an entity such as an organization, board, commission, authority, agency or body succeeds to the principal functions of, or power and duties granted to, Party B or any Credit Support Provider of Party B) and, at the time of such consolidation, amalgamation, merger, transfer, reorganization, incorporation, reincorporation, reconstitution, reformation or succession:”
(ii) adding in the first line of Subparagraph (1) thereof and in the second line of Subparagraph (2) thereof between the words “surviving” and “or” the words “, reorganized, reincorporated, reconstituted,”, (iii) deleting in the first line of Subparagraph (1) thereof and in the second line of Subparagraph (2) thereof the words “or transferee” and replacing them with the words “transferee or successor”.
(e)	The “Credit Event Upon Merger” provisions of Section 5(b)(iv) as amended below will apply to Party A and to Party B.
(f)	The “Automatic Early Termination” provision of Section 6(a) will not apply to Party A or to Party B.
(g)	Payments on Early Termination.  For the purpose of Section 6(e):  (i) Loss will apply, and (ii) the Second Method will apply.
(h)	“Termination Currency” means United States Dollars.
(i)	Section 5(b)(iv) is hereby amended by (i) adding in the fourth line thereof after the words “to, another entity” the words “and also, in the case of Party B, any board, body, commission, agency or authority succeeds to the principal functions of, and/or the powers and duties granted to, X (or, in the case of Party B, any Credit Support Provider of such party or any applicable Specified Entity of such party), and (ii) adding the following phrase between the closing parenthesis and the semicolon at the end thereof:  “provided, however, that the foregoing action or event shall not constitute a Termination Event (1) if after such action or event such resulting, surviving, or transferee entity (which entity is the successor-in-interest to such party) is directly or indirectly owned or controlled by such party’s Credit Support Provider, if any, and the Credit Support Documents supporting such party’s obligations remain in full force and effect, or (2) so long as in connection with or after such action or event X or its successor or transferee provides (or causes to be provided) to the other party (“Y”) within two Local Business Days of Y’s written demand therefor Eligible Credit Support in an amount satisfactory to Y in its sole discretion.  If such Eligible Credit Support is provided, it shall be in addition to Eligible Credit Support required under the ISDA Credit Support Annex attached hereto as Annex A, but it shall be otherwise administered under Annex A.”
(j)	“Contractual Currency” unless otherwise specified in a Confirmation, shall mean United States Dollars.
Part 2.	Tax Representations.
(a)	Payer Representations.  For the purpose of Section 3(e), Party A and Party B make the following representation:
It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii), or 6(e)) to be made by it to the other party under this Agreement.  In making this representation, it may rely on (i) the accuracy of any representations made by the other party pursuant to Section 3(f), (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii), and (iii) the satisfaction of the agreement of the other party contained in Section 4(d), provided that it shall not be a breach of this representation where reliance is placed on Clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position.
(b)	Payee Representations.  For the purpose of Section 3(f), Party A and Party B make the following representations:
(i)	The following representation applies to Party A:
Party A is a corporation organized under the laws of the State of Delaware.
(ii)	The following representation applies to Party B:
Party B is a municipal corporation organized under the laws of the State of California.
Part 3.	Agreement to Deliver Documents
(a)	Tax forms, documents, or certificates to be delivered are:  United States Internal Revenue Service Form W-9.
(b)	Other documents to be delivered are:
Party required to deliver document	Form/Document/Certificate	Date by which to be delivered	Covered by Section 3(d) Representation	
Party A	Duly executed Credit Support Document specified in Part 4(d)	At execution of this Master Agreement	Yes	
Party A and Party B	Duly executed tax forms, documents, or certificates referenced in Part 3(a) above	At execution of this Master Agreement and as otherwise provided in Part 3(a) above	Yes	
Party A and Party B	Evidence of authority and specimen signatures with respect to the party’s and its Credit Support Provider’s (if any) signatories executing this Agreement or any Credit Support Document	At execution of this Master Agreement	Yes	
Party A	A Certificate certifying (a) resolutions of Party A’s and its Credit Support Provider’s (if any) board of directors  (or other governing body) (i) authorizing this Agreement and the Transactions contemplated hereby (or the Credit Support Document, as the case may be) and (ii) authorizing a specified person or persons to execute and deliver on its behalf this Agreement (or the Credit Support Document, as the case may be) and (b) copies of Party A’s and its Credit Support Provider’s (if any) articles of incorporation and bylaws (or other constituent Documents)	At execution of this Master Agreement	Yes	
Party B	Certified copies of:  (1) the charter, enabling statutes, and constitution or comparable legislation, creating or authorizing Party B; (2) bylaws of Party B; (3) other charter and constituent instruments of Party B; (4) investment policies, guidelines or restrictions of Party B; (5) resolution approving the Transactions contemplated by this Agreement and authorizing a specified person or persons to execute and deliver on behalf of Party B this Agreement, the exhibits, supplements, and attachments hereto, the documents incorporated by reference herein, and the Confirmations hereunder; and (6) amendments to any of the foregoing	At execution of this Master Agreement	Yes	
Party A	Annual Audited Consolidated Financial Statement of Party A’s Credit Support Provider certified by independent public accountants	Promptly following demand by Party B, but in no event later than 120 days after the end of each fiscal year of Party A’s Credit Support Provider if such Financial Statement is not available on “EDGAR” or Party A’s Credit Support Provider’s home page on the World Wide Web at www.enron.com	Yes	
Party A	Quarterly Unaudited Consolidated Financial Statement of Party A’s Credit Support Provider	Promptly following demand by Party B, but in no event later than 60 days after the end of each of the first three fiscal quarters of each fiscal year of Party A’s Credit Support Provider if such Financial Statement is not available on “EDGAR” or Party A’s Credit Support Provider’s home page on the World Wide Web at www.enron.com 	Yes	
Party B	Annual Audited Consolidated Financial Statement of Party B certified by independent public accountants	Promptly following demand by Party A, but in no event later than 120 270 days after the end of each fiscal year of Party B	Yes	
Party B	Quarterly Unaudited Consolidated Financial Statement of Party B	Promptly following demand by Party A, but in no event later than 60 270 days after the end of each of the first three fiscal quarters of each fiscal year of Party B	Yes	
Party B	Legal opinion in form and substance of Attachment 1 hereto	At execution of this Master Agreement	No	
Part 4.  Miscellaneous.
(a)	Addresses for Notices.  Section 12(a) is hereby amended to delete the following phrase from the second and third line thereof:  “(except that a notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system)”.  For the purpose of Section 12(a) of this Agreement:
Address for notices or communications to Party A:

Address: 

Street Address:
(for courier delivery)
	Enron North America Corp.
P.O. Box 4428
Houston, Texas  77210-4428
1400 Smith Street
Houston, Texas  77002
Attn:  Director, Documentation Department	Facsimile No.:  (713) 646-4816
Telephone No.:  (713) 853-3300	
A copy of any notice sent to Party A pursuant to Section 5 or 6 or Annex A must also be sent to (i) Enron Corp., Attention:  Corporate Secretary at the above address and facsimile no. (713) 853-2534, and (ii) Enron North America Corp., Attention:  Assistant General Counsel, Trading Group at the above address and facsimile no. (713) 646-4818.

Address for notices or communications to Party B:

Address: 
Street Address:
(for courier delivery) 
	City of Glendale
_________________________________141 N. Glendale Ave., 4th Level
_________________________________Glendale, California  91206-4496
Attn.: ____________________________ Facsimile No.: Attn.:  Director Public Service	Facsimile No.:  (818) 552-2852
Telephone No.: Telephone No.:  (818) 548-2107	
(b)	Offices; Multibranch Parties.  The provisions of Section 10(a) will be applicable.  For the purpose of Section 10(c):  Party A is not a Multibranch Party and Party B is not a Multibranch Party.
(c)	Calculation Agent.  The Calculation Agent is Party A.
(d)	Credit Support Documents.  Details of any Credit Support Document, each of which is incorporated by reference in, and made part of, this Agreement and each Confirmation (unless provided otherwise in a Confirmation) as if set forth in full in this Agreement or such Confirmation:  (i) Guaranty dated as of the date hereof by Enron Corp. in favor of Party B as beneficiary thereof in the form attached hereto as Exhibit A and (ii) ISDA Credit Support Annex attached hereto as Annex A.
(e)	Credit Support Provider.  (i) Credit Support Provider means in relation to Party A, Enron Corp., and (ii) Credit Support Provider means in relation to Party B, none.
(f)	Netting of Payments.  Section 2(c)(ii) will not apply to all Transactions.
(g)	Governing Law.  This Agreement and each Confirmation will be governed by, and construed, interpreted, and enforced in accordance with, the substantive law of the State of New York (without reference to its choice of law doctrine).
(h)	Jurisdiction.  Section 13(b) is hereby deleted in its entirety and replaced with the following:

	(b)	Agreement To Arbitrate:  Any claim, counterclaim, demand, cause of action, dispute, and controversy arising out of or relating to this Agreement or the relationship established by this Agreement, any provision hereof, the alleged breach thereof, or in any way relating to the subject matter of this Agreement, involving the parties and/or their respective representatives (collectively the “Claims”), even though some or all of such Claims allegedly are extra-contractual in nature, whether such Claims sound in contract, tort, or otherwise, at law or in equity, under state or federal law, whether provided by statute or the common law, for damages or any other relief, shall be resolved by binding arbitration.

Conduct Of The Arbitration, And Authority Of The Arbitrators:  Arbitration shall be governed by the Federal Arbitration Act and conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association.  The validity, construction, and interpretation of this agreement to arbitrate, and all procedural aspects of the arbitration conducted pursuant hereto shall be decided by the arbitrators.  In deciding the substance of the parties’ Claims, the arbitrators shall refer to the Governing Law.  It is agreed that the arbitrators shall have no authority to award treble, exemplary or punitive damages of any type under any circumstances whether or not such damages may be available under state or federal law, or under the Federal Arbitration Act, or under the Commercial Arbitration Rules of the American Arbitration Association, the parties hereby waiving their right, if any, to recover any such damages.

Forum For The Arbitration And Selection Of Arbitrators:  The arbitration proceeding shall be conducted in New York, New York.  Within thirty days of the notice of initiation of the arbitration procedure, each party shall select one arbitrator.  The two arbitrators shall select a third arbitrator.  The third arbitrator shall be a person who has over eight years professional experience in over-the-counter derivative products and who has not previously been employed by either party and does not have a direct or indirect interest in either party or the subject matter of the arbitration.  While the third arbitrator shall be neutral, the two party-appointed arbitrators are not required to be neutral, and it shall not be grounds for removal of either of the two party-appointed arbitrators or for vacating the arbitrators’ award that either of such arbitrators has past or present minimal relationships with the party that appointed such arbitrator.

Confidentiality:  To the fullest extent permitted by law, any arbitration proceeding and the arbitrators award shall be maintained in confidence by the parties.

Part 5.  Other Provisions.
(a)	Conditions Precedent.  The condition precedent set forth in clause (1) of Section 2(a)(iii) shall not apply to payments owed by a party if the other party shall have satisfied in full all its payment obligations under Section 2(a)(i) and shall at the relevant time have no future payment obligations whether absolute or contingent, under Section 2(a)(i).
(b)  Obligations:  General Conditions.  Section 2(a)(iii) is hereby amended by:  (i) deleting in the second line thereof the word “or” and replacing it with the comma; and (ii) inserting in the second line thereof after the words “Potential Event of Default” the words “, or Incipient Illegality”.
(c)  Powers.  Section 3(a)(ii) is hereby amended by (i) inserting in the first line thereof after the word “power” the words “(in the case of Party B, pursuant to the Authorizing Law)”; (ii) deleting in the fifth line thereof after the word “party” the word “and” and replacing it with “, it”; (iii) inserting in the fifth line thereof after the word “action” the words “and has made all necessary determinations and findings”; and (iv) adding in the fifth line thereof after the word “performance” and before the semicolon the words “, the individual(s) executing and delivering this Agreement and any other documentation (including any Credit Support Document) relating to this Agreement to which it is a party or that it is required to deliver are duly empowered and authorized to do so, and it has duly executed and delivered this Agreement and any Credit Support Document to which it is a party”.
(d)	Absence of Certain Events.  Section 3(b) is hereby amended by inserting in the first line thereof after the word “knowledge,” the words “Incipient Illegality (in the case of Party B) or”.
(e)	Representations.  Section 3 is hereby amended by adding at the end thereof the following Subsections (g), (h), (i), (j) and (k):
(g)	Line of Business.  (i) It is entering into this Agreement, including without limitation, any Credit Support Document to which it is a party and each Transaction, in conjunction with its line of business (including financial intermediation services) or the financing of its business; and (ii) with respect to Options (other than weather-related options), it is a producer, processor, commercial user of, or merchant handling, the commodity subject to the Transaction or the products or byproducts thereof, and is entering into each Option Transaction solely for purposes related to its business as such; and (iii) with respect to any weather-related Transactions, it is exposed in the conduct of its business to the risk of variations in weather and is entering into such Transactions to manage or offset such risks.
(h)	Eligible Swap Participant.  It constitutes an “eligible swap participant” as such term is defined in Rule 35.1(b)(2) of the Commodity Futures Trading Commission, 17 C.F.R. § 35.1(b)(2) (1993).
(i)	Customization and Creditworthiness.  The economic terms of this Agreement, any Credit Support Document to which it is a party, and each Transaction have been individually tailored and negotiated by it; the creditworthiness of the other party was a material consideration in its entering into or determining the terms of this Agreement, such Credit Support Document, and such Transaction.
(j)	No Reliance.  In connection with this Agreement, any Credit Support Document to which it is a party, and each Transaction:  (i) it is acting as principal; (ii) the other party is not acting as a fiduciary or financial or investment advisor for it; (iii) it is not relying upon any representations (whether written or oral) of the other party other than the representations expressly set forth in this Agreement and in such Credit Support Document; (iv) it has not been given by the other party (directly or indirectly through any other person) any advice, counsel, assurance, guarantee, or representation whatsoever as to the expected or projected success, profitability, return, performance, result, effect, consequence, or benefit (either legal, regulatory, tax, financial, accounting, or otherwise) of this Agreement, such Credit Support Document, or such Transaction; (v) it has consulted with its own legal, regulatory, tax, business, investment, financial, and accounting advisors to the extent it has deemed necessary, and it has made its own investment, trading, hedging, and other decisions based upon its own judgment and upon any advice from such advisors as it has deemed necessary, and not upon any view expressed by the other party; (vi) its decisions have been the result of arm’s length negotiations between the parties; and (vii) it is entering into this Agreement, such Credit Support Document, and such Transaction with a full understanding of all of the risks hereof and thereof (economic and otherwise), and it is capable of assuming and willing to assume those risks.

(k)	Termination Payments.  Each party acknowledges that, pursuant to the terms of this Agreement (including, without limitation, Section 6(e) hereof), it may owe a payment to the other party upon the designation of an Early Termination Date hereunder, even in the event such Early Termination Date is the result of an Event of Default or Termination Event with respect to such other party. 
(f)	Additional Representations of Party B.  For the purpose of Section 3 of the Agreement, Party B hereby further represents and warrants to Party A (which representations will be deemed to be repeated by Party B at all times until the termination of this Agreement and any Transactions) that:

(i)	Non-Speculation.  This Agreement and each Transaction has been and will be, entered into not for the purpose of speculation but solely in connection with the financing activities of Party B, including, without limitation, increasing the predictability of cash flow, including earnings on invested funds, and otherwise improving Party B’s ability to manage its funds and revenues.

(ii)	No Immunity.  It is not entitled to claim immunity on the grounds of sovereignty or other similar grounds with respect to itself or its revenues or assets (irrespective of their use or intended use) from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) or (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be made subject to in any suit, action or proceedings relating to this Agreement in the courts of any jurisdiction, and no such immunity (whether or not claimed) may be attributed to such party or its revenues or assets.

(iii)	Legal Investment.  This Agreement and each Transaction hereunder do not constitute any kind of investment by Party B that is proscribed by any constitution, charter, law, rule, regulation, investment guideline, restriction or policy, government code, constituent or governing instrument, resolution, guideline, ordinance, order, writ, judgment, decree, charge, or ruling to which Party B (or any of its officials in their respective capacities as such) or its property or revenues is subject.

(iv)	Assets of Party B.  No Affiliate or other person, firm, corporation, entity or association may liquidate, borrow, encumber or otherwise utilize the assets (including without limitation the source of funds) of Party B.

(v)	Organization.  Party B is a state or political subdivision thereof, or an instrumentality, agency or department of either of the foregoing.

(vi)	Investment Policies.  It has clear investment policies, its personnel are fully trained in and knowledgeable of such investment policies, and such investment policies are subject to regular reviews.

(g)	Additional Agreements.  (i) The introductory clause of Section 4 of this Agreement is
hereby amended to read in its entirety as follows:

“4.	Agreements.  Each party agrees with the other (and, in the case of Section 4(f), Party B agrees with Party A) that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party:”

(ii)  Section 4 of this Agreement is hereby amended by adding the following Section (f) thereto:

“(f)	Notice of Incipient Illegality.  If an Incipient Illegality occurs, Party B will, promptly upon becoming aware of it, notify Party A, specifying the nature of that Incipient Illegality and will also give such other information about that Incipient Illegality as the other party may reasonably require.”

(h)	Source of Payments.  Party B agrees that its obligations hereunder are, and until the 
termination of this Agreement pursuant to the terms hereof shall remain, payable solely out of or from [specify source of payments]___________________________________. Electric 552 Fund.

(i)	Nature of Obligations.  The obligations of Party B to make payments to Party A under 
this Agreement and each Transaction (a) are not subject to appropriation or similar action and (b) do not (1) constitute any kind of indebtedness of Party B or (2) create any kind of lien on or security interest in any property or revenues of Party B which, in either case (1) or (2), is proscribed by any constitution, charter, law, rule, regulation, investment guideline, restriction or policy, government code, constituent or governing instrument, resolution, guideline, ordinance, order, writ, judgment, decree, charge, or ruling to which Party B (or any of its officials in their respective capacities as such) or its property or revenues is subject.
(j)	Reference Market-makers.  The definition of “Reference Market-makers” in Section 14 is hereby amended by deleting clause (b) thereof.
(k)	Definitions.  This Agreement, each Confirmation, and each Transaction are subject to the 1991 ISDA Definitions, as such definitions may be amended, supplemented, replaced or modified from time to time (collectively, the “Definitions”), each as published by the International Swaps and Derivatives Association, Inc. (“ISDA”), and will be governed in all respects by the Definitions (except that any references to “Swap Transactions” in the Definitions will be deemed to be references to “Transactions”).  The Definitions are incorporated by reference in, and made part of, this Agreement and each relevant Confirmation as if set forth in full in this Agreement and such Confirmation.  In the event of any inconsistency between the provisions of this Agreement and the Definitions, this Agreement will prevail.
(l)	Procedures for Entering into Transactions.  The parties hereby amend Section 9(e)(ii) by adding the following sentences at the end thereof:  “On or promptly following the Trade Date of a Transaction, Party A will send to Party B a Confirmation.  Party B will promptly thereafter confirm the accuracy of, or request the correction of, such Confirmation.  If any dispute shall arise as to whether an error exists in a Confirmation, the parties shall in good faith make reasonable efforts to resolve the dispute.  If Party B fails to accept or dispute the Confirmation in the manner set forth above within two Local Business Days after it was effectively sent to Party B, the Confirmation shall be deemed to correctly reflect the parties’ agreement on the terms of the Transaction referred to therein, absent manifest error.  The requirement of this Section and elsewhere in this Agreement that the parties exchange Confirmations shall for all purposes be deemed satisfied by a Confirmation sent and an acknowledgment deemed given as provided herein.”
(m)	Recording.  Each party consents to the recording, at any time and from time to time, by the other party of any and all communications between officers or employees of the parties, and waives any further notice of such recording.
(n)	Setoff.  (A) Upon the designation or deemed designation of an Early Termination Date the Non-defaulting Party or the non-Affected Party (in either case, “X”) may, at its option and in its discretion, setoff, against any amounts owed to the Defaulting Party or Affected Party (in either case, “Y”) in Dollars or any other currency by X or any Affiliate of X under this Agreement or otherwise, any amounts owed in Dollars or any other currency by Y to X or any of its Affiliates (irrespective of place of payment or booking office of the obligation) under this Agreement or otherwise.  The obligations of Y and X under this Agreement in respect of such amounts shall be deemed satisfied and discharged to the extent of any such setoff.  For this purpose, the amounts subject to the setoff to the extent necessary may be converted by X into the Termination Currency at the rate of exchange at which X, acting in a reasonable manner and in good faith, would be able to purchase the relevant amount of the currency being converted.  X will give Y notice of any setoff effected under this section as soon as practicable after the setoff is effected provided that failure to give such notice shall not affect the validity of the setoff.  If an obligation is unascertained, X may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained.  Nothing herein shall be effective to create a charge or other security interest.  This setoff provision shall be without prejudice and in addition to any right of setoff, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise).
(B)  Notwithstanding any provision to the contrary contained in this Agreement, the Non-defaulting Party or non-Affected Party, as the case may be, shall not be required to pay to the Defaulting Party or Affected Party any amount under Section 6(e) until the Non-defaulting Party or non-Affected Party receives confirmation satisfactory to it in its reasonable discretion (which may include an opinion of its counsel) that all other obligations of any kind whatsoever (whether pursuant to Specified Indebtedness as defined herein or otherwise) of the Defaulting Party or Affected Party to make any payments to the Non-defaulting Party or non-Affected Party or any of its Affiliates under this Agreement or otherwise which are due and payable as of the Early Termination Date hereof have been fully and finally performed.
(o)	LIMITATION OF LIABILITY.  NO PARTY SHALL BE REQUIRED TO PAY OR BE LIABLE FOR SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL, CONSEQUENTIAL, OR INDIRECT DAMAGES (WHETHER OR NOT ARISING FROM ITS NEGLIGENCE) TO ANY OTHER PARTY; PROVIDED, HOWEVER, THAT NOTHING IN THIS PROVISION SHALL AFFECT THE ENFORCEABILITY OF SECTION 6(e) OF THIS AGREEMENT.  IF AND TO THE EXTENT ANY PAYMENT REQUIRED TO BE MADE PURSUANT TO THIS AGREEMENT IS DEEMED TO CONSTITUTE LIQUIDATED DAMAGES, THE PARTIES ACKNOWLEDGE AND AGREE THAT SUCH DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE AND THAT SUCH PAYMENT IS INTENDED TO BE A REASONABLE AND GENUINE PRE-ESTIMATE AND APPROXIMATION OF THE AMOUNT OF SUCH DAMAGES AND NOT A PENALTY.
(p)	Confidentiality.  The contents of this Agreement and all other documents relating to this Agreement, and any information made available by one party or its Credit Support Provider to the other party or its Credit Support Provider with respect to this Agreement is confidential and shall not be disclosed to any third party (nor shall any public announcement relating to this Agreement be made by either party), except for such information (i) as may become generally available to the public, (ii) as may be required or appropriate in response to any summons, subpoena, or otherwise in connection with any litigation or to comply with any applicable law, order, regulation, ruling, or accounting disclosure rule or standard, (iii) as may be obtained from a non-confidential source that disclosed such information in a manner that did not violate its obligations to the non-disclosing party or its Credit Support Provider in making such disclosure, or (iv) as may be furnished to the disclosing party’s Affiliates, and to each of such person’s auditors, attorneys, advisors or lenders which are required to keep the information that is disclosed in confidence.

(q)	Transfer.  Section 7 is hereby amended by adding the following Subsection (c):

“(c)  Party A may transfer its rights and obligations under this Agreement, in whole but not in part, to any Affiliate so long as the obligations of such Affiliate are guaranteed by Enron Corp., pursuant to a guaranty substantially similar to the one provided on behalf of Party A hereunder, provided that such transfer will not give rise to a Termination Event or an Event of Default.”
(r)	Applicable Rate.  The definition of “Applicable Rate” set forth in Section 14 is hereby amended by adding to the end of Subsection (b) of the definition after the word “Rate” the following provision:  “; provided, however, that if the payee is a Defaulting Party for purposes of Section 6(e), then the rate shall be the Non-default Rate.”
(s)	Severability.  If any term, provision, covenant or condition of this Agreement, or the application thereof to any party or circumstance, shall be held to be invalid or unenforceable (in whole or in part) for any reason, the remaining terms, provisions, covenants, and conditions hereof shall continue in full force and effect as if this Agreement had been executed with the invalid or unenforceable portion eliminated, so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter of this Agreement and the deletion of such portion of this Agreement will not substantially impair the respective benefits or expectations of the parties to this Agreement; provided, however, that this severability provision shall not be applicable if any provision of Section 1, 2, 5 or 6 (or any definition or provision in Section 14 to the extent it relates to, or is used in or in connection with any such Section) shall be so held to be invalid or unenforceable.
(t) 	Existing Transactions.  In the event that the parties have entered into Transactions prior to the date of this Agreement (collectively, the “Prior Transactions”), the parties agree that all such Prior Transactions shall constitute Transactions under and governed by this Agreement.  To the extent of any conflict between the terms and provisions of the Prior Transactions and the terms and provisions of this Agreement, the terms and provisions of this Agreement shall control. 
(u)	Additional Definitions.  Section 14 of the Agreement is hereby amended by adding the following definitions:

(i)	“Authorizing Law” means [specify any statute(s) authorizing Party B to enter into the Swap Agreement and related documents, and to pledge revenues hereunder and thereunder_______________________________.] the Charter of the City of Glendale, Glendale Municipal Code, 1995, Council Motion dated March 6, 2001, Resolution 01-86, dated May 15, 2001.

(ii)	“Incipient Illegality” means (a) the enactment by any legislative body with competent jurisdiction over Party B of legislation which, if adopted as law, would render unlawful (i) the performance by Party B of any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of a Transaction, or the compliance by Party B with any other material provisions of this Agreement relating to such Transaction, or (ii) the performance by Party B or a Credit Support Provider of Party B of any contingent or other obligation which Party B (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction; (b) any assertion in any proceeding, forum or action by a government entity, in respect of Party B, or in respect of any entity organized under the laws of the state in which Party B is located to the effect that performance under this Agreement or similar agreements is unlawful; or (c) the occurrence with respect to Party B or any Credit Support Provider of Party B of any event that constitutes an Illegality.

Part 6.  Additional Provisions For Commodity Derivatives Transactions.

(a)	The 1993 ISDA Commodity Derivatives Definitions, as amended, supplemented, replaced or modified from time to time, (the “Commodity Definitions”) are incorporated by reference in this Agreement and the relevant Confirmations with respect to “Transactions,” as defined by the Commodity Definitions, in commodities, except as otherwise specifically provided in the relevant Confirmation.  All terms used in this Part 6 that are not otherwise defined shall have the meanings given to them in the Commodity Definitions.

(b)	In lieu of Section 7.4(d) of the Commodity Definitions, the “Market Disruption Events” specified in Section 7.4(c)(i), (c)(ii), (c)(iii), (c)(iv), (c)(v) and (c)(viii) of the Commodity Definitions shall apply, except as otherwise specified in the relevant Confirmation.

(c)	Section 7.4(c)(viii) of the Commodity Definitions is hereby amended by the addition of the following at the end thereof:

“For these purposes, a limitation of trading on any Commodity Business Day shall be deemed to be material only if the relevant Exchange establishes limits on the range within which the price of the Futures Contract may fluctuate in the first nearby month and the closing or settlement price of such Futures Contract on such day is at the upper or lower limit of that range.”

(d)	Section 7.5(e) of the Commodity Definitions is hereby deleted.

(e)	“Additional Market Disruption Events” shall apply only if so specified in the relevant Confirmation.

(f)	The following “Disruption Fallbacks” specified in Section 7.5(c) of the Commodity Definitions shall apply, in the following order, except as otherwise specified in the relevant Confirmation:

(i)	“Postponement”, with three (3) Commodity Business Days as the Maximum Days of Disruption;

(ii)	“Fallback Reference Price” (if the relevant parties have specified an alternate Commodity Reference Price in the Confirmation);

(iii)	“Negotiated Fallback” (provided that the reference in Section 7.5(c)(ii) to “fifth Business Day” shall be amended to be “twelfth Business Day”); and

(iv)	The Relevant Price will be determined and calculated as set forth in the definition of “Commodity-Reference Dealers”, however, notwithstanding any reference to the number of Specified Prices in such definition, Party A shall obtain in good faith quotations from two (2) leading dealers in the relevant market and the price for that Pricing Date will be the arithmetic mean of the Specified Prices.

(g)	For purposes of any Transaction in which paper or pulp is the relevant Commodity, the phrase "within 30 calendar days" in line 5 of Section 7.3 of the Commodity Definitions shall be replaced by the phrase "within 40 calendar days."

(h)	For purposes of any Transaction in which the relevant Commodity is traded in a market that is less liquid than other OTC derivatives markets, Party B recognizes that (i) such market is less liquid than other OTC derivatives markets; (ii) it may be more difficult for it to obtain quotations from a marketmaker or other dealer that is not a party to the Transaction and consequently to establish an independent value for the Transaction; (iii) any prices or terms quoted by Party A for entering into, modifying, or terminating a Transaction, although based upon what Party A believes to be a commercially reasonable valuation methodology, may be different than if this market were more mature and liquid; and (iv) any valuations which may be provided by Party A do not necessarily reflect Party A’s internal bookkeeping or theoretical model-based valuations of the Transaction and may reflect other factors, including without limitation the creditworthiness of a counterparty, costs of carry, use of capital, and profit.

EXECUTED effective as of the date first written above.

ENRON NORTH AMERICA CORP.

By:						
Name:						
Title:    	
Date:     						CITY OF GLENDALE

By:						
Name:						
Title:						
Date:     						

ATTACHMENT 1	FORM OF LEGAL OPINION (PARTY B)
ANNEX A	ISDA CREDIT SUPPORT ANNEX, including Paragraph 13 thereto
SCHEDULE 1	IRREVOCABLE TRANSFERABLE STANDBY LETTER OF CREDIT
EXHIBIT A	FORM OF GUARANTY (PARTY A)

ATTACHMENT 1

LEGAL OPINION

[Letterhead of Counterparty’s Outside Legal Counsel]
[Date]
Enron North America Corp.
1400 Smith Street
Houston, Texas  77002
Re:	Master Agreement between Enron North America Corp. (“Enron”) and City of Glendale, California (“Counterparty”)
Ladies and Gentlemen:
We are attorneys admitted to practice law in the State of California (the “Relevant Jurisdiction”), and we are generally familiar with the affairs of Counterparty.  We have examined and are familiar with (i) the documents relating to the creation, authorization, organization, existence, and operation of Counterparty, (ii) the ISDA Master Agreement, dated as of _______________, by and between Counterparty and Enron (together with the Schedule thereto, any other documents incorporated by reference therein or made a part thereof, and any Credit Support Document to which Counterparty is a party, collectively, the “Swap Agreement”), (iii) the Confirmation, dated _________________, by and between Counterparty and Enron (the “Confirmation”) (the Swap Agreement and the Confirmation, collectively, the “Agreement”), (iv) all necessary documentation of Counterparty relating to its authorization, execution, delivery, and performance of the Agreement and any other documentation relating to the Agreement to which it is a party, and (v) such other records, documents, and instruments as we deemed advisable.
Based upon the foregoing, we are of the opinion that:
1.	Counterparty is duly organized, validly existing, and in good standing under the constitution and laws of the Relevant Jurisdiction.
2.	Counterparty has the legal right and power, pursuant to [Name and General Citation of Relevant Act or Statutes] (the “Act”), to execute the Agreement and any other documentation relating to the Agreement to which it is a party, to deliver the Agreement and any other documentation relating to the Agreement that it is required by the Agreement to deliver, and to perform its obligations under the Agreement and any other documentation relating to the Agreement to which it is a party.  All necessary action and all necessary determinations and findings to authorize Counterparty’s execution, delivery, and performance of the Agreement, and any other documentation relating to the Agreement to which it is a party or that it is required by the Agreement to deliver, have been taken and made.  The individual(s) executing and delivering the Agreement, and any other documentation relating to the Agreement to which Counterparty is a party or that it is required under the Agreement to deliver, are duly empowered and authorized to do so.  Counterparty has duly authorized, executed, and delivered the Agreement, and any other documentation relating to the Agreement to which it is a party or that it is required under the Agreement to deliver.
3.	Such execution, delivery, and performance do not violate, conflict with, or constitute a breach or default under, any law applicable to Counterparty, any provision of its constitutional documents, any order or judgment of any court or agency of government applicable to it or any of its assets, or any contractual restriction binding on or affecting it or any of its assets.  Counterparty is not in violation or breach of, or default under, any law applicable to Counterparty, any provision of its constitutional documents, or any order or judgment of any court or agency of government applicable to it or any of its assets, which could adversely affect (i) the Agreement or any other documentation relating to the Agreement to which it is a party or that it is required by the Agreement to deliver, (ii) the legality, validity, binding effect, or enforceability thereof, (iii) the ability of Counterparty to perform its obligations thereunder, or (iv) the financial condition or operations of Counterparty.
4.	All governmental and other consents, approvals, registrations, licenses, or exemptions that are required to have been obtained by Counterparty with respect to the Agreement, or any other documentation relating to the Agreement to which it is a party or that it is required by the Agreement to deliver, have been obtained and are in full force and effect, and all conditions thereof have been complied with.
5.	Under laws of, and the judicial interpretations of courts in, the Relevant Jurisdiction, the governing law, submission to jurisdiction, and waiver of immunities provisions of the Agreement, as applicable would be enforced in accordance with their respective terms, and the substantive law of the State of New York would be applied to the construction and enforcement of the Agreement and any other documentation relating to the Agreement to which Counterparty is a party, if an action for the same were pursued in a state or federal court located in the Relevant Jurisdiction.”
6.	There is not pending or, to our knowledge, threatened against Counterparty (nor to our knowledge is there any basis for), any action, suit, claim, inquiry, investigation, or proceeding at law or in equity or before any court, tribunal, governmental body, agency, official, or arbitrator that is likely to affect the legality, validity, or enforceability against Counterparty of the Agreement, or any other documentation relating to the Agreement to which it is a party, or Counterparty’s ability to perform its obligations under the Agreement or any other documentation relating to the Agreement to which it is a party.
7.	Counterparty is an “eligible swap participant” as defined in the Part 35 Regulations of the U.S. Commodity Futures Trading Commission.
8.	Counterparty is not entitled to claim immunity on the grounds of sovereignty or other similar grounds with respect to itself or its revenues or assets (irrespective of their use or intended use) from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance, or for recovery of property, (iv) attachment of its assets (whether before or after judgment), or (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be made subject to in any suit, action, or proceedings relating to the Agreement in the courts of any jurisdiction, and no such immunity (whether or not claimed) may be attributed to Counterparty or its revenues or assets.
9.	The Agreement and each Transaction thereunder do not constitute any kind of investment by Counterparty that is proscribed by any constitution, charter, law, rule, regulation, investment guideline or restriction, policy, government code, constituent or governing instrument, resolution, ordinance, order, writ, judgment, decree, or ruling to which Counterparty (or any of its officials in his or her respective capacity as such) or its property or revenues is subject.
10.	No person, firm, corporation, entity, or association other than Counterparty may liquidate, borrow, encumber, or otherwise utilize the assets [(including, without limitation, the assets identified in [[track language regarding assets of Party B in Schedule)] of Counterparty.
11.	The execution and delivery by Counterparty of the Agreement, any other documentation relating to the Agreement to which it is a party, and each Confirmation, and the performance by Counterparty of its obligations thereunder, are in furtherance, and not in violation, of the public purposes for which Counterparty was created and organized under the Act and pursuant to the laws of the Relevant Jurisdiction.
12.	The obligations of Counterparty to make payments to Enron under the Agreement and each Transaction (i) are not subject to appropriation or similar action, and (ii) do not (A) constitute any kind of indebtedness of Counterparty or (B) create any kind of lien on or security interest in any property or revenues of Counterparty which, in either case (A) or (B), is proscribed by any constitution, charter, law, rule, regulation, investment guideline or restriction, policy, government code, constituent or governing instrument, resolution, ordinance, order, writ, judgment, decree, or ruling to which Counterparty (or any of its officials in his or her respective capacity as such) or its property or revenues is subject.
13.	Counterparty’s obligations under the Agreement are, and until the termination of this Agreement pursuant to the terms hereof shall remain, [track language regarding source of payments in Schedule].
14.	The execution and delivery of the Agreement, or any of the documentation relating to the Agreement, will not result in the imposition of any tax, duty, or fee on Enron by any governmental or public board, body, agency, or other authority or instrumentality in the Relevant Jurisdiction.
15.	Enron is not (i) required to qualify or obtain any certificate of authority to do business in, or to register or file with, or to obtain any license from, any governmental or public board, body, agency, or other authority or instrumentality in the Relevant Jurisdiction, or (ii) subject to any requirement to make or pay any taxes, duties, or fees, required of foreign entities doing business in the Relevant Jurisdiction, in either case (i) or (ii), solely as a result of executing, delivering, and performing the Agreement, or any other documentation relating to the Agreement to which Enron is a party or that it is required by the Agreement to deliver.
Very truly yours,

DRAFT OF 02/09/2001

PARAGRAPH 13
to the
ISDA CREDIT SUPPORT ANNEX

dated as of _________________, 2001

between
ENRON NORTH AMERICA CORP., a corporation organized under the law of the State of Delaware (“Party A”), and	CITY OF GLENDALE, a _____________municipal corporation organized under the law of the State of California (“Party B”)

Paragraph 13.  Elections and Variables.

(a)	Security Interest for “Obligations”.  The term “Obligations” as used in this Annex includes the following additional obligations:

With respect to Party A:  None.

With respect to Party B:  None.

(b)	Credit Support Obligations.

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

(A) “Delivery Amount” has the meaning specified in Paragraph 3(a).

(B) “Return Amount” has the meaning specified in Paragraph 3(b).

(C) “Credit Support Amount” will mean the higher of (i) the amount calculated as provided in the definition of that term in Paragraph 3 and (ii) the sum of the Pledgor’s Independent Amounts; provided, that, the Credit Support Amount shall be deemed to be zero on any Valuation Date in which there are no Transactions outstanding and Party A and Party B have no obligations, contingent or otherwise, to each other under this Agreement or any Credit Support Document.

(ii)  Eligible Collateral.  The following items will qualify as “Eligible Collateral” for the party specified.

Party A	
Party B	Valuation
Percentage
	
(A)	Cash
	[X]	[X]	100%	
(B)	Negotiable debt obligations issued by the U.S. Treasury Department having an original maturity at issuance of not more than one year (“Government Obligations”)
	[  ]	[  ]	98%	
(C)	Other:	None

(iii)  Other Eligible Support.  The following items will qualify as “Other Eligible Support” for the party specified:

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

(iv)  Thresholds.

(A)  “Independent Amount” means with respect to a party, the amount specified as such for that party in each Confirmation, or if no amount is specified, zero.

(B)  “Threshold” means with respect to Party A, U.S. $20,000,000 and with respect to Party B, U.S. $5,000,000 $15,000,000; provided, however, that the Threshold for a party shall be zero upon the occurrence and during the continuance of a Material Adverse Change or an Event of Default or Potential Event of Default with respect to such party.

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

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

(D)  Rounding.  The Delivery Amount will be rounded up to the nearest integral multiple of U.S. $250,000 and the Return Amount will be rounded down to the nearest integral multiple of U.S. $250,000.

(c)  Valuation and Timing.
(i)  “Valuation Agent” means, for purposes of Paragraph 3, the party making the demand under Paragraph 3; for purposes of Paragraph 4(d), the Secured Party for purposes of calculating the Value of the Substitute Credit Support and Posted Credit Support involved in the substitution; for purposes of Paragraph 5, the Secured Party; and for purposes of Paragraph 6(d), the Secured Party receiving or deemed to receive the Distributions or the Interest Amount, as applicable; provided, however, that in all cases, if an Event of Default or Potential Event of Default or Specified Condition has occurred and is continuing with respect to the party designated as the Valuation Agent, then in such case, and for so long as the Event of Default or Potential Event of Default or Specified Condition continues, the other party shall be the Valuation Agent.

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

(iii)  “Valuation Time” means:

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

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

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

(iv)  “Notification Time” means 10:00 a.m., New York time, on a Local Business Day.

(d)	Conditions Precedent and Secured Party’s Rights and Remedies.  The following Termination Event(s) will be a “Specified Condition” for the party specified (that party being the Affected Party if the Termination Event occurs with respect to that party):

Specified Condition	Party A	Party B
	
Illegality
	[X]	[X]	
Tax Event
	[X]	[X]	
Tax Event Upon Merger
	[X]	[X]	
Credit Event Upon Merger
	[X]	[X]	
Additional Termination Event(s): 
	None	None	

(e)  Substitution.

(i)  “Substitution Date” has the meaning specified in Paragraph 4(d)(ii).

(ii)  Consent.  If specified here as applicable, then the Pledgor must obtain the Secured Party’s consent for any substitution pursuant to Paragraph 4(d):  Inapplicable.

(f)  Dispute Resolution.

(i)  “Resolution Time” means 1:00 p.m., New York time, on the third Local Business Day following the date on which notice of the dispute is given under Paragraph 5.

(ii)  Value.  For the purpose of Paragraphs 5(i)(C) and 5(ii), the Value of Posted Credit Support as of the relevant calculation date will be calculated as follows:

(1)  With respect to cash, the face amount thereof; and

(2)	With respect to any Government Obligations, the sum of (A)(x) the mean of the high bid and low asked prices quoted on such date by two principal market makers of recognized national standing (each a “Principal Market Maker”) for such Government Obligations chosen by the Valuation Agent, or (y) if quotations are not available from two Principal Market Makers for such date, the mean of such high bid and low asked prices as of the day next preceding such date, on which such quotations were available, plus (B) the accrued interest on such Government Obligations (except to the extent Transferred to a party pursuant to any applicable provision of this Annex or included in the applicable price referred to in (A) of this clause (2)) as of such date, multiplied by the applicable Valuation Percentage.

(iii)  Alternative:  The provisions of Paragraph 5 will apply except to the following extent; pending the resolution of a dispute, Transfer of the undisputed Value of Eligible Credit Support or Posted Credit Support involved in the relevant demand will be due as provided in Paragraph 5 if the demand is given by the Notification Time but will be due on the second Local Business Day after the demand if the demand is given after the Notification Time.

(g)	Holding and Using Posted Collateral.

(i)  Eligibility to Hold Posted Collateral; Custodians.  Party A and its Custodian will be entitled to hold Posted Collateral pursuant to Paragraph 6(b); provided that the following conditions applicable to it are satisfied:

(1) Party A is not a Defaulting Party and Party A’s Credit Support Provider has a Credit Rating from S&P and the lowest Credit Rating for Party A’s Credit Support Provider is “BBB-” or higher by S&P.
(2) Posted Collateral may be held only in the following jurisdictions:  Any jurisdiction within the United States.
(3) The Custodian is a Qualified Institution (as defined below), approved by Party B (which approval shall not be unreasonably withheld). The Custodian shall hold the Posted Collateral in a segregated, safekeeping or custody account within the Custodian with the title of such account indicating that the property contained therein is being held as Posted Collateral for the ownership of Party B, subject to the security interest of Party A.

Party B and its Custodian will be entitled to hold Posted Collateral pursuant to Paragraph 6(b); provided that the following conditions applicable to it are satisfied:

(1) Party B is not a Defaulting Party and a Material Adverse Change has not occurred with respect to Party B.

(2) Posted Collateral may be held only in the following jurisdictions:  Any jurisdiction in the United States.
(3) The Custodian is a Qualified Institution, approved by Party A (which approval shall not be unreasonably withheld).  The Custodian shall hold the Posted Collateral in a segregated, safekeeping or custody account within the Custodian with the title of such account indicating that the property contained therein is being held as Posted Collateral for the ownership of Party A, subject to the security interest of Party B.

If a party or its Custodian is not eligible to hold Posted Collateral pursuant to this Section, then it shall be considered a “Downgraded Party” or a “Downgraded Custodian”, as the case may be (as defined in Paragraph 13(g)(ii)) and Posted Collateral shall be maintained in accordance with Paragraph 13(g)(ii).

(ii)  Use of Posted Collateral.

The provisions of Paragraph 6(c) will apply to the parties; provided, however, that if a party or its Custodian is not eligible to hold Posted Collateral pursuant to Paragraph 13(g)(i) (the event that caused it or its Custodian, if any, to be ineligible to hold Posted Collateral shall be a “Credit Rating Event”; if such Credit Rating Event occurs with respect to a party, such party shall be the “Downgraded Party”; and if such Credit Rating Event occurs with respect to a party’s Custodian, such Custodian shall be the “Downgraded Custodian”), then:

(1)  the provisions of Paragraph 6(c) will not apply with respect to the Downgraded Party as the Secured Party for so long as both the Secured Party or its Custodian, if any, remain a Downgraded Party or a Downgraded Custodian, respectively.

(2)  the Downgraded Party shall be required to deliver (or cause the Downgraded Custodian to deliver, as the case may be) not later than the close of business on the second Local Business Day following such Credit Rating Event all Posted Collateral in its possession or held on its behalf to a commercial bank or trust company organized under the law of the United States or a political subdivision thereof, with a Credit Rating of at least “A-” in the case of S&P or “A3” in the case of Moody’s (“Qualified Institution”), approved by the non-Downgraded Party (which approval shall not be unreasonably withheld) to a segregated, safekeeping or custody account (“Collateral Account”) within such Qualified Institution with the title of the Collateral Account indicating that the property contained therein is being held as Posted Collateral for the Downgraded Party; provided, that, if the Credit Rating Event occurs with respect to a party’s Custodian that is holding Posted Collateral on behalf of such party, then such Downgraded Custodian may also deliver such Posted Collateral to such party.  The Qualified Institution shall serve as Custodian with respect to the Posted Collateral in the Collateral Account, and shall hold such Posted Collateral in accordance with the terms of this Annex and for the security interest of the Downgraded Party and, subject to such security interest, for the ownership of the non-Downgraded Party.

(3)   So long as the provisions of Paragraph 6(c) do not apply, the Qualified Institution holding the Posted Collateral will invest and reinvest or procure the investment and reinvestment of the Posted Collateral in accordance with the written instructions of the Pledgor, subject to the approval of such instructions by the Secured Party (which approval shall not be unreasonably withheld), provided that the Secured Party shall not be required to so invest or reinvest or procure such investment or reinvestment if an Event of Default or Potential Event of Default or Specified Condition with respect to the Pledgor shall have occurred and be continuing.  The Secured Party shall have no responsibility for any losses resulting from any investment or reinvestment effected in accordance with the Pledgor’s instructions.

(iii)  For purposes of Section 5(a)(iii) of this Agreement, failure by a party or its Custodian to comply with any of the obligations under this Paragraph 13(g) will constitute an Event of Default with respect to such party if the failure continues for two (2) Local Business Days after notice of the failure is given to that party.

(h)	Distributions and Interest Amount.

(i)  Interest Rate.  The “Interest Rate” will be:  Federal Funds Effective Rate as from time to time in effect.

(ii)  Transfer of Interest Amount.  The Transfer of the Interest Amount will be made on the last Local Business Day of each calendar month and on any Local Business Day that Posted Collateral in the form of Cash is Transferred to the Pledgor pursuant to Paragraph 3(b).  If Transfer of an Interest Amount (or any portion thereof) to a Pledgor on any day would result in, or increase, a Delivery Amount (treating the day as a Valuation Date, as provided in Paragraph 6(d)(ii)) but the Pledgor would nonetheless have no obligation to make a Transfer pursuant to Paragraph 3(a) on that day if it were a Valuation Date (because the Delivery Amount is lower than the Pledgor’s Minimum Transfer Amount or otherwise), the Secured Party will be required to Transfer that Interest Amount (or portion thereof) to the Pledgor, notwithstanding anything to the contrary in Paragraph 6(d)(ii).

(i)	Additional Representation(s) and Covenants.

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

(j)	Other Eligible Support and Other Posted Support.

(i)  “Value” with respect to Other Eligible Support and Other Posted Support means:  The Valuation Percentage times the stated amount then available under the Letter of Credit to be unconditionally drawn by the Secured Party.

(ii)  “Transfer” with respect to Other Eligible Support and Other Posted Support means:  For purposes of Paragraph 3(a), delivery of the Letter of Credit by the Pledgor to the Secured Party at the address specified in this Annex or delivery of an executed amendment to such Letter of Credit (extending the term or increasing the amount available to the Secured Party thereunder) by the Pledgor to the Secured Party at the address specified in this Annex; and for purposes of Paragraph 3(b), return of the Letter of Credit by the Secured Party to the Pledgor, at the address specified in this Annex, or delivery of an executed amendment to the Letter of Credit in form and substance satisfactory to the Pledgor, reducing the amount available to the Secured Party thereunder by the Pledgor to the Secured Party at the address specified in this Annex.

(iii)  All Other Eligible Support and Other Posted Support consisting of Letters of Credit shall be issued and maintained in accordance with the provisions set forth in Exhibit A and Schedule 1 attached hereto.

(k)	Demands and Notices.

All demands, specifications, and notices under this Annex will be made pursuant to the Notices Section of this Agreement.

(l)	Addresses for Transfers.

Party A:     To be provided in notice requesting delivery/return of Eligible Credit Support/Posted Credit Support.

Party B:      To be provided in notice requesting delivery/return of Eligible Credit Support/Posted Credit Support.

(m)	Other Provisions.

(i)  Paragraph 12 of this Annex is hereby amended by adding the following:

“Credit Rating” means with respect to a party (or its Credit Support Provider, as the case may be) or entity, on any date of determination, the respective ratings then assigned to such party’s (or its Credit Support Provider's, as the case may be) or entity’s unsecured, senior long-term debt or deposit obligations (not supported by third party credit enhancement) by S&P, Moody’s or the other specified rating agency or agencies.
 
“Federal Funds Effective Rate” means, for the relevant determination date the rate opposite the caption “Federal Funds (Effective)” as set forth in the weekly statistical release designated as H.15 (519), or any successor publication, published by the Board of Governors of the Federal Reserve System.

“Letter of Credit” means an irrevocable, transferable, standby letter of credit, issued by a major U.S. commercial bank or foreign bank with a U.S. branch office with a Credit Rating of at least “A-” by S&P and “A3” by Moody’s, utilizing the form set forth in Schedule 1 attached hereto, with such changes to the terms in that form as the issuing bank may require and as may be acceptable to the party in whose favor the letter of credit is issued.  Each Letter of Credit shall be a Credit Support Document.

“Material Adverse Change” means (a) with respect to Party A, its Credit Support Provider’s Credit Rating is below “BBB-” by S&P; or (b) with respect to Party B, in the reasonable opinion of Party A, a material adverse change has occurred in the business, financial condition or operations of Party B.

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

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

(ii)  Paragraph 6(d)(i) is hereby amended by adding the following sentence:

“Subject to Paragraph 4(a) and only to the extent contemplated in the previous sentence, if a Secured Party receives or is deemed to receive Distributions on a day that is not a Local Business Day, or after its close of business on a Local Business Day, it will Transfer Distributions to the Pledgor on the second following Local Business Day.”

(iii)  Paragraph 7(i) is hereby amended by deleting the words “Eligible Collateral” and replacing them with the words “Eligible Credit Support.” 

EXHIBIT A
to Paragraph 13
of Annex A

LETTER OF CREDIT PROVISIONS

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

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

(b)  Upon the occurrence of a Letter of Credit Default, X agrees to deliver to Y either a substitute Letter of Credit or other Eligible Credit Support, in each case on or before the second Local Business Day after the occurrence thereof (or on or before the fifth Local Business Day after the occurrence thereof if only clause (i) under the definition of Letter of Credit Default applies).  “Letter of Credit Default” shall mean with respect to an outstanding Letter of Credit, the occurrence of any of the following events:  (i) the issuer of such Letter of Credit shall fail to maintain a Credit Rating of at least “A-” by S&P or “A3” by Moody’s; (ii) the issuer of the Letter of Credit shall fail to comply with or perform its obligations under such Letter of Credit if such failure shall be continuing after the lapse of any applicable grace period; (iii) the issuer of such Letter of Credit shall disaffirm, disclaim, repudiate or reject, in whole or in part, or challenge the validity of, such Letter of Credit; (iv) such Letter of Credit shall expire or terminate, or shall fail or cease to be in full force and effect at any time during the term of this Agreement; or (v) any event analogous to an event specified in Section 5(a)(vii) of this Agreement shall occur with respect to the issuer of such Letter of Credit; provided, however, that no Letter of Credit Default shall occur in any event with respect to a Letter of Credit after the time such Letter of Credit is required to be canceled or returned to X in accordance with the terms of this Agreement.

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

(d)  (i)  A Letter of Credit shall provide that Y may draw upon the Letter of Credit in an amount that is equal to all amounts that are due and owing from X but have not been paid to Y within the time allowed for such payments under this Agreement.  A Letter of Credit shall provide that a drawing may be made on the Letter of Credit upon submission to the bank issuing the Letter of Credit of one or more certificates of Y in accordance with the specific requirements of the Letter of Credit.

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

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

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

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

SCHEDULE 1

IRREVOCABLE TRANSFERABLE STANDBY LETTER OF CREDIT FORMAT
DATE OF ISSUANCE:  			
[Address]
	Re:  Credit No. _______________

	We hereby establish our Irrevocable Transferable Standby Letter of Credit in your favor for the account of _____________ (the “Account Party”), for the aggregate amount not exceeding ____________ United States Dollars ($_______), available to you at sight upon demand at our counters at (Location) on or before the expiration hereof against presentation to us of one or more of  the following statements, dated and signed by a representative of the beneficiary:

1.	“An Event of Default (as defined in the Master Agreement dated as of ________ between beneficiary and Account Party, as the same may have been amended (the “Master Agreement”)) has occurred and is continuing with respect to Account Party under the Master Agreement.”; or
2.	“An Early Termination Date (as defined in the Master Agreement) has occurred as a result of a Termination Event (as defined in the Master Agreement) and Account Party has failed to make all payments due and owing to beneficiary in accordance with the terms of the Master Agreement.”

	The amount which may be drawn by you under this Letter of Credit shall be automatically reduced by the amount of any drawings paid through the Issuing Bank referencing this Letter of Credit No. ____.  Partial drawings are permitted hereunder.

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

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

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

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

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

	This Letter of Credit is transferable, and we hereby consent to such transfer, but otherwise may not be amended, changed or modified without the express written consent of the beneficiary, the Issuing Bank and the Account Party.
[BANK SIGNATURE]
EXHIBIT A

ENRON CORP.

Guaranty

This Guaranty (the “Guaranty”), dated as of 		, 2001, is made and entered into by Enron Corp., an Oregon corporation (“Guarantor”).
W I T N E S S E T H:

WHEREAS, CITY OF GLENDALE, a municipal corporation (“Counterparty”), and ENRON NORTH AMERICA CORP. (“Enron”), a wholly owned subsidiary of Guarantor, are contemplating entering into one or more swap, option or other financially-settled derivative transactions, which transactions will be evidenced by one or more swap agreements, confirmations and/or master agreements, including without limitation, the Master Agreement of even date herewith (the “Master Agreement”) (all such swap, option or other financially-settled derivative transactions and the agreements evidencing same, including without limitation, the Master Agreement, whether entered into prior to, on or after the date hereof, as the same may from time to time be modified, amended and supplemented, shall be referred to herein collectively as the “Contract”); and 

WHEREAS, Guarantor will directly or indirectly benefit from the transactions to be entered into between Enron and Counterparty;

NOW THEREFORE, in consideration of Counterparty entering into the Contract, Guarantor hereby covenants and agrees as follows:

1.  GUARANTY.  Subject to the provisions hereof, Guarantor hereby irrevocably and unconditionally guarantees the timely payment when due of the obligations of Enron (the “Obligations”) to Counterparty under the Contract.  This Guaranty shall constitute a guarantee of payment and not of collection.  The liability of Guarantor under the Guaranty shall be subject to the following:
(a)  Guarantor’s liability hereunder shall be and is specifically limited to payments expressly required to be made under the Contract (even if such payments are deemed to be damages) and, except to the extent specifically provided in the Contract, in no event shall Guarantor be subject hereunder to consequential, exemplary, equitable, loss of profits, punitive, tort, or any other damages, costs, or attorney’s fees.
(b)  The aggregate amount covered by this Guaranty shall not exceed U.S. $25,000,000.

2.  DEMANDS AND NOTICE.  Upon the occurrence and during the continuance of an Event of Default or Termination Event, if Enron fails or refuses to pay any Obligations and Counterparty has elected to exercise its rights under this Guaranty, Counterparty shall make a demand upon Guarantor (hereinafter referred to as a “Payment Demand”).  A Payment Demand shall be in writing and shall reasonably and briefly specify in what manner and what amount Enron has failed to pay and an explanation of why such payment is due, with a specific statement that Counterparty is calling upon Guarantor to pay under this Guaranty. A Payment Demand satisfying the foregoing requirements shall be required with respect to Obligations before Guarantor is required to pay such Obligations hereunder and shall be deemed sufficient notice to Guarantor that it must pay the Obligations within five (5) Business Days after its receipt of the Payment Demand. A single written Payment Demand shall be effective as to any specific default during the continuance of such default, until Enron or Guarantor has cured such default, and additional written demands concerning such default shall not be required until such default is cured.

3.  REPRESENTATIONS AND WARRANTIES.  Guarantor represents and warrants that:
(a)  it is a corporation duly organized and validly existing under the laws of the State of Oregon and has the corporate power and authority to execute, deliver and carry out the terms and provisions of the Guaranty; 
(b)  no authorization, approval, consent or order of, or registration or filing with, any court or other governmental body having jurisdiction over Guarantor is required on the part of Guarantor for the execution and delivery of this Guaranty; and
(c)  this Guaranty, when executed and delivered, will constitute a valid and legally binding agreement of Guarantor, except as the enforceability of this Guaranty may be limited by the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general principles of equity.

4.  SETOFFS AND COUNTERCLAIMS.  Without limiting Guarantor’s own defenses and rights hereunder, Guarantor reserves to itself all rights, setoffs, counterclaims and other defenses to which Enron or any other affiliate of Guarantor is or may be entitled to arising from or out of the Contract or otherwise, except for defenses arising out of the bankruptcy, insolvency, dissolution or liquidation of Enron.

5.  AMENDMENT OF GUARANTY.  No term or provision of this Guaranty shall be amended, modified, altered, waived or supplemented except in a writing signed by Guarantor and Counterparty.

6.  WAIVERS.  Guarantor hereby waives (a) notice of acceptance of this Guaranty; (b) presentment and demand concerning the liabilities of Guarantor, except as expressly hereinabove set forth; and (c) any right to require that any action or proceeding be brought against Enron or any other person, or except as expressly hereinabove set forth, to require that Counterparty seek enforcement of any performance against Enron or any other person, prior to any action against Guarantor under the terms hereof.

Except as to applicable statutes of limitation, no delay of Counterparty in the exercise of, or failure to exercise, any rights hereunder shall operate as a waiver of such rights, a waiver of any other rights or a release of Guarantor from any obligations hereunder.

Guarantor consents to the renewal, compromise, extension, acceleration or other changes in the time of payment of or other changes in the terms of the Obligations, or any part thereof or any changes or modifications to the terms of the Contract.

Guarantor may terminate this Guaranty by providing written notice of such termination to Counterparty and upon the effectiveness of such termination, Guarantor shall have no further liability hereunder, except as provided in the last sentence of this paragraph.  No such termination shall be effective until five (5) Business Days after receipt by Counterparty of such termination notice.  No such termination shall affect Guarantor's liability with respect to any Transaction (as defined in the Contract) entered into prior to the time the termination is effective, which Transaction shall remain guaranteed pursuant to the terms of this Guaranty.

7.  NOTICE.  Any Payment Demand, notice, request, instruction, correspondence or other document to be given hereunder by any party to another (herein collectively called “Notice”) shall be in writing and delivered personally or mailed by certified mail, postage prepaid and return receipt requested, or by telegram or telecopier, as follows:

To Counterparty:	City of Glendale	To Guarantor:	Enron Corp.	
	141 N. Glendale Ave., 4th Level		1400 Smith Street	
	Glendale, California  91206-4496		Houston, Texas 77002	
	Attn.:  Director Public Service
Fax:  (818) 552-2852		Attn.:  Vice President, Finance and Treasurer	
	Fax No.: 		Fax No.:  (713) 646-3422	

A copy of any notice sent to Guarantor pursuant hereto must also be sent to the above address to:  (i) Enron Corp., Attention: Corporate Secretary, Fax No. (713) 853-2534, and (ii) Enron North America Corp., Attention:  Assistant General Counsel, Trading Group, Fax No. (713) 646-4818.

Notice given by personal delivery or mail shall be effective upon actual receipt. Notice given by telegram or telecopier shall be effective upon actual receipt if received during the recipient's normal business hours, or at the beginning of the recipient's next business day after receipt if not received during the recipient's normal business hours.  All Notices by telegram or telecopier shall be confirmed promptly after transmission in writing by certified mail or personal delivery.  Any party may change any address to which Notice is to be given to it by giving notice as provided above of such change of address.

8.  MISCELLANEOUS.  This Guaranty shall in all respects be governed by, and construed in accordance with, the law of the State of Texas, without regard to principles of conflicts of laws.  This Guaranty shall be binding upon Guarantor, its successors and assigns and inure to the benefit of and be enforceable by Counterparty, its successors and assigns.  The Guaranty embodies the entire agreement and understanding between Guarantor and Counterparty and supersedes all prior agreements and understandings relating to the subject matter hereof.  The headings in this Guaranty are for purposes of reference only, and shall not affect the meaning hereof.

IN WITNESS WHEREOF, the Guarantor has executed this Guaranty on 		, 2001, but it is effective as of the date first above written.

ENRON CORP.

By:  						
Name:  						
Title: